National Tenant Helpline?

We have recently been instructed by a landlord who has found themselves dealing with the amusingly named National Tenant Helpline. Contrary to what the name might suggest this is not a government funded (or any funded) organisation but a private company operating on a “no win, no fee” basis.

This organisation is a trading name of Leigh Legal Ltd and their modus operandi is to send aggressive letters to landlords and to scare them into paying up. They do not appear to be solicitors but rather another firm who are making money out of aggressively chasing for unpaid debts.

Unfortunately, the NTH does not seem to be aware of the recent HM Courts Service guidance (we mentioned it here) which requires that deposit protection claims are issued as part 8 claims. We know this as one of their tactics is to send a completed claim form to landlords without sending it to the Court and they are currently sending out the wrong form (If you are reading this guys it is an N208 form you need)!

Their clients may not be aware f this error but it is quite important as issuing proceedings under the wrong part will delay a claim and gives the defending party an (almost) automatic right to costs. It is also the case that a claim under part 8 must be served with all the evidence that the claimant will be relying on attached to the form. If they do not do this then they will have to seek the Court’s permission to admit any evidence which will incur further delays and costs.

Interestingly, their website states that they will take 15% of the money recovered from the landlord as a fee but the small print states that if they go to Court they will take 50% of the Court judgement. I expect this comes as a surprise to many tenants but I suppose the tenant still gets more money than they started with. It does ignore the fact however, that many solicitors (including this one) will take deposit return claims for tenants on a ‘no win, no fee’ basis without taking any money from the recovered deposit itself.

How they carry forward a claim is unclear as they are not solicitors and therefore have no right to sign claim forms on behalf of their clients or represent them in Court, presumably they instruct an appropriate person if it gets that far.

It is unfortunate to find private companies looking to encourage more litigation under the tenancy deposit provisions. Certainly tenants are entitled to have their deposits properly protected but the intent of the legislation was not to allow third parties to make money out of the situation. It is particularly annoying that a company can set itself up on the internet, with little or no pedigree and describe itself as ” the only tenancy deposit recovery specialists in the country”, especially when they are making such basic errors.

Our advice for any landlord who finds themselves dealing with these people is to instruct a solicitor. Actually, we would advise tenant’s to do that too!

Filed under: Uncategorized , deposits, Housing Act 2004

TDP. New Case and a Summary

District Judge Burn at Bromley County Court has ordered a landlord to pay 3 times the deposit and to return of the initial deposit paid to his former tenants due to his failure to lodge the deposit with an authorised tenancy deposit.

In the recent case of Da Costa v Pinter the claimants were assured shorthold tenants whose tenancy had come to an end. The tenancy agreement required the rent of £1,950.00 a month and a payment initially of £4,200.00. A dispute arose with regards to the Deposit and the tenants issued court papers in order to recover the deposit amount. The court papers were then subsequently amended by the tenants for a further claim of £6,750.00 representing 3 times the initial deposit amount under the Housing Act (HA) 2004 section 214 (4). After proceedings were issued the deposit was then placed in an authorised tenancy deposit scheme.

The judge confirmed that she was happy that the £4,200.00 included a deposit of £2,250.00 and that the agent had described it as such. There was a clear breach of section 213 of the HA 2004 since the deposit was not paid into a scheme within 14 days of receipt. The judge was satisfied that the ‘initial requirements’ of a tenancy deposit scheme were not met and that the remedies of ss 213 and 214 therefore applied, that is the return of the deposit and an award of 3 times of the deposit. Undoubtedly, the judge was assisted in her decision by the fact that the tenancy had actually come to an end prior to the deposit being protected.

This case illustrates the ongoing problems both landlords and agents are having with the tenancy deposit schemes. The case law surrounding this area is mostly unreported however having viewed some judgements there does appear to be some uncertainty over whether the ‘initial requirement’ is to both lodge the deposit with a scheme within 14 days and to provide the prescribed information within the same period or whether lodging the deposit alone is enough. This uncertainty will no doubt continue until a court of record (High Court or above) is asked to rule on the point. Until such a time agents and landlords are warned that judges will decide each case as they see fit given that the decisions of the lower courts are not binding on other lower courts.

