Gladehurst Properties Ltd v Farid Hashemi
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Mrs Justice Baron,Lord Justice Carnwath |
| Judgment Date | 19 May 2011 |
| Neutral Citation | [2011] EWCA Civ 604 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 May 2011 |
| Docket Number | Case No: B2/2010/0073 |
[2011] EWCA Civ 604
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CLERKENWELL AND SHOREDITCH COUNTY COURT
His Honour Judge Cryan
9EC01126
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Carnwath
Lord Justice Patten
and
Mrs Justice Baron
Case No: B2/2010/0073
Laura West (instructed by Bude Nathan Iwanier Solicitors) for the Appellant
Kevin Gannon (instructed by Osbornes Solicitors) for the Respondent
Hearing date: 22 nd March 2011
Gladehurst Properties Limited ("Gladehurst") is the landlord of flat 8, 238 City Road, London EC1V 2PQ which it let to Mr Farid Hashemi and Mr Matthew Johnson under an assured shorthold tenancy agreement dated 8 th August 2007. The tenancy was granted for a fixed term of one year commencing on 6 th September 2007 subject to a break clause under which either the landlord or the tenants could terminate the lease after 6 months by giving two months' notice in writing.
The rent payable under the tenancy was £2,080 per calendar month. It was payable in advance on the 6 th day of each month. Under clause 1 of the general tenancy conditions the tenants covenanted to keep the interior of the flat in a good and clean state of repair and condition and to deliver up the premises in that state at the end of the term. They also paid a deposit of £6,240 which was held by the landlord as stakeholders on the following terms:
"The Tenant shall pay to the Landlord's Agent as stakeholder on the signing of this Agreement the amount of the Deposit and the first payment of Rent provided always that the Landlord may, at the end of the tenancy, howsoever determined apply to the stakeholder to deduct and pay over from the Deposit whatever monies may be due to him from the Tenant either against the Inventory or by virtue of any breach by the Tenant of any of his obligations under this Agreement including rent owed to the Landlord including rent in advance which has fallen due and any sum expected by the Landlord in remedying any breaches of this Agreement by the Tenant.
As soon as practicable after the determination of the tenancy (howsoever the same may be determined) the Stakeholder shall retain (and account to the Landlord) such part of the Deposit as the Landlord's Agent shall deem necessary to enable the Landlord as at the date of such determination to make good any breach or non-compliance by the Tenant with his obligations hereunder and pay all costs, charges and expenses incurred in connection therewith including the Landlord's Agent's reasonable fees and disbursements and shall account to the Tenant for any balance of such sum. If the deposit shall be insufficient for the purposes aforesaid the Tenant shall pay to the Landlord forthwith on demand such further sum as shall in the opinion of the stakeholder be required for such purposes."
The Housing Act 2004 introduced provisions for the creation of tenancy deposit schemes which were designed to put an end to complaints by residential tenants that their deposits had been unreasonably withheld by their landlords at the termination of the lease or, in some cases, had even been misappropriated. Until 2000 the taking of deposits (which are a common feature of short residential tenancies) was entirely unregulated. In March 2000 a voluntary scheme was set up by the Independent Housing Ombudsman but it was not widely used and subsequently closed down. The government then decided to legislate.
The purpose of tenancy deposit schemes is to safeguard the deposit during the term of the lease and then to provide machinery to resolve any disputes which arise about the proportion of the deposit which the landlord is entitled to retain to meet the tenant's liability for rent or any breaches of covenant. To this end, s.212 of the Act requires the appropriate national authority to arrange for one or more tenancy deposit schemes to be made available. The schemes must comply with the requirements of Schedule 10 to the Act which contains detailed provisions about the contents of the schemes and what they must provide for on the termination of the tenancy.
I shall return later to some of those provisions but, for the moment, it is enough to record that tenancy deposit schemes must take one of two forms: either a custodial scheme under which the deposit is paid to the landlord and then transferred to a designated account held by the scheme administrator or an insurance scheme under which the landlord retains the deposit but pays over to the scheme administrator at the end of the lease any part of the deposit which is in dispute between the landlord and his tenant. The administrator is then responsible for paying out the disputed sums under the scheme, subject to a right of re-imbursement from the landlord, which is backed by insurance: see Schedule 10, paragraph 1.
