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In the case I am currently dealing with, the agent received the deposit on 1 August 2008 and protected it on 1 April 2010. The agent received the part 8 claim issued by the tenant claiming 3 x compensation and repayment of the deposit from the court on 8 April 2010 which had been posted on 6 April 2010. Unfortunately, the court failed to fill in the issue date but have verbally stated it was 30 March 2010, therefore one day before the deposit was protected. At least we can raise the point that the agent did not react to the papers because the deposit was protected before the papers were posted. There was no pre action letter by the tenant.

We must therefore be prepared for the situation that it will be argued by the tenant that the deposit was protected after the papers were issued. (Also, the prescribed information was provided after the court papers were received by the agent so the protection date is perhaps of little relevance.)

Section 214 Housing Act 2004 states that a tenant (or relevant person) “may make an application to a county court…” where a deposit has not been protected or prescribed information not provided.

214 Proceedings relating to tenancy deposits

(1) Where a tenancy deposit has been paid in connection with a shorthold tenancy, the tenant or any relevant person (as defined by section 213(10)) may make an application to a county court on the grounds—

… (deposit not protected etc.)

When a court is deciding whether to award the compensation and repayment / protection of the deposit, the court must be satisfied on such an application that the deposit has not been protected etc.

(2) Subsections (3) and (4) apply if on such an application the court—

(a) is satisfied that those requirements have not, or section 213(6)(a) has not, been complied with in relation to the deposit, or

(b) is not satisfied that the deposit is being held in accordance with an authorised scheme,

as the case may be.

What is your opinion on the word “application”? Does it mean the “issue date” of the court papers, or does it mean the day of “the hearing” (or trial)?

Clearly we know that a deposit can be protected after 14 days and the landlord (or agent) avoids penalty [Draycott v Hannells Lettings Ltd [2010] EWHC 217 (QB)] but this and other cases were  decided where the landlord has protected the deposit (and provided prescribed information) before court papers were issued by the tenant.

In the Draycott case, Mr James Browne of Lamb Chambers acting for the defendants comments:

Mr Browne accepted that an unscrupulous landlord could, on his interpretation, hold on to the deposit until proceedings were brought.  If that is what the landlord did, but after the tenant commenced proceedings the landlord then paid the deposit into the scheme before an order was made under s.214(3), the sanction would be an order that he pay the costs of the proceedings, but no more. If he obdurately continued to hold on to the deposit after the tenant had commenced proceedings, so that an order could be made under s.214(3), then an order under s.214(4) could be made, but not otherwise. [para 44]

I am tempted to agree with this interpretation but in our case, there was no letter before action as now required by the Civil Procedure Rules, so I intend to suggest that costs are only payable where a letter before action has been issued and the landlord still fails to protect the deposit.

The other argument is, if the legislator had intended the day the papers were issued by the court, the legislator would have referred to when “proceedings were commenced” or similar because similar wording has been established to mean the issuing of the court papers.

“… In section 8 there are a number of references to proceedings for possession and the way in which these references are expressed makes it quite clear that “proceedings for possession” there means “court proceedings”” [Ferris J, Shepping v Osada (2000) L. & T. R. 489, CA]

However, on the down-side for my client, the court is not going to give this easily for fear of unscrupulous landlords simply waiting for papers to be issued, then protecting those deposits last minute before the hearing as Mr Brown suggests above.

But, as we have previously discussed, even if unscrupulous landlords do this, other than the costs (which I accept should be paid by a landlord or agent), the tenant is in no worse a position than if the landlord (or agent) had protected the deposit prior to papers being issued. Their deposit is still protected.

The other final argument that I can think of, is that before compensation can be awarded, the court must order that the deposit be repaid or protected. If the deposit has already been protected, how can the court make this order?  In addition, because in this case the deposit has been protected with the DPS custodial scheme, no “person” is holding the deposit, a scheme is “holding the deposit”. sub sections (3) and (4) below refer to an order being made against “a person”. It is therefore submitted that if the court cannot make an order under sub (3), it “also” cannot order the compensation under sub (4).

(3) The court must, as it thinks fit, either—
(a) order the person who appears to the court to be holding the deposit to repay it to the applicant, or
(b) order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme,
within the period of 14 days beginning with the date of the making of the order.
(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.
I would be really grateful for any comments anybody may have. If you don’t want comments to be publicly visible, please email me instead
Thank you in advance.