Landlords of tenancies which pre-date April 2007 who are still reeling from the effect of Superstrike now have another Court of Appeal decision to worry them. Charalambou v. Ng, which you can read on Bailii here.
Unlike the Superstrike case, here the tenancy became periodic before the scheme came into force too.
The facts of the case
In this case the deposit was paid in 2002 and the tenancy, after being renewed a couple of times, became periodic in 2005. The tenancy deposit scheme came into force in April 2007.
A section 21 notice was served on the tenants on 17 October 2012 by the landlord Mrs Ng, and the tenants defended the subsequent eviction claim on the basis that the notice was invalid.
To cut a rather long story short (and you can read the full argument on Bailii) the Court of Appeal agreed with the tenant.
What the Court of Appeal said
The landlord was not subject to the financial penalty as the scheme had not been in force when the deposit was paid and again when the tenancies were renewed, so she could not have protected the deposit at that time.
However she could have protected it later. Indeed before the second set of regulations came into force in 2012 there was a period of time allowed for landlords to regularise their situation and protect all their deposits.
This is what the relevant section in the Housing Act 2004 says (including the 2012 amendments) – notes in green are my comments and not part of the regs
215 Sanctions for non-compliance
(1) Subject to subsection (2A), if a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when–
(a) the deposit is not being held in accordance with an authorised scheme, or
(b) section 213 (3) has not been complied with in relation to the deposit. (this requires the landlord to comply with the initial requirements of an authorised scheme)
(2) Subject to subsection (2A), if section 213 (6) is not complied (this is about the prescribed information) with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213 (6) (a) is complied with.
(2A) Subsections (1) and (2) do not apply in a case where—
(a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or
(b) an application to the county court has been made under section 214 (1) and has been determined by the court, withdrawn or settled by agreement between the parties.”
The Judge said that the straightforward meaning of the first part of 215 (ie s215(1)(a)) is that if a deposit had been paid and not protected at the time a s21 notice is served it cannot be effective. The fact that the landlord is not liable for the penalty does not alter this. The two are ‘disjunctive’.
It is unfortunate that almost everyone has taken the view that the two were not disjunctive and that if you took a deposit at a time when it did not need to be protected, you were completely outside the regulations.
The tenancy deposit regulations disaster
In fact these whole regulations have been unfortunate. A second amendment is currently working its way through the parliamentary system, but the Judge in this case has pointed out that the proposed wording of the amendment would not cover this case.
David Smith writing on the Nearly Legal Blog has suggested an easy amendment to the wording which would do this, and hopefully the government will take this up.
Personally I would like the whole thing re-written in a more user friendly style. As they stand, the regulations are virtually unreadable due to the constant cross referencing which makes them extremely confusing.
These regulations are supposed to be for ordinary landlords and tenants to use and rely on – how can they do this with any confidence if the regulations are unreadable and the interpretation and guidance put forward by government is constantly being undermined by the Court of Appeal?
We need to have ‘plain English’ laws for consumer legislation.
Advice to landlords holding pre April 2007 deposits
However returning to this case – I am afraid the advice for all landlords who took a deposit before April 2007 should be – if you want to serve a section 21 notice you must either protect the deposit and serve the prescribed information, or return the money to the tenants.
Even if you are not in breach of the regulations insofar as the penalty is concerned, according to this case, you will still not be able to serve a valid section 21 notice while the deposit remains unprotected.