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Landmark Ruling Set to Support Landlords
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A landmark ruling in a recent court case is set to end the potential for fining residential landlords for failing to pay a tenant's deposit into a statutory scheme and provide the tenant with information about the scheme within 14 days.
According to Jo Milward-Hyde, legal executive at leading Midlands law firm Flint Bishop, until now private landlords who have failed to pay a tenant's deposit into a regulated Tenancy Deposit Scheme and inform the tenant within 14 days of taking the deposit, could have been forced to pay to the tenant three times the amount of the deposit as a penalty.
In the recent case of Tiensia v Vision Enterprises Ltd (t/a Universal Estates) and Honeysuckle Properties v Fletcher and others, the landlord failed to protect the tenant’s deposit with a Tenancy Deposit Scheme and provide the prescribed information within 14 days of receipt of the deposit as required by the Housing Act 2004. The tenant applied to the court for the landlord to pay a penalty of three times the amount of the deposit.
Now, the Court of Appeal has held that providing the landlord complies with the ‘initial requirements’ of the Tenancy Deposit Scheme before the actual court hearing of the tenant’s claim and provides the prescribed information to the tenant, he will not be subjected to this sanction.
Commenting on the recent ruling, Jo said:
“Landlords and tenants have been awaiting clarification on this issue for some time and the court’s decision will be welcomed by landlords.
"This ruling will mean that, although the court has the ultimate power to impose a penalty of three times the deposit, it is unlikely to be exercised in practice. However, this ruling should not been seen as mandate for landlords to avoid paying the deposit into a Tenancy Deposit Scheme.
"Tenants often use this legislation as a loop hole to avoid paying rent arrears. I would, therefore, urge landlords to always comply with the 14 day time limit as the sanction could still be implemented by the courts in some circumstances.
"There are also other provisions which prevent a landlord from relying on the procedure under Section 21 of the Housing Act for accelerated possession if he has not properly protected a tenant's deposit.
"This means that in addition to the potential fine, failure to comply with the deposit regulations will render a standard notice under Section 21 of the Housing Act invalid.
"This will make it much harder to remove tenants from the property, so it should give landlords an extra incentive to make sure that they always follow the regulations very carefully," added Jo.
For further information contact the commercial dispute resolution team at Flint Bishop on 01332 226150.
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