31 January, 2012 • 17:26 2
A short blog to highlight to readers that TDS and the Residential Landlords Association have created a fourth tenancy deposit scheme with price structures that are targeted at private landlords. The scheme is called Deposit Guard and the scheme will not charge an annual subscription fee or joining fee. For more information click here.
Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004
18 January, 2012 • 21:30 9
Painsmith has recently encountered the Kafkaesque world of the tenancy deposit protection schemes, specifically the DPS and its new rules relating to the release of the deposit following a court hearing.
DPS is currently refusing to release deposits where the courts have not specifically ordered it and they have changed their rules to reflect the same. Under rule 29 (a) DPS will only release the Deposit if the Court Order specifically refers to the Deposit and how much to be paid out to the tenant.
Several of our landlord clients have obtained a possession order on the grounds of rental arrears and are finding it impossible (or very nearly impossible….or just very expensive) to get the deposit released, even where the contract specifically allows for the deposit to be applied against rental arrears.
Of course it is always open for the tenant to agree the release of the deposit to the landlord, but once possession is obtained many tenants lose interest in co-operating with their former landlord.
In the absence of an agreement from the former tenant the landlord is left to apply to the scheme to ask for the release of the deposit. We believe this should simply be a matter of drawing the scheme’s attention to the court order for possession and rent arrears and the clause in the contract, which allows the deposit to be used against rental arrears, where applicable.
However on more than one occasion recently a landlord’s application to the DPS for the release of the deposit has been refused and the applicant referred to clause 29 of the terms and condition ( see above) and informed that if they want DPS to release the deposit to them they must either arrange for the Court Order to be amended or a Third Party Debt Order to be obtained.
Concurrently, courts are refusing to make orders that would satisfy the DPS rules with many judges refusing to address the issue of the deposit on the grounds that it is a matter for the scheme and they do not want to usurp the jurisdiction of the Adjudicator.
You will recall that part of the point of these schemes was to take the matter of deposit handling away from the courts and instead use an alternative dispute resolution, that is the Adjudicator. However landlords find themselves facing courts that refuse to deal with the deposit because it is a matter for the scheme, and the scheme refusing to release the deposit without a court order so the whole thing becomes farcical.
Painsmith has historically been involved in deposit protection reform and we would suggest that between the schemes and the courts there needs to be some clarification.
Filed under: England & Wales, FLW Article, comment, consultations, deposits, Housing Act 2004, litigation, possession
20 October, 2011 • 10:01 0
This not really a heading that one would expect on a Landlord and Tenant blog but with the country up in arms in many cases about the sentencing of the rioters and the recent Court of Appeal decisions we thought it prudent to mention the case of Premier Places.
Brandon Weston and David Christopher Williams ran Premier Places, a lettings agency with offices in Worcester and nearby Redditch. They were sentenced this week for a long-running fraud but the sentences were suspended.
Weston who ran the business pleaded guilty to four charges of fraud between 1 April 2007 and 28 February 2008 and was sentenced to 12 months in jail. But the sentence was suspended for two years and so he will not go to jail unless he is convicted of another offence within that time. He was also ordered to serve 250 hours of community service which is an alternative to custody. Williams, the book keeper, was sentenced to serve eight months, suspended for two years plus 150 hours of community service. He pleaded guilty to three charges of forgery of an accountant’s signature.
In sentencing, the Judge at Worcester Crown Court took into consideration the fact that Weston exhibited genuine remorse and was bankrupt with the events having had a devastating effect on his family.
According to prosecutors, Weston had interests in a restaurant, “The Glasshouse” in Worcester, a family home, a house in France and seven other houses in Worcester he was also allegedly taking £8,500 out of the business every month.
Daniel White of Counsel for Weston confirmed that he had signed over to the prosecution or sold all his assets and that his life had been turned upside down following his bankruptcy.
Premier places were a member of TDS (the Dispute Service) which has made good the losses suffered by both tenants and landlords at a cost of some £63,000. As most of you know the deposit should be held in a designated client account which is treated as a trust account and is therefore ring fenced from the assets of any company. However the deposits were not ring fenced despite the reassurances given to the tenants and landlords.
Steve Harriott, the Chief Executive of TDS, says that the sentences are “a kick in the teeth” for the tenants and landlords who were the victims of the scheme and that it “undermined the excellent work of properly self-regulated agents.”
Whatever your opinions maybe on the sentencing of these agents we at PainSmith Solicitors do agree that the industry needs to be regulated and that just like lawyers agents should undergo a minimum amount of training every year.
Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004, legislation
20 September, 2011 • 11:30 4
Sam asked “change of occupancies can be a legal minefield so some clarification on the best procedure would be helpful.”
The document you need is the Deed of Assignment.
The 3 main points to note:
Deposit
We do not know how many of you have been affected by this but DPS in their rules (16c) state that they will only allow registrations to be changed where you have the written consent of the outgoing tenant. So the Deed should include a clause which states that the outgoing tenant permits the landlord to change the registration of the deposit into the name of the new tenant and that the new tenant and outgoing tenant agree to settle the issue of any deposit monies to be passed between them themselves.
Inventory
The Deed also needs to include clauses relating to the inventory. When a tenancy is being assigned the new tenant must be given a copy of the inventory and given the opportunity to go through it before the Deed is signed. This may mean an additional visit to the property. However when the inventory is agreed this should be noted in the Deed and the inventory should be attached to the Deed. If the new tenant takes issue with the condition of the property then have the outgoing tenant and the new tenant deal with that between themselves even if that means the outgoing tenant compensates the new tenant and then have them contact you to finalise the Deed. The new tenant must agree that the condition of the property when they move in is as per the inventory compiled at the beginning of the tenancy. Agents and landlords should not finalise the Deed until the inventory is agreed to as this will affect the landlord’s ability to make any claim on the deposit at the end of the tenancy if the need arises.
