When deposit disputes have been to court, pragmatism is the order of the day - a response to Painsmith

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Painsmith Solicitors recently published an article highlighting the difficult process of releasing a deposit from the custodial scheme following a court hearing (which you can view here). The courts have wider powers of investigation and take precedence over tenancy deposit protection schemes.  As a result, TDS are not able to deal with cases where a claim has already been heard by a court or if court proceedings are on-going.

However we can, in some cases, arrange for a deposit to be paid in accordance with a court order. 

The Housing Act 2004, Schedule 10, paragraph 6(4)(a), requires TDS to make payment in accordance with a court order if:

  1. the court order is specific i.e. it clearly sets out what the judgement was for e.g. rent arrears or damages to the property and directs TDS to make payment from the deposit.  If a court order merely states that an award is made without being specific, the parties will need to obtain a direction from the court specifying the outcome of the proceedings and directing how the deposit is to be distributed; and
  2. any court order granted is final i.e. either the time limit for appeal has expired without an appeal being filed or, if an appeal was made, the appeal has been disposed of; and
  3. no payments have been made either in full or in part that will affect the amount TDS pay and to whom.

Where a dispute arises at the end of a tenancy, it is for the deposit holder to submit the disputed amount of the deposit to TDS whether the parties intend to go to court or not.  For the reasons stated in PainSmith’s blog, instances where the court directs TDS to make payment are infrequent because the courts often take the view that deposit disputes should be dealt with by the schemes and refer the cases back to the schemes for resolution. 

For cases where the dispute continues through the court, TDS issue guidance documents to all parties when we become aware of intended court action.  This ensures that the parties are aware at the outset of our requirements for the release of the deposit. They can request the judge to include a direction to TDS about the deposit at the time of the judgement, thus avoiding the additional expense of having to return to court for a further TDS deposit direction to be granted or to obtain a Third Party Debt order.  Our experience has been that this guidance has resulted in an increase in court orders being granted with a specific direction to TDS to release the deposit.

Having said this, TDS adopt a more pragmatic approach than DPS.

We will still consider releasing a deposit in accordance with a court order that does not contain a specific direction to pay out the deposit.  The proviso for this is that the deposit clause in the tenancy agreement permits the deposit to be used for the purposes of the judgement in the court order and that the remaining criteria set out above (2 and 3) are also satisfied. In other words, if the order tells us what the award is for, and the tenancy agreement allows the deposit to be used for that award, we may release the deposit as long as the order is final and no payments have been made under a payment schedule.

TDS can also consider offsetting any balance of the deposit following our adjudication against a court order that contains no specific direction to TDS to pay out, provided the same requirements above are met.  

As Painsmith rightly state, part of the intention of tenancy deposit protection schemes was to divert deposit disputes away from the costly and time consuming court process; an effort to assuage the ordeals that it creates for both tenants and landlords. Our more pragmatic approach to disputes involving court hearings is a demonstration that TDS remains conscious of why we were created in the first place.

Posted by Sandy Fisher, TDS Adjudicator on 7 February 2012

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