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A selection of reported Tenancy Deposit Scheme Court cases will appear in this section.

The following case is reported with thanks to Painsmith Solictors Blog

 High Court decision on Tenancy Deposit Scheme 

The High Court has handed down its decision in the case on Tenancy Deposit Protection.In Draycott v Hannells Lettings Ltd, PainSmith Solicitors have been acting for the Defendant lettings agency and have used Mr James Browne of Lamb Chambers as counsel. The facts of the case were undisputed and the essential issue is that Hannells registered the deposit with the custodial scheme operated by DPS more than 14 days after receipt.The tenants claimed for the usual penalty of three times the value of the deposit and after decisions in their favour at lower courts the matter came before Mr Justice Tugendhat in the High Court. There were three issues before the Court:1. Could an agent be held liable for a failure to protect a deposit or was it entirely a matter for the landlord;2. Was the requirement to register the deposit and give the required information within 14 days as required by section 213(6)(b) of the Act subject to the penalties set out in section 214; and3. Is it an actual or implied initial requirement of the DPS scheme that the deposit be registered within 14 days of receipt.If point 1 was found in favour of Hannells they could not be liable under any circumstances but if they failed on this point then both points 2 and 3 would also have to be found in their favour for them to escape liability. On point 1 the Court decided that the wording of section 2 12(9)(a) was clear in stating that in the section of the Act relating to deposit protection: references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies. Accordingly, the Court found against Hannells on this point. In relation to point 2 the Court looked at the wording of section 213(6) which reads: (6) The information required by subsection (5) must be given to the tenant and anyrelevant person(a) in the prescribed form or in a form substantially to the same effect, and(b) within the period of 14 days beginning with the date on which the deposit is receivedby the landlord.and the wording of section 214(1)(a) which provides that an application can be made to the Court where a person believes:(a) that the initial requirements of an authorised scheme (see section 213(4)) have not, orsection 213(6)(a) has not, been complied with in relation to the deposit;The Court noted that the Circuit Judge whose decision was being appealed had taken the view that to suggest that the 14 day requirement set out in s213(6)(b) did not attract the penalties set out is section 214 was to "drive a coach and horses" through the intent of the Act as it would permit a landlord to not protect a deposit until such time as they were challenged in Court. However, it also heard submission that this view was overly draconian as it penalised innocent error and that a failure to protect the deposit properly would always be penalised by section 215, which prevents the service of a section 21 notice while the deposit remains unprotected. Ultimately the latter position prevailedand the Court agreed that the Act itself does not impose a requirement that the deposit be protected within 14 days as long as it is protected prior to the matter coming before a Court. The third point was more complex. Initially, none of the schemes had formally set out any initial requirements. In December 2008 the TDS scheme altered its rules to make clear that it had an initial requirement that any deposit registered with it be protected within 14 days of receipt. It was common ground that section 214(1)(a) allowed for a penalty to be imposed where an initial requirement had been breached. What was at issue was whether the DPS scheme imposed such a requirement. On looking at the DPS rules it could be seen that they had a clause stating that the deposit should be lodged with them within 14 days of receipt. However, there was no mention of this being an initialrequirement. The Court took the view that a simple restatement of the Act did not amount to an expression of an initial requirement and that while it could be seen that an initial requirement of the DPS scheme was that a deposit be lodged with it, it could not be taken that it was required that the deposit be lodged within 14 days. Therefore, this point was found in favour of Hannells Therefore, although it was found that Hannells were potentially liable for a failure to lodge a deposit it was found that their late lodging of that deposit with the DPS was not a breach of the Act or of the initial requirements of the DPS scheme and accordingly the appeal was allowed and the judgement against Hannells of the lower Court was set aside. Therefore as things currently stand agents are liable for a failure to register the deposit, late registration does not automatically attract the penalties set out in section 214, and the DPS scheme has no initial requirement that the deposit be registered with it within 14 days of being received. This is by no means the end of the matter though. This case is still capable of being taken to the Court of Appeal and there are at least two more cases which will see judgements handed down from that Court within the next few months and they could have the effect of altering the position again.Although, there are other decisions from more senior Courts in the pipeline, this is the first binding decision on the issue of Tenancy Deposit Protection and, as such, is very important.

