As has already been announced on the PainSmith blog and on Nearly Legal, there is now, finally, a binding decision (for now) on tenancy deposits and the vexed question of when the award of three times the depost sum can be made to the tenant. Whether it is a decision that we like is another matter.
The matters in question were whether an agent can be liable under the regulations, and whether the landlord should still be liable to pay the penalty if they protect the deposit outside the 14 days but before the court hearing. The decision the Judge came to, in essence, was:
1. A agent will be liable under the regulations as well as the landlord, if it was the agent who was dealing with the deposit.
2. The award of three times the deposit sum is not payable if the landlord has satisfied the initial requirements of the tenancy deposit scheme being used.
In the Draycott case, the scheme being used was the Deposit Protection Service (DPS). The Judge took the view that, although the DPS’ scheme terms and conditions say in section 9
“The Landlord or Letting Agent is responsible for ensuring that Deposits are submitted for protection within 14 calendar days of the date of receipt by the Landlord …”
“In my judgment, the requirement that there be payment into the Scheme is the initial requirement of the Scheme, and not the requirement that that be done within 14 days”.
Therefore by protecting the deposit outside the 14 day period, the landlords agents were not in breach of the initial requirements of the scheme, and the tenant was not entitled to the award of three times the deposit sum.
This is perhaps an unfair summary of the case, and there is of course a lot more to the judgment than this. A lot of very sound points were made, which together go to confirm just how badly drafted this particular piece of legislation is. Anyone interested in the legal arguments should read the case decision, which is here.
However I suspect that a lot of non lawyers will be very surprised by a decision which finds that a contract term which says “The Landlord or Letting Agent is responsible for ensuring that Deposits are submitted for protection within 14 calendar days of the date of receipt by the Landlord. …” is not in fact imposing an initial obligation that the deposit be protected within 14 days.
Some thoughts which occur to me:
- Surely it should be up to Parliament to decide the circumstances when a tenant is entitled to the award, not the tenancy deposit scheme’s legal draftsmen
- It is possible that there could be two situations, with exactly the same facts, where tenant A will be entitled to the award and tenant B will not, simply because a different tenancy deposit scheme has been used – is this fair?
- What if the tenancy deposit scheme rules have changed since the deposit was paid – how will the tenant know this, and will he be able to get hold easily of the terms and conditions current at the relevant time?
You may think of other problems, in which case please leave a comment at the end of this post.
This is consumer law which has been introduced to protect tenants deposits. The award of three time the deposit sum was put in the legislation as a deterrent to force landlords to comply. As most tenants are not lawyers and will not normally be able to afford lawyers to act for them, it ought to be possible for them to work out, reasonably easily, whether or not their landlord is in breach of the law.
- We now have a situation where landlords will feel that they can leave deposits unprotected until threatened by tenants with court action (assuming they do not wish to use section 21).
- In order to find out whether their landlords are liable for the award, tenants will have to read not only the legislation but also the terms and conditions of their landlords tenancy deposit scheme.
- We also have a decision where apparently straightforward wording such as “The Landlord or Letting Agent is responsible for ensuring that Deposits are submitted for protection within 14 calendar days of the date of receipt by the Landlord. …” is held to mean the opposite of what the ordinary man in the street would expect it to mean.
This is highly unsatisfactory and hopefully we will get a decision from the Court of Appeal shortly which will clarify matters.
In view of the uncertainty introduced by this case, I am withdrawing my Kit 2 (which is to assist tenants claim under the tenancy deposit regulations) from sale, until the legal situation is clarified.
Note – if you have a tenancy deposit dispute take a look at the book on >> this page.