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Court of Appeal Rules on Tenancy Deposit Protection

At 0945 this morning, 11 November 2010, the Court of Appeal handed down its judgement in the two conjoined cases of Universal Estates v Tiensia and Honeysuckle Properties v Fletcher. The decision was a majority decision of Lord Justices Rimer and Thorpe, with Lord Justice Sedley dissenting.

Facts
The facts in the two cases were as follows. In Universal Estates the tenant was taken to Court for possession for arrears of rent. The possession claim was adjourned after she indicated her intention to counterclaim, although that counterclaim was not for an unprotected deposit. The deposit was then registered with MyDeposits but it was, of course, late, more than 14 days from the date of receipt. The High Court has held, in the case of Draycott v Hannells Lettings, that registration more than 14 days after receipt of the deposit cannot be penalised. However a breach of the initial requirements of the relevant deposit scheme can incur the penalties and it was argued in Universal Estates that the MyDeposits scheme had such an initial requirement. In Honeysuckle a claim for possession for rent arrears was also commenced. The tenant’s counterclaimed on the basis that the deposit was not registered. The deposit was protected before the hearing of the matter by the Court, again with MyDeposits.

Therefore the issues before the Court of Appeal were whether it was permissible to protect the deposit more than 14 days after its receipt and at what date there should be a consideration of the protection status of the deposit, at the date of issue of proceedings or at the date of the Court considering the situation at a hearing.

Decision
In short, the Court considered that the High Court had decided correctly in Draycott v Hannells and that late protection is acceptable. Where the Court of Appeal has gone further is that it has ruled that provided protection has been done, and the correct information provided, before the Court comes to consider the matter at a hearing then that is acceptable, even after proceedings have been issued for non-protection. Therefore the landlord’s deadline for compliance is the Court hearing itself and not the date by which proceedings have been issued. The Court did hold that if a tenant is compelled to issue proceedings to force the protection of a deposit then they are probably entitled to their legal costs in so doing. It should be noted here that the Court emphasised the importance of pre-action conduct and discouraged any attempt to ‘ambush’ landlords by issuing proceedings for an unprotected deposit without writing to them first.

The Court further held that no scheme can impose an initial requirement that a deposit must be protected within 14 days, a failure to adhere to which will allow a tenant to claim against the landlord. Therefore the current imposition by The Dispute Service scheme of a requirement to register within 14 days is no more than an administrative requirement for that scheme and registrations with that scheme made after 14 days are not invalid for the purposes of tenancy deposit protection legislation although the scheme may consider them violations of its rules and may therefore adjudicate on the deposit in a manner that is against the landlord’s interests.

The Court made no comment on what the correct position should be if the deposit is not protected until after the tenancy has ended. This remains a live issue and one which must be considered.

All three judges commented that the interpretation which they have been forced into is totally unsatisfactory and they found it hard to believe that this is what Parliament intended when it made the legislation. The consensus certainly appeared to be that the legislation is now toothless and largely without value. The onus now seems to be on Parliament to consider reform of the legislation as a matter of urgency to restore a proper balance.

Full text of decision.

34 Comments

  • Abacus House 11th November 2010 at 11:19 am

    Excellent news. Some sense at last !

    Thank you for the update David.

    AH

  • Peter Smith 11th November 2010 at 3:28 pm

    I know a lot of people don’t like to hear the words, “I told you so,” but I did.

    On this site, in various online forums, and in court I have maintained that this is the only logical interpretation of the various relevant clauses and sub-clauses. In court I won on this argument even though the tenancy had ended subsequent to the tenant’s death. But the deposit had been returned by using it to pay the last month’s rent.

    I haven’t read the full text, so I don’t know if their Lordships mentioned this, but the legislation was always intended to protect tenants. not to booby-trap landlords.

    What we now need is a scheme in which it is the tenant’s responsibility to pay in and get a certificate which the landlord must accept.

    “Simples! click”

    • PainSmith 11th November 2010 at 4:21 pm

      I am afraid that the Court of Appeal in no way approved a situation where the landlord does not protect the deposit, spends it, and then claims there was no deposit to protect. All it did was state that you can put the deposit into protection late, in some cases very late. It was clear however that the deposit must always be protected.

