Falling foul of the Tenancy Deposit Scheme: a lesson learnt

In the article "The Tenancy Deposit Scheme: Back from the Brink - again?", I highlighted the amendments being made to those parts of Housing Act 2004 relating to the Tenancy Deposit Scheme following the coming into force of the Localism Act on 6 April 2012.

The amendments included a change to the period for complying with the requirement to protect the deposit and provide the information to the tenant about that protection will be 14 days to 30 days. Whilst residential Landlords who receive deposits from tenants of Assured Shorthold Tenancies, for the most part, lodge the deposit with an approved tenancy deposit scheme within the 30 days period, unfortunately, some then fail to provide the tenant with all relevant information regarding the scheme within that period also.

Section 213(5) Housing Act 2004 requires any Landlord who receives a deposit from a tenant of an assured shorthold tenancy to provide the Tenant and any 'relevant person' (a party who may have paid the deposit in behalf of the Tenant) such information "as may be prescribed". The Housing (Tenancy Deposit)(Prescribed Information) Order 2007 ('the 2007 Order") sets out the prescribed information that must be provided, such including, but not limited to:-

• The name, address, telephone number, e-mail address and any fax number of the scheme administrator of the authorised tenancy deposit scheme with which the deposit has been lodged.
• the procedures that apply under the scheme by which an amount in respect of a deposit may be paid or repaid to the tenant at the end of the tenancy
• the procedures that apply under the scheme where the landlord and the tenant dispute the amount to be paid or repaid to the tenant in respect of the deposit;
• the facilities available under the scheme for enabling a dispute relating to the deposit to be resolved without recourse to litigation

The 2007 Order also requires a Landlord to provide specified information in connection with the tenancy in respect of which the deposit has been paid, including but not limited to:

• the amount of the deposit paid;
• the address of the property to which the tenancy relates;
• the name, address, telephone number, and any e-mail address or fax number of the landlord;
• the circumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy

The Landlord must also confirm, in the form of a certificate signed by the Landlord, that the information provided is accurate to the best of his knowledge and belief.

The recent case of Ayunnuga v Swindells (2012) emphasises the importance of complying with Section 213(5) Housing Act 2004. In that case, the Landlord placed the Tenant's deposit with an authorised deposit scheme. The Landlord then provided the Tenant with information confirming with whom the deposit had been lodged but failed to comply fully with the requirements of the 2007 Order.

The Tenant fell into arrears with his rent and possession proceedings were issued by the Landlord on the basis of rent arrears. The Tenant counterclaimed for the recovery of the deposit plus 3x the value of the deposit on the basis of the Landlord's non-compliance with the 2007 Order.

The Landlord argued that the main purpose of the legislation surrounding the Tenancy Deposit Scheme was to protect tenant's deposits, adding that the failure to provide the prescribed information, whilst strictly a breach of the 2007 Order, was a procedural breach and that this technicality did not defeat the primary purpose of the legislation. The Landlord also argued that the Tenant could with little effort have obtained the information which the Landlord had failed to provide to the Tenant simply by asking the Scheme administrator. In the first instance, the Tenant's counterclaim was rejected. The Tenant appealed.

The Court of Appeal, overturning the first instance decision, noted that compliance with the requirement to provide the prescribed information enables a Tenant to understand how they can recover the deposit and how they can dispute any deductions made by a Landlord without litigation. That the Tenant could have obtained the missing information themselves was irrelevant. The onus is on a Landlord to provide the prescribed information. In this instance, the Landlord did not do so and the Court of Appeal ordered that the Landlord both repay the deposit to the Tenant and also pay a penalty to the Tenant of 3x the value of the deposit.

Parliament would not have set out the information to be provided to a Tenant if it did not intend that the Landlord must provide that information. It is not at the discretion of a Landlord as to whether a Landlord provides the prescribed information to the Tenant, rather the provision of that information is a part of the 2 stage process which must be followed by a Landlord.

A Landlord must protect the deposit and provide the prescribed information to the Tenant within 30 days of receipt of the deposit. If a Landlord fails to take these simple steps, they will foul of the Tenancy Deposit Scheme legislation, providing a Tenant with:-

• the ability to resist any possession proceedings brought on the basis of a section 21 notice (also known as a 2 month notice)';
• a claim for the recovery of the deposit and 3x the value of that deposit which could be brought as a standalone claim, a counterclaim in any pure debt action claim brought by a Landlord or a counterclaim in any possession proceedings brought by a Landlord on the basis of rent arrears.

Getting things wrong can have costly consequences for a Landlord. Rollits' Property Dispute Resolution Team, headed by partner Ralph Gilbert, has a wealth of experience in assisting residential Landlords in not only resolving problems that may arise from their legal duties and obligations but also providing proactive advice to minimise the risk of any issues arising in the first place. If you have any contentious property related queries, please contact Ralph Gilbert, partner and Head of the Property Dispute Resolution Group on 01482 323239 or at moc.s1714735735tillo1714735735r@tre1714735735blig.1714735735hplar1714735735.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.