Deposit regulation came into force in April 2007. What is the situation regarding tenancy deposits paid to landlords before then?
The general view is that the deposit needs to be protected in a scheme if the tenancy is ‘renewed’, for example by the tenant signing a new agreement or renewal form.
Although no money has changed hands, as the tenancy has been renewed, the money is deemed to have been transferred from one tenancy to another. Several County Court decisions confirm this.
However it is generally believed that it does NOT have to be protected if the tenancy is allowed to roll on as a periodic. Many landlords done this, specifically to avoid having to protect the deposit.
But is this view correct?
Tenancies continue after the end of the fixed term under section 5 of the Housing Act 1988, which says in 5(2):
the tenant shall be entitled to remain in possession of the dwelling-house let under that tenancy and … his right to possession shall depend upon a periodic tenancy arising by virtue of this section.
So this means that a new tenancy is created (or ‘arises’) immediately after the fixed term ends. Does this mean therefore that the deposit should then be protected at that point? Even if it was paid before 7 April 2007?
What do you think?