Tenancy Deposit Protection - First High Court Decision

[bedlington83]

Absolutely agreed. Therefore, in the absence of such a comment (or more specifically in the absence of the comment that the 3 x deposit does NOT Apply if the deposit is returned), then the act has still been breached.

The counter argument is this, not that I necessarily disagree with you:

Look at what the law actually says in relation to the 3 X penalty at 214(4);

(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

The key word there is "also". If the court hasn't ordered the return of the deposit it cannot also order the 3 X deposit. Clearly the penalty only applies where the deposit has not been returned

 

Housing Act 2004 (c. 34)

[lawdoctor]

Here is a post on Landlord Law website last year.

More tenancy deposit muddle

 

Written on April 28, 2009 by Tessa Shepperson in Law case report

1 Comment - Leave a comment!

 

 

One of my clients has drawn my attention to an interesting forum discussion on tenancy deposit claims here.

It seems from this that many Judges (although not all) are taking the view that the fine of three times the deposit amount should not be awarded if the landlord refunds the deposit before the court hearing. The reason for this is the wording of the relevant sections. This is s214 (3) and (4) which say (after the first part of the section says what things trigger a claim):

“(3) The court must, as it thinks fit, either—

(a) order the person who appears to the court to be holding the deposit to repay it to the applicant, or

(b) order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme,

within the period of 14 days beginning with the date of the making of the order.

(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.”

The argument is that the words ‘must also order’ in (4) means that if the award in (3) is not payable because the landlord has returned the deposit, the award in (4) is not payable either. You can only have both or neither.

If a landlord can escape liability by simply handing over a cheque in the court waiting room, five minutes before the hearing, it makes the penalties look ridiculous.

We urgently need a test case to go to the Court of Appeal so we all know where we stand.

[MrShed]

Yep fair point there bed and LD

 

As the last line states - test cases required

[lawdoctor]

Mrshed that post on Landlord Law site was from cag a year ago you yourself posted on that thread. Your views have not changed much!!

 

That's a compliment by the way.

 

lawdoctor.

[lawdoctor]

I was wrong you did not post on that thread,silly me.

 

I must need reprograming!!!

[Webranger]

I've nothing against the law as it stands, I'm just against those who want to put an even more draconian interpretation on it.

 

At the time it came into force I was actually helping my son get his deposit back from a student sit through court action, so I know that there was a problem that needed solving.

 

Of course, ignorance is no defence in law, but it's a shame that in this case the authorities took less trouble than they might to see that all landlords - and tenants - were aware of the change in law.

 

I really don't see why this needs to go to Appeal, we do know where we stand, just read the words as they are written - present tense, use of the word "also" etc. As I say, they key is to ask, "is the tenant protected?" not, "is the landlord being penalised?" To take that attitude is not pro-landlord bias, it's just seeking a a just balance between parties. If the tenant is protected, why would any fair person want the landlord penalised?

Edited March 5, 2010 by Webranger
superfluous word

[MrShed]

But to be fair, the tenant should enforce his legal rights.

 

If this amounts to 3x deposit for a technical breach, then so be it.

 

I will repeat, its not like its a hard legal obligation to adhere to - protect and send information. Simple as that.

[danielr]

I agree with both:

 

if the tenant hasn't lost out, (i.e got all their deposit back, or their deposit only minus fair deductions that they'd agree to). then what's the trouble, why penalise the landlord.

 

so I think the sentance should have said.

 

"But to be correct, the tenant should enforce his legal rights."

 

the fairness would probably be unique to each situation.

 

if the landlord did return the deposit, and everyone was happy, it's not "fair" (in my mind) to try and screw 3x the deposit further from them!

 

on the other hand, if they didn't protect and tried to skip off with the money,

then it's "fair" to give them a wrap on the knuckles with a really big draconian stick.

[MrShed]

Thing is though, it isnt the tenants fault - its the legislation.

 

If I was a tenant right now, and my deposit was not protected, even if I did not feel it was an issue, I could not honestly say that I would not pursue the 3 x deposit fine.

 

After all, £3000 or more can be a LOT of money, especially when a tenant.

[Webranger]

Exactly! It has been hatched by and fed into the blame culture.

 

"Sue the b****s" is the cry, even if, as can be the case here. no-one has suffered any loss.

 

The son and daughter of my friend Gary's deceased tenant wouldn't provide her with the deposit when she desperately needed it, but now think they have a right to four times that deposit just because they think they can manipulate the law to get it. But judges should recognise such people for what they are and give them short shift, not encourage them.

