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

New Generic Pre-action Protocol

From 1 April 2009 the 49^th update to the Civil Procedure Rules will come into force.  One of its most important changes is the introduction of a generic pre-action protocol.  A number of types of case already have pre-action protocols in place, the new general protocol will apply to most other case types.

As with other protocols failure to comply without good reason will lead to a request for an explanation for the non-compliance by the Court and could lead to costs being awarded against the defaulting party, even in the small claims track.  It is therefore clear that an understanding of, and compliance with the new protocol is important.

There are genuine practical advantages to compliance too.  The aim of the protocol is to assist parties in settling disputes at an early stage without embarking on litigation.  Therefore compliance with the protocol could assist parties in settling their dispute more quickly and at a lower cost.

Pre-action Letter

The protocol requires a pre-action letter to be sent by the claimant.  The letter should include:

• The claimants name and address;
• The basis of the claim;
• A clear summary of the facts;
• The remedy the claimant seeks;
• An explanation of how any financial remedy sought has been calculated;
• Provide details of any specific funding arrangement entered into by the Claimant;

The protocol also requires the claimant to:

• List the main documents on which they rely (and presumably include copies);
• State when the claimant expects a response;
• Offer ADR if the claimant thinks it appropriate and invite agreement;
• Ask for copies of specific documents that the claimant desires to see.

A number of points are worth noting from this list of requirements:

• 1. The claimant must show a basis for calculation of any financial demands.  This is something that claimants frequently do imprecisely, if at all, and so it will be necessary to apply more rigour to such calculations;
  2. While the protocol does not require the claimant to provide the documents he is relying on he is required to list them and so the implication appears to be that copies should be provided;
  3. The claimant is encouraged to put forward a proposal for ADR.  Interestingly the protocol list several different methods of ADR, including mediation, early neutral evaluation, arbitration, and plain old negotiation so the current bias in the Courts toward mediation as the only valid form of ADR may start to change;
  4. The claimant is allowed to ask for copies of documents.  However he is required to ‘identify’ them so the protocol is not a licence for ‘fishing expeditions’.

Additionally, where a defendant is believed to be unrepresented the claimant is expected to refer the defendant to the protocol and provide a warning that ignoring the letter could lead to the commencement of legal proceedings.

Defendant’s Response

The defendant is normally expected to respond within 14 days in full.  Where that is not possible they should send an acknowledgment letter within 14 days stating:

• If an insurer is involved;
• If the defendant is seeking advice who they are seeking it from;
• When the defendant, its insurer, or its advisors will provide a full response;

The letter should also request any further information the defendant requires to make its full response.

The full response should begin by accepting the whole or part of claim or denying the claim.  If the defendant is not accepting the whole claim the letter should then state:

• Why the claim is being denied by reference to the facts which are disputed and clearly identifying any parts which are accepted;
• State whether any counter-claim is to be made and provide the same information as must be provided by the claimant’s pre-action letter;
• State whether the defendant believes the claimant to have been to blame for any part of the claim and, if so, state why;
• Agree to the proposals for ADR or state why they are not agreed and propose an alternative form of ADR or state why no ADR is relevant;
• List the essential documents on which the defendant intends to rely;
• Supply any documents requested by the claimant or, alternatively, state why they will not be supplied;
• Identify and ask for any documents the defendant wishes to view.

Claimants Response

In response to the defendant’s letter the claimant should provide the documents sought or state why they will not be provided and, if the defendant has made a counterclaim, should respond in the form required for the defendant’s letter.

After this process the protocol anticipates that the parties will be in a position to review the relative merits of their respective cases, to eliminate unimportant issues, and consider how to proceed.  The protocol encourages further careful thought before the issue of proceedings.

Debt Proceedings

Where the claim being contemplated is one by a company against an individual for unpaid debts there are further requirements to be followed.  The initial claim letter is required:

• To provide details of how the outstanding monies can be paid;
• To state that the defendant can contact the claimant to discuss repayment options and provide details of a suitable contact; and
• Give the defendant details of organisations that can provide free, independent advice and help.

Conclusions

Many will undoubtedly see this process as an unnecessary and unwieldy bar to swiftly progressing a claim into Court.  However, the Courts are increasingly awash with relatively minor claims that could easily be resolved by sensible negotiation between the parties.  By forcing both sides to declare their case earlier and also creating significant costs consequences for failure to comply with the protocol in all tracks the Courts presumably intend to reduce the quantity of cases being litigated.  The introduction of the protocol makes it even more important for landlords and agents to consider whether their agreements should include clauses offering suitable forms of ADR to reduce their reliance on the protocol and to help expedite disputes.

Filed under: Uncategorized, litigation, procedure