Laws regarding tenancy deposits could be changed by the Government following a controversial decision made earlier this year by the Court of Appeal. The change could well have major implications for landlords across the country.
The ruling made by the Court in the Superstrike vs Rodrigues case, determined that periodic tenancies that have been created following the end of a fixed-term tenancy must be treated as “new and distinct”. As a result of this, tenancy deposits may well need to be re-protected in line with every new periodic tenancy.
The case centred around a landlord who had taken a deposit from his tenants prior to the 2007 implementation of rules relating to tenancy deposit protection. After the time at which the rules regarding protection had been rolled out, the fixed-term tenancy turned into a periodic tenancy and, because the deposit had not been protected, the tenant believed that the landlord should therefore not be entitled to serve a section 21 notice to end the tenancy.
The tenant won the case, with the court ruling that the statutory periodic tenancy created a new agreement, and therefore the deposit should have been protected and any necessary information served to tenants once again.
Following the case, former Housing Minister Mark Prisk confirmed that this had not been the intention of the law relating to deposit protection, and that, as a direct result of the case, it may be altered.
Mr Prisk wrote in a letter to the Residential Landlords Association: “There are concerns that the Court of Appeal decision means that where a deposit was taken for an assured shorthold tenancy before the introduction of tenant deposit protection and continued as a statutory period tenancy after 6 April 2007, the landlord should have protected the deposit at the start of the statutory period tenancy.
“This was not the intention of the legislation and we are urgently exploring whether new legislation is required to clarify the situation,” he said.
Jonathan Litchfield, a solicitor within Burke Niazi’s Housing department, acted for the tenant in their successful High Court appeal in the tenancy deposit case of Suurpere –v– Nice [2011] EWHC 2003 (QB).
Jonathan emphasises the importance of landlords being aware of the up-to-date tenancy deposit legislation and recommends that pending any further changes to the law, as a precautionary step, a landlord should write to a tenant within 30 days of any fixed-term tenancy ending to confirm that the deposit, which now relates to the new periodic tenancy, is being protected. The landlord should also re-serve the prescribed information within the 30 days.
Jonathan explains: “Although this is a further administrative burden for a landlord, it is a minor inconvenience when measured against the considerably greater burden of defending a tenancy deposit claim in which the tenant might ultimately be awarded a penalty of as much as three times the value of the deposit”.