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Landlord Legal

Deposits – The Final Word?

On 11th November 2010, The Court of Appeal gave much welcomed clarification upon the confusion surrounding the requirements of the Tenancy Deposit Scheme under the Housing Act 2004.

The clarification came via the long running claim of Tiensia v Vision Enterprises Ltd (t/a Universal Estates) [2010] EWCA Civ 1224

Background

Landlord legalVision Enterprises Ltd (“Universal”), the landlord legal, brought a claim against Ms Tiensia, the appellant, for poss

ession and arrears of rent in Croydon County Court. Ms Tiensia in turn made a section 214 Housing Act 2004 counterclaim for 3 times the value of the deposit claiming, amongst other things, that Universal had not complied with the requirements of the Housing Act 2004.

Ms Tiensia’s counterclaim succeeded before Deputy District Judge Clarke on 23 February 2009, who ordered Universal to pay to Ms Tiensia £7,200 (a sum equal to three times her deposit). Universal appealed and were successful – the matter being heard by His Honour Judge Ellis on 17 June 2009. Lloyd LJ then gave Ms Tiensia permission to appeal to the Court of Appeal.

Facts

Universal had issued proceedings, based upon a section 8 notice for rent arrears. The difficulty they faced was that they had not protected the deposit paid by Ms Tiensia and neither had they provided her with the prescribed information about the deposit within 14 days of receiving the deposit. They did not do this until 2nd October 2008, albeit after the proceedings had been issued.

It was common ground that Universal had not met either the 14-day time limit imposed by section 213(3) for compliance with the ‘initial requirements’ or the 14-day time limit imposed by section 213(6)(b) for providing the tenant with the information required by section 213(5). The question was whether either breach triggered the entitlement to the sanctions mandatorily imposed by section 214(3) and (4) i.e 3 times the value of the deposit?

The decision

The Court considered carefully the wording of the relevant sections of the Housing Act 2004 and favored a view that the relevant issue for assessing compliance was whether the Landlord legal was in breach of the requirements of the Housing Act 2004 by the time of the hearing of any claim and not within the 14-day of the Landlord receiving the deposit, as argued by Ms Tiensia.

In support of his Judgment, Lord Justice Rimer said:

“…..if, therefore, the landlord is late in complying with his dual section 213 obligations, but he nevertheless duly does so before any section 214 proceedings are brought by the tenant, the tenant will have no cause of action under section 214 and any claim he brings under it will fall to be dismissed

“That interpretation of the legislation means that late, but nevertheless due, compliance by the landlord with his dual obligations under section 213(3) and (6) will furnish him with a complete defence to any claim by the tenant under section 214…

What does the decision mean?

This is a decision which will be very welcomed by Landlords (and Letting Agents) up and down the County. It means that failure to register the deposit and provide the prescribed information within 14 days of getting the deposit will no longer likely result in a claim for 3 times the value of the deposit. More importantly, it means tenants will find it difficult to run this Defence in an attempt to delay possession proceedings – an all too familiar event.

Landlords cannot, however, rely on this decision not to protect deposits at all. Any Landlord legal who fails to register a deposit which results in a tenant issuing proceedings, is likely to find that they will be paying the tenants landlord legal costs of the proceedings if they protect the deposit after the proceedings have been issued.

At Granditsch & Moore we specialise in advising Landlord’s & Letting Agents. If you need any advice on deposit issues, or any Landlord legal & tenant related issues, call Russell Dean on 0208 892 7576 or email on russell@gandmsolicitors.co.uk