Wednesday, October 29, 2008

Another tenancy deposit decision

Note - the Landlord Law Blog has now moved to


This is a report of a case kindly provided to me by Simon Parrott of Palmers Solicitors (Bedford).

I am writing following a recent hearing at Bedford County Court on 28th October, to let you know the result of my case. I act for the landlords.

The circumstances of the case were that the tenancy deposit had not been protected at the time that it was taken (1st June 2007). Then, approximately 13½ months later (mid July 2008), this was discovered by my clients after receiving a request from the Tenants for confirmation of the Deposit Protection Scheme. My Clients immediately took steps to protect the deposit with DPS that same day and then served the “prescribed” information upon the tenants. The tenants denied receipt of various letters and documents but they had received proof of the protection three times over by the end of July, and by the time they issued their proceedings claiming the penalty (mid August). We made an application to strike out the case under CPR24 and the hearing on 28th was our summary judgment application.

The Judge granted our application and struck out the claim on the ground that there was no real prospect of success. The essence of the judgement was that, considering the wording of Section 214 of the Housing Act, the Judge was satisfied that because we had paid the money into DPS we were able to satisfy the initial requirements of “an authorised scheme”. Having then served this information upon the tenants, the tenants were then able to obtain confirmation from the scheme administrator that the deposit was being held in accordance with the scheme. The tenants were therefore not able to get over the initial test of Section 214(1). The Judge also had quite considerable regard to the notes to the Housing Act, and in particular note 503, and was satisfied that the time for consideration of the Landlord’s rectification of his default was at the Court hearing.

One particular issue of the case was that my clients were unable to use any of the group insurance schemes available to them because by the time they discovered their mistake the tenancy had outlived its contractual term and was therefore a statutory periodic tenancy. Neither TDS nor MyDeposits would allow them to protect the deposit in those circumstances and my clients were, therefore, only able to protect the deposit by paying it into the statutory scheme (DPS). Whilst we were therefore unable to satisfy the initial requirements of Section 213(3), the Judge accepted my submission that by accepting payment of the deposit out of time the DPS scheme “initial requirements” allowed a late payment into the scheme which then enabled the Landlord to escape the penalty provisions of Section 214(4).

I am grateful to Richard Jones at Bury & Walkers for letting me have a copy of the Harvey v Bamforth report and whilst our District Judge was persuaded to read the report, he stressed that he didn’t feel himself bound by that as precedent.

This case makes it clear that, as things stand at present, tenants are unlikely to succeed if their landlord has protected the deposit before the issue of proceedings, and possibly if it is protected afterwards so long as this is before the hearing date.

I understand that these proceedings were issued by the Money Claim Online procedure. I recently came across this practice note here (you can also locate it by putting tenancy deposit in the search box on the Court Service web-site home page) which indicates that section 214 claims should really be made using the Part 8 procedure. It appears that in due course the CPR will be amended to provide for this.

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Nearly Legal said...

Interesting, although not at all surprising. The emerging County Court consensus is pretty much how may of us thought it would be taken, but there are some significant issues still to be played out. For instance, what of a claim after the tenancy has ended before the deposit is entered into a scheme?

I'll put a precis and link on Nearly Legal if that is OK.

Anonymous said...

As far as I can see, TDS includes in its "initial conditions" that the 14-day period for protecting a deposit *must* be met, and further, that the contract *must* include certain prescribed terms. I have heard of a case where a deposit was accepted by the TDS, but then TDS refused to take the dispute resolution case, advising tenant to sue for the 3x deposit because the TDS terms weren't incorporated into the contract.

So landlords who foul up are (it would seem) well-advised to use DPS.