Tenancy Deposit – A Cautionary Tale
December 11, 2012
Guest Article provided by Gareth Archer
As reported by Kelly Smith last month, a recent Court of Appeal case of Ayannuga -v- Swindells set alarm bells ringing amongst residential landlords. That case involved a landlord who had failed to produce part of the prescribed information required to the tenant under the Tenancy Deposit Scheme. As a result, the landlord was ordered to pay the maximum penalty of three times the value of the deposit.
The penalty seems unduly harsh and sets a marker firmly on the side of the tenant. Unfortunately, I do not have the benefit of the full case report but, as I understand it, the landlord’s failure was to provide information relating to the Tenancy Deposit Scheme itself, information that was provided within the Scheme’s own leaflet which was available on the Scheme’s website.
Unfortunately, for the landlord, the TDS Rules are quite clear. The rules specifically set out the requirements of the Housing Act 2004 and state that Section 213(5) and (6) of the Act require a landlord to give the tenant prescribed information, being such information as required in accordance with the Housing (Tenancy Deposits) (Prescribed Information) Order 2007. It also provides that the landlord must include any leaflet published by the applicable Tenancy Deposit Protection Scheme.
Whilst the information contained in the leaflet is available to the tenant elsewhere (if only on the Scheme’s website), the above Order has always provided that any scheme leaflet should be served in addition to the prescribed information. Do not forget, the prescribed information should also be served on any person who has paid towards the deposit, e.g. a parent of a tenant.
I have always emphasised the need for the landlord to hand over the scheme leaflet. It is more paperwork and I recall, earlier this year, a landlord informing me that he was going to buy new shock absorbers for his car in order to cope with the increased paperwork that the Tenancy Deposit Scheme caused him to produce! Whilst some landlords may have overlooked the need to provide the scheme leaflet in the past, clearly it is now important to ensure that it is provided along with all of the prescribed information in order to avoid having to pay a penalty.
If it is found that the correct prescribed information has not been provided within 30 days of receipt of the deposit, not only is the penalty payable but also the landlord loses their Section 21 rights until it is served.
It is therefore important for landlords to remember what the Court has said. The prescribed information has been held to be a key part of the two elements of the Tenancy Deposit Legislation. Mere protection of the deposit itself is not enough. The information must also be given via the landlord rather than leave the tenants to find it out themselves. Providing the information, therefore, really matters. Whilst onerous, it must be done on every occasion and within the required time.
It is also important for landlords to ensure that they follow the applicable scheme rules. Irrespective of the requirement of the Housing Act 2004, if a landlord breaches the scheme rules, they could find themselves in difficulty in recovering any part of the deposit that is disputed by the tenant. If a breach is identified, the relevant scheme may simply state that they have no requirement to undertake an adjudication, within the scheme, relating to any alleged damages or rent arrears. Instead, the scheme may determine matters in favour of the tenant without due consideration of the landlord’s position.
As an example, I do not believe that the Act (or the above Order) sets out that a landlord must provide a copy of the Tenancy Deposit Certificate (that is issued by the scheme) to the tenant. However, the TDS Rules provide for this albeit there is no time limit on when this should be done. A landlord should have a practice of giving all tenants, and third parties, the full prescribed information, any scheme leaflet and the Tenancy Deposit Certificate.