Deposit protection responsibilities

[Lawcruncher]

Looking at the HA 2004 in connection with another thread I noted that section 219(2)(a) provides: "In this Chapter [that is the section of the Act relating to tenancy deposits] references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies".

Is that as far-reaching as I think it could be? Is an agent (and possibly any inventory clerk, lawyer or other professional involved not only when the tenancy was negotiated but later) liable to perform all the obligations imposed on landlords and to pay compensation if the deposit is not protected or protected late?

Another doubt: Section 213(1) provides: "Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme." That seems straightforward, but one of the conditions for a tenancy to be an AST is that "the tenant or, as the case may be, at least one of the joint tenants occupies the dwelling-house as his only or principal home". A landlord cannot be certain, even if the tenant takes up occupation, that the tenant is occupying it as his only or principal home. That means that a landlord can never be sure if the obligations imposed by the HA 2004 kick in.

What flows from that?

[jpkeates]

Is that as far-reaching as I think it could be? Is an agent (and possibly any inventory clerk, lawyer or other professional involved not only when the tenancy was negotiated but later) liable to perform all the obligations imposed on landlords and to pay compensation if the deposit is not protected or protected late?

As I read the legislation, any person receiving a deposit has to comply with the legislation, but the only people who can be sanctioned for not doing so are the landlord(s) (s214).

The s214 sanctions apply to s213(3) and (6) only, both of which apply to landlords who receive tenancy deposits only. So, while 219(2)a broadens the definition of a landlord, the liability would only apply to them If they receive a tenancy deposit - which wouldn't normally be anyone but the landlord or their agent.
And, should one of the other professions somehow receive a tenancy deposit (although I can't imagine how that might happen), they should have the responsibility to ensure it's protected.

What flows from that?

That landlords should err on the side of caution and protect deposits even if there is some doubt that the tenancy is an AST or not.
There's no downside I can see to a landlord protecting a deposit that doesn't need protecting, other than it allows a tenant access to a dispute resolution service that may not deliver a result the landlord wishes.

[Lawcruncher]

Wherever in chapter 4 "landlord" appears it has to be read as:"the landlord or a person or persons acting on his or their behalf in relation to the tenancy",

The Act says that section 214(4) applies if the court (a) is satisfied that section 213(3) or (6) has not been complied with in relation to the deposit, or (b) is not satisfied that the deposit is being held in accordance with an authorised scheme. So, it is irrelevant who is required to comply with those sections.

Section 214(4) says:

The court must order the landlord to pay to the applicant a sum of money not less than the amount of the deposit and not more than three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

Applying section 219(2)(a) we can rewrite that as:

The court must order the landlord or a person or persons acting on his behalf in relation to the tenancy to pay to the applicant a sum of money not less than the amount of the deposit and not more than three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

Say a tenant tells a landlord he is going to sue under for non-protection. The tenant gets a letter from a solicitor denying the claim. The solicitor is a person acting on behalf of the landlord in relation to the tenancy. Can the tenant sue the solicitor?

*

What about this argument from a landlord sued for non-protection?

At the time I received the deposit the tenancy had not begun, the tenant was not in occupation and I did not know if the tenant would in fact take up occupation or, if he did, whether the property would be his only or principal home. Accordingly, at the time I received the deposit I did not know if the tenancy would be an AST. If I did not know that I did not know if I had an obligation to protect the deposit. How can I be expected to do something if I do not know if I am expected to do it? If I later learn that the tenancy is an AST it is impossible to comply with the Act because it requires protection to be effected at the time I received the deposit.

[DPT57]

I may be mis-remembering, but my recollection is that it has been discussed on here several times that an agent who collects and has responsibility for the deposit is equally liable for the penalty if the legislation is breached. I have always assumed that to be the case.

[jpkeates]

The court must order the landlord or a person or persons acting on his behalf in relation to the tenancy to pay to the applicant a sum of money not less than the amount of the deposit and not more than three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

Say a tenant tells a landlord he is going to sue under for non-protection. The tenant gets a letter from a solicitor denying the claim. The solicitor is a person acting on behalf of the landlord in relation to the tenancy. Can the tenant sue the solicitor?

No.
Because the only person who can breach 213(3) is "a landlord [who] receives a tenancy deposit in connection with a shorthold tenancy", and 213(6) "A landlord who has received such a tenancy deposit" (actually defined in 213(5)).

