It is a common problem with assured shorthold tenancies of a flat or a house: an unscrupulous landlord takes a deposit from a tenant and then, at the end of the tenancy, refuses to return the deposit on some largely trumped up basis. In effect the landlord challenges the tenant to sue him for return of the deposit. The sums involved are important to the tenant losing them, but in reality are so small that the time and money required to recover them through the Courts is disproportionate. The landlord gets a windfall.
In April 2007 provisions of the Housing Act 2004 were brought into force in an attempt to curb this abuse by landlords.
In outline, ss212 to 215 of the 2004 Act required landlords to protect any deposit into an authorised scheme and to give to the tenant statutory information1 concerning the scheme, all within a prescribed period of 14 days. The rules of such schemes then provided for a low cost method of resolving any dispute which might arise over the deposit at the end of the tenancy. There were various sanctions for non-compliance by the landlord either with the substantive requirements, or with compliance within the specified time. On the face of it the financial penalties under s214 for a landlord’s failure to comply failure were swingeing: immediate return of the deposit by the landlord, and a fine of three time the amount of the deposit payable to the tenant.
However, the effectiveness of the sanctions in curbing rogue landlords was considerably reduced or “evicerated” by a series of higher Court decisions. In Tiensia v Vision Enterprises Ltd  EWCA Civ 1224 the Court of Appeal held that a landlord could comply with its obligations under the Act (and avoid the financial penalties) if by the date of the hearing of the tenant’s claim (or counterclaim) under s214 for the three-time deposit penalty the landlord had actually complied.
In Gladehurts Properties v Hashemi  EWCACiv the Court of Appeal held that a tenant could not bring a claim under s214 after the tenancy had terminated.
However, as from the 6/4/12 the Localism Act 2011 has amended the relevant sections in attempt to reverse these decisions.
First, the 14 day deadline for lodging the deposit monies and giving to the tenant the statutory information has been extended to 30 days, starting with the date on which the deposit was received. The Act provided for compliance by the 7/5/12 for pre-6/4/12 tenancies.
Secondly, the penalties under s214 for non-compliance have been altered radically. In particular, the penalty is now between one and three times the deposit – not a fixed rate of three times. The Court has a discretion. The deposit must also be paid back to the tenant, or into an authorised scheme. It is now clear also that an action under s214 can be brought even after a tenancy has terminated (s214(1A)). There is the same discretionary penalty, and the deposit may be paid back to the ex-tenant. This seems to give the Court some discretion as to how much should be re-paid (in contrast to the position while the tenancy is still ongoing).
Importantly, a tenant can now apply to the Court under s214 either in relation to non-protection of the deposit or for non-provision of the statutory information (or both). The 30 day limit is absolute late protection or late provision of information will not save a landlord from financial penalty. In this context it is worth noting that the Courts take a strict line on what “compliance” means. In the recent case of Ayannuga v. Swindells  EWCACiv 1789 CA the tenant counterclaimed under s214 in an action for possession on the basis of rent arrears brought by the landlord. The landlord had protected the deposit properly, but had given the tenant only enough information to identify the relevant deposit scheme where the tenant could find all the statutory information if he wished. The Court of Appeal held that this was not good enough. The landlord had clearly not provided the information required by the Act, and must pay the penalty.
This decision was of course under the pre-April 2012 provisions, but it is suggested that it remains good law in so far as it determines what a landlord has to do substantively to comply with his obligations to provide information.
The amended s215 provides that no s21 notice can be served where the deposit has not been protected, or not protected within the 30 day time limit. Thus, a landlord can no longer serve a s21 notice at the commencement of the tenancy. He must wait (but not more than 30 days) until he has protected the deposit, and then serve.
After the 30 days have passed a landlord may only serve a s21 notice if he has first refunded the deposit to the tenant in full, with any agreed deductions or a Court has made an order requiring return of the deposit in s214 proceedings.
None of this applies to a failure to give the prescribed information. While no s21 notice can be served until the information has been given, service of the information at any time will trigger the right to serve a s21 notice.
The effect of all these provisions can be summarised as follows:
- Late protection of a deposit by a landlord (i.e after 30 days) will never avoid liability under s214, nor will it allow a s21 to be served.
- To serve an s21 notice the landlord must repay the deposit (minus “agreed” reductions) to the tenant.
- Late protection of a deposit may provide mitigation (but not a defence) for a landlord when a Court decides the penalty under s214.
- Late provision of prescribed information will never defeat a claim under s214.
- Late provision of prescribed information will allow a s21 notice to be served and may provide mitigation for the landlord in any claim under s214.
 As set out in the Housing (Tenancy Deposits) (Prescribed Information) Order 2007, SI 2007/797
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