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Tenancy Deposit Schemes - Landlords beware!

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Are you a landlord of a residential property? Are you unsure about Tenancy Deposit Schemes and what they mean?

What is a Tenancy Deposit Scheme?

Landlords who have granted a new Assured Shorthold Tenancy and who have received a deposit from the tenant must protect that deposit with a Government approved Tenancy Deposit Scheme. This means that when a tenant pays a deposit, it will be protected and returned to the tenant at the end of the AST, except when the landlord has a legitimate claim on it.

What are a landlord’s obligations under a Tenancy Deposit Scheme?

Within 30 days of receiving the deposit, a landlord must give the tenant, or anyone who paid the deposit on his behalf, certain prescribed information. Failure to do so will have serious consequences for the landlord. Any Section 21 Notice requiring possession will be of no effect and the tenant may claim three times the value of the deposit.

Recently, a Judgement handed down by the Court of Appeal in the case of Superstrike Limited – v – Rodrigues, ruled that a statutory periodic tenancy arising at the end of fixed term Assured Shorthold Tenancy is a new tenancy. Therefore, any deposit retained by the landlord is deemed to have been received again. That deposit may remain protected as before, but is the landlord obliged to provide the tenant with the prescribed information again? The belt and braces answer is “yes”. Even though the prescribed information may not have changed since the first time it was given to the tenant, the landlord remains under an obligation to serve it within 30 days of receiving the deposit. Therefore when the deposit is “received” again under the new statutory periodic tenancy, the landlord must comply or face the consequences!

Whilst the Court of Appeal’s decision clarifies the issue as to whether a statutory periodic tenancy is a new tenancy, it does mean that, albeit unwittingly, some landlords will be in breach of their obligations and will need to act quickly to ensure compliance or return the deposit to the tenant.

I would advise landlords to check now to ensure they have complied with their statutory obligations in particular where a tenant is holding over at the end of the fixed term.