These articles gives a general overview only and the legal position at the time of writing them. It cannot be relied upon in any particular case. Specific legal advice must always be considered to include consideration as to whether the legal position contained in this article has changed since going to print.

Tenant’s Deposit Scheme – Time Limit

Residential Landlords will be aware of the provisions of the Housing Act 2004 (“HA”) which brought mandatory requirement to protect the tenant’s deposit paid to the landlord under and Assured Shorthold Tenancy which started after 6 April 2007.

The HA requires residential landlords to protect the deposit by one of two statutory Tenancy Deposit Schemes (“TDS”):

  1. Custodial Scheme – deposit paid to the administrator of the scheme until the tenancy comes to an end or
  2. Insurance Scheme – landlord holds the deposit but secures this by paying a fee and insurance premium to the scheme administrator.

Landlords must protect their Tenants’ deposits using one of the Government-approved TDS providers.

The TDS is designed to guarantee that tenants get their deposits back at the end of the tenancy providing they do not breach the terms of their Tenancy Agreement and do not damage the property.

The residential landlord is required to under Section 213 of HA within 14days of receipt of the deposit to secure the deposit by using of the above statutory schemes and provide the prescribed information to the tenant.

For residential landlords the sting in the tail is provided in Section 214. This provides that if the landlord fails to comply within 14 days of receipt of the deposit to protect it and provide the prescribed information, the court must order the landlord to pay the tenant damages three times the amount of the deposit.

The legislation had such a serious impact because a the failure to comply could prevent a landlord from recovering possession of his property and it appeared to give tenants an automatic entitlement to damages amounting to three times the deposit upon application by the tenant to the Court. In addition, the Landlord could be ordered by the Court to return the deposit to the Tenant or to protect it in accordance with the legislation.

However, residential landlords can sigh of relief because of the recent rulings by the Court of Appeal in Tiensa –v- Vision Enterprise Ltd and Honeysuckle Properties –v- Fletcher and Others (2010).

The Court of Appeal gave careful consideration to the wording of the HA.

To the landlords’ relief it was decided that as long as a landlord pays the deposit into a TDS before the final hearing of the tenant’s application, the landlord will not be ordered to pay damages to the tenant although the landlord may find himself ordered to pay the Tenant’s costs.

It was found that the time limit within which the landlord must comply (within 14days) was not a pre-condition of an application by the tenant under Section 214. The focus of that section was not on the failure to comply within the time limit but the failure to comply at all. The purpose of the legislation was to protect tenants’ deposits rather than punish landlords who might be late by a day in complying with the provisions.

This is clearly a decision that will be welcomed by landlords across the country. However, for the tenants it has to be noted that the decision could give rise to the unintended consequence of landlords becoming more reluctant to pay deposits into a TDS due to the time they now have to correct any breach.

Nita King

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