Please note, there has been a number of amendments a few hours after publication and this article should be read again if it was read on the day of publication (26 June 2014). See the new summary below

 

We reported a month ago about a proposed amendment to tenancy deposit legislation which would remove the effects of Superstrike and in particular, the necessity to issue prescribed information again when a tenancy goes statutory periodic. In addition, that proposal would require all deposits taken pre April 2007 to be protected within 90 days. We were critical of that latter requirement in particular because:

It seems there is no provision to simply return the deposit before three months which in our view is entirely unfair. We and many others took a conscious decision to cease taking deposits from April 2007 onwards to avoid the absolute mess that is tenancy deposit legislation. Yet here we are being forced into it.

Now, there is a major amendment to the proposal which in our view is much better and more comprehensive in it’s approach. It is proposed that new sections 215A, B, C and D are inserted into the Housing Act 2004.

Summary (applies to assured shorthold tenancies only)

  • Any deposit received before 6 April 2007 and went statutory periodic on or after 6 April 2007 must be protected within 90 days.
  • Any deposit received for a fixed term on or after 6 April 2007 and was protected / prescribed information given correctly at the time will be treated as being protected / prescribed information given when it goes statutory periodic (so no need for new protection / prescribed information).
  • Any deposit received for a fixed term or contractual periodic tenancy on or after 6 April 2007 and prescribed information was given correctly at the time, then, if a renewal tenancy is granted (between same landlord and tenant for substantially same property), or a contractual periodic tenancy replaces the original tenancy, the prescribed information is treated as having being given in respect of the renewal / replacement tenancy (but not necessarily a new protection as that depends on scheme rules, see later).
  • For transitional provisions see later.

 

 

Analysis of each proposed section

215A Statutory periodic tenancies: deposit received before 2007

This will apply where a deposit has been received before 6 April 2007 and the following applies:

  • deposit was received (before 6 April 2007) in connection with a fixed term assured shorthold tenancy, and
  • a statutory periodic tenancy arose on or after 6 April 2007, and
  • on the date of commencement of this amendment, the periodic tenancy still exists, and
  • the deposit continues to be held by the landlord (or agent)

Where all of above applies, the deposit must be protected and prescribed information given within 90 days beginning with the commencement date. It is important to note that it is the commencement date that will trigger the requirement to protect within 90 days. Therefore if a landlord does not wish to protect the deposit, they must return it in full before that date although it is worth noting it only refers to deposits received before 6 April 2007 and went statutory periodic on or after that date so there will be a very limited number of affected deposits.

The date to protect can be made to be sooner than 90 days if, before the first day after commencement the court has determined an application for protection and compensation or, determines whether to order possession under section 21. This means current Superstrike based claims for compensation are still valid until commencement as too are defences against section 21 notices citing Superstrike until commencement (although see at bottom transitional provisions).

If on the commencement date, the statutory periodic tenancy has ended or the deposit is no longer being held in connection with the periodic tenancy (i.e. has been returned before the commencement date or tenant vacated) it is treated as though the landlord had complied with protection and prescribed information. This means that on or after commencement, no more Superstrike claims can be made in relation to a period before the commencement date which is a good thing for landlords.

Where there has been a renewal since April 2007 and the deposit is still being held, the normal protection rules in relation to that renewal will continue to apply.

215B Statutory periodic tenancies: deposit received on or after 6 April 2007

Where a deposit has been received by a landlord in connection with a fixed term tenancy on or after 6 April 2007 and:

  • the deposit was protected and prescribed information given in accordance with the rules at the time (e.g. currently within 30 days), and
  • a statutory periodic tenancy arises at the end of the fixed term, and
  • the deposit continues to be held in the same scheme

Then, the landlord is deemed to have complied with protection and prescribed information requirements in relation to the deposit being held under the statutory periodic tenancy. As a result, the effects of Superstrike will no longer apply and protection / prescribed information will not be needed where a tenancy goes statutory periodic.

215C Renewed fixed term or contractual periodic tenancies: deposit received on or after 6 April 2007

Where a deposit has been received on or after 6 April 2007 and:

  • the deposit was in relation to a fixed term tenancy or,
  • the deposit was in relation to a periodic tenancy from the outset (no fixed term e.g. verbal tenancy)

And,

  • prescribed information was given in accordance with the rules at the time (e.g. currently within 30 days), and
  • a new fixed term or replacement contractual periodic tenancy comes into being, and
  • the deposit continues to be held in the same scheme as was last required to be complied with.

Then, the landlord is treated as having complied with the prescribed information requirements in relation to the new fixed term or the replacement contractual periodic tenancy (and only the prescribed information part). Note the important difference with this compared to the statutory periodic provisions above. Under this provision, section 213(3) (protection) is not treated as having been complied with and only 213(5) & (6) (prescribed information) is treated as complied with. Whether the deposit will need re-protecting in respect of the renewal or replacement contractual periodic tenancy will depend on the individual rules of each scheme. For example the TDS rules clearly state that there are no new requirements for a renewal or statutory periodic tenancy but My Deposits specifically require a further fee with fixed term renewals which would still need to complied with otherwise the deposit will cease to be protected. The rules aren’t clear with the DPS so hopefully they will make a change to their terms and conditions in the near future to offer clarification.

