Please note: if any case is on or after 6 April / 6 May 2012 this article might not be reliable
After the handing down of the judgement in Draycott v Hannells 2010,it would seem clear as long as deposit has been protected, albeit late, there is a good possibility that a landlord can avoid the penalty provisions of the tenancy deposit scheme part of the Housing Act 2004.
Much comment has been made in several cases and on the internet about “the spirit of the legislation” and using this term to suggest the 14 day rule should mean after day 14, the tenant is entitled to three times compensation whether the deposit is subsequently protected or not.
I would disagree with this approach to the spirit of the law. Let’s go back 10 years. Around this time, the civil procedure rules were introduced. Although they were intended to modernise court procedure, they also introduced many measures to keep claims out of court by introducing several pre-action protocols. Recently, there is even a new pre-action protocol for ALL claims where there is no specific protocol. The intention of these several protocols is to give the parties the opportunity to reach conclusion without the need for court proceedings.
In addition to the CPR, mediation is being heavily promoted by the courts and Government.
Why then, if there is all this effort going into keeping court cases to a minimum, would Parliament create a piece of legislation that, by it’s nature could significantly increase the workload of the courts? The answer is, (in the authors opinion) they didn’t. What the TDP legislation is essentially saying is, as long as a landlord or agent has protected a deposit and provided the prescribed information before a hearing, the purpose of the legislation will have had it’s desired effect and the tenant will be in no worse a position and so shouldn’t profit out of genuine mistakes by landlords or agents. However, if a landlord or agent simply refuses to ever protect a deposit, then the court will (quite rightly) penalise the appropriate person.
Besides which, a landlord is prohibited from serving a section 21 notice at any time when the deposit is not protected [s.215], so there is a continuing sanction contained within the legislation.
I agree. The spirit of the legislation is to protect the tenants money and this is still achieved if protection takes place after day 14. After all the number 14 is pretty arbitrary and could have been 7 if that is what the law said.
I have read the judgment in this case. You seem to suggest that this judgment is somehow in accord with the spirit of the legislation. This is quite clearly wrong. David d’Orton Gibson says that once the tenancy is protected, it is protected. Granted. However, he must see that, by the same token, the converse is true. While it is not protected, it is not. And therefore, this judgment is clearly a travesty and completely overturns the legislation. Why, if there was no intent that the deposit should be lodged within 14 days, does the Act stipulate that it should be deposited within 14 days?
Why, if there was no intention that feckless landlords should be punished for their failure to comply with the 14 day requirement, is there a very clear penalty (the payment of a punitive 3 times the deposit ‘fine’) stipulated in the legislation?
Judge Tugendhat says that the purpose of this legislation is merely to ensure that the money was paid into a scheme. Well, that is right in so far as it goes. Of course, that is the purpose of the legislation BUT, the way that it seeks to do that is to impose penalties on those who fail to do so. Ridiculously, Tugendhat has now removed the penalties that were put in place to enforce the compliance that the Act intended.
Let’s face it, not all landlords are perfect. If they were, this legislation would never have been passed. I do not know anyone who has lived in rented accommodation who does not have at least one horror story of the landlord claiming that the property had been ruined during a tenancy and refusing to repay the deposit. It has happened to me. The landlord tried to bill me for a new kitchen when I had eaten out nearly every single night during my short tenancy and had not used the oven. It was only when I told him I was a lawyer that he changed his tune.
A friend of mine’s landlord tried to retain £500 of her deposit because, having mowed the lawn before leaving, she had left one bin bag of cuttings in the garden. He actually kept £200 after she told him she was a lawyer.
So, the problem to be addressed was that landlords were treating deposits as their own property. The remedy for this was to insist that all deposits were paid into specially created bank accounts. In order to get the process under way and to punish those who would not comply, penalties were put in place to make a financial case for compliance. After all, landlords are businessmen and understand profit and loss.
Tugendhat’s ruling has removed that case at a stroke. On his interpretation, if a tenant takes an action against a landlord under the relevant sections, the best he can hope for is that his deposit is finally paid into a scheme and his costs are paid. All the parliamentary time spent debating this rather dry subject has now been consigned to history by Judge Tugendhat, who is so uninterested in the statues intention that he was not prepared to consider Hansard.
Tenants should not have to issue a claim just to have their landlord do what he is legally obliged to do in any event. Under Tugenaht’s ruling there are no circumstances in which the stipulated fine will ever be incurred.