It is recommended that you consider both the issues above no matter what scheme the deposit is registered with.
Signature
As you are no doubt aware when tenants enter into a tenancy they do so on a joint and several basis. This means that when one gives notice you can accept it on behalf of all of them and when one defaults in his rent payment you can seek the default amount from those that have already paid. It is due to this joint and several principle that many argue that when there is going to be a change in tenants that the remaining tenants consent should be sought and they should also sign the Deed.
It is therefore advisable that all the tenants that remain also sign the Deed along with the outgoing and new tenant and of course the landlord. However obtaining everyone’s signature is sometimes easier said than done. Whilst you can choose not to release the outgoing tenant unless they obtain the consent of the others, if for example, they are leaving the country they are unlikely to be too concerned about the procedure that they need to follow. Therefore if you obtain the signature of only the outgoing and new tenant along with the landlord the new tenant has at best an equitable right to remain in the property where rent is paid and accepted. This means that possession proceedings can be pursued against all those in the property following the assignment but the assignment needs to be fully explained in the court papers.
The problem with this issue is that there is no legislation or case law that supports the view that everyone should sign or not as the case may be. There is also the concern that in the case of an assured shorthold tenancy the new tenant could argue that he has 6 months security of tenure because he has a new tenancy. At PainSmith, 2 solicitors a barrister and 2 paralegals argued over this issue for some time and still there is no consensus. Therefore whilst the easy option is to sign a whole new tenancy this may not be what the landlord wants because of the security of tenure issue and as such the Deed with only the outgoing and new tenant signing maybe the only option available with the landlord warned of the above risks. To minimise the signature being a problem agents could consider handing tenants a letter at the outset explaining that if there is to be a change that everyone will have to sign a Deed and if they do not that not change will be considered. We can draft a template of this letter for readers to purchase if needed.
Sam thank you for the feedback and sorry for the delay!
Filed under: England & Wales, FLW Article, comment, deposits, legislation, procedure
9 August, 2011 • 21:32 0
in court arguing over a deposit again!
Suurpere entered into an assured shorthold tenancy agreement with the landlords Nice and Anor for a period of 6 months on the 9th January 2009.
For a number of reasons the relationship between the parties began to deteriorate and the landlords served a Section 21 and issued possession proceedings on this notice which was in fact defective.
The landlords did not lodge the deposit with a scheme pursuant to Section 213 of the Housing Act 2004 until the 20 July 2009. On the 10 August 2009 the tenant issued for this breach, which included the landlords’ failure to provide the “prescribed information”.
On the 14 August 2009 the tenant left the premises allegedly due to the landlords unlawful harassment. The deposit was returned to her in full on the 1 September 2009. In their defence the landlord’s confirmed that the tenant had received her rent in full and that their failure to register the deposit was a “innocent technical breach”.
The county court judge applied the decision in Draycott and held that because the landlord had registered the deposit before the tenant issued proceedings, the sanctions in Section 214 (4) (3 times the penalty) did not apply. The tenant therefore appealed.
The landlords claimed that pursuant to the Hashemi case because the tenant “vacated” on the 14th August 2009 the court had no power to make an order under Section 214 (4).
However, the Appeal court held that in Hashemi the date on which the tenancy ended was clear but in this case the tenant did not accept that her tenancy had been determined because she brought a claim for wrongful eviction, claiming that she was forced to vacate as a result of the landlord’s harassment. Therefore Hashemi did not apply.
The tenant relied on Tiensia and argued that due to the landlord’s failure to register the deposit with a scheme and provide the requisite information in the prescribed form she was entitled to an award of a sum of money equal to 3 times the amount of the deposit. The Court of Appeal agreed with this and awarded 3 times the deposit because the tenancy had not been lawfully determined.
Filed under: England & Wales, FLW Article, deposits, Housing Act 2004, litigation
24 June, 2011 • 09:28 0
Some of you will note that we have blogged on the Localism Bill previously and the expected changes to the Housing Act 2004 specifically the sections on the registration of deposit. The amendments were not supported by the Commons and it was assumed that alternatives would be proposed. However, no such alternatives have been proposed and Lord Best has therefore introduced the original amendments into the Lords.
The Bill started its committee stage on 20 June and given that in the House of Lords committees are always ‘committees of the whole House’, i.e. every peer is able to contribute a huge number of amendments are expected.
Filed under: England & Wales, England only, comment, consultations, deposits, Housing Act 2004
25 May, 2011 • 23:56 6
Call me lazy but here’s the summary of the case.
The Court of Appeal in their judgement held that the case of Tiensia did not assist the landlord in this case because the landlord had never complied with the initial requirements or provided the prescribed information and given that the lease had now ceased they cannot do so.
The landlords arguments in defence of the application were:
In response to the above arguments the court held that the legislation does not make it a prerequisite of any application by a tenant that the lease must still subsist. The legislation also does not include a definition for ‘tenant’ although it is accepted that the word is used to refer to former tenants by the DPS. Finally that the word deposit had a clear meaning which was the deposit money paid at the commencement of the tenancy.
Taking all of this into account and the circumstances of this case the Court of Appeal has made the decision that the court cannot make an award for three times the deposit where the lease has expired. Whilst it was recognised that a landlords failure to register the deposit was unlawful it was not a criminal offence for which there were criminal sanctions imposed.
The obvious problem with this decision is that if no liability is going to be imposed then landlords will simply choose not to register the deposit and will only do so if the tenant makes a threat to go to court during the tenancy. When this was put to the court the response was that tenants could still rely on the Act to make an application for the award during the tenancy. In relation to the loss of the benefit of the deposit adjudication services that tenants would experience from this becoming a common strategy the Court noted that they would be able to make use of the small claims track in the county courts…..which was one of the things that tenancy deposit protection was introduced to get away from!
Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004
18 May, 2011 • 22:27 3
Gladehurst granted Mr Hashemi and Mr Johnson (the tenants) an assured shorthold tenancy of a flat for a fixed term of one year from September 2007. The monthly rent was £2,080. A deposit of £6,240 was paid to Gladehurst. The terms of the agreement provided that the deposit was to be held by Gladehurst. The deposit was never registered in accordance with the Housing Act 2004.
The tenants vacated the property in October 2008. Following an inventory check out, Gladehurst paid back the deposit minus various deductions. Mr Hashemi then wrote to Gladehurst requesting receipts and a breakdown of the sums deducted from the deposit and he put them on notice that he would make a claim for three times the deposit under s214.
In February 2009, Mr Hashemi issued a claim against Gladehurst in both his own name and that of Mr Johnson. Gladehurst in its defence pleaded that it had not been fully aware of the impact of the 2004 Act, but accepted that it applied. The defence also asserted that the landlord had all the necessary receipts for the dilapidations and other expenses paid on behalf of the tenants.
In April 2009, District Judge Manners, of her own motion on the papers, struck out the claim on the basis that the tenancy ended before the application was made. Mr Hashemi applied to set that order aside. District Judge Stary dismissed that application in so far as it related to the s214 claim, but reinstated the claim for the deductions of £618. Mr Hashemi appealed.
HHJ Cryan allowed the appeal and found for Hashemi. He noted that the landlord:
… never dealt with the deposit in the correct way in accordance with Act and still retains part of it … There can be no question that in accordance with the scheme of the Act a landlord should not be holding any part of a qualifying deposit at this stage, or at least without the safeguards of the Act being in place.
Gladehurst then appealed to the Court of Appeal.
Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004, legislation
17 May, 2011 • 14:00 0
We believe the decision will be handed down on Thursday.
Filed under: England & Wales, England only, comment, deposits, Housing Act 2004
6 May, 2011 • 15:17 19
The High Court has handed down its decision in the case of Potts v Densley today. Previous blogs can be viewed here.
We acted on behalf of the Claimant who in this instance was the Tenant with James Browne of counsel.
Facts
The landlord first let the property for a term of one year commencing on 12th May 2007. The property was managed by a lettings agent. A deposit was taken of £1,500, which was correctly registered with the TDS scheme. In 2009 an agreement was made between the parties that a new tenancy would be agreed at a lower rent, without the management of the agents. It was agreed that the deposit would be withdrawn from the TDS and paid direct to the Landlord who would be responsible for protecting it themselves.
In order to assist the Tenant the Landlords agreed not to insist on a further deposit upon this renewal. Instead they agreed to wait for the return of the deposit from the agent and then register it upon receipt. The Landlords received the deposit of £1,590 on 18th June 2009. In the meantime on the 15th June 2009, the Tenant exercised a break clause bringing the tenancy to an end on 15th August 2009.
On the 10th August the Landlord offered to pay the deposit back to the Tenant however, the Tenant refused the deposit and insisted that the Landlord register the deposit with a scheme pursuant to their obligations under the section 213 of the Housing Act 2004. The Landlords failed to do so and the Tenant issued proceedings on the 12th August 2009. The Landlords in response no doubt registered the deposit with the DPS custodial scheme on the 17th August 2009, 2 days after the Tenant vacated.
The Prescribed Information as required by s213 (3) and s213 (6) was never served.
Before Her Honour Judge Hallon, it was held that there had been a breach of the requirement to secure the deposit, because the initial requirements of the scheme can not be complied with after a tenancy has come to an end. This is despite the decision in Tiensia. However, the judge refused to award the penalty of three times the deposit because she held that there had been a technical breach of the requirement to secure the deposit and that given the:
“unusual circumstances of the case, it would not be in the interests of justice to do so”.
She did not deal with the prescribed information at all.
The Tenant appealed.
Two main issues were raised in the appeal. First that the judge had no discretion to refuse to impose a sanction once she had decided there had been such a breach and it thus follows that she was wrong to refuse to award the penalty. Second that the judge erred in failing to deal with the issue of the Prescribed Information.
The Judgment of Today
The Honorable Mrs Justice Sharp when referring to the County Court decision above states at paragraph 23 of her judgment:
“it is obvious that the judge had considerable sympathy with the position of the Landlords on the facts found by her and considered it would be unjust for them to be subject to the sanction provided for non compliance, under section 214 (4) of the Act”.
She then went on to say that to award the penalty for a breach of a technical nature when the deposit was not returned due to the insistence of the Tenant pursuant to section 214 would:
“do a very considerable injustice”.
With regards to the 2 points of appeal, Mrs Justice Sharp upheld the County Court decision and based her reasoning on the decision on Tiensia. That is that Landlords had until the date of the hearing of the Tenants application to comply with the provisions and having secured the deposit before the hearing they had a complete defence to the Tenants application.
On the matter of the prescribed information, Mrs Justice Sharp held that due to the failure to plead this in the particulars of claim submitted by the Tenant, the judge had not erred. The issue over the prescribed information was mentioned in court by the Tenant and also mentioned in the Tenants witness statement. However, it was held that this was not clearly pleaded but had it been the judge would no doubt have dealt with it.
Conclusion
Whilst we welcome the release of the decision the area of law is not concluded. It does appear that you can register the deposit after the tenancy but the judge did not deal with implied or the actual requirements of the scheme because they had not been pleaded. It may be the case that it is an implied “initial requirement” of all 3 deposit schemes that the deposit be registered before the tenancy ends. Even if it is not an implied requirement is it likely that it will become explicitly stated requirement!
There of course remains the decision of Hashemi v Gladehurst which has the potential of changing this decision.
Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004, legislation
4 April, 2011 • 11:48 14
After the introduction of Tenancy Deposit Protection agents are required, where they are holding deposits, to do so as a stakeholder. We have noticed that on the Helpline there is still some confusion about what this actually means.
