Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

30 April, 2010 • 16:32 14

More Key Tenancy Deposit Cases Come to Court

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, ,

23 April, 2010 • 10:52 3

CLG View on Tenancy Deposits After 1 October

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, , , ,

13 April, 2010 • 09:30 2

Selective and Additional Licensing Consent

We have previously posted on proposed changes to the consent process for local authorities wishing to introduce selective or additional licensing of HMOs or other properties in their areas of responsibility.

The government has now published a summary of the responses to the consultation it carried out on this topic. The response break down much as expected. Local Authorities supported a move to give a general unfettered consent and opposed anything which would limit this. Landlords were opposed to the whole idea.

The plan going forward is not clear. The summary report states that the responses will now be considered. With the election in the offing it now seems unlikely that anything will happen before any new government takes power and therefore what happens will depend entirely on the outcome of the election as the Conservatives are unlikely to give a blanket consent.

Filed under: England only, ,

12 March, 2010 • 16:22 48

New Planning Categories for HMOs

We have previously reported that the Government was planning to amend the Town and Country Planning (Use Classes) Order 1987 to create a separate planning class for HMOs. The changes will come into force on 6 April 2010. The changes will only apply to England as Wales has its own devolved powers to deal with these matters.

The statutory instrument to carry out this change has just been published on the OPSI website as the The Town and Country Planning (Use Classes) (Amendment) (England) Order 2010.

The new planning classes will be as follows:
Class C3 has been amended to cover single households of up to six occupiers.
A new class C4 has been created which will cover HMOs of up to six people.
Properties with more than six occupiers will continue to be outside any planning category.

These changes will bring the definition of HMO for the purposes of planning in line with those used in the Housing Act 2004. The upshot of this issue is that any property which is an HMO (irrespective of whether it requires a licence) will now need to have a separate planning approval. The government has previously stated that they do not consider that this applies to tenancies which are currently in place as at 6 April but will presumably an application will need to be made on renewal. However, it is not clear how local authorities will view this area.

This will undoubtedly cause a massive increase in the number of planning applications and therefore the number of appeals. This will therefore mean yet another increase in cost to landlords and the amount of paperwork. Inevitably, many landlords will simply decline to let to sharers to avoid the hassle.

Filed under: England & Wales, England only, , ,

12 February, 2010 • 10:45 13

High Court decision on TDP

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:

  1. Could an agent be held liable for a failure to protect a deposit or was it entirely a matter for the landlord;
  2. Was the requirement to register the deposit and give the required information within 14 days as required by section 213(6)(b) of the Act subject to the penalties set out in section 214; and
  3. Is it an actual or implied initial requirement of the DPS scheme that the deposit be registered within 14 days of receipt.

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, ,

11 February, 2010 • 11:45 3

Decision in High Court TDS Case

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, ,

29 January, 2010 • 11:30 7

New Announcements on HMOs

The Department for Communities and Local Government has today published its response to comments made on a previous consultation on the planning status of HMOs and has also launched a new consultation in relation to additional and selective licensing powers.

In July 2009, the CLG launched a consultation on possible ways to deal with the creation of ‘HMO ghettoes’, where large numbers of HMO properties cluster together in a small area. We reported on this here. This issue is particularly prevalent in areas with high student populations. There were several proposals to deal with this but the most highly advocated, and the one most supported by the consultation was to create a new planning use class specifically for HMOs. Currently, dwelling-houses make up the C3 use class and are defined as properties comprising one household with up to 6 occupants. The definition of household is unclear but is not the same as that used by the Housing Act 2004. HMOs falling outside this class were uncategorised and required planning permission to be sought but a large number of smaller HMOs fell within the class and had no involvement from planning officers. The proposed changes will mean that a new use class is created which will be for HMOs specifically and will replicate the definition in s254 of the Housing Act 2004. That is properties rented to three or more occupiers where those occupiers do not form one household. The change will be implemented by an amendment to the Town and Country Planning (Use Classes) Order 1987 which will come into effect on 6 April 2010. In short, properties to be rented to three or more sharers after that date will require planning consent. This change has enormous potential effects. A large number of properties are let to small groups of sharers and are therefore HMOs without ever becoming licensable. Properties that are to be let in this manner after 6 April will require planning permission to be sought in advance. As the government accepts, this will lead to a significant rise in planning applications. What it appears not to have realised is just how large that rise could be and, in addition, that there will be a concomitant rise in planning appeals. It is not yet clear whether an application for the new use class will be met by an addition of that class to the current one or whether the use class will be changed. If it is the latter then landlords will, of course, need to make another application to change the use back again if they wish to let to a family. Landlords will therefore need to choose between letting to families or as an HMO or resign themselves to making regular applications for a change of use.

