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Important ruling on tenancy deposits in the Court of Appeal

On 14 June 2013, the Court of Appeal handed down an important decision in Superstrike Limited v Marino Rodrigues [2013] clarifying the position in respect of deposits held on tenancy agreements pre-dating 6 April 2007, but which have subsequently become periodic tenancies.

This case concerned a tenancy agreement granted by the landlord for a period of 1 year less one day from 8 January 2007. A deposit equal to one month’s rent was paid by the tenant. The fixed term expired and a statutory periodic tenancy agreement came into place in accordance with section 5 of the Housing Act 1988.

In due course, the landlord served a section 21 notice requiring possession of the property and the County Court granted a possession order. This decision was appealed by the tenant on the basis that the deposit hadn’t been protected in accordance with the provisions of the Housing Act 2004 and the matter came before the Court of Appeal.

The Court considered the relevant provisions of the Housing Act 2004, as amended by the Localism Act 2011, and also considered the decision in Vision Enterprises Limited v Tiensa [2010] (which gives the landlord the opportunity to get their house in order prior to any hearing and therefore allows them to overcome the sanctions provided for by the Housing Act 2004).

The Court acknowledged that the deposit had been received before the Housing Act 2004 came into force and so did not need to be protected at that stage. However, it decided that a statutory periodic tenancy is in fact a new tenancy and not a continuation of the fixed term. The deposit is regarded as having been paid again by the tenant for the purposes of the new periodic tenancy agreement. Therefore the provisions for the protection of the deposit introduced by the Housing Act 2004 have to be complied with by a landlord, when a periodic tenancy begins, before a section 21 notice can be served.

This decision raises some serious questions for landlords who have accepted a prior to 6 April 2007 on a fixed term tenancy agreement which has since become a periodic tenancy. A landlord will not be able to serve a valid section 21 notice until such time as the deposit is protected. Furthermore, a landlord may well be fined by the court for non-compliance with the legislation.

This decision also raises questions about whether a landlord must re-serve the prescribed information on a tenant once a fixed term tenancy has expired and a periodic tenancy commences.

This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.

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