Landlords must have hoped that the decisions in Vision Enterprises Ltd (t/a Universal Estates) v Tiensia [2010] EWCA Civ 1224; [2010] 3 EGLR 53; [2010] 49 EG 80 and Hashemi v Gladehurst Properties Ltd [2011] EWCA Civ 604; [2011] 29 EG 90 had put paid to many of the problems arising out of sections 13 to 214 of the Housing Act 2004. The Act introduced a deposit protection scheme for residential tenants and the sanctions for non-compliance are penal.
Vision Enterprises established that late compliance with the legislation will give a landlord with a complete defence to any claim by a tenant for a penalty payment (equal to three times the amount of the deposit), so long as the landlord has complied with its legal obligations before the tenant’s claim for a penalty payment is heard. Hashemi went further. It established that the court’s power to order a landlord to make a penalty payment ends when a tenancy determines.
Both cases focussed on the need to protect the tenant’s deposit with an accredited deposit protection scheme. However, the obligations imposed by the legislation are twofold. In addition to protecting the deposit, section 213(5) also requires landlords to provide tenants with prescribed information about the way in which their deposits have been protected: see article 2 of the Housing (Tenancy Deposits) (Prescribed Information) Order 2007. Suupere v Nice [2011] EWHC 2003 (QB); [2011] 32 EG 55 (CS) highlights the importance of complying with both requirements.
In Suupere, the judge ruled that the obligation to inform tenants is independent of, and as important as, the duty to safeguard a deposit because the information provided enables tenants to understand how the tenancy deposit schemes work and how to recover their deposits at the end of their tenancy. Consequently, a court can order the landlord to pay a penalty for failure to comply with the information requirements even though the tenant’s deposit has been fully protected or has already been repaid to the tenant.
On the facts of this case, the landlord had failed to comply with the information requirements when the tenant’s claim for a penalty payment was heard. His omission was not deliberate; it was the result of his inexperience as a landlord. He did not know that he was obliged to protect the deposit until the Citizens’ Advice Bureau wrote, on the tenant’s behalf, drawing attention to his obligations (without mentioning the information requirements). The deposit protection service (DPS) then wrote to the tenant to confirm that the deposit had been protected. However, the legislation imposes separate notification obligations on the landlord personally, which must be satisfied within 14 days of receiving the deposit. Consequently, the judge found in favour of the tenant.
The landlord’s ignorance of the tenancy deposit legislation suggests that the authorities need to publicise the rules more widely. Indeed, the judge drew attention to the existence of a template that the DPS provides for use by landlords in conjunction with its scheme.
Meanwhile, the government plans to use the Localism Bill to amend the legislation as a result of the decisions in Vision Enterprises and Hashemi. This case postdates the insertion of the draft amendments into the Bill. It will be interesting to see whether further amendments follow as a result.
Allyson Colby is a property law consultant
