When does a Landlord have to protect a deposit? (Superstrike v Rodrigues)
Residential landlords must follow the correct legal procedures for gaining possession of a tenanted property. Often landlords encounter problems when attempting to gain possession, due to their failure to protect the tenant’s deposit in an authorised Tenancy Deposit Scheme (TDS) on commencement of the tenancy.
Since 6 April 2007, it has been mandatory for a landlord to join a TDS when a deposit is given by the tenant on the commencement of a new residential tenancy. TDS was introduced by the Housing Act 2004 to safeguard deposits paid by tenants. If the landlord fails to comply with the requirements under the TDS, they will be prevented from relying on a section 21 notice for possession of the property and the tenant will also be entitled to seek compensation of up to three times the amount of the deposit.
Superstrike v Rodrigues concerned a case where a deposit had been taken before the legislation came into force in April 2007. It was held that the requirements also applied to statutory periodic tenancies which arise on the expiry of the fixed term.
The recent case of Gardner v McCusker has considered the principle established in Superstrike. The Landlord had failed to (re)serve the prescribed information when the tenant’s fixed term ended and a statutory periodic tenancy arose and then served a section 21 notice. The County Court Judge held that the prescribed information had to be re-served within 30 days of the statutory periodic tenancy arising. However, as the deposit was already in a scheme, it did not need to be re-protected. Whilst this is only a County Court decision and therefore is not binding on other courts, the case provides guidance to landlords.
The Government has proposed amendments to reform the rules governing registration of residential tenancy deposits in the Deregulation Bill. This should end the uncertainty surrounding tenancy deposits following the Superstrike case and to clarify landlords’ responsibilities.
The amendment will provide that where a deposit is taken on or after 6th April 2007 during a fixed term tenancy and the landlord has complied with the initial requirements, there will be no need to re-serve the prescribed information when a statutory periodic tenancy arises.
Where the first tenancy commenced before 6th April 2007 and a replacement periodic tenancy comes into effect, the landlord will have 90 days from commencement of the deregulation Act to protect the deposit and comply with the initial requirements.
The Deregulation Bill is yet to receive Royal Assent and therefore in the meantime, we advise landlords to re-serve prescribed information when a fixed term ends.
In summary, landlords need to actively monitor their lettings to ensure that they comply with the rules and regulations relating to tenancy deposits to avoid facing penalties and difficulties in serving notices.
If you have any queries with regards to serving a Section 21 notice or protecting a deposit please contact me on 01202 525333.