The Court held that as a statutory periodic tenancy arising under s5 of the Housing Act 1988 is a new tenancy, when many in the industry had assumed that it was a continuation of an existing fixed term tenancy, and therefore needed no further action regarding the deposit.
Not only does the ruling affect tenancies started before April 2007, which many people thought we exempt the deposit rules, it also brought into doubt the position regarding renewals and tenancies which become statutory periodic post April 2007.
The guidance now issued is available on the four schemes’ websites:
In England and Wales, if you rent out a residential property on an assured shorthold tenancy, and you take a deposit from your tenant, you must place it in one of the following tenancy deposit protection (TDP) schemes. The information they have issued is here:
The main points are:
1 At the end of the fixed term, check with the deposit protection scheme you used to make sure the protection is current and re-serve the prescribed (s213) notice on your tenant ' available for the scheme website. Don?t forget you need proof of service.
2 When you renew a tenancy, or when it becomes a statutory periodic tenancy, re-check with the deposit scheme and re-serve the statutory notice.
3 If your tenancy has already been renewed or become periodic without completing step 2 then you could be in breach of the rules. This has still not been defined and awaits a further court decision on this point.
4 Landlords are advised to seek legal advice on point 3, but common sense should prevail here by taking sensible measures to protect yourself, to either:
a. Check the protection registration again and re-serve the prescribed information now, even though it's late, in an attempt to mitigate your penalty if in the event it does arise as an issue, or
b. Leave the service of the prescribed information until just before you decide to serve a section 21 notice.
The choice is yours and of course the risk is yours.
If you are in position where you never protected the deposit at all, you won?t be able to use the possession procedure at all, unless you can persuade your tenant to accept a full refund of the deposit. There still doubt about your position if you just send the money. Of course in this situation you will still be subject to a fine.
This whole episode is a complete fiasco and must be a total embarrassment to the last Labour Government which introduced this wonky legislation.
Article courtesy of LandlordZONE