In addition the the response the CLG has published a ‘short’ consultation for a change in the process by which local authorities gain permission for additional and selective licensing schemes under the Housing Act 2004. Additional licensing allows for a local authority to license HMOs that fall outside the mandatory licensing set by Government. Selective licensing allows for the licensing on non-HMO landlords in areas of low-housing demand where there is a problem with anti-social behaviour. Currently in order to be permitted to carry through such licensing a local authority must carry out a consultation exercise and then seek the permission of the Secretary of State to go forward. The intent is to give a blanket permission to all local authorities so that they need merely carry out the consultation exercise. On the face of it this seems perfectly reasonable. However, when we consider that a number of authorities have been refused permission for additional or selective licensing or have been asked to provide more information then there must be doubt as to whether it is appropriate for this control to be removed. There is certainly a danger of a number of costly and time-consuming judicial review applications in order to challenge the local authority consultation process. For a landlord facing a prosecution such action, while unattractive, may be preferable to a substantial fine.

Although the Government, in announcing these measures reiterated their commitment to a landlord registration scheme this is something that will require primary legislation and, unsurprisingly, will not make it into this Parliament and, unless Labour wins the election, presumably not into any Parliament. One is therefore left to wonder if the latter measure is an effort to introduce partial landlord registration by the back door.

We do not usually comment on political matters, but it is disturbing to see these measures, along with others, being introduced in very short order in April. It immediately gives rise to concerns as to the level of consideration that has been given to the measures and their likely effects. It also gives the appearance of measures being forced through prior to an election in order to score points with the electorate or simply on the basis that the Conservative party, should they win an election, will be too busy to reverse them. One hopes that is not what is going on but if it is then it is sad to see cheap political point-scoring at the expense of the private rented sector which houses a significant percentage of the population and makes a substantial contribution to, an already weakened, economy.

Filed under: England & Wales, , ,

24 January, 2010 • 16:11 9

Tenancy Deposit Protection- A Binding Decision

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.

  1. Whether an agent can be pursued for the usual penalties under s214 due to the deposit being unregistered; and
  2. Whether the penalties under s214 bite merely on late registration or only if the deposit is unregistered when the Court comes to consider the matter at hand.

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, ,

13 January, 2010 • 10:52 0

Selective Licensing

Selective Licensing

Selective licensing is provided for by Part 3 of the Housing Act 2004 and is related to the licensing of HMOs. Unlike, normal HMO licensing however, it allows for the licensing of any rented property in a designated area irrespective of its HMO status. To undertake selective licensing the individual local authority must make an application for permission to the government sowing that the area is one of low housing demand or that the area is one suffering from anti-social behaviour.

Local authorities are supposed to publicise their application process and the making of a selective licensing designation but it seems that these often pass people by.

The following Local Housing Authorities are known to have gained permission for selective licensing in some or all of their areas of responsibility although they may not yet all have schemes in operation:

  • Salford
  • Manchester
  • Gateshead
  • Middlesbrough
  • Sedgefield
  • Blackburn with Darwen
  • Hartlepool
  • Burnley
  • Easington
  • Bolton
  • Newham

It should be made clear that the failure to obtain a licence for a property that is subject to selective licensing carries the same criminal and civil penalties and restrictions as would be imposed in relation to an HMO that has no licence and, indeed, a landlord in Salford has already been prosecuted and fined due to a failure to have a licence required under a selective scheme. Notably, however, the fine was relatively small at £2,500.

It is usually best to keep an eye on the LACORS website as they tend to be aware of the applications of local authorities for selective licensing consent. This is definitely something that local authorities in England and Wales are being encouraged to carry out and will probably continue to grow during the course of the year.

Filed under: England & Wales, , ,

11 November, 2009 • 12:41 1

TDP. New Case and a Summary

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, , ,

4 November, 2009 • 20:06 3

EPCs and the HHSRS

We have been surprised to be told of a few cases where Local Housing Authorities are serving improvement notices under the Housing Health and Safety Rating System on landlords because they have a very poor Energy Performance Certificate rating. Presumably this is on the basis if the ‘excess cold’ hazard profile in the HHSRS. However, an EPC is a measure of the cost of heating and lighting a property and says nothing about how warm or cold that property can be. Therefore it is hard to see on what basis action is being taken.

If anyone would care to give some more information we would be grateful!

Filed under: Uncategorized, , ,

5 August, 2009 • 13:10 0

TDP and Prescribed Information

It has come to our attention that many agents are still not providing all the necessary prescribed information to tenants on the registration of deposits under the various tenancy deposit protection schemes. Section 213(5) of HA 2004 requires that the tenant is given such information as may be prescribed. Section 216(b) requires that this is given within 14 days of the receipt of the deposit. There is still a lot of debate as to whether there is any penalty for the giving this information late.