  • Trevor Hulme 11th November 2010 at 7:52 pm

    Very reassuring for landlords

  • Q.F.E 11th November 2010 at 9:25 pm

    I am involved in legal proceedings and awaited the decision with baited breath. It does seem that a Landlord can avoid the sanctions of the 3x provided they do so by the time of the hearing. What I am interested in to explore is the situation upon which a Lndlord has been penalised and the ability to commence legal proceedings thereafter.Any thoughts?

    • PainSmith 11th November 2010 at 10:15 pm

      We are not really clear what you mean. If the landlord has already been penalised they cannot be penalised again.

  • Q.F.E 11th November 2010 at 10:46 pm

    That is my point- if no compliance continues by way of the following:
    1. new tenancy
    2. change of landlord
    3. the tenancy continues, ends becomes periodic

    • PainSmith 12th November 2010 at 8:58 am

      If the landlord has been ordered by the court to protect the deposit but continues not to then he would be in breach of a court order and so in contempt

  • David Howell 12th November 2010 at 6:49 am

    Hello

    What I am still unsure on is where a Landlord has protected the deposit but not complied with the terms of the scheme. ie not produced the required documents to the tenant. It would imply from this ruling that provided the Landlord corrects the situation before trial they are ok irregardless of the time that has passed since lodging the deposit.

    I am aware of a LH association that has lodged tenants deposits but not advised tenants with any documentation. This applies to thousands of tenants!

    David

    • PainSmith 12th November 2010 at 9:00 am

      That would be our assessment. Failure to provide the correct documentation can be corrected just like a failure to protect

  • Q.F.E 12th November 2010 at 10:17 pm

    I also agree with D. Howells comment- what is the situation whereby a penalty has been applied and the Landlord continues the non-compliance whilst the tenancy remains in existence; albeit under a perodic tenancy. Surely, section 21 can never be served??.

    • PainSmith 14th November 2010 at 3:37 pm

      As we have already said, a landlord who has not complied with an order of the Court is liable to have that order enforced against them. They would additionally be unable to serve a section 21 notice until the deposit was properly protected.

  • Q.F.E 14th November 2010 at 10:59 pm

    Here lies the dilemma – It is not clear what constitutes ‘properly protected’. Does this simply mean the deposit of funds in a scheme or does it mean the provision of prescribed information as well?. As a common sense point of view, it would seem that the provision of the prescribed information is a safeguard to ensure that a tenant is aware of the sanctions etc available for non- compliance. If a Landlord lodges the deposit into a scheme but fails to provide the prescribed information and subsequently, the tenant starts legal action then can it not be argued that the provision of the prescribed information was an unnecessary burden upon the Landlord?.

    • PainSmith 14th November 2010 at 11:28 pm

      The law is clear that the protection process includes provision of the prescribed information. It is not optional.

  • Ed 16th November 2010 at 9:53 pm

    What I am interested in is whether this slew of judgements puts landlords in a strong position to counterclaim for expenses, etc in the instance of unscrupulous tenants seeking to exploit the 14 day reference?!

  • SS 22nd November 2010 at 1:01 pm

    Is this likely to be the end of the matter or will the case be appealed to the Supreme Court?

    • PainSmith 22nd November 2010 at 1:21 pm

      We understand that permission to appeal to the Supreme Court has been sought. We do not know if it will be granted.

  • SS 22nd November 2010 at 5:28 pm

    Thank you for your reply. Do you have any inkling as to how long that process might take, both with permission for the appeal and for an appeal to take place?

    Having read the Judgment, I will be interested to see the outcome of an appeal. LJ Sedley was very much against the overall outcome and LJ Thorpe spoke of the merits of LJ Sedley’s view.

    Could you enlighten me with what key points are likely to be considered when deciding on whether to allow an appeal?

    • PainSmith 22nd November 2010 at 7:34 pm

      We have no idea as to the timeline. Permission to appeal is given by the Court of Appeal itself and only if it thinks there is a point of law of general public importance that should be considered. If it refuses permission then the Supreme Court can be asked to grant permission itself.

      More information can be found on the Supreme Court website here.

  • SS 23rd November 2010 at 10:08 pm

    Thank you again for your reply – the SC website is useful resource!

    What would be PainSmith’s opinion on the the merits of an appeal in this case?

    • PainSmith 24th November 2010 at 12:07 am

      We think it unlikely that an appeal will be granted. As to merits, we think the answer now is for parliament to reconsider the legislation and its phrasing. The Scottish legislation is phrased much better.