So broadening the definition of landlord makes no difference, because the other half of the requirement is equally critical.
It might even be suggested that the receipt of the deposit is the essential element.

What about this argument from a landlord sued for non-protection?

At the time I received the deposit the tenancy had not begun, the tenant was not in occupation and I did not know if the tenant would in fact take up occupation or, if he did, whether the property would be his only or principal home. Accordingly, at the time I received the deposit I did not know if the tenancy would be an AST. If I did not know that I did not know if I had an obligation to protect the deposit. How can I be expected to do something if I do not know if I am expected to do it? If I later learn that the tenancy is an AST it is impossible to comply with the Act because it requires protection to be effected at the time I received the deposit.

In practice, I suspect that the judge would simply award a low penalty if presented with that argument.

But let's unpick it (quiet Saturday).

At the time I received the deposit the tenancy had not begun, the tenant was not in occupation and I did not know if the tenant would in fact take up occupation or, if he did, whether the property would be his only or principal home. Accordingly, at the time I received the deposit I did not know if the tenancy would be an AST.

That might fly if you didn't sign a tenancy agreement. The wording of the agreement would be indicative of your view at the time (or your expectation before the tenancy began).

If I did not know that I did not know if I had an obligation to protect the deposit. How can I be expected to do something if I do not know if I am expected to do it?

A counterargument would be to suggest that because of the significance of the regulation, the default, if you were genuinely not sure, would be to protect the deposit "just in case, rather than assume it wouldn't be and not protect the deposit."

As it is also possible to word the tenancy agreement so that it couldn't be an AST, as a landlord you do have the opportunity to be definite.

If I later learn that the tenancy is an AST it is impossible to comply with the Act because it requires protection to be effected at the time I received the deposit.

I don't think that's correct, the requirement arises to protect the deposit when the Landlord "receives a tenancy deposit in connection with a shorthold tenancy".

If the tenancy was an AST when it began, the requirement arose whether the landlord knew it was or not (the protection requirement is, essentially, strict liability - in the same way that not knowing the speed limit doesn't matter, other than in mitigation for sentencing).


If the tenancy wasn't an AST when it began and became one, when the deposit was received (when the money was handed over) there was no receipt in connection with a shorthold tenancy.
A tenancy can't change in nature, so when the tenancy ceases to be an Assured Tenancy and "becomes" an AST, it's actually a new tenancy.

As per Superstrike, "Something must have happened [when the periodic tenancy that was the subject of the appeal was created] which led to the result that the deposit was held in relation to the new tenancy. That something could have been either an actual (or... physical) payment (but none took place in this instance) or something which amounted to payment. If there was an actual payment or something treated as a payment there must also have been a corresponding receipt."

I don't see why that logic wouldn't apply here. So the deadline starts when the tenancy becomes an AST.

Alternatively, the court might decide that if the tenancy that was granted was not a shorthold tenancy, even if both the landlord and tenant intended that it would be, it cannot simply "evolve" into one.
If the reverse happened, someone stops living in a property, for example, there doesn't seem to be any notion that section 21 can't be used.

[theartfullodger]

.................. If I did not know that I did not know if I had an obligation to protect the deposit. How can I be expected to do something if I do not know if I am expected to do it?......

Sounds a bit like Johnson claiming not to have been told about the laws & regulations:...... (that he happened to have passed). Or a driver who genuinely doesn;t know there's a 70mph limit in UK.

But IANAL....

[KTC]

If the tenancy wasn't an AST when it began and became one, when the deposit was received (when the money was handed over) there was no receipt in connection with a shorthold tenancy.

I agree with this.

A tenancy can't change in nature, ....

But not from here onwards.

Whether a tenancy is assured (shorthold or otherwise) is a matter of fact. If the requirements specified in Housing Act 1988 are met, then it must be so. There's nothing stopping whether those requirements are met changing over the life time of the tenancy, and hence the status of said tenancy changing accordingly, possibly multiple times.

Practically, that is how some long lease inadvertently became assured shorthold when the ground rent increased took it over the assured low rent limit.

Section 5 of the Act actually uses the phase "while the tenancy remains an assured tenancy", which clearly implies that it is possible for assured status to change mid-tenancy.

Another practical example from that section, the tenant leaves by the end of a fixed term tenancy, the tenancy then ends by effluxion of time. The tenancy did not come to an end through surrender or other action on the part of the tenant. However no SPT arises becase when the tenancy ended, the tenant no longer occupies the dwelling-house as his only or principal home so the tenancy at the time it ended was not assured.

