SAFEAS HOUSES


neil spurrier explains how deposits paid by anyone living in a flat under an Assured Shorthold


Tenancy is protected by the Housing Act 2004


The governmenT conTinues to take a surprisingly laissez-faireattitude towards theway inwhichflat owner’smoney is held by landlordsand propertymanagers.Thisis in starkcontrasttothe legislationapplied to client’smoney within theshort lettings sector under the Assured Shorthold Tenancy Rules. Since 2007, tenants under Assured


the tenant brought his claim there was no liability at all. Gladehurst in particular caused tenants problemssincemany tenants maynot findout that their deposithas notbeenpaid into aschemeuntil after the end of the tenancy when thetenanthas


asked for hismoney back. TheLocalismAct,which


cameinto forceinApril 2012, redressesthese effects. It is nowno longer


adefence


foralandlord to show that he has


complied with thedeposit requirements by the timeof thecourt hearing. Theoriginalfailure to paythe deposit


ShortholdTenancies (which arethe bulk of all residential lettings),who are required to pay a deposit, have hadthe protectionofthe Housing Act2004. This Actcreated theprescribed TenancyDeposit Schemes. Underthe schemes, a tenant’s depositmoney is protected froma landlord running off with themoney or failing to return it at theend of thetenancy.There are


two types of scheme: nCustodial Scheme; and nInsuranceBackedScheme.


Thefirst of theserequiresthemoney to be paid over to the Government’s named deposit taker andthe second allows thelandlord’sagent to keep themoney in aseparateclientaccount provided that theagent has in placeapproved insuranceagainst non-return. Thepenalties forlandlordswho do not


comply with thelaw aredraconian.Until recently,alandlord couldnot gethis property back unless and until he had put the deposit into oneofthese schemes. Second, thelandlord wouldeitherhavetopay thedeposit into a CustodialSchemeor, at theCourt’sdiscretion, thetenantwas entitled to hisdeposit back plus, in either case, amandatory penalty of


Flat Living Issue 13, Winter


threetimes theamountofthe deposit. Similar sanctionswereapplicableifthe landlord had not, within 14 days of thepayment of the deposit, giventothe tenant theprescribed information about the tenancy deposit scheme that is being used. Tworecentcases detractedfrom these


sanctions: Tiensia v Vision Enterprises Ltd [2012] and Gladehurst Properties vHashemi [2011].In Tiensia thecourt foundthatalandlord,who failed to paythe depositintoaschemeand was sued forthe penalty, couldavoid liability if he subsequently paid thedeposit into thescheme before thecourt Hearing. Gladehurst went furtherand provided that if thetenancy hadexpired by thetimethat


not comply with the lawaredraconian


Thepenalties for landlordswhodo


into theSchemeisenough. In additionthe fact that a tenancy has expired is no longer adefence to aclaim broughtbyatenant. Thepenalties areclaimablenot only fora failureofthe landlord to paythemoney into a depositschemebut also forafailure to supply thetenantwiththe prescribed information within atimelimit -now extended from14 to 30 days of receiptofthe deposit. Note that the receipt of the depositmoney is the critical date.So, if adeposit is takenbythe letting agentten days before thetenancy is actually completedand theprescribed informationis notgiven until21daysafter completion of the tenancyagreement,the requirementwillnot have beenmet andthe landlord is liable.The penaltyofthree timesthe deposithas now becomeamaximumpenaltyratherthana mandatoryamount, although somepenaltyof at leastanamountequal to theamountofthe depositisstillmandatory. Thereistherefore an incentivefor alandlord to rectifythe position if he has defaulted.●


neilspurrierisaConsultantSolicitor atAstonRose(West End) Limited,London Tel 02076291533 email neilspurrier@astonrose.co.uk Websitewww.astonrose.co.uk


25


LEGAL Advice Atenant’s


depositmoney is protected


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