News Flash: Latest Development in Tenancy Deposits Law

Latest Development in Tenancy Deposits Law

During June 2013 the Court of Appeal handed down judgment on an appeal in the case of ‘Superstrike Ltd vs Marino Rodrigues’.

The case concerned an assured shorthold tenancy which began in January 2007 for a fixed term of one year less one day.  A deposit was taken by the landlord at the outset, but it was not placed in a deposit protection scheme (deposit protection was introduced in April 2007).  On expiry of the fixed term the tenancy became a statutory periodic tenancy, from January 2008 onwards.  In June 2011 the landlord served a section 21 to bring the periodic tenancy to an end.

On expiry of the section 21 notice the landlord obtained a possession order under the accelerated possession procedure, but the possession order was set aside on the ground of non-compliance with the requirements of tenancy deposit protection.  The landlord appealed the decision.

The Court of Appeal determined that a statutory periodic tenancy is a new, distinct tenancy and not a continuation of the tenant’s original tenancy.  The deposit held by the landlord at the end of the fixed term stood as security for the performance of the tenant’s obligations under the new tenancy and was deemed to have been received, in relation to the new tenancy, in January 2008 i.e. when the periodic tenancy came into being, after the introduction of tenancy deposit protection.

As the landlord had not complied with the requirements of tenancy deposit protection in relation to the new tenancy, the section 21 notice served in June 2011 had been invalid and the possession order originally granted in the landlord’s favour could not stand.

The Implications

Landlords of assured shorthold tenancies which began pre-6 April 2007, for which deposits were taken but not protected by being placed in a deposit scheme need to consider the deposit protection requirements following the expiry of those tenancies.  Landlords need to place deposits in a deposit protection scheme if they wish to allow their tenants to remain in occupation under periodic tenancies after the expiry of the fixed term.  A section 21 notice served to terminate a periodic tenancy whilst the requirements of tenancy deposit protection have not been complied with will be invalid.

The decision in ‘Superstrike’  does not apply to deposits taken after 6 April 2007 and does not introduce a requirement to re-protect deposits held in accordance with a tenancy deposit scheme when a periodic tenancy comes into being.

Litigation Department, Kerseys