In order to assist with the uncertainty The Dispute service (TDS) has amended its rules and now confirm that its initial requirements are that the deposit be registered with the scheme within 14 days of receipt and that the prescribed information must be provided within the same 14 days. Consequently members that miss the 14 day deadline will automatically find themselves in breach of the initial requirements of the TDS and risk being ordered to pay 3 times the deposit.

In the case of Universal Estates v Tiensia MyDeposits have also been held to have similar ‘initial requirements’ to the TDS.

It is also vital that agents are particularly careful when landlords are registering the deposit themselves. Section 212 (9) (a) of the HA Act states:
References to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies.
This is of course open to interpretation but from an initial reading it seems that where the landlord fails to lodge the deposit the tenant may have a claim against the agent for the landlord’s failure to register. County Courts appear to support this position and agents may, therefore, wish to consider including a indemnity in their terms of business protecting them from the landlords failure. It may be prudent for the agent to seek confirmation that the landlord has registered with a scheme prior to sending the deposit to him or in the case of the custodial scheme that is Deposit Protection Service (DPS), sending the deposit to them directly. However this does not deal with the issue of relying on the landlord to ensure that the prescribed information is also provided to the tenant within the 14 day deadline. For a more ‘belt and braces’ approach, agents may wish to consider insisting on registering the deposit themselves through their own scheme membership.

The purpose behind the HA 2004 is to secure deposits and to return them quickly to tenants in the event of no dispute or to refer the matter to adjudication where there is, without the need for court. Landlords that do not secure the deposit within 14 days of receipt and then attempt to deduct monies upon the expiry of the tenancy are seen to be flouting the sprit of the legislation and agents need to ensure that they are not seen in the same light.

Filed under: Uncategorized , deposits, Housing Act 2004, litigation

TDS, Evidence, and Bias

We often hear allegations that tenancy deposit protection schemes are biased towards tenants. This, in part, conceals a fundamental misunderstanding of the nature of a deposit.

The tenant’s deposit belongs to the tenant and continues to do so until such time as the landlord becomes entitled to make reasonable deductions from it. Therefore the default position is that all the deposit should be returned to the tenant unless the landlord demonstrates that the deposit should be sent to them. This is not bias but the correct application of the law.

It is for landlords to show that the tenant’s deposit or parts of it should be passed to them by providing evidence of the tenant’s breaches of the tenancy agreement. This should be weighed on the balance of probabilities but the landlord will need to provide solid evidence that the loss or damage has occurred and that the valuation placed on it is realistic. Where this is not provided or the tenant provides evidence to the contrary then the money should be returned to the tenant.

In summary, the various schemes are no more biased than the Courts. They start from the proposition that the money belongs to the tenant and require the landlord to show that it should be given to them. Where insufficient evidence of that proposition is provided then the money will be returned to the tenant.

Accusations of bias toward tenant should perhaps be viewed as an admission that the landlord could not make a strong enough case. Looking at the statistics it can be seen that the schemes make awards almost equally to both parties. Given that they should be starting from the premise that the money is the tenant’s this shows that landlords do relatively well from scheme adjudications.

Filed under: Uncategorized , comment, deposits

TDP and Prescribed Information

It has come to our attention that many agents are still not providing all the necessary prescribed information to tenants on the registration of deposits under the various tenancy deposit protection schemes. Section 213(5) of HA 2004 requires that the tenant is given such information as may be prescribed. Section 216(b) requires that this is given within 14 days of the receipt of the deposit. There is still a lot of debate as to whether there is any penalty for the giving this information late.

