Following the introduction of the Tenancy Deposit Scheme under Part I of the Housing Act 2004 (‘the 2004 Act’) most landlords are aware that deposits taken from tenants in connection with a shorthold tenancy must now be registered with an authorised scheme such as The Deposit Protection Service (“DPS”), the Tenancy Deposit Scheme (“TDS”) and mydeposits.
Conversely, clued-up tenants are also aware that a failure by their landlord to register the deposit may entitle them to bring a claim against their landlord and a potential jackpot of three times the deposit under s. 214 of the 2004 Act.
Recent developments in the case law have been of mixed blessings to the forever concerned and increasingly regulated landlord. Given the activity within the judicial system, now is as good a time as any to consider the obligations of landlords in receipt of their tenants’ deposits.
A landlord’s obligations
Under s. 213 of the 2004 Act where a landlord receives a deposit after 6 April 2007, the landlord must (1) register that deposit with an authorised scheme and (2) must provide the tenant and any relevant person information(‘the Prescribed Information’). relating to the authorised scheme. The Prescribed Information must be given to the tenant in the prescribed form or in a form substantially to the same effect.
The consequences of failure to comply for the landlord can be twofold: (1) a substantial financial penalty equivalent to 3 times the deposit, and (2) no power to serve a section 21 notice until such failure is rectified.
When must a landlord comply?
It was initially thought that a landlord had to comply with its obligations within 14 days of the deposit being received and a failure to meet this deadline, should a tenant cotton on and start a claim under s. 214 of the 2004 Act, would result in the county court awarding the tenant three times the amount of the deposit.
A rather harsh and draconian measure? All is not lost if a landlord has failed to register the deposit and the Prescribed Information has not been provided. The Court of Appeal’s ruling in Tiensia v Vision Enterprises Limited (t/a Universal Estates); Honeysuckle Properties v Fletcher came to the rescue of the absent minded (or, perhaps, cynical) landlord by ruling that late registration and provision of the Prescribed Information by a landlord will provide a complete defence to any claim by a tenant under s. 214, so long that this failure is not in breach of the authorised schemes ‘initial requirements’. In terms of how late, the answer is pretty late - a landlord has until the hearing of a tenant’s s.214 application to comply with its obligations under s.213.
Landlords, however, should collectively lower the cigar; sit bolt upright and resume the natural position of slight unease and anxiety – if a claim has been issued and a landlord does comply with their obligations, albeit late, a landlord could still be liable for the tenant’s court costs, so the sooner a landlord complies with their obligations the better - for all parties concerned.
Can landlords be sued after the tenancy has ended?
In another relatively rare and recent victory for landlords, it was held by the Court of Appeal in Gladehurst Properties Ltd v Hashemi, that where a landlord has failed to deal with a deposit in accordance with an authorised tenancy deposit scheme, a tenant cannot apply for an award of three times the amount of the deposit under s.214 if his assured shorthold tenancy has already come to an end.
So, in the main the answer to the above question is no – however, landlords should be careful to determine exactly when the tenancy came to an end.
A final word of warning
In conclusion, there is no doubt that recent case law as made the consequences less onerous on landlords should they fail to initially comply with the obligations imposed upon them under the Tenancy Deposit Scheme. Life, however, is not all beer and skittles for a landlord; landlords need to be aware that the authorised schemes referred to above do not send the prescribed information to the Tenant. The schemes inform the Tenant that a deposit has been registered - but that is not the same as providing the Tenant with the Prescribed Information. The schemes place the onus on landlords to send the Prescribed Information to the Tenant.
The DPS template for its scheme can be found at: http://www.depositprotection.com/documents/prescribed-information-template.pdf.
The TDS template for its scheme can be found at: http://www.thedisputeservice.co.uk/resources/files/Prescribed-Information-and-Clauses-non-ASTs-Fourth-Edition.pdf
Information on the Prescribed Information in relation to mydeposits can be found at: http://www.mydeposits.co.uk/node/239
Remember - failure to take this additional step and serve the Prescribed Information on the Tenant, as highlighted in the recent case of Suurpere v Nice, is as costly as failing to register the deposit in the first place.