Where a fixed term tenancy continues into a contractual periodic tenancy such as our agreements, no further action upon the continuation is necessary because there is no replacement tenancy which is a prerequisite of the provisions.

For the prescribed information to be treated as being complied with upon renewal or replacement contractual periodic tenancy, the landlord and tenant must be the same as the original tenancy and the premises let must be the same or substantially the same as originally let. It is worth noting, this rule does not apply if there is a change in the composition of tenants at the time of the renewal tenancy and such a renewal would need a full new protection and prescribed information.

Thanks to David d’Orton-Gibson for spotting this difference between statutory periodic tenancy provisions and renewal tenancy provisions.

215D Sections 215A to 215C: transitional provisions

All the provisions discussed above are treated as having effect since 6 April 2007 except a number of individual circumstances. The provisions do not have effect in relation to:

  • a claim under section 214 Housing Act 2004 (penalty for failure to protect) or section 21 Housing Act 1988 in respect of a tenancy which is settled before the commencement date (whether or not proceedings in relation to the claim have been instituted), or
  • Proceedings under section 214 HA2004 or section 21 HA1988 which have been finally determined before commencement (“finally determined” means they have been determined by a court and there is no further right to appeal.)

Where proceedings have been commenced but not yet determined by the commencement date and because of the new sections 215A, B and C, the court decides not to make an order for penalty or allows an appeal by the landlord, the tenant will not be ordered to pay the landlord’s costs in relation to that part of the proceedings.

Where proceedings in relation to a section 21 notice have been started but not determined by the commencement date and because of the new sections, the court decides to order possession (where perhaps if it weren’t for the new sections it wouldn’t have) or, to allow an appeal by the landlord, the tenant will not be ordered to pay the landlord’s costs in relation to that part of the proceedings.

Comment

This amendment is a massive improvement on the original proposal as the first proposal only included statutory periodic tenancies. This current version of the amendment (which may change yet) incorporates all types of transitions from one tenancy to another including renewals. In addition, the fact that deposits can be returned for the few pre April 2007 deposits caught which will avoid the need for protection is a huge improvement in our view.

This amendment clearly addresses the situation in Superstrike where the deposit was received pre April 2007 but went statutory periodic after April 2007. However, in Superstrike at the end of the judgment, the following was said at paragraphs 43 – 45:

… Towards the end of a further skeleton argument lodged thereafter by Mr Westgate and Mr Chataway another point was taken, namely that even if the provisions of section 213 had not applied to the deposit as a result of the creation of the statutory periodic tenancy in 2008, nevertheless the terms of section 215(1) were such that it applies so as to prevent a section 21 notice from being served whenever a deposit is held which is not held in accordance with an authorised scheme.

I can see the basis for this argument on the literal words of the section. If it is right, it would have had extensive consequences when the legislation first came into force, since it would have required any deposit to be put into an authorised scheme before the landlord could serve a section 21 notice after the commencement date, even if there would have been no other obligation to do so under section 213. It is not clear how significant would be the effect of this point now, six years after the provisions first came into force.

Interesting as the point is, it is not necessary to decide it for the purposes of determining this appeal. For that reason, I prefer not to deal with it but to leave it to be decided in a case in which it matters, if one such were to arise.

It is strange that with such a comprehensive set of amendments, ALL deposits taken pre April 2007 including those that went statutory periodic before 6 April 2007 hasn’t been covered by these amendments.  Clarification to clear up this possible problem which as yet remains undecided would have been nice. However, it seems only the service of a section 21 notice is potentially affected by Superstrike and nobody seems to be suggesting such deposits need protecting. The option is still available therefore to return the deposit before service of a section 21 in these circumstances to be safe.

Although this is only a proposal at the moment, it is likely that this will get the go ahead even if not in exactly this form. The full text of the proposed new sections is copied below.

Proposed Amendment Text

“Tenancy deposits
In Chapter 4 of Part 6 of the Housing Act 2004 (Tenancy Deposit Schemes), after
section 215 insert—

215A Statutory periodic tenancies: deposit received before 6 April 2007
(1) This section applies where—
(a) before 6 April 2007, a tenancy deposit has been received by a landlord in connection with a fixed term shorthold tenancy, and
(b) on or after that date, a periodic shorthold tenancy is deemed to arise under section 5 of the Housing Act 1988 on the coming to an end of the fixed term tenancy.
(2) If, on the commencement date—
(a) the periodic tenancy is in existence, and
(b) all or part of the deposit paid in connection with the fixed term tenancy continues to be held in connection with the periodic tenancy, section 213 applies in respect of the deposit that continues to be held in connection with the periodic tenancy, and any additional deposit held in connection with that tenancy, with the modifications set out in subsection (3).
(3) The modifications are that, instead of the things referred to in section 213(3) and (5) being required to be done within the time periods set out in section 213(3) and (6)(b), those things are required to be done—
(a) before the end of the period of 90 days beginning with the commencement date, or
(b) (if earlier) before the first day after the commencement date on which a court does any of the following in respect of the periodic tenancy—
(i) determines an application under section 214 or decides an appeal against a determination under that section;
(ii) makes a determination as to whether to make an order for possession in proceedings under section 21 of the Housing Act 1988 or decides an appeal against such a determination.
(4) If, on the commencement date—
(a) the periodic tenancy is no longer in existence, or
(b) no deposit continues to be held in connection with the periodic tenancy, the requirements of section 213(3), (5) and (6) are treated as if they had been complied with by the landlord in respect of any deposit that was held in connection with the periodic tenancy.
(5) In this section and sections 215B to 215D “the commencement date” means the date on which section (Tenancy deposits) of the Deregulation Act 2014 is fully in force in England and Wales.

