After a recent case which concerned a fixed-term tenancy which commenced before tenancy deposit protection became mandatory and later became periodic, the rules around periodic tenancies and deposit protection was gotten a lot murkier.
- The landlord took a deposit when the tenancy started but did not protect it as this was not required at the time
- The tenancy became statutory periodic after 6 April 2007 when the law came in
- The landlord did not protect the deposit but continued to hold it
- When the landlord tried to serve a Section 21 notice to gain possession of the property, the tenant challenged this because the deposit had not been protected
- The Court of Appeal ruled that when the tenancy went statutory periodic, a new tenancy was created. The deposit should have been protected and the Prescribed Information served
- This meant that the landlord was not entitled to serve a Section 21 notice
The case has implications for landlords in 3 situations:
- Landlords with tenancies that began before tenancy deposit protection became the law
- Landlords with fixed tenancies that began post-6 April 2007 and which become periodic in the future
- Landlords with periodic tenancies that began as fixed post-6 April 2007
What to do
If you find yourself in one of these situations, the current advice from the tenancy deposit schemes varies:
- If you have any tenancies which began pre-6 April 2007 and became periodic after this date, for which you hold a deposit which was not protected, you may not be able to issue a Section 21 notice at the moment at the moment until the law is changed
- If a current fixed-term tenancy has a protected deposit, the tenancy deposit schemes advise that you (or agents acting on your behalf) to re-serve the Prescribed Information within 30 days of it becoming a statutory periodic tenancy in the future
- In the case of periodic tenancies that began as fixed post-6 April 2007, the schemes outline three potential options but as none of these have been tested in court, they also advise that you take independent legal advice:
- Do nothing and rely on the fact that the Prescribed Information was served when the deposit was first received.
- Re-issue the Prescribed Information for tenancies that have gone from fixed to statutory periodic.
- Issue the Prescribed Information just before serving a Section 21 notice.
To clear up this confusion, the government have added an amendment to the Deregulation Act 2014, which states:
- when a fixed term tenancy becomes periodic, landlords are advised to re-send the Prescribed Information about the deposit protection
- within three months of the amendment becoming law, all deposits that have been taken before 6 April 2007 must be protected and the Prescribed Information sent to the tenant
It is hoped that these 2 clauses will mean that landlords are then allowed to issue Section 21 notices as normal.
This means that once this bill becomes law:
- If you have a tenant change from a fixed to periodic tenancy in the future, you MUST resend the details of where you have placed their deposit and all the accompanying information
- If you have had a tenant change from a fixed that started after 6 April 2007 to periodic tenancy, you MUST resend the details of the tenancy scheme you are using
- If you are currently holding unprotected deposits for tenancies, fixed or periodic, that started before 6 April 2007, you MUST place them in a recognised deposit protection scheme and notify the tenant you have done so
Until the bill receives Royal Assent, this advice remains uncertain, though the RLA recommend that you should continue to send the Prescribed Information to your tenants when the tenancy becomes statutory periodic.
For more information, read the sector-wide guidance issued by a number of leading PRS institutions.