Law regarding statutory periodic and deposit protection

[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. 

I just wonder if the offer of 0.5x is a bit low ball, as if matter does reach Court, it is somewhat understandable on the part of the tenant, as the offer doesn't even meet the 1x which is the minimum penalty guaranteed. I'd imagine a 1x offer would conclude the matter, and if it was to reach Court, the expectation of the Court awarding 1-1.5x with no solicitor fees.

greatcrested

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.

This /\.

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. 

But that is not a comparable case. Failure to protect, or failure to serve PI, are both of a magnitude worse than a lapsing of protection which was remedied.

I just wonder if the offer of 0.5x is a bit low ball, as if matter does reach Court, it is somewhat understandable on the part of the tenant, as the offer doesn't even meet the 1x which is the minimum penalty guaranteed. I'd imagine a 1x offer would conclude the matter, and if it was to reach Court, the expectation of the Court awarding 1-1.5x with no solicitor fees.

If we assume (as we should?) that

a) the court might actually find in the LL's favour and

b) if not, the likely penalty is 1 times the deposit, plus

c) the tenant is paying a solicitor unrecoverable legal fees

offering less than 1 times is reasonable to avoide court for both parties.

Though I'd be tempted to let the tenant make the claim and then defend.

princeofpounds

The Ayanugga/Swindells case was decided under the rules that applied before the Localism Act update to the deposit scheme laws, so the 3x penalty was mandatory despite the apparently modest nature of the infraction.

I agree that 3x is highly unlikely in this situation, and think that 1x is more likely, although that's just an opinion.

A settlement (offers made without prejudice and for full and final settlement of course) is the best option, but you may wish to a be a bit smart about how you do it, given they are paying for a lawyer and those costs are not recoverable. You could not reply or offer a lowball settlement now. When they actually proceed to court proceedings, you could raise to a settlement offer that would be similar to what they might expect to receive, minus legal costs. Plus a little bit more to incentivise acceptance. If they don't bite, then closer to court itself you can make a final offer, even at the court door if required. 

solidpro

hi there.....

[Deleted User]

solidpro said:

So just to clarify. The deposit was circa £1500 and £1250 was returned immediately. We did a thorough inventory with photographs signed by both parties and the closing inventory shows the damage. They have never disputed the damage and could easily have taken this up with the deposit protection as their certificate clearly shows they're currently 'protected'.

Reading s213 and s214 we have adhered to it as I can see no specific description of a 'gap' inbetween the end of the AST and the vacating, but where both are (as in this case) protected. It does say the deposit must be 'initially' protected within 30 days (met). However there is a clause about 'adhering' the the DPS scheme. If we didn't adhere to it, why have they re-protected it and told us the tenant is covered for the £250?

Thanks for the advice so far. I've been to court twice, defending myself once and won both times. Whilst I understand this is a case of a 'penalty', I am happy to pay a fair penalty if it comes to that. I'd like a judge to decide though, rather than someone else's solicitor. Also more than happy to spend a day learning how the process works.

It would be nice if you could let us know the final outcome if you end up settling or going to court and if so what the outcome is as we very rarely ever get a conclusion to these kind of threads. 

anselld

OP, sorry if I missed it but I could not see the answer to my question in post 2 ...  did you serve the PI?

solidpro

anselld said:

OP, sorry if I missed it but I could not see the answer to my question in post 2 ...  did you serve the PI?

Yes we did, via email when they moved in.

Wanderingpomm

How long was it unprotected for? 

solidpro

Lover_of_Lycra said:

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. 

Can anyone else concur with the above

solidpro

Wanderingpomm said:

How long was it unprotected for? 

I don't know.