Normally, questions go to our ask a question part of the website but this question received early this morning sums up the case from Friday (Superstrike Ltd v Rodrigues) perfectly and shows that perhaps there will be more landlords affected than first thought. We have put it here so all can see the post as it may be useful for landlords or agents.

**Update 21 June 2013** We have now added a new guidance page which should be consulted by landlords wanting to know what to do as a result of this recent tenancy deposit case.

Question

Dear adrian

Thank you for the latest info regarding the deposit. As usual you are spot on..

This is so ridiculous it seems that the original reasoning behind the deposit insurance scheme has been completely forgotten and now the court are just acting to promote the profit margin of the insurance companies.

Regarding the actual case you have highlighted i have a tenant since 2004 and another since 14/3/2007 so will insuring their deposit now will allow me to evict if needed?
The way i see it as long as a deposit insurance is made there is no restriction on section 21 date as it is prior to the changes that have taken place.

Am i correct in thinking so?

Best Regards

R

Reply

I don’t think this has anything to with the schemes in all fairness. One of the schemes is custodial and not insured anyway so there is never need for a landlord to pay to protect their deposits.

If I may, I reply in reverse order regarding your tenancies.

The 2007 tenancy

The tenancy you granted in 2007 is basically identical to the case we are talking about. I assume it was a 6 month fixed term initially (but it doesn’t really matter) so it will have turned statutory periodic on or about 14 September 2007. As I say the date doesn’t really matter. What’s important is that because it became statutory periodic ‘on or after’ 6 April 2007, according to this case, you returned the deposit to the tenant on that date and then the tenant gave you a deposit back again under the new periodic tenancy and so you should have protected the deposit within 14 days from 14 September 2007. Of course none of this ‘physically’ happened but that is what legally happened.

Protecting the deposit now is of no use because the Localism Act changes that are now effective means that in order for a section 21 notice to be served you must either repay or agree deductions before service of the notice. Unfortunately what this decision also means is that if the tenant were to make an application for the penalty (between 1 and 3 times deposit) they may be successful (but I suspect this would attract the lowest possible penalty).

Therefore, you could either return the deposit now or simply wait and see if you require possession and return it sometime prior to serving a section 21. By waiting, things could have changed again by then! (I am forever the optimist!)

The 2004 tenancy

The 2004 tenancy is less clear and we’re actually more annoyed about this age of tenancy than the one above regarding this case. In the latter paragraphs of the judgment the court said:

… even if the provisions of section 213 had not applied to the deposit as a result of the creation of the statutory periodic tenancy …, 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.

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.

Why would the court make such a comment? There was no need for this comment to be made whatsoever as it had nothing to do with this case.

Again, if we assume your 2004 tenancy was a six month tenancy so this time, the statutory periodic took place before 2007 so here there are no new tenancies whatsoever. Despite this, the court hinted that the inability to serve a section 21 notice under section 215 Housing Act 2004 may apply to ‘all’ deposits not held in a scheme at the time when service of the section 21 takes place. Now, the Localism Act changes means the deposit must be returned or agreed deductions must take place first.

I think leave this alone for now and we will see if you ever require possession. We may well know the answer to the question by this time because at the moment we don’t know. The penalty is unlikely (but in theory possible) but I suspect the worst thing you would need to do would be return the deposit before service of the notice. There is nothing else that can be done to protect your position so there is nothing lost in waiting on this one.

Many thanks

Guild of Residential Landlords

Pin It on Pinterest

Share This

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close