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The Tenancy Deposit Regulations

This article is now out of date and has been superseded by the Deregulation Act 2015.

DPS is one of the main three deposit escrows".

DPS is one of the main three tenancy deposit “escrows”.

A new potentially precedent setting judgment by District Judge Bell where our Advocate represented the Claimant may shed some clarity and certainty in regards to the protection of tenancy deposits.

The law aims to protect tenant’s deposits from rogue landlords by ordering all landlords to place the deposit in, effectively, an escrow with a third party mandated by the government such as the Tenancy Deposit Scheme.

However, the law not only orders landlords to protect the deposit, but do so within 30 days and also inform the tenant by serving what is called “prescribed information” – a bundle of documents explaining the scheme.

If these requirements are not met, then the landlord opens himself to sanctions of up to three times the amount of the deposit as well as the full return of the deposit. More crucially, a section 21 notice to quit can not be served on the tenant.

Judges and many others in the legal profession have often interpreted the three sections of the law in regards to deposit protection very strictly. It often happens that a landlord instructs an estate agent who unfortunately goes rogue or bankrupt without protecting the deposit within 30 days. If a s.21 notice can not be served unless the deposit was protected within 30 days of receipt, then the landlord would have no option but to return the deposit out of his own pocket regardless of whether the tenant has caused any damage to the property, which strikes many landlords as somewhat unjust.

Fortunately, a new lower court decision has clarified that, regardless of whether the deposit is protected within 30 days or otherwise, as long as it is protected before the service of the s.21 notice and the prescribed information are served on the tenant before the s.21 notice, the s.21 notice is valid.

Quentsons Legal Services represented the landlord in the case of Singh v Hernandaz where the landlord had evidence that he secured the deposit and served the prescribed information, but some four years after he received the deposit. Initially, the very able District Judge Bell was of the opinion that the s.21 notice was not valid as the deposit had to be protected within 30 days or returned to the tenant. Our Advocate argued that the 30 days time period may apply in regards to sanctions, which was not a matter to be decided today. However, if the act was read closely, it does not require the deposit to be protected within 30 days in order for a s.21 notice to be valid.

Our Advocate argued that s.215(1) states that “If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when— (a)the deposit is not being held in accordance with an authorised scheme” and s.215(2) states that “If section 213(6) is not complied with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213(6)(a) is complied with.” s.213(6)(a) deals with compliance while s. 213(6)(b) concerns the time period. However, s.213(6)(b) was not mentioned in s.215(2). Neither does s.215(1)(a) require compliance within a certain time. Therefore, as long as the deposit was protected and the prescribed information were served prior to the service of the s.21 notice, the notice is valid.

After consulting “the bible” of Tenant and Landlord Law, the very Honourable District Judge agreed with our Advocate and ruled that as long as the deposit was protected and the prescribed information were served prior to the service of the s.21 notice, the notice is valid.

This is a First Instance decision, therefore it is not binding. However, on principle, there is hardly any difference between the deposit being fully returned and the deposit being protected as in both cases it is no longer with the landlord, but with a third party. As such, we hope that all judges follow District Judge Bell’s decision in line with Parliament’s intention.


 

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