Government may change law over tenancy deposits

The government may rewrite laws following a controversial ruling regarding tenancy deposits.

As previously reported, a Court of Appeal decision made in June could have major implications for all landlords. In Superstrike vs Rodrigues the Court held that periodic tenancies made after the end of a fixed term tenancy are treated as “new and distinct” and, as a result, deposits may need to be re-protected with each new periodic tenancy.

The ruling revolved around a case in which a landlord had taken a deposit before the 2007 rules regarding deposit protection came into force. The fixed term tenancy became a periodic tenancy after the new rules were enacted and, as the deposit had not been protected, the tenant argued that the landlord should not be allowed to serve a section 21 notice. The Court ruled in favour of the tenant.

Now housing minister Mark Prisk has indicated that this was not the intention of the law, and that it may be changed as a result.

In a letter to the Residential Landlords Association Mr Prisk said: “There are concerns that the Court of Appeal decision means that where a deposit was taken for an assured shorthold tenancy before the introduction of tenant deposit protection and continued as a statutory period tenancy after 6 April 2007, the landlord should have protected the deposit at the start of the statutory period tenancy.

“This was not the intention of the legislation and we are urgently exploring whether new legislation is required to clarify the situation.

“I understand that concerns have also been raised that the decision could have implications for some tenancies where a deposit has been protected in an authorised scheme in relation to a tenancy begun after 6 April 2007 and the fixed term has expired, and the tenancy continues as a statutory periodic tenancy.

“While the Court of Appeal did not make a decision on these particular facts and we cannot advise on individual cases, as a precaution, landlords could decide to re-issue the prescribed information to their tenant(s) which should ensure they can rely on the section 21 procedure if they wish to end the tenancy. Again, we are exploring whether new legislation is required to clarify the situation.”

Further information on the Court of Appeal ruling is available in our recent interview with landlord solicitor Tessa Shepperson.

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