Regular readers will remember the Court of Appeal decision in the case of Tiensia v Vision Enterprises Ltd (t/a Universal Estates). This drove a ‘coach and horses’ through the tenancy deposit legislation by saying that landlords could protect the deposit up to a day before the court hearing date.
However this case was in the context of a deposit which was protected during the tenancy. What is the situation if the deposit is still unprotected at the time the tenancy ends?
While we wait for the High Court and Court of Appeal to pronounce on this situation in the various cases which are waiting in the litigation queue, the County Court is having to sort things out on its own.
We saw one answer in the Soens-Hughes v. Lewis case. Here the landlord returned the deposit and was let off the hook. Now we have another, different decision.
Shepley v. Yassen
Tameside County Court, 13 January 2011. (Reported in LAG April 2011)
Here District Judge Stockton (following the decision of Woods v. Harrington), said that protection after the end of the tenancy was not acceptable. He made the award in favour of the tenant.
Comment
It seems a bit unfair that a landlord who withholds the deposit for damage should be in such a worse situation than the landlord who returns the deposit. Mind you, the tenant in the Shepley case is deprived (by virtue of the deposit being unprotected) of the opportunity to use the free adjudication service available with the tenancy deposit scheme. So that is a bad mark for the landlord. However some landlords might say that it is a case of a tenant who causes damage to the property being rewarded for it.
Landlords, particuarly those who have been on the wrong end of a court decision, are pretty fed up with all this.
“I was ordered to pay the penalty” one landlord said to me recently at a landlords forum meeting “and now it seems from the Tiensia case that I should have won. Can I get my money back?”
As the case was heard some years ago, the answer is “no” which did not please him, at all. What with this, the time it takes to get an order for possession, and on top of that the suggestion that they reduce their rents for housing benefit tenants, landlords could be justified in thinking that the system is against them.
On the other hand, they are mostly in quite a good place so far as the shortage of available property is concerned and the resultant increase in rents …
Not sure I see the tenant in the Shepley case being deprived of adjudication. If the landlord protects it late, then the tenant still has access to adjudication if it is accepted into a scheme.
Amazingly, I still find it astonishing that a piece of legislation that was brought in to sort out a major problem (witholding of deposits) and given it is a relatively short section of the Act, should have given rise to so many anomolies and so much confusion.
The confusion is giving rise to all sorts of mis-advice. I just interviewed a couple whose landlord hasnt protected their desposit. They went to see a local solicitor who warned them about the Tiensia decision and said if they take out a case for the 3 x penalty and the landlord protects the deposit before court action, the tenants would have to pay the landlord.
In my opinion, all these decisions make sense as they in effect say that a landlord must protect the deposit during the tenancy or refund it in full to the tenant.
Had it be decided that a landlord may protect the deposit after the tenancy had ended, it would have in effect signified that deposit protection is optional, which clearly it is not.
I think thats exactly the point JJ. Tiensia has pretty much made deposit protection optional at the moment, in that there is always a ‘Get out of jail free’ card for recalcitrant landlords.
It isnt just about a refund either but also the 3 x penalty. What I do agree with the proposed changes that were originally in the Localism bill, but are now looking for another route, is the 3 x penalty as an ‘Up to’, rather than a full whack for every transgression.
I see landlords who honestly didnt know about it and those who steadfastedly just refuse to comply. I think there should be a gradated penalty in that respect, to seperate the different intentions.
Well, not exactly optional as the decisions seem to point towards signifying that the deposit must be protected during the tenancy, but that it does not really matter when.
So basically the deposit must be protected before any sort of dispute can arise. I believe that this is basically the point of the legislation.
If protection would have been allowed after the end of the tenancy, then protection would in effect have been optional.
I disagree JJ. If the landlord doesnt protect the deposit and the tenant moves out without challenging it, then surely that makes protection optional. The landlord’s ‘Option’ only being reduced if challenged, at which point the wise landlord whacks it into the DPS before hearing and the tenant then loses their court application fee.
I think the overall point of the legislation was quite clear, but the way it was worded was rubbish and that has caused the problems
Ben, what you say now only applies _during_ the tenancy.
What Shepley v. Yassen says is that if the tenancy ends before the deposit is protected the landlord has no way out as even if challenged he cannot protect it anymore!
Hence why I’m of the opinion that this make protection compulsory as it’d be too risky to let the tenancy end without protecting it.
As disputes regarding deposit deductions occur at the end of the tenancy, the point of deposits protection is safe.
Yes I know but that still makes it optional during the life of the tenancy, which isnt the same thing as mandatory deposit protection, which was the whole point of the legislation
The legislation was brought in because so many tenant’s depsoits were being witheld on spurious grounds and tenants had no control over what is, after all, their money.
I agree with your point about it being risky to leave it too late but I still think Tiensia went against the intention of the Act, despite the late adition of the Sheppley and woods cases. Remember these 2 are not proper case laws, just county court decisions
“The legislation was brought in because so many tenant’s deposits were being withheld on spurious grounds and tenants had no control over what is, after all, their money.”
But for the tenant to be protected against that what is relevant is that the deposit be protected when the tenancy ends, as it is when tenants want their deposit back and when disputes arise!
During the life of the tenancy it does not make any practical difference.
I see your point but there is a procedural problem with that.
If the landlord has the money registrered with an insurance based scheme, if there is no dispute the tenant can have it back straight away, but a late protected deposit has to go to DPS which takes 10 days to release even undisputed amounts, so the tenant has to find quite a substantial sum to move.
As I posted above most deposits I see nowadys are 6 weeks, not 1 month so for a 2 bed flat the tenant has to find the best part of £2k. If they dont have a credit card, savings or a solvent mate to lend it to them they are screwed.
Going back to the original article here if the tenant gets 2 month’s notice unexpectedly how will they be able to get £2k together in such a short tiime? If the counter argument to that is that they should have it aside at the start in casee of such an eventuality then with rent in advance they wouldnt be able to take up residence anywhere without having around £5k behind them. With that knd of money they could buy under the new intermediate mortgage schemes.
Nobody talks much abaout the length of time it takes the schemes to pay out. This is a major headache for tenants on the move
Ben, I agree with you that the financial buffer needed by tenants when moving can be an headache.
But to me that is irrelevant when interpreting the legislation as to the acceptable time frame to protect the deposit because in any case (i) the landlord is free to choose the DPS over MyDeposits and (ii) whatever the scheme refund will be delayed in case of disputes.
About upfront expenses: I think this is a fact of life when moving. The only solution I could see would be for a public body to provide advances/cheap-ish loans to lower income tenants to pay deposits and agency fees. Some other EU countries have schemes to that end.
Now that is an excellent idea JJ. It helps out both landlords and tenants that way. Credit Unions can help there. Citizen’s banks where you can draw twice what you have in there if you suddenly need it.
I also agree with your point about upfront expenses and the cost of moving. The problem in the scenario outlined by Tessa’s original client is that the enforced move came as a surprise, so she would have been unlikely to have been able to get the sum together so fast.
You said on another post that where there is a 12 month contract with a 6 month break clause that tenants should view it as a 6 month let but I dont think people do. Tenants look on it as a 12 month let with the option of getting out early so tenants work on the assumption that they will have longer to gather moving expenses. Generally people dont go for 6 month lets, they want more stability.
I do see the point of law you are referring to but I still think it goes against parliament’s intention in drafting the legislation in the first place