Tiensia v Vision Enterprises Ltd (t/a Universal Estates)
As has been reported elsewhere, the Court of Appeal decision in the Tiensia tenancy deposit case is now out. I am not going to report the details of the case – they can be read in the BAILII report. I am going to concentrate on the issues raised.
Majority decision for the landlords
The majority decision in this case was for the landlords. This is because (said the Judge) the language of the legislation seems to indicate that it is not the failure to protect within the 14 days period which is important, but the failure to protect at all.
Therefore, the relevant time by which the landlord needs to have protected the deposit, is the date of the court hearing. Not 14 days after the deposit money was paid. Or the date when court proceedings are issued.
So far as the reference to landlords complying with the initial requirements of an authorised scheme is concerned, this “is only be to those requirements for protecting a deposit other than any time limit for doing so that may be imposed by the scheme” .
Any differences in the schemes own terms and conditions, will not therefore affect the landlords liability for the penalty. Which cuts out the prospect, raised in my post on the Draycott case, of the tenants’ chances of success depending on the rules of the particular scheme used.
This decision and interpretation is, said the Judge
an interpretation that is consistent with the purpose of the legislation. That purpose is to achieve the due protection of deposits paid by tenants, ideally within the 14-day period but, if not, then later. It cannot be its purpose to punish landlords who may for example, for innocent reasons, be just a day late in securing such protection.
The above is the majority decision of the Court of Appeal, and the wording quoted is that of Lord Justice Rimer, who gave the leading judgement. However in my view, it is the dissenting judgment of Lord Justice Sedley which is the more interesting.
The dilemma raised by the dissenting decision
Lord Justice Sedley starts by pointing out that
this legislation was passed to deal with a widespread abuse in a situation of housing scarcity – the retention by lessors of deposits, commonly of a month’s rent, at the termination of the tenancy. It makes compulsory provision for safeguarding tenants’ money and backs the scheme up by penalising defaulting landlords in triple damages. This much is plain.
he then goes on to say that if
a landlord is not culpably in default if, months or maybe years after the expiry of the fortnight given by law for compliance, he or she eventually complies with the initial requirements, then the scheme is a dead letter.
and if
the landlord’s opportunity for penitence extends not only to the date of issue of the tenant’s claim or (more probably) counterclaim but to the eve of judgment … no tenant could ever sensibly be advised to sue or counterclaim for the penalty.
He points out that if the alternative view was taken, this would be harsh on landlords who had inadvertently failed to comply, but
The fact that, on the tenants’ reading, the penalty falls on the inadvertent and the unlucky equally with the devious and the dishonest is morally questionable but perfectly explicable: Parliament has decided that recovery is to be in the tenant’s hands, that it is to depend on the simple question of compliance or non-compliance, and that strict liability for non-compliance will catch the devious and encourage the others. That is a matter for legislators, not for us.
However if this view is accepted, then what about the other penalty, that of making a section 21 notice invalid if it is served at a time when the landlord is in default?
It could mean that a landlord who was just one day late, could never recover his property under section 21. The Judge concluded
We are left with an intractable dilemma: to drain the legislative scheme of all effect by reducing the remedy for non-compliance to near-impotence, or to give what in my judgment was without doubt the intended meaning to the prescribed 14-day limit, with irreversible economic and proprietary consequences for landlords who fail, even if only through misfortune, to meet it.
The result of the majority decision of the Court, is that the financial penalty is effectively toothless, but it allows landlords to evict under section 21 if the deposit is protected late. Which will no doubt be of great relief to all landlords in this position.
A further appeal?
But why bother talking about a minority judgement, you might ask, however interesting?
Well because it seems that Ms Tiensia may be appealing the Court of Appeal decision to the Supreme Court. It she does so, it is entirely possible that the Supreme Court could take the view of Lord Justice Sedley.
Post tenancy claims
There is one situation which was not covered by the Court of Appeal judgments. What happens if the tenant brings his claim for the penalty award after he has moved out of the property and the tenancy has ended?
David Smith, writing on the Nearly Legal Blog, considers that this is one situation where the landlord will not be able to defeat the tenants claim by late protection:
it seems to me that it must be an implied condition of any scheme that the deposit which is being registered with it is one for a tenancy that is actually in existence at the date of registration otherwise the schemes become unworkable in an economic and business sense, particularly the insurance backed ones.
If the Tiensia case does go forward to the Supreme Court I hope that they will consider this aspect and give some guidance.
