LETTINGSlegal
Tenancy deposits: Matthew Lake, Solicitor at Weightmans LLP, gives some clarification of the rules.
T
he Court of Appeal recently heard two cases in which tenants had taken their landlords to court for failing to comply with the rules
relating to tenancy deposits. The outcome of these cases; Christelle Tiensia v Vision Enterprises (T/A Universal Estates) and Honey Suckle Properties v James David Fletcher (and others), means that landlords and tenants now know precisely when a tenant can/cannot recover compensation from his landlord for a breach of the rules. The rules relating to the Tenancy
Deposit Scheme (TDS) require a landlord to pay a tenant’s deposit into an authorised scheme and to give the tenant prescribed information about where the deposit is being held within 14 days of receiving that deposit. If the landlord does not do this, his tenant can apply to court for an order either that his deposit is returned to him or an order that it is paid into an authorised scheme. The court decides which of these two remedies should be granted and it makes a decision “as it thinks fit.” The rules also state that the court must
order the landlord to pay his tenant an amount equivalent to three times the value of the deposit. The word ‘must’ suggests that a failure to pay a deposit into an authorised scheme or a failure to notify the tenant in the prescribed manner within 14 days is a breach which is not capable of being remedied. This has been argued in a number of cases and different courts have come to different conclusions; even where the facts are very similar. In Stankova v Glassonbury (2008) the
court reluctantly ruled that the use of the word ‘must’ meant that the court had no discretion on this issue and was forced to award the tenant three times the value of the deposit, even though the landlord had remedied his breach before the hearing.
50 JANUARY 2011 PROPERTYdrum
‘The best way of avoiding a claim is to comply!’
However in Harvey v Bamforth (2008), the court refused to award the tenant three times the value of the deposit because the landlord had remedied the breach before the hearing. This lack of consistency led to confusion and resulted in further claims, including Christelle and Honey Suckle. In both Christelle and Honey Suckle
Properties the landlords admitted that they had initially failed to comply with the rules but both had complied before the court hearings took place. Therefore, the only question for the court was whether the landlords should be punished for their earlier breaches even though in reality, no harm had been caused to their tenants. In both cases the first court awarded the
tenants three times the value of deposit originally paid. In Christelle the landlord successfully challenged this decision and the tenant appealed. In Honey Suckle Properties the landlord appealed the first court’s original decision. The Court of Appeal held that for a
tenant to succeed in a claim of this kind, he must prove that his landlord has failed to comply with his tenancy deposit obligations altogether. The court stated that if a landlord has paid his tenant’s deposit into an authorised scheme and has given the tenant the prescribed information regarding that deposit before the date of the hearing, then the tenant’s claim must fail. The court also gave a warning to tenants
that they should not bring a claim without first sending a letter before action to their landlord. Those tenants who issue proceedings without first sending a letter before action could have to reimburse their landlord’s legal fees. The court’s decision will no doubt be
welcome news to landlords as there is now good authority which may be relied on to protect those landlords who are genuinely unaware of the tenancy deposit requirements. However, this should not be interpreted by landlords as an open invitation by the court to delay paying a deposit into a TDS until proceedings are commenced by their tenant. Whilst the court may not award compensation, it may still decide that the landlord’s behaviour was unreasonable and order the landlord to pay the tenant’s legal costs. Whilst the decision in Christelle and
Honey Suckle Properties gives landlords a safety net, the best way of avoiding a claim is to ensure that the rules relating to tenancy deposits are complied with within 14 days of receiving the deposit.
Matthew Lake is a solicitor at law firm Weightmans LLP
Matthew.lake@
weightmans.com
Add your own opinions to the debate:
www.propertydrum.com/articles/deposits
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