Two recent cases have considered failures by landlords to comply with the tenancy deposit schemes that were established under the Housing Act 2004 to protect deposits paid in connection with assured shorthold tenancies.
The landlord must protect the tenant's deposit in accordance with the requirements of the Act and he must do so within 14 days of receipt. If the landlord has failed to comply the tenant can apply to the court. If the court is satisfied that the landlord has not complied it must order the landlord to pay the tenant a sum of money equal to three times the amount of the deposit. In both cases the landlord failed to protect the deposit within 14 days of receipt but had done so by the time the matter came before the court.
The Court of Appeal ruled that the penalties under the Act only apply if the landlord has not complied with its obligations by the time of the court hearing. So a landlord who has not complied can easily remedy his breach by registering the deposit as soon as he is given notice by his tenant that he is not complying with his obligations, for example, in a letter before action. A landlord who is in default will still be at risk from a costs order in favour of the tenant who has had to embark upon litigation in order to get the landlord to comply.
The majority opinion of the Court of Appeal is neatly summarised by Rimer LJ who said: "the objective of the legislation is not the punishment of landlords but the achieving of proper protection of tenants' deposits".
Vision Enterprises Ltd (t/a Universal Estates) v Tiensia and Honeysuckle Properties v Fletcher and others (2010).< title=http://www.bailii.org/ew/cases/EWCA/Civ/2010/1224.htmli>