A call for clarity
However isn’t it disgraceful that a case has to go all the way to the Supreme Court before the meaning of legislation, which was intended to protect the public, can be properly understood?
As Lord Justice Sedley rightly said “legislation like this is or ought to be written for lay people“. Is the fact that it clearly is not, a gross breach of natural justice in itself?
I think you are right Tessa, Sedley’s dissenting opinions are interesting.
I remember reading a survey about 8 or 10 years back when it was claimed that only 14% of people got their depsoits back when they left. Obviously some were leigitmately witheld because of actions by the tenants but a significant proportion werent, which was the point oif the legislation.
Having said that, as Sedley indicates, what is the purpose of the legislation? to protect a tenant’s deposit or to penalise a landlord? Well obviously both to an extent but as he states “It cannot be its purpose to punish landlords who may for example, for innocent reasons, be just a day late in securing such protection”. The vast majority of landlords I come across are certainly in that group.
Conversely, before all this deposit stuff went south I interviewed a student and advised her of her right to recovery and penalty and she told me that she liked the place so didnt want to take any action right now but would whack the landlord when she leaves……charming!!
Although the law on this has essentially become toothless in terms of a penalty, the deposit still has to be protected, albeit in a different way. So the main purpose of the Act is still there provided the tenant knows enough to challenge the landlord if it hasnt been protected.
To my mind the block on Section 21 proceedings is still a strong deterrent for the rogue elements.
Or maybe I’m getting too liberal in me old age
In Australia you pay a Bond to the states Rental Bond Board. I disputed my bond and had to meet for arbitration with the Landlord face to face. We agreed to differ on the notice which was verbal and therefore split the difference. I wasnt happy but had no evidence except my word. It was a satisfactory process. Now in the UK as a Landlord 15 years later it seems crazy that this system is in its infancy. My gripe is trying to actually get the deposit back from the deposit scheme. It’s all in the tenants favour when they don’t agree to pay you the rent or legitamate repairs when they move out. I’ve had to do more chasing than normal and get a solicior involved as demanded by the deposit scheme. I’m still waiting waiting for an answer on 2 situations and haven’t even had any acknowledgement letters. The Deposit Schemes are a law unto themselves which is what I don’t like. PS. I was late setting up the deposit as I didn’t know until I was pursuing the section 21! It seemed clear that I needed to put the deposit in a scheme then to bring about the claim but not that it was unlawful as I didn’t do within the first 14days. It needs to be spelt out on contracts if that’s the case. As a new landlord we just searched the web for a standard contract and legal bits we needed to follow. I’m part of a proper forum since this though and it seems like a much more complicated undertaking that we imaged but I am perservering and will follow with interest.
My landlord refused to return my deposit because she wanted to use to offset her letting agent fees even though she accepted a replacement tenant I found for her. And I contacted the deposit registry schemes to claim back my deposit but then it turned out that she hasn’t registered it.
I went to see the lawyer because I thought I could rely on s214(3) and (4) to claim 3 times of the deposit back so that would cover the legal cost, since my claim amount was under £5k so I wouldn’t be entitled to sue for cost. I had the lawyer sent the landlord a letter, the landlord returned my deposit. But by the time I had already incurred £1,200 legal fees. So we went to the Court to claim the 3x deposit amount, and so far I incurred about £3k of legal cost.
So the Court of Appeal decision in Tiensia and Honeysuckle pretty much rendered the Act useless. Landlord are allowed to bully their tenants and hold their deposits for as long as they want. The tenants are discouraged from seeking legal advice from lawyers because the legal cost will normally be more than the deposit amount. I thought the law is supposed to protect the weaker party (in most cases this will be the tenants) from stronger party’s abuse of power
I agree with above poster, the Law is supposed to protect the weaker party, but unless you have some money behind you to enable you to persue the case then you’re left useless as to what you can do.
We were having trouble claiming our deposit back and only learned of our Landlord not putting our deposit in to a scheme when he tried deducting costs which were unfair and we wanted to appeal. Now we are not sure how to proceed as £3k of legal costs to try and claim the 3x compensation, we most certainly cannot afford! We still have no deposit 6 months on as our landlord is still trying to deduct the money form our deposit. But as he didn’t protect it we cannot appeal the deductions with the TDS and now have the hassle of going to the small claims court to claim the deposit that’s rightfully ours!
Claire, you may be able to use our no win no fee service here: http://www.tenancydepositclaim.co.uk/ it was set up for that sort of situation.