Failure to return deposit meant assured shorthold tenancy possession proceedings still invalid

At the end of an assured shorthold tenancy a claim for possession may fail because the tenant has given the landlord a deposit and the relevant landlord’s notice under section 21 of the Housing Act 1988 was served at a time when the deposit had not been protected under the tenancy deposit scheme and/or the prescribed information in respect of the tenancy deposit scheme had not been provided to the tenant as required by section 213(6) of the Housing Act 2004.

Section 215(2) of the 2004 Act provides that if section 213(6) is not complied with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213(6)(a) is complied with.

The Localism Act 2011 inserted section 215(2A) into the Housing Act 2004 which sets out the circumstances in which a section 21 notice may be delivered, notwithstanding that the deposit was not protected within 30 days of the landlord receiving it:

“(2A) Subsections (1) and (2) do not apply in a case where –

(a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or

(b) an application to a county court has been made under section 214(1) and has been determined by the Court, withdrawn or settled by agreement between the parties.”

So if the deposit has been repaid either voluntarily or pursuant to an application to the court, then it’s open to the landlord to issue the section 21 notice, even though the deposit may not have been protected within the prescribed period at the outset.

The Localism Act 2011 also amended section 214 so that if the deposit was not protected nor the prescribed information supplied within 30 days of the deposit being received by the landlord, the court ‘must’ make an order in respect of the deposit, and an order that the landlord pays the tenant an amount of between one and three times the amount of the deposit.

In the recent County Court case of Khuja v Chowdhury [2015] the Section 21 notice was found to be invalid because, though by then the deposit had been protected by the scheme and the tenant had received the prescribed information, the deposit had not been returned to the tenant.

The mandatory penalty was kept down to twice the amount of the deposit as the court found some mitigating factors including the fact that the landlord had acted honestly.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.