Gladehurst had let the property to the two tenants under an assured shorthold tenancy. They paid a deposit, which it retained and never paid into the deposit scheme. The tenancy came to an end when the tenants vacated the property, after which deductions from the deposit were made for breaches of the cleaning and repairing covenants, with the balance then being repaid to the tenants via a bank transfer. The tenants then brought a s.214(4) claim for payment of the penal sum, the landlord having failed to comply with the relevant statutory provisions in respect of their deposit. The tenants’ claim was struck out by the District Judge on the basis that it had been made after the tenancy had come to an end and that the provisions of s.214(4) no longer applied. HH Judge Cryan allowed their appeal and restored the claim. Gladehurst now appealed. The main issue on appeal was whether, in those circumstances, the tenants were entitled to an order for payment of the penal sum under s.214(4) following the landlord’s failure to register their deposit or to pay it into the deposit scheme.
Held: The power of the Court to make an order under s.214(3) and (4) is no longer exercisable once the tenancy has come to an end. The District Judge was right to reject the tenants’ s.214(4) claim.
Patten LJ said: ‘The point is not an easy one but I have come to the conclusion that the power of the Court to make an order under s.214(3) and (4) is no longer exercisable once the tenancy has come to an end. Although s.213 makes it unlawful for a landlord to require the payment of a deposit which is not to be dealt with in accordance with an authorised scheme and requires the landlord within 14 days of receipt of a deposit to comply with the initial requirements of such a scheme, it is important to note that no criminal penalty is imposed for non-compliance with these provisions. Instead, they are made enforceable at the option of the tenant under s.214. It is entirely a matter for him as to whether he chooses to take advantage of the provisions in s.213 which were created for his benefit.
The answer therefore to the argument that the construction of s.214 contended for by Gladehurst will encourage landlords not to comply with their legal obligations under s.213 is the same as applies to any breach by a landlord of its covenants or other obligations under the lease. The tenant always has it within his hands to secure their enforcement by the taking of proceedings. That is the remedy prescribed by s.214 of the Act and it is up to the tenant to make use of it.
Looked at in this way it is entirely understandable if some temporal limits apply to the exercise of the right of enforcement under s.214. The initial requirements of an authorised scheme are, as Mr Gannon submitted, matters to be dealt with at the inception of the lease and not later than the expiry of the term. Section 214(1), as interpreted in Tiensia, speaks in terms of these requirements not yet having been complied with and therefore carries the strong implication that the default can still be remedied. This impression is confirmed by s.214(3) which requires the Court either to order the repayment of the deposit to the applicant or to order the landlord to pay it into an authorised scheme. For the Court to have a genuine discretion to exercise both alternatives must be available. On the facts of this case, neither was. Although Judge Cryan treated the andpound;618 as part of the deposit retained by Gladehurst, it was artificial to do so. The tenants had agreed to Galdehurst retaining the andpound;618 pending the prosecution of their claim for its return which it was for them to pursue and make out. The retention was therefore consensual.
The issue raised by the landlord has also to be resolved in a case where the landlord has returned the entirety of the deposit on the termination of the lease. Mr Gannon accepted that if this were the case then no s.214 claim could be made. Section 214 envisages that it must still be open to the Court to make both a s.214(3) and a s.214(4) order. Where this is not the case neither applies.
But that argument would mean that a defaulting landlord who nevertheless was scrupulous in dealing with the deposit at the end of the lease would be in a worse position with a defaulting tenant than he would be with a tenant who observed his own covenants to the letter. If the landlord was able to refund the deposit in its entirety he would escape the consequences of s.214(4) but not if he had legitimate grounds for retaining part of it to pay for repairs.
Anomalies of this kind are avoided by reading s.214(1)(a) as meaning that the initial requirements of an authorised scheme have not been but are still capable of being complied with. This is consistent with the decision in Tiensia and is the only meaning which ties in with the two alternatives in s.214(3) continuing to be available. In practice, this means that the grounds for a s.214 application will cease to exist once the lease expires and no order under either s.214(3) or (4) can therefore be made after that date. From that moment on the application will cease to be ‘such an application’ as is described in s.214(2).’
Judges:
Carnwath, Patten LJJ, Baron J
Citations:
[2011] EWCA Civ 604, [2011] 4 All ER 556, [2011] 2 P andCR DG17, [2011] 29 EG 90, [2011] HLR 36
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Cited – Tiensia v Vision Enterprises Ltd (T/A Universal Estates) CA 11-Nov-2010
The court was asked whether, where a landlord had failed to comply with the requirement to place a deposit received with a tenancy deposit scheme within fourteen days, the tenant was entitled to the penalties imposed by the Act despite later . .
Cited by:
Cited – Suurpere v Nice and Another QBD 27-Jul-2011
The tenant appealed against refusal of her claim for damages under sections 213 and 214 of the 2004 Act, saying that the notice as to the protection of her deposit had been inadequate on the grant of an Assured Shorthold Tenancy to her.
Held: . .
Cited – Kenny and Others v Abubaker and Others CA 23-Oct-2012
The defendant landlord sought to appeal against an order that he pay to the respondent tenants a penalty under the 2004 Act of three times the tenancy deposit. The court was now asked whether there was has any right to have set aside a judgment . .
Cited – Superstrike Ltd v Rodrigues CA 14-Jun-2013
The Defendant took an assured shorthold tenancy of premises from the Claimant for a fixed term of one year less one day, paying a deposit of a month’s rent under the terms of the tenancy agreement at that time. At the expiry of the fixed term, by . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant, Housing
Updated: 13 September 2022; Ref: scu.440117