Following the Court of Appeal’s judgment in Tiensia v Universal Estate, when it was found that the mandatory penalty to be imposed upon landlords in the event that they did not comply with the Housing Act 2004 would not be payable in the event that the landlord is sued but pays the tenants deposit into a recognised scheme before the Hearing of the Claim.
The Court of Appeal in Tiensia was considering whether a landlord who had not protected the tenant’s deposit should pay the penalty prescribed by the Act which is 3 times the amount of the deposit. In the Tiensia case, the tenancy was still an active tenancy and the parties were still landlord and tenant. Many commentators considered that the Court of Appeal’s judgment in Tiensia spelled the beginning of the end of the tenancy deposit legislation. It permitted a landlord to withhold the deposit from the scheme and it would be for the tenant to sue the landlord to demand that deposit be protected, together with the penalty payment. Even in those circumstances, the landlord could pay in the deposit in the course of those proceedings at any time up to the Hearing. In doing so, the penalty would not be payable.
The decision in Tiensia will have been of huge relief to many landlords who, for whatever reason, had not protected their tenants’ deposit within a recognised scheme. The legislation had, before the decision in Tiensia, afforded tenants the opportunity of securing a cash windfall from defaulting landlords. The legislation is becoming to be well known amongst landlords. Nonetheless, there were some landlords initially and there remain landlords who may not be aware of the Act itself and the potentially serious implications that follow in the event that they are in default of its requirements.
The question was raised following the decision in Tiensia as to whether it would apply to cases where the relationship of landlord and tenant had already come to an end. It is usually when the tenant is close to leaving or has left the property that there are discussions or disagreements regarding the amount of deposit to be returned to the tenant and how much is to be retained by the landlord. It was argued in the cases of Potts v Densley and Gladehurst Properties Limited v Hashemi that a different approach should be taken where landlords had failed to protect the deposit, but the tenancy had come to an end. The cases were heard in the High Court and Court of Appeal respectively. Judgment in the case of Potts v Densley was handed down a fortnight ago. The judgment in the Court of Appeal in the case of Gladehurst v Hashemi was released last Thursday. The Courts held that a landlord was not liable to pay the tenant a penalty of 3 times the amount of the deposit even if the deposit had not been protected until after the tenancy had come to an end. The Court of Appeal’s judgment confirms that, in their opinion, it is too late for a tenant to bring a claim for a penalty under the Housing Act 2004 once the tenancy has come to an end.