Rent Deposit Schemes

In effect a landlord of an assured shorthold tenant needs not protect the payment within the 14 days of the agreement provided the tenancy has now come to an end and the landlord has been repaid the deposit to the tenant. The tenant cannot bring an action for the recovery of the three times as he or she has already enjoyed the benefit the statute seeks to allow.

Gladehurst Properties Ltd v Hashemi [2011] EWCA Civ 604, May 19, 2011

The Court of Appeal has held 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 (4), Housing Act 2004, if his assured shorthold tenancy has already come to an end.

The Housing Act 2004, Pt 6, Ch.4 introduced tenancy deposit schemes for assured shorthold tenancies. There are two types of tenancy deposit scheme: (i) custodial schemes, under which the landlord pays the deposit into a designated account held by the scheme administrator; and, (ii) insurance-backed schemes, under which the landlord retains the deposit but pays it to the scheme administrator at the end of the lease in the event of a dispute. All deposits paid must be dealt with in accordance with an authorised scheme.

Tenancy Deposit Schemes

Chapter 4 in Part 6 of the Housing Act 2004 set up tenancy deposit schemes to, inter alia, safeguard tenancy deposits paid in respect of assured shorthold tenancies and provide sanctions for non-compliance by landlords.

By s.213 of the 2004 Act where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the “initial requirements” of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with date on which it is received (s.213(3)). The “initial requirements” are defined as “such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit” (s.213(4).

Furthermore, a Landlord must give the tenant and any relevant person such information relating to the authorised scheme applying to the deposit, compliance by the with the initial requirements of the scheme, and the operation of the provisions in Chapter 4 in relation to the deposit (s.213(5)). Such information must be given to the tenant in the prescribed for or in a form substantially to the same effect (s.213(6)(a)) and within the period of 14 days beginning with the date on which the deposit is received by the landlord (s.213(6)(b)).

The tenant may make an application to a court if the initial requirements of an authorised scheme have not been complied with or the landlord has not provided the prescribed information (s.214(1)(a)) for the deposit to be repaid to him or placed into an authorised custodial scheme within 14 day of the making of the order (s.214(3)). The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit (s.214(4)).

One of the approved tenancy deposit schemes, My Deposits, has purported to impose, as an initial requirement of its scheme, the requirement that deposits must be protected within 14 days of their receipt by the landlord In 2007, the appellant granted a joint, assured shorthold tenancy of a flat to the respondent and his co-tenant. The tenants paid a deposit of £6,240 but the landlord did not pay this into an authorised scheme. In 2008, on expiry of the term of the tenancy, the tenants left the flat. An inventory clerk inspected the flat and advised that £1,123.99 of the deposit should be withheld by the landlord because of the flat’s condition and missing items. The landlord paid the balance of £5,116.01 into the respondent’s nominated bank account.

Sometime after his departure from the flat, the respondent issued a claim for three times the amount of the deposit (£18,720) under s.214(4), 2004 Act. Without a hearing, a district judge struck the claim out on the ground that it had been made after the tenancy had come to an end so that the provisions of s.214 no longer applied. The respondent applied to set that order aside. Another district judge dismissed the claim in so far as it related to the claim for three times the deposit but allowed the claim to stand in respect of a disputed sum of £618 out of the £1,123.99 retained by the landlord.

The respondent appealed to the circuit judge who allowed the appeal and, inter alia, gave judgment for the tenants in the sum of £18,720 and ordered the return of the deposit.

The landlord appealed to the Court of Appeal, contending that “tenant” in s.214(1) should be construed to mean a tenant under a subsisting lease. Patten LJ held, at [37]:

Patten L.J. noted, at [39], that an order can only be made under s.214(3) where both alternative courses of action under that subsection are available to the court. In the present, that was not so because the deposit had already been paid back to the tenants.