Let's Update You – Draycott & Anor V Hannells Letting Limited: Deposit Claims

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Ellisons Legal

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Ellisons Legal
We are frequently asked to advise on claims relating to failure to protect a rental deposit, or mistakes made during the process of protecting a rental deposit.
UK Real Estate and Construction
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We are frequently asked to advise on claims relating to failure to protect a rental deposit, or mistakes made during the process of protecting a rental deposit. There is a lot of confusion around who is responsible for payment of compensation, when there is a letting agent involved in the process.

The case law on this area is sparse and relatively old – however, it remains good law. This note, therefore, is an update on tenant deposits but on a case that is almost 14 years old!

Background

The High Court case of Draycott & Anor v Hannells Letting Limited in 2010 produced a judgment which was extremely to claims made as a result of incorrect protection of a deposit and incorrect service of the prescribed information, when a deposit is taken in connection with an assured shorthold tenancy agreement ('AST').

Where a deposit is taken in connection with an AST, the Housing Act 2004 requires certain steps to be taken:

  1. The deposit must, from the time it is received, be dealt with in accordance with an authorised tenancy deposit scheme; and
  2. The initial requirements of the authorised tenancy deposit scheme must be complied with within 30 days of receipt of the deposit.

Please note that 30 days is the current time period prescribed by the Housing Act 2004, but this could change. At the time that Draycott & Anor v Hannells Letting Limited was dealt with by the High Court, the relevant time period was 14 days.

The initial requirements of an authorised scheme will require the deposit to be protected within 30 days of receipt and require the prescribed information to be served to all tenants and any relevant persons. The information that must be given to satisfy the prescribed information being satisfactorily served is outlined within the Housing (Tenancy Deposits) (Prescribed Information) Order 2007.

Where a deposit is not protected correctly within 30 days of receipt and/or the prescribed information is not correctly served, the Court must order the 'landlord' to pay to the tenant a sum of money equal to three times the amount of the deposit.

Facts

In Draycott & Anor v Hannells Letting Limited the following took place:

  1. An AST was entered into with a tenant. There was a letting agent managing the property for the landlord.
  2. A deposit was paid in accordance with the tenancy agreement by the tenant. The AST provided that the deposit be paid to the letting agent and the letting agent was required to hold the deposit as stakeholder. The deposit was paid accordingly.
  3. The deposit was not protected within the required time. The prescribed information was not given to the tenant within the required time.
  4. The tenant made a claim against the letting agent for compensation due to incorrect protection of the deposit and incorrect service of the prescribed information. By the time the claim was made, the deposit had been protected and the prescribed information served.

Held

The High Court held that:

  1. A claim for compensation is not limited to only being made against the landlord under the AST and an order can be made against the person other than the actual landlord under the AST.
  2. A claim for compensation for incorrect protection of the deposit should be made against the person who is holding the deposit and who is responsible for protecting the deposit. If deductions have been made to the deposit in whole or in part and the deposit has subsequently been returned to the actual landlord under the AST, the order for compensation should still be made against the person that was responsible for protecting the deposit, regardless of who is holding the deposit at the time the claim is made.

The letting agent attempted to argue that no order for compensation can be awarded where, at the time the claim is made, the deposit is protected and prescribed information served (albeit done so later than the Housing Act 2004 requires). This argument was rejected.

Key points

  1. A claim for compensation can be awarded even where, at the time the claim is made, steps have been taken to remedy incorrect protection of the deposit and/or incorrect service of prescribed information have been taken.
  2. An order for compensation is to be made against the person/organisation that is responsible for protecting the deposit.

The case is binding on all County Court judgments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Let's Update You – Draycott & Anor V Hannells Letting Limited: Deposit Claims

UK Real Estate and Construction

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Ellisons Legal
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