Localism and Tenancy DepositsMake Text Bigger
As regular readers of P118 will know, the rocky road of tenancy deposits was pretty much a farce from its introduction in 2007 and has been right up to the present day.
I’ve been involved in housing law for most of my working life and I have to say I have never seen anything quite like it. The law unraveled faster than Jeffrey Archer in a witness stand.
The aim of it was good. Prior to it’s inception, records were showing that only 14% of tenants were getting their deposits back when they left and I know from my own anecdotal experience that a huge amount of landlords were withholding them on spurious and unsupportable grounds. Landlords too are saved the hassle of ill founded back claims, with the schemes adjudication teams making the decisions.
Australia had long had a deposit protection scheme that operated successfully and the UK government drew on that model, but it was in the wording of our version that things went awry.
For the first couple of years that the new law was in many landlords just didn’t know about it and if they did, the small details were too legalistic to be of much use. Courts too, who were dealing with claims made by tenants, couldn’t agree on how to interpret the various clauses. There was no consistency in terms of decisions being made and for a long while none of the cases went up to the higher courts so there were no case law precedents that could be used in legal cases. In short, it was chaos out there.
The first challenge that did end up in a court of authority was the infamous Tiensia case, which didn’t bode well for tenants.
The Housing Act 2004 that set out the deposit protection rules stated that if a landlord did not protect the deposit within 14 days of receiving it or if they failed to serve prescribed information in the correct form, also within 14 days, then the tenant could take the landlord to court and the courts would order the landlord to return the deposit and pay a penalty to the tenant of 3 times the amount of the deposit.
The Tiensia case pretty much shot that one down, making the argument that as long as a landlord protected the deposit before the tenant got the case into court they could avoid paying the penalty.
Landlords 1 : Tenants 0.
Running up the wing and crossing the ball from Tiensia came Gladehurst Properties v. Hashemi in midfield putting the nail in the coffin of tenants claiming the 3 x penalty after the tenancy had ended. The courts said it can’t be done.
Landlords 2 : Tenants 0.
For once the government admitted the law was an ass in this case and made amendments in the Localism Act to bring things back closer to the intended flavour of the original law.
The new Act is currently going to be effective law in April 2012, probably the 1st of the month, although things could move a bit.
Gone is the protection within 14 days rule and in its place a requirement to protect within 30 days, with a similar requirement to provide the prescribed information to the tenant. A far more reasonable regulation I’m sure you will agree.
The 3 x penalty has also been amended. If a landlord fails to protect or provide prescribed information within the newly extended 30 days then the tenant can still sue the landlord but the courts will only order a penalty of ‘Up to’ 3 times the amount of the deposit, not a blanket 3 x penalty.
Working in this way allows the courts to use their discretion and differentiate between genuine errors and wilfulness on the part of the landlord.
This corrected the problem seen in the differing decisions of the lower courts before Tiensia, some county court judges were reluctant to whack a full 3 x penalty on an ignorant as opposed to wilful landlord. Again no bad thing and I doubt that any hardcore tenants champions would have a problem with that.
The Gladehurst decision has also been reversed, claims against landlords for non protection will be able to be made after the tenancy has ended.
A smaller change, but one worth noting is that if a court agrees with the tenant’s application the landlord will be ordered to protect the deposit within 14 days of the decision.
Landlords failing to protect a deposit will still be excluded from using Section 21 to end a tenancy.
So that, in effect, brings us back to 2007, with a few tweaks to the wording and a bit of fine tuning. The 3 schemes remain the same.
All of the anomalies raised by judges in the last 4 years seem to have been addressed and things will get tighter once the Localism Act comes in. So expect housing advice units and lawyers getting more strident in their arguments. They are going to be much more confident about advising tenants in non protection cases after April.
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