The tenancy deposit legislation remains open to interpretation.

Sections 213-215 of the Housing Act 2004 require landlords to protect deposits received from assured shorthold tenants using an approved tenancy deposit scheme. The obligations imposed by the legislation are twofold.  In addition to protecting the deposit, landlords must also tell tenants how their deposits have been protected – and must do so within 30 days of receipt. The sanctions for non-compliance are also twofold. The landlord will be liable to pay the tenant a sum of between one and three times the deposit. In addition, landlords are unable to serve a section 21 notice to recover possession at the end of a tenancy “at a time when the deposit is not being held in accordance with an authorised scheme”: section 215(1). The legislation also prohibits landlords from serving section 21 notices until the prescribed information has been provided: section 215(2).  The Encyclopaedia of Housing Law and Practice suggests that the sanctions in section 215 might put paid to the practice adopted by some landlords of serving section 21 notices at the outset of a tenancy. However, R (on the application of Tummond) v Reading County Court [2014] EWHC 1039 (Admin); [2014] PLSCS 215 suggests otherwise. The case concerned an assured shorthold tenancy agreement that was granted on 18 December 2012. The landlord served a section 21 notice on the same date notifying her tenant that she required possession at the end of the fixed term. The landlord received a deposit from the tenant and protected it and gave the tenant the prescribed information on 2 January 2013. When the fixed term expired, the landlord sought possession, relying on the section 21 notice served on the date of the tenancy agreement. The tenant tried unsuccessfully to persuade the county court that the legislation prevented the landlord from relying on the notice, which was served at a time when he had not received the prescribed information and his deposit was not being held in accordance with an authorised scheme.  The tenant’s application for judicial review of the county court’s decision to refuse permission to appeal was unsuccessful. However, during the course of the hearing, the judge commented that he was not satisfied that the county court was wrong. The judge did not need to decide the point to dispose of the case, so his comments were strictly obiter. However, he noted that section 215 is headed “Sanctions for non-compliance” and that the landlord had complied with all the legislative requirements. Consequently, it was difficult to see what justification there could be for sanctions here. The judge took a purposive approach to the legislation. The landlord was contractually bound by a provision in the tenancy agreement requiring her to protect the deposit from the moment of its receipt. The judge considered that this meant that the deposit was “held” in accordance with an authorised scheme as soon as it was received. Therefore, the landlord’s section 21 notice was valid, even though it was served before the deposit was actually protected with an authorised scheme. It is easy to understand why the judge construed the legislation in the way that he did. However, the interpretation appears to fly in the face of clear legislative provisions to the contrary and will add to the controversy that continues to surround the legislative requirements. Allyson Colby is a property law consultant