Landlord who failed to pay tenancy deposit into approved scheme for four years unsuccessful in appeal

A landlord who failed to pay a tenancy deposit into an approved deposit scheme until four years into the tenancy has been unsuccessful in challenging a payment order.

Linda Searle appealed against a decision of the First-tier Tribunal for Scotland Housing and Property Chamber (FtT) in which she was ordered to pay £1,875 to the respondents, Marc Bleazard and Kimberly Whyte.

The appeal was heard by Sheriff Nigel Ross in the Upper Tribunal for Scotland.

‘Two tenancies’

Mr Bleazard and Ms Whyte were the tenants of a property in Edinburgh owned by the appellant from July 2013 to mid-2018, with an initial duration of one year and thereafter continued by tacit relocation. They paid a tenancy deposit of one month’s rent set at £625. This was not paid into an approved tenancy deposit scheme, legally required by the Tenancy Deposit Schemes (Scotland) Regulations 2011, until September 2017, following the landlord and her son becoming aware of the requirement in August of the same year. Following the conclusion of their tenancy in July 2018, the tenants applied to the FtT for a payment of up to three times the sum of the deposit in respect of this failure.

The appellant opposed the application, stating that their one tenancy was actually two separate ones. She claimed that the first tenancy had ended in September 2017 and had been replaced by a new one at that time. As such, their claim was time-barred, as it had not been made within three months of the end of the original 2013 to 2017 tenancy.

The FtT held an evidence hearing, at which the tenants stated that they had never agreed to a new tenancy and were unaware of the alleged existence of one until October 2018. They also stated that they did sign a document given to them by the landlord’s son in September 2017, but thought that it was only half a page long and not a lease.

At no point during this time did the landlord’s son intimate to the tenants that the landlord wished to terminate the existing agreement. The FtT subsequently ruled that the original tenancy had not been terminated in 2017, that there was no new tenancy, and therefore the claim was valid. The landlord was ordered to pay £1,875, which was the maximum three times the sum of the original deposit.

The landlord appealed the decision on three grounds. First, the FtT had inverted the burden of proof by requiring her to prove the existence of the second tenancy agreement instead of the tenants. Second, she claimed the FtT had erred in law and failed to apply contract law correctly regarding the common law principle that a party cannot sign a contract and then avoid liability under it by claiming they did not read it. Third, the FtT had acted ultra vires of its competency to deal with contract law.

‘A misconception’

In Sheriff Ross’ decision notice, he rejected all three of these appeal grounds. Regarding the second tenancy agreement, he said that this appeal ground was based “on a misconception”. He continued: “The respondents’ case did not rely on the 2017 agreement. It relied on a 2013 agreement. It was not their case that the 2017 agreement was in any way relevant, and therefore they had nothing to prove and no interest in that agreement, which they claimed was never knowingly concluded. The appellant, on the other hand, relied on an alleged contract in 2017. She was relying on it, and therefore the evidential burden was on her to prove its validity.” Thus, it was repelled.

Regarding the FtT’s alleged error in law, Sheriff Ross recognised the existence of the common law principle in Scots law, but said “it does not reflect the facts in this case”. He continued: “The FtT did not decide that the respondents had intended to sign a new tenancy agreement in 2017, or that they did so. They decided that, while the respondents did sign a document in 2017, it was probably not the same document that the appellant produced in evidence. Accordingly, the appellant failed to prove the existence of the claimed 2017 agreement. It was not a case where one party voluntarily signed an agreement then ignored it. Instead, the claimed 2017 agreement was not proved to exist, and so that principle was not engaged.” This appeal ground was therefore also refused.

In respect of the final appeal ground, he said: “This ground is not a sound one, because the question for the FtT involves considering what legal documents existed, and what the effect of those documents might be. These documents are contracts, and therefore questions of contract are at the core of what the FtT requires to consider in any given case. Some confusion about the word ‘competent’ became evident, but after discussion were resolved: ‘competency’ is a term of art, and refers not to ability or training, but the formal legal power, to deal with a question of fact or law.”

As a result of this, the suspension of the original award of £1,875 was lifted, and the decision of the FtT was upheld.

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