Assured shorthold tenancy – Deposit – Letting agent – Respondents paying deposit under terms of tenancy agreement – Appellant letting agent failing to pay deposit into authorised scheme within specified time limit – Whether appellant breaching obligations under the deposit scheme – Whether respondents properly bringing claim against agent rather than landlord — Whether court entitled to impose sanction once deposit lodged with scheme outside statutory time limit — Appeal allowed
The respondents had entered into an assured shorthold tenancy agreement for a property in Derby with the appellant acting as the letting agent for the landlord. Under the terms of the agreement, the respondents had to pay a deposit of £2,700 to the appellant, which was to hold it as stakeholder. The deposit was to be held as security for the performance by the respondents of their obligations under the agreement.
Chapter 4 of the Housing Act 2004 provided for a tenancy deposit scheme to safeguard tenancy deposits paid in connection with shorthold tenancies. One purpose of the Act was to provide security to tenants; in some cases, landlords had retained the tenant’s deposits at the end of the tenancies, when they were not entitled to do so. Section 213 required that any tenancy deposit paid to a party in connection with a shorthold tenancy must, as from the time it was received, be dealt with in accordance with an authorised scheme. Sections 214 and 215 enabled tenants to initiate proceedings should the landlord fail to comply with the requirements of the Act and provided for sanctions for non-compliance. Under section 213, the Deposit Protection Service (DPS) was authorised to administer a tenancy deposit scheme.
The respondents paid their deposit in March 2008, but it was not registered with the DPS until 19 May. They brought a claim against the appellant, alleging that, owing to the late registration of their deposit, the appellant had failed to comply with the requirements of the protection scheme so that it was liable to pay the statutory penalties set out in section 214 of the Act, in particular, to pay a sum equal to three times the deposit: section 214(4). The county court allowed the respondents’ claim, rejecting the appellant’s argument that such a claim could be brought only against the landlord and that no penalty could be imposed because the deposit had been registered before the claim was issued. The appellant appealed.
Held: The appeal was allowed.
(1) The appellant had been in breach of section 213 of the 2004 Act during the period in which the deposit was not lodged with the DPS, although it had not failed to comply with the initial requirements of the scheme.
Section 213(3) imposed a 14-day time limit for compliance with the initial requirements but it did not identify those requirements because the statute envisaged that more than one type of scheme might be authorised: section 212(1) and (2). The DPS provided a custodial scheme and required deposits, but it did not follow that all authorised schemes had to follow that model. Section 213(4) defined initial requirements of an authorised scheme as those imposed with which a landlord would have to comply in receiving a tenancy deposit.
In the instant case, the requirement that a payment should be made into the scheme was the initial requirement of the scheme, but the requirement that that was paid within 14 days was not. That time limit was a requirement of section 213(3). The fact that the time limit was reiterated in the terms of the scheme did not make it an initial requirement of that scheme.
(2) The respondents had been entitled to bring their claim against the appellant. Section 212(9) of the 2004 Act provided that a landlord in respect of a shorthold tenancy included a reference to parties acting on its behalf in connection with that tenancy. Those words were unambiguous and applied to section 214(4), which was a penal provision. The penalty should be imposed on the party that was responsible for the failure to comply with section 213 which, in this case, was the appellant, not the landlord.
(3) However, since the appellant had protected the deposit outside the 14-day period but before the claim was issued, the respondents were not entitled to an order under section 214(4). Since the court had found that the 14-day requirement was not an initial requirement of an authorised scheme, it could not be satisfied that those requirements had not been complied with in respect of to the deposit under section 214(2)(a), and the court was therefore unable to make an order under section 214(3) or (4).
James Browne (instructed by PainSmith Solicitors, of Medstead) appeared for the appellant; Andrew McNamara (instructed by Geldards LLP, of Derby) appeared for the respondents.
Eileen O’Grady, barrister