The information required to be handed over is set out by the Housing (Tenancy Deposits) (Prescribed Information) Order 2007. Provision of the tenancy agreement and the information certificate supplied by all of the schemes will satisfy most f the requirements of this Order. However paragraph 2(1)(b) requires the provision of

any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the provisions contained in sections 212 to 215 of, and Schedule 10 to, the Act

Both the insured schemes (TDS & MyDeposits) provide such leaflets and they must be passed on to the tenant to comply with the terms of the Order. This provision is frequently being ignored but failure to fulfil it properly may lead to the usual penalties being applied.

You have been warned!

Filed under: Uncategorized, ,

20 July, 2009 • 09:30 0

Planning and HMOs

Not sure how we missed this really but the Department of Communities and Local Government has launched a consultation on possible changes in planning systems to deal with HMOs.

This consultation is in response to an increase in HMOs in parts of the country and the tendency for these to be grouped together in small areas. This is sometimes referred to as “studentification”.

The current method of control of HMOs involves the licensing of larger properties. However, there is no power to refuse a licence on the basis that there are a large number of other HMOs in the same area. The problem is made worse by the fact that student naturally wish to cluster and the type of property suitable for conversion naturally tends to be built in blocks.

There is an aspect in which this is a bit ironic in that many of the issues with concentrations of HMOs are caused by the growth of educational institutions and the need to house the resulting large numbers of students. The government encouraged this but made no effort to ensure that the growing establishments provided suitable accommodation for there students. Therefore the private sector has tended to take up the slack. For the government and local authorities to complain about this now is a little unfair and is largely illustration of a failure to properly consider all the consequences of unchecked growth in higher education establishments.

In any event, the consultation ends on 7 August 2009.

Filed under: Uncategorized, , ,

12 June, 2009 • 18:13 0

The Life and Death of Tenancy Deposit Scheme

This week has seen a degree of excitement in the world of Tenancy Deposit Protection. We know….the excitement is just too much to bear.

A new tenancy deposit scheme appeared to have set itself up earlier this month calling itself MyTenancyDeposit. Its website described itself as a custodial scheme. This was a surprise to the three government approved schemes and indeed to the Department of Communities and Local Government as no such scheme had in fact been authorised. Much paper was expended behind the scenes and the telephone wires turned red hot!

All has now been revealed. Looking at the website today it appears that MyTenancyDeposit had already registered with the MyDeposits scheme and was, in effect, acting as a deposit taking agent protecting its holdings with the MyDeposits scheme. They are now apparently taking legal advice as to whether they can continue to operate.

While it appears that there was no intent to evade the provisions of the Housing Act 2004 the website was, at best, deceptive about the actual method of operation of the system. Given that the system was essentially free and actually paid £10 to agents who registered deposits with it, it is hard to see how it was actually going to make any money as its earnings on the deposits would be limited to that obtainable as interest on a ring-fenced account.

Anyway, the system may reappear depending on legal advice given. However, MyTenancyDeposit may find it hard to persuade MyDeposits, or any other provider, to work with them.

Filed under: Uncategorized, , ,

21 May, 2009 • 12:16 1

Proper Place for TDS Claims

The Court Service has published guidance setting out that the proper route for bringing claims under the Tenancy Deposit Provisions of the Housing Act 2004 is via Part 8 of the Civil Procedure Rules.

Key points to note are:

  • these claims are automatically allocated to the multi-track which means that legal costs are recoverable irrespective of the size of the claim;
  • the claim must be commenced on a form N208 and not the standard N1 claim form;
  • the claim cannot be commenced using the moneyclaim online service;
  • the Claimant is required to serve a witness statement with their claim form setting out their evidence;
  • the Defendant is required to serve a witness statement with its aknowledgment of service setting out its evidence;
  • failure to serve witness statements at the appropriate times will preclude reliance onm evidence save by permission of the Court

A great many claims are currently not being commenced correctly and are not having the appropriate procedure followed.  While it is unlikely that a claim will be struck-out for following the improper procedure, a defendant may be precluded from giving evidence and there may be costs implications for both parties if the correct procedures are not followed.

Filed under: Uncategorized, , ,

15 April, 2009 • 17:37 0

Tenancy Deposit Protection and ‘Rent in Advance’

A recent case in Grimsby County Court reported in Legal Action magazine has cast doubt on a method commonly used by private landlords to avoid the tenancy deposit protection regime.

