Landlords of residential premises who are holding deposits under older tenancies may need to take action by 23 June 2015, writes Nicholas Pye of Hill Dickinson.
Landlords should by now be familiar with the requirements of the Tenancy Deposit Scheme (TDS) introduced in April 2007. Deposits taken from residential tenants must be protected under the scheme and prescribed information given to the tenant within 30 days. Landlords who fail to comply cannot serve a valid section 21 notice bringing an assured shorthold tenancy to an end and can also be made to pay a sum of up to three times the deposit to the tenant.
Recent cases in the Court of Appeal have demonstrated the problems that can arise with tenancies granted before 2007. In Superstrike v Rodrigues (2013), the landlord was unable to terminate a tenancy which had been granted before 2007 but which had mutated into a statutory periodic tenancy after TDS came into force. Now, Charalambous & Karali v Ng & Ng has decided that even where the statutory periodic tenancy arose before TDS, a landlord cannot terminate the tenancy if the deposit is not protected by TDS.
The Deregulation Act 2015, which received Royal Assent on 26 March 2015 (the same day that Parliament was prorogued for the general election), seeks to correct these inconsistencies:
- in a Superstrike situation, where the periodic tenancy has arisen since 2007, the landlord has 90 days from 26 March 2015 (ie until 23 June) to protect the deposit and serve the prescribed information; and
- in a Charalambous situation, landlords are not at risk of financial penalty for failure to protect the deposit, but cannot serve a valid section 21 notice unless the deposit has either been protected or returned.
Landlords holding unprotected deposits received before TDS should therefore review whether action is required in light of the Deregulation Act.