 

But as long as it is well publicised and it is interpreted as it is written and landlords can take 2 x month's rent up front with no deposit, it is an acceptable law and it does offer protection against the minority of landlords who really are unscrupulous.

[lawdoctor]

Here is what I posted earlier on this thread. Landlords should pay careful attention to the second para;

 

 

"I am afraid that the industry and landlords small and large are just going to have to accept that the good old days of riding roughshod over the private tenant are dead and gone - just as the days of hiding your business dealings from HM Customs & Excise were extinguished to a large extent upon the passing of the tenancy deposit legislation"!

 

"I am reasonably informed that HM Customs and the Treasury had the tax avoidance issues fully to the forefront of their mind when this legislation and its bolt on extras soon to be introduced was being given legal birth."

 

lawdoctor.

[Webranger]

This:

 

Here is what I posted earlier on this thread. Landlords should pay careful attention to the second para;

 

 

"I am afraid that the industry and landlords small and large are just going to have to accept that the good old days of riding roughshod over the private tenant are dead and gone "

 

lawdoctor.

 

shows an awful lot of undue prejudice.

 

Of course there were bad landlords and even the infamous Rachman (who wasn't really a landlord) but they were never all like that and even less so nowadays. In my experience well intentioned landlords suffer a great deal from tenants; in fact it is the experience with bad tenants that make many landlords become hard. But not all tenants are dishonest and unscrupulous, either, so generalisations of this sort from either side are nonsense.

 

"bolt on extras soon to be introduced" sound alarming. Could you provide some detail?

 

All in all, it's looking more and more as though the option of asking for two months rent up front and no deposit is going to be more attractive.

[MrShed]

I dont understand how 2 months rent up front protects you from any damage?

 

I agree that generalisations on both sides are often unfair.

 

However, you have to be aware that the tenant is by far the more vulnerable party in the landlord/tenant relationship, and as such it is only right that legislation falls more on the side of protecting the tenant than the landlord.

[MrShed]

2 months rent up front also causes its own other legal issues bear in mind.

[bedlington83]

All in all, it's looking more and more as though the option of asking for two months rent up front and no deposit is going to be more attractive.

Do you really think county court judges are stupid enough not to see through this?

[MrShed]

Do you really think county court judges are stupid enough not to see through this?

 

You are more right than you think bed - apparently back in Feb 09 the first landlord who did things this way got stung for 3 x deposit, as the judge ruled that no matter what the money up front was called, it was still for security and therefore HA 2004 still applies.

 

http://nearlylegal.co.uk/blog/2009/02/its-not-a-deposit-honest/

[Webranger]

To take the last first, that ruling should have been appealed because it was wrong. The law is quite clear that a deposit is something that has to be returned unless there is damage or arrears to set against it.

 

(Of course, it is possible that you have not reported the decision fully and there was more to it)

 

If a landlord asks for 2 months rent upfront, that is his right. The downside for him is that the tenant stops paying 2 months before he leaves and there is nothing left to set against damage. That's why it is NOT for security.

 

So, no this strategy does not protect one from physical damage, but it does give you better cover while you get an eviction order if the tenant stops paying. At least, that's the theory.

 

But the really important thing to challenge you on is your idea that the tenant is more vulnerable than the landlord. That really is unrealistic bunkum.

 

A bad tenant can cost the landlord thousands of pounds, not only in lost rent, but in physical damage to the property - and even to himself. The police don't want to know, the civil court makes evictions and claims for arrears and damage as expensive and slow as it can, and how do you get anything back from an unemployed layabout even if you have a court order?

 

Now tell me, in what way, under present law, is the tenant vulnerable?

[MrShed]

To take the last first, that ruling should have been appealed because it was wrong. The law is quite clear that a deposit is something that has to be returned unless there is damage or arrears to set against it.

 

Thats not true I'm afraid. Read the act:

 

Any money intended to be held (by the landlord or otherwise) as security for -

(a) the performance of any obligations of the tenant, or

(b) the discharge of any liability of his arising under or in connection with the tenancy.

 

Interesting to note that some very senior solicitors in the field (PainSmith etc) disagree with you.

 

 

(Of course, it is possible that you have not reported the decision fully and there was more to it)

 

The link was there for you to read as you see fit.

If a landlord asks for 2 months rent upfront, that is his right. The downside for him is that the tenant stops paying 2 months before he leaves and there is nothing left to set against damage. That's why it is NOT for security.

 

It is for security, merely security of rent rather than damages.

