The Superstrike case was published a couple of weeks ago and has caused quite a furore among the landlord community.

What the case said

The case concerns a deposit taken BEFORE the tenancy deposit regulations came into force in April 2007 where the fixed term ended AFTER that time. The landlord did not protect the deposit as he did not believe it was necessary.

However the Court of Appeal awarded judgement for the tenant. There were two reasons:

1. A periodic tenancy which arises at the end of a fixed term, is in fact a new tenancy (although lawyers have long known this) and

2. The deposit should be treated as having been paid back to the tenant and repaid to the landlord at that stage (ie when the periodic tenancy arose), meaning that the deposit then needed to be protected at that time (or at any rate before the general ‘amnesty’ period which ended on 6 May 2012).

The effect of this case

One of the problems about our legal system is that it is difficult to be sure how this case will be interpreted by other Judges coming later:

• It could be interpreted narrowly, for example limiting it to situations where landlords have not protected their deposits before the tenancy went periodic.
• Or it could be interpreted very widely – there are even suggestions that means a deposit has to be re-protected every month for a monthly periodic tenancy!

The decision could also be appealed to the Supreme Court where the judgement could be overturned or the regulations interpreted in a different way. A Supreme Court decision would be helpful but it depends on the parties and whether they can afford to fund it.

What the legislation says

The legislation being the Housing Act 2004. There are three elements to look at:

1. s213(1) refers to a deposit needing to be dealt with in accordance with an authorised scheme from the time it is ‘received’

This begs the question: when is it received? Is it when the money is actually paid to the landlord? Or is it deemed ‘received’ again every time a tenancy agreement changes from a fixed term to a periodic tenancy?

2. There is then the question of what the landlord must do when the deposit is ‘received’. S313(3) says the initial requirements of an authorised scheme must be complied with within 30 days.

It is arguable that if the scheme provides for the deposit to continue to be protected in the event of a new periodic tenancy arising under s5, then the landlord will be compliant.

For example this is specifically stated in the terms and conditions of TDS and My Deposits.

Remember that the Superstrike case is in the context of a deposit which had never been protected at all.

3. Finally there is the question of the prescribed information. Under s213(5) and (6), this must be provided within 30 days of the deposit money being ‘received’. So again this depends on the Court of Appeal interpretation of ‘received’ being correct.

However, the general understanding is that s21 notices can be served after a late service of the prescribed information (s215(2), provided the deposit is properly protected.

Conclusion

All of the deposit companies have a notice on their websites saying that they are in consultation with the Department of Communities and Local Government about this case, so we need to wait and see what they say.

However, this whole sorry situation would never have happened if only this legislation had been drafted in a clear and comprehensive manner.

These laws are intended for ordinary people. How are they supposed to act in accordance with the law if the true meaning cannot be known until after a series of Court of Appeal decisions?

PLEASE can we have more clarity in our legislation.

Tessa Shepperson is a solicitor and practices online at www.landlodlaw.co.uk. She also blogs at www.landlordlawblog.co.uk where a longer version of this article appeared earlier.

A new rent survey is bidding to give better results for landlords by reporting rents agreed between more than 1,500 private landlords and their tenants.

The research targets landlords who belong to the National Landlord Association.

Excluding the capital, average monthly rents for a two bedroom flat start at £480 in the North East and range up to £695 in the South East.

Average rents for three-bedroom homes vary between £500 in the North East to £935 in the South-East.

In London, the survey splits properties in line with transport zones.

In zones 1-2, the monthly rent for a two bedroom flat is £1,515 and £1,815 for a three bedroom home.

In zones 3-6 the figures are £1,060 for a two bedroom flat and £1,435 for a larger home.

Tenants outside London pay around a third of their disposable income as rent, while the figure stretches to 42% in the capital.

The first survey also found:

• 87% of landlords managed to hit their listed rent
• 41% of landlords have put up rents over the past 12 months, compared to just 7% who had reduced their prices
• Almost a quarter of landlords (23%) want to buy at least one more buy to let property in the next year
• The average tenant stay in a private rented home is around 30 months

Paul Winstanley, of Allsop LLP, who helped compile the rent check report, said: “The demand for rented housing and the constraints on the wider housing market mean that rented housing is likely to retain the same income dynamics for the medium to long-term. The rented sector is growing at such a rate that landlords will share in a secure and attractive return.”

The report is scheduled for release every six months.

After reports emerged that thousands of landlords could face legal action for inadvertently breaking the law over tenancy deposit protection, Landlord Action’s solicitors are looking into the ruling in some detail as they say it does not make any sense at all.

It has been reported that tenants whose deposits were not re-protected when their fixed term tenancy rolled over into a statutory periodic tenancy (if they stayed on in the same property) after the tenancy deposit law became mandatory in April 2007, may have a legal case against landlords, even arguing any eviction was unlawful.

Clarifying just who may be affected, Justin Selig, Solicitor and Director at Landlord Action comments “Firstly, if you are a landlord and your tenant occupies your property under an Assured Shorthold Tenancy and you have taken a deposit from your tenant, then this applies to you. If you have not taken a deposit, then you have nothing to worry about.

“If you have taken a deposit at the beginning of the fixed term of the tenancy, and the tenant remains in the property beyond the expiry of the fixed term, then according to this case the periodic tenancy is deemed to be a “new” tenancy. According to the rules relating to deposit protection, a deposit for a new tenancy needs to be protected.

“The Court of Appeal ruling states that a deposit is deemed to be received at each renewal – so in the case they were dealing with, the switch from fixed term to periodic meant that a new deposit was deemed to have been received – and because the time it was received was after April 2007 it therefore required protection for that particular tenancy.

“I think the arguments as to whether or not this issue applies to deposits received pre or post April 2007 are irrelevant as all deposits being held today (regardless of when they have been received) must be protected by virtue of the Localism Act 2011.

“The question is, therefore – where you are holding a protected deposit – do you need to re-protect it each time there is a renewal of a tenancy? At present, I think the answer to that question is, yes – but hopefully I will be proved wrong on this.

“Therefore, anyone who is holding a deposit received at the beginning of a fixed term is required to re-protect that deposit when it moves to a periodic. There is a further problem which may hopefully highlight how this does not make sense. A periodic tenancy is deemed to be renewed at the expiry of each period. Therefore, if you follow the argument – this would mean that the deposit would need to be re-protected at the beginning of each period. Most periodic tenancies are monthly – so the deposit would need to be re-protected monthly.

“Obviously this does not make sense, nor I am sure is this the intention of the legislation. So how does a landlord protect himself?
“The first thing I would do is to obtain written clarification from the deposit protection company you are using as to their take on the ruling, and comply with their recommendations. Secondly, as a minimum and you have a fixed term tenancy about to go onto a periodic, you should at least protect your deposit again when it goes periodic. (Personally, I would actually return the deposit to the tenant – but I appreciate that this is not always practical.) Thirdly, and for belt and braces protection – where you are still holding the deposit, you may want to consider not allowing the tenancy to go onto periodic, but to re-issue the tenant with a new fixed term – and re-protecting the deposit for that fixed term.
I hope that the Landlord does decide to appeal this decision and take it to the Supreme Court as some further clarification is definitely needed.”

Landlord Action is a UK based organisation helping landlords, letting agents and other property professionals. As a champion for landlords, it has campaigned extensively and was instrumental in getting the law changed to make squatting a criminal offence.

www.LandlordAction.co.uk