Rental deposit court case could ‘wipe out’ some letting agents, warns lawyer

high court rental deposit

Leading housing lawyer David Smith of legal firm JMW has warned letting agents that many could be ‘wiped out’ this year by a little-known evictions and rental deposit case heard in the High Court just before Christmas, he told a Fixflo webinar yesterday.

Last year the Solihull branch of Northwood tried to evict a couple who had stopped paying their rent, and served a Section 8 eviction notice.

But the tenants, Mr Fearn and Ms Cooke, had argued during an initial County Court hearing that under section 44 of the Companies Act 2006 their eviction notice had not been signed by two authorised signatories or by a company director in the presence of a witness, and that also the section 44 requirements also applied to the confirmatory certificate for their original deposit.

On this basis, they argued that the attempted eviction was invalid. But the case was then elevated to the High Court at a hearing held on December 21st.

Rental deposit

At this hearing judges ruled that section 44 of the Companies Act 2006 did not apply to eviction notices, but did uphold the claim that it applied to a confirmatory certificate for a rental deposit.

Link to Lettings news“The reality of this case is that, as things currently stand, if you as an agent have signed a proscribed [rental deposit] information certificate on behalf of a landlord and you’re a corporate agent, then if it has not been signed by a director and witnessed, then the certificate will be defective,” says Smith.

“This means attempting to serve a Section 21 will not be possible, and a tenant could turn around make a claim against you for up to three times the original deposit.

“So I am concerned about the possibility of a massive blast of claims against agents because the High Court judgement is retrospective going back six years as well as looking forward.

“This could wipe out some lettings agencies if their insurance won’t cover it.”

Watch the webinar.

Read David Smith’s blog on the case.

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Rental deposit court case could ‘wipe out’ some letting agents, warns lawyer