 

But the really important thing to challenge you on is your idea that the tenant is more vulnerable than the landlord. That really is unrealistic bunkum.

 

A bad tenant can cost the landlord thousands of pounds, not only in lost rent, but in physical damage to the property - and even to himself. The police don't want to know, the civil court makes evictions and claims for arrears and damage as expensive and slow as it can, and how do you get anything back from an unemployed layabout even if you have a court order?

 

Now tell me, in what way, under present law, is the tenant vulnerable?

 

You miss the point entirely.

 

The tenant is not more vulnerable in terms of they can suffer more financial loss.

 

That is the whole point.

 

the landlord can suffer only financial loss in the landlord/tenant relationship. Admittedly, this financial loss can be significant, but it is financial all the same.

 

You are dealing with the home of the tenant, which is quite something else entirely.

 

As a landlord, you are in a somewhat priviledged position, and have an awful lot of power over the life of your tenant. This has to be protected against.

[Webranger]

"The link was there for you to read as you see fit." Yes, I missed that and now I have read it, I see that I was correct.

 

The point here was that the agreement was for a rent paid weekly in advance, so anything extra held was treated as a deposit. But if the ASTA clearly says that rent is to be paid two months in advance, then the situation is different and there is nothing being held as a deposit.

 

The second month's rent is no more for security than the first. There are plenty of tenancy agreements around that are paid quarterly in advance and the Act says nothing about whether rent should be paid in advance or arrears or for what periods.

 

"the landlord can suffer only financial loss in the landlord/tenant relationship. Admittedly, this financial loss can be significant, but it is financial all the same."

 

ONLY? Can you tell me any other business in which the customer can cause so much damage to the supplier? - Can refuse to pay for the goods or service provided but can go on receiving them for months with the backing of the law? And then cause thousands of pounds worth of damage which he will never have to pay for?

 

Moreover, as long as the tenant pays the rent and causes no problems, it's in the landlords interest to keep them.

 

Except in the case of repossession (in which case the landlord has already suffered the bigger loss) the tenant always has at least two month's notice and it takes at least another month to get them out after that if they resist, so their vulnerability is far less.

 

"As a landlord, you are in a somewhat priviledged position, and have an awful lot of power over the life of your tenant. This has to be protected against."

 

Under the present law, bad tenants are over-protected and they know it and how to exploit it. I had a couple, with whom I had been very understanding with the result that they were well over £1,000 in arrears, suddenly decamp without any communication at all. They have disappeared and I have no come back at all. But if I had tried to bundle them out with no notice, I would have been sent to prison.

 

Who is the more vulnerable? What power over the life of my tenant?

[MrShed]

The HA clearly states that the regulations apply to any monies taken that are to act as security to ensure the tenants obligations are met.

 

My point still stands.

 

I agree that tenants can exploit legislation, but I stand by my point that the landlord has only financial losses whereas you are dealing with the home of another person on the side of the tenant.

[Planner]

Two scenarios;

 

1) You take two months rent in advance at the start of the tenancy and then dont take any further rent until the third month.

 

2) You take two months rent in advance and then take another months at the start of month two.

 

Option 2 is clearly a deposit.

[Webranger]

Mr. Shed: then how does that not apply to the first month's rent?

I'm not sure whether you are defending the present law, which I'm not attacking, or wanting yet more.

 

Planner: Yes, I've thought of that and you could be right, but that is one matter that would probably have to go right up to the Appeal Court for clarity. It's not as clear as you say. It would come back to the question above: in what way does month 2's rent differ from month 1's in ensuring that the tenant's obligations are met? If the tenancy agreement did not say that deductions could be made to cover other costs, then I still do not think that it could be taken as anything other than legitimate rent.

 

What loss could the tenant suffer? The legislation was to protect tenants who were refused the return of their deposit for spurious reasons (like my son, see above) but a tenant in these circumstances is not expecting anything back. He has to be given two month's notice on or before a rent day, so he has no more rent due at that point. Nothing to return, therefore nothing to protect.

[MrShed]

There is a definite difference WR between the two scenarios highlighted.

 

Month 2 differs from month 1s in that you pay 1 month in advance right through the tenancy.

 

Taking 2 months rent, one for month 1 and one for the last month, is a very different kettle of fish. I agree there is no actual precedent at this stage, but there are cases where this has occurred, and the HA reads relatively clear on this specific point.

 

The tenant can suffer very little loss - I was talking about a more generic point when referring to tenants requiring protection. As I have stated, I believe that HA2004 TDS requirements are draconian. They still need to be followed though.

