Tenancy deposit ruling

The first ruling on tenancy deposit protection schemes under the Housing Act 2004 has been issued by the High Court.

In Draycott v Hannells Lettings Ltd, the agent admitted the deposit had been protected late, outside the 14-day requirement of the Act. The tenants claimed against the agent for the normal remedy that the deposit plus three times its value be returned in full.

The agents contested on the basis an agent should not be held liable for protection of the deposit, and that s 214 of the Act does not provide a penalty for late registration.

Mr Justice Tugendhat found against the agents on the first point, holding that an agent can be held liable in place of the landlord. He did not comment on whether an agent would be liable if the landlord had received the deposit and not registered it. However, he found in favour of the agent on the second point, ruling that late registration does not create a right for a tenant to seek penalty of three times the deposit.

The court further held that there was no initial requirement for the deposit to be protected within the scheme within 14 days of receipt.

Marveen Smith, principal of PainSmith, which acted for Hannells, says: “This is an important decision which brings much needed clarity to this area of the law.

“Many agents and landlords have been penalised when they had innocently failed to protect a deposit within 14 days despite the fact that they had not done so maliciously. They will breathe a sigh of relief that they now have a route by which they can satisfy their legal obligations and not face a penalty for doing so.”