Effects of Tenancy Deposit Scheme on Older Tenancies

The Tenancy Deposit Scheme for residential tenancies has been compulsory since 6 April 2007 so landlords have now had plenty of time to get used to it.

Although regular landlords may be aware of the ins and outs of the scheme for assured shorthold tenancies created since that date, they may not be aware of its peculiarities for tenancies entered into before then.

If pre 6 April 2007 tenancies have continued beyond the expiry of the original term and a deposit was originally taken outside the Tenancy Deposit Scheme, landlords may have a shock in store if they try to seek possession using the normal Housing Act 1988 section 21 notice procedure.

A Quick Overview of the Tenancy Deposit Scheme

Under section 213(1) of the Housing Act 2004, landlords taking deposits from tenants entering into assured shorthold tenancies must register the deposit under the Tenancy Deposit Scheme within 30 days of receipt.

Landlords must also provide certain prescribed information to the tenant within that time limit.

Failure to do either can result in a penalty and invalidate the service of a section 21 notice to recover the property.

How Does this Affect Older Tenancies?

Assured shorthold tenancies entered into before 6 April 2007 were not subject to the rules governing the Tenancy Deposit Scheme but the conclusion of a Court of Appeal case in 2013 means that they can still be affected by it.

In Superstrike Limited v Rodrigues [2013] the landlord had entered into an assured shorthold tenancy with a tenant in January 2007 and taken a deposit of one month’s rent. The fixed term expired in January 2008 but the tenancy continued as a statutory periodic tenancy under the same terms until June 2011.

In June 2011 the landlord sought repossession of the property and served a section 21 notice on the tenant. Following repossession proceedings, a possession order was made in May 2012 but this was set aside because the deposit had not been protected under the Tenancy Deposit Scheme.

In the Court of Appeal the landlord argued that the tenancy had been started prior to the Tenancy Deposit Scheme being implemented so the deposit did not need to be protected and the section 21 notice was therefore valid. The Court of Appeal disagreed on the basis that the statutory periodic tenancy was effectively a new tenancy and that the deposit should therefore have been protected. Failure to do so invalidated the section 21 notice.

Conclusion

Where pre 6 April 2007 tenancies have expired and become periodic tenancies without the deposit being protected and without the prescribed information being served on the tenant at the time, landlords should seek legal advice before issuing a notice to recover possession.

For specialist advice contact Jane Canham today by email JCanham@rollingsons.co.uk or telephone 0207 611 4848.