Double Protection

Do Landlords need to re-register all deposits after the fixed term has come to an end, even when the Tenants remain in the Property? What if the tenant enters into a new Assured Shorthold Tenancy Agreement or a rent increase is agreed? 

Background 

All deposits taken after April 2007 must be registered in one of the recognised Tenancy Deposit Schemes within 30 days of receipt. Failure to do so, either on time or at all, can mean a Landlord must return the deposit to the Tenant and pay between one and three times that amount in compensation. This causes major complications in evicting tenants due to rent arrears. Landlords are also unable to serve a Section 21 Notice to regain possession. However, the Courts have now determined that a deposit taken before April 2007 may require registering, and if it has not been, the Landlord will fall foul of the penalties for non-compliance. 

Superstrike Ltd v Rodrigues (2013 - Court of Appeal) 

The tenancy commenced and the deposit was paid in January 2007. The deposit was not protected as the requirement to do so did not arise until April 2007. The fixed term came to an end in January 2008 and the tenancy continued as a periodic tenancy under the same terms. 

Proceedings were issued for several reasons and the Court of Appeal was asked to determine whether the deposit should have been registered in January 2008, when the tenancy changed from a fixed term tenancy to a periodic tenancy. The Court of Appeal agreed. 

Practical Advice 

Whilst Superstrike focused on a deposit that had not been protected, it is uncertain whether the Courts will expect Landlords to re-register a deposit when the fixed term come to an end and the Tenant remains in the property. 

1) If you received a deposit before April 2007, the fixed term tenancy came to an end after April 2007 and the Tenant remains, you should register the deposit as soon as possible. You must then provide the Tenant with the Prescribed Information. However, this will not avoid the penalties for non-compliance and a Section 21 Notice can only be served if you return the deposit to the Tenant in full or with agreed deductions. 

2) If you have already protected the deposit and the Tenancy changes from a fixed term to a periodic tenancy or a new fixed term you should re-serve the Prescribed Information within 30 days of the date the Tenancy changed. 

3) If you have already protected the deposit, but the Tenancy changed some time ago, check that the deposit is still registered. You then have 3 options regarding the Prescribed Information: 

a. Do nothing. The risk is that the Court will refuse a Section 21 Notice and/or issue a penalty for non-compliance. 
b. Send a copy of the Prescribed Information to the Tenant again. However, the Court may decide that the Prescribed Information was served late as it was not done within 30 days and refuse any Section 21 Notice and/or issue a penalty. 
c. Send a copy of the Prescribed Information to the Tenant before any Section 21 Notice is served. As above, the Court may still refuse any Section 21 Notice and/or issue a penalty for late compliance. 

Rent Increase and new Tenancy Agreements 

Of particular concern in the above case, is the passing reference in the Judgment of Lord Justice Lloyd to new tenancy agreements and rent changes. As no such changes occurred in the above case, this remained a passing comment. The implication is that entering into a new tenancy agreement or changing the rent could trigger the obligation to register the deposit and provide the prescribed information. A worrying thought for many Landlords who hold deposits received before April 2007. 

Unfortunately, the uncertainty will remain until the above issues are raised and dealt with in Court. If and when it does, we will update you. 

If you have any queries regarding this please contact Joanne Green.