The information required to be handed over is set out by the Housing (Tenancy Deposits) (Prescribed Information) Order 2007. Provision of the tenancy agreement and the information certificate supplied by all of the schemes will satisfy most f the requirements of this Order. However paragraph 2(1)(b) requires the provision of

any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the provisions contained in sections 212 to 215 of, and Schedule 10 to, the Act

Both the insured schemes (TDS & MyDeposits) provide such leaflets and they must be passed on to the tenant to comply with the terms of the Order. This provision is frequently being ignored but failure to fulfil it properly may lead to the usual penalties being applied.

You have been warned!

Filed under: Uncategorized , deposits, Housing Act 2004

The Life and Death of Tenancy Deposit Scheme

This week has seen a degree of excitement in the world of Tenancy Deposit Protection. We know….the excitement is just too much to bear.

A new tenancy deposit scheme appeared to have set itself up earlier this month calling itself MyTenancyDeposit. Its website described itself as a custodial scheme. This was a surprise to the three government approved schemes and indeed to the Department of Communities and Local Government as no such scheme had in fact been authorised. Much paper was expended behind the scenes and the telephone wires turned red hot!

All has now been revealed. Looking at the website today it appears that MyTenancyDeposit had already registered with the MyDeposits scheme and was, in effect, acting as a deposit taking agent protecting its holdings with the MyDeposits scheme. They are now apparently taking legal advice as to whether they can continue to operate.

While it appears that there was no intent to evade the provisions of the Housing Act 2004 the website was, at best, deceptive about the actual method of operation of the system. Given that the system was essentially free and actually paid £10 to agents who registered deposits with it, it is hard to see how it was actually going to make any money as its earnings on the deposits would be limited to that obtainable as interest on a ring-fenced account.

Anyway, the system may reappear depending on legal advice given. However, MyTenancyDeposit may find it hard to persuade MyDeposits, or any other provider, to work with them.

Filed under: Uncategorized , comment, deposits, Housing Act 2004

Proper Place for TDS Claims

The Court Service has published guidance setting out that the proper route for bringing claims under the Tenancy Deposit Provisions of the Housing Act 2004 is via Part 8 of the Civil Procedure Rules.

Key points to note are:

• these claims are automatically allocated to the multi-track which means that legal costs are recoverable irrespective of the size of the claim;
• the claim must be commenced on a form N208 and not the standard N1 claim form;
• the claim cannot be commenced using the moneyclaim online service;
• the Claimant is required to serve a witness statement with their claim form setting out their evidence;
• the Defendant is required to serve a witness statement with its aknowledgment of service setting out its evidence;
• failure to serve witness statements at the appropriate times will preclude reliance onm evidence save by permission of the Court

A great many claims are currently not being commenced correctly and are not having the appropriate procedure followed.  While it is unlikely that a claim will be struck-out for following the improper procedure, a defendant may be precluded from giving evidence and there may be costs implications for both parties if the correct procedures are not followed.

Filed under: Uncategorized , deposits, Housing Act 2004, litigation

Changes to ASTs

The government has published a response to the Rugg Review.

One of the proposed changes is that the upper limit threshold on Assured and Assured Shorthold Tenancies (set at £25,000 by para 2(1)(b) of Schedule I of the Housing Act 1988) should be raised to £100,000.

Section 2A of the Act allows this amount to be easily varied by Stautory Instrument and we have heard on the grapevine that the government is minded to do this as soon as October this year.

This will have far reaching consequences, particularly in the South-East as the majority of higher value tenancies that were outside the Act will not be brought into it. This will mean a large increase in the number of tenancies requiring to have their deposits protected and changes in the way possession proceedings are brought for these tenancies.

There are some important uncertainties. Will it be the case that the raise will be retroactive such that all tenancies under a rent of £100,000 per annum will automatically fall inside the Act? If so, this will affect tenancies already in place and will mean that their deposits will need to be placed in protection.

It would be better if the change was made so that only new tenancies after the start date were caught. However, in that case it will be necessary to bear in mind that renewal tenancies will drop inside the Act.