[lawdoctor]

Webranger, I am a landlord so unlikely to be prejudice as you claim.

 

"Bolt on extras" Detail's you seek.....try these(remember what I said about HM Customs)

 

The £25,000 short hold tenancy limit to be lifted to £100,000.Should be lots of tax in that move would you not agree?

 

"PLUS" read this already in play in Scotland!! Message from me Lawdoctor to all those with tax "problems" be afraid be very afraid!!! There is no statute of limitations on undeclaired tax income.

 

Every private landlord in England will have to sign up to a national register before they can let their properties to tenants, government proposals confirmed today.

Some details of the scheme had been reported earlier this month, but today the communities and local government department confirmed its plans and gave more details of its plans to crackdown on rogue landlords and offer consumers more protection.

As well as requiring landlords to be registered the government plans to introduce full regulation of all letting and managing agents. It said only around half of the estimated 8,000 agents in England were signed up with professional schemes and that it was not "desirable or appropriate in the modern age" that it was still possible to set up as an agent without any qualifications.

It is also hoping to set up a scheme allowing tenants to register official complaints about sub-standard landlords.

The plans follow an independent review into the private rented sector carried out last year for the government by Julie Rugg, a senior research fellow at the centre for housing policy at the University of York.

Rugg recommended the introduction of a "light touch licensing system" for landlords and mandatory regulation for letting agencies aimed at increasing protection for both vulnerable tenants and decent landlords.

Under the rules, agents would be subject to minimum entry requirements, would have to adhere to a code of practice for members – including a requirement that they do not let properties which do not comply with decent homes standards – and would have schemes in place to protect clients' money and offer redress in the case of problems.

In addition, any homeowner who lets a property – whether they are a professional landlord, a buy-to-let investor, or a would-be seller who has been unable to find a buyer – will have to pay an annual fee to join a national register and would receive a unique landlord registration in return.

Landlords would be able to use the register to market properties to prospective tenants, and could include details of other professional schemes to which they belonged. However, they could be removed from the register and lose their properties if there were a large number of complaints about them or they failed to comply with the rules.

 

lawdoctor.

[lawdoctor]

By the way Webranger you say Peter Rachman was not really a landlord, you are clearly wrong.

 

Read on;

 

Police and Home Office officials wanted to trap the notorious slum landlord Peter Rachman in the United States in 1960 as the chances of prosecuting him in Britain faded.

 

Police and Home Office officials wanted to trap the notorious slum landlord Peter Rachman in the United States in 1960 as the chances of prosecuting him in Britain faded.

They considered allowing the Polish-born businessman out of the country to visit the US and refusing to let him return, but ruled it out because it would mean breaking international agreements.

The plan is revealed in a document from the Public Record Office that details Rachman's activities in Notting Hill, where he rented scores of flats to immigrants at exorbitant rents and was linked with intimidation and prostitution. His activities provoked a parliamentary question and a deputation from local people and MP George Rogers.

The authorities decided a successful prosecution was unlikely because most witnesses were unreliable, and reluctant to make statements against Rachman, then 41, who had also started selling many of his properties in Notting Hill.

He had been accepted in Britain as a refugee after the Second World War and worked as a tailor then as a clerk. He used a loan to buy four flats in Notting Hill in 1954. By 1959 he controlled 144 homes through 23 companies.

The Home Office considered sending him back but thought the Polish were unlikely to accept him, and the deportation would be difficult because he had been given refugee status. But in February 1960 police discovered that Rachman was planning to visit the US and suggested the Home Office used the trip to keep him out of Britain.

In Home Office notes sent to police, an official said the idea was "attractive'' but "not, alas, a practical proposition''. He said the Home Office would have to give the US assurances that Rachman could return to Britain before they would give him a visa, and the Home Office would "feel obliged'' to honour an "implied undertaking'' to readmit him.

"We might, I suppose, refuse to issue Rachman with any documentation but the only effect of this would be to prevent [him] leaving the country and our action could be represented as a breach of the 1951 convention under which we issue documents to refugee Poles and under which Rachman obtained a document in 1954,'' the note said.

A Home Office minister, Davie Renton, wrote to Mr Rogers saying a deportation would not be attempted. He said police were still scrutinising Rachman's activities, although the file shows police were little more than "keeping an eye'' on him.

Rachman's name is so synonymous with bad housing that it is included in dictionaries as Rachmanism: "Landlords buying up slums to fill with immigrants at extortionate rents." He died in 1962.