Tenancy Deposits – Latest Developments

In our blog of 6th June 2011 (‘Tenancy Deposits – Recent Cases’) we examined the decision of the Court of Appeal in two recent cases heard together, Tiensia v Vision Enterprises Limited (t/a Universal Estates) and Honeysuckle Properties v Fletcher, McGrory & Whitworth.  By a majority decision the Court held that if a landlord fails to place a tenant’s deposit in a deposit scheme within the required 14-day period there will only be a penalty if there is a complete failure to protect the deposit at any stage up to the hearing of a claim brought by a tenant for a remedy under the Housing Act 2004.

The facts in both of these cases were similar and concerned late compliance by the landlord under existing tenancies.  The decision left unclear the position where the tenancy has already ended, ie whether the landlord can protect the deposit after the end of the tenancy and still escape liability.  The Court of Appeal has now considered this issue in the case of Gladehurst Properties Limited v Farid Hashemi.  Unfortunately the Court of Appeal interpreted the relevant provisions of the 2004 Act in such a way as to find that grounds for an application for penalty orders under the 2004 Act cease to exist once a tenancy has expired.  Therefore it is not possible for tenants to succeed in obtaining an order requiring a landlord to pay a sum of money equal to three times the amount of the deposit in these circumstances.

The decisions in Tiensia and Gladehurst have been heavily criticised, on the basis that they largely deprive the law of the effect which Parliament intended.  Nevertheless these are Court of Appeal decisions and as such lower courts are bound to follow them.

Ross Burkitt
Solicitor in Litigation Department, Kerseys
2nd August 2011