We are 11 years into deposit protection now and still, the problems keep coming.
Most normal landlords and agents are on top of things, in terms of protecting the deposit and serving the prescribed information of the scheme being used but in downtown rogue landlord world where I work, deposit protection is still rare enough for people to point in wonder at.
Like an Edwardian farmer shielding his eyes against the sun to squint at a flying machine passing over his Shire horses.
Deposits not paid directly by tenants
In an attempt to get on top of homelessness prevention many councils have for some time been paying deposits on behalf of tenants. Some as a one-off emergency and others through dedicated and funded schemes, including loans from credit unions.
Recent court case
I often become involved in such schemes when trying to source alternative accommodation for illegally evicted tenants or those displaced by prohibition notices and fire brigade house closures and I notice a procedural issue in the way that different schemes work that was ably demonstrated in a court case from late last year, that seemed to evade wider publicity but which is actually very important.
A couple of bits of law from the Housing Act 2004 (the act which sets up the deposit protection system) to start us off:-
- Section 213 (5) hits us first with the requirement to serve the prescribed information on the tenant “And any relevant person”.
- Section 213 (10) then tells us that a relevant person is “Any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant”.
For once, very clear.
If a person pays the deposit for another person then that person must also be served with a copy of the prescribed information of the deposit scheme and as with the tenant themselves, no s21 notice served will be valid until this requirement has been satisfied.
Coppard v. Barrington
Now let’s look at what happened in the case of Coppard v. Barrington, heard at Basingstoke County Court in August 2017.
Joyce Barrington agreed to act as guarantor for Carl Barrington and his partner who subsequently left the property owing £3,167 in rent arrears.
The landlord Susan Coppard protected the deposit and served the prescribed information on Carl and partner before serving s21 and going for possession with a money judgement claim for the arrears in the wings.
Realising that as a guarantor that she was in the frame Joyce Barrington mounted a defence on the basis that the s21 was invalid because, as a relevant person who had lent the couple the money for the deposit, she had not been served with the prescribed information.
She lost the case.
The judge clarified the difference between what happened in actuality and the wording of section 213 (10), which by way of reminder says that it relates to a person who “Paid the deposit on behalf of the tenant”.
In Ms Barrington’s case, she had merely lent them the money to pay the deposit, she didn’t pay it for them and this meant it was merely a private arrangement between them and didn’t qualify her as a relevant person.
So, Landlords be very careful
This made me think of the various schemes for paying deposits mentioned above. Some do pay the deposit for the tenant and some, like credit unions, merely lend them the money.
Landlords should be aware of this legal point, lest they agree with a scheme, perhaps run by the local authority, where the deposit is paid directly, to take on a tenant and later need to serve an s21 only to find it invalid and leave themselves open to paying a penalty for non-compliance because they didn’t serve the PI on the council as well as the tenant.
Credit unions and other schemes who might simply lend money for a deposit should note that this probably doesn’t make them a relevant person.
There is a clear distinction
Advisers seeking to challenge the validity of a s21 should also be aware of this distinction where the deposit money was provided by someone else. The s21 may or may not be invalid, depending on how things were set up.
Whilst on this subject of prescribed information
Jemmying in another related point worth mentioning, I regularly see cases where the landlord has protected the deposit but didn’t serve the prescribed information, sometimes because they didn’t think they had to.
Serving Prescribed Information is a legal requirement
Sometimes (very commonly) they give the tenant a copy of the protection certificate thinking that this is the prescribed information and just as commonly, they simply didn’t think it was that important, as long as the deposit was protected.
The case of Ayannuga v. Swindells  disabuses us of such notions.
The landlord protected the deposit within the requisite timeframe but did not give the tenant the prescribed information of the scheme being used.
In his defence, the landlord argued that the amount of information contained in the tenancy agreement was substantial enough to meet the requirements of the legislation.
The court disagreed, saying:-
“The provisions of the tenancy agreement did not address the procedural provisions of the deposit scheme itself. Articles 2 (1) e; and 2 (1) f; of the Prescribed information Order were not to be regarded as mere matters of procedure or of subsidiary importance”.
In other words, service of the prescribed information is a legal requirement as equal in importance as the actual protection of the deposit.
Mistakes can be very costly
Ayannuga was ordered to return the deposit to the tenant and pay the full penalty of three times the amount of the deposit. So,
Make sure you do it right!
Whoever you are and whatever your role is in this, make sure you are clear on prescribed information rules.