A Further Warning to Landlords Following the Superstrike Rumble

The Housing Act 2004 - requirements to tenancy deposits

The recent unreported case of Gardner and McCusker from May 2014 means landlords and their agents will need to take extra precautions when dealing with AST agreements and ensuring they are compliant with the requirements of the Housing Act 2004.

The Housing Act 2004

The rules relating to Tenancy Deposits came into force on 6 April 2007. Section 213 sets out the requirements relating to tenancy deposits and what landlords must do to comply.

It states that where a landlord receives a tenancy deposit it must be dealt with in accordance with an authorised scheme within 30 days starting on the date on which the deposit is received. Dealing with a deposit in accordance with an authorised scheme means the landlord must protect the deposit, and give the tenant and any relevant person (whoever paid the deposit on the tenant’s behalf) a copy of the prescribed information.

The sanctions for failing to comply with this provision of the Act are severe. If a Court finds that the landlord was in breach, then the Court must order between one and three times the amount of the deposit to be paid to the tenant (s.214(4) of the Act).

Further, s.215(1) of the Act confirms that if the prescribed information was not provided to the tenants in accordance with the Act, then no section 21 Notice of possession can be given until the Act has been complied with.

Periodic Tenancies and Superstrike

A statutory periodic tenancy arises where a fixed term tenancy comes to an end, and the tenant remains in occupation at the property.

In the case of Superstrike v Rodrigues it was decided that where a tenant stays in occupation after the expiry of the original fixed term agreement (that was entered into before 6 April 2007 and therefore before the tenancy deposit rules came into force), a new statutory periodic tenancy is deemed to arise and the tenancy registration rules must at that point be complied with.

Therefore, if a deposit was taken by a landlord before 6 April 2007, and if the landlord failed to provide the prescribed information or register the deposit with a scheme upon expiry of the fixed term, the landlord would be in breach of the Housing Act 2004, and might be liable to the tenant as set out above.

Developments in Gardener v McCusker

In this case, the original fixed term AST in Gardner and McCusker had been entered into after the tenancy deposit rules came into force on 7 April 2007.

The landlord had correctly protected the deposit and complied with the rules. However, the Court applied the decision in Superstrike v Rodrigues, to determine that upon the expiry of the fixed term agreement, a new tenancy had been created, which meant that even though the landlord had complied with the rules at the outset, because the landlord had not provided the tenant with the prescribed information yet again within 30 days of a statutory periodic tenancy arising, the landlord was in breach of the Housing Act 2004.

The Court held that the landlord was required to comply with the tenancy deposit registration rules upon expiry of the fixed term, even where the prescribed information was served on the tenant at the start of the fixed term tenancy.

What does this mean for landlords?

If the tenancy deposit rules are not complied with (including sending the prescribed information) at the start of a fixed term tenancy, nor within 30 days of the end of the fixed term tenancy, the landlord will be in breach of s.213(5) of the Act.

A valid section 21 Notice cannot be served until the rules have been complied with, and the landlord will be leaving itself open to a claim for between one and three times the deposit.

As a result of this Gardner and McCuskar decision, it is essential for landlords and agents to ensure they comply with the Housing Act 2004 and the tenancy deposit rules when a new tenancy arises upon expiry of the original fixed term. These stringent requirements mean landlords and agents, particularly those with a large property portfolio, will need to keep on top of AST agreement expiry dates, and remember to send out the prescribed information within 30 days where the tenant remains in occupation.