Filed under: Uncategorized , deposits, Housing Act 1988, legislation

Tenancy Deposit Protection and ‘Rent in Advance’

A recent case in Grimsby County Court reported in Legal Action magazine has cast doubt on a method commonly used by private landlords to avoid the tenancy deposit protection regime.

Under section 213(8) of the Housing Act 2004 a deposit is defined as property intended to be held as security for the performance of any obligation of the tenant. Many landlords seek to avoid this by taking money described as ‘rent in advance’ and claiming not to hold a deposit at all.

This was precisely the position in the case of Piggot v Slaven in Grimsby. The Court held that the question of whether or not money has been taken as security must be judged objectively in each case. However in the case before the Court it was held that the money was intended to provide the landlord with security should the tenant fail to pay rent at some future date. The money held was therefore caught by the defintion in s213(8) and should have been prtected in a scheme. The landlord was accordingly ordered to pay the normal ‘3 times the deposit’ penalty to the tenant.

While this case is only a decision of a District Judge in a County Court and is therefore not binding on other Courts it is undoubtedly a shot accross the bows of landlord who seek to avoid the tenancy deposit protection provisions by asserting that money they are holding is merely rent in advance and not a deposit.

Filed under: Uncategorized , deposits, Housing Act 2004

More TDP Problems

PainSmith Solicitors is currently instructed in a matter relating to Tenancy Deposit Protection which has significant implications for the entire industry. In this case the agent was instructed on a full management basis and held the deposit in a separate designated account. The landlord and agent subsequently failed to register the deposit within the 14 day timeline. Leaving aside the still, highly disputed, question of whether late registration is acceptable this case raises another, far more concerning issue. The tenant has issued proceedings against the agent and not the landlord and has stated that the agent is liable for the penalty of three times the deposit. To support their argument the tenant’s solicitor has put forward the wording of section 212(9)(a) of the Housing Act 2004 which states:

references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies

The tenant therefore submits that this definition includes the agent and therefore the penalties set out in s214, which are expressed as applicable to the landlord, are equally applicable to the landlord’s agent.
This poses a serious problem for agents. The DCLG has advised, and the view has generally been, where an agent acts for a let-only landlord, the liability is on that landlord to ensure that the deposit is properly protected and that if the landlord does not do so then the agent has no liability. This case has the potential to overturn that comfortable certainty of which will leave agents acting for clients on a let-only basis or a full management basis in a difficult position. It is likely that the only sure way for agents to resolve any potential claims will be to require landlords to leave their deposits with the agent for the agent to register under their own scheme membership. As this case demonstrates it is fundamental that the agent ensures the deposit and any initial requirements of the Tenancy Deposit Scheme are complied with within 14 days of receiving the deposit. In the meantime many agents will be faced with a large number of potential claims. It may be possible to seek insurance to cover this risk but this is not a good time to ask insurers to cover large potential risks of uncertain scope.

UPDATE: PainSmith has lost this case at first instance but application has been made to the High Court for permission to appeal.

Filed under: Uncategorized , deposits, Housing Act 2004, litigation

Interest Rate Cuts and Tenancy Deposits

Today the Bank of England cut its base rate to 2%.  While this will hopefully help the economy there is an unintended consequence that will affect many tenants.  Tenancy Deposit Protection was introduced by the Housing Act 2004.  One of the three approved tenancy deposit protection schemes was the government-backed Deposit Protection Scheme (DPS).  The Housing (Tenancy Deposits) (Specified Interest Rate) Order 2007specified that this scheme would pay interest at 2.32% below the Bank of England base rate.  With the rate cut this means that the DPS is now paying interest at -0.32%.  Effectively, tenants will find themselves paying interest to the scheme at 0.32%.  While it is unlikely that this will occur and the government will hopefully act to resolve the problem it is nonetheless embarassing.

Meanwhile the primary advantage to tenants of using the DPS, the payment of interest, has now gone.  Agents who wish to attract tenants and use one of the other schemes may choose to offer to pay interest to tenants, albeit at a low rate.

Filed under: Uncategorized , deposits, Housing Act 2004