Test Case: Superstrike Ltd v Marino. Rodrigues
The case involved a landlord who had taken a deposit from the tenant before the deposit protection rules came into force in April 2007, since changed by the Deregulation Act 2015 – see below. When the tenancy later became a statutory periodic tenancy, by which time the deposit protection rules had been introduced, the landlord served a Section 21 notice and the tenant successfully defended the claim on the basis that no s21 notice could be served when the deposit protection rules had not been complied with.
This article applies primarily to English law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.
Statutory Periodic Tenancies
The case went to appeal, and the Court of Appeal held that a statutory periodic tenancy is a new tenancy. This was a key ruling as most people up to that time had assumed that the fixed term and a statutory periodic arising from it were one and the same tenancy, but not so said the High Court judge in this new ruling.
The case threw a large spanner in the works for all residential landlords and their agents as every tenancy deposit not renewed, and the statutory information not re-served, when the tenancy was renewed or extended with the same tenant, or when it became a statutory periodic tenancy, was in fact in breach of the law. Fines could be automatic if cases like this were brought to court by the tenant, and a valid s21 notice could not be served.
Contractual Periodic Tenancies
Interestingly, this anomaly did not arise with a Contractual Periodic Tenancy, as these were deemed to be the same and a continuing tenancy. An assured shorthold tenancy (AST) can be drawn up as a contractual periodic tenancy from the start, for example, month to month, or run into one automatically when the fixed term ends, simply because the agreement says so – it will continue as a periodic tenancy once the fixed term ends.
The Deregulation Act 2015
The Deregulation Act was good news for landlords, as it will wiped out the deposit issues which arose following the Superstrike case, but the case did establish the fact that a statutory periodic tenancy is in fact a new tenancy and therefore had other implications – see: Tenant’s Liability to Pay Council Tax Leeds City Council v Broadley 
The main changes relating to deposits brought by the Deregulation Act 2015:
- Deposits taken before April 2007, where the tenancy became periodic after that date, had to be protected and the prescribed information served within 90 days of the Deregulation Act coming into force. This meant the deposit is treated as if it had always been protected.
- Deposits taken after April 2007 that were protected, and the prescribed information served at some stage during the initial tenancy, are now treated as if the prescribed information had been served on every renewal or whenever a statutory periodic tenancy arose, so no need to re-serve statutory information and no need to re-protect the deposit.
- Deposits taken before April 2007, which became periodic before that date, then had to be protected, or the money returned to the tenant (or the person who paid it), before a valid s21 notice can be served. Landlords would not be liable to a fine in this case for non-protection.
- The prescribed information rules were amended to allow which allowed for agents details to be given instead of landlords details, where the agent is dealing with a deposit.
The current Deposit Protection Rules require that:
- a landlord who receives a deposit from a tenant (or paid by someone on the tenant’s behalf) must protect it with one of the authorised schemes (s213(1) Housing Act 2004 (“HA 2004”)
- within 30 days of receipt the deposit it must be protected (s213(3) HA 2004), along with serving the scheme leaflet and the prescribed information on the tenant and/or anyone else who provided it (s213(5) HA 2004);
Failure to comply with these rules has two main consequences: the landlord could be required to pay a fine of between one and three times the deposit amount to the tenant (s214(4) HA 2004), and it will not be possible to serve a valid Section 21 Notice.
Source: Deposit Protection Service (DPS)
Deposit Scheme Exemptions
Some types of letting are exempt for the deposit protection rules and don’t need to register a deposit with one of the government approved schemes:
- Resident landlords – the landlord lives in the property
- Lodger landlords – the lodger shares facilities with the landlord
- If the tenancy has a rental value of over £100,000 a year
- Company lets
- Student accommodation let directly by universities or colleges
Landlords in Breach of the Rules
Many landlords have been caught out by the deposit protection rules, either because they have been unaware of them, or they have been careless with the deadline date. They often only find out in the unfortunate situation where they need to evict their tenant.
How to recover the situation then?
The only effective way for a landlord to recover if the deposit rules have not been complied with is to repay the deposit to the tenant. This leaves the way open to serving a valid section 21 notice and going through the eviction process. It has been suggested that should the tenant refuse to accept the return of the deposit, that is their choice, they have been offered it and that is sufficient. However, it still does not remove the liability to a fine, and should there be rent arrears, the arrears will be set against the fine.
Tenancy Deposits, Superstrike and the Deregulation Act https://t.co/O5MXQawYqy
— LandlordZONE (@LandlordZONE) May 17, 2017