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• Author: Ray Brownson

Tenancy Deposit Scheme: what are the penalties for the landlord if things go wrong?

Okadigbo v Chan (2014) EWHC 4729 (QB)

It is common for the landlord to take a dilapidations deposit at the start of a tenancy as a safeguard in case the tenant causes any damage to the property. The Housing Act 2004 introduced regulations which have, since April 2007, required deposits to be placed in approved schemes. The landlord also has to give the tenant a notice, which is called prescribed information. If the landlord fails to abide by the rules there are penalties.

The penalties were considered by the High Court recently in the case of Okadigbo v Chan. It was an appeal from Willesden County Court to the High Court. The landlords, the Chans, received a deposit and the tenancy began in August 2012. However, the deposit was not put it in a scheme until March 2013 and they did not give the prescribed information until July 2013. The rent was not paid and so the Chans commenced possession proceedings. Mr Okadigbo counterclaimed for a penalty payment because the Chans had breached the rules regarding the deposits.

Before trial the Chans admitted liability, they could do little else. They had not been helped by their estate agents, who plainly had not done their job. The Chans could not avoid a penalty because s214(4) of the Housing Act 2004 directs that the court must order the landlord to pay a sum of money not less than the amount of the deposit and not more than three times the deposit. The trial Judge used her discretion and ordered the Chans to pay a sum equal to the deposit on the basis that the breach was “at the lowest end of the scale of culpability for non-compliance”. The Chans had to pay £1,520.

Surprisingly the tenants appealed arguing for an additional £1,520. The appeal received short shrift in the High Court, where the Judge found that the degree of culpability was the most relevant factor in determining the amount that the landlord had to pay. The tenants had lacked the statutory protection for some months but in the end matters were put right. In addition, the landlords had been relatively inexperienced. Accordingly, the appeal was dismissed and the Judge noted that discretion must lie with the Judge making the initial decision. Were the costs of that appeal in any way proportionate? Frustratingly, as with most law reports, there is no reference the court’s costs orders.