TDS still valid on contract extension?

[BemusedConfused]

I can't find anything on TDS regarding this (and have never come across them before) so hopefully someone here with more experience knows the answer.

 

Our rental contract was coming to an end and we found a new rental house to move to. Unfortunately, the new house fell through. An alternative rental house was found but we couldn't move in until a week after our previous rental contract would have expired (leaving us homeless for a week). So we asked our landlord if we could stay an extra week and pay him the same rental rate that we always had, for that extra week. He agreed.

 

I didn't really think about the fact that there was no formal tenancy agreement/contract for that extra week. Or that we hadn't involved the lettings agency. The landlord managed the property and the rent always went straight to him. A lettings agency had set up the original contract a year before. We made all this agreement through email.

 

We are now having a dispute with the landlord over the tenancy deposit (despite the property being in immaculate condition and professionally cleaned top to bottom when we left with receipts to prove it). We have tried to reach an agreement over the last three weeks but he is being totally unreasonable and uncontactable and I think arbitration is the only way to go now.

 

The deposit was protected by the TDS. However, when I looked at raising a dispute, it said we could only do this if the deposit was protected when we vacated the property. If our formal tenancy agreement had run out, does that mean that our deposit was not protected when we left?

 

Perhaps I'm being paranoid but does that stop us being able to open a dispute with the TDS?

[Ed999]

My comments apply only if the premises are entirely within England and Wales, and only if you were granted a shorthold tenancy (under which you - and your spouse/partner/children, if any - had exclusive use of a seperate dwelling, which was not shared with another tenant nor with the landlord), and only if you were over 18 years of age when the tenancy was granted.

 

This posting is supplemental to the information in this forum's "sticky" threads and is NOT to be read in isolation.

 

 

Ending the Tenancy

 

If the fixed term has ended, the letting has become a periodic tenancy; i.e. you still have a tenancy.

 

If the fixed term has ended, there is simply a periodic tenancy with a period of one week or one month. The tenant must give one month's notice in writing to end the periodic tenancy, expiring on the last day of a rent period (but if the tenancy agreement requires a longer period of notice, the tenant must give the period of notice required by the agreement).

 

If you move out without ending the tenancy, the rent will continue to run and you can be sued for non-payment.

 

 

Tenancy Deposit Scheme

 

If you paid a deposit, read the FAQs about the tenancy deposit scheme, under which you might be entitled to sue for compensation if the deposit has not been protected, under the Housing Act 2004, if you were granted a shorthold tenancy:

 

- Tenancy Deposit Scheme

 

- Tenancy Deposit Protection - First High Court Decision

 

- TDS eligibility, implication of breach and legal questions answered

 

 

The Court of Appeal decided in the case of Tiensia v Vision Enterprises that if the Landlord protects or repays the deposit even as late as the day of the court hearing, or at any time before judgement (if later), the court will not be able to award the penalty of three times the amount of the deposit.

 

This was NOT overturned by the High Court decision in Potts v Densley. In Tiensia the landlord had protected the deposit at a time when the tenancy still existed. In Potts, where the landlord had only protected it after the tenancy terminated, the Court rejected the tenant's argument that it was too late for the landlord to protect the deposit once the tenancy had ended [see paragraph 55 in the Judgement].

 

 

In a further development, the Court of Appeal has decided, in Gladehurst Properties Ltd v Hashemi (19th May 2011), a case in which the tenancy deposit was never protected by the landlord, that section 214 of the Act only makes sense if both options contained in it (i.e. return of the deposit or its payment into a TDS scheme) are available to the Court. The Court said that as this can only be the case if the tenancy is still on-going, the penalties for non-protection of the deposit are NOT available to the tenant after the tenancy has come to an end: the tenant CANNOT succeed in a claim for three times the deposit once the tenancy is over [see paragraphs 37 and 42 in the Judgement].

 

I quite realise that Gladehurst was wrongly decided. If the tenancy still exists, the court has no jurisdiction to order the return of the deposit, the purpose of which is to meet any rent arrears or disrepair when the tenancy ends.

 

But the practical effect of Gladehurst is that the tenant must make any claim for penalties at the BEGINNING of the tenancy. Remember, a shorthold tenancy can't be brought to an end by the landlord, by notice, in the first six months, nor during any fixed term; and can't be ended by a section 21 notice at any time after that, either, if the deposit is not protected.

