Tenancy Deposits – Where are we now?
Many landlords have been thrown into confusion over the last few months as tightening legislation and a series of recent court cases has shrouded the legal position of taking a tenancy deposit with an air of uncertainty. Property Hawk welcomes the expert views of Rebecca Brough from Fidler Pepper to give Property Hawk regulars a legal update:
Last April saw the introduction of the Localism Act 2011, which tightened the regulations on deposit protection.
The new regulations state:
1. The deposit must be protected within 30 days of receipt and the landlord must give the tenant the prescribed Information, also within 30 days;
2. Failure to comply with this means that the tenant can apply to the Court for the deposit to be protected or returned, when making the Order the Court must also order the landlord to pay the tenant compensation – this will be an amount equivalent to between one to three times the amount of the deposit;
3. Further, if the deposit is not protected within 30 days and the prescribed information not served on the tenant, the landlord can not serve the tenant with a Section 21 Notice unless the deposit is returned to the tenant.
Reason for the changes
The new regulations were brought in by the Government as they felt that the Judges were being too lenient on landlords and allowing them to avoid the penalties by protecting the deposit late.
The new rules seem pretty clear. But there is the question of when the deposit is received?
At the start of the tenancy this is quite straight forward, but what happens once the tenancy comes to an end.
Case causes confusion
If you issue a new tenancy agreement you will need to re-protect the deposit. But what happens if you let your tenancy run over onto a periodic tenancy. It was thought that you did not need to re-protect the deposit. However the ruling in the case of Superstrike Ltd v Marino Rodrigues on 14 June 2013 caused some confusion when the Court of Appeal held that a periodic tenancy creates a new tenancy, and because of this the deposit needs to be re-protected. This has caused some panic among practitioners, deposit protections schemes and landlords.
However, on further reading of the judgment we can now all relax a little – the facts specific to the case are that an Assured Shorthold Tenancy commenced on 8 January 2007, before the regulations came in regarding deposit protection. As there were no requirements to protect the deposit at that time it was held by the landlord.
The fixed period of the tenancy ended on 7 January 2008, and it was allowed to run over onto a periodic tenancy. The Judges ruled that at that point a new tenancy was created and the deposit must be protected within the deposit regulations.
The ruling did not state that all protected deposits must be re-protected when the tenancy becomes a periodic tenancy. If you have protected your deposit as required and allow your tenancy to roll over on to a periodic tenancy you do not need to do anything further.
However, what it does mean is that if you entered into an Assured Shorthold Tenancy Agreement before 6 April 2007 and have allowed the tenancy to roll on to a periodic tenancy there is an obligation to protect the deposit. Of course you will now be out of the 30 day deadline for protection, so how do you get round this?
• landlords can protect the deposit late, but if you do so you can not serve a Section 21 Notice until the deposit is returned to the tenant;
• landlords can give your tenant a new Assured Shorthold Tenancy Agreement
• and then protect the deposit; or
• landlords can return the deposit to your tenant.
Prescribed information overlooked
Unfortunately this is not the only problem that is occurring. My general finding is that most landlords are now aware that the deposit should be protected and are ensuring that they have protected it within the 30 days. However, many landlords do not know anything about the Prescribed Information.
The Housing (Tenancy Deposit) (Prescribed Information) Order 2007 sets out the information that must be given to the tenant on the protection of the deposit. This can be given in any form but it is advisable to use the document provided by your deposit scheme to ensure that you give your tenant all the required information. Just to make it clear – the Tenancy Deposit Certificate is not the Prescribed Information and does not contain all the information required in The Housing (Tenancy Deposit) (Prescribed Information) Order 2007.
In order to get the Prescribed Information you will have to download and print off a separate document from your tenancy deposit website (it is available for FREE through Property Hawk’s free property management software – PM3, fill in information and hand it to the tenant. Both the landlord and the tenant should sign the document and both parties should keep a copy.
Failure to provide the prescribed information carries the same penalties as not protecting the deposit, although it can be given after the 30 day deadline.
On investigation I have found that while they have protected the deposit they have not given the tenant the Prescribed Information. This means that the Section 21 Notice is invalid. The only way to remedy this is to give the tenant the Prescribed Information and then serve a new Section 21 Notice, which of course leads to a delay of at least 2 months.
Although the tenancy deposit scheme websites will advise you to serve the Prescribed Information on the tenant it is often tucked away under other information. After you have protected the deposit there is nothing advising you about this document. I do think this can be resolved quite easily by a further step being added to the deposit protection procedure, which would bring up the document after you have protected the deposit and advise that you print it out and hand to your tenant. If you could not exit the scheme until you have seen the document and had this advice it would be very hard for a landlord to miss this. I have set up an e-petition on the Government website suggesting this, if it receives 100,000 signatures it will be debated by the House of Commons.
Can you please sign the petition – it is in your interest to do so.
In the meantime check that you have given all your tenants the Prescribed Information, and if you find that you haven’t do it straight away, this will avoid any delays in obtaining possession at a future date or the tenant bringing a claim against you for not giving them the Prescribed Information.
If you need any advice or assistance regarding this or any other tenancy issues you can email me at firstname.lastname@example.org
Fidler & Pepper
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