Tenancy Deposit Schemes some light relief for Landlords, at least for the time being!

23 January 2012

Until recently there has been a lack of guidance in the interpretation of the statutory framework regulating deposits under assured shorthold tenancies. A number of county court decisions left the law in an uncertain state. However, on the 11 November 2010 the Court of Appeal in Tiensia v Vision Enterprises Ltd provided some much needed clarification. The Court of Appeal found that late but nevertheless due compliance by the Landlord with their obligations under the Housing Act 2004 ("the Act") gave them a complete defence to any claim by a tenant under Section 214 of the Act. This will be some light relief to Landlords in these currently very difficult financial times. Section 213 of the Act imposes various obligations upon a Landlord who receives a deposit under an assured shorthold tenancy including (1) the need to take steps to protect the deposit with an appropriate protection scheme within 14 days of receipt of the deposit and (2) the need to give prescribed information to the Tenant about the prescribed scheme within 14 days. Section 214 of the Act entitles a Tenant to make an application to the court if a Landlord fails to comply with those obligations. If the application is successful the Court can order that the deposit be returned to the Tenant and order the Landlord to pay a sum equal to three times the amount of the deposit ("the penalty"). Some earlier county court decisions had found that a Landlord was liable to pay the penalty where the Landlord had failed to comply with their obligations on time. For example where the Landlord secured the deposit but not within the required 14 day period. Clearly this is an onerous obligation for Landlords especially those who own multiple properties however the Court of Appeal have found that late compliance is an absolute defence to any claim by the Tenant. Therefore provided compliance takes place before Trial it appears a Landlord will not be liable for the penalty. Landlords should not treat this decision as authority to ignore their obligations under the regulatory framework. Attempts should be made to adhere to the requirements of the Act as Tenants may still commence claims based upon any default. Whilst Landlords will have an absolute defence to those claims they will have a potential liability for the Tenant's legal costs if compliance takes place after court proceedings have been issued. However Landlords do have the piece of mind that an inadvertent oversight will no longer see them liable for the penalty. But be aware the decision in the Court of Appeal was only by majority with Lord Justice Sedley dissenting. Therefore there must be the possibility that the issue may yet be referred to the House of Lords, so Landlords be aware the reprieve may be short lived. For additional information or comment please contact: Justin Emerson of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.