Tenancy Deposit Scheme: Court of Appeal clarification upon the deadline for protecting a tenant`s deposit

In the recent case of Christelle Tiensia v Vision Enterprises Limited (t/a Universal Estate) and Honeysuckle Properties v (1) James David Fletcher (2) Frank Alexander McGrory (3) Matthew Anthony Whitworth (2010), the Court of Appeal was required to determine the circumstances in which sanctions could be imposed against a Landlord when he was found to be in breach of his obligations with regards to the Tenancy Deposit Scheme under Section 213 of the Housing Act 2004. 

Section 213 of the Act states that where a deposit is paid to a Landlord in connection with a shorthold tenancy, that deposit must be dealt with in accordance with an authorised tenancy deposit scheme. It goes on to state that the initial requirements of a particular authorised tenancy deposit scheme must be complied with within 14 days, that period beginning on the date the tenancy is received. The term "initial requirements" is explained as being such requirements as are imposed by an authorised tenancy deposit scheme upon a Landlord having received a deposit. 

Section 214 of the Act states that a tenant, having paid a deposit to a Landlord in connection with a shorthold tenancy, may make an application to the court on the grounds that the requirements of an authorised tenancy deposit scheme have not been complied with or that he has been notified by the Landlord that an authorised tenancy deposit scheme applies to the deposit but the tenant has been unable to obtain confirmation for the authorised tenancy deposit scheme administrator that it is being held in accordance with that scheme. 

If the Court is satisfied that the requirements of Section 213 have not been complied with, Section 214 provides that the Court must order the Landlord to pay to the tenant a sum of money equal to 3 times the value of the deposit within 14 days. Section 215 of the Act also makes clear that when the despot is not being held in accordance with an authorised tenancy deposit scheme or the initial requirements of an authorised tenancy deposit scheme have not been complied with, no section 21 notice (commonly known as a "2 month notice") may be given by a Landlord 

In Christelle Tiensia v Vision Enterprises Limited (t/a Universal Estate)and Honeysuckle Properties v (1) James David Fletcher (2) Frank Alexander McGrory (3) Matthew Anthony Whitworth (2010), both Landlords had failed to comply with their obligations under Section 213 before proceedings were issued, although did so since. In both cases the judge at first instance ordered the Landlord to pay the tenants 3 times the value of their deposits and in both instances, the decision was appealed. 

The Landlords argued that the purpose of the 2004 Act was to protect a tenant`s deposit and as such, provided it was protected, however long that took, the purpose of the Act had been achieved. They further argued that that a Landlord had until the hearing of the hearing of a tenant`s claim pursuant to Section 214 to protect the deposit. 

The Court of Appeal concluded that the purpose of the 2004 Act was to protect tenant`s deposits paid by tenants, ideally within 14 days, but if not, then later. It held that if a Landlord was late in complying with his obligations under Section 213 of the Act but nevertheless did so before proceedings were issued under Section 214 by a tenant, the tenant would have no cause of action and as such any claim brought would be dismissed. The key date by which a Landlord had to comply with his obligations under Section 213 of the Act was the date of the hearing of the tenant`s Section 214 claim. 

A Landlord`s failure to promptly comply with the Section 213 of the 2004 Act upon receipt of a deposit is not fatal but it could result in the Court ordering a Landlord to make a substantial payment to the tenant, leaving a Landlord out of pocket and potentially scupper a Landlord`s claim for possession based on rent arrears. It will also prevent a Landlord relying on a Section 21 notice to recover possession, such a notice being a useful tool available to a Landlord to enable them to recover possession of a property. 

If you have any issues relating to the Tenancy Deposit Scheme or simply want to know more about the Property Dispute Resolution Group, contact Ralph Gilbert on 01482 323239, email ralph.gilbert@rollits.com or Chris Drinkall on 01482 337367, email chris.drinkall@rollits.com

Posted on: 23/11/2010

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.

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