Deposit protection updates: when might incorrect Prescribed Information still be enough?

Richard Pulford, Senior Associate in the Dispute Resolution team, looks at the case of Lowe v The Governors of Sutton’s Hospital in Charterhouse and the clarification to deposit protection that this offers.

Anyone dealing with Assured Shorthold Tenancies regularly will be well aware of the risks in handling security deposits. Penalties are significant and the breaches involved do not need to be particularly obvious for there to be serious ramifications. From protection 1 day late to failure to serve the necessary information on relevant third parties, there are many hurdles that can trip up Landlords and managing agents alike.

In the case of Lowe v The Governors of Sutton’s Hospital in Charterhouse, we get a little more clarification as to what errors may not be fatal to Landlords when realising that a mistake has been made. There are separate interesting Limitation Act points that were also discussed in this case, but for the purposes of this blog, Richard will focus on the protection of the deposit itself.

 

The facts

The Tenant moved into the property in early 2010, just before the shift in rental thresholds in what could be an Assured Shorthold Tenancy (AST). At the time of the tenancy, the maximum rent for an AST was £25,000 per year, subsequently, this was increased to £100,000 per year. As we have discussed previously on separate topics, regardless of what a tenancy is called on the agreement, it will be read to be whatever it should be. In this case, the shift in threshold, meant that the tenancy automatically changed from being a contractual tenancy, crucially with no requirement to register the deposit, to an AST which does.

The managing agent did what they should and registered the deposit and served prescribed information on the tenant. However, there were a few errors on the prescribed information, and it was not signed by the Landlord. The tenant waited and made a claim many years later claiming failure to properly protect the deposit and the penalty amount of 1-3 times the deposit amount for each of the subsequent tenancies entered into which totalled in excess of £120,000.

 

The findings

It was not denied that there were some errors on the prescribed information, however, it was decided that the prescribed information had been materially sufficient to meet the requirements. The two main reasons for this that were discussed were:

• With the error on the Prescribed Information, the judge used the precedent from Mannai Investment Co v Eagle Star Life Assurance, in that if the error is clear and what was intended was immediately obvious from the notice, then this should not invalidate the notice. We looked at the Mannai Principle previously.
  
  Given we have been told plenty of times that the Prescribed Information should be treated as a legal notice, this should probably not be a surprising interpretation, but it is useful to have the confirmation. Therefore, in this case, reference to the wrong contractual provision did not invalidate the prescribed information.
• Equally, the failure to sign the prescribed information is not fatal as long as it was given in a form ‘substantially to the same effect’ as the prescribed language in Housing (Tenancy Deposits)(Prescribed Information) Order 2007. In this case, the prescribed information was sent with a cover letter that had been signed by the managing agent. Therefore, despite not being signed itself, it was clear who it had been sent by and with who’s authority it was sent with.

 

Conclusions

This decision seems to make logical sense. There are many traps that Landlords can fall into with deposits, many of which, landlords will feel carry a disproportionate penalty. In this instance, some common sense was applied.

This does not give Landlords and managing agents carte blanche to make errors regularly but use this as a fall back. This will not protect all situations, but it does offer a little solace to those who realise a very minor error years after the fact and wonder whether they are going to be at risk of either complicating the process of seeking possession or being subject to a money claim.

If any Landlords or managing agents find themselves in a situation like this and advice is required, please contact [email protected] where we can assist you.​​​