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The bane of the life of many an amateur landlord in England and Wales, and also (until this Thursday at least, when judgement in Universal Estates v. Tiensia in the Court of Appeal was delivered), the bane of the life of many a housing lawyer, letting agent, and District Judge. So much so that a lot of cases dealing with it have found themselves adjourned out until after that time.

If you want to point the finger of blame, look no further than the Blair Government, who introduced the Housing Act 2004. Included in this was a provision, which came into force in April 2007, requiring all tenancy deposits to be protected in an "approved deposit protection scheme." Unfortunately the sections dealing with it - 212 to 215 - were to awfully drafted that it's taken years for the Courts to sort the kinks out of them. Seriously. The law was passed in 2004, took until April 2007 for it to come into force, because it was so ridiculously thorny and poorly drafted and only by then was it at all practicable, and only now (November 2010) are we getting any idea as to what actually it all means.

In the good old days, a landlord would take the deposit and basically stuff it in a high interest account to get a few quick quids until the tenant left, upon where it would be returned less any repairs or other such stuff. Well, a good one would. There were also a lot of dodgy landlords who would spend it down the boozer or find nonsense excuses to hold onto it. And they could get away with this rather because usually a deposit was under £5,000 and thus any Court action based on it was a small claims matter and therefore not exactly cost effective to pursue other than in person, and even where they did do so, it was easy enough to fluff the issue suitably. Naturally, Something Had To Be Done. So, enter the Tenancy Deposit Protection Schemes. These are various accounts that a landlord of residential property on an assured shorthold tenancy, and in which the deposit must abide while the tenancy carries on. The schemes also act as mediation for any disputes over deductions for, say, damage to the property or other such things.

The bit that is in contention, though, is what happens if you don't protect your tenants deposits.

Firstly, you can't serve a Section 21 notice. This is the procedure by which, on an assured shorthold tenancy (in layman's terms, a fixed-term let), a landlord can regain possession on two months' (or thereabouts) notice that possession is required, irregardless of any rent arrears of breach of tenancy by the tenant. Any Section 21 notice served while the deposit is unprotected is not valid. So effectively, while the deposit is unprotected, your tenant has cast iron security of tenure (breaches of tenancy terms notwithstanding, and also, before someone else says as much, yes, it's still not as much as under the Rent Acts which provided mithril security of tenure).

And secondly, if the tenancy deposit is unprotected, and a certificate of protection is not served, the tenant can apply to Court for damages equal to three times the value of the deposit, even if the deposit is returned in full and the tenancy is over.

Let's go over that again. You don't protect the deposit, you get damages against you on the basis set out in statute. It is, effectively, a civil fine, which is all but unheard of in English law.

This may seem clear, but believe me, it is not! The statute itself says that the deposit must be protected within 14 days of its receipt, but the provision that sets the fine, for want of a better word, seems to refer to "complying with the initial requirements" and which does not mention anything about what those requirements are.

The other thing about this is that there is the possibility for a tenant to "ambush" their landlord with a claim at random, which surely would sour tenancy relations somewhat. And what about tenancy deposits that were taken before this Act came into force but when the tenancy was since renewed? Does that deposit have to be protected because it's in relation to a tenancy that has been made since the coming into force of the Act? It's quite alarming at times, and there is an equally alarming amount of case law relating to it, mainly because the law is so badly drafted.

I'm not going to bore you with the metric fuckton of cases of note relating to the ongoing wranglements with it, whether the 14 days is an initial requirement or not, when the three-times-value-of-deposit penalty kicks in (which has saved an awful lot of private tenants in rent arrears, believe you me), and so forth. It was believe that when Universal Estates v. Tiensia was decided in the Court of Appeal this Thursday that all this would be resolved as to whether the landlord must protect the deposit by the time of the Court application for three times the value of the deposit in damages, or whether they can do it prior to the hearing of such an application. And indeed it is - it is by the time of the Court hearing. However, it is still up in the air what happens if a claim is brought by the time the tenancy is over, and the Court of Appeal's ruling basically tramples all over the statute and the Parliamentary guidance, which means that Whitehall will have another go at it. And given the colossal arse-up they made of it at first, I'm not holding out much hope for the future.

In short, if you don't understand any of the above, you're not alone. I do this sort of thing as my job and I find it all a hopeless mess.

To be fair, I genuinely think that the idea of deposit protection has been a damp squib from the beginning. Landlords really hate it because it's incomprehensible and a lot of them don't bother with it. The dispute resolution procedure incorporated into the various protection schemes are also byzantine. And in any event in most tenancies, if your fixed term has expired and you try to ambush the landlord with a claim he will probably be able to get away with it because he could easily protect the deposit before the hearing anyhow. That's if he hasn't tried to dodge the issue of taking a deposit by insisting on additional rent in advance and then having in the tenancy agreement a provision for a "refund for good behaviour" or similar. And there was always action in small claims court for non-returned deposits anyhow, which is probably faster than the schemes' dispute resolution procedures and less byzantine.

I do honestly think that this legislative stillbirth should now be scrapped, as it's been a source of little more than uncertainty and incomprehension from the beginning. And I question the extent of the problem to begin with. Still, if you're representing a tenant it's always good to throw into a disrepair or unlawful eviction claim just to pad things out a bit!

(DISCLAIMER: If you need legal advice on this, go and see a solicitor. They have professional indemnity insurance, unlike this node, which is also node 10 of my 30 IRON NODES.)