Most Landlords of residential property will take a tenancy deposit at the start of an assured shorthold tenancy (AST). Tenancy deposits are a wise precaution against damage to the premises or to the Landlord’s furniture and contents, and against the possibility that the Tenant might leave rent or other money due under the AST unpaid.
Since April 2007 tenancy deposits taken at the start of an AST have to be protected in a tenancy deposit scheme (TDS). The purpose of this protection is to enable tenants to get tenancy deposits back at the end of an AST if there is no breach of the AST. TDSs provide dispute resolution schemes that both parties have to use if there is a dispute as to whether the Tenant is entitled to have all or part of the deposit returned.
A Landlord has to protect the deposit in a TDS within 30 days of when he receives it. He also has to give the Tenant and any person who paid the deposit on the Tenant’s behalf prescribed information in writing about the AST, the parties to the AST, and the TDS within 30 days of receiving the deposit.
This is mandatory if a deposit is taken – the Landlord and the Tenant cannot lawfully opt out.
A Landlord ignores this exercise at his peril. A Landlord who has not protected a tenancy deposit or given the prescribed information to the appropriate persons cannot rely on a section 21 Housing Act 1988 notice to recover possession of the property.
Until recently it was not certain what would be the position if an AST originally granted before April 2007 continued after its original period and a tenancy deposit was taken.
The June 2013 Court of Appeal case of Superstrike Limited –v- Rodrigues has now answered this question.
In Superstrike, the AST started on 8th January 2007 and was for a fixed term of one year less one day at a rent of £606.66 per month. Mr Rodrigues paid on month’s rent as a deposit in January 2007. Mr Rodrigues stayed on after 7th January 2008 and carried on paying rent. Superstrike did not put the deposit into a TDS in 2008 or beyond. On 22nd June 2011 Superstrike served a Section 21 Notice requiring possession. The Court of Appeal had to decide whether Superstrike could serve that notice.
The Court of Appeal decided that in January 2008 when Mr Rodrigues stayed on and continued paying rent, a statutory tenancy arose. At that point Superstrike should have put the deposit into a TDS because tenancies that started after April 2007 where deposits were taken were caught by the TDS legislation. The Court of Appeal said that Superstrike could not rely on the section 21 notice they served in June 2011, and could not get possession on that notice.
AST terminations can be complex and Landlords should take legal advice first. Cases like this mean a Landlord’s notice may not be a good notice. It is still wise to take tenancy deposits, but Landlords must protect them correctly and give out the correct information.
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