Deposit protection
We are 11 years into deposit protection now and still, the problems keep coming.
Most normal landlords and agents are on top of things, in terms of protecting the deposit and serving the prescribed information of the scheme being used but in downtown rogue landlord world where I work, deposit protection is still rare enough for people to point in wonder at.
Like an Edwardian farmer shielding his eyes against the sun to squint at a flying machine passing over his Shire horses.
Deposits not paid directly by tenants
In an attempt to get on top of homelessness prevention many councils have for some time been paying deposits on behalf of tenants. Some as a one-off emergency and others through dedicated and funded schemes, including loans from credit unions.
Recent court case
I often become involved in such schemes when trying to source alternative accommodation for illegally evicted tenants or those displaced by prohibition notices and fire brigade house closures and I notice a procedural issue in the way that different schemes work that was ably demonstrated in a court case from late last year, that seemed to evade wider publicity but which is actually very important.
A couple of bits of law from the Housing Act 2004 (the act which sets up the deposit protection system) to start us off:-
- Section 213 (5) hits us first with the requirement to serve the prescribed information on the tenant “And any relevant person”.
- Section 213 (10) then tells us that a relevant person is “Any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant”.
For once, very clear.
If a person pays the deposit for another person then that person must also be served with a copy of the prescribed information of the deposit scheme and as with the tenant themselves, no s21 notice served will be valid until this requirement has been satisfied.
Coppard v. Barrington
Now let’s look at what happened in the case of Coppard v. Barrington, heard at Basingstoke County Court in August 2017.
Joyce Barrington agreed to act as guarantor for Carl Barrington and his partner who subsequently left the property owing £3,167 in rent arrears.
The landlord Susan Coppard protected the deposit and served the prescribed information on Carl and partner before serving s21 and going for possession with a money judgement claim for the arrears in the wings.
Realising that as a guarantor that she was in the frame Joyce Barrington mounted a defence on the basis that the s21 was invalid because, as a relevant person who had lent the couple the money for the deposit, she had not been served with the prescribed information.
She lost the case.
The judge clarified the difference between what happened in actuality and the wording of section 213 (10), which by way of reminder says that it relates to a person who “Paid the deposit on behalf of the tenant”.
The facts
In Ms Barrington’s case, she had merely lent them the money to pay the deposit, she didn’t pay it for them and this meant it was merely a private arrangement between them and didn’t qualify her as a relevant person.
So, Landlords be very careful
This made me think of the various schemes for paying deposits mentioned above. Some do pay the deposit for the tenant and some, like credit unions, merely lend them the money.
Landlords should be aware of this legal point, lest they agree with a scheme, perhaps run by the local authority, where the deposit is paid directly, to take on a tenant and later need to serve an s21 only to find it invalid and leave themselves open to paying a penalty for non-compliance because they didn’t serve the PI on the council as well as the tenant.
Credit unions and other schemes who might simply lend money for a deposit should note that this probably doesn’t make them a relevant person.
There is a clear distinction
Advisers seeking to challenge the validity of a s21 should also be aware of this distinction where the deposit money was provided by someone else. The s21 may or may not be invalid, depending on how things were set up.
Whilst on this subject of prescribed information
Jemmying in another related point worth mentioning, I regularly see cases where the landlord has protected the deposit but didn’t serve the prescribed information, sometimes because they didn’t think they had to.
Serving Prescribed Information is a legal requirement
Sometimes (very commonly) they give the tenant a copy of the protection certificate thinking that this is the prescribed information and just as commonly, they simply didn’t think it was that important, as long as the deposit was protected.
The case of Ayannuga v. Swindells [2010] disabuses us of such notions.
The landlord protected the deposit within the requisite timeframe but did not give the tenant the prescribed information of the scheme being used.
In his defence, the landlord argued that the amount of information contained in the tenancy agreement was substantial enough to meet the requirements of the legislation.
The court disagreed, saying:-
“The provisions of the tenancy agreement did not address the procedural provisions of the deposit scheme itself. Articles 2 (1) e; and 2 (1) f; of the Prescribed information Order were not to be regarded as mere matters of procedure or of subsidiary importance”.
In other words, service of the prescribed information is a legal requirement as equal in importance as the actual protection of the deposit.
Mistakes can be very costly
Ayannuga was ordered to return the deposit to the tenant and pay the full penalty of three times the amount of the deposit. So,
Make sure you do it right!
Whoever you are and whatever your role is in this, make sure you are clear on prescribed information rules.
Simon Davey says
February 20, 2018 at 9:05 AMBen makes a very good point about the distinction between a parent who has loaned their child the deposit money and councils who pay it for them. If the tenant pays over a deposit we would be into lengthy questioning as to where the money came from if loans counted towards making someone a relevant person. Letting agents would be serving PI on all known relatives to cover themselves!!