The following cases are listed with thanks to Legal Action magazine  

Universal Estates v Tiensia - Croydon County Court 23 February 2009

Universal Estates granted Ms Tiensia an assured shorthold tenancy. The deposit of £ 2,400 was paid in instalments. Later the landlord sought possession relying on HA 1988 Sch 2 Grounds 8, 10 and 11. MsTiensia defended the subsequent possession claim and counter claimed for a payment under HA 2004 s214(4). The landlord subsequently registered the deposit with Tenancy Deposit Solutions Ltd, an online, insurance-based,tenancy deposit scheme. The certificate was faxed to Ms Tiensia on 3 November 200 8. The terms of the scheme (as set out in the 'Information for tenants' leaflet) stated: 'Within 14 days of receiving the deposit from you, your landlord/ agent must protect the deposit with the scheme as well as provide to you details of how your deposit is being protected and what to do if there is a dispute about the repayment of your deposit at the end of the tenancy agreement. On an application for summary judgment on the counterclaim, Deputy District Judge Clarke accepted that the 'initial requirements' of the scheme itself (as well as s213) required the landlord to protect the deposit and provide the required details within 14 days and that, therefore, this requirement could not be satisfied once the 14 days hadpassed. The judge ordered the landlord to pay Ms Tiensia £7, 200. (For a fuller note of the first instance decision see May 2009 Legal Action 25.). Subsequently, a circuit judge allowed an appeal, holding that the sanctions in s214(3) and (4) did not apply where the landlord had complied with the requirements of the scheme, and provided the information to the tenant by the date of the hearing. Permission for a second appeal to the Court of Appeal was granted by Lloyd LJ on 23 September 2009. The appeal is listed as a floater on 31 March/l April 2010 before Arden, Maurice Kay and Patten LJJs.

Hashemi v Gladehurst Properties Limited Clerkenwell and Shoreditch County Court, 9 December 2009 

Gladehurst granted Mr Hashemi and Mr Johnson (the tenants) an assured shorthold tenancy of a flat for a fixed term of one year from September 2007. The monthly rent was £2,080. A deposit of £6,240, the equivalent of three months' rent, was paid to Gladehurst in advance. The terms of the agreement provided that the deposit was to be held by Gladehurst. Contrary to the provisions of HA 200 4 Part 6, the deposit was never registered or dealt with in accordance with the Act.  The tenants vacated the property in October 2008. An inventory clerk inspected the flat. He suggested that the premises had not been well cared for and that significant deductions should be made from the deposit. As a result, Gladehurst paid back the deposit minus various deductions. The tenantsaccepted some of these, but disputed £500 for the repainting of walls and £11 8 for other dilapidations. Mr Hashemi then wrote to Gladehurst requesting receipts and a breakdown of the sums deducted from the deposit. He put the company on notice that the tenants would make a claim for three times the deposit under s214. In February 2009, Mr Hashemi issued a claim against Gladehurst in both his own name and that of Mr Johnson. Gladehurst in its defence pleaded that it had not been fully aware of the impact of the HA 2004, but accepted that it applied. The defence also asserted that the landlord had all the necessary receipt s for the dilapidations and other expenses paid on behalf of the tenants. In April 2009, District Judge Manners in April 2009, her own motion on the papers, struck out the claim on the basis that the tenancy ended before the application was made. Mr Hashemi applied to set that order aside. District Judge Stary dismissed that application in so far as it related to the s214 claim, but reinstated the claim for the deductions of £61 8 . Mr Hashemi appealed.  HHJ Cryan allowed the appeal and reinstated the claim. He noted that: '" never dealt with the deposit in the correct way in accordance with Part VI of the Act and still retains par t of it .. . There can be no question that in accordance with the scheme of the Act a landlord should not be holding any part of a qualifying deposit at this stage, or at least without the safeguards ofthe Act being in place. He said that it was 'obvious upon a full reading of Schedule 10 that the role of the scheme under the Act is every bit asoperative after the tenancy has come to an end as during its course' . He rejected the suggestion that there was 'some species of equitable defence' based on an implied duty on the tenant to place a landlord on notice before making a claim.

