New case provides much needed clarification.
On 14 June 2013 Lord Justice Lloyd delivered his judgement on an appeal from the Wandsworth County Court in the case of Superstrike Ltd vs Marino Rodrigues which involved tenancy deposit protection rules and how they applied in that case.
The Superstrike case caused much confusion as to how the rules would be applied when a fixed term has expired and a statutory periodic tenancy has arisen.
Would the requirements in s.213 of the Housing Act 2004 apply again at this point? If so, must the prescribed information (s213 notice) be served again and would failure to serve this notice invalidate any future s21 notice, leaving the landlord liable to a fine under s.214?
A more recent case may just provide an answer: in the case of Gardner v McCusker (2014) at Birmingham County Court where, following service of a s21 notice and possession proceedings being commenced, a defence was brought by the tenant claiming that no prescribed information (s213 notice) was served when the tenancy became periodic.
In the Superstrike appeal, Lord Justice Lloyd had ruled that when a fixed term ends and the tenancy automatically becomes a statutory periodic tenancy, a new tenancy will arise (s.5, Housing At 1988). Up until then almost everyone had assumed that an AST periodic tenancy was a continuation tenancy and therefore there was no need to re-protect the deposit and re-serve the statutory deposit notice on the tenant.
In Gardner v McCusker the tenant argued that the landlord should have served the notice after the deposit re-protection was confirmed, in respect of the new tenancy – a statutory periodic one. In that case it was argued the landlord was subject to the statutory fine and the s21 notice was invalid.
The landlord argued in reply that as the deposit was deemed to “roll over” into a new tenancy (subject to confirmation being received from the protection agency) so too the prescribed information provided under the old tenancy was also deemed to “roll over”.
Unfortunately for the landlord the court ruled that the logic the tenant used was correct. It found that all the requirements in s.213 would have arisen anew when the tenancy became statutory periodic in May 2010.
The prescribed information had not been given in respect of the statutory periodic tenancy and therefore the s.21 notice was invalid.
The court ordered the landlord to return the deposit to the tenant in full (£600) and pay damages of 2 times the value of the deposit (£1,800 in total).
The claimant (tenant) was to pay the costs of the claim and the counterclaim which were to be off-set against outstanding costs from earlier proceedings, and rent arrears.
This ruling accords with and confirms the correct guidance given by the various deposit protection agencies to-date; that a new statutory notice (s213 notice) should be served on the tenant when the tenancy becomes a statutory periodic one and when the protected deposit is re-protected by confirmation.
This ruling may leave many landlords and agents vulnerable if they thought that this requirement would be dropped with the Government’s promised amendment through the forthcoming Deregulation Bill. However, given a tight legislative programme coming up to an election and the chance there may be no time and no amendment to change to this, landlords and agents should consider their position.
If you have tenancies in this situation it may be prudent to serve the prescribed information now. Bear in mind that you should also get proof of service to avoid the possibility of tenants bringing the defence that they never received it. This action will not absolve you from the possibility of a fine through failing to serve the notice within the statutory period of 30 days from the start of the new tenancy, but it may just allow you to use s21.
— LandlordZONE (@LandlordZONE) September 4, 2014