(14/11/2019 NB, this post has been edited following a complaint from Mr Scott, details of which will be set out below)
Thank you to my colleague and fount of wisdom Deirdre Forster for this case note on a tenancy deposit claim.
Howard Davies v Scott, County Court at Clerkenwell & Shoreditch, 18 January 2018
In April 2013 Mr and Mrs Howard Davies signed an assured shorthold tenancy for a fixed term of two years. They paid a deposit of £4,600. On the expiry of the tenancy they held over on a statutory periodic tenancy for a further three months. After they had given notice, their landlord Mr Scott raised a complaint about moth damage to carpets in the loft area. At the end of the tenancy Mr Scott refused to return the deposit and alleged other items of damage. When asked about deposit protection Mr Scott provided a deposit scheme landlord ID number but the deposit was not protected under that ID. He then claimed that he had failed to protect the deposit because he had been unaware that the threshold for high rent tenancies had changed in 2010 and he had thought that his letting was exempt. He instructed a surveyor to negotiate with Mr and Mrs Howard Davies on his behalf. The surveyor quoted outdated law (Gladehurst Properties Ltd v Hashemi (2011) EWCA Civ 604) to suggest that Mr and Mrs Howard Davies had no claim. At this point they consulted solicitors. When further negotiations proved fruitless they issued a claim for the return of the deposit plus two sets of penalties. Mr Scott counterclaimed for some £15,000 worth of alleged damage.
District Judge Rand did not accept the large part of the counterclaim, finding that Mr Scott had not been forthright. The award on the counterclaim was £2421.72.
On the deposit penalty, the District Judge awarded three times the penalty for the failure to protect the deposit in April 2013, stating that a five minute computer search would have told Mr Scott that the high rent threshold changed in 2010 and that it is a landlord’s responsibility to know the law. She stated that misleading tenants is conduct justifying a penalty at the high end of the scale.
The Judge accepted the proposition that the periodic tenancy arising at the end of a fixed term was a new tenancy (section 5 Housing Act 1988 and Superstrike Ltd. v. Rodrigues (2013) EWCA Civ 669) but disagreed with submissions that a second penalty was payable when the statutory tenancy arose in April 2015. She referred to section 214 of the Housing Act 2004 which refers to “a penalty, a tenancy and a deposit” in the singular, and noted that the opportunity to clarify the point in the Deregulation Act amendments to Housing Act 2004, after Superstrike, had not been taken.
The District Judge ordered that the deposit be returned, less the sum of £2,421.72, giving a total judgment in the sum of £15,978 plus costs. In addition she ordered a payment of £15,000 on account of costs.
(14/11/2019. Mr Scott has contacted me with what he regarded as problems with this post. He claimed that the deposit scheme landlord ID was not for a different property. There is no comment on this in the judgment, but it is clear that the deposit was not registered under that ID, so I have amended to record that.
Mr Scott rightly corrected the figures on the total counterclaim. I was informed it was circa £25,000. It was in fact ‘in excess of £15,000’. The counterclaim was largely reduced at trial and an award of £2421.72 made on the counterclaim, That award figure has also been corrected in the post.
Mr Scott also wished me to correct any statement that he had been dishonest. This post entirely correctly recorded that the District Judge had found that Mr Scott had misled the tenants, and no change to the post has been made in that regard.
This judgment was appealed by Mr Scott, and a note of the appeal decision is forthcoming. The appeal decision did not alter the findings that Mr Scott had been misleading, or change the award on the counterclaim)
With respect to the District Judge, I do think this has to be wrong. Section 214 is in the singular (a penalty, a tenancy, a deposit) because it is in regard to an instance of non-compliance. A claim that includes as separate heads of claim a number of failures to protect a deposit (which was received afresh for each new/replacement tenancy as per Superstrike) in relation to a series of tenancies (fixed term to new fixed term, or fixed term to statutory periodic), is not pleading a single failure to comply with s.213. The claim is actually for a breach in relation to a tenancy and a deposit, but for a series of different tenancies and deposits. So s.214 operates, singularly, for each breach.
As a thought experiment, could a separate claim be brought for each breach? The answer has to be yes. So it must also be possible to bring a single claim with separate heads for each breach in relation to each subsequent tenancy, and have the penalty awarded for each breach.
And, because this is something I had heard was raised in another deposit claim before a different District Judge in a different city, the Deregulation Act amendments to the Housing Act 2004 on deposits make no difference whatsoever to the position on penalty claims, with one exception – below. While a deposit protected late in the course of one tenancy might count as protected in the next replacement tenancy for the purposes of serving a s.21 notice, this in no way rectifies the initial breach for the purposes of a s.214 claim.
The one exception is the very limited class of the classic ‘Superstrike‘ case – where a fixed term tenancy began before 6 April 2007 but became a statutory periodic tenancy after 6 April 2007 – which basically gave the landlord 90 days to protect the deposit from the commencement of the Deregulation Act to achieve full retrospective compliance. If they didn’t, that is that.