With regard to councils they more commonly use a bond guarantee now rather than actually parting with hard cash. No money changing hands means no deposit registration and no PI which makes things a lot easier.
Ben Reeve-Lewis says
February 20, 2018 at 1:00 PMSimon that isnt always the case though. In emergencies some councils still pay the deposit, so just be awake to that possibility. It is, as you can see, a crucial legal detail
Elaine says
February 20, 2018 at 9:21 AMIs there a list of the exact items that must be provided/served to the tenant in order to comply with the deposit protection Scheme and the ability to serve a legally compliant section 21 notice. To my knowledge you must provide:
1) A copy of the energy rating for the dwelling
2) A gas safety certificate
3) An Electrical safety certificate
4) A copy of the deposit protection scheme or maybe better described as the information about which deposit protection scheme you have used.
It may vary for the four items I’ve listed above but I’d say that you should provide all of 1 through 4 on the day tenant moves in. Does that cover all that is required?
Regards EJHatOxon
Ben Reeve-Lewis says
February 20, 2018 at 9:44 AMElaine its handy to look at the new s21 form 6A which contains information for the tenant post Dereg Act but also the new N5B form that came out in November and must be used for all accelerated possession claims from then on, which goes into matters relating to property licensing, retaliatory eviction, the How to Rent booklet.
Two weeks ago a case was referred to me by a local authority to defend the possession action, which so often is like shooting fish in a barrel because so few of the landlords and agents I deal with are anywhere close on any compliance but in this case the agent gave all of the required information when they tenant signed on the dotted line. They were given a full pack in a plastic wallet and had a front sheet with all of the documents listed which the tenant had to sign for, even a copy of the licence, which isnt a requirement.
The result? There was absolutely no defence I could help the tenant with and although I dont often say this, hats off to the agent for a pro job.
Kate Pearson says
February 20, 2018 at 11:06 AMThis article is a great relief as I’ve often worried about a tenant not disclosing that someone else had given them the money for the deposit. I can now rest easy in the knowledge that unless the money came to me directly, the source of funds is not my concern in terms of the prescribed information obligations.
Ben Reeve-Lewis says
February 20, 2018 at 3:08 PMHere is a recommendation based on the work of the agent who served s21 on my client recently, bearing in mind that my job, in part, is to defeat possession claims.
*When setting up a tenancy do the following:-
*Serve a copy of the gas safe certificate BEFORE the tenant moves in.
*Give a copy of the EPC (Not required for HMOs but why quibble? do it anyway)
*Provide a copy of the property licence if required by the local authority.
*print off the latest how to rent booklet. It wont cost you anything but time.
*Give a copy of the deposit protection certificate.
*GIve them the prescribed information of the scheme being used (Not just the registration certificate)
GIve the whole shebang to the tenant in a plastic wallet bought from WH Smith, along with a cover sheet listing the documents they have received and asking them to sign for it.
These are the things that defence people like me look out for immediately.
All of the above will cost you 10 minutes at your photocopier and 15p for the plastic wallet.
as an alternative, spend hours posting online about the unfairness of legal processes hahaha
Michael Barnes says
February 21, 2018 at 8:53 AMThe How to Rent booklet has so much background colour that it takes half an ink cartridge to print; that costs money a well as time.
Getting prospective tenants to agree to receive it as an email attachment is the free option (NOTE that emailing a link to the government web site is NOT acceptable).
Sam Osborne says
February 20, 2018 at 7:04 PMWould the landlord also be in breach if they failed to provide the DPS Terms and Conditions with the Prescribed Information?
Ben Reeve-Lewis says
February 20, 2018 at 7:29 PMRead the legislation Sam
Smithy says
February 22, 2018 at 9:58 AMMany thanks for this article which has come at just the right time for me. My local Council are paying a deposit through the ‘Private Rental Scheme’ for a young single mum who is moving into one of my houses (The council lady told me off when I referred to a ‘bond’.) Luckily I now know I must serve the Prescribed Information on the Council as well as the tenant. I don’t think I would have realised otherwise.
Sam Osborne says
February 26, 2018 at 11:57 AMBen is there any case where the tenant successfully sued the Agent, who protected the deposit? There appears to be a lot of information that the Landlord is ultimately liable but I can’t find anything as to whether the Agent can be take to court.
There may be circumstances where an Agent is deliberately operating not in the best interest of either the Tenant or the LL and it’s the Agent the Tenant may wish to sue for not sending the Prescribed Information.
P HANSON says
April 16, 2018 at 11:33 AMSee Housing Act 2004 s212((9)