Court of Appeal acts on tenants' deposits 14 day rule

A ruling by the Court of Appeal has safeguarded landlords from being unfairly penalised if they fail to give tenants information about how their deposits are protected within 14 days.

It has ruled that landlords can escape prosecution just as long as the deposits are protected by the time a case is brought.

Landlords who have been prosecuted because of breaching the 14-day rule may be able to have their fines quashed.

The Court of Appeal heard two appeals as one. Cases previously heard at Croydon and Manchester courts by Judge Ellis were appealed by a tenant against a landlord, and by a landlord against tenants.

In one case, Christelle Tiensia appealed against Vision Enterprises, trading as Universal Estates, and in the other, Honeysuckle Properties appealed against three tenants, James Fletcher, Frank McGrory and Matthew Whitworth.
 
Both appeals raised the same issue – the date by which a landlord has to protect a tenant’s deposit in order to avoid a penalty.

The Appeal Court recognised that under the Housing Act 2004, section 213, landlords must protect a tenant’s deposit in one of three schemes and give the tenants “prescribed information relating to such protection” – and do so within 14 days. Section 213 also requires courts to impose sanctions on a landlord who has breached these obligations, one sanction being an order requiring the landlord to pay the tenant three times the amount of the deposit.

In Christelle Tiensia v Vision Enterprises, Tiensa was the tenant. She was taken to court for possession and arrears of rent. She successfully counter-claimed that she had not been given the prescribed information within 14 days, and her landlord, Vision Enterprises, was ordered to pay £7,200.

Universal successfully appealed, but the tenant won the right for a second appeal.

In the other case, Honeysuckle Properties (the trading name of landlord Melissa Moore) v Fletcher and Others, the landlord was represented by Richard Jones, solicitor for the Residential Landlords Association.

Melissa Moore had taken her three tenants to court for unpaid rent and they successfully counter-claimed. Honeysuckle Properties was ordered to pay them £3,408. Honeysuckle appealed.

The Court of Appeal said the issue was the circumstances in which sanctions must be imposed. It looked at three possible time limits for providing the prescribed information – within14 days, before a tenant lodged a claim, or before the case was heard.

The court ruled that so long as a landlord has protected the deposit with one of the schemes, and given the required information to the tenant, before a court hears the claim, then the tenant is not entitled to the penalty payment.

After the case, Richard Jones said: “Up to now there has been a great deal of uncertainty over the date after which a tenant can claim this penalty if the landlord defaults. 

“Judges have been divided on this question and different courts have arrived at different conclusions. This has led to so much uncertainty that the Residential Landlords Association decided to back one of its members in a test case.
 
“The Court of Appeal’s decision is in line with the Government’s original intention when the legislation was introduced.

“The penalty provision was always intended to ensure that the deposit is properly protected and to give the tenant a way of compelling his landlord to comply – not to punish the landlord.

 “We took this case, on behalf of our member, to resolve all the previous uncertainty because it was becoming a lawyers’ paradise. 

“The Appeal Court judges said that the legislation was not well drafted. It was introduced in a hurry without proper debate. 

“As a result, landlords who made honest mistakes were being penalised in the same way as those who deliberately ignored their responsibilities.
 
“In this particular case, our member thought she had protected the deposit but, due to a mistake in the payment system, her fee was not collected. She only realised this when she received the claim from her tenants and immediately took steps to put this right.
 
“The judges’ decision has recognised that, because courts had no discretion to waive or reduce the penalty, landlords could be unfairly penalised – as happened in this case. The landlord had obtained judgement against the tenant for rent arrears but these were wiped out by the amount of the claim.
 
“Another problem is that landlords who had got their paperwork wrong were being penalised even though they had properly registered the deposit with one of the schemes.

“Concerns were raised by the judges that landlords may now be less willing to protect their deposits. However, landlords should always protect their deposits within 14 days of receiving them and give the required notification to their tenants.
 
“If they fail to do so, and the tenant brings a court claim, the landlord could face a bill for costs even though the deposit is protected. 
 
“What we have achieved, by backing this test case appeal, however, is to make sure that the intention of the legislation is carried out. The landlord now has a chance to put things right. 

“According to the Government it was always meant to be a way of making sure that tenants had a means of getting landlords to comply. In reality, though, it was giving tenants a way of collecting an unjustified windfall.”

Jones added: “Landlords who have already paid the penalty may wish to take legal advice about claiming it back.”