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Important Note - this page applies to
tenancies that ended before April 2012

If your tenancy continued after 6th April 2012, see here

Claiming compensation for deposit non-protection

Claims under section 214 of the 2004 Housing Act

The Housing Act 2004 introduced the concept of "Tenancy Deposit Protection" with regard to AST tenancies and obliges landlords to protect/register all tenancy deposits with one of 3 approved schemes within 14 days of the deposit being paid.  The penalty for failure to do this, or provide details of the protection (called 'prescribed information') is that the court has to order the return of the deposit and in addition a payment equal to three times the value of the deposit.
Unfortunately, there have been various appeal court decisions and court administrative decisions that have affected this legislation.
The court service made a decision in (I think) 2009 that claims under section 214 will be 'part 8 claims', which in effect means they have to be submitted on a different claim form (N208) and will NOT be allocated to the small claims track.  See Here   This means;
  1. The claim is much more complex - most litgants will require the services of a solicitor
  2. The claim is much more expensive - the court fees alone to get the hearing to court are in excess of £1000
  3. The losing party may be ordered to pay the other partys solicitors costs etc (solicitor - £150/hr?)
In February 2010 the Appeal Court decision in Draycott & Draycott -v- Hannells Letting Limited removed the requirement for a deposit to be protected within 14 days if the DPS was used - because the DPS did not have this requirement in it's own 'initial requirements'.
Later in November 2010, a joint Appeal Court hearing in Universal Estates v Tiensia and Honeysuckle Properties v Fletcher extended this 'get out' by including all schemes and clarified that a landlord can indeed protect a deposit with any scheme that will accept it at any stage up to the claim hearing without penalty.
In May 2011 the Appeal Court decision in Gladehurst Properties Ltd v Hashemi had the effect of limiting section 214 claims to existing tenancies - stating that the grounds for a s.214 application will cease to exist once the lease expires.  In other words - once the tenancy is over, no claim can be submitted. 
This leaves a very limited number of claims that can actually succeed.  Only claims which are commenced within the tenancy dates can be considered, and all an errant landlord has to do is to return or protect the deposit and provide the prescribed information before the claim is heard to avoid the penalty.  Set this against the costs and risks faced by the litigant tenant and the law seems somewhat skewed to the advantage of the landlord.
It is hoped that amends to the legislation will be introduced before long to address the issues raised in these 3 appeal court rulings, and hopefully redress the balance slightly. See Here