Law regarding statutory periodic and deposit protection

greatcrested

So defend the claim presenting your evidence of protection dates just as you've descibed here.

Note - the tenant cannot 'sue'. They can claim a 'penalty'. This may appear semantics, but the process is different.

When the fixed term ended, and the protection allegedly ended, what happened? Was the deposit returned to the tenant? To you? Or retained by the scheme? If retained by the scheme then surely it was still protected.

You say  "We did reprotect it when we realised", so did you transfer the money back to the scheme?

If the court agrees there was a period of non-protection, the judge must award a penalty of at least 1 times the deposit, and up to 3 times. Given the circustances it would almost certainly be the minimum penalty.

But the court may well agree with you that the deposit was protected throughout.

More here:

Post 3: Deposits: Payment, Protection and Return.

edit:

Their solicitor has asked us to settle for almost the full amount or reply.

What does 'full amount' mean? Are they asking for 3 times the deposit? Clearly absurd as nojudge willaward that in the circumstances.

Or do you mean full amount of your deductions? Is that £250? How much is the deposit?

And what does 'or reply' mean?

theoretica

What happened to the deposit during the 'unprotected' period?  And specifically could you have got it into your bank account without the tenant's knowledge?  I assume the deposit would have been handled as though the tenancy had ended at the end of the fixed term - so could it count as the deposit was still protected, but as an unreturned deposit relating to the fixed term portion of the tenancy that had ended?

[Deleted User]

@greatcresed and @theoretica, the op used an insurance back scheme rather than custodial so the deposit has always been in the op’s possession it’s just that for a period following the end of the fixed term it wasn’t insured. 

GDB2222

IIRC the penalty is between 1 and 3 times, at the judge’s discretion. It seems that there was an infringement but that was accidental, so I very much hope the court would award 1x.

[Deleted User]

Lover_of_Lycra said:

@greatcresed and @theoretica, the op used an insurance back scheme rather than custodial so the deposit has always been in the op’s possession it’s just that for a period following the end of the fixed term it wasn’t insured. 

I do see the situation. Is it a feature of an insured scheme, that the protection ends when the fixed term ends? 

[Deleted User]

solidpro said:

Hi
We're new landlords and our second tenant has now vacated the property but is suing us for a period of unprotection in their deposit. Apparently they can sue us for 3 times the deposit amount. This started because we returned the deposit minus a small amount for some burn damage to the kitchen and instead of a civil conversation they just decided to do this.

We protected the deposit as we should have done in line with the initial tenancy, but at the end of the AST we didn't get a clear response as to what they wanted to do and I didn't actually know that you had to call up the company you initially protect the deposit with and put it (for free) under a "statutory periodic". We did reprotect it when we realised this and the deposit insurance company say they can still dispute the burn damage with them.

However they claim they are the victims of injustice for the period of unprotected period and therefore under s213 housing act 2004 they're entitled to sue. Their solicitor has asked us to settle for almost the full amount or reply.

Does anyone have any advice (besides independent legal advice)?

Thanks

The judge must award the tenant between 1-3 times the value of the deposit plus the tenant can claim the court costs from you which I believe will be £308 if, or rather when, he wins his case. Any costs the tenant incurs for using a solicitor are on him though, you can’t be made to pay those. 

My advice would be to make the tenant a “without prejudice” offer to settle for two times the value of the deposit or take the gamble and see if the tenant will even go to court and if so what the judge might award. I have seen a previous case where the tenant was awarded two times the deposit for late protection before but I can’t for the life of me find the link now. 

Consider using a custodial scheme in future. 

[Deleted User]

[Deleted User] said:

Lover_of_Lycra said:

@greatcresed and @theoretica, the op used an insurance back scheme rather than custodial so the deposit has always been in the op’s possession it’s just that for a period following the end of the fixed term it wasn’t insured. 

I do see the situation. Is it a feature of an insured scheme, that the protection ends when the fixed term ends? 

I believe it is and has caught a few landlords out before. 

45002

Hope OP gets this sorted, just been reading very slimmer story on another forum !

99

saajan_12

Lover_of_Lycra said:

solidpro said:

Hi
We're new landlords and our second tenant has now vacated the property but is suing us for a period of unprotection in their deposit. Apparently they can sue us for 3 times the deposit amount. This started because we returned the deposit minus a small amount for some burn damage to the kitchen and instead of a civil conversation they just decided to do this.