 

 

In Potts, the tenant might still have won, if she had raised the related point that the landlord had failed to provide her with the prescribed information pursuant to section 213(5) [see paragraph 56 in the Judgement]. But she failed to do so (she based her claim solely on the landlord's failure to pay the deposit into an authorised scheme), thus she lost the case.

 

If you expressly mention section 213(5) in your claim, then you might win - even though the tenant lost in Potts.

 

The claim you need to make in this respect is for breach of section 213(5) [provision of prescribed information], not section 213(3) [securing the deposit]. If you claim only under section 213(3) you are likely to lose for the same reason the tenant lost in Potts. You must claim under both 213(3) and 213(5).

 

 

None of the foregoing prevents the tenant succeeding in a claim for the return of the original deposit (which the tenant can only sue for AFTER the tenancy ends, as it's security for non-payment of the rent).

 

The tenant will ask for either (a) his deposit back, or (b) payment to him of three times the amount of the deposit - depending whether he is suing after the tenancy ends or at the start of the tenancy. The effect of a tenant suing for (b) may well be that a properly advised landlord will protect the deposit, so as to avoid the penalty, in the wake of the above-mentioned court decisions. But the tenant is not specifically asking for that.

 

 

Suing for the penalty, or merely threatening to do so, might cause the landlord to return the entire deposit to you without any deductions, if the tenancy has not ended, thus resolving any dispute.

 

The Act expressly states that the parties to the tenancy cannot agree not to protect the deposit. So it's futile for the landlord to raise this defence - but many still try to!

 

While the deposit is not protected, any section 21 notice given to the tenant is invalid, so will not end the tenancy. But a section 8 notice can validly be given (e.g. for rent arrears).

 

 

The High Court decided in Potts v Densley that the tenant can win a claim if the landlord fails to provide the prescribed information pursuant to section 213(5), even if the deposit is actually protected within the TDS scheme.

 

 

As a result of Gladehurst, it is clear that a claim for failure to protect the deposit can ONLY be made BEFORE the tenancy has ended. The Court of Appeal in Gladehurst has overruled the High Court in Potts on this point.

 

In my opinion, the county court could possibly make a sympathetic finding in the tenant's favour, because the Act tends to favour the tenant, in terms of returning the original deposit. It's only in relation to the penalties that the Court of Appeal has severely limited the availability of the remedy.

 

 

Alternative Dispute Resolution

 

If it is a shorthold tenancy, where there is a dispute concerning disrepair at the end of the tenancy the following matters apply.

 

If the deposit paid by the tenant is currently still protected within an authorised TDS Scheme, the Deposit Protection Service (DPS) - who administer all TDS Schemes - offer an alternative procedure for resolving disputes, to save you having to go to court.

 

They have issued a guide, explaining the disputes procedure they provide:

 

http://www.depositprotection.com/documents/a-guide-to-tenancy-deposits-disputes-and-damages.pdf

 

Where a deposit is protected by being placed in the TDS scheme, if a dispute arises at the end of the tenancy (e.g. over alleged disrepair) the parties can choose to resolve it by this procedure instead of going to court (but must begin the procedure within a time limit).

 

Both the landlord and the tenant must agree to use the DPS disputes procedure. It cannot be initiated by only one of them. But it can be MUCH cheaper than a court case.

 

 

The same procedure applies in ANY dispute concerning a tenancy deposit protected in a TDS scheme, regardless of the type of scheme involved (i.e. whether it is a custodial scheme or an insurance scheme), and regardless of which of the three authorised bodies is administering the scheme.

 

 

Further information: Deposit Protection Service (DPS) website

[Steve__M]

Perhaps I'm being paranoid but does that stop us being able to open a dispute with the TDS?

 

I suggest you assume that you can raise a dispute unless and until TDS say you can't. I think the insurance based ones only require one payment per deposit that applies for the whole tenancy (however long it is extended).

[Ed999]

I suggest you assume that you can raise a dispute unless and until TDS say you can't. I think the insurance based ones only require one payment per deposit that applies for the whole tenancy (however long it is extended).

 

 

As I explained, although a tenancy definitely still exists, both the landlord and the tenant must agree to use the TDS disputes procedure. The tenant can't insist on the TDS having jurisdiction if the landlord refuses to agree: in that case, the tenant must apply to the court if he wishes to make a claim.