Important Court Decision on the Deposit Protection Scheme


Tenancy Deposit Schemes  (TDSs) were introduced under the Housing Act 2004, and require landlords who take deposits from their tenants either to insure that deposit, or to hold the deposit within a recognised scheme. The TDS was brought in to safeguard tenants’ interests as some landlords were failing to pay back deposits at the end of the tenancy, despite there being no damage caused to the property and the rent having been fully paid.
The recent case of Draycott v Hannells Letting has important implications for landlords who rent out residential properties. The Draycotts moved into a property at the end of February 2008, which was let to them through an agent, Hannells Letting. The Draycotts paid a deposit of £2,700 into Hannells’ account on 4 March 2008.
Under the relevant TDS legislation, the deposit needs to be either insured or deposited with a scheme within 14 days of receipt. Tenants also must be provided with information about the scheme. In this case the relevant scheme was the Deposit Protection Service, which holds the full deposit until the end of the tenancy. Hannells did not lodge the deposit with the DPS until 19 Ma 2008, and the Draycotts did not receive the information about the scheme until the 21 May 2008.
The court ruled that while the scheme specified that the deposit had to be lodged, the fourteen day requirement was not an ‘initial requirement’ of the scheme. If a penalty had to be paid for lodging the deposit after the two weeks expired, it would be the letting agent who was responsible rather than the landlord. Hannells had paid the deposit in accordance with the law but not within the fourteen day timescale, but the Draycotts did not commence their claim until after the deposit had been lodged with the scheme. As a result, no penalty was payable.

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