Gladehurst granted Mr Hashemi and Mr Johnson (the tenants) an assured shorthold tenancy of a flat for a fixed term of one year from September 2007. The monthly rent was £2,080. A deposit of £6,240 was paid to Gladehurst. The terms of the agreement provided that the deposit was to be held by Gladehurst. The deposit was never registered in accordance with the Housing Act 2004.
The tenants vacated the property in October 2008. Following an inventory check out, Gladehurst paid back the deposit minus various deductions. Mr Hashemi then wrote to Gladehurst requesting receipts and a breakdown of the sums deducted from the deposit and he put them on notice that he would make a claim for three times the deposit under s214.
In February 2009, Mr Hashemi issued a claim against Gladehurst in both his own name and that of Mr Johnson. Gladehurst in its defence pleaded that it had not been fully aware of the impact of the 2004 Act, but accepted that it applied. The defence also asserted that the landlord had all the necessary receipts for the dilapidations and other expenses paid on behalf of the tenants.
In April 2009, District Judge Manners, of her own motion on the papers, struck out the claim on the basis that the tenancy ended before the application was made. Mr Hashemi applied to set that order aside. District Judge Stary dismissed that application in so far as it related to the s214 claim, but reinstated the claim for the deductions of £618. Mr Hashemi appealed.
HHJ Cryan allowed the appeal and found for Hashemi. He noted that the landlord:
… never dealt with the deposit in the correct way in accordance with Act and still retains part of it … There can be no question that in accordance with the scheme of the Act a landlord should not be holding any part of a qualifying deposit at this stage, or at least without the safeguards of the Act being in place.
Gladehurst then appealed to the Court of Appeal.