I have learned of an interesting letter from housing minister Mark Prisk, published on the Residential Landlords Association website, which confirms the governments concern at the recent decision in the case of Superstrike v. Rodrigues.
The Superstrike v. Rodrigues case
The Superstrike case itself (which I discussed here) is about a deposit which was taken prior to the regulations coming into force. Mr Prisk confirms that it had been the governments intention that the regulations would not affect these deposits.
Cause for complaint
If the decision is allowed to stand, particularly if it is also held to apply to post April 2007 situations where the deposit HAS been protected within 30 days of payment but not re-protected or where the prescribed information was not re-served at that time, then landlords do have some considerable cause for complaint.
For example if it had been made clear last spring that the legislation would apply to pre April 2007 deposits, landlords could have protected them prior to 6 May 2012.
This was the last day of the ‘amnesty’ period allowed to landlords to regularise their tenancy deposit protections at the coming into force of the Localism Act 2011 amendments last year.
New laws – what they could do
I don’t think that it would be appropriate for new legislation to say that a periodic tenancy arising after the end of a fixed term is not a new tenancy, for the reasons I set out here.
However it would be very easy for the legislation to state that
- so long as the deposit is treated as being protected under the rules of the relevant tenancy deposit company, re-service of the prescribed information will not be necessary, and
- where a deposit has been taken prior to April 2007, the arising of a periodic tenancy after that date will not be treated as a new tenancy for the purpose of the tenancy deposit regulations.
Wait and see
The Minister’s letter makes it clear that government is “exploring whether new legislation is required to clarify the situation”.
Pending this, I suggest that landlords wait and see what happens.
Any landlords who are sued by their tenants on the basis of the Superstrike case, should contact one of the landlords associations. It is possible they may be prepared to help fund the litigation as a test case (although this is just a guess – I have no inside information).
However as a precautionary measure landlords should also arrange for the prescribed information to be re-served whenever a tenancy becomes periodic after the end of a fixed term.
Amending legislation – a request
Although the Superstrike decision itself has come as a bit of a surprise to people, the question of if and (if so) when a deposit taken before April 2007 needs to be protected has never been clearly stated in the legislation.
Had this matter been addressed in the Localism Act amendments, the Superstrike case would probably never have happened.
However I understand that the draftsmen refused to consider anything other than the resolution of the problems raised by the Tiensia and Hashemi cases. Despite the fact that various other issues were pointed out to them at the time.
I hope that if further legislation is introduced, government listen this time to advice and ensure that any other open issues are addressed. For example unresolved issues left after the Johnson v. Old case relating to the definition of a deposit.
Then maybe landlords will finally know where they stand and the industry can settle down.
If that’s not what they intended then then should have drafted the law differently.
IMHO, the current wording is clear and the Superstrike decision is not unexpected.
The key wording, and on which the Superstrike decision is based, is that scheme requirements must be met and PI given when “a landlord receives a deposit in relation to an assured shorthold tenancy”. This appears twice in essentially the same form: once for scheme requirements, once for PI.
The advantage of the current wording is that it is generic and applies in all cases. I’m not sure that creating special cases will necessarily make things simpler.
Proposal not to require giving PI again as long as deposit is considered protected is a possibility. At the same time having to give PI again for every tenancy is not a big issue and is probably useful for tenants to be confident that their deposit is secure.
Second proposal re. deposits taking before 2007 is a bit confusing, I think.
Perhaps at the whole concept of deposit protection and what it tries to achieve should be re-thought…
Good to see the Housing Minister’s comment, which is based on common sense. Let’s hope his comment: “urgently exploring whether new legislation is required” means urgent as ordinary people understand it and not sometime before the end of the decade.
“For example if it had been made clear last spring that the legislation would apply to pre April 2007 deposits, landlords could have protected them prior to 6 May 2012.”
section 16(1) of the Localism Act 2011 says:
“. . . the amendments made by section 184 of the Act apply in respect of any tenancy deposit received by a landlord in connection with a shorthold tenancy where the tenancy was in effect on or after 6th April 2012.“
Tessa
“the question of if and (if so) when a deposit taken before April 2007 needs to be protected has never been clearly stated in the legislation”
Maybe not in the 2007 Act, but in LA 2011 transitional regulations it clearly states the changes as applying to “all deposits held on the 6 April 2012 in respect of ASTs”. This point was not decided in law but this is why the safe route post LA 2011 has to be to protect all AST deposits, regardless of when they were collected.
Perhaps they will fix it this time. But it’s the second attempt, and the problem was entirely predictable as pointed out above.