[Lawcruncher]

Sounds a bit like Johnson claiming not to have been told about the laws & regulations:...... (that he happened to have passed). Or a driver who genuinely doesn;t know there's a 70mph limit in UK.

The ignorance of the law is no excuse rule always applies. Here, though, the landlord is not saying that he does not know the law but that he does not know if the law that requires deposits to be protected applies. He argues:

· I must protect the deposit when I receive it if the tenancy is going to be an AST.

· When I receive the deposit I do not know if the tenancy will be an AST.

· If I do not know if the tenancy will be an AST I do not know if the deposit I have received needs protecting.

· It is unreasonable to say I should protect the deposit until I know it needs protecting. It is not reasonable to impose an obligation subject to a condition when it cannot be known if the condition is fulfilled until after the time for compliance has passed.

This possible loophole only arises because because, unless he has served notice that the tenancy is not to be an AST or the agreement contains a statement to the effect that the tenancy is not an AST, a landlord has no control over whether a tenancy will be an AST because he has no control over whether the occupation condition set out in section 1 HA 1988 is fulfilled.

[Lawcruncher]

No.
Because the only person who can breach 213(3) is "a landlord [who] receives a tenancy deposit in connection with a shorthold tenancy", and 213(6) "A landlord who has received such a tenancy deposit" (actually defined in 213(5)).

If you want to know if section 214(4) applies you have to ask whether 213(3) or (6) has been complied with or if the deposit is being held in accordance with an authorised scheme. If the answer to either question is "no" then section 214(4) applies. When you go to section 214(4) and ask who the court can order to pay it says "the landlord" but you have to read that as "the landlord or a person or persons acting on his behalf in relation to the tenancy".

[jpkeates]

If you want to know if section 214(4) applies you have to ask whether 213(3) or (6) has been complied with or if the deposit is being held in accordance with an authorised scheme. If the answer to either question is "no" then section 214(4) applies. When you go to section 214(4) and ask who the court can order to pay it says "the landlord" but you have to read that as "the landlord or a person or persons acting on his behalf in relation to the tenancy".

I agree with this.
My point was that for anyone to be liable to a sanction, receiving the deposit is an (or even the) essential element.

[jpkeates]

Whether a tenancy is assured (shorthold or otherwise) is a matter of fact. If the requirements specified in Housing Act 1988 are met, then it must be so. There's nothing stopping whether those requirements are met changing over the life time of the tenancy, and hence the status of said tenancy changing accordingly, possibly multiple times.

My point was rather that for this to work in practice a new tenancy must arise when the type of tenancy changes - following (but extending) the superstrike thinking.

Otherwise we have Schrödinger's tenancy, which is either an Assured or Assured Shorthold tenancy depending on your view of it.
As the tenant, I know I now live here, so I know it's an AST.
As the landlord, I don't know that, so I think it's an AT.

Or, conversely, we both intended the tenancy to be an AST and neither of us know it isn't because the circumstances of the tenant have changed to the point where some factual threshold for residence has been crossed for another property.

Practically, that is how some long lease inadvertently became assured shorthold when the ground rent increased took it over the assured low rent limit.

So at that point, a new tenancy began - which is knowable because the rent was increased at some knowable point.

Section 5 of the Act actually uses the phase "while the tenancy remains an assured tenancy", which clearly implies that it is possible for assured status to change mid-tenancy.

I suspect that's just another example of tenancy being used loosely to refer to both one in a series of tenancies and all of them.

Another practical example from that section, the tenant leaves by the end of a fixed term tenancy, the tenancy then ends by effluxion of time. The tenancy did not come to an end through surrender or other action on the part of the tenant. However no SPT arises becase when the tenancy ended, the tenant no longer occupies the dwelling-house as his only or principal home so the tenancy at the time it ended was not assured.

I think the tenancy arises because it "tak[es] effect in possession" and if there's no possession, it doesn't arise.
The tenant's only or principle home would simply determine what type of periodic tenancy would be created.

The practical consequences of a tenancy changing during its existence are concerning.

A possession claim arising from a section 21 notice could be defeated by the tenant not living at the property as their home.
This doesn't seem to happen - there must be lots of claims where the tenant isn't there at all.
It would be odd if every judge and advisor who was faced with this situation missed such a fundamental point.

That would mean that a landlord who let to a tenant who then sublet the entire property to someone else couldn't reliably end the tenancy.
They'd have to rely on a section 8 discretionary ground if the tenancy agreement forbade subletting (which might be an unenforceable term in itself).

