Following the decision reached by the Court of Appeal in Superstrike Ltd v Rodrigues (2013), guidance has been produced jointly by the authorised tenancy deposit schemes (TDS) which you should now consider in respect of all deposits paid under Assured Shorthold Tenancy Agreements (AST). Below are the summarised facts of the case and the guidance produced by the TDS:
The Tenant (Rodrigues), took an AST from the Landlord (Superstrike Ltd) dated 8 January 2007 (prior to the introduction of mandatory tenancy deposit protection on 6 April 2007), for a fixed term of 1 year less 1 day, at a monthly rent of £606.66, and paid a deposit of that same amount under the terms of the AST. At the expiry of the fixed term, by Section 5 of the Housing Act 1988, the Tenant became entitled to a statutory periodic tenancy on equivalent terms. On 22 June 2011 the Landlord served a notice under Section 21 of the Housing Act 1988 requiring possession. The issue before the Court was whether the Landlord was entitled to do so, as the deposit had not been protected within a TDS authorised by the Housing Act 2004.
The Court of Appeal decided that when the tenancy continued on a statutory periodic basis in 2008, a new tenancy was created and a new deposit was deemed to have been received; accordingly the obligations under the Housing Act 2004 applied to the deposit so received. Since the deposit was not held in accordance with a TDS, the landlord was not entitled to possession under Section 21.
The TDS have now considered and consulted with the Department for Communities and Local Government in relation to this recent decision and produced the following guidance note.
The result is that landlords must ensure deposits paid prior to 6 April 2007 are protected where a statutory periodic tenancy has arisen after 6 April 2007. This is a change to the way the law was understood before.
In addition, if a deposit is already protected and the tenancy has been renewed (either a statutory periodic tenancy or with a new fixed term) then the decision in Superstrike confirms that this change in the tenancy is a new tenancy. What is unclear is how a landlord is supposed to apply it. Does the deposit need to be re-protected and the does the prescribed information need to be re-served?
In response to this question, the guidance sets out three options:
Do nothing and rely on the fact that the prescribed information was served when the deposit was first received. The risk is that the Court, applying the reasoning in Superstrike, will find that the prescribed information has not been served, strike down a Section 21 notice and impose a financial penalty.
Re-issue the prescribed information now to ensure that the landlord can rely on a Section 21 notice in the future. There is still the risk that the Court will find that the prescribed information was served late and impose a financial penalty for this.
Re-issue the prescribed information before the landlord serves a Section 21 notice. Again, there is still a risk that the Court will find that the prescribed information has been served late and imposes a financial penalty for this.
For Receivers, the position is more complex because they rarely receive confirmation that the prescribed information was served when the deposit was taken. The Court of Appeal decision creates an added complexity to obtaining possession under Section 21.
Currently there is no right or wrong way of addressing to the decision in Superstrike. This decision certainly took the deposit scheme providers by surprise and changed the way we view periodic tenancies and prescribed information. We will continue to monitor the position and advise you further of any reported decisions made at County Court level in relation to Superstrike.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2013. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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