Tenant Deposit Scheme Applicable When Fixed Term Tenancy Becomes Periodic

A Landlord can only serve a valid Notice under Section 21 of the Housing Act 1988 requiring possession of a property if any deposit paid has been registered. This applies to a “new” statutory periodic tenancy which arises when a fixed term tenancy ends even if the registration of the deposit was not required under Section 213 of the Housing Act 2004 because the fixed term tenancy started before the implementation of the 2004 provisions..

The Court of Appeal in Superstrike Limited -v- Mario Rodrigues ruled a Possession Order should not have been made when a deposit which should have been registered at the start of the new periodic tenancy but was not. The Landlord had not complied with an authorised Tenant Deposit Scheme, so the Section 21 Notice Requiring Possession served to end the periodic tenancy was not valid.

The circumstances will be familiar. A fixed term tenancy for one year less one day was granted on the 8th January 2007 with one month’s deposit paid. By Section 5 of the Housing Act 1988, at the end of the fixed term the tenancy became a statutory periodic tenancy. The Landlord then served a Section 21 Notice and obtained a Possession Order. It was accepted on appeal that the deposit was not payable to an authorised scheme within fourteen days of the start of the fixed term of the tenancy because the fixed term tenancy started before the provisions of the 2004 Act came into force.

The Tenant however argued that at the end of the fixed term, under the Housing Act 1988 a new periodic tenancy was created which in effect had provisions regarding the original deposit paid. The Landlord had kept the deposit as security for the performance of the Tenant’s obligations under the “new” tenancy. If the parties had been aware of the consequences relating to the deposit at the end of the fixed term tenancy they would have discussed the issue event though there was no evidence that they actually did. It was accepted by the parties that the obligation of the Landlord to return the deposit at the end of the fixed term tenancy was offset by the Tenant’s obligation to provide the deposit for the new periodic tenancy.

In those circumstances Section 213 should be read in the context of Section 5 of the Housing Act 1988. In other words if there is a new tenancy under Section 5 of the Housing Act 1988 then the deposit should have been registered. As it had not been, the Landlord had not given a valid Notice Requiring Possession and therefore no Possession Order should have been made.

This is a highly significant case where Tenants have occupied properties for a substantial period of time. It had previously been unclear when the original tenancy had started before the Tenant Deposit Scheme requirements had came into force and the Landlord, Tenant and property remained the same for many years whether there was a requirement to register the deposit. This case now clearly shows that there is. However the question does arise as to whether a re-registration of the deposit and/or the sending out of the latest prescribed information has to be done at the end of the fixed term tenancy when a “new” statutory periodic tenancy arises notwithstanding that the deposit had been correctly registered and the prescribed information sent at the start of the fixed term tenancy. This case may be an indication that whereas previously the Court of Appeal decisions had effectively made the original Tenant Deposit Scheme legislation unenforceable, Landlords cannot assume the Court of Appeal will take a similar view in the future and must now ensure that the Tenant Deposit Scheme is complied with before serving any Section 21 Notice.

If you have any queries concerning the matters raised please contact
Jeremy Teall, Partner and Housing Management Team Leader on
020 8567 3477 or e-mail jteall@prince-evans.co.uk