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Tenancy Deposit Protection – Legislation without Teeth?

Solicitors in London

Tenancy Deposit Protection – Legislation without Teeth?

News article published on: 25th March 2019

Ross Howarth, a trainee in Osbornes social welfare department, considers the protection of tenant’s deposits.

On 11 November 2010 the Court of Appeal handed down their judgment in the case of Tiensia v Universal Estates. It had been hoped that the decision would provide much needed clarity on the question of the mandatory protection of tenant’s deposits required under Housing Act 2004. The Court delivered a split judgment that has potentially raised more questions than it has answered.

Most private landlords and tenants should now be aware that within 14 days of receiving a tenancy deposit the landlord should protect it using one of three government approved schemes. Where they have failed to do this the tenant can go to Court to request an Order that the deposit is protected. They can also request the Court to apply a penalty against the landlord of three times the value of the deposit.

The main question for the Court was whether they should apply the penalty where the landlord has protected the deposit late. The two-judge majority decided that as long as a landlord has protected the tenancy deposit before the Court hearing they would not be able to require them to pay the penalty. However, they noted that if tenants had to bring this matter to Court in order to force the landlord to protect the deposit, it was likely that the Court would find the landlord liable to pay the tenant’s legal costs.

The dissenting judge felt that this completely undermined the purpose of the deposit protection regime. If landlords can leave the deposits unprotected until the tenant contemplated legal action then why would they protect deposits in the first place?

In English law the majority rule and therefore the rules now allow the landlord to protect the deposit up to the doors of the Court and avoid paying the three-times penalty. However, it can be argued that this decision upholds the spirit of the legislation by providing a mechanism to force landlords to protect the deposit. If the matter reaches Court and the landlord has not protected the deposit then the judge will have to Order the landlord to pay the penalty. However, in practice it is unlikely that many tenants would seek to bring a claim against their landlord for three times the amount of the deposit if they knew their landlord could avoid any penalty (other than perhaps a costs penalty) if the landlord is able to protect their deposit at any time up until the hearing of the case.

But it is not over yet. What happens where the tenancy has come to an end and the landlord refuses to release an unprotected deposit? What happens if the landlord has at no time provided the tenant with the prescribed information about their deposit as required by law? What is the position in respect of joint tenancies – can one joint tenant bring a claim on behalf of all of the other tenants or can each individual tenant make a claim in their own right? With such a strong dissenting judgment in Tiensia will this matter be appealed to the Supreme Court to provide a definitive judgment from the highest Court?

Osbornes solicitors’ Social Welfare Team have been at the forefront of developing this area of housing law and are in an excellent position to advise both landlords and tenants on their rights surrounding tenancy deposits. So if you are involved in a dispute in this area please do not hesitate to contact us. Ross can be contacted at rosshowarth@osbornes.net

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