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Court Ruling - Deposit Protection

Court Ruling - Deposit Protection

On the 14th June the Court of Appeal published a verdict which could have a far reaching impact on Landlords across the whole spectrum of the Private Rented Sector.

 

A very long story short, the Court of Appeal judged that should a tenancy become a statutory periodic tenancy after its initial fixed term has expired, then a brand new tenancy is created rather than the existing arrangements being continued on. This in itself is not particularly earth shattering provided that the original tenancy agreement was a fully legally conforming document, however, of greater import is that the Court also said the Prescribed Information required to be issued to tenants in relation to their security deposit needs to be reissued at the point where a statutory periodic tenancy is created. And, the security deposit itself requires to be re-protected.

 

Without wishing to become technical, basically, Prescribed Information is simply information about which of the approved schemes the deposit is protected with and the terms and conditions relevant thereto. As a matter of course, for example, we include this as part and parcel of putting a tenancy agreement in place. As for the need to re-protect the deposit, this is a thorny one because the Deposit Protection Service with whom we protect all security deposits, does not provide such a mechanism. Indeed at the time of writing this, The DPS website specifically statesno such action is required.

 

So what are the theoretical implications? Well the argument goes that if a deposit is not re-protected then (a) A section 21 action by the landlord to remove the tenants will fail in Court and, worse, (b) the tenant could ask a Court to award them the deposit and up to 3 times the deposit amount as a penalty against the landlord. As you can imagine the internet is abuzz with commentary on this particularly in the property sector blogsphere. Indeed, the doom and gloom merchants among them are already predicting the end of the private rental sector and homelessness en-masse. This is a little extreme to say the least!

 

From a practical perspective, our message is Keep Calm & Carry On Letting. In our view it is inevitable that this case will end up in the High Court when commonsense will prevail. In the meantime, where you have let your property with Martin & Co in Norwich, you may rest assured, the agreement we put in place for you at the outset of the tenancy is fully conforming and the security deposit is properly protected.

 

If you're interested enough to read the case in full here is the link http://www.bailii.org/ew/cases/EWCA/Civ/2013/669.html

 

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