Landlord escapes deposit protection penalty under legal loophole. A loophole in the wording of a law designed to penalise landlords who fail to protect tenant deposits has been exposed in court.

by Mark Alexander

15:00 PM, 27th October 2010
About 10 years ago

Landlord escapes deposit protection penalty under legal loophole. A loophole in the wording of a law designed to penalise landlords who fail to protect tenant deposits has been exposed in court.

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Landlord escapes deposit protection penalty under legal loophole. A loophole in the wording of a law designed to penalise landlords who fail to protect tenant deposits has been exposed in court.

The case highlighted the wording of Section 214 of The Housing Act 2004, which concerns courts making an order for landlords to protect a deposit or return the money in full to the tenant.

The section also allows a court to penalise a landlord who fails to protect a deposit by imposing a penalty of three times the deposit amount.

The flaw in the wording was exposed in Green v Sinclair Investments Limited at Clerkenwell and Shoreditch County Court.

As this is a county court ruling, the finding is not binding on other courts.

Nevertheless, the court dismissed the tenants claim to make an order to repay or protect and agreed with the landlord the court could not impose any penalty on the grounds the deposit was repaid in full prior to the hearing.

The key words are in Section 214(4) of the Housing Act, which says the three times penalty ‘must also’ follow an order to protect/repay under Section 214(3) of the act.

The argument put forward by the landlord was as the deposit was already repaid in full and the tenancy had ended, no section 214(3) order could be made, and as a result, the ‘must also’ wording of Section 214(4) prevented the imposition of any penalty.

The judge sided with the landlord and dismissed the claim.

The background to the landlord and tenant agreed a one-year assured shorthold tenancy, with a deposit of £2100.

The deposit was not protected. The tenancy ended after seven months.

The former tenant claimed in September for the return of the deposit and the three times penalty.

The landlord sent a cheque for the full deposit to the tenant’s solicitors, who returned the cheque.

In February 2010, the former landlord paid the deposit amount directly into the tenant’s bank account.

The former tenant did not reject or return the money.

The landlord argued that the court could not make an order for the return of the deposit or deposit protection because the tenancy had ended and the deposit had been repaid in full.



Comments

Gareth Thomas

6:23 AM, 25th December 2010
About 10 years ago

At last common sense has prevailed.

Some unscrupulous tenants have been using this law to make a profit out of landlords. It's true the landlord didn't do what they were supposed to do, i.e. register the deposit, but in 99% of cases where this might have happened it was not with any intended malice or fraud on the part of the landlord. It was more than likely a mistake on their part, or bad advice or service on the part of their agent, if they used one.

16:35 PM, 26th December 2010
About 10 years ago

Yes at last but too late for me. I ended up settling out of court to the sum of £1,000 (which was advised from various Solicitors) My ex-tenants were just trying to make a quick buck as I had already repaid their deposit when they moved out.


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