O'Brien v HillBarnet County Court.22 September 2009

Mr O'Brien granted Mr Hill an assured shorthold tenancy for a fixed term of 12months starting on 9 June 2008. On 12 June 2008, the landlord served a notice under HA 1988 s21. On 2 July 2008, the landlord received the payment of the deposit from a third party, Barnet council, which had previously agreed to pay the tenant's deposit. The landlord registered the deposit with TheDeposit Protection Service on 7 July 2008. Later, he issued a possession claim under the accelerated procedure relying on the s21 notice served on 12 June 2008. District Judge Silverman ordered that the claim be struck out on the basis that the s21 notice was invalid because it was given at a time when there had not been compliance with HA 2004 s213, but gave the claimantpermission to restore the claim if he thought that the order should not have been made. The claimant then applied to restore the claim on the basis that s213 did not apply because, at the time that the s21 notice was served(i.e., 12 June 2008), the landlord had not yet received the deposit from Barnet and therefore he was unable to protect the deposit with an authorised scheme. The landlord argued that the s21 notice must therefore be valid and requested that a possession order be made. District Judge Silverman accepted this argument and made a possession order.

Saad v Hogan Brentford County Court, 16 February 2009 (appeal heard in the County Court) 

In November 2005, Mr Saad granted Ms Hogan an assured shorthold tenancy for one year at a rent of £1,000 per month. Ms Hogan paid a deposit of £1,000. The tenancy deposit provisions of HA 2004 ss212—214 came into force in April 2007. In November 2007, Mr Saad granted Ms Hogan a further one-year tenancy. The new tenancy agreement provided for payment of a deposit of £1,000, but no new deposit was physically handed over; the landlord retained the deposit originally paid. In June 2008, the landlord served a HA 1988 s8 notice relying on arrears of rent. Ms Hogan defended on the basis that the landlord had failed to protect her deposit and that she wished any compensation to be set off against the rent arrears, By the date of the possession hearing, four months’ rent were unpaid. District Judge Rowley found that Mr Saad was under no obligation to protect the deposit because no money was paid over under the 2007 agreement. She made a possession order under HA 1988 Sch 2 Part 1 Ground 8. Ms Hogan appealed. HHJ Oppenheimer noted that ‘extraordinarily’ there were no transitional provisions to provide for the situation where a deposit was not physically paid over because money was retained under an earlier agreement. ‘The draftsman . . . has lamentably failed to deal with this obvious point.’ In the absence of guidance in the legislation, he adopted a purposive construction. Having regard to s212, ‘the purpose of the statutory provisions is very clear, namely to safeguard such deposits and to facilitate the resolution of disputes’. In one respect, there had been a payment by the tenant under the 2007 agreement even though there was no physical or electronic transfer of money. He allowed the appeal and stated that Mr Saad was liable to pay £3,000, subject to set off, for failure to protect the deposit.

 Piggott V Slaven Great Grimsby County Court, 23 February 2009

In April 2005, Mr Piggott granted Ms Slaven a tenancy of a house. She paid him a deposit of £600. On 14 February 2008, Mr Piggott granted Ms Slaven an assured shorthold tenancy of a different property, for an initial fixed term of six months. Of the deposit for the earlier premises, £75 was returned to Ms Slaven. The balance of £525 was retained by Mr Piggott. He said that £105 was for the first week’s rent under the new tenancy, and the remaining £420 was ‘rent in advance’ . On 24 June 2008, he served a s21 notice, stating that he required possession on 27 August 2008. Ms Slaven defended the possession claim which Mr Piggott subsequently issued, stating that he had failed to comply with HA 2004 5213(1) (deposit to be dealt with in accordance with an authorised scheme) or s213(4) (initial requirements of a tenancy deposit scheme) and so, according to s215(1), was not entitled to serve a s21 notice. She also counterclaimed for an order that he pay her three times the amount of the deposit in accordance with 5214(4).
After referring to 5212(8), District Judge Richardson held that the question of whether or not money is to be held as security is to be judged objectively. It would be contrary to the purpose of the Act to allow landlords to avoid its consequences by stating that they personally did not intend to hold money as a security. He found that the sum of £420 was not paid as rent in advance, but was intended to afford Mr Piggott security should Ms Slaven breach any future obligations to pay rent under the tenancy agreement. It was accordingly a ‘tenancy deposit’ for the purposes of s212(8). It had not been dealt with in accordance with an authorised scheme, as required by s213. He dismissed the possession claim and ordered Mr Piggott to pay £1260 within 14 days.