Draycott & Anor v Hannells Letting Ltd (t/a Hannells Letting Agents)

Under the tenancy-deposit provisions of the Housing Act 2004, the requirement to pay a deposit into an authorised scheme is an initial requirement of the scheme. The statutory 14-day period for compliance is imposed by section 213(3), but does not itself become an initial requirement merely because it is repeated in the scheme’s terms.

A letting agent acting for the landlord falls within the statutory definition of “landlord” where the agent receives the deposit and is responsible for the non-compliance. However, once the deposit has been paid into the scheme before proceedings are commenced, the court cannot be satisfied that the initial scheme requirements remain unfulfilled and cannot make the monetary sanction under section 214(4). The statutory scheme retains other sanctions, including the restriction on serving a section 21 notice.

The letting agent received a £2,700 tenancy deposit in connection with an assured shorthold tenancy. The deposit was not submitted to the Deposit Protection Service within 14 days, but was later registered and protected before the tenants commenced proceedings.

The county court held that the agent was liable under section 214 of the Housing Act 2004 and rejected the agent’s arguments that only the actual landlord could be sued and that late protection prevented any monetary order. The agent appealed to the High Court. The central issues were whether the 14-day period was an initial requirement of the authorised scheme, whether a letting agent was a statutory landlord, and whether section 214(4) could apply after late protection of the deposit.

The appeal was allowed.

1. Initial requirements. Section 213(3) of the Housing Act 2004 imposes a 14-day period for compliance with the initial requirements of an authorised scheme. Section 213(4) leaves the content of those initial requirements to the scheme. Under the Deposit Protection Service terms, the initial requirement was submission of the deposit for protection. The 14-day period, although repeated in the scheme terms, remained a statutory requirement and did not become an additional initial requirement of the scheme.
2. Non-compliance. There was a breach of section 213 while the deposit remained outside the scheme. The breach was not converted into a continuing failure to satisfy the scheme’s initial requirements after the deposit had been lodged.
3. Liability of an agent. The definition of “landlord” in section 212(9) applied to section 214. It included a person acting on the landlord’s behalf. The agent that received the deposit and was responsible for the failure could therefore be liable under section 214(4). The reference in section 214(3)(a) to the person holding the deposit limited the restitutionary order under that subsection; it did not restrict the separate monetary sanction under section 214(4).
4. Timing of the section 214 sanction. If a deposit was paid into the authorised scheme after the 14-day period but before proceedings were commenced, the court could no longer be satisfied under section 214(2)(a) that the initial requirements had not been complied with. An order under section 214(3) or section 214(4) could therefore not be made on that basis. The court made no decision on the meaning of section 215.

1. Derby County Court: HHJ Lea rejected the agent’s arguments and made a decision dated 24 August 2009.
2. High Court (Queen’s Bench Division): Mr Justice Tugendhat granted permission to appeal and allowed the appeal.