The case of Manzanilla Limited v. Corton Property and Investments Limited; John Maciver (Southport) Limited; Rootbrights Limited and Halliwell Landau (a firm) [1996] EWCA Civ 942, sets out the position of a stakeholder very clearly:
Where a stakeholder is involved, there are normally two separate contracts to be considered. There is first the bilateral contract between the two principals, the landlord and tenant in our case, which contemplates two possible alternative future events and by which the parties agree to pay a sum of money to a stakeholder to abide the happening of one or other of them. In the case of a tenancy agreement, the relevant event would be the failure to maintain the Premises for the duration of the agreement or to pay any costs associated with the occupation of the Premises, such as utility bills. The second contract is the tripartite contract which results from the deposit of the money with the agent as stakeholder on terms that he is to keep it until one or other of the relevant events happens and then pay it to one or other of the parties accordingly. The agent as stakeholder is a party to the second contract but not the first. The agent’s rights and obligations are not normally expressly spelled out. They are implicit in the transaction itself, and must be discovered, not by implying terms, but by analysing the relationship of the parties which arises from the deposit of the money.
The following propositions emerge from the authorities:
Whilst the position seems clear in light of the above it is strongly recommended that the agent advises both the landlord and the tenant what the stakeholder principle entails and assures them that no action will be taken until the dispute between them is resolved.
We find more often than not that agents become embroiled in dilapidation disputes at the end of a tenancy and to the frustration of landlords fail to refer the matter to either the appropriate TDPS in the correct time period or advise the parties to seek legal advice. Whilst some agents perseverance is commendable sometimes walking away and allowing the landlord and tenant to talk to each other is the better option.
Filed under: England & Wales, England only, comment, deposits
14 March, 2011 • 10:41 2
As some of you will recall we mentioned some possible changes to the Tenancy Deposit Protection legislation. These TDP changes do not however, appear to have survived the committee stage of the bill. This is not to say that they will not get back in later but it is of some concern that what we considered to be improvements has been overlooked.
Filed under: England & Wales, FLW Article, comment, consultations, deposits, Housing Act 2004, review
2 March, 2011 • 09:36 1
The Localism Bill rather surprisingly (or not, depending on which side you are on) includes new sections which are designed to make amendments to the Housing Act 2004 and specifically to the tenancy deposit protection provisions.
The changes are intended to clarify the concept of ‘initial requirements’ and remove the late protection loopholes as discussed in Draycott v Hannells and Tiensia v Universal Estates. The Bill also hopes to remove the loophole of returning the deposit to the tenant in full prior to any proceedings and then asserting that s214(4) does not apply because in the absence of a deposit they can not be subject to the three times penalty.
If the changes are implemented tenants should find it far easier to pursue landlords or agents who have failed to protect their deposits and landlords will not be able to register the deposit and escape liability after the initial 14 day period.
From the landlords point of view the changes are an improvement because it is hoped that the law will be a little more certain with less grey areas and loopholes! The Bill will also be introducing a variable penalty rather than a fixed 3 times the deposit penalty. The tenant will be entitled to their deposit back or have it paid into the custodial scheme and then will also receive a further sum of money equivalent to not less than the deposit and not more than three times the deposit.
The benefit of this regime for the landlord is that when making an order the Court will consider why the landlord did not protect the deposit, what the landlord knew or should have known about his obligations, and how quickly he resolved the situation. This means that landlords that are still ignorant of the legislation may still be penalised but they may be subject to a more manageable penalty.
It is not certain or clear whether the amendments will make it into the legislation but given the case law surrounding this issue it is likely that the amendments will become law.
Filed under: England & Wales, FLW Article, consultations, deposits, legislation
18 February, 2011 • 10:09 11
While we await the outcome of Potts v Densley & Pays in the High Court, followers of deposit protection litigation might be interested in a case with similar facts to Potts, but a different outcome in the county court.
Gemma Shepley v Majid Yassen, Tameside County Court, Thursday 13th January 2011 (Unreported), has been spotted and commented on by Nearly Legal.
To recap, in Potts v Densley & Pays the main issue is, can the tenant sue for the usual penalties where the landlord has protected the deposit after the end of the tenancy but before the court hearing and failed to provide the prescribed information?
The Shepley v Yassen facts mirror Potts: the deposit was not protected during the tenancy, and after the end of the tenancy the tenants issued proceedings (in May 2010) for the usual remedies. The deposit was protected in August 2010 with DPS. But the prescribed information was never served on the tenants.
The (County) court held that protection after the end of the tenancy was not acceptable. The cases of Draycott and Tiensia were distinguished on the basis that in those cases the deposits had been protected late but had still been placed into schemes before the tenancy ended.
NL comments that this “seems to be absolutely correct. If a landlord can put the deposit into protection after the tenancy has ended then it makes a total nonsense of the legislation and almost encourages a “wait and see” attitude.”
Painsmith agrees. Currently no-one is sure of their position when a deposit is protected after the end of the tenancy and this is disconcerting for both landlords and tenants. With the Potts v Densley & Pays judgment still not handed down, landlords, tenants and lawyers are indeed having to wait and see, whether we want to or not. A High Court decision that deposits cannot be protected after the end of the tenancy would be welcomed.
Filed under: England & Wales, FLW Article, deposits, Housing Act 2004, legislation, litigation
9 February, 2011 • 17:38 2
As advised on the 4th February 2011, PainSmith attended the hearing at the High Court today.
There were 3 issues considered by the court, 2 of which were subsidiary and therefore not relevant for the purposes of this blog.
The main issue before the court was, can the tenant sue for the usual penalties where the landlord has protected the deposit after the end of the tenancy, albeit before the court hearing.
The judgment has been reserved but we hope that the court will hand it down in late March and obviously we will publish the decision as soon as we receive it on this blog.
