Can the tenancy deposit laws be challenged in the courts?
Tenancy deposit law has been with us for several years now, and most people are getting used to it, even if many of them don’t like it. However one website I spotted recently still has big questions.
The website is Buy to Let Building Insurance and they are asking UK Lawyers to comment on whether tenancy deposit law is legal or not, pointing out that in the past many tenants got their deposit back on the day they moved out:
Now the tenant has to wait 10 days and a request for the deposit has to be sent by the landlord and tenant to the DPS if there is no dispute. In the meantime some tenants will have to borrow for their next deposit.
Is it not the case that the deposit is at all times the property of the tenant and so the government and the law have no right to interfere with how he wishes to use it and who he wants to hold it as long as the purpose is not illegal?
If this is the case then could making the use of the scheme compulsory be overturned by appeal to a High Court or a European Court as the law deprives the tenant of the right to do what he wants with his own money?
This sort of question is rather outside my area of expertise, but I note that three Court of Appeal Judges recently spent a long time looking at various questions about the tenancy deposit laws in the Tiensia case, and did not question its legality, although I suppose that was not a matter before the court.
My view is that a law which passes through both houses of Parliament and has the Queens approval is probably sufficient to force landlords to protect other people’s money held by them, when there is clear evidence that in the past many landlords (not all but a substantial minority) were seriously abusing their position.
After all as a solicitor, I have to comply with rigid rules about holding other people’s money, and have to have my accounts specially audited and a report sent to the Solicitors Regulation Authority every year.
But what do you think?
I agree with you about the probable legality Tessa but I also agree with the quote about the problems with the 10 day element of it.
This causes annoying and inconvenient delays for both tenant and new landlords. If we can transfer funds between bank accounts and instantly pay bills online why cant an account for undisputed amounts be set up to clear the same day?
If I understand correctly, the point of the quoted blog post is that tenants should have the right to decide whether their deposits is protected by one of the schemes or kept by landlord as a bond.
Using a scheme does seem to me in the tenant’s best interest (schemes were made compulsory to protect tenants after all!) so why would a tenant “freely choose” not to have his deposit protected?
That said, I agree with Ben that 10 days to return a non-disputed deposit is un-necessarily slow (my guess is that it helps the DPS provisioning and shifting money internally as it is held on interest bearing financial products)
A complete non-starter as an idea. The challenge would, presumably, have to be either:
(a) that the relevant provisions of HA 2004 violate one or more rights protected under the Human Rights Act 1998, such that the 2004 Act should either:
(i) be ‘read down’ so as to give the tenant a choice as to where the money goes; or
(ii) be declared incompatible.
or
(b) that the relevant provisions of HA 2004 are incompatible with some aspect of EU law and are therefore unlawful.
(b) is a complete non-starter; there is no treaty provision (or subordinate legislation) that prohibits Parliament from legislating in this manner in respect of tenancy deposits; the regulation of deposits in the private rented sector is not something within the competence of the EU.
(a) would, presumably, have to be based on A1P1 (right to peaceful enjoyment of property). But HA 2004 doesn’t deprive the tenant of his money, it merely regulates the conditions under which a deposit can be held. It is, in the language of the ECtHR, a “restriction” case, rather than a “deprivation” case, and it’s pretty hard to see how it can be said that the restriction isn’t one that Parliament could properly and proportionately decided to be appropriate, given that:
(i) there is ample evidence of abuse by landlords (see, e.g. Tenancy Money: Probity and Protection, ODPM 2002);
(ii) voluntary schemes were tried before legislation was passed; and
(iii) there is no requirement for landlords to take a deposit.
I think if you check with The DPS they return money in no more than half the time you quote and the law allows.
To challenge the legality of legislation duly passed by our parliament presumably there would have to be a declaration of incompatibility with the Human Rights Act (as this matches the “Do what I want with my money”). It is worth noting most Human Rights Act claims in housing have failed.
It is actually possible for the deposit to be refunded to the tenant on move out, if the landlord wants to help, but you could ask why should he?
Another area I think if you want to look at challenges to TDP legislation would be the use of Lead Tenants. Considering the views of the OFT on the Unfair Terms in Consumer Contracts I think they would struggle to accept some of the joint tenants signing away their right to discuss the deductions probably at least 6 months before they even know if they want to dispute it. Since the landlord/agent decides the scheme, can the tenant be bound when they have so little choice. It will be interesting to see if someone decides to challenge this some time.
Leaving aside the issue that the time for such an appeal ended three months after the legislation came into force, there is no reason why the state cannot introduce legislation which fetters people’s rights to do whatever they wish with their own property or to prevent them making agreements.
As an (extreme) example if I own a gun it is unquestionably my personal property. However, I am not allowed to walk down the street waving it at people and I am not permitted to sell it to anyone I please.
Equally, tenants cannot agree that the landlord should be entitled to give them just one months notice for them to vacate the property.
When considering tenancy deposit protection issues it should be remembered that for most people the system works well and provides definite advantages. The disadvantages are relatively minor and do not seriously impact on any party.
Thank you very much gentlemen for all your comments – we seemed to have knocked that one on the head anyway!
I will ask Kevin about the time it takes to refund the deposit money when I interview him next week.
I just got in from attending our local county court user’s group where non lawyers like me get to fire burning questions at the judges who rip us to shreds every day.
They said that they are getting a lot of cases where the landlord or their agent has served the section 21 notice the day the tenant moves in (very common practice) but the law requires the deposit to be protected before service of notice and this knocks out many claims. It is heartening to her our local DJs on the case.
More worrying they also report a rise in a particular scam they get involved with where tenants rent out a flat and then advertise it and take rent in advance and deposits from 10 luckless new tenants who all turn up on the same day to move in, only to find they have been scammed and the agent or real landlord knows nothing about it. I really hope this isnt going to become a fashion.