English landlords will not need to re-comply with tenancy deposit requirements when tenancy 'rolls over'

Out-Law News | 20 Jun 2014 | 4:40 pm | 2 min. read

English landlords that secured deposits from fixed-term tenants would not have to re-comply with the deposit protection rules if that tenancy later 'rolls over' to become a statutory periodic tenancy or if the landlord enters into a new tenancy with the same tenant for the same premises, the UK government has proposed.

It also plans to legislate to create a 90-day 'grace period' during which landlords who took deposits for fixed-term tenancies granted before the deposit protection rules came into effect in April 2007 can register the deposit and provide prescribed information without penalty.

The changes have been introduced as amendments to the Deregulation Bill, which is currently before parliament, and have been put forward by the UK government's Department for Communities and Local Government (DCLG). They are intended to address areas of uncertainty highlighted by last year's 'Superstrike' decision, in which the Court of Appeal ruled that rolling over triggered the statutory deposit protection requirements in relation to a deposit taken for an assured shorthold tenancy (AST) entered into before the TDS regime came into force .

However, the court left open the question of whether a landlord would have to re-comply with the requirements when the periodic tenancy arose in relation to an AST entered into after the new regime came into force. The government has now confirmed that it does not intend for a landlord that has already complied with the deposit protection requirements in relation to the fixed-term tenancy agreement to have to re-comply with the new rules if a statutory periodic tenancy arises, or if the landlord enters into a new tenancy with the same tenant for the same premises.

"Private sector landlords will welcome the government's intervention as the question left open by the Superstrike decision had the effect of placing a significant and unnecessary administrative burden on them if they wanted to fully protect their position," said Nicola Buchanan, a property disputes specialist at Pinsent Masons, the law firm behind Out-Law.com. "First, they had to put in place robust systems to ensure that they are tracking the date on which a statutory periodic tenancy will arise; and, second, they had to re-protect the deposit and serve all the prescribed information within 30 days of that date."

Tenancy deposit schemes were introduced in England and Wales in April 2007, when the relevant provisions of the 2004 Housing Act came into force. Deposits paid by assured shorthold tenants now have to be lodged with an authorised statutory scheme within 30 days of receipt, while tenants must be provided with certain prescribed information as to how their deposits have been protected.

Among the legal consequences for a landlord that fails to hold a deposit in accordance with an authorised scheme is that it may not issue a notice requiring possession under section 21 of the 1988 Housing Act in the absence of a statutory reason for doing so, simply because it wants to bring the tenancy to an end. In the Superstrike case, the Court of Appeal said that a statutory periodic tenancy which automatically arose after a 12-month AST expired was a new tenancy, and that the deposit protection requirements which came into force between the two tenancies applied.

The Deregulation Bill is currently in the House of Commons. It must be passed by both the Commons and the House of Lords before these changes can come into force.