It would create the situation that Lawcruncher has highlighted - a landlord might become liable to protect the deposit without being aware of it.
And any court making a ruling about a penalty based on the situation would have to reverse Superstrike, because the "something" necessary for the payment, and therefore receipt, of a deposit didn't happen.

Any contract between the landlord and tenant has a degree of uncertainty baked into it, which undermines the intent necessary for the contract to be formed.

[KTC]

My point was rather that for this to work in practice a new tenancy must arise when the type of tenancy changes - following (but extending) the superstrike thinking.

Superstrike doesn't extend like that. While non-tenancy lawyers may have been suprised that a periodic tenancy arising pursuant to s5 of the Housing Act 1988 is legally a new tenancy, that wasn't really a question for housing lawyer and if you read the judgment wasn't even a point on appeal. Both sides treated as a given that a SPT was a new tenancy. To them, the point for decision was whether the deposit requirements applied again.

Key element of a tenancy is the grant of exclusive possession for a period of time at a rent etc. A SPT is a new tenancy because s5(3)(b) of the 1988 Act explicitly deemed such a tenancy have been granted by the person who was the landlord of the fixed term tenancy. When for example a tenant no longer lives at the property, the landlord doesn't magically grant a new tenancy.

Otherwise we have Schrödinger's tenancy, which is either an Assured or Assured Shorthold tenancy depending on your view of it. ...

I assume you meant assured (whether shorthold or otherwise) vs a common law tenancy.

That would mean that a landlord who let to a tenant who then sublet the entire property to someone else couldn't reliably end the tenancy.

A notice to quit ends a non-assured periodic tenancy on its expiry.

I have no answer to what happens if a non-assured tenancy becomes assured after a NTQ have been given but before its expiry though.

And any court making a ruling about a penalty based on the situation would have to reverse Superstrike, because the "something" necessary for the payment, and therefore receipt, of a deposit didn't happen.

I don't follow.

Any contract between the landlord and tenant has a degree of uncertainty baked into it, which undermines the intent necessary for the contract to be formed.

Not really. You cannot contract out of (or into) whether a tenancy is assured. Your tenancy agreement is a contract for the landlord to grant exclusive possession for a period of time for rent with both parties intending to create the legal relations of landlord and tenant. That it is assured (or assured shorthold) is because the Housing Act say so.

[jpkeates]

I assume you meant assured (whether shorthold or otherwise) vs a common law tenancy.

I didn't, but your point is valid, the third option (not an assured tenancy at all) is also a possibility.

A notice to quit ends a non-assured periodic tenancy on its expiry.

If it's a common law tenancy, the tenancy agreement might have the terms for a tenancy as part of it.

I have no answer to what happens if a non-assured tenancy becomes assured after a NTQ have been given but before its expiry though.

Neither do I, and it's partially that uncertainty that bothers me.

I don't follow.

Sorry.
I meant that the judgement in Superstrike was that "something" must have happened when the periodic tenancy began, and that the something was sufficient to cause a payment to be made.
If a tenancy is able to change in nature between an Assured (or Common Law) tenancy into an AST because of a change in the tenant's circumstances, what "something" happens?

Not really. You cannot contract out of (or into) whether a tenancy is assured. Your tenancy agreement is a contract for the landlord to grant exclusive possession for a period of time for rent with both parties intending to create the legal relations of landlord and tenant. That it is assured (or assured shorthold) is because the Housing Act say so.

I didn't intend to suggest that and I agree with the point you make.
The tenancy and it's conditions are part of land law.
But there's also a contract law element.
And if the landlord and tenant can't be sure what type of tenancy they're agreeing to, it's hard to see how they can form a contract about it.

[Lawcruncher]

And if the landlord and tenant can't be sure what type of tenancy they're agreeing to, it's hard to see how they can form a contract about it.

The nature of an assured tenancy is such that that is indeed what you can do. In fact, if you grant a tenancy there has to be some sort of tenancy even if it is not the sort of tenancy you thought it was.

[jpkeates]

Lawcruncher, I agree that there will be a tenancy, I am not sure that there can be a valid contract.

What tenancy is created will be a matter of fact, but if you and I contract for one type of tenancy and it turns out to be a different kind, the intent for a contract is, at minimum, undermined.

If we both wanted an AST, signed a contract to the effect and ended up with a common law tenancy, how can we have intended for that to happen?