The Act requires all deposits to be dealt with in accordance with an authorised scheme. Section 213 provides that:
"(1) Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.
(2) No person may require the payment of a tenancy deposit in connection with a shorthold tenancy which is not to be subject to the requirement in subsection (1).
(3) Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received.
(4) For the purposes of this section "the initial requirements" of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.
(5) A landlord who has received such a tenancy deposit must give the tenant and any relevant person such information relating to—
(a) the authorised scheme applying to the deposit,
(b) compliance by the landlord with the initial requirements of the scheme in relation to the deposit, and
(c) the operation of provisions of this Chapter in relation to the deposit,
as may be prescribed.
(6) The information required by subsection (5) must be given to the tenant and any relevant person—
(a) in the prescribed form or in a form substantially to the same effect, and
(b) within the period of 14 days beginning with the date on which the deposit is received by the landlord.
(7) No person may, in connection with a shorthold tenancy, require a deposit which consists of property other than money.
(8) In subsection (7) "deposit" means a transfer of property intended to be held (by the landlord or otherwise) as security for—
(a) the performance of any obligations of the tenant, or
(b) the discharge of any liability of his,
arising under or in connection with the tenancy.
(9) The provisions of this section apply despite any agreement to the contrary.
(10) In this section—
"prescribed" means prescribed by an order made by the appropriate national authority;
"property" means moveable property;
"relevant person" means any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant."
Clause 8.1(i) of the tenancy agreement provided that:
"The Tenant agrees to pay the Landlord's costs of and in connection with:
(i) The sum of £176.25 being £150 + VAT for the set up costs of this tenancy including the preparation and completion of this contract together with the checking of the said Inventory at the commencement of the tenancy. A further £100 + VAT will become payable if the tenant wishes the Landlord to register the deposit with the government deposit scheme."
But the deposit which the tenants paid was never registered or paid into a tenancy deposit scheme. Instead it was retained by Gladehurst in its own bank account until October 2008 when the tenants vacated the flat. There were various breaches of the cleaning and repairing covenants outstanding at the end of the lease and Gladehurst arranged for an independent inventory clerk to inspect the flat and to assess the cost of cleaning and making good the disrepair. He recommended the deduction of £1,123.99 from the deposit. This was therefore retained by Gladehurst and the balance of £5,116.01 was repaid to the tenants via a bank transfer to their nominated account.
In November 2008 Mr Hashemi contacted Gladehurst and requested receipts and a breakdown of the amount deducted from the deposit. At the same time he put the landlord on notice that he would issue a claim for three times the deposit as provided for under s.214 of the 2004 Act. Section 214 provides that:
"(1) Where a tenancy deposit has been paid in connection with a shorthold tenancy, the tenant or any relevant person (as defined by section 213(10)) may make an application to a county court on the grounds—
(a) that the initial requirements of an authorised scheme (see section 213(4)) have not, or section 213(6)(a) has not, been complied with in relation to the deposit; or
(b) that he has been notified by the landlord that a particular authorised scheme applies to the deposit but has been unable to obtain confirmation from the scheme administrator that the deposit is being held in accordance with the scheme.
(2) Subsections (3) and (4) apply if on such an application the court—
(a) is satisfied that those requirements have not, or section 213(6)(a) has not, been complied with in relation to the deposit, or
(b) is not satisfied that the deposit is being held in accordance with an authorised scheme,
as the case may be.
(3) The court must, as it thinks fit, either—
(a) order the person who appears to the court to be holding the deposit to repay it to...
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...unreasonably withheld by their landlords at the termination of the lease or, in some cases, had even been misappropriated." Gladehurst Properties Ltd v Hashemi [2011] EWCA Civ 604, [2011] 4 All ER 556 at [3] 5 The provisions have since been amended by the Localism Act 2011, and I will need......
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