Guidance has now been issued in the wake of the Superstrike v Rodrigues case. However, landlords should be aware that it remains a legal minefield. Taken from our RPI magazine please take the time to take in this legal update.
In an example of the industry working together, the RLA, together with other landlord and letting agent organisations, have issued advice following the Superstrike v Marino Rodrigues case.
In addition, the four tenancy deposit schemes have also co-operated to produce guidance. Unfortunately, none of it can be described as definitive. The tenancy deposit schemes’ advice urges individual landlords to take their own legal advice.
It is also emphasised that it may take further court cases to give much-needed clarity, while the Government may well revisit its own legislation. Indeed, in a letter to RLA chairman Alan Ward, housing minister Mark Prisk has said that he is “urgently” considering the matter.
Solicitor Tessa Shepperson described the situation as “highly unsatisfactory”. An expert on landlord law, she said: “It just shows what happens if legislation is not thought through properly.”
In a nutshell, the case concerned a tenancy which commenced before tenancy deposit protection became mandatory. The landlord took a deposit but did not protect it, breaking no law because this not required.
The tenancy became statutory periodic after the law came in, in April 2007.
The landlord did not protect the deposit but continued to hold it. When the landlord tried to serve a Section 21 notice to gain possession of the property, the tenant challenged this because the deposit had not been protected.
The Court of Appeal ruled that when the tenancy went statutory periodic, a new tenancy was created. The deposit should have been protected and the Prescribed Information served. The landlord could not serve a Section 21 notice.
The ruling has implications for landlords with tenancies that began before tenancy deposit protection became the law, and also for all landlords with tenancies that began as fixed and became statutory periodic.
Landlords must bear in mind that, whether or not they use a letting agent who arranges deposit protection, it is they and not the agent who bears the ultimate legal responsibility.
The tenancy deposit schemes now advise landlords (or their agents) 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 (see below**) but does not give concrete advice as to which is best. Instead, it urges agents and landlords to take their own legal advice.
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.
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.
It is also worth noting that other options do exist for landlords, including returning the deposit, and these are in the advice issued by the RLA and other stakeholders. There could also be a strong argument for avoiding statutory periodic tenancies altogether, and creating new fixed-term tenancies instead.
* Joint industry advice on Superstrike can be found on the RLA website, together with the RLA’s own explanatory notes for members. The RLA, along with other bodies, is also researching how the Superstrike case could affect landlords via an online survey.
**The Three Options:
- 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.
- 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.
- Issue the Prescribed Information before serving a Section 21 notice. Again, a court may decide this has been served late and issue a penalty.