We acted on behalf of the Claimant who in this instance was the Tenant with James Browne of counsel.
The landlord first let the property for a term of one year commencing on 12th May 2007. The property was managed by a lettings agent. A deposit was taken of £1,500, which was correctly registered with the TDS scheme. In 2009 an agreement was made between the parties that a new tenancy would be agreed at a lower rent, without the management of the agents. It was agreed that the deposit would be withdrawn from the TDS and paid direct to the Landlord who would be responsible for protecting it themselves.
In order to assist the Tenant the Landlords agreed not to insist on a further deposit upon this renewal. Instead they agreed to wait for the return of the deposit from the agent and then register it upon receipt. The Landlords received the deposit of £1,590 on 18th June 2009. In the meantime on the 15th June 2009, the Tenant exercised a break clause bringing the tenancy to an end on 15th August 2009.
On the 10th August the Landlord offered to pay the deposit back to the Tenant however, the Tenant refused the deposit and insisted that the Landlord register the deposit with a scheme pursuant to their obligations under the section 213 of the Housing Act 2004. The Landlords failed to do so and the Tenant issued proceedings on the 12th August 2009. The Landlords in response no doubt registered the deposit with the DPS custodial scheme on the 17th August 2009, 2 days after the Tenant vacated.
The Prescribed Information as required by s213 (3) and s213 (6) was never served.
Before Her Honour Judge Hallon, it was held that there had been a breach of the requirement to secure the deposit, because the initial requirements of the scheme can not be complied with after a tenancy has come to an end. This is despite the decision in Tiensia. However, the judge refused to award the penalty of three times the deposit because she held that there had been a technical breach of the requirement to secure the deposit and that given the:
“unusual circumstances of the case, it would not be in the interests of justice to do so”.
She did not deal with the prescribed information at all.
The Tenant appealed.
Two main issues were raised in the appeal. First that the judge had no discretion to refuse to impose a sanction once she had decided there had been such a breach and it thus follows that she was wrong to refuse to award the penalty. Second that the judge erred in failing to deal with the issue of the Prescribed Information.
The Judgment of Today
The Honorable Mrs Justice Sharp when referring to the County Court decision above states at paragraph 23 of her judgment:
“it is obvious that the judge had considerable sympathy with the position of the Landlords on the facts found by her and considered it would be unjust for them to be subject to the sanction provided for non compliance, under section 214 (4) of the Act”.
She then went on to say that to award the penalty for a breach of a technical nature when the deposit was not returned due to the insistence of the Tenant pursuant to section 214 would:
“do a very considerable injustice”.
With regards to the 2 points of appeal, Mrs Justice Sharp upheld the County Court decision and based her reasoning on the decision on Tiensia. That is that Landlords had until the date of the hearing of the Tenants application to comply with the provisions and having secured the deposit before the hearing they had a complete defence to the Tenants application.
On the matter of the prescribed information, Mrs Justice Sharp held that due to the failure to plead this in the particulars of claim submitted by the Tenant, the judge had not erred. The issue over the prescribed information was mentioned in court by the Tenant and also mentioned in the Tenants witness statement. However, it was held that this was not clearly pleaded but had it been the judge would no doubt have dealt with it.
Whilst we welcome the release of the decision the area of law is not concluded. It does appear that you can register the deposit after the tenancy but the judge did not deal with implied or the actual requirements of the scheme because they had not been pleaded. It may be the case that it is an implied “initial requirement” of all 3 deposit schemes that the deposit be registered before the tenancy ends. Even if it is not an implied requirement is it likely that it will become explicitly stated requirement!
There of course remains the decision of Hashemi v Gladehurst which has the potential of changing this decision.