L's Agent may be sued for non-protection of T's deposit

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  • L's Agent may be sued for non-protection of T's deposit

    I know this is a bit long but is an extract from Estate Agent Today

    A case at Leeds County Court has highlighted that letting agents may face proceedings over tenancy deposits.

    In this notable case, the agents escaped penalty even though the tenant’s deposit had not been protected and the tenants not given the ‘prescribed’ information. Their lawyer successfully argued that the legislation had been badly drafted.

    Diamond Properties, based in Headingley, Leeds, are thought to be the first agents to find themselves in court over tenancy deposit protection. Until now, it has been landlords who have had to face the music. The company are busy agents managing some 500 properties a year, many of which are let to students, said their lawyer.

    Hayden Glinn, of Lupton Fawcett, who represented Diamond, said that while landlords were generally seen to have ultimate legal responsibility for tenants’ deposits, the Housing Act, which introduced compulsory tenancy deposit protection, lays down that “any relevant party” could face penalties.

    Compulsory tenancy deposit protection makes it illegal for any letting agent or landlord to take a tenant’s deposit unless it is protected in one of three Government-approved schemes. Whoever takes the deposit must also give the tenant certain information within 14 days, including details of the scheme, address of the rental property, and address and name of the landlord.

    Failure to do either of these means that the landlord – or, as this case suggests, agent – is liable to be penalised. The penalties are heavy: the court has power to order that the deposit plus three times its amount has to be handed to the tenants. Also, where a tenancy is ongoing, the landlord or agent cannot use the fast-track Section 21 procedure to regain possession.

    In this particular case, a group of students had paid a deposit in May 2007, shortly before their tenancy started.

    The following March, they wrote saying they had reason to believe their deposit was not protected. The deposit was duly protected that same month, but the tenants were not given the prescribed information until after the tenancy had finished and court proceedings had started. The prescribed information was supplied in December 2008.

    However, Hayden Glinn was able to argue that although the intention of the Housing Act was to make it a statutory obligation both to protect the tenant’s deposit and to confirm the arrangement within 14 days, the law had been so drafted that the penalty could be escaped just as long as the deposit had been protected and the tenants informed before the case got to court.

    Glinn said after the case: “I spent about 100 hours poring over the Housing Act and found it had been drafted incorrectly. What it says is not in line with its intentions. I reckon that if you were on the steps outside the court and could protect the deposit, you would escape penalty. But of course, if everyone did that, all the tenancy deposit schemes would be out of business.”

    Glinn also warned that student tenants in particular were likely to try to pursue the penalty: “Across the country, students have been having a field day, knowing that a lot of landlords have not been complying with statutory tenancy deposit protection. Students are particularly well informed about the law: go on to any campus and there will be posters asking if their landlord has protected their deposit.

    “The Tenancy Deposit Scheme was introduced on April 6, 2007 and since then tenants have learned to use it to their advantage. In a significant number of cases landlords have been harshly penalised not because they had failed to comply with the Act, but because they had failed to do so within the short time limit laid down by the Act. There have even been cases where a landlord has put the protection in place but just failed to notify the tenant properly.

    “This is not how the Government intended the scheme to work. Tenants have exploited a badly worded piece of legislation and landlords have been paying a heavy price.”

    The part of the Housing Act 2004 at the heart of this case was Section 21.4(1)(a).

    But Glinn emphasised that it was far better for both agents and landlords not to overlook their obligations over tenancy deposits, and to stick to the 14-day time limits. He also pointed out that this particular case was heard in a county court, whose rulings do not bind other courts.
    The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

  • #2
    It largely confirms what LZ members already know:
    a. that the 2004 Act is inadequately drafted; and
    b. that one can apparently protect a deposit late, as long as it's before a Court hears T's case seeking the 3x.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

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    • #3
      It also brings up another point concerning recent posts. Some landlords don't want their address disclosed to tenants on the AST, but the TDS requires the landlord's name & address to be on the information given to tenants regarding the deposit, so there is little point in just providing an address in England & Wales (in isolation), for service of Notices if the landlord has to show his own name & address to comply with the deposit schemes.

      Of course if the landlord doesn't wish to retain a deposit then the S.48 notice would suffice without the necessity of the landlord's address being disclosed. Then again under S.1 L & T Act 1985 the tenant can find out the identity and address of the landlord by a written request to his agent or collector of rent.
      The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

      Comment


      • #4
        Originally posted by Paul_f View Post
        It also brings up another point concerning recent posts. Some landlords don't want their address disclosed to tenants on the AST, but the TDS requires the landlord's name & address to be on the information given to tenants regarding the deposit, so there is little point in just providing an address in England & Wales (in isolation), for service of Notices if the landlord has to show his own name & address to comply with the deposit schemes.

        Of course of the landlord doesn't wish to retain a deposit then the S.48 notice would suffice without the necessity of the landlord's name and address being disclosed. Then again under S.1 L & T Act 1985 the tenant can find out the identity and address of the landlord by a written request to his agent or collector of rent.
        Again this highlights what a pig's ear the L&T legislation is- disorganised and uncrossreferenced.
        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
        4. *- Contact info: click on my name (blue-highlight link).

