Important guidance has been issued jointly by the tenancy deposit schemes in the wake of the Superstrike v Marino Rodrigues case.
It advises agents and landlords to re-serve the Prescribed Information whenever, and within 30 days, of each tenancy renewal or the creation of a statutory periodic tenancy, wherever the deposit is currently protected.
However, the situation is less clear where tenancies have already gone from fixed term to become statutory periodic.
The guidance outlines three different options but does not give concrete advice as to which is best. Instead, it urges agents and landlords to take their own legal advice.
The Superstrike ruling was that when a tenancy goes from fixed to statutory periodic, a new tenancy is created. It was this that raised the issue as to what landlords or their agents should do in terms of deposit protection and the serving of Prescribed Information.
The tenancy deposit schemes – TDS, Mydeposits, DPS and Capita – say that there is “uncertainty” on the legal position where tenancies have become statutory periodic, and that they will monitor the position and issue updated guidance as further decisions are made by the courts or government.
The three options are:
1. Do nothing. Rely on the fact that the Prescribed Information was served when the deposit was first received, although there is a risk that a court might apply Superstrike reasoning and find that the Prescribed Information has not been served. The court could refuse a Section 21 notice and issue a financial penalty. This would delay getting possession of the property.
2. Re-issue the Prescribed Information for tenancies that have gone from fixed to statutory periodic. There is still a risk that a court could decide that the Prescribed Information had been served late and issue a financial penalty.
3. Issue the Prescribed Information before serving a Section 21 notice. Again, a court may decide this has been served late and issue a penalty.
Other parts of the guidance are clearer, relating to deposits taken before April 6, 2007, when tenancy deposit protection became mandatory.
The advice is that where a deposit was taken and remains in place and unprotected when a statutory periodic tenancy arises, then the deposit should be protected now, Prescribed Information given, and a record kept to show when and how this was done.
This, says the guidance “could help show that you are complying with the legislation as now interpreted by the Court of Appeal.
“However, it is the case that you will have protected the deposit late and will also have served the Prescribed Information late. In these circumstances, you can only issue a Section 21 notice if you return the deposit to the tenant in full, or with agreed deductions.
“A court may also issue you with a penalty … but your action in protecting the deposit late and keeping records to demonstrate that you did this because of Superstrike may help to mitigate this.”
As to whether the deposit itself should be re-protected once a fixed-term tenancy becomes statutory periodic, the advice suggests that this could be the subject of a future court case. The guidance does not tell landlords and agents to re-protect deposits, but it does advise them to check that the deposit is still protected.
The guidance also notes that industry bodies will be issuing their own guidance. This could include advising landlords and agents on other options, such as returning the deposit, or creating new fixed-term tenancies.
Comments
@IHS
Absolutely correct the previous agent provided you have satisfied TDP. If the deposits stay in the same scheme no need to re-protect, but you'd be best advised to serve fresh PI
@everyone
NO a periodic is a new tenancy with no fixed term but is one one NEW tenancy so you only need to re-protect and re-serve PI at the start within 30 days of it going periodic.
Please let's not look for problems there are enough already!!
@ Rajeev
Excellent post 100% correct you should have been a lawyer!!
@ ADIP
Also absolutely correct. The time, energy and emotion expended on moaning about things we have to do is always better spent doing them even if we thing they are silly and unnecessary.
The long and short is we're only compliant until we're told we're not. It's nothing new and we shouldn't let hubris sing us a lullaby. We can meet the highest standards and even help little old ladies across the road but keep your guard up because that over hand right's a bitch.
We chose a life strewn with legislation so heads up for schizophrenic interpretation and whilst we can't budget for crazy it something we're going to have to accept. The gimp suit comes with territory but here's hoping common sense prevails...
By analogy to the commercial property case of Newham London Borough Council v Thomas-Van Staden a period of occupation after the expiry of a term certain is treated as a new tenancy.
For commercial (protected tenancies) the effect is that the periodic (new) tenancy can benefit from security of tenure even if the original fixed term tenancy was validly contracted out.
