The Sheffield Case

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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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?