Under section 213(8) of the Housing Act 2004 a deposit is defined as property intended to be held as security for the performance of any obligation of the tenant. Many landlords seek to avoid this by taking money described as ‘rent in advance’ and claiming not to hold a deposit at all.

This was precisely the position in the case of Piggot v Slaven in Grimsby. The Court held that the question of whether or not money has been taken as security must be judged objectively in each case. However in the case before the Court it was held that the money was intended to provide the landlord with security should the tenant fail to pay rent at some future date. The money held was therefore caught by the defintion in s213(8) and should have been prtected in a scheme. The landlord was accordingly ordered to pay the normal ’3 times the deposit’ penalty to the tenant.

While this case is only a decision of a District Judge in a County Court and is therefore not binding on other Courts it is undoubtedly a shot accross the bows of landlord who seek to avoid the tenancy deposit protection provisions by asserting that money they are holding is merely rent in advance and not a deposit.

Filed under: Uncategorized, ,

17 March, 2009 • 18:11 15

More TDP Problems

PainSmith Solicitors is currently instructed in a matter relating to Tenancy Deposit Protection which has significant implications for the entire industry. In this case the agent was instructed on a full management basis and held the deposit in a separate designated account. The landlord and agent subsequently failed to register the deposit within the 14 day timeline. Leaving aside the still, highly disputed, question of whether late registration is acceptable this case raises another, far more concerning issue. The tenant has issued proceedings against the agent and not the landlord and has stated that the agent is liable for the penalty of three times the deposit. To support their argument the tenant’s solicitor has put forward the wording of section 212(9)(a) of the Housing Act 2004 which 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

The tenant therefore submits that this definition includes the agent and therefore the penalties set out in s214, which are expressed as applicable to the landlord, are equally applicable to the landlord’s agent.
This poses a serious problem for agents. The DCLG has advised, and the view has generally been, where an agent acts for a let-only landlord, the liability is on that landlord to ensure that the deposit is properly protected and that if the landlord does not do so then the agent has no liability. This case has the potential to overturn that comfortable certainty of which will leave agents acting for clients on a let-only basis or a full management basis in a difficult position. It is likely that the only sure way for agents to resolve any potential claims will be to require landlords to leave their deposits with the agent for the agent to register under their own scheme membership. As this case demonstrates it is fundamental that the agent ensures the deposit and any initial requirements of the Tenancy Deposit Scheme are complied with within 14 days of receiving the deposit. In the meantime many agents will be faced with a large number of potential claims. It may be possible to seek insurance to cover this risk but this is not a good time to ask insurers to cover large potential risks of uncertain scope.

UPDATE: PainSmith has lost this case at first instance but application has been made to the High Court for permission to appeal.

Filed under: Uncategorized, , ,

4 December, 2008 • 20:46 0

Interest Rate Cuts and Tenancy Deposits

Today the Bank of England cut its base rate to 2%.  While this will hopefully help the economy there is an unintended consequence that will affect many tenants.  Tenancy Deposit Protection was introduced by the Housing Act 2004.  One of the three approved tenancy deposit protection schemes was the government-backed Deposit Protection Scheme (DPS).  The Housing (Tenancy Deposits) (Specified Interest Rate) Order 2007specified that this scheme would pay interest at 2.32% below the Bank of England base rate.  With the rate cut this means that the DPS is now paying interest at -0.32%.  Effectively, tenants will find themselves paying interest to the scheme at 0.32%.  While it is unlikely that this will occur and the government will hopefully act to resolve the problem it is nonetheless embarassing.

Meanwhile the primary advantage to tenants of using the DPS, the payment of interest, has now gone.  Agents who wish to attract tenants and use one of the other schemes may choose to offer to pay interest to tenants, albeit at a low rate.

Filed under: Uncategorized, ,

20 October, 2008 • 20:30 0

New Fire Safety Guidance

LACORS has created new guidance on appropriate standards of fire safety in residential rented accommodation.

Previously there was a requirement for properties to be fire safe under the HHSRS or when applying for an HMO licence but there was little information on what fire safe meant which led to a wide disparity of standards between different local authorities.  LACORS has taken best practice and ideas from around the country and combined it into one document.

The standard required depends on the size of the property and its anticipated occupancy. HMOs and larger properties will need to meet a higher standard. For most landlords the main issue that will cause concern is the requirement that all properties should have a mains-powered, battery-backed, smoke detection system.

It should be remembered that the guidance is just that, guidance. Therefore there is no legal requirement for a property to fulfil the standard before it is rented. However, if the property is inspected by the local authority for the purposes of the HHSRS or HMO licensing these are the type of standards they will expect.

More information on the guidance can be found here.

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