In this note, we consider the situation where there is an issue with a tenancy deposit; and that issue spans more than one tenancy.
Where the deposit has not been correctly protected and/or the prescribed information has not been provided to the tenant in accordance with the rules, the court must order that the landlord return the deposit to the tenant. Further, the court must order that the landlord pay the tenant a penalty of between one and three times the deposit.
But what happens when the issue spans more than one tenancy? It is often the case that a tenant will remain in a property for several years. There will often be several tenancy agreements over the period that the tenant lives at the property. Must the court award a penalty to the tenant for each tenancy?
And the answer is….no one knows!
A new fixed-term tenancy agreement is a new fixed-term tenancy, obviously. Holding over after the end of a fixed-term tenancy, without entering into a new agreement, creates a new tenancy by statute. This tenancy is not for a fixed term but rolls month to month (a statutory periodic tenancy). When the tenancy becomes statutory periodic at the end of a fixed-term, this is a new tenancy.
So, let’s suppose that Albert granted Brenda a 6-month assured shorthold tenancy. Albert received a deposit but, for whatever reason, the deposit wasn’t protected in accordance with the rules. After 6 months, the tenancy becomes statutory periodic (a new tenancy). That would be 2 tenancies. A couple of months later, Albert and Brenda decided they would both like the security of another 6-month fixed term tenancy. That would be three tenancies. That tenancy also became statutory periodic after 6 months, four tenancies, and then they decide that it’s all going jolly well, and they enter into another 6 months fixed term contract.
There have been 5 tenancies in all.
Brenda now discovers that not only has Albert not protected the deposit but that she is entitled to a payment as a consequence. According to s. 214 Housing Act 2004, the court must make an order that Albert returns her deposit and in addition, pay her up to three times the deposit.
Imagine Brenda’s excitement at this unexpected and very welcome windfall.
Brenda thinks it would be amazing if she could claim 3 times the deposit for each of the of the 5 tenancies, 15 times the deposit in all; the question is can she?
The first problem for Brenda is that the court may not award 3 times the deposit as a penalty. It is entirely at the discretion of the judge. The presumption is that the judge will start at one times the deposit as a penalty and increase the award if there are aggravating factors. An aggravating factor for example might be that the landlord had misled the tenant about the protection of the deposit or hadn’t taken any steps to correct the situation when the landlord became aware of the issue.
So, Brenda may only be awarded one times the deposit as a penalty (and return of the deposit itself).
The next question is whether the court should award the penalty once, as it is a single deposit, or multiple times because there are several tenancies?
Well, it isn’t at all certain. There is no binding authority, and there are decisions in the county court that go both ways.
In Akrigg v Pidgeon County Court at Chippenham and Trowbridge on 25 September 2015, Deputy District Judge Horsey awarded the tenant multiple penalties. However, in Howard Davies v Scott County Court at Clerkenwell and Shoreditch, District Judge Rand observed that the wording of the relevant statute, s. 214 of the Housing Act 2004, used the singular in respect of the penalty and therefore only one penalty need be awarded.
So, the answer is that no one knows.
There is another penalty if the deposit has not been correctly dealt with. That is that a s. 21 notice cannot be served until the matter is rectified so that a tenant cannot be evicted using the s. 21 procedure. To rectify the situation, so that a tenant eviction is possible, it usually necessary to return the deposit to the tenant.
In practice, where the landlord has simply made a mistake, the landlord will not be aware of the issue until he or she tries to evict the tenant. The tenant may also be unaware until they are advised in relation to the eviction proceedings, that they cannot be evicted using the s. 21 procedure if there is an unresolved deposit issue. From the landlord’s point of view, this is a disaster. The tenant eviction process will fail. The landlord will have to serve a new notice and start the process afresh. This means that the tenant eviction process will take many months longer and cost twice a much. The cost might be even greater if the landlord was evicting because of continuing rent arrears.
Simon Vollans LL.B., LL.M. Solicitor