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?
Yes, but that would only apply in the case of a tenancy that becomes periodic after 7 April 2007.
In any case, I don’t see why landlords want to avoid protecting these old deposits, particularly as DJs get used to the requirement of a deposit being protected as a requirement for possession under s. 21. There is going to come a time where having an unprotected deposit is going to at least cause confusion at the possession hearing, particularly if the unrepresented tenant complains that the deposit is unprotected.
I agree, I think landlords should just bite on the bullet and protect all deposits regardless, but not all landlords think like this!
But yes, if they get to court with an unprotected deposit there is a greater probability that things will go wrong for them.
I’m with Marcin – yes for a tenancy that became periodic after 7 April 2007. My view has always been that a periodic is a new tenancy under the Housing Act 1988. There are counter views, though and it is a pity it hasn’t been tested.