  • Ian MacDonald 17th January 2011 at 1:43 pm

    I succesfully used this legislation against my former landlord last year before this ruling. I was just talking to my colleague today. His flat was flooded with sewage, he has small children and it is unfit for human habitation. He is living in temporary accomodation and unsure if he will be compensated for that. His deposit has not been registered by his landlord. This ruling means he now has almost no bargaining power with his landlord in what is clearly a very distressing situation. I say to those of you that hail this ruling as common sense, reason etc, have a thought for people that are living with real bad landlords out here in the real world where the difference between “have not” and “did not” embedded in the middle of several thousands words of text doesn’t have the effect of completely reversing its meaning. Unbelievable!

  • SS 23rd January 2011 at 10:05 pm

    Is it known whether leave to appeal this ruling was granted?

  • Tom Derrett 26th January 2011 at 10:33 am

    Your colleague can still use the legislation to force the landlord to protect the deposit, so all is not lost for tenants.

  • Dean Winter 29th May 2011 at 2:35 pm

    The decision appears that the landlord must protect the deposit by the date of any hearing; not the 14 day period stated by the deposit protection services available.

    My landlord did not protect the deposit only having registering it almost 7 months into the tenancy when he merely registered it on my asking for details of the deposit protection service being used.

    • PainSmith 30th May 2011 at 9:15 pm

      This position was covered by Tiensia and the courts have held that this is valid protection.

  • Dean Winter 29th May 2011 at 2:39 pm

    My landlord, 7 days after the end of my tenency, has still not protected it and is not replying to my requests to return it.

    I am thus in the position where I am considering legal proceedings. I believe I am in a strong position to do so as the landlord has been given suitable time to protect the deposit (requests recorded in email) and, as the tenancy has now ended, a DJ may use his discretion (not the case above)or the statute to rule in my favour.

    • PainSmith 30th May 2011 at 9:17 pm

      The case of Hashemi will be followed by any district judge because it’s a court of appeal decision. You are therefore unlikely to succeed if the tenancy has ended and you issue now.

  • Junaid Aadeez 13th July 2011 at 11:52 am

    I know a lot of people don’t like to hear the words. I also agree with D. Howells comment- what is the situation whereby a penalty has been applied and the Landlord continues the non-compliance whilst the tenancy remains in existence; albeit under a perodic tenancy.

  • Stephen O'Neill 28th July 2011 at 10:28 am

    Interestingly the High Court distinguished Hashemi on the facts in Suurpere v Nice & Anor [2011] EWHC 203 (QB) on the basis that the Appellant’s tenancy had not been lawfully determined as at the date of the hearing.

  • GG 13th October 2011 at 12:34 am

    My problem ist that I protected the deposit six months late and I didn’t give the T the PI but verbally informed her. Now the tenancy has ended and I want issue section 21 to the T. please, want do I do?

    • PainSmith 13th October 2011 at 8:38 am

      You need to hand the prescribed information to her and ensure you have complied with the scheme rules and then serve the section 21 a day later.

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7 Trackbacks

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  • […] held that protection after the end of the tenancy was not acceptable. The cases of Draycott and Tiensia were distinguished on the basis that in those cases the deposits had been protected late but had […]

  • […] requirements’ and remove the late protection loopholes as discussed in Draycott v Hannells and Tiensia v Universal Estates. The Bill also hopes to remove the loophole of returning the deposit to the tenant in full prior to […]

  • By Deposits, set for change? « FreeLegalWeb on 5th March 2011 at 1:40 pm

    […] requirements’ and remove the late protection loopholes as discussed in Draycott v Hannells and Tiensia v Universal Estates. The Bill also hopes to remove the loophole of returning the deposit to the tenant in full prior to […]

  • […] Court of Appeal in their judgement held that the case of Tiensia did not assist the landlord in this case because the landlord had never complied with the initial […]

  • […] Tiensia v Vision Enterprises Ltd (t/a Universal Estates) – a landlord can protect the deposit at any stage, even if more than 14 days have elapsed since it was received, without penalty as long as they do so before the case comes before a court. […]

  • By The Localism Act « FreeLegalWeb on 2nd March 2012 at 7:50 pm

    […] Tiensia v Vision Enterprises Ltd (t/a Universal Estates) – a landlord can protect the deposit at any stage, even if more than 14 days have elapsed since it was received, without penalty as long as they do so before the case comes before a court. […]

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