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Tenancy Deposit Protection Schemes – Rights & Recent Case Law

Tuesday, 30th August 2011

Categories: Lettings

Author: Peter Barry

Like the vast majority of young people these days, leaving home and setting off into the big wide world means to entering the world of private renting. The first experience of this is likely to be at university, where tales of rogue Landlords, and sharing houses with things that move more than their housemates are aplenty! Granted the latter is of the stereotypical grubby student, and rental properties today are generally of a far higher standard than they were say 10 years ago.

Be the tenant a student or professional, young or more mature in years, the Landlord of any property will require them to pay a deposit to cover any damages that may occur over the course of their tenancy. In order to ensure this money is kept safe, Landlords by law must protect the deposit in a Tenancy Deposit Scheme. This ensures that at the end of the tenancy, if the terms of the agreement are met and the property is not damaged, the deposit can be returned in full. The schemes also offer an independent dispute resolution service as an alternative to Court proceedings, where there are disagreements.

Landlords must protect a tenant’s deposit in one of three approved schemes, if the property is let on an assured shorthold tenancy (AST) that started after April 2007. These are:

The Tenancy Deposit Regulations 2007 state that if a Landlord does not protect the deposit when required, they can be taken to Court by a tenant, who can seek not only for the deposit to be repaid but possibly even three times the amount.

The tenant should be advised of the scheme operator within 14 days of the tenancy start date, so in theory could commence such proceedings if the Landlord did not do so in the given time frame. The more likely scenario is that having been served notice to leave the property at the end of their tenancy, they then discover their deposit has not been protected.

So should they haul their Landlord in front of the Courts, rubbing their hands together at the thought of three times the deposit? There have been many successful claims but more recently there have been a number of cases that have set different precedents, some in favour, some not in favour of tenants. What follows is a bit of a legal rollercoaster!

In the case of Tiensia v Vision Enterprises Ltd, (Nov 2010), it was held that Landlords could protect the deposit up to a day before the Court hearing date. As a result, the hearing is the relevant date, not the 14 days after the deposit is paid or the date that Court proceedings are issued.

This supported the decision reached previously in Draycott & Draycott v Hannells Letting Ltd, (Feb 2010), with the Judge commenting:

“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.”

But what if a deposit is still unprotected when a tenancy ends? This could be a common situation where there is a dispute regarding deductions and it is found that all along the deposit was never protected.

In Shepley v Yassen, (Jan 2011), the judge ruled in favour of the tenant, as protection after the end of the tenancy was unacceptable:

“If a landlord can put the deposit into protection after the tenancy has ended then it makes a total nonsense of the legislation and almost encourages a “wait and see” attitude. …leaving aside the legal arguments, to allow monies to be placed with schemes for non-existent tenancies would risk making them unviable as business entities”

However, as tends to happen, the case of Hashemi v Gladehurst, (May 2011) turned the whole issue of tenancy deposit protection upside down. Upon reaching the Court of Appeal it not only extended the Tiensia decision to allow a deposit to be protected after the end of a tenancy it effectively went against Shepley, ruling that the tenant could not pursue a claim for the return of a deposit and/or three times the value in the same situation.

This ruling produced a considerable number of negative comments, in particular as it meant that tenants would only have the tenancy period to find out whether they where protected and then take action. The Court dismissed that tenants were now deprived of the dispute resolution mechanisms previously laid down, insisting that the County Courts could still be used as a point of recourse.

Subject to the right conditions however, Judges will rule in the tenant’s favour. In Suurpere v. Nice, (July 2011), Ms Suupere successfully claimed in the High Court for three times the deposit. Tiensia did not apply as the Court did not receive the relevant information regarding the late protection of the deposit, and Hashemi did not apply as the tenancy had not expired.

There are still many outstanding issues and grey areas in particular the vulnerability of a tenant after the ruling in the Hashemi case. The Government has commented that the issue will be addressed when it makes amendments to the Localism Bill later in the year.

It is also worth noting that Peter Barry work closely with Landlords and Tenants to insure that deposits are correctly protected and the tenants are informed, thus avoiding the sort of conflict described here and saving everyone a lot of time and stress!

In the mean time I will keep my eye out for any further items of interest and report back with part 2 if any arise. Watch this space…



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