Tenant deposit protection laws are in disarray after a controversial decision by the Court of Appeal.
The judgment appears to go against guidance issued by deposit protection providers and is perplexing property lawyers trying to sort out how the case affects thousands of buy to let landlords and tenants.
The case has triggered an emergency meeting of deposit protection providers to discuss how to implement the rulling.
In the case, Superstrike Ltd v Marino Rodrigues, judges ruled that when a fixed term assured shorthold tenancy expires, but the tenant stays on in a rolling periodic tenancy, landlords should protect any deposit again at the start of the new tenancy.
Failure to do so means the landlord is in breach of deposit protection laws and could face paying tenants hefty compensation while losing the right to take court action to possess the property.
The judges say the interpretation of law behind the decision until now is flawed and continuing a tenancy after the fixed term has ended is the start of a new tenancy, which calls for the reprotection of the deposit.
However, the judges did not indicate the administrative process involved, so landlords do not know whether to reserve the deposit protection paperwork.
Any landlord that has had a fixed term tenancy end and convert to a periodic tenancy since April 2012 are subject of the judgment.
“Unfortunately, several points under this legislation turned out not to be as may have been expected or intended. It is therefore essential that landlords take proper legal advice before potentially wasting a good deal of time and money in seeking a possession order which may be doomed to failure,” said one of the judges.
Some lawyers suggest that landlords with long-standing tenants should consider returning any deposit so they can possess their property without protection issues leading to problems.
Link to judgement: http://www.bailii.org/ew/cases/EWCA/Civ/2013/669.html