Filed under: England & Wales, FLW Article, deposits, guidance, procedure
7 February, 2011 • 11:11 2
We sometimes get asked about the apparent arbitrariness of judges when it comes to ordering the release of the deposit when making an order for possession based on rental arrears. Some judges make orders along the lines of “All or any deposit monies paid by the Defendant to the Claimant be credited to and set off against judgment debt together with any costs outstanding”. Others refuse to deal with the deposit at all and say that it is a matter for the relevant deposit protection scheme despite the landlord/landlord’s representatives making submissions requesting an order such as the above.
The fact that the judge does not make reference to the deposit in the order does not stop the landlord from claiming the deposit as payment towards any judgment for arrears, interest and legal costs obtained, however you will have to follow the prescribed process that is required under the rules for each scheme. For example, the DPS requires landlords to make a single claim and obtain a statutory declaration before they agree to the release of the money to the landlord. It is therefore important for agents to familiarise themselves with the rules of the scheme that they are registered with when advising landlords on how to proceed.
You can view all our posts on deposits by following this link.
Filed under: England & Wales, FLW Article, deposits, guidance
4 February, 2011 • 10:54 10
On Wednesday 9th February 2011 PainSmith has a case appearing in the High Court which should provide a further binding decision on Tenancy Deposit Protection under the Housing Act 2004.
In Potts –v- Densley & Pays there are two issues for the Court to consider:
1. Whether the trial judge had made the wrong decision in refusing to award the penalty pursuant to s214 of the Housing Act 2004 for three times the value of the deposit despite having found that the Landlord had breached s213 by failing to lodge the deposit with a deposit scheme.
2. Whether the prescribed information required to be given to the tenant pursuant to s213 (5) and s213 (6) of the Act had been complied with in these particular circumstances.
This case relates to the registration of the deposit post the expiration of the tenancy and PainSmith is acting for the Claimant. Although it is unlikely that we will receive a decision on the 9th February it will no doubt be reported on this blog as soon as we receive it.
Filed under: England & Wales, FLW Article, deposits, Housing Act 2004, legislation
11 November, 2010 • 10:58 37
At 0945 this morning, 11 November 2010, the Court of Appeal handed down its judgement in the two conjoined cases of Universal Estates v Tiensia and Honeysuckle Properties v Fletcher. The decision was a majority decision of Lord Justices Rimer and Thorpe, with Lord Justice Sedley dissenting.
Facts
The facts in the two cases were as follows. In Universal Estates the tenant was taken to Court for possession for arrears of rent. The possession claim was adjourned after she indicated her intention to counterclaim, although that counterclaim was not for an unprotected deposit. The deposit was then registered with MyDeposits but it was, of course, late, more than 14 days from the date of receipt. The High Court has held, in the case of Draycott v Hannells Lettings, that registration more than 14 days after receipt of the deposit cannot be penalised. However a breach of the initial requirements of the relevant deposit scheme can incur the penalties and it was argued in Universal Estates that the MyDeposits scheme had such an initial requirement. In Honeysuckle a claim for possession for rent arrears was also commenced. The tenant’s counterclaimed on the basis that the deposit was not registered. The deposit was protected before the hearing of the matter by the Court, again with MyDeposits.
Therefore the issues before the Court of Appeal were whether it was permissible to protect the deposit more than 14 days after its receipt and at what date there should be a consideration of the protection status of the deposit, at the date of issue of proceedings or at the date of the Court considering the situation at a hearing.
Decision
In short, the Court considered that the High Court had decided correctly in Draycott v Hannells and that late protection is acceptable. Where the Court of Appeal has gone further is that it has ruled that provided protection has been done, and the correct information provided, before the Court comes to consider the matter at a hearing then that is acceptable, even after proceedings have been issued for non-protection. Therefore the landlord’s deadline for compliance is the Court hearing itself and not the date by which proceedings have been issued. The Court did hold that if a tenant is compelled to issue proceedings to force the protection of a deposit then they are probably entitled to their legal costs in so doing. It should be noted here that the Court emphasised the importance of pre-action conduct and discouraged any attempt to ‘ambush’ landlords by issuing proceedings for an unprotected deposit without writing to them first.
The Court further held that no scheme can impose an initial requirement that a deposit must be protected within 14 days, a failure to adhere to which will allow a tenant to claim against the landlord. Therefore the current imposition by The Dispute Service scheme of a requirement to register within 14 days is no more than an administrative requirement for that scheme and registrations with that scheme made after 14 days are not invalid for the purposes of tenancy deposit protection legislation although the scheme may consider them violations of its rules and may therefore adjudicate on the deposit in a manner that is against the landlord’s interests.
The Court made no comment on what the correct position should be if the deposit is not protected until after the tenancy has ended. This remains a live issue and one which must be considered.
All three judges commented that the interpretation which they have been forced into is totally unsatisfactory and they found it hard to believe that this is what Parliament intended when it made the legislation. The consensus certainly appeared to be that the legislation is now toothless and largely without value. The onus now seems to be on Parliament to consider reform of the legislation as a matter of urgency to restore a proper balance.
Filed under: England & Wales, FLW Article, deposits, Housing Act 2004
9 November, 2010 • 00:22 2
The judgement in the two conjoined Court of Appeal cases of Universal Estates v Tiensia and Honeysuckle Properties v Fletcher will be handed down on Thursday 11 November 2010 at 0945.
As regular readers of this blog will know these cases deal with tenancy deposit protection matters and relate to late protection in the MyDeposits scheme and protection after Court proceedings for non-protection have already begun.
There is a rumour that the landlords in both cases have won but we do not know this for certain. The precise position is likely to be much more complex than this.
We intend to be at Court for the decision and will be posting the results as soon as possible on the 11th.