For residential tenancies my view (not legal advice) is that a new deposit should be submitted and protected for a periodic tenancy after the initial tenancy ends.
Both of these conclusions are contrary to the commercial intention of the parties and the law needs to be reviewed.
Let me get this straight.
A periodic tenancy is new tenancy and this means if you have a monthly periodic tenancy you are expected to serve Prescribed Information every time one is created, i.e. every month? What utter stupidity.
Industry Observer
A hypothetical question - if I was to purchase a portfolio of properties from another agent, of which some of the deposits may not have been protected properly, who would be liable if a tenant made a claim?
I would, of course, protect the deposits and issue proscribed information to all of the tenants at the time of receipt of the deposits from the other agent irrespective of the status of their tenancies.
My feeling is that any claim by the tenant would have to be made against the previous agent.
Thank you Industry Observer. Always enjoy reading your no-nonsense, straight-to-the-point posts.
"Gritting teeth and complying" is what we do. This LAT forum allows me to let off some steam. Of course there is too always the hope that our comments might reach the "decision makers". And perhaps they will take them on board. Or perhaps I am too wishful. No harm saying it though.
@Carol
Here is the nub of the problem it is not the job of TDP schemes to interpret the Law it is their job to provide insurance (or hold the money) and provide ADR as and when it is needed.
No-one ever asked them to do more than that, and they certainly were never tasked to.
AM
You can believe and say and indeed do what you like. Problem is it is what a Court of Record says that matters.
There is a huge amount of info now coming out and complex tables. In simple terms
Every time you do a re-let to new tenants protect and serve PI
Every time those tenants renew do the same
If those tenants go periodic, do the same
On existing tenancies
If they renew, do as above
If they go periodic, do as above
On all existing tenancies where they are still fixed term or periodic - review your paperwork and if not 100% correct i.e. you have protected and served 100% correct PI, decide what to do between nothing, satisfying TDP, or doing a renewal and satisfying TDP
All other comment is just additional words - do as above and be 100% safe.
Or don't and risk it
Trust me M a periodic is a new tenancy the CoA says so.
And the deposit attached to it is a new deposit - may be same money but a new deposit.
Save energy and emotion, stop struggling, just grit teeth and comply
I still don't see any common sense in serving the prescribed info more than once anyway. The deposit is paid once.
I liken it to a receipt. You pays your money, you get a receipt. ONE receipt.
And no matter how many different ways it is worded, I still say it is ONE TENANCY: from the date the tenant moves in, till the date the tenant moves out. All the rest of it is utter nonsense. Red tape in the extreme.
I wonder how many tenants are reading the first PI, let alone the subsequent ones.
I fail to understand why a court could issue a penalty for re-serving prescribed information late when an entire industry guided by their deposit schemes and regulatory bodies have not been advised to do this previously. They are trying to shift blame onto letting agents and landlords who have in the main done their best to comply with the legislation. The lettings industry should be given a fixed time to re-serve PI and if not re-served by a certain date, then penalties may be imposed. If the deposit schemes weren't able to interpret the law and guide us correctly - what chance did we have? If it so important to re-serve PI then surely we should be re-serving PI every year or each time the PI changes so tenants always have the up to date version - but no-one has mentioned this! Otherwise we will all be getting penalty notices for tenants having out of date information.
Agree with Roach. Why aren't these laws written out properly in the first place? EPC and Tenancy Deposit laws have been a shambles, both before and after re-writes. Do the legislators get reprimanded? Sacked? Financially penalised?
Totally fed up with it. And as someone who has always worked very hard to make sure that his agency complies fully with legal requirements, I'm going to be extremely peeved if I end up getting screwed over as a result of a government cock-up.
It's all nonsense as opposed to common sense!
I'm sure that there will be plenty of tenants rubbing their hands together with great glee at the "penalty" payments they will receive from landlord and agents who have followed all the proper guidlines in protecting deposits, yet as a result of the absurdity of our legal system, now find themselves falling foul of the law.
Its unjust that a landlord or agent who complied fully with the law as it stodd prior to Superstrike case, now finds, not just that he has to re-serve notices etc, but that he could be fined by a court.