Well we didn’t have to wait long since my most recent blog to report back on a further case relating to Tenancy Deposit Schemes. However, the Courts are pushing the door further shut on tenants seeking to recover a fine of three times the value of the deposit from their landlord in the event that the landlord fails to comply with his/her statutory obligations.
First was the Tiensa decision which gave the landlord a complete defence to claims for the fine provided they complied with the requirement to pay the deposit into an authorised scheme or to return it to the tenant before the date of the court hearing. Then, as I wrote about last week the Court of Appeal decided against a tenant who was claiming that after the end of tenancy a landlord could no longer protect the deposit as it was no longer technically a landlord.
A similar case has been decided, again in the Court of Appeal, which follows the general rule that the courts are reluctant to enforce this sanction against landlords. In Gladehurst Properties Ltd v Hashemi  EWCA Civ 604 a tenant was again unsuccessful in recovering the fine from a landlord who had failed to pay the deposit into a scheme at all. Even in these circumstances the landlord was not punished for this misdemeanour, despite the fact that this was clearly the purpose of the legislation.
The reasons that the Court gave for this hinged on the fact that the tenant had not brought their claim until after the end of the tenancy. The tenant had accepted the landlord’s retention of part of the deposit pending the resolution of this case and the landlord had paid the balance of the deposit back to the tenant.
The Court decided that section 214(1)(a) of the Housing Act 2004 required that the initial requirements of a tenancy deposit scheme should still be capable of being complied with. This is not actually what the section says but based upon this interpretation (which could be traced back to the Tiensia case), because the tenancy was at an end and the deduction was consensual it was no longer possible for the deposit to be paid into an authorised scheme or returned to the tenant. The Court was therefore deprived of its discretion to choose. In the face of that loss of its discretion, the Court decided that it did not have the power to make any order under section 214 (3) and therefore could not make the ancilliary order for the landlord to pay the tenant the fine under section 214 (4).
An alternative approach would have been for the Court to make an order in relation to the retained portion of the deposit on the basis that those deductions were unlawful owing to the landlord’s breach of statutory duty beforehand. This could have triggered payment of the fine which the courts are so reluctant to enforce. However, the consent of the tenant appears to have proved fatal to such an argument in this case.
The practical consequence for tenants is to make it even less likely that they will want to bring a claim for payment of the fine, as once the tenancy ends they will not get their windfall. This will even be the case where the tenancy ends after the issue of proceedings (in most other types of claim the clock stops once proceedings are issued).
I would be interested to see if the Court would be prepared to decide differently where there had been an opposed retention of part of the deposit. In those circumstances, the Court would retain its discretion to make an order in relation to part of a deposit and therefore could order the landlord to pay a fine.