Filed under: England & Wales, FLW Article, deposits, Housing Act 2004
9 September, 2010 • 08:42 0
The Dispute Service, operators of one of the two insurance backed tenancy deposit protection schemes will shortly be providing guidance as to their position on the changes to the maximum rent threshold under the Housing Act 1988.
More importantly we understand that TDS will be updating document TDS G which contains the prescribed clauses that TDS require to be placed in any tenancy agreement that is to be dealt with under the scheme. There are to be two different sets of clauses. One set will be for Assured Shorthold Tenancies that are being formally registered with TDS to comply with the requirements of the Housing Act 2004 (although these are unchanged from previous versions) while the other are for Non-Housing Act tenancies which are not being registered but wish to make use of TDS to resolve any disputes over the tenancy deposit at the end of the tenancy.
It should be noted that TDS will now be charging for their adjudication services in relation to disputes over Non-Housing Act tenancies.
We understand that the new version of TDS G will be available from Monday 13 September. On that date it will also be possible to purchase ASTs and Non-Housing Act tenancies incorporating the new clauses from the PainSmith webshop. It will also be possible to purchase deeds of variation which will insert the relevant information for any of the three protection schemes into a tenancy agreement which is converting to an AST on 1 October.
You can view all our posts on the AST threshold change by following this link.
Filed under: England & Wales, deposits, rent threshold change
16 August, 2010 • 10:03 1
The two conjoined appeals of Universal Estates v Tiensia and Honeysuckle Properties v Fletcher were heard by the Court of Appeal on 7 May 2010. These are both appeals relating to the tenancy deposit protection provisions introduced by the Housing Act 2004.
The judgement has been reserved and we are informed that further questions were asked of the various parties involved fairly recently. As the Court of Appeal is now in recess until 1 October there is now unlikely to be a any decision in these key cases until after that date.
UPDATE- The Court of Appeal has now handed down its decision. A full report is available here.
Filed under: England & Wales, deposits, Housing Act 2004
6 August, 2010 • 15:40 10
Looking through the latest edition of Legal Action there are two cases on tenancy deposits. These are County Court cases and so not binding but they are of interest.
In O’Brien v Jones, Northampton County Court, 12 February 2010 it was claimed by the tenant that teh landlord had failed to provide the full information prescribed by the Housing (Tenancy Deposits) (Prescribed Information) Order 2007. Specifically, the landlord had not provided her address and telephone number. However, the agent’s address and telephone number were provided on other documents. DJ Watson found that this was sufficient and that, in any event, the situation had been remedied prior to the hearing. This does address one remaining area of uncertainty as there has been no clear decision on whether the prescribed information does actually require the provision of the landlord’s address and telephone number or whether providing the agent’s details is enough. Understandably many landlords who are spending money on a managing agent are reluctant to give their personal details to the tenant on the basis that they do not want to deal with them. It seems that DJ Watson agrees that the agent’s details are sufficient.
In Baafi v Mapp, Central London County Court, 24 June 2010 the landlord had registered the deposit with MyDeposits. He had failed to properly appreciate that the MyDeposits scheme does not and cannot provide all the information required by the Prescribed information Order. In particular, MyDeposits makes clear on its certificate that it does not tell the tenant what to do at the end of the tenancy if the landlord or agent cannot be contacted and also does not explain what things the landlord will retain the tenancy deposit against. MyDeposits expects these items to be dealt with in the tenancy agreement. It should be noted here that DPS does much the same thing. The landlord was using a tenancy agreement which the Court described as ‘archaic’ which did not clear up these areas. On appeal the tenant was awarded the usual three times the deposit penalty and the landlord’s claim for possession based on a section 21 notice was dismissed as the notice could not be relied on until all the proper information had been given to the tenant.
Tenants should note that PainSmith solicitors is now operating a “no win, no fee” service for tenants whose tenancies have ended and whose landlords have not properly protected their deposits. Contact us for more details.
Filed under: England & Wales, FLW Article, deposits
4 August, 2010 • 10:10 4
The Scottish Executive has published a consultation, including draft regulations, for the operation of tenancy deposit protection schemes in Scotland.
Unlike in England & Wales the protection scheme in Scotland is intended to apply to all residential tenancies, not just Short Assured Tenancies under the Housing (Scotland) Act 1988. This means that the protection regime will also include lettings to companies. However, the scheme only applies to monetary deposits so where a company offers (and the landlord will accept) a guarantee the scheme will not apply. There is no maximum rent threshold under the Housing (Scotland) Act 1988 so there will be no exception for high value tenancies either. Holiday lettings will fall outside the legislation and there may be a raft of further litigation as to what constitutes a holiday for this purpose.
The proposals look to have benefited from experience in England & Wales. The draft regulations are detailed and consideration has clearly been given to closing loopholes. One issue remains somewhat unclear however. The consultation and the draft scheme rules both make reference to the deposit being lodged within 30 days. However, the regulations as drafted appear to allow the tenant to begin Court action immediately. This is probably something that needs to be addressed.
Implementation will occur 6 months after the regulations come into force and all new tenancies created after that point or tenancies which are renewed (either explicitly or by way of tacit relocation) will have to comply with the new procedures.
Penalties for non-compliance are similar. On application the Court can order the deposit to be protected or returned. The Court is also empowered to award a sum not exceeding three times the sum of the deposit to be paid to the tenant. This means that the Court has a discretion in relation to the actual size of the award which will negate the charge unfairness which has been laid against the mandatory penalty south of the border.
The regulations appear to envisage the existence of both custodial and insured schemes. This is a bit of a problem as we are not aware of any party who is interested in running a deposit scheme in Scotland. None of the three organisation operating in England & Wales have been especially keen to expand their operations up north. In addition the size of the private rental sector in Scotland is far smaller and it is debatable whether it is large enough to support more than one scheme, particularly if that scheme is only operating in Scotland. There appears to be a recognition of this issue implicit in the regulations as they state that they cannot come into force until a scheme has been approved by the Scottish Executive. This may be a recognition of the difficulty that the Executive may have in persuading an organisation to operate such a scheme.
