Still a potential minefield post-Superstrike, admit deposit schemes

Still a potential minefield post-Superstrike, admit deposit schemes

Important guidance has been issued jointly by the tenancy deposit schemes in the wake of the Superstrike v Marino Rodrigues case.

It advises agents and landlords to re-serve the Prescribed Information whenever, and within 30 days, of each tenancy renewal or the creation of a statutory periodic tenancy, wherever the deposit is currently protected.

However, the situation is less clear where tenancies have already gone from fixed term to become statutory periodic.

The guidance outlines three different options but does not give concrete advice as to which is best. Instead, it urges agents and landlords to take their own legal advice.

The Superstrike ruling was that when a tenancy goes from fixed to statutory periodic, a new tenancy is created. It was this that raised the issue as to what landlords or their agents should do in terms of deposit protection and the serving of Prescribed Information.

The tenancy deposit schemes – TDS, Mydeposits, DPS and Capita – say that there is “uncertainty” on the legal position where tenancies have become statutory periodic, and that they will monitor the position and issue updated guidance as further decisions are made by the courts or government.

The three options are:

    1.    Do nothing. Rely on the fact that the Prescribed Information was served when the deposit was first received, although there is a risk that a court might apply Superstrike reasoning and find that the Prescribed Information has not been served. The court could refuse a Section 21 notice and issue a financial penalty. This would delay getting possession of the property.?
    2.    Re-issue the Prescribed Information for tenancies that have gone from fixed to statutory periodic. There is still a risk that a court could decide that the Prescribed Information had been served late and issue a financial penalty.?
    3.    Issue the Prescribed Information before serving a Section 21 notice. Again, a court may decide this has been served late and issue a penalty.

Other parts of the guidance are clearer, relating to deposits taken before April 6, 2007, when tenancy deposit protection became mandatory.

The advice is that where a deposit was taken and remains in place and unprotected when a statutory periodic tenancy arises, then the deposit should be protected now, Prescribed Information given, and a record kept to show when and how this was done.

This, says the guidance “could help show that you are complying with the legislation as now interpreted by the Court of Appeal.

“However, it is the case that you will have protected the deposit late and will also have served the Prescribed Information late. In these circumstances, you can only issue a Section 21 notice if you return the deposit to the tenant in full, or with agreed deductions.

“A court may also issue you with a penalty … but your action in protecting the deposit late and keeping records to demonstrate that you did this because of Superstrike may help to mitigate this.”

As to whether the deposit itself should be re-protected once a fixed-term tenancy becomes statutory periodic, the advice suggests that this could be the subject of a future court case. The guidance does not tell landlords and agents to re-protect deposits, but it does advise them to check that the deposit is still protected.

The guidance also notes that industry bodies will be issuing their own guidance. This could include advising landlords and agents on other options, such as returning the deposit, or creating new fixed-term tenancies.

See also today’s blog.