        Comment


        • #5
          100 hours on the Housing Act?? ........ Probably would have been cheaper for the LA to just pay the penalty!!!
          PAUL GIBBS, solicitor, Jacobs & Reeves. My comments on this forum are correct to the best of my knowledge and belief. No responsibility or liability is accepted by reason of reliance upon such comments. This disclaimer would not apply to direct clients of Jacobs & Reeves where there is a valid retainer in place and I would be happy to confirm any advice if formally instructed. . Jacobs & Reeves now offer a fixed fee possession service.

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          • #6
            Originally posted by Paul Gibbs View Post
            100 hours on the Housing Act?? ........ Probably would have been cheaper for the LA to just pay the penalty!!!
            That's £10,000 of Jeffrey's time Money well spent of course!
            I also post as Moderator2 when moderating

            Comment


            • #7
              Originally posted by Mars Mug View Post
              That's £10,000 of Jeffrey's time. Money well spent of course!
              In my dreams...
              JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
              1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
              2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
              3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
              4. *- Contact info: click on my name (blue-highlight link).

              Comment


              • #8
                For immediate advice, LZ members can use e-mail or telephone (not LZ private message). This service costs £2 per minute (+ VAT).

                2x60 = 120

                120x100 = 12,000

                Providing you did it all over the telephone O_o

                am guessing thats where the so called 10k of your time came from :P

                Comment


                • #9
                  Originally posted by Paul_f View Post
                  I know this is a bit long but is an extract from Estate Agent Today
                  Are Estate Agents Today notoriously or irrepressibly longwinded, or is this a non-sequitur?


                  Originally posted by Paul_f View Post
                  Glinn said after the case: “I spent about 100 hours poring over the Housing Act and found it had been drafted incorrectly.
                  Well, he was either a very slow reader, or very slow on the uptake. The conclusion he reached after his protracted (and presumably expensive) 'poring' is glaringly obvious.

                  Originally posted by Paul_f View Post
                  Glinn also warned that student tenants in particular were likely to try to pursue the penalty: “Across the country, students have been having a field day, knowing that a lot of landlords have not been complying with statutory tenancy deposit protection. Students are particularly well informed about the law: go on to any campus and there will be posters asking if their landlord has protected their deposit.
                  Good for them, I say.
                  'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                  Comment


                  • #10
                    I am confused by this article;

                    On the one hand it says that if LL protects deposit prior to court (and not when he should have) he will be OK

                    On the other hand it says that many students have screwed the system unfairly (which I take it often means that LL may have protected the deposit but not in the time)

                    The result is that the decision can go any way according to who is on the bench at the time, but they seem to spin it in the landlord/agents favour, suggesting they can rely on the same defence. This is not a landmark decision.
                    All posts in good faith, but do not rely on them

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                    • #11
                      O.K. so who is going to shell out to appeal such a ruling and get a definitive appeal court decision? The problem is that to do so will take so much time and thus expense on behalf of some poor landlord or agent as to be a non starter - unless you happen to be the Duke of Westminster!

                      P.P.
                      Any information given in this post is based on my personal experience as a landlord, what I have learned from this and other boards and elsewhere. It is not to be relied on. Definitive advice is only available from a Solicitor or other appropriately qualified person.

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                      • #12
                        The tenant presumably gets left with the filing fee... and possibly costs?

                        Something to protect tenants and they get screwed over anyway.

                        Well done NuLab
                        Now signature free.

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                        • #13
                          Originally posted by Bel View Post
                          The result is that the decision can go any way according to who is on the bench at the time, but they seem to spin it in the landlord/agents favour, suggesting they can rely on the same defence. This is not a landmark decision.
                          Hi, yes, it does seem from the anecdotal evidence that decisions are going both ways although, I have so say, the majority I have heard about are going in the landlord's favour.

                          The upshot seems to be that when advising a landlord who has been challenged, tell them to protect the deposit and provide the information and, if they do so before the court hearing, they will probably get away with it; and when advising a tenant whose deposit has not been protected or protected late, tell them that they might be successful with a challenge.

                          Comment


                          • #14
                            Originally posted by lorenzo View Post
                            Well done NuLab
                            I do not think we can blame the government or Parliament. The blame lies squarely with the draftsmen of the Act. It was a while before the flaw was spotted. It takes concentration and time to work through the wording to see where the error lies. If it took the lawyer a hundred hours it can only be because he could not believe what he was reading and felt the need to keep checking it.

                            Assuming the flaw was not deliberately slipped in (as if it was!) this goes to show just how tricky legal drafting can be. If top counsel cannot get it right all the time what hope is there for the rest of us? It serves as a reminder to landlords and agents that they should not engage in legal drafting. Instead, they should pay people like Jeffrey a large wad of cash to get it right.

                            Comment


                            • #15
                              Originally posted by Lawcruncher View Post
                              Instead, they should pay people like Jeffrey a large wad of cash to get it right.
                              And, by gum, he is always right.
                              All posts in good faith, but do not rely on them

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