It would seem all the talk currently is about Superstrike Ltd v Rodrigues [2013] EWCA Civ 669. I thought today we would provide a few more thoughts on this now that things have had time to settle and also explain why we are especially concerned with comments made in this judgment.

I should just say from the outset this is more of a personal blog entry than would normally be found on this site so anything said here are personal opinions and not necessarily advice or views held by the Guild (I intend to make clear any distinctions if there are any).

Recap

First, lets have a quick recap of Superstrike Ltd v Rodrigues. Tenancy deposit legislation came into force on 6 April 2007. The landlord in this case took a deposit before this date and then the tenancy became a statutory periodic tenancy in January 2008. The court ruled that a statutory periodic tenancy is a brand new tenancy and therefore in effect the landlord had returned the deposit to the tenant in January 2008 under the old fixed term tenancy and the tenant gave back the deposit for the new periodic tenancy. As the landlord had now effectively received a new deposit (no money actually changed hands this is what happened in law), the Court of Appeal ruled that the landlord should have protected the deposit back in January 2008. As the deposit wasn’t protected, the landlords section 21 notice (served in 2011) was invalid. In order for the landlord to now rectify the situation, he must return the deposit (or agree deductions) before serving a section 21 despite ‘physically’ receiving the deposit prior to the start of the legislation.

Statutory periodic tenancy

The first thing to note is that you may be surprised to hear we’re not that annoyed about this decision. I don’t necessarily agree with the outcome but I totally understand the argument which fundamentally ended up being about whether a statutory periodic tenancy is a new tenancy comparable to a physical renewal or not (the Court held it was a new tenancy).

As I say, that’s not the end of the world although I’m rather surprised as to the very little thought and consideration that went into this part of the decision. However, this type of question has been debated for some time now although it’s interesting to note how many people are now saying “I told you so” but it’s difficult to find any article whatsoever dated around 6 April 2007 when the legislation took effect, that say words to the effect “if you have recently taken a deposit and your tenancy is about to become periodic, you should protect the deposit within [14] days of going periodic”.

Government guidance

It is also worth noting that the guidance issued by the government at the time (which I think is still current) said in the q & a section (highlights added):

Q.34 How will this affect deposits paid for ASTs which start before 6 April 2007?

The legislation will only apply to new deposits paid for ASTs entered into on or after 6 April 2007. Any deposit paid before this date will not need to be safeguarded by a tenancy deposit scheme.

Q.35 What happens if the tenant renews their contract after 6 April 2007?

If the tenant decides to remain in their existing rented property beyond the initial fixed term of 6 months, how the deposit is treated will depend on how the tenancy is continued:

Periodic tenancy – i.e. the tenancy continues with no new agreement – TDP will not apply, as no new AST will have been created.

Replacement tenancy – i.e. a new AST is created between the same landlord and tenant for the same property on substantially the same basis – TDP will apply to the initial deposit that was paid prior to 6 April 2007.

And my favourite q and a:

Q.36 Can landlords avoid TDP by not taking a deposit at all?

Other options have always been open to landlords but most landlords will want to continue to take a deposit in order to protect their interests.

Yea right, whatever!

As I have mentioned above, fair enough, a statutory periodic tenancy is a new tenancy, that’s not really the point. Even if it is a brand new tenancy (which I’m still not 100% convinced of but must accept that it is), I see no reason why the court couldn’t distinguish between a voluntary arrangement of a physical renewal tenancy and a statutory tenancy which emerges where landlord and tenant have no choice, as was compared in Well Barn Farming v Backhouse [2005] 3 E.G.L.R. 109 (on incomparable issues). As the tenancy deposit legislation is written, it’s my view that it could have been interpreted both ways and I see no benefit in interpreting it the way the Court did.

Guarantee agreements

The problem with this claim about statutory periodic tenancies being a brand new tenancy is all the follow on problems this causes like guarantors for example. Do they all now cease because in effect a new tenancy has been granted? (Normally a guarantee agreement ends if a renewal is provided although our guarantee agreement continues into renewals and periodic so are ok).

