Tenancy Deposits - Legal Update

Finally we have a decision by Court of Appeal on the protection of tenancy deposits and the sanctions following the failure to protect the deposit.

The Housing Act 2004 states that a deposit must be protected within 14 days of receipt in an approved scheme.

Under the Act, if a deposit is not invested the tenant can apply to the Court for the deposit to be protected and when making the Order, the Court must order that the Landlord pay the tenant compensation equivalent to three times the amount of the deposit. If the deposit is £500, this could mean that you would have to pay the tenant £1500.

There has been legal arguments since the Tenancy Deposit Scheme came in April 2007 as to when the compensation was payable. Many Solicitors argued that if the deposit had not been protected within 14 days of receipt then the compensation was payable. Other Solicitors, including myself were of the view that providing the deposit was protected when the matter came before a Judge, the compensation was not payable.

A binding decision was handed down on 11 November 2010 by the Court of Appeal in Christelle Tiensia v Vision Enterprises Ltd (t/a Universal Estates) and others.

It was held that provided the deposit was protected at the time of the Court hearing, the Court would not order that the landlord pay compensation to the tenants.

It should always be the case that the deposit is invested immediately upon receipt, however, if it comes to your attention that it has not be protected you should ensure that you protect it immediately.

If you fail to invest it preferring to wait until the tenant takes Court action, but then protect the deposit, you could still find that you loose out financially as a Court can order that the Landlord pay the tenant's legal costs of bringing the action.

My advice therefore is, if you have not protected a tenancy deposit, it's not too late but do so today to prevent action being taken against you.

Rebecca Brough is a Solicitor at Fidler and Pepper who deals with Residential Landlords on a daily basis. Rebecca offers landlords requiring legal help a Free initial consultation.


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