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Lettings Legal Update on Tenancy Deposit Protection

Blog By Priya Gohil LLB (Hons, Property Manager

Best Property Manager in the UK Ever

I recently attended the ARLA Region 2 meeting where we were privileged enough to have David Smith a specialist solicitor of Anthony Gold Solicitors explain to us the value of ARLA in keeping us up to date with changing legislation relating to the Tenancy Deposit Scheme. David has written The Guide to the Tenancy Deposit Scheme, which is published by the Tenancy Deposit Scheme, the not-for-profit organisation run by The Dispute Service. The guide is seen as a vital tool to help secure the huge sums taken in deposits throughout the rental market every year.

The Guide to the Tenancy Deposit Scheme has been designed to take Landlords and Tenants and their Lettings Agents through the security of deposits from the beginning of a tenancy to the end also covering how the process works for the minority of tenancies ending in a dispute between parties to the tenancy.  It aims to ensure that Landlords, Tenants and Letting Agents understand the principles behind the legal requirement for deposit protection and the penalties and pitfalls, as well as the benefits and attractions.  It describes the application of deposit protection by the Tenancy Deposit Scheme, how deposits are safeguarded and the process of Alternative Dispute Resolution.

David brought our attention to 2 of the most recent influences on how deposits are held with the decisions made in cases Johnson v Old 2013 and Superstrike Ltd v Marino Rodriguez 2013.

In the case of Johnson v Old 2013, the District Judge held that Ms Old’s successive payments of six months rent up front were in reality deposits. As the Landlord had failed to protect them, this prevented him from being able to serve a valid section 21 notice.  The matter was then referred to HHJ Simpkiss on appeal, when he overturned the decision saying that the payment was rent and not a security deposit.  Ms Old then secured legal aid which allowed the decision to be sent to the Court of Appeal.  Landlords everywhere were relieved to hear that the decision went in favour of the Landlord – the leading judgment which was made by Sir John Chadwick upheld the decision of HHJ Simkiss, 6 months rent in advance is RENT and not DEPOSIT money.

Lots of Landlords take payments up front from Tenants who fail referencing or are unable to meet standard agency criteria, as happened in this case.  If these payments were all at risk of being treated as security deposits, all sorts of outlandish results would follow. Thankfully the Court of Appeal has knocked these on the head.  However, it also shows that Landlords and their Agents need to take care when drafting their tenancy agreements.  It is generally accepted that the agreement in question here lacked clarity and had it been a bit clearer this litigation could probably have been avoided.

The second crucial case of the moment is Superstrike ltd v Marino Rodriguez 2013. Just last week Lord Justice Lloyd delivered his judgment on an appeal and there has been a great many discussions since about the potential impact that this judgment may have on Landlords.  Something that must be remembered is that appeal judges only consider the case presented to them, the precedent they set is therefore only applicable to cases subject to the same set of circumstances, so this particular case is not representative of all Landlords.

In this case the tenancy began before the introduction of the Tenancy Deposit Protection Legislation: The initial tenancy was continuing on a statutory period basis, without renewal or changes: No deposit was ever protected in relation to this tenancy, as it was received prior to the legislation when this become a requirement. Three years later a section 21 notice was served to end the periodic tenancy.

The Judge concluded that a statutory periodic tenancy is a new and distinct tenancy, not a continuation of the tenant’s previous status. Essentially what this means is if you have any tenancies which began pre- 6 April 2007 and became periodic after 6 April 2007, for which you hold a deposit which was not protected, you may not be able to issue a section 21 notice. There are three possible options open to Landlords / Agents: Return the deposit, orotect the deposit or wait and see.  If you do not have any tenancies which match this description, this judgment should have no impact on you whatsoever. Depending on the TDP scheme used, you may receive correspondence in the near future asking you to confirm the status of tenancies for which the fixed term has ended.

Both these cases reiterate the significance of ARLA in advocating an up to date account of affairs in legislation and prevailing judicial precedence. Being a regulated agent ensures we are up to date with current affairs and ensure we protect our landlords to the highest standards.

Thank you for reading my blog, please feel free to contact me at priya@sewellgardner.com if you have any questions.

Rickmansworth Property Manager

 

 

 

 

Priya Gohil

 


ARLA The Association of Residential Letting Agents


 

 

 

 

 

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