Where a deposit has not been protected within 30 days of being received, the only way a section 21 can then be served is by returning the deposit in full to the tenant or agreeing deductions.
In this article, we summarise cases about the return of a deposit and outcomes. None of the below cases are binding at the time of writing.
Of all the cases, the first one below is made by the High Court, but it was a permission to appeal decision and not an actual binding case (but being High Court is arguably persuasive).
- 1 Returning by cheque
- 2 Authorising return by a deposit scheme
- 3 Comment
Returning by cheque
Lingfield Point No. 2 v Hodgson High Court (Queen’s Bench Division) Sheffield District Registry, 30 July 2015
A deposit of £375 was paid by the tenant in connection with an assured shorthold tenancy commencing from 21 May 2012. The deposit was paid by cheque (which is an important point, as will be seen later). The landlord failed to protect the deposit.
As the deposit had not been protected, the landlord had to return the deposit in full before serving a section 21 notice and a cheque for the £375 was posted to the tenant on 28 July 2014.
The cheque was returned by the tenant’s solicitor, saying paying by that method was not acceptable. The cheque was never presented.
On 31 July 2014, the landlord served a section 21 notice.
The possession claim was defended by the tenant, saying that the deposit had not been returned prior to service of the notice, and therefore it was invalid.
The first County Court held that the payment of the cheque was an adequate means of returning the deposit and ordered possession.
The tenant sought permission to appeal which was refused by the High Court, stating that the provisions were there to protect tenants, but they could not be used as a blunt instrument to defeat landlords’ interests. The tenants had indicated that payment by cheque was acceptable because when they originally paid the deposit it was by cheque. As such, there was no real prospect of success if an appeal were allowed.
Gul v Bilal, Stratford Hearing Centre, 18 October 2021
In contrast to the above case, this County Court decision considered the position of a cheque being left with a tenant at the tenancy address.
In January 2020, the landlord had attended the tenancy address and left a cheque for the deposit amount on the kitchen table.
In June 2021, the landlord served a section 21 notice on the tenant.
In the subsequent possession proceedings, the tenant defended, saying that the cheque from January 2020 had not been accepted, and it was common ground that the cheque had never been cashed. As such, the deposit had not been returned.
The County Court agreed that the deposit amount had not been returned in full, and the section 21 was held to be invalid.
Authorising return by a deposit scheme
Ahmed v Shah, Bradford County Court. June 2015
The tenant was granted an assured shorthold tenancy from February 2014 for which a deposit of £600 was paid.
The deposit was protected 12 August 2014 (not within 30 days) and no prescribed information had been given.
Although slightly unclear, it looks like the landlord authorised the DPS to repay the deposit to the tenant in October 2014. But, the tenant did not accept the deposit from the DPS.
In October 2014, the landlord served a section 21 notice and commenced proceedings in February 2015.
The County Court stated that there wasn’t any evidence that the full deposit was available for repayment via the DPS. The emails from the DPS did not specify that the full deposit was being offered to be repaid. The court held that the deposit had not been returned and as such the section 21 was not valid.
In this case, the landlord had also sent the tenant a cheque for £600 in June 2015 (after service of the section 21 notice). It was held that a cheque cannot be retrospectively sent for the deposit.
Chalmiston Properties Ltd v Boudia. Barnet County Court, 27 October 2015
There was an assured shorthold tenancy from 2008 for which a deposit of £780 had been paid by the tenant.
At some point the deposit had been protected with the DPS scheme but prescribed information had never been given.
On 10 February 2015, the landlord authorised release of the full deposit back to the tenant.
On 12 February 2015, the DPS contacted the landlord saying that the deposit was being released.
The landlord served a section 21 notice, which was deemed served on 12 February 2015.
On 16 February, the deposit being returned by the DPS was actually paid into the tenant’s account.
In possession proceedings, the tenant successfully defended the claim on the ground that the DPS had not actually made payment until 16 February and as such, the notice served 12 February was served before the deposit had been returned in full to the tenant. The possession claim was dismissed.
Yeomans v Newell, Canterbury County Court, 25 May 2016
An AST was granted to the tenant in 2011 when £300 towards the deposit was paid. This deposit amount was protected with the DPS custodial scheme in November 2015.
On 22 December 2015, the deposit was authorised by the landlord to be returned in full to the tenant.
On 23 December 2015, the landlord served a section 21 notice on the tenant.
The tenant received the funds from the DPS on 19 February 2016. As such, the notice was served before the tenant received the funds but after the landlord authorised its release.
The tenants defended the subsequent possession claim by saying that the deposit amount had not been returned to them as at the date of serving the section 21 notice, and therefore the notice was invalid.
The court disagreed and ordered possession, saying that the authorisation made on 22 December 2015 was sufficient as the deposit money was available for the tenant from that date being before service of the section 21 notice.
As can be seen from taking all the above together, if a return of the deposit is required, in order to serve a section 21 it’s best to ensure the deposit has been fully returned before serving notice. Anything less could result in the notice being held as invalid.
One option is to agree deductions (such as offsetting rent arrears) but this would need to be a written agreement (confirmed email or similar would suffice) in case the agreement needed to be relied upon. We have a template for agreeing deductions here.
If returning by cheque, the best advice is for the landlord to wait until it’s been cashed before serving a section 21 notice.
The only exception might be if there is an agreement or implied agreement to accept payment by cheque. An example of an implied agreement might include if the deposit was initially paid by cheque, or if the rent is regularly paid by way of a cheque. Even then, we would prefer to wait and see if it’s cashed before serving.
Where a cheque has been given, accepted by the tenant, and cashed, repayment of the deposit will be from the date the cheque was delivered not the date it was cashed Coltrane v Day (2003) EWCA Civ 342.
Cash is risky because it could be denied that it was given and could be difficult to prove. A written receipt for the cash confirming the deposit has been repaid in full would be needed.
Postal order/bankers draft
A postal order has been our recommendation in the past. But, we’re not sure if even a postal order could be returned as not being accepted.
Payment into bank
If the landlord has the tenant’s bank details (which a good application for accommodation form would have asked for), this might be the best solution for returning a deposit in full. It would be an instant transfer of cash. A letter or email confirming the date, amount and that it’s the “deposit repaid in full” should be sent at the time of the transfer.
Initiating return via a deposit scheme
Where the deposit was protected after 30 days and is initiated to be released to the tenant, a letter or email would need to be sent at the time of release explaining it’s the deposit “being repaid in full”.
However, the section 21 cannot be served until the landlord is certain that the tenant has physically received the funds from the deposit scheme.