What worries me more is the way ministers consider that they can provide guidance so that courts interpret things the way they want, when courts of course have to follow the law, not what some minister thinks it ought to be – Mrs May (and others) please note.
It is clear from the Localism Act that Tenants have all the rights. How can Landlords protect themselves from unscrupulous tenants? S8 has no teeth, which means dispite the tenant breaching all of the terms of the agreement a Landlord has to suffer them for at least 2 months ( they usually do not pay rent during the 2 mths) and yet a Landlord makes one slip up by innocently failing to protect the deposit and they get penalised by at least one months rent! How is this right? One rule for tenants and a very different rule for Landlords. Tiensea was correct. The purpose is not to prevent the need for litigation. If the tenant has not suffered any predjudice why should they get a free pay check? This just opens the floodgates for claims. The new generation of ambulance chasers!
I think reverting to the purpose of the act, ie to ensure the tenant gets their money back is a good one (but lets not do it urgently as this has a habit of being bad legistion like section 212-215 of the Housing ACt 2004 which brought it in in a rush in the first place).
First change that needs to be made is that to achieve the refund of the deposit they should scrap the penalty for any situation where the deposit has been paid back to the tenant (or likewise transferred to the tenant for a new tenancy, a situation which would greatly benefit from Superstrike decision! I would also suggest a pre action protocol that required the tenant to write a letter before engaging any claimable cost. The biggest danger is the no win no fee mob who make money simply from talking to landlords and settling over small problems that have not really caused the tenant any problems.
While we are proposing changes why not make the penalty “up to” 3 times the deposit so that the tenant knew that for minor breaches the judge might say, guilty but no penalty? Then we would start having a more level playing field.
I think the Judges would like to have the ability to award no penalty in suitable cases, but this apparently was refused by government.
If deposit protection is compulsory then it seems that some sort of penalty for non-compliance is in order.
It may seem that if the landlord protects the deposit before the tenant vacates or if he refunds it in full then no harm was done.
However, I think one of the purpose of protection is also to ensure that the deposit can be returned even if the landlord goes bust.
Trying to avoid a speeding ticket by claiming that no accident occurred would not go down well ;-)
Yes but if the deposit had to be refunded to avoid the penalty there is a penalty, no deposit. Lets also not mix different law as a civil law breach of the requirement to give 2 months notice does not attract a fine. There are plenty of civil issues with no express penalty, only the implications of your actions.
I’m sure you got the point of my analogy ;)
As for the requirement to give 2 months notice this is also quite different since not complying means that the notice is invalid and without effects.
Sorry Roman but I see no difference in not “protecting” the deposit or giving prescribed information and having the penalty of not being able to use a section 21 notice and the wrong section 21 notice details and not being able to rely on the section 21 notice either.
Undoubtedly the purpose was to ensure the deposit was either “returnable” (when held by the landlord and ultimately “returned” (after all a landlord having it in his bank and refusing to refund would be no good). Therefore if the deposit is returned to the tenant the legislation has met objectives 100% and there need be no further penalty. What is completely wrong is the fact that the objective is completely met (returned) and still there is a penalty. This is after all only a civil matter. Sorry but I fail to see why not including the details of a relevant person on a piece of paper when the tenant has been given all the money back, should attract a penalty to the tenant and a large fee to some no win no fee company.
@ David Reaney
100% correct and the only post that needs reading on this issue. Personal preferences or wish lists do not matter a jot. What does is the LAW and it is 100% crystal clear, always was in my view and now emphasised by the Superstrike judgement where IU agree with Romain not unexpected and 100% correct.
@ David
You I am afraid are simply wrong and the easiest way to deal with all of this is simply to comly every time you do a renewal, re-let or an existing AST goes periodic. Simple as that, protect and issue PI, re-protect and re-issue PI simple as that – to be 100% safe.
Legislation in my view unlikely to change and even if it does could take a long time.
INdustry Observer, I am not sure how you can say I am “wrong” when I am expressing an opinion of where a fairer balance in the parties would lie. I am not making any statement of where the facts of the current law are.
Indeed you own comments about “re-protecting” the deposit every time are not required in law. Some scheme have clearer requirements but apart from Capita (who demand a new fee for a statutory periodic) none of the others that I have seen actually think you need to do anything. The only difference is how clearly they express that and full marks to TDS for their new rules which are very clear on the subject.
@ David
Apologies
But to be clear when I say “re-protect” I mean do whatever the Schemes require, which ranges I think from nothing for DPS to putting in new dates certainly for TDS.
What is clear is that whenever there is a new tenancy you have to go through the TDP rituals, even if in terms of re-protecting you don’t have to do very much.
What you clearly must do post Superstrike is re-serve PI every time.