Section 21 Notices: deposit protection pitfalls

The termination of tenancies with the use of Section 21 Notices, otherwise known as ‘no fault evictions’, have become quite the popular topic, with the current government planning to abolish a tenancy termination regime that many regard as unfair.  

It is not clear when these Notices will become a thing of the past so, for now, they remain an option for landlords. Indeed, for many landlords, a Section 21 Notice may currently be the only means of terminating a tenancy that is available to them.

Getting these Notices right is not always easy. Even a minor mistake can result in a Notice being held to be invalid and thereby forcing a landlord to repeat a termination process all over again.

One of the more common mistakes is failing to comply with the tenancy deposit protection requirements fully. Many landlords will comply in part, by protecting the deposit, but then will not deal with the further requirement, namely serving on the tenant the details about the deposit protection; those details are called ‘the Prescribed Information’. Failing to serve the Prescribed Information can mean that a landlord will struggle to rely upon a Section 21 Notice.

What are the deposit protection requirements?

Under The Housing Act 2004, any deposit taken in relation to an Assured Shorthold Tenancy must be protected in an authorised deposit scheme within 30 days of being received by the landlord.

The landlord must also serve the Prescribed Information on the tenant (or anyone who paid the deposit) within the same 30 day period as protecting the original deposit.

It is this second requirement that is often overlooked by landlords.

The Prescribed Information must include the following information:-

1. the name, address and contact details of the scheme administrator for the deposit protection scheme.
2. the deposit leaflet for the scheme, if there is one.
3. the procedures, under the scheme, to repay the deposit at the end of the tenancy.
4. the procedures that apply under the scheme where either the landlord or the tenant is not contactable at the end of the tenancy.
5. the procedures that apply under the scheme where the landlord and the tenant dispute the amount to be repaid.
6. the facilities available under the deposit scheme for any dispute resolution.
7. the amount of the deposit.
8. the address of the property to which the tenancy relates.
9. the name, address and contact details of the landlord, the tenant and any relevant person.
10. the circumstances when all or part of the deposit may be retained by the landlord.
11. a certificate, signed by the landlord, confirming that the information provided is accurate to the best of their knowledge, and that they have given the tenant the opportunity to sign the document.

A landlord cannot pick and choose which information to supply. All of the information above must be supplied. A failure to do so will leave the landlord potentially exposed to financial penalties and compromise a landlord’s ability to terminate the tenancy.

What about minor errors in the Prescribed Information that, on the face of it, seem fairly harmless?

The recent case of Lowe v The Governors of Sutton’s Hospital in Charterhouse dealt with that very issue.

The High Court was asked to consider the consequences of some of the details in the Prescribed Information being incorrect or missing.

In this Lowe case, the landlord had successfully provided the tenant with the Prescribed Information. There were however two minor errors:-

• in one section, the Prescribed Information mistakenly referred to the wrong clause of the tenancy; and
• the landlord had not signed the Prescribed Information (although the landlord had signed the covering letter that accompanied the Prescribed Information).

Were these ostensibly trivial errors really enough to put the landlord in breach of the statutory obligations?

On the first point, the High Court found that although the document did clearly contain an error in that it referred to the incorrect clause, the reality was that any reasonable person would have been able to locate the correct clause and understand that this was an error.

On the second point, the High Court found that although the Prescribed Information was unsigned, this error was in effect rectified by the fact that the landlord had signed the covering letter that accompanied the Prescribed Information. That signed, covering letter was sufficient to ensure the compliance with the landlord’s obligation to provide a signed certificate.

This judgement of the High Court has provided clarity and relief for landlords in equal measure.

The decision indicated that the court will adopt a sensible approach when it comes to errors such as referencing the wrong clause or not signing the Prescribed Information (provided a signed covering letter accompanies the Prescribed Information).

That said, just when landlords thought it was safe to get back in the water, the news arrived that the tenant in the Lowe case had been granted permission to appeal the High Court decision to the Court of Appeal.

The Court of Appeal may come to the same ultimate decision as the High Court, it may not. But one has to conclude that, whatever the outcome, it surely pays not to take any chances with the Prescribed Information: be thorough, get it right first time, and check what you are sending the tenant at least one more time than you think you need to.

If you have any queries in relation to tenancy termination, please contact Jo Lingard in Hughes Paddison’s Property Litigation Team on 01242 574 244 or at jli@hughes-paddison.co.uk