Tugendhat is wrong. If I did not know that English judges are hard to bribe, I would say that he had been got at. If he hasn’t then he is thoroughly incompetent. Either way, this draws into question his suitability for his post. His ruling makes no sense. I sat with a group of ten lawyers last night all of whom were incandescent with rage at the idiocy of this decision.
Many of the errors are elementary stuff. He says that he will not consider s215 then does so. He seems to believe that, even though the DPS has a requirement that money be deposited within 14 days as part of its rules, he finds this is not an ‘initial requirement’ purely because it is not expressly called ‘an initial requirement’ even though, clearly, the very first thing that must be done in order to join the scheme must be to put the bloody money in.
Under his, incredibly stupid, reasoning as PainSmith acknowledge on their blog, if the money had been paid into a different scheme, with different terminology, where the 14 day requirement was considered to be an ‘initial requirement’ this ruling would have been reversed but, surely even Tugendhat can see the absurdity of this; the money has not in any event, been paid into ANY scheme. So, if the landlord fails to pay the money into one scheme, he is safe, if he fails to pay it into another, he must pay. It is Alice Through The Looking Glass stuff.
Also Tugendhat was wrong to consider that the initial requirements of any scheme were important at all. What the act says is that, whatever the initial requirements were, they should have been complied with within fourteen days. Tugendhat seems to say that one must look at the scheme’s rules in order to see not only what they are but when they must be complied with. This is another absurdity. He seems to suggest that one could somehow join a scheme without paying the money in. What could that possibly mean?
By this reasoning, surely what the Landlords Association should now do is create a scheme with no initial requirements or even requirements that actually detract further from the Act’s power. Perhaps one could have a scheme that has an initial requirement that one need not pay the money into it at all. And as long as the landlord complies with this ‘initial requirement’ then hey presto! Your tenant can just bugger off.
So, you are a landlord. You decide to keep your tenant’s deposit. He takes you to court. You still refuse to pay. Your tenant is a litigant in person. After issue but before the hearing, even very shortly before the hearing, you pay the money into a scheme one with no initial requirement that payment be made in 14 days obviously) and no harm is done to you. The judge orders you to pay your tenant’s costs. As a litigant in person, these are negligible. And so, you pay his issue fee. You have caused your tenant inconvenience and distress.
You have involved the court service in considerable expense and you will never face any sanction unless you refuse the court order telling you to put the deposit in a scheme, which you have already done. You would have to be an idiot not to and this law is not aimed at idiots but at unscrupulous landlords. This is not a case of using the court service as a kind of reminder to forgetful landlords.
The purpose of the three times deposit penalty is to rapidly change the landscape. My current landlord is a good one and is a businessman who does not want to lose money so has read the legislation and complied with it. While one can have sympathy with private landlords who may not understand the law, one can have none with agents who offer a service to their clients and then fail to do their job. In this case, there was a letting agent who was responsible for the breach. It should not have been excused punishment. Tugendhat said he was not concerned with why the payment had been made late. This shows that ignorance of the legislation is no excuse, and this is a very deeply entrenched principle of English law.
This is akin to a ‘strict liability offence’ on any proper reading of the Act and Tugendhat has acknowledged this but somehow claimed that it is a strict liability offence with no penalty attached. He is wrong again.
Tugendhat should hang his head in shame. Judges have never liked ‘something for nothing’ claims but this is not about that. Parliament has explicitly stipulated that there should be a penalty to discourage the sort of abuse that landlords routinely got up to.
I am a great supporter of activist judges. I believe in judge-made law but this decision is a travesty and, as you will all realise, were it not for the extreme inequality of the positions of the two parties in this case, there would have been a successful appeal against it.
However, because landlords have more money and the tenants in this particular case would not be prepared to gamble (why would they risk anything on a judge’s judgment after having just heard that ludicrous load of rubbish?) on a successful appeal. So, this decision will stand and many similar cases, will fail. It is disgrace and merely confirms the old adage that the door to English Justice is open to all, like that of the Ritz Hotel.
I wonder what Disgusted of Tugendhat Wells would say if a policeman stopped him for doing 32mph in a 30mph zone? The law says 30mph ….. Most of his (?) argument relates to retention of the deposit at the end of a tenancy which is different matter. I fail to see what the tenants’ losses in this case are. The tenant has suffered no loss because their deposit was protected (albeit late) when they issued their court papers.