Landlords of residential properties will by now be familiar with tenancy deposit requirements. Where an Assured Shorthold Tenancy is entered into and a deposit taken that deposit must be protected under one of the authorised schemes and notice given to the tenant. If these requirements are not fulfilled the Landlord is not allowed to rely on a Notice under Section 21 of the Housing Act 1988 to regain possession of the property at the end of the tenancy, and may suffer penalties if the tenant makes a claim.

A case recently heard in the Court of Appeal illustrates another pitfall. It involved a Landlord who granted an AST in 2007 and took a deposit of one month’s rent. At the time the Tenancy Deposit Scheme was not in force. The tenancy was for a period of one year but it ran out and was not formally renewed, although the tenant remained in occupation and continued paying rent. In 2011 the Landlord decided to regain possession of the property and served a Section 21 Notice. The tenant resisted the possession proceedings on the basis that the deposit had not been protected. The Landlord argued in essence that when originally taken the deposit did not need to be protected, and this was the same property, the same tenant and (as it happened) the same rent, and no action had been required prior to the service of the Notice. The Court of Appeal, however, disagreed. Technically, when the original one year term ran out a new Statutory Tenancy came into being, which meant that the tenant was entitled to the return of the deposit, and if the Landlord wanted to continue to hold it he needed to use one of the authorised schemes.

The implications of this judgment are potentially far reaching. The Court only dealt with the facts specific to this case, but the prudent advice is that where a Statutory Tenancy arises or indeed where a new tenancy is granted to the same tenant then the statutory information should be served where the deposit is retained, no matter when the original tenancy began.

If you need any advice concerning residential tenancies contact James Matthews, email: jamesmatthews@tassells-solicitors.co.uk

June 2013