A Change In Protecting Tenants’ Deposits – Landlords Beware!

It has come to most private Landlords’ attention by now that Tenants’ deposits must be protected in one of the four appropriate government-backed schemes, a rule which came into force on 6 April 2007.

Following this rule, there was some argument about when the prescribed information, about where the deposit is held, must be sent to the Tenant. Since April 2012, a Landlord has 30 days in which to supply this information to the Tenant.

There have been a flurry of cases where Tenants have sued their Landlords for either not protecting the deposit or for protecting it but not providing the appropriate information in the specific time period, and they have recovered anything between one and three times the deposit amount.

It is also the case that Section 21 notices cannot be validly served unless the deposit has been appropriately protected and the information provided to the Tenant; possession claims have therefore been dismissed.

A case in 2013, Superstrike Ltd v Rodrigues, has however thrown the world of tenancy deposits into disarray once more; leaving Landlords wide open to County Court claims.

The reasons for this are as follows:

1)     In the Superstrike case, the tenancy began in January 2007, before the deposit rules came into force. It was a fixed tenancy for 12 months. In January 2008 the fixed term ended and the tenancy rolled over on the same terms, but instead of being a fixed term tenancy, now became a statutory periodic tenancy.

2)     The Landlord served a Section 21 notice in 2011, asking the Tenant to vacate the property. When they inevitably didn’t, the Landlord issued possession proceedings. The issue of a deposit was not initially considered because the tenancy was pre-April 2007.

3)     The possession order was granted but the Tenant appealed, his argument was that while the fixed term tenancy was pre-April 2007, when the tenancy’s fixed term ended and became a statutory periodic one in January 2008, a new tenancy altogether was created. The argument was put forward therefore that the Landlord should have protected the original deposit in one of the appropriate schemes, and subsequently served the Tenant with the prescribed information.

4)     There were ensuing arguments about when the deposit was classed as having been ‘received’ by the Landlord, and ultimately it was decided by the Court of Appeal that the Tenant is classed as having paid, and the Landlord received, the deposit when the tenancy becomes periodic, by way of set-off against the Landlord’s obligation to account to the Tenant for the deposit in respect of the previous tenancy. The Landlord therefore should have protected the deposit as soon as the fixed term ended and the periodic tenancy began, and they should have sent the Tenant the prescribed information within 30 days.

5)     In this case there was no claim against the Landlord for damages for his failure to protect the deposit, but his claim for possession was dismissed, because the Section 21 notice could not have therefore been valid. The Landlord was, and is, open to a claim here by the Tenant for failing to protect the deposit.

Landlords everywhere will now understandably be worried about their position and will question whether:

a)     They can serve a valid Section 21 notice to enable them to ultimately gain possession of the property; and

b)     They are open to County Court claims from their Tenants

The reality is that the vast majority of Landlords are now in a very vulnerable position and do need to be sure as to their position and what steps, if any, they need to take to protect themselves and/or rectify their position as best they can.

How can we help?

If you are a Landlord and you are unsure as to your position, we can provide specific advice in relation to any of the following scenarios:

  1. Deposits taken on assured shorthold tenancies (ASTs) before 6 April 2007, where these tenancies became statutory periodic tenancies or fixed-term tenancies after 6 April 2007;
  2. Existing statutory periodic tenancies and renewals of fixed-term ASTs, where the deposit is already protected in an authorised scheme;
  3. New statutory periodic tenancies or renewals on a new fixed term where the deposit is already protected in an authorised scheme.

 

Please note that the comments in this document cannot be perceived as being legal advice provided; you must contact one of our specialist housing solicitors in order to receive advice which relates to your individual circumstances.

If you wish to speak to arrange an appointment to seek tailored advice, please contact Kirsty Almond on 0161 480 6551 or alternatively by e-mail: kalmond@alfrednewton.com. We offer competitive fixed fee advice sessions and drafting services.

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