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Tenant's Deposits - Draycott v Hannells Lettings
The High Court has handed down a decision in Draycott v Hannells Letting Agents which landlords and tenants have been waiting for, for some time. The decision is significant because the Court were considering Tenancy Deposit Schemes and of particular interest was how the Court would interpret section 214(4) of the Housing Act 2004.
What does section 214(4) say?
What section 214(4) says is that court must order the landlord to pay to the tenant a sum of money equal to three times the amount of the deposit by way of a sanction - this sanction has been said to apply where a Landlord fails to secure a Tenant's deposit within an authorised scheme within 14 days of receipt of the deposit by the Landlord.
This sanction has been used by tenants as a "stick to beat" their landlords with: where a landlord fails to pay the deposit into an authorised scheme within the 14 day period, the argument from tenants has been that three times the deposit is payable by the landlord to the tenant. This was claimed even where the Landlord was only a few days late and had paid the deposit into an authorised scheme by the time the Tenant complained.
Landlords have argued that if they remedy this "breach" before proceedings are issued, the Court will not impose the sanction.
The Problem for Landlords and Tenants
The issue that has troubled landlords and tenants (and lawyers!) is when the Court would impose the three times deposit sanction.
In the Draycott case, a deposit had been paid but had not been lodged within an authorised Tenancy Deposit Scheme promptly. There had been a delay and the Tenants had sought the three times deposit sanction under section 214(4). The claim was brought by the Tenants after the deposit had been protected.
What the Court was being asked to consider, amongst other things, was whether three times the deposit was payable by the Landlord (or in this case the letting agent) to the Tenants for failing to pay the deposit into a scheme within 14 days?
"The Court decided that the Landlord was not liable to pay three times the deposit to the Tenants."
The Court decided that the Landlord was not liable to pay three times the deposit to the Tenants. Mr Justice Tugendhat decided that it was not a requirement of the authorised scheme for the deposit to be paid within 14 days, and therefore, the three times deposit sanction was not imposed on the Landlord (or in this case, the Letting Agent).
The Court were satisfied that other sanctions were available to the Tenants, in particular, until the deposit is lodged, the Landlord cannot recover possession.
The decision in Draycott -v- Hannells Letting Limited (trading as Hannells Letting Agents) is significant, and clarifies the Court's view on section 214(4).
If you would like advice on Tenancy Deposit Schemes or Assured Shorthold Tenancies generally, please contact Greg Hollingsworth at Bradshaw Hollingsworth Solicitors on 0116 204 7260 or by email at greg.hollingsworth@bhlaw.co.uk
Bradshaw Hollingsworth provide specialist legal advice in the areas of Employment Law, Litigation, Commercial, Insolvency, Debt Recovery, Wills & Probate and Property, including residential conveyancing, house sales, house purchases and re-mortgages. For more information about our services please contact Greg Hollingsworth of Bradshaw Hollingsworth Solicitors, 19 New Walk, Leicester on 0116 204 2500 or by email at greg.hollingsworth@bhlaw.co.uk.
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