The consultation contains a series of questions and is open for comments until 3 October 2010.
Filed under: FLW Article, Scotland, deposits
30 April, 2010 • 16:32 14
Next week is a big week for political parties but it is also a big week for tenancy deposit protection.
Two key cases, Universal Estates v Tiensia and Honeysuckle Properties v Fletcher, are both being heard together before the Court of Appeal on 7 May.
Universal Estates concerns late registration of a tenancy deposit with the MyDeposits scheme. At first instance, the County Court held that the MyDeposits scheme had an initial requirement that the deposit be paid within 14 days on the basis of a statement made on a leaflet supplied to the tenant by the scheme. This is in direct contrast to the ruling of the High Court in the case of Draycott v Hannells Lettings which we have discussed on this blog at length.
The facts in Honeysuckle Properties are unknown but it is a case on which the Government are intervening and was originally intended to be the one that set the marker for all tenancy deposit protection cases.
The Court of Appeal ruling will be important and could overturn the High Court decision in Draycott so it will no doubt be awaited with baited breath by a number of different groups.
Filed under: England & Wales, deposits, Housing Act 2004
23 April, 2010 • 10:52 3
As we have previously reported the maximum rent threshold for Housing Act 1988 tenancies is to be altered on 1 October from £25,000 to £100,000.
One of the key questions has been what the position will be for tenancy deposits taken in respect of tenancies which start prior to 1 October and are not ASTs but which will become ASTs on 1 October. There has been some uncertainty as to whether these tenancy deposits will need registration with an authorised scheme or not. If they do need registration then there is some doubt as to when that will need to occur.
It seems that DCLG thinks they will need registration. They have been advising stakeholders that:
Our intention is that these new assured shorthold tenants should have the same protection as existing tenants, so if the tenancy started after 6 April 2007, the landlord will have to protect the deposit.
It is debatable whether they can, in fact, achieve this as the trigger for the protection of a deposit is receipt in connection with an AST. These deposits were received prior to the change and were not received in accordance with an AST and so did not require protection as at the time they were received. Clearly, however, the DCLG thinks different and will seek to encourage the Courts to rule on this basis.
The DCLG recognises that landlords will not have been able to register deposits within 14 days of receipt but states that
we would expect them to protect the deposit as soon as possible.
Apparently they will ask the Courts to give landlords leeway on this issue although after the ruling in Draycott v Hannells the Courts should not be acting on late registration anyway so it is hard to see what useful guidance can be provided.
While we have some doubts about the validity of the DCLG position the message is clear. Protect all tenancy deposits as soon as possible and definitely promptly after 1 October. We hope the deposit protection schemes are prepared for the rush.
Filed under: England & Wales, deposits, guidance, Housing Act 2004, rent threshold change
12 February, 2010 • 10:45 12
We are pleased to report that the High Court has handed down its decision in the case on Tenancy Deposit Protection that we have previously mentioned on this blog.
In Draycott v Hannells Lettings Ltd, PainSmith Solicitors have been acting for the Defendant lettings agency and have used Mr James Browne of Lamb Chambers as counsel. The facts of the case were undisputed and the essential issue is that Hannells registered the deposit with the custodial scheme operated by DPS more than 14 days after receipt.
The tenants claimed for the usual penalty of three times the value of the deposit and after decisions in their favour at lower courts the matter came before Mr Justice Tugendhat in the High Court.
There were three issues before the Court:
If point 1 was found in favour of Hannells they could not be liable under any circumstances but if they failed on this point then both points 2 and 3 would also have ot be found in their favour for them to escape liability.
On point 1 the Court decided that the wording of section 212(9)(a) was clear in stating that in the section of the Act relating to deposit protection:
references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies…
Accordingly, the Court found against Hannells on this point.
In relation to point 2 the Court looked at the wording of section 213(6) which reads:
(6) The information required by subsection (5) must be given to the tenant and any relevant person—
(a) in the prescribed form or in a form substantially to the same effect, and
(b) within the period of 14 days beginning with the date on which the deposit is received by the landlord.
and the wording of section 214(1)(a) which provides that an application can be made to the Court where a person believes:
(a) that the initial requirements of an authorised scheme (see section 213(4)) have not, or section 213(6)(a) has not, been complied with in relation to the deposit;
The Court noted that the Circuit Judge whose decision was being appealed had taken the view that to suggest that the 14 day requirement set out in s213(6)(b) did not attract the penalties set out is section 214 was to “drive a coach and horses” through the intent of the Act as it would permit a landlord to not protect a deposit until such time as they were challenged in Court. However, it also heard submission that this view was overly draconian as it penalised innocent error and that a failure to protect the deposit properly would always be penalised by section 215, which prevents the service of a section 21 notice while the deposit remains unprotected. Ultimately the latter position prevailed and the Court agreed that the Act itself does not impose a requirement that the deposit be protected within 14 days as long as it is protected prior to the matter coming before a Court.
The third point was more complex. Initially, none of the schemes had formally set out any initial requirements. In December 2008 the TDS scheme altered its rules to make clear that it had an initial requirement that any deposit registered with it be protected within 14 days of receipt. It was common ground that section 214(1)(a) allowed for a penalty to be imposed where an initial requirement had been breached. What was at issue was whether the DPS scheme imposed such a requirement. On looking at the DPS rules it could be seen that they had a clause stating that the deposit should be lodged with them within 14 days of receipt. However, there was no mention of this being an initial requirement. The Court took the view that a simple restatement of the Act did not amount to an expression of an initial requirement and that while it could be seen that an initial requirement of the DPS scheme was that a deposit be lodged with it it could not be taken that it was required that the deposit be lodged within 14 days. Therefore, this point was found in favour of Hannells.
