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.
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.