Deposit Penalty - Multiple Breaches and Limitations
With thanks to NearlyLegal for reporting this one. In Howard v Dalton, County Court at Dartford, 7 May 2019, a couple of interesting points were raised about the penalty provisions where a deposit had not been protected nor prescribed information given, namely:
- limitation of 6 years
- can a tenancy deposit claim include a failure to protect and a failure to provide prescribed information?
The landlord (Mr D) granted an assured shorthold tenancy to Ms H in 2007, under which a deposit of £900 was paid. In addition, an amount of £845 was paid, and a receipt was issued saying ‘deposit remainder’.
The total paid was £1745.00. There had been seven more tenancy agreements (so a total of 8, including the original), and the deposit was not protected until 2014. Deposit prescribed information was never given to the tenant.
At the first hearing, the district judge held that for the eight tenancies, there had been two breaches (failing to protect and provide prescribed information), which totalled 16 breaches.
The court ordered the landlord to pay 3 x deposit (£1745 x 3 = £5235) for the two breaches (£5235 x 2 = £10,470) for each of the eight tenancies (£10,470 x 8 = £83,760).
The landlord appealed.
Section 214(1) is the provision allowing a tenant or relevant person to claim a penalty:
(1) Where a tenancy deposit has been paid in connection with a shorthold tenancy on or after 6 April 2007 , the tenant or any relevant person (as defined by section 213(10)) may make an application to the county court on the grounds—
(a) that section 213(3) or (6) has not been complied with in relation to the deposit, (…)
Section 214(1)(a) provides a penalty that can be claimed for a breach of 213(3) (failing to protect within 30 days) OR 213(6) (failing to give prescribed information).
On appeal, the court held this was a single award for either of the breaches but not both because of the word “or” between the two violations:
S.214 Housing Act 2004 provided a point of access for damages for either a breach of s.213(3) or s.213(6). A single award of damages was intended regardless of the number of individual breaches.
A failure to protect under s.213(3) would inevitably give rise to a failure to provide prescribed information under s.213(6). It was not Parliament’s intention that damages should be awarded for each breach, rather than only either breach. The requirement to provide prescribed information could not be independent from the requirement to protect.
On appeal, it was therefore held that there was only one penalty per tenancy, not two.
Under section 9, Limitation Act 1980, there is a time limit of 6 years to bring an action to recover any sum recoverable by virtue of any enactment.
In this case, at the appeal, the claim amount was limited to the last four tenancies and not the full eight.
It’s unclear at what point the six years start. It would seem in this case that the six years started from each failure to protect, and presumably, it was day 31 onwards of each failure.
We had wondered if the six years started when the tenant vacated, but this case would indicate it’s connected to the point at which protection or prescribed information must be concluded.
Other Matters and Order
The additional payment of £845.00 (under which a receipt was issued) was held to be rent in advance and not part of the deposit. As such, the final calculation for a penalty only included the £900 tenancy deposit.
Further, the penalty was reduced to two times deposit from three times.
The total deposit penalty payable by the landlord was ultimately reduced to £7200 (£900 x 2 x 4).
Even though, on appeal, this is only a county court case so not binding on other courts except those within the immediate area of the circuit judge who made the decision. That being said, it is quite possibly correctly decided.
Subscribers get full access to exclusive content, including forms, articles and discounts, plus our time saving Tenancy Builder tool.
Signup for our free weekly digest and get the latest news and guidance straight to your inbox (some content requires a paid subscription).
View Related Handbook Page
Deposits and Tenancy Deposit Schemes
Many landlords take a deposit from tenants to hold for the duration of the tenancy. When the tenant moves out, this is returned to the tenant less any deductions permitted: typically for damage (above fair wear and tear), additional cleaning, and cover any outstanding rent. Note: deposits can only be withheld if stipulated what the deposit is being held against in the contract.