Assured shorthold tenancy – Dwelling – Sections 213 and 214 of Housing Act 2004 – Landlords failing to protect tenants’ deposits within 14 days of receipt by complying with initial requirements of authorised tenancy deposit scheme and informing tenants of such compliance as required by section 213 – Tenants claiming landlords liable to sanctions prescribed by section 214 for failure to comply with initial and notification requirements – Whether compliance within 14-day period necessary to avert sanctions – Whether compliance by date of hearing sufficient – Judgment for landlords
In each of the two joined appeals, a landlord received a deposit on granting an assured shorthold tenancy of a dwelling. Both landlords failed, within 14 days, to protect that deposit by complying with the “initial requirements” of an authorised scheme and giving the required information to the tenant concerning such compliance, contrary to section 213(3) and (6) of the Housing Act 2004 respectively.
In the first appeal, the respondent landlord brought proceedings against the appellant tenant for possession and arrears of rent. In the second, the appellant landlord claimed unpaid rent and other sums from the three respondent tenants. In both cases, the tenants counterclaimed, under section 214 of the 2004 Act, for a sum representing three times the deposit, on the grounds of the landlord’s failure to comply with the initial requirements of an authorised tenancy deposit scheme or to provide them with the prescribed information. In each appeal, the landlord took steps before the hearing to register the tenants’ deposit with an authorised scheme and produced a certificate confirming this. However, the tenants contended that the section 214 sanctions had been triggered by the landlord’s failure to fulfil the statutory requirements within the 14-day period laid down by section 213 and that it could not avoid those sanctions by late compliance.
In both appeals, the tenants’ counterclaims were allowed at first instance. However, in the first appeal, the summary judgment obtained by the appellant tenant was set aside and the point of law redecided in favour of the landlord. It was held that section 214 focused not on the 14-day period but on whether the landlord was in continuing breach of its obligation to comply with the initial requirements and to provide the tenant with the required information concerning such compliance.
The appellants appealed. A further issue arose on the first appeal as to the effect of a time limit imposed by the particular deposit scheme; that chosen by the respondent landlord contained a requirement in similar terms to those in section 213, requiring it, within 14 days of receiving a deposit, to protect that deposit within the scheme.
Held: (Sedley LJ dissenting): The first appeal was dismissed; the second appeal was allowed.
(1) The precondition of a tenant’s application to the court under section 214 was not a failure by the landlord to meet the 14-day time limit for complying with the “initial requirements” or informing the tenant thereof, but the failure to comply with those obligations at all. Had the time for compliance with the initial requirements been in section 214’s sights, it would have referred back to section 213(3), which prescribed the 14-day period, rather than to section 213(4); similar considerations arose regarding the reference in section 214 to the notification requirements. Moreover, the language of section 214(1)(a) and 214(2)(a), raising the question of whether the requirements of an authorised scheme “have not” or the notification requirement “has not” been complied with, was consistent only with an inquiry into whether the initial requirements and notification obligations had been performed, and not with whether they had been performed within a particular period that had passed. That interpretation was also supported by the wording of section 215 relating to the service of section 21 notices; section 215 barred service of such a notice only for so long as non-compliance with the initial requirements continued; it was not intended to impose a permanent bar where a landlord had failed to comply with the 14-day time limit. Accordingly, where a landlord was late in complying with its section 213 obligations but did so before the tenant brought section 214 proceedings, the tenant would have no cause of action under that section and the landlord’s compliance with its dual obligations under section 213 would furnish it with a complete defence to any section 214 claim: Draycott v Hannells Letting Ltd (t/a Hannells Letting Agents) [2010] EWHC 217 (QB); 3 All ER 411 applied. That interpretation was consistent with the purpose of the legislation, which sought to achieve the due protection of deposits paid by tenants, not to punish landlords that might be late in securing such protection.
(2) Moreover, the relevant date for determining whether the initial requirements were satisfied was the date of the hearing of the tenant’s section 214 claim, not the date on which it issued its claim or counterclaim: see section 214(2)(a) and (b). The legislation should not be interpreted in a way that implicitly encouraged the ambushing of landlords by tenants who had grounds for believing that the landlord had not complied with its section 213 obligations. Litigation should be avoided if, following receipt of a letter before claim, the landlord promptly put its house in order. If the landlord failed to do so, the tenant could pursue its section 214 claim. That claim would still fail if the landlord remedied its default later, before the hearing, although the tenant would ordinarily recover its costs.
(3) The “initial requirements” referred to in section 213(3) and (4) of the 2004 Act did not include a requirement imposed by a particular scheme as to the time within which the landlord must secure the deposit. Since section 213(3) imposed a time limit within for compliance with the initial requirements, it was necessarily implicit that a time limit imposed by a particular scheme was not one of those requirements. Otherwise, uncertainty and confusion could arise as to the relationship between the section 213(3) time limit and the scheme time limit.
James Bowen (instructed by Wandsworth & Merton Law Centre) appeared for the appellant in the first appeal; Matthew Hutchings (instructed by Brian McKenna & Co) appeared for the respondent; Jonathan Manning (instructed by Bury Walkers LLP, of Leeds) appeared for the appellant in the second appeal; the respondents appeared in person.
Sally Dobson, barrister