215B Statutory periodic tenancies: deposit received on or after 6 April 2007
(1) This section applies where—
(a) on or after 6 April 2007, a tenancy deposit has been received by a landlord in connection with a fixed term shorthold tenancy,
(b) the requirements of section 213(3), (5) and (6) have been complied with by the landlord in respect of the deposit held in connection with the fixed term tenancy,
(c) a periodic shorthold tenancy is deemed to arise under section 5 of the Housing Act 1988 on the coming to an end of the fixed term tenancy, and
(d) when the periodic tenancy arises, the deposit paid in connection with the fixed term tenancy continues to be held—
(i) in connection with the periodic tenancy, and
(ii) in accordance with the same authorised scheme as when the requirements of section 213(3), (5) and (6) were last complied with in respect of it.
(2) The requirements of section 213(3), (5) and (6) are treated as if they had been complied with by the landlord in respect of the deposit held in connection with the periodic tenancy.

215C Renewed fixed term or contractual periodic tenancies: deposit received on or after 6 April 2007
(1) This section applies where—
(a) on or after 6 April 2007, a tenancy deposit has been received by a landlord in connection with a shorthold tenancy (“the original tenancy”),
(b) the requirements of section 213(5) and (6) have been complied with by the landlord in respect of the deposit held in connection with the original tenancy,
(c) a new fixed term or periodic shorthold tenancy (“the new tenancy”) comes into being on the coming to an end of the original tenancy or a tenancy that replaces the original tenancy,
(d) the new tenancy is not one that is deemed to arise under section 5 of the Housing Act 1988,
(e) the new tenancy replaces the original tenancy, and
(f) when the new tenancy comes into being, the deposit paid in connection with the original tenancy continues to be held—
(i) in connection with the new tenancy, and
(ii) in accordance with the same authorised scheme as when the requirements of section 213(5) and (6) were last complied with in respect of it.
(2) The requirements of section 213(5) and (6) are treated as if they had been complied with by the landlord in respect of the deposit held in connection with the new tenancy.
(3) The condition in subsection (1)(a) may be met in respect of a tenancy even if—
(a) it replaces an earlier tenancy, and
(b) the tenancy deposit was first received in connection with the earlier tenancy (either before or after 6 April 2007).
(4) For the purposes of this section, a tenancy replaces another tenancy if—
(a) the landlord and tenant under the later tenancy are the same as under the earlier tenancy, and
(b) the premises let under the later tenancy are the same or substantially the same as those let under the earlier tenancy.

215D Sections 215A to 215C: transitional provisions
(1) Sections 215A to 215C are treated as having had effect since 6 April 2007, subject to the following provisions of this section.
(2) Sections 215A to 215C do not have effect in relation to—
(a) a claim under section 214 of this Act or section 21 of the Housing Act 1988 in respect of a tenancy which is settled before the commencement date (whether or not proceedings in relation to the claim have been instituted), or
(b) proceedings under either of those sections in respect of a tenancy which have been finally determined before the commencement date.
(3) Subsection (5) applies in respect of a tenancy if—
(a) proceedings under section 214 in respect of the tenancy have been instituted before the commencement date but have not been settled or finally determined before that date, and
(b) because of section 215A(4), 215B(2) or section 215C(2), the court decides—
(i) not to make an order under section 214(4) in respect of the tenancy, or
(ii) to allow an appeal by the landlord against such an order.
(4) Subsection (5) also applies in respect of a tenancy if—
(a) proceedings for possession under section 21 of the Housing Act 1988 in respect of the tenancy have been instituted before the commencement date but have not been settled or finally determined before that date, and
(b) because of section 215A(4), 215B(2) or 215C(2), the court decides—
(i) to make an order for possession under that section in respect of the tenancy, or
(ii) to allow an appeal by the landlord against a refusal to make such an order.
(5) Where this subsection applies, the court must not order the tenant or any relevant person (as defined by section 213(10)) to pay the landlord’s costs, to the extent that the court reasonably considers those costs are attributable to the proceedings under section 214 or (as the case may be) section 21 of the Housing Act 1988.
(6) Proceedings have been “finally determined” for the purposes of this section if —
(a) they have been determined by a court, and
(b) there is no further right to appeal against the determination.
(7) There is no further right to appeal against a court determination if there is no right to appeal against the determination, or there is such a right but—
(a) the time limit for making an appeal has expired without an appeal being brought, or
(b) an appeal brought within that time limit has been withdrawn.”

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