When a deposit is paid to a landlord in relation to a tenancy it is important that this deposit is protected in a Government recognised scheme and prescribed information is given to the tenant which relates to the deposit, both within 30 days, as per the legal requirements under Section 213 of the Housing Act 2004 (“The Act”).

The consequences of failing to comply with the Act are dealt with in Section 214 which deals with the financial penalty that can be imposed on the landlord for this failure. The relevant section states the following:-

“s214(3) The court must, as it thinks fit, either—

(a)order the person who appears to the court to be holding the deposit to repay it to the applicant, or

(b)order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme”

“s213(3A)The court may order the person who appears to the court to be holding the deposit to repay all or part of it to the applicant within the period of 14 days beginning with the date of the making of the order.”

“s213(4)The court must order the landlord to pay to the applicant a sum of money not less than the amount of the deposit and not more than three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.”

This means that any tenant who makes a claim against a landlord for failing to protect their deposit, properly or at all, and/or not providing the correct prescribed information properly or at all, could make a claim for the following:

1. The return of the deposit itself if not already repaid in full or part.

AND

2. An amount of either 1, 2 or 3 times the full deposit

As a starting point, the above amounts of 1, 2 or 3 times the Deposit can be applied to each separate tenancy where the Deposit has not been protected. Therefore, if the landlord had entered into further fixed term tenancies, or a fixed term tenancy lapsed into a statutory periodic tenancy (which is treated in law as a new tenancy), then these would be classed as additional tenancies and the financial penalty can be compounded by being claimed for those also.

This did not apply to contractual periodic tenancies as it is a not a new tenancy.

In some cases, tenants could argue that if a landlord did not protect the deposit or protected it late then this is one breach, and if the correct prescribed information was not given within 30 days or at all then it can be argued that this is a second breach. Therefore, in many cases the tenant may argue that they are entitled to claim for each breach, as well as each tenancy. This can become costly for the landlord as the tenant in theory could claim up to 3 times the deposit amount for each breach.

There have been several cases that have addressed how much of a penalty should be imposed on a landlord for failing to comply with the Act.
In the recent case of Szorad & Anor v Kohli (2023) EW Misc 12 (CC) the court have again addressed the issue of how many deposit breaches can be claimed for in relation to the same deposit.

Mr Szorad and Ms Kozmar (“the tenants”) were the assured short hold tenants of Mr Kohli (“the landlord”) on a 12-month tenancy from July 2019, then on a statutory periodic until they left in December 2020. A deposit of £1,326.92 was paid. The deposit was never protected and was not returned to the tenants.

The tenants sought two penalties, one for the initial tenancy and another for the statutory periodic, arguing, that the deposit was received again on the statutory periodic tenancy arising, they referred to the case of Superstrike Limited v Rodrigues (2013) EWCA Civ 669, which is the precedent case that dealt with this matter.

The argument was rejected by the Deputy District Judge and a penalty of 3 times the amount of the deposit for a single breach was awarded. The DDJ seems to have misinterpreted the ruling in Superstrike as later addressed in the appeal made to a circuit judge.

HHJ Johns KC allowed the appeal and confirmed that a statutory periodic tenancy was a new tenancy on which the obligation to protect the deposit arose again.

HHJ Johns awarded 3 times the deposit on the first breach, 2 times the deposit on the second breach and ordered the return of the deposit.

Both decisions were costly for the landlord. There is no dispute over the fact they had to pay, it was just a query on how much and ultimately the tenants’ argument on the amount of breaches was accepted which left the landlord with a big bill.

This case highlights how important it is for landlord to ensure they are protecting their deposits within the relevant period and seeking legal advice immediately if any breach have been found.

While the above case law relates to the financial penalties that can apply for failing to adhere to the law on tenancy deposits, a consequence can also be that the landlord is prevented from serving a valid notice seeking possession pursuant to s21 Housing Act 1988 (as amended).