Monday, September 08, 2008

The Sheffield Case

Note - the Landlord Law Blog has now moved to


The Residential Landlords Association is pretty pleased with itself, as it has successfully challenged a claim by a tenant, supported by the CAB, against a landlord who was in breach of the tenancy deposit regulations.

As regular readers of this and other housing blogs will know, the regulations appear to say that if a landlord fails to protect a deposit under one of the government authorised schemes, and serve a notice containing prescribed information on their tenant, within 14 days of receiving the deposit, they will be ordered by the court to repay the deposit (or protect it with the custodial scheme) and pay the tenant a fine of three time the amount of the deposit money.

There is a lot of confusion about these regulations, and Judges on the whole appear reluctant to enforce them. There are quite a lot of conflicting decisions coming from the courts. However these are all County Court decisions and are mostly unreported.

The Sheffield case (which you can read about in an RLA press release and in an article in the Solicitors Journal) involved a situation where the deposit had been protected, but the landlords agent had failed to serve the notice. The notice was then served out of time, but the tenant went ahead anyway and issued the proceedings. At first instance the Judge made the award in favour of the tenants. However the landlord, funded by the RLA, appealed the decision. It came before HHJ Bullimore who ruled that the landlords were not in breach and the fine was not payable.

However what was not decided at the hearing was whether the landlord would have been in breach if he had served the notice after the issue of proceedings rather than before. The RLA take the view that the it is the date of the hearing which is important, not the issue of proceedings. They base this view on the notes to the Housing Act 2004. These have this to say about proceedings relating to tenancy deposits:

"503. If at the court hearing the court is satisfied that the landlord has not complied with the initial requirements of a scheme or provided the information required by section 213 (6)(a) or that the deposit is not being safeguarded by an authorised scheme the court must either order the person holding the deposit to repay the deposit to the applicant or pay it into an authorised custodial scheme within 14 days of the order being made. The court must also order the landlord or his agent to pay the applicant an amount equivalent to three times the deposit."

The RLA take the wording 'if at the court hearing' at the start of the paragraph to mean that so long as the requirements are satisfied before the hearing takes place, the landlord will not be penalized. However this is not the only interpretation of these words – it could just be a statement of when the decision will be made by the court - it would after all be highly inappropriate for the Court to make any decision before the hearing!!

My feeling is that if the landlord can get off the hook by complying with the requirements on the day before the court hearing, this is grossly unfair. It will in effect be encouraging landlords only to protect deposits where tenants bring court actions, and will mean that it will be virtually impossible for a tenant ever to succeed in such a claim. However I agree that it is unfair to penalize landlords who act in good faith and who only fail to comply through error (as was the case in the Sheffield case, where the deposit had in fact been protected).

We should also remember, that although this was an appeal, it was not the Court of Appeal, so this decision is not binding on anyone. County Court Judges will probably take note of it, but they do not have to follow it. We really need a test case to be taken up to the Court of Appeal.

But isn’t it ridiculous that a major court case has to take place before the effect of a piece of legislation can be known. Surely there must be a better way?

Stumble Upon Toolbar


Nearly Legal said...

One of our team at Nearly Legal has a copy of the Bamforth judgment on its way to him. Once we get it, a full commentary rather than our current brief one will be up.

(Sorry, Tessa. I still get a ridiculous thrill out of saying 'the team' at NL. Even better, I get to speak in the plural without people looking at me funnily.)

Tessa said...

A full commentary will be very useful. We at Landlord-Law (thats the royal we) will be most interested.

As of course will all my customers looking to bring claims with my kit 2.

Anonymous said...

Thanks for this very helpful commentary. I am a landlord who did not register the deposit because I was incorrectly advised by a barrister friend that, since there was no AST signed by both parties due to an error made by my agent, the tenants occupied my flat on the terms of a bare licence (in which case the deposit scheme rules did not apply). When the tenants left I withheld a relatively small amount from the tenants' deposit to cover the cost of repairing damage they caused to my flat and the one below. The tenants did not accept the deduction and are now suing me to recover that small amount + 3 x the original (very large) deposit. I consider the deduction is reasonable and that the tenants are using the legislation inappropriately to 'encourage' me to repay the deposit in full despite the damage. Section 214 seems a little vague: if the deposit has been paid in full (i.e. assuming the court accepts that the deduction is reasonable) can the court make an order against me to pay the fine? It seems to me from the reading of s214 that the fine can only be ordered if there is also an order for payment of the deposit to either the tenant or into a scheme? CRM

Tessa said...

If you did not protect the deposit, you are vulnerable to having the award made against you. It is not 100% certain (hardly anything is in litigation) but I would say it is very likley.

I would suggest you try to reach some sort of agreement with the tenants, otherwise it could be expensive for you.

Lester said...

Thanks for hosting this information. I am a tennant (AST) who paid a large deposit to our landlords agent (who say they do not hold the deposit). Now, after 5 months we have still not been notified of how or where our deposit is saved.
I contacted my lanlord's office today and asked where it was held, they said that it hadnt been placed in a scheme and that they would do it today.
This probably wont make me very popular on your site, but as i understand it - as a consumer, I am now entitled to apply to the county court to make sure that they do this AND to have have 3 x the deposit paid to me. Is this correct?
Obviously the landlord would never have paid the deposit into a scheme if I hadnt brought this up, so in my eyes I am perfectly entitled to seek the payment, as the landlord has blatantly broke the law and the idea of the fine is surely to discourage lanlords from ignoring the law.
A professional and or landlords opinion would be very interesting.

Tessa said...

You are probably entitled to the award, yes, however things are never straightforward in the law. The Judges are unhappy generally about awarding the fine, particuarly if they consider the landlord has acted in good faith, and there are a number of cases where they have refused to make the award. However there are also a number of other cases where Judges have made the award saying that they have no option but to do so!

If you decide to go ahead, note that my Kit 2 may be of assistance to you.

Have a look also at the other postings on this blog on tenancy deposits.

Lester said...

Thankyou for the reply Tessa.

unhappy tenant said...

I left a flat at the beginnig of January that my partner and I had rented for just over a year. The whole time I was a tenant, the landlord did not give us any information regarding our deposit being protected. After we left, the landlord tried to deduct money from our deposit for something we didn't agree with. We told her we understood that she couldn't just deduct from the deposit without our agreement, and asked her whether she put the deposit in a protection scheme. Three days after we sent her this message, we received an email from her giving us a deposit ID number and saying we could obtain a unique repayment ID from the scheme. We believe she put our deposit into the scheme after receiving our email. Is she likely to be liable if she did, given the circumstances, especially that she only put the deposit in the scheme after we pointed it out to her and seemed happy to simply deduct the money from the deposit prior to this?

Tessa said...

As you can see from all the other postings and comments on this site regarding tenancy deposits, there are conflicting decisions coming out from the courts on this point.

I think you would have a good chance of getting the award made in your favour, but I cannot be more definite than that.