Therefore, although it was found that Hannells were potentially liable for a failure to lodge a deposit it was found that their late lodging of that deposit with the DPS was not a breach of the Act or of the initial requirements of the DPS scheme and accordingly the appeal was allowed and the judgement against Hannells of the lower Court was set aside.
Therefore as things currently stand agents are liable for a failure to register the deposit, late registration does not automatically attract the penalties set out in section 214, and the DPS scheme has no initial requirement that the deposit be registered with it within 14 days of being received.
This is by no means the end of the matter though. This case is still capable of being taken to the Court of Appeal and there are at least two more cases which will see judgements handed down from that Court within the next few months and they could have the effect of altering the position again.
Although, there are other decisions from more senior Courts in the pipeline, this is the first binding decision on the issue of Tenancy Deposit Protection and, as such, is very important. We are pleased and proud to have been involved in this case.
A copy of he handed down judgement is available in Word format.
Filed under: England & Wales, deposits, Housing Act 2004
11 February, 2010 • 11:45 3
We have been informed that a decision in relation to the High Court case of Draycott v Hannells Lettings is to be handed down tomorrow (Friday 11 February 2010).
This is a case relating to Tenancy Deposit Protection in which PainSmith has been acting for Hannells. It represents the first binding decision in relation to this area.
Filed under: England & Wales, deposits, Housing Act 2004
24 January, 2010 • 16:11 9
Tomorrow (Monday 25 January 2010) PainSmith has a case appearing in the High Court which should provide the first binding decision on Tenancy Deposit Protection under the Housing Act 2004.
In Draycott v Hannells Lettings Ltd there are two issues for the Court to consider.
PainSmith is acting for the Defendant lettings agent in this case which is expected to have far-reaching effects across the industry. There is unlikely to be a final decision tomorrow but it should follow relatively shortly and will, no doubt, be reported here when it does.
UPDATE: Mr Justice Tugendhat has reserved his decision. At this stage we do not know when a final decision will be rendered. We will post more information here as it becomes available.
Filed under: England & Wales, deposits, Housing Act 2004
11 November, 2009 • 12:41 1
District Judge Burn at Bromley County Court has ordered a landlord to pay 3 times the deposit and to return of the initial deposit paid to his former tenants due to his failure to lodge the deposit with an authorised tenancy deposit.
In the recent case of Da Costa v Pinter the claimants were assured shorthold tenants whose tenancy had come to an end. The tenancy agreement required the rent of £1,950.00 a month and a payment initially of £4,200.00. A dispute arose with regards to the Deposit and the tenants issued court papers in order to recover the deposit amount. The court papers were then subsequently amended by the tenants for a further claim of £6,750.00 representing 3 times the initial deposit amount under the Housing Act (HA) 2004 section 214 (4). After proceedings were issued the deposit was then placed in an authorised tenancy deposit scheme.
The judge confirmed that she was happy that the £4,200.00 included a deposit of £2,250.00 and that the agent had described it as such. There was a clear breach of section 213 of the HA 2004 since the deposit was not paid into a scheme within 14 days of receipt. The judge was satisfied that the ‘initial requirements’ of a tenancy deposit scheme were not met and that the remedies of ss 213 and 214 therefore applied, that is the return of the deposit and an award of 3 times of the deposit. Undoubtedly, the judge was assisted in her decision by the fact that the tenancy had actually come to an end prior to the deposit being protected.
This case illustrates the ongoing problems both landlords and agents are having with the tenancy deposit schemes. The case law surrounding this area is mostly unreported however having viewed some judgements there does appear to be some uncertainty over whether the ‘initial requirement’ is to both lodge the deposit with a scheme within 14 days and to provide the prescribed information within the same period or whether lodging the deposit alone is enough. This uncertainty will no doubt continue until a court of record (High Court or above) is asked to rule on the point. Until such a time agents and landlords are warned that judges will decide each case as they see fit given that the decisions of the lower courts are not binding on other lower courts.
In order to assist with the uncertainty The Dispute service (TDS) has amended its rules and now confirm that its initial requirements are that the deposit be registered with the scheme within 14 days of receipt and that the prescribed information must be provided within the same 14 days. Consequently members that miss the 14 day deadline will automatically find themselves in breach of the initial requirements of the TDS and risk being ordered to pay 3 times the deposit.
In the case of Universal Estates v Tiensia MyDeposits have also been held to have similar ‘initial requirements’ to the TDS.
It is also vital that agents are particularly careful when landlords are registering the deposit themselves. Section 212 (9) (a) of the HA Act states:
References to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies.
This is of course open to interpretation but from an initial reading it seems that where the landlord fails to lodge the deposit the tenant may have a claim against the agent for the landlord’s failure to register. County Courts appear to support this position and agents may, therefore, wish to consider including a indemnity in their terms of business protecting them from the landlords failure. It may be prudent for the agent to seek confirmation that the landlord has registered with a scheme prior to sending the deposit to him or in the case of the custodial scheme that is Deposit Protection Service (DPS), sending the deposit to them directly. However this does not deal with the issue of relying on the landlord to ensure that the prescribed information is also provided to the tenant within the 14 day deadline. For a more ‘belt and braces’ approach, agents may wish to consider insisting on registering the deposit themselves through their own scheme membership.
The purpose behind the HA 2004 is to secure deposits and to return them quickly to tenants in the event of no dispute or to refer the matter to adjudication where there is, without the need for court. Landlords that do not secure the deposit within 14 days of receipt and then attempt to deduct monies upon the expiry of the tenancy are seen to be flouting the sprit of the legislation and agents need to ensure that they are not seen in the same light.
Filed under: Uncategorized, deposits, Housing Act 2004, litigation
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17 February, 2012 • 18:21 2
TDS
We have blogged on the issues surrounding the release of Deposits following possession proceedings here. Many of you will be interested to note that the TDS have replied to this blog here.
Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004