Old tenancies can still be subject to new rules. In this month’s column Stephanie Robinson explains how to avoid falling foul of the laws protecting deposits...
I granted a shorthold tenancy agreement in 2005 and took a deposit. We had a long fixed term and when it ended, the contract rolled over onto a periodic agreement. I still hold the original deposit, is there anything I should now consider changing?
Since April 6 2007 landlords have been legally obliged to protect deposits in a government approved scheme and provide tenants with prescribed information about where it is lodged.
It is mandatory for landlords using assured shorthold agreements to join a tenancy deposit scheme if a bond is taken. Both parties are bound by the terms of the lease and this includes adhering to these requirements. The only way to circumvent your obligations is not to take a deposit, although this is generally regarded as a bad idea.
Last year, a decision was made in a matter commonly referred to as the Superstrike case about a deposit that remained unprotected as the tenancy pre-dated the introduction of the legislation.
When the fixed term ended, the tenancy became periodic and the deposit remained unprotected. During this time, a notice to quit was served by the landlord, which the court decided was unlawful, as the deposit had not been protected in an appropriate scheme. This subsequently delayed the landlord’s ability to gain vacant possession.
The Superstrike case confirms that when a fixed term expires, a periodic tenancy is regarded as a new agreement and the deposit paid originally is, therefore, subject to the mandatory rules governing protection.
If you have any assured shorthold tenancy agreements that pre-date April 6 2007 and the fixed term has come to an end, you should ensure the deposit is protected and supply your tenant with information about the scheme you choose.
If you want to serve a notice to quit, you should appreciate that the court may impose a financial penalty for late deposit protection. That said, without adhering to the rules, you will not be granted a possession order and you will be unable to remove the tenant in the timescale you require.
Any deposit taken against an assured shorthold tenancy signed after April 6 2007 should already be protected in an approved scheme. If this has been overlooked, it should be rectified immediately to avoid future delays.
Three organisations provide deposit protection to landlords and letting agents – the Deposit Protection Service, Tenancy Deposit Scheme and MyDeposits. They are all supported by call centres and advocate alternative dispute resolution to help settle disagreements without issuing legal proceedings. Even if you embark on this, both parties retain the right to go to court.
There is speculation about the impact of the Superstrike decision on deposits taken against statutory periodic tenancies that were created when an assured shorthold agreement with a protected deposit expired. Likewise the status of protected deposits relating to the renewal of an assured shorthold tenancy is also in question. These issues were not addressed directly by the court and I would recommend contacting a solicitor for further guidance.
Stephanie Robinson is a solicitor specialising in property and commercial litigation at Sheffield’s Taylor&Emmet LLP. Telephone 0114 218 4000 or visit www.tayloremmet.co.uk and www.landlorddisputes.co.uk.