We protected the deposit as we should have done in line with the initial tenancy, but at the end of the AST we didn't get a clear response as to what they wanted to do and I didn't actually know that you had to call up the company you initially protect the deposit with and put it (for free) under a "statutory periodic". We did reprotect it when we realised this and the deposit insurance company say they can still dispute the burn damage with them.

However they claim they are the victims of injustice for the period of unprotected period and therefore under s213 housing act 2004 they're entitled to sue. Their solicitor has asked us to settle for almost the full amount or reply.

Does anyone have any advice (besides independent legal advice)?

Thanks

The judge must award the tenant between 1-3 times the value of the deposit plus the tenant can claim the court costs from you which I believe will be £308 if, or rather when, he wins his case. Any costs the tenant incurs for using a solicitor are on him though, you can’t be made to pay those. 

My advice would be to make the tenant a “without prejudice” offer to settle for two times the value of the deposit or take the gamble and see if the tenant will even go to court and if so what the judge might award. I have seen a previous case where the tenant was awarded two times the deposit for late protection before but I can’t for the life of me find the link now. 

Consider using a custodial scheme in future. 

I certainly wouldn't be offering 2x deposit as a settlement. The point of a settlement is for both sides to give up something to avoid the lengthy battle and risk of a worse outcome.

This is the most "technical" of breaches if at all, as the deposit was protected at the start, undisputed balance returned promptly, tenant able to use arbitration etc. So I think 3x and even 2x deposit penalties would be extremely unlikely - particularly when you consider the top end of 1-3x range has to cover the spectrum of bad LLs, who may never protect, keep the deposit without cause etc. So I think the worst case for this LL with any reasonable probability is penalty of 1-1.5x deposit. Then add on the fact that the tenant would have to go through the courts, incur solicitors costs which likely won't be recovered (the don't have to but seem to be using sols). So that time and money saving has to be worth something.. I'd offer 0.5-0.75x deposit if anything, in return for a quick settlement. 

[Deleted User]

saajan_12 said:

Lover_of_Lycra said:

solidpro said:

Hi
We're new landlords and our second tenant has now vacated the property but is suing us for a period of unprotection in their deposit. Apparently they can sue us for 3 times the deposit amount. This started because we returned the deposit minus a small amount for some burn damage to the kitchen and instead of a civil conversation they just decided to do this.

We protected the deposit as we should have done in line with the initial tenancy, but at the end of the AST we didn't get a clear response as to what they wanted to do and I didn't actually know that you had to call up the company you initially protect the deposit with and put it (for free) under a "statutory periodic". We did reprotect it when we realised this and the deposit insurance company say they can still dispute the burn damage with them.

However they claim they are the victims of injustice for the period of unprotected period and therefore under s213 housing act 2004 they're entitled to sue. Their solicitor has asked us to settle for almost the full amount or reply.

Does anyone have any advice (besides independent legal advice)?

Thanks

The judge must award the tenant between 1-3 times the value of the deposit plus the tenant can claim the court costs from you which I believe will be £308 if, or rather when, he wins his case. Any costs the tenant incurs for using a solicitor are on him though, you can’t be made to pay those. 

My advice would be to make the tenant a “without prejudice” offer to settle for two times the value of the deposit or take the gamble and see if the tenant will even go to court and if so what the judge might award. I have seen a previous case where the tenant was awarded two times the deposit for late protection before but I can’t for the life of me find the link now. 

Consider using a custodial scheme in future. 

I certainly wouldn't be offering 2x deposit as a settlement. The point of a settlement is for both sides to give up something to avoid the lengthy battle and risk of a worse outcome.

This is the most "technical" of breaches if at all, as the deposit was protected at the start, undisputed balance returned promptly, tenant able to use arbitration etc. So I think 3x and even 2x deposit penalties would be extremely unlikely - particularly when you consider the top end of 1-3x range has to cover the spectrum of bad LLs, who may never protect, keep the deposit without cause etc. So I think the worst case for this LL with any reasonable probability is penalty of 1-1.5x deposit. Then add on the fact that the tenant would have to go through the courts, incur solicitors costs which likely won't be recovered (the don't have to but seem to be using sols). So that time and money saving has to be worth something.. I'd offer 0.5-0.75x deposit if anything, in return for a quick settlement. 

The Court of Appeal awarded the full 3x deposit for failure to provide the PI, the deposit had been protected with in the correct time frame in Ayannuga vs Swindells. This notion that a judge will only award 1x the deposit for a small infraction is often touted in this forum when there are real cases to show that doesn’t necessarily hold true.