Tenancy Deposit Schemes: Where are we now?

Author: Chris Alexander

It has been an interesting few months in the courts for the tenancy deposit legislation and the balance of power has swung very firmly in favour of the landlords.

All private residential landlords should be familiar with the requirement to pay a tenancy deposit into an authorised scheme within 14 days of receipt.  It has been a mandatory requirement to do so since April 2009.  There legislation provided for some fairly draconian penalties against landlords for non-compliance, including a requirement to either return the deposit to the tenant or to pay it into a scheme and to pay the tenant a fine to the value of three times the amount of the deposit after the tenant has applied to Court.

Those of you who read my blogs in November 2010 (Tenancy Deposit Schemes, common sense prevails?) and in May 2011 (More Deposit Protection Developments) will be familiar with the fact that landlords can escape this fine if they pay the deposit into a scheme before the Court hearing date and that they can do this even after the tenancy has ended.

The position has got even tougher for tenants after the recent decision in Gladehurst Properties Ltd v Hashemi and another [2011] EWCA Civ 604.  Now, if a tenant fails to issue their Court proceedings before their tenancy ends, they will be too late to claim their fine as the Court of Appeal ruled that after the tenancy had ended it lacked the genuine discretion to choose.  This decision could be interpreted one step further and mean that even proceedings issued shortly before the end of the tenancy may not be effective as if the tenancy ends before the hearing then the tenant will lose.

This whole episode means that the likelihood of many more of these cases coming to Court is fairly limited as the door has been firmly slammed in the faces of the tenant.

However, it does not make compliance optional for landlords, until the deposit is properly protected and the relevant information has been served upon the tenant then the landlord still cannot use section 21, which is usually the cheapest way to evict a tenant.