The High Court has provided much-needed clarification on the tenancy deposit protection scheme that was introduced by the Housing Act 2004.
This morning, Tugendhat J ruled that although agents are potentially liable for a failure to protect a tenancy deposit, late registration will not attract a penalty provided that the deposit has been properly protected before the tenant commences legal proceedings.
On 28 February 2008, the claimants, Michelle and Paul Draycott, entered into a 12–month tenancy agreement for a property in
A deposit of £2,700 was paid to Hannells on 4 March, but it was not registered by the landlord with the Deposit Protection Service until 19 May, which meant that it was outside the 14 days set down by section 213 of the 2004 Act.
The Draycotts issued a claim against Hannells, under section 214, alleging that because of the late registration the requirements of the protection scheme had not been complied with and that the agent was liable to pay the statutory penalties set out in section 214 of the Act.
The penalty provides for the payment of the deposit plus three times its value.
At Derby County Court, HH Judge Lea allowed the Draycotts’ claim. He rejected Hannells’ argument that the claim could be brought only against the landlord and that because the deposit had been registered before the claim was issued no penalty could be imposed.
Allowing Hannells’ appeal, Tugendhat J ruled on the first issue that section 212(9) of the Act is clear and unambiguous in that an agent can be held liable in place of the landlord in respect of the liability to protect a tenancy deposit.
He did not address the issue of whether an agent should be liable when the landlord had received the deposit but had not registered it.
On the second issue, the judge found that as long as the deposit was registered, late registration does not, in and of itself, create a right for a tenant to seek a penalty of three times the value of the deposit.
The judge rejected the Draycotts’ submission that the deposit protection scheme had an implied requirement that the deposit be paid in within 14 days of receipt.
PainSmith Solicitors, a specialist landlord and tenant firm based in Hampshire, acted for Hannells and instructed James Browne of Lamb Chambers as counsel.
Following judgment, Marveen Smith, principal of PainSmith, said: “This is an important decision that brings much-needed clarity to this area of the law.
“Many agents and landlords have been penalised when they innocently failed to protect a deposit within 14 days despite the fact that they had not done so maliciously.
“They will breathe a sigh of relief that they now have a route by which they can satisfy their legal obligations and not face a penalty for doing so.”
Draycott and another v Hannells Lettings Ltd Queen’s Bench Division (Tugendhat J) 12 February 2010.
James Browne (instructed by PainSmith Solicitors, of Medstead) appeared for the appellant; Andrew McNamara (instructed by Geldards LLP, of
