Thoughts on Universal Estates v Tiensia and Honeysuckle Properties v Fletcher

Universal Estates v Tiensia and Honeysuckle Properties v Fletcher were joined as a single appeal. The judgment handed down by the Court of Appeal on 11th November 2010 is widely considered to have confirmed a loophole in the deposit protection legislation, but the exact nature of the precedent set has been a cause of some confusion amongst landlords.

The cases stem from possession proceedings brought on the basis of rent arrears. In both cases the landlords protected the deposit with My Deposits, but well outside of the 14 day deadline specified in the Housing Act 2004. Only in Honeysuckle did the the tenant actually counterclaim for the fixed penalty for non-protection. The court looked at Draycott v Hannells where late protection had been considered acceptable by the high court because it did not infringe the initial requirements of the DPS. The Court of Appeal approved of the reasoning in Draycott, and held that the 14 day deadline was only effective as an administrative requirement of the particular scheme, and non-compliance was not a basis for legal action.

The situation as it stands is that, where the tenancy has not yet ended, the deadline for protection of a deposit is the date of the court hearing although, according to the Court of Appeal, landlords can expect to found liable for costs in such circumstances. Whether the higher courts would look so favourably on late protection after the end of the tenancy is still a live issue, although I am aware of lower court decisions where protection on the eve of the case has been held to be sufficient.

A point to note for landlords is that failure to adhere to the 14 day deadline for protection may still be grounds to have a claim pursued through the scheme’s own dispute resolution system thrown out. Notably, landlords using the DPS need not worry about this.

How long this particular loophole will remain open is yet to be seen. Whitehall do not like having swathes of legislation interpreted down by the courts and there are clauses in the Localism Bill, currently being debated in Parliament, which may serve to tighten the legislation governing deposit protection. Watch this space.