It’s important to ensure that the tenancy deposit rules (including service notices) are applied “to the letter”, as otherwise a new fine can be added each time a tenancy is renewed when the statutory rules are not followed correctly on the first one.

When a tenancy deposit is taken it must be protected in one of the government approved schemes within 30 days of it being handed to the landlord or agent. At the end of the tenancy, landlords must return the deposit within 10 days of both landlord and tenant agreeing how much will be returned.

In addition the landlord or agent must provide certain statutory (prescribed) information to their tenant in the form of a written notice, again within 30 days of receiving the deposit which includes:

  • the address of the rented property
  • how much deposit was paid
  • how the deposit is protected
  • the name and contact details of the tenancy deposit protection (TDP) scheme and its dispute resolution service
  • the landlord’s or the letting agency’s name and contact details
  • the name and contact details of any third party that’s paid the deposit or part of the deposit
  • the circumstances in which some or all of the deposit can be retained
  • how the tenant is to apply to get the deposit back at the end of the tenancy
  • an alternative contact for the landlord at the end of the tenancy
  • the procedure if there is a dispute over the deposit

In addition, the letting agreement should contain information which mirrors this notice, and landlords / agents should get proof of service – documentary evidence that the notice was sent and received. Ideally this information should be attached to the letting agreement and receipted, unless it is not available at the time the agreement is signed, in which case it must be sent separately.

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Failure to comply means that private landlords face compensation claims paid to the tenant and restricted eviction rights (Section 21 procedure) if they don’t follow this process.

Compensation ordered by a court can be up to 3 times the value of the deposit, plus the return of the deposit, often a tidy sum, because as this case shows, this fine can be multiplied each time a tenancy is renewed without these issues being mended.

There is some leeway in that a judge can decide how much a landlord should have to pay by taking into account the circumstances of each individual case. A judge will often impose stricter penalties on a professional landlord or if the landlord is using a letting agent who should be aware of the law, or as in this case, when the landlord behaves badly – it’s the landlord who gets fined, not the agent, so chose agents wisely.

In Liaw v Sohal at Central London County Court, January 2019 a county court deposit claim decision has broader significance, as well as providing some useful lessons as to how landlords and agents should proceed.

Ms Liaw was given a 12 months assured shorthold tenancy of a central London flat by Ms Amrit Sohal which commenced in October 2013 and a deposit of £2100 was taken by the landlord Sohal.

Ms Liaw left in October 2016 but Sohal did not return the deposit, following which she brought a claim for 1) the return of the deposit, and 2) penalty (compensation) for the landlord’s failure to provide the prescribed information going back to the first 12 month tenancy, plus two more penalties for the two subsequent 12 month renewals.

The landlord’s defence was based on the claim that the prescribed information had been served within 30 days on the first tenancy, and that there were no renewal tenancies, only a automatically renewed statutory periodic tenancies. In addition the landlord Sohal counterclaimed for loss of rent for the tenant’s short notice to leave, council tax after the tenant had moved out, repair costs plus ‘administration and time costs’.

The landlord’s defence failed. The judge thought that the information letter purportedly sent to the tenant dated 25 October 2013 was not genuine and that although the deposit was protected, no prescribed information was served in 2013, in breach of s.213 Housing Act 2004.

The argument that the tenancy had simply continued as a statutory periodic tenancy after the initial term also failed as there was clear evidence that the landlord had sent renewal agreements to the tenant, and that Ms Liaw had paid the advance rent according to those agreements.

Although the landlord argued there has to be a signed tenancy document in order for it to be a renewal, the judge said that is not correct: It is quite often a method used, particularly by letting agents, to renew agreements by either using a memorandum, or as in this case, which is much clearer, a renewal agreement.

It is clear from the exchange of correspondence that took place between the claimant and the defendant, particularly regarding the second renewal, that even though no signature is on the renewal agreement itself, the term and the rent and the six months’ clause break is clearly set out and agreed. This is particularly the case when one considers that Ms Liaw then immediately pays the rent that is due and owing.

The judge decided there had been two renewal tenancies and on each occasion a tenancy for a 12 month term had been entered into. On each occasion the landlord was under an obligation to serve the prescribed information, given that she had not done so on the first occasion and so the Deregulation Act amendments to Housing Act 2004 did not apply.

Therefore the judge awarded a penalty for each occasion stating that the landlord was aware of her obligations, having let the property several times prior to the current letting.

The judge awarded to Ms Liaw the return of her deposit of £2,100 “and in light of my concerns as to the manner in which the alleged notice of 25 October 2013 has been presented to this court, I award two times the return of the deposit on three occasions as damages to Ms Liaw.”

Therefore, that was £4,200 multiplied by three, a total of £12,600 plus £2,100

The counterclaim was based on the contention that Ms Liaw had not given adequate notice at the end of the last tenancy and that two months notice was required. This would have been the case had the tenancy become periodic, but as it was a fixed term tenancy no notice is required for an AST.

The claim for council tax and rent were dismissed and there was no legal basis for the claim in disbursements and time. This was also dismissed as was most of the claim for repairs.

This type of ‘multiple tenancy’ deposit penalty claim has arisen before and was upheld again here, though it would perhaps be useful to have a higher court test case ruling on the matter.

Several lessons can be learned from this case:

1 – Be aware of the rules and follow them “to the letter”

2 – Don’t try to hoodwink the court – you will be found out and it will cost you!

3 – When you know you are in the wrong try to reach a financial settlement with your tenant, it will likely cost you a lot less than going to court.

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