Parliament has sought to establish schemes to protect tenants’ deposits (incorporating alternative dispute ­resolution) and to penalise any landlord who fails to comply with his duty to protect the deposit within an authorised tenant deposit scheme.

Sections 214 and 215 of the Housing Act 2004 provide that in the event of default, the court must order payment of the deposit to the tenant or into a custodial scheme, and payment by the landlord to the tenant of a penalty three times the amount of the deposit (section 214(4)); and the landlord cannot give a section 21 notice (section 215).

In Tiensia v Vision Enterprises Ltd [2010] EWCA Civ 1224 and Gladehurst Properties Ltd v Farid Hashemi [2011] EWCA Civ 604 the Court of Appeal interpreted those provisions in a way which Lord Justice Sedley in his dissenting judgment in Tiensia described as rendering the scheme a ‘dead ­letter’.

The Localism Act 2011 received Royal Assent on 15 November. Section 184 enacts a number of amendments to the provisions ­governing tenancy deposits. As the Explanatory Notes to the bill record, the purpose of the amendments is to ensure that the financial penalties in the legislation apply where a deposit is protected after the deadline set by the legislation and the financial penalties apply equally after the tenancy with which the deposit is associated has ended. This will reverse Tiensia and Gladehurst. The deadline, in which the landlord must protect the deposit and provide information to the tenant about that protection, is extended from 14 to 30 days. The court is given discretion to set the financial penalty for non-compliance at between one and three times the deposit.

The court is not told on what basis to exercise its discretion, but it may be presumed that it will look at all of the circumstances, including the reasons given by the landlord for not complying and the length of any delay, together with the effect, if any, upon the tenant. The prohibition on the giving of a section 21 notice is reversed once action has been taken to rectify the situation by agreed repayment of the deposit (whether in full or with agreed deductions) or following determination, settlement or withdrawal of any claim under section 214(1). This addresses the ‘penal’ consequences of section 215 identified in Tiensia.

The key sections as amended are set out below. It appears that the main criticisms of the provisions identified in Tiensia and Gladehurst have been specifically addressed and the sanctions upon defaulting landlords made more proportionate. However, as so often the changes are to come into force ‘on a date to be appointed’, and we are left to guess what transitional provisions to apply.

Section 213

(3) Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 30 days beginning with the date on which it is received. (6) The information required by subsection (5) must be given to the tenant and any relevant person: (a) in the prescribed form or in a form substantially to the same effect; and (b) within the period of 30 days ­beginning with the date on which the deposit is received by the landlord.

Section 214

(1) Where a tenancy deposit has been paid in connection with a shorthold tenancy, the tenant or any relevant person (as defined by section 213(10)) may make an application to a county court on the grounds: (a) that section 213(3) or (6) has not been complied with in relation to the deposit; or(b) that he has been notified by the landlord that a particular authorised scheme applies to the deposit but has been unable to obtain confirmation from the scheme administrator that the deposit is being held in accordance with the scheme. (1A) Subsection (1) also applies in a case where the tenancy has ended, and in such a case the reference in subsection (1) to the tenant is to a ­person who was a tenant under the tenancy.(2) Subsections (3) and (4) apply in the case of an application under ­subsection (1) if the tenancy has not ended and the court: (a) is satisfied that section 213(3) or (6) has not been complied with in ­relation to the deposit; or (b) is not satisfied that the deposit is being held in accordance with an authorised scheme, as the case may be.(2A) Subsections (3A) and (4) apply in the case of an application under subsection (1) if the tenancy has ended (whether before or after the making of the application) and the court:(a) is satisfied that section 213(3) or (6) has not been complied with in relation to the deposit; or (b) is not satisfied that the deposit is being held in accordance with an authorised scheme, as the case may be.(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, within the period of 14 days beginning with the date of the making of the order.(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. (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.

Section 215

(1) Subject to subsection (2A), if a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when: (a) the deposit is not being held in accordance with an authorised scheme; or (b) section 213(3) has not been complied with in relation to the deposit. (2) Subject to subsection (2A), if section 213(6) is not complied with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213(6)(a) is complied with. (2A) Subsections (1) and (2) do not apply in a case where: (a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant; or (b) an application to a county court has been made under section 214(1) and has been determined by the court, withdrawn or settled by agreement between the parties.

District Judge Pates sits at Crewe County Court. He is a contributor to Civil Court Service (Jordans)