Assured shorthold tenancy – Deposit – Sections 213 and 214 of Housing Act 2004 –Respondent landlord giving notice to terminate tenancy – Appellant claiming three times amount of initial deposit as sanction under section 214(4) for respondents’ failure to pay deposit into authorised scheme – Whether entitled to sanction where deposit paid into scheme prior to hearing – Whether compliance impossible once tenancy ended – Whether court having discretion to refuse sanction – Appeal dismissed
The respondents let a residential property to the appellant on a series of one-year assured shorthold tenancies from May 2007. On the first two occasions, the deposit that the appellant had paid was held in an authorised tenancy deposit scheme within the meaning of Chapter 4 of Part 6 of the Housing Act 2004. On the 2009 renewal, it was agreed that rather than continuing with that arrangement, the appellant would withdraw the deposit from the scheme and pay it directly to the respondents, who would take responsibility for protecting it. The respondents agreed that the appellant did not have to pay the deposit immediately at the outset of the tenancy but could do so once she had received back her previous deposit.
The appellant delayed in paying the full amount of the deposit to the respondents. In June 2009, they served her with a notice terminating the tenancy in exercise of a break clause. They received the full amount of the deposit three days later and offered to refund it directly to the appellant, who instead insisted that it be handed over to an authorised deposit holder. She then applied to the county court for an order that the respondents pay her three times the deposit amount, pursuant to section 214 of the Act, as a sanction for failing to comply with the initial requirements of an authorised scheme, pursuant to section 213, within 14 days of receipt. The respondents paid the deposit into a scheme a few days later.
The county court dismissed the appellant’s application on the ground that although there had been a technical failure to comply with the initial requirement to secure the deposit, it would be unjust to apply the sanction in section 214(4) in the circumstances of the case. The appellant appealed. Meanwhile, the Court of Appeal held in Vision Enterprises Ltd (t/a Universal Estates) v Tiensia [2010] EWCA Civ 1224; [2010] 49 EG 80 that a sanction could not be imposed where the landlord had complied with the initial requirements by the date of the hearing. The appellant sought to distinguish that decision as not applying where the tenancy had ended before the deposit was paid into an authorised scheme.
Held: The appeal was dismissed.
(1) Section 214(4) of the 2004 Act was mandatory, in that once it was found that a deposit had not been secured in accordance with the Act, or that the prescribed information had not been provided, as at the date of the hearing, there was no discretion to refuse to make an order for payment of three times the deposit sum. Accordingly, having found a breach of section 213(4), the county court judge had erred in refusing to make an order and purporting to exercise a discretion for which the Act did not provide.
(2) However, the judge should have found that the relevant provisions had been complied with. A landlord could comply with the requirements of section 213(3) and (5) well after the inception of the tenancy, indeed at any point until the hearing of the application under section 214(4): Vision Enterprises applied. There were no grounds for making the distinction put forward by the appellant between compliance before and after the tenancy had terminated. Although the obligations in section 213 fell on “the landlord”, that did not mean that compliance was not possible once the relationship of landlord and tenant had ended. The sanction in section 214(4) was likewise stated to be payment by “the landlord” of three times the deposit sum. It was difficult to see how a party could, simultaneously, no longer be the landlord for the purposes of compliance but still be the landlord for the purposes of sanction. The more natural and consistent reading of the Act’s provisions was that a party’s position as “the landlord” or “the tenant” crystallised when a deposit was paid in connection with a shorthold tenancy. Thereafter, “the landlord” continued to be such for those purposes, regardless of whether the tenancy had been determined, and remained under a continuing obligation to comply with the initial requirements of the scheme and to provide the prescribed information, subject to sanction if this were not done by the time of hearing of the section 214(4) application. Consequently, the respondents, having secured the deposit before the hearing, albeit after the termination of the tenancy, had a complete defence to the appellant’s section 214(4) claim.
James Browne (instructed by PainSmith Solicitors, of Medstead) appeared for the claimant; David Giles (instructed under the bar public access rules) appeared for the defendants.
Sally Dobson, barrister
