The Housing Act 2004 contains provisions to safeguard rent deposits paid by residential tenants. Landlords are required to protect deposits paid by assured shorthold tenants with an approved tenancy deposit scheme within 14 days. The government’s intention was that a tenant would be entitled to a payment equal to three times the deposit if the landlord failed to comply with the rules. However, the statutory provisions are not as clear as the government had hoped.
Information supplied to the House of Commons suggests that Citizens Advice Bureaux have dealt with almost 15,000 enquiries relating to tenancy deposit protection in the past year. In addition, more than 3,000 people asked the housing charity Shelter for advice; in 2009-10, its web advice on tenancy deposits received more than 45,000 views.
Legal opinions concerning the effect of the legislation have been divided. Consequently, the courts have had to wrestle with a series of disputes, culminating in Vision Enterprises Ltd (t/a Universal Estates) v Tiensia [2010] EWCA Civ 1224; [2010] 49 EG 80. The decision confirmed that landlords can escape liability for the financial penalty by protecting a tenant’s deposit at any time before the date of the court hearing to determine whether the tenant is entitled to compensation. Many believe that the decision undermines the legislation by reducing the remedy for non-compliance to near-impotence.
Legislative amendments to the scheme were considered during the committee stage of the Localism Bill in the House of Commons.
The proposed amendments would have clarified the law and given judges greater discretion to decide the level of compensation for non-compliance with the legislation. The intention was to ensure that amounts paid by landlords are proportionate and that those wilfully failing to protect deposits pay higher penalties than those that, for innocent reasons, are a few days late in securing protection.
Additional clauses would have enabled former tenants to receive compensation if their landlords did not protect their deposits during a tenancy – to deal with the issues raised in Hashemi v Gladehurst Properties Ltd unreported 9 December 2009. In addition, the amendments would have obliged landlords to protect deposits when properties change hands or when tenancies that began before the introduction of the tenancy deposit protection scheme are renewed.
However, the government had reservations about the amendments as drafted and they were withdrawn. It is disappointing that the amendments appear not to have survived to the report stage of the bill, but the minister indicated that he was sympathetic to the proposals and has promised to reflect further on how to address the points raised.
Reports suggest that there is broad support for reforms to improve the scheme and that Communities and Local Government has been considering how best to deal with ambiguities in the legislation. Perhaps, therefore, the government will now table its own amendments to render the tenancy deposit requirements clear, workable and fair.
Allyson Colby is a property law consultant
