Please Note: This Article is 3 years old. This increases the likelihood that some or all of it's content is now outdated.

We are still being asked a lot of questions about tenancy deposits and the tenancy deposit situation and what’s happened since the Superstrike case.

Also, it’s pretty obvious from the enquiries we get that there are landlords around who are still ignorant of the deposit legislation 5 years after it was brought in.

Not only are some people unaware of the basics; the importance of protecting a deposit within 30 days of taking it, plus serving the statutory (s213) notice, and getting proof of service, they don’t know about the implications of Superstrike.

This is a typical quation we get:

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“I’m confused about the situation with the rules on tenancy deposits. I know there is a lot of confusion around generally following a recent test case, but I’m worried that I could be vulnerable and liable to a fine. I protected deposits on several tenancies over the last 3 or 4 years, which are still protected, but I’ve done nothing since. What do I need to do?”

Following an Appeal Court ruling in favour of the tenant in the Superstrike Ltd v Rodrigues [2013] case, which itself followed two previous hearings which ruled in the landlord’s favour, the deposit protection rules have been thrown into turmoil.

It seems that what almost everyone assumed, myself included, since the introduction of this deposit protection rules in April 2007, has been wrong all along.

Deposits not protected for tenancies started before 7th April 2007 were exempt the rules, that’s clear enough. But what most people assumed was that they remained exempt until the tenancy was physically renewed – i.e., a new agreement was signed.

What has caught most people off guard is that according to the Appeal Court Judge, and clearly stated in the Housing Act 1988 s5, when an existing tenancy becomes statutory periodic, which requires no action on the part of the parties, a new tenancy is created.

Legally it seems, once the initial tenancy ends, the deposit should be treated as having been paid back to the tenant and then repaid to the landlord at that stage, meaning that a deposit then needs to be re-protected.

The implication of the judgement is that ALL deposits paid may now need to be re-protected and the prescribed (s213) information re-served if tenants stay on, after the fixed term ends, as a statutory periodic tenant.

This being so has serious implications for landlords. This is especially pertinent to those landlords with long running tenancies, whether started before the deposit legislation came in force or after it, which have subsequently become periodic.

There must be thousands of tenancies in existence which have become statutory periodic tenancies without any subsequent action having been taken regarding the protected deposit.

Those landlords that thought they had followed the rules to the letter now find themselves in a difficult position and subject to the possibility of fines and being unable to use the s21 eviction process.

Despite several sets of guidelines having been issued by the authorised deposit protection agencies and the main landlord associations, there is still no full

clarity on the situation and unlikely to be so until either the government amend this faulty legislation, or further cases are considered by the courts.

All one can assume is that Parliament in its wisdom did not intend to cause such confusion by enacting legislation to trick landlords. Common sense should prevail and we should hope that judges will follow common sense logic if and when further cases come to court.

It all hinges on how judges interpret the existing rules, strictly or with some flexibility. Clearly a landlord that has protected the deposit, which remains protected, and served the statuary notice within the now amended 30 day time limit, is halfway there, and his failure to “re-protect” and re-serve the statutory notice is a mere technicality.

All of the main deposit agencies have issue interim guidance on this- see http://goo.gl/VDAsWa – and state that they are in consultation with the Department of Communities and Local Government about this case.

This is the guidance given by the Deposit Protection Service (DPS): http://www.depositprotection.com/landlord-info

The rules as they stand mean that any landlord or agent taking a deposit has 30 days in which to protect it in one of the approved schemes and serve on their tenant the prescribed (s213) notice. This notice is available to download from their chosen scheme.

It is very important that landlords should serve the notice correctly after the signing of the tenancy agreement, and obtain proof of service. They will not be able to evict using the section 21 procedure if a tenant denies having received it. The tenancy agreement should always include agreed methods of serving notices.

If the tenancy is renewed (by signing a new agreement) it is important that the deposit protection is re-confirmed (virtual renewal) and a new set of prescribed information served.

By Tom Entwistle

This article was originally published in the Landlord & Buy to Let Magazine.

The DPS – Guide to Deposits & Disputes

MyDeposits – Guide to Deposits, Disputes and Damages

How to Win Deposit Disputes by Tom Derrett

Please Note: This Article is 3 years old. This increases the likelihood that some or all of it's content is now outdated.