Banking a Deposit can prove Good Value for Landlords

Article

07 July, 2009

The recent introduction of tenancy deposit schemes into the law governing landlord and tenant law may prove to be a new source of litigation in the future. Under the Housing Act 2004, a landlord is required to place a tenant's deposit into a scheme created specifically for this purpose and additionally provide the tenant with the necessary information about where it was stored. In some situations however, both of these requirements have not been met, which has led to disputes arriving at court.

Harvey v Bamforth

One such case was Jenny Harvey v Andrew Bamforth (2008) (unreported) which was heard in Sheffield county court in front of HHJ Bullimore. The landlord (H) was appealing against the earlier decision of Barnsley county court that she was required to pay the tenant (B) amounts of money under the Housing Act 2004. B had entered into an assured shorthold tenancy with H and had paid her a deposit which had been placed into a tenancy deposit scheme as required by the 2004 Act.

H later issued proceedings against B for possession of the property on the basis that substantial level of rent arrears had built up. H also gave B the required information about the scheme, but did so outside of the 14 day time limit set out in the legislation. B made an application to the court in relation to this breach and it was decided that H should pay B his deposit back in addition to three times the amount of the deposit.

The Appeal

H's appeal was allowed and it was held that the sections of the Act which related to paying back three times the amount of the deposit only applied where the prescribed information had not been given at all. In fact, as previously stated, H had provided all of the details but outside the stated time period. The court held that the judge at first instance had erred in taking the view that the provisions relating to the requirement for information to be given and the time period in which it had to be provided were so closely related that they only made sense if they were read together. The court was of the opinion that the draftsman of the 2004 Act had been very clear in differentiating between the two requirements and that the potential orders for the payment of the deposit and three times that amount was punitive in nature.

It was held that a tenant could only claim the statutory repayment amount where at the time of the application the landlord had either still not put the money into a scheme or provided the relevant information and that the statute only enabled the court to award the statutory repayment amount where at the time of the court's determination the landlord had either still not put the money into a scheme or had still not given the prescribed information. In either situation it was decided that the mere fact that the landlord had not complied with the 14 day period requirement did not give rise to a cause of action.

Summary

A failure to place a tenancy deposit into a designated scheme can result in serious problems for a landlord. The threat of having to hand back the deposit in addition to a 'penalty' of three times that amount may be a considerable amount of money which, in difficult economic times, can have significant consequences.

This ruling suggests that where a tenant claims the statutory repayment amount as a result of the landlord's ongoing non-compliance, then the landlord can avoid repaying the statutory repayment amount if they immediately comply with all their requirements, but the tenant will be entitled to costs. However, where the landlord has fully complied but done so after the 14 day time limit but before the tenant begins the claim, the landlord will be entitled to their costs as the claim will be manifestly ill-founded.

For more information and assistance on these issues, please contact the Housing Litigation Department at Forbes Solicitors on 01772 220200 or contact Stuart Penswick by email.

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