Landlord and tenant – Tenancy deposit scheme – Housing Act 2004 – Localism Act 2011 – Respondent landlords not protecting appellants’ tenancy deposit in authorised scheme under 2004 Act – Whether respondents thereby precluded under section 215 of 2004 Act from serving notice of possession under section 21 of Housing Act 1988 – Whether section 215(1)(a) as amended by 2011 Act applying to deposits paid before statutory regulation of tenancy deposits introduced under 2004 Act – Appeal allowed
In August 2002, the appellants paid a deposit of £1,560 to the respondent landlords on taking a tenancy of a residential property for a term of one year less one day. The tenancy was renewed for further one-year periods in August 2003 and 2004, with the tenancy agreement requiring the same deposit to be paid each time, although no more money actually changed hands and the original deposit was instead carried over and credited against the renewed tenancy. The deposit was never held under any statutory deposit scheme.
When the last of the tenancies expired in August 2005, the appellants remained in occupation under a statutory periodic tenancy arising under the Housing Act 1988. In October 2012, the respondents gave a notice under section 21 of that Act requiring possession of the property. The appellants contended that the notice was invalid on the ground in section 215(1) of the Housing Act 2004, as amended by section 184 of the Localism Act 2011, namely that, at the time when the notice was served, the deposit was not held in accordance with an authorised tenancy deposit scheme under the 2004 Act or the respondents had not complied with the requirements of section 213(3) of that Act regarding compliance with the initial requirements of such a scheme. The amended provisions had been brought into force in April 2012 by article 8 of the Localism Act 2011 (Commencement No 4 and Transitional and Saving Provisions) Order 2012 and applied to any tenancy deposit received in respect of a tenancy in effect on that date, subject to a grace period provided for in article 16(2).
The district judge held that the section 21 notice was valid and the appellants appealed. An issue arose as to the effect of the amended provisions of section 215, in contrast to the original wording as analysed in Vision Enterprises Ltd (t/a Universal Estates) v Tiensia [2010] EWCA Civ 1224; [2012] 1 WLR 94; [2010] 3 EGLR 53.
Held: The appeal was allowed.
Where a landlord failed to comply with the requirements of the 2004 Act regarding the protection of tenancy deposits, the tenant could obtain the sanction prescribed by section 214, including a payment up to three times the deposit amount, only if the tenant made an application to the court, which would require the tenant to be pro-active and probably to spend money. The really effective sanction was instead that imposed by section 215, which prevented the landlord from serving a section 21 notice and thus recovering possession. The first condition for the application of section 215 was that a tenancy deposit had been paid in connection with a shorthold tenancy. That condition, which looked at a past event, was satisfied because the appellants had paid a deposit, as statutorily defined, in connection with the shorthold tenancy granted to them in 2002. The application of section 215 was not confined to deposits paid after the date when statutory regulation of tenancy deposits was introduced under the 2004 Act, namely April 2007. The section did not say that any such limitation applied.
The second condition would be fulfilled where either of two alternatives was established. The first, as set out in section 215(1)(a), was that “the deposit is not being held in accordance with an authorised scheme”. That provision was expressed in the present tense and looked to a current state of affairs, which existed in the instant case because the deposit paid by the appellants was not, and never had been, held in accordance with an authorised scheme.
The second alternative, as set out in section 215(1)(b), was that “section 213(3) has not been complied with”. That provision looked at a past event, namely compliance with the initial requirements of an authorised scheme within the statutory time limit imposed by section 213(3), which had originally been 14 days but was now 30 days. The respondents had not been required to comply with section 213(3) at the time when they received the deposit, or at the time when the statutory periodic tenancy arose, since there was no authorised scheme at either of those dates and therefore nothing on which section 213 could bite. However, that did not prevent the first alternative in section 215(1)(a) from applying. The natural target of section 215(1)(a) was those cases where the deposit was not in fact being held in accordance with an authorised scheme, whether or not the landlord had a preceding obligation to deal with the deposit in any particular way. It was that provision that gave real protection to tenants.
Section 215(1)(a) did not fall foul of the presumption against retrospective legislation, which was said to apply where legislation removed or impaired a vested right. So far as section 215(1)(a) precluded the service of a section 21 notice, it was prospective in operation rather than retrospective since it was only concerned with section 21 notices served after it came into force. Moreover, the nature of the right involved was the right to serve a section 21 notice at a time when the deposit was unprotected. To the extent that it was possible to differentiate between substantive and procedural rights, that right was procedural in nature and there was no particular value in it. The purpose of the legislation was to protect tenants’ deposits and no real hardship was caused to landlords by applying section 215(1)(a) in such a manner. The respondents could have cleared the path to serving a section 21 notice either by paying the deposit into an authorised custodial scheme or, if that was inconvenient, by repaying the deposit to the appellants: Odelola v Secretary of State for the Home Department [2009] UKHL 25; [2009] 1 WLR 1230 and AXA General Insurance Ltd v Lord Advocate (Scotland) [2011] UKSC 46; [2012] 1 AC 868 considered.
Furthermore, article 16 of the 2011 Order plainly envisaged that, as from the coming into force of the amendments made by section 184 of the 2011 Act, the code would apply to existing tenancies. By article 16(1), the amendments would apply to tenancies in existence on 6 April 2012; that provision was concerned not with the date at which the deposit was received but with the date when the tenancy was in effect. Since the section 184 amendments included amendments to section 215(1) itself, it must have been envisaged that the amended section 215 would apply to all such tenancies. It followed that, since the appellants’ deposit had never been held in accordance with an authorised scheme, the respondents’ section 21 notice was invalid.
Per curiam: The better view was that section 215(1)(b) did not have retrospective effect, since it applied only where section 213(3) had not been “complied with”, and the notion of compliance presupposed an obligation to comply. Where the landlord had received the deposit before section 213 came into force, it would never have been under an obligation to comply with section 213 and section 215(1)(b) would therefore not apply. Article 16(1) of the 2011 Order, allowing landlords a period of 30 days after the coming into force of the amendments within which to comply with the initial requirements of an authorised scheme, would take effect by applying to landlords who had, at the time when they received the deposit, been required to comply with section 213.
Mark Tempest (instructed by direct access) appeared for the appellants; Brie Stevens-Hoare QC and Morayo Fagborun Bennett (instructed by The Law Department) appeared for the respondent.
Sally Dobson, barrister
