This entry is part 11 of 11 in the series Possible defences - section 21 notices

Update: this page has been updated October 2015 reflecting new case law about returning a deposit by cheque. See below.

I thought today we would try and resolve a little problem as to the procedure of serving a section 21 where a deposit has not been protected after the changes have now taken effect from section 184 Localism Act 2011.

The problem is that many of the free websites and those wonderful things known as unmoderated forums will often say that as long as the deposit has been protected (albeit late) then, a section 21 notice can be served. Of course, landlords are choosing to listen to that advice because they prefer that advice and then getting to court, into all sorts of trouble and ending up with the tenants costs to pay when they loose the possession case. It seems the free sites in particular are simply too busy to chase advertisers to pay for their site leaving no time to actually research the law on which they are writing about.

The main problem is that when a tenant is in rent arrears (the usual reason for requiring possession), the last thing the landlord wants to do is return the deposit to the tenant. Instead they would rather (reluctantly) protect the deposit albeit late.

This article is all about explaining in much greater detail the procedure relating to serving a section 21 notice if a deposit has not been protected.

Introduction

We have already written about the changes introduced by the Localism Act 2011 and in particular in relation to serving a section 21 where the deposit has not been protected. This article is not talking much about compensation payments and such, we are just going to talk about the legal requirements in relation to serving a section 21 notice and the correlation between protecting tenancy deposits.

Pre 6 April 2012

Before the changes were introduced, section 213 Housing Act 2004 said the following (as far as material):

Section 213

(3)Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received.

(4)For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.

Therefore, to summarise in plain english, 213(4) provides that initial requirements means protect a deposit following the rules of each scheme and 213(3) requires a landlord (or agent) to protect a deposit by following those rules within 14 days.

The penalty of not being allowed to serve a section 21 notice pre April 2012 is dealt with by section 215(1) Housing Act 2004 which used to read:

Section 215

(1)If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when—

(a)the deposit is not being held in accordance with an authorised scheme, or
(b)the initial requirements of such a scheme (see section 213(4)) have not been complied with in relation to the deposit.

Again, to summarise in plain english, this section is saying that if a deposit has been received, then a section 21 notice may not be served if (a) the deposit is not with a scheme or (b) if the rules of the scheme have not been complied with when it was protected (for which see section 213(4)).

If you look back above, you will note section 213(3) is the only section which refers to the 14 day requirement. Yet, the prohibition of serving a section 21 notice makes no reference back to 213(3) whatsoever. It only refers back to 213(4) which is simply defining “initial requirements” (basically the rules of the scheme).

It has been held pre April 2012 that any scheme rules that require a deposit to be protected within a certain timeframe (e.g. within 14 days) are simply repeating the law but do not form part of the initial requirements.

In my judgment, the requirement that there be payment into the Scheme is the initial requirement of the Scheme, and not the requirement that that be done within 14 days. The time limit of 14 days is a requirement of s.213(3). That requirement is repeated in the scheme, but so are a number of other provisions of the 2004 Act. The fact that the time limit is repeated in the terms of the Scheme does not make it an initial requirement of the Scheme. – paras 28 & 29 [Draycott v Hannells Lettings Ltd 2010 EWHC 217 QB] confirmed in Tiensia v Vision Enterprises Ltd (t/a Universal Estates) and between Honeysuckle Properties v Fletcher 2010 EWCA Civ 1224

… Tugendhat J in Draycott (at … paragraph [29]), was also of the view that a scheme time limit is not one of ‘the initial requirements’ within the meaning of the definition in section 213(4). I respectfully agree with him … [Lord Justice Rimer at para 35]

Therefore, pre April 2012, as long as the deposit was protected prior to the service of a section 21 (even the day before), even if the deposit was protected after 14 days, then, the section 21 notice was all the same validly served.

On or After 6 April 2012

However, the section prohibiting service of a section 21 notice has been totally changed since the provisions contained in the Localism Act 2011 took effect on 6 April 2012. In particular, section 215 has been radically altered but first let’s look at 213(3) and 213(4) again and see how they are now written (as of 6 April 2012). I have highlighted the change.

Section 213

(3)Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 30 days beginning with the date on which it is received.

(4)For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.

You will notice there is only one change and that is the number 14 has been changed to 30. Otherwise it’s as it was before.

So, now onto the big change which is in section 215 and now reads (as far as material for this article, highlights added):

Section 215

(1)Subject to subsection (2A), If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when—

(a)the deposit is not being held in accordance with an authorised scheme, or

(b)section 213(3) has not been complied with in relation to the deposit.

There is more to come in a moment but just to stop there for a moment, notice the massive change here already. In the Pre April 2012 version, the prohibition on serving a section 21 notice referred back to the scheme rules and did not refer back to the 14 days requirement. This has now been completely changed and a landlord is specifically prohibited from serving a section 21 notice now if section 213(3) has not been complied with. Section 213(3) requires the deposit to be protected within 30 days. Therefore, as a result of this, once 30 days has passed, that’s it. A section 21 notice cannot be served if we just read (b) and stopped. However, notice also the addition of “subject to subsection (2A)” so we now need to look at that subsection and see what that says.

Section 215

(2A)Subsections (1) and (2) do not apply in a case where—

(a)the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or

(b)an application to a county court has been made under section 214(1) and has been determined by the court, withdrawn or settled by agreement between the parties.

Again to translate into plain english, this is now saying that the prohibition on serving a section 21 notice does not apply if a landlord has done any of the following: (i) returned the deposit, (ii) made such deductions as agreed between landlord and tenant from the deposit or, (iii) the tenant has made an application for up to 3 x deposit from the landlord as a penalty for failing to protect (or issue prescribed information) and that case has been determined, withdrawn or settled.

So, a landlord (or agent) may not serve a section 21 notice at any time when the deposit is not being held with a scheme [section 215(1)(a)] (which has the effect that if it takes 10 days to protect, no notice may be served before 10 days) or, if the deposit was not protected within 30 days [section 215(1)(b)]. Once 30 days has passed and the deposit was not protected (even if it is subsequently protected) the landlord may only serve a section 21 notice if any of the following is done:

(i) Return the deposit [section 215(2A)(a)] or,

(ii) Agreed deductions from the deposit with the tenant [section 215(2A)(a)] or,

(iii) If the tenant has already made an application for the penalty of up to 3 x deposit for the failure to protect the deposit or give prescribed information within 30 days (even if it was subsequently protected) and that application has been determined by the court, withdrawn or settled [section 215(2A)(b)].

If the deposit was not protected within 30 days and none of the above has been done with the deposit then, section 215(1)(b) continues to apply which prohibits the service of a section 21 notice until (i), (ii) or (iii) above are done.

Returning the deposit

If it becomes necessary to return the deposit to the tenant in full, ... Please login or signup to continue reading this content

Series Navigation<< New Prescribed Section 21 Form||