Section 21 notices

Although a section 21 notice would potentially be treated as withdrawn if a renewal was done after service, even if a statutory periodic tenancy is a brand new tenancy, previously served section 21 notices will be fine because section 21(2) when referring back to the 21(1)(b) notice provides:

… that subsection shall have effect notwithstanding that on the coming to an end of the fixed term tenancy a statutory periodic tenancy arises.

Prescribed information

This Superstrike Ltd v Rodrigues judgment states that the deposit is received again when the tenancy goes statutory periodic which also gives other problems. A number of commentators are suggesting as a result of this case that prescribed information will have to be given not only when the deposit was received but also when the tenancy goes statutory periodic (because the deposit is received again). This is good advice and officially the Guilds advice because we quite see the argument. However, on a personal note, I don’t think this will be necessary (but then I didn’t think any deposits taken prior to 6 April 2007 would be affected!) There has been no decision whatsoever on this point of giving prescribed information a second time (some solicitors are even advising to give new prescribed information monthly if the periodic tenancy runs monthly!) All these recent big cases are cases where the deposit was ‘never’ protected nor ‘full’ prescribed information given. At the time of writing therefore, there is no Court ruling that this must be done. It is nothing more than speculation (with reasonable grounds to speculate).

Our latest deposit assured shorthold tenancy agreements do not require prescribed information to be given again at periodic stage even if the speculation is correct.

Service of section 21 on pre April 2007 tenancies

The part of the judgment that has really got under our skin though is not just the part above but mostly the comments made at the bottom of the judgment in relation to ‘all’ deposits.

To summarise the comments, it was suggested by the Court that the restriction on serving a section 21 notice (which is one of the penalties for failing to protect) might apply to ‘all’ deposits, even those taken pre April 2007 and even those that turned periodic pre April 2007 so literally meaning all deposits currently held by landlords or agents that are not (and didn’t need to be) protected. The court then went on to say:

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 …

Quite what the point in mentioning this if it wasn’t going to be decided is unclear but anyway, assuming this is right, take Rachel and I for example. We have quite a number of tenants who paid a deposit long before 2007 and are still in occupation. It’s surprising we have any of these long term tenants left though because according to Shelter, we landlords simply evict all our tenants without reason! Yet, here we are with tenancies around 10 years old? We have even had to carry out repairs on these older tenancies and we didn’t serve a retaliatory section 21 notice on them! Quite amazing I know but it’s true! As we keep trying to explain to Shelter and such organisations, we landlords are in the business of ‘letting property’. The only reason we evict people is to protect our livelihood (where for example rent is not being paid or damage is being caused) for otherwise we would be bankrupt within a year. Anyway, to get back on topic, on 6 April 2007, We took a considered decision to never take a deposit on our properties again because it was clear protecting deposits was going to be too complex and require a ridiculous amount of paperwork. We have only taken a deposit on one property for research purposes so I could protect and get used to procedures and such for the help-line.

It must surely have been my right to cease taking deposits from April 2007? And yet, here we are and it’s now been suggested that we are somehow involved with tenancy deposit schemes? I’m sorry but that can’t be right.

Legislation changes

That’s why I said in my earlier article the legislation is now unsustainable. With respect, no legislation should be allowed to put any member of the public in such a situation and it is that reason why this particular quarter was surprised by the decision. It’s my view that the legislation has no choice but to be drastically overhauled now, if not abolished altogether (with some intention to start again after proper consultation and proper research this time).

As it turned out, the decision to not take deposits and instead rely on guarantors worked fantastically well and I doubt we would go back to deposits even if the legislation were abolished tomorrow but that’s not the point here. It is a fundamental right of choice that this judgment has potentially infringed upon and it is that which I have a problem with.

You never know, something good might come of all this in the end? We are working on many meetings currently with our MP and such. Perhaps now we will finally be heard in particular about the prescribed information problems which we’ve complained about from day one (having to serve around 10 pages of information on every tenancy is simply nonsensical). We can be hopeful that if changes are now made, they will be made for the better.

Final comment

I have been writing this post throughout late last night and this morning and I see also this morning a similar ‘after the event’ excellent post has been provided by Tessa Shepperson on her excellent Landlord Law Blog (links to post). I promise I didn’t copy or steal that idea. Indeed I believe I started writing this post first (smiley face).