The Deregulation Act explained for landlords – Part 2 – Tenancy Deposits

Posted: April 2, 2015 | Author: | Filed under: Landlords, Letting Agents, Managing Agents, Possession, Property Law, Residential Property, Tenancy Agreements, Tenancy Deposits, Tenants | Tags: , , , , , , , , | Leave a comment

Sections 30 – 32 of the Deregulation Act 2015 aim to rectify flaws in tenancy deposit protection legislation contained within the Housing Act 2004. Several cases, including Superstrike, have caused difficulty for landlords regarding non-compliance. The new provisions set out the position in cases where the deposit was received either before or after 6 April 2007 (the date when the deposit protection legislation was originally introduced).

Firstly, where a deposit was received before 6 April 2007 in connection with a fixed term which rolled over into a statutory periodic tenancy on or after that date and the deposit is still held by a landlord in connection with the periodic tenancy, the landlord has now until 23 June 2015 to ensure that the deposit is protected and the prescribed information served. If a landlord takes these steps (subject to any court proceedings as below), they will not be liable for a penalty claimed by the tenant.

It is worth noting that the date of 23 June 2015 may be brought forward if matters are before the Court for determination of an application for a penalty before 23 June 2015. In that case, the landlord should comply before the date of the Court hearing.

In cases where a deposit was taken by a landlord on or after 6 April 2007 which was placed in a deposit scheme and the prescribed information served, if that tenancy subsequently became or becomes a statutory periodic tenancy then the landlord’s original compliance in protecting the deposit and serving the prescribed information will suffice for the purposes of the statutory periodic tenancy. Therefore, if the landlord originally registered the deposit during the fixed term and complied with the prescribed information requirements, there is no need to re-protect or re-serve.

However, the amendments do not offer protection to landlords who did not originally protect the deposit.

Further, the new legislation confirms that where a tenancy became periodic before 6 April 2007 and an unprotected deposit continues to be held, whilst there is no financial penalty payable, the deposit should be protected if the landlord wishes to serve a Section 21 notice.

The above provisions are in force now and have retrospective effect back to 6 April 2007. There are some transitional provisions within the Act which would need to be considered on a case by case basis as they affect matters subject to Court proceedings and issues relating to costs. I am happy to consider any queries that landlords have in this respect.

The Act has also confirmed that it is acceptable to provide the details of the agent, on behalf of the landlord, who protected the deposit within the prescribed information rather than the landlord’s details.

Clarification has, at least, been provided to address issues that have arisen within cases over the last few years. Nonetheless, this is the third attempt in settling deposit legislation and we must wait and see how matters pan out.

Deregulation Bill 2015 – Tenancy Deposit Amendments

Posted: February 24, 2015 | Author: | Filed under: Deregulation Bill, Tenancy Deposits | Tags: , , | Leave a comment

As a result of both a relatively quiet few months as far as developments go and plenty of cases to deal with rogue tenants and, indeed, rogue landlords, it is time to provide an update on tenancy deposits.

After the decision of Superstrike Limited –v- Rodrigues (click here for a summary) and Charalambous –v- NG the need to amend the legislation has come to the forefront once again and, thankfully, the Deregulation Bill 2015 is progressing through Parliament. Whilst there are further stages to go through before it becomes law, it may well be as early as 30 March 2015 that the Bill will be passed.

The proposed Section 32 of the Deregulation Act 2015 (as it will become) deals with the issue of deposits received before the 6 April 2007 (Superstrike territory) and those deposits received on or after 6 April 2007. The proposal is for new sections (Section 215A and Section 215B) to be inserted into the Housing Act 2004 and will be treated as having had effect since the 6 April 2007.

The proposed amendments (and thus they are still subject to change and approval) will relate to circumstances where deposits were received before the 6 April 2007 and deposits that were received since then. As it stands, the main amendments are as follows:-

  • If a landlord received a deposit in respect of a fixed term assured shorthold tenancy before 6 April 2007, which then became periodic after 6 April 2007, the landlord would not be jeopardised if they protect the deposit and provide the prescribed information within 90 days of the Bill gaining Royal Assent (which could be 30 March 2015).
  • If a landlord received a deposit after the 6 April 2007, which was placed in a tenancy deposit scheme and prescribed information served, and the tenancy then became a statutory periodic tenancy, the landlord’s compliance with the tenancy deposit scheme legislation in respect of the original tenancy would suffice for the purposes of the statutory period tenancy. Therefore, there would be no need to re-register the deposit nor re-serve prescribed information. However, protection will not be offered to those landlords who never protected the deposit during the original tenancy as required.
  • The legislation will confirm the recent decision of Charalambous –v- NG where it was decided that any landlord of a tenancy which became a periodic tenancy before the 6 April 2007 should protect those deposits but there would be no financial penalty for failure to do so.
  • It will be confirmed that details of an agent who protected a deposit for the landlord from the outset can be named in the prescribed information in place of the landlord.

In effect, the new legislation will require all deposits to be protected within a deposit scheme irrespective of when they were received or the tenancy began

Rent in advance- Deposit or no deposit?

Posted: April 26, 2013 | Author: | Filed under: Housing Act, Landlords, Letting Agents, Managing Agents, Possession, Property Law, Tenancy Agreements, Tenancy Deposits | Tags: , , , , , , , , , , | Leave a comment

Recent uncertainty as to whether rent in advance is a deposit or not has been clarified by the Court of Appeal decision in the case of Johnson v Old. Much to the relief of landlords, the decision was made in favour of the landlord. This means that when rent is paid in advance, where payment of the monies is to discharge the tenant’s liability for rent only, it is not treated as a deposit and therefore does not need to be registered.

I have set out in my previous articles the requirements of deposit registration and the consequences of failure to do so. This decision is important therefore for landlords that seek to take rent in advance as it now provides them with some peace of mind that a Section 21 Notice served will not be invalidated and they will not be liable to pay a penalty.

The case itself of Johnson v Old involved the Court dealing with some issues to the drafting of the tenancy agreement. So far as to say, the clearer the terms of the tenancy agreement, the less likely any dispute is to arise. The important issue addressed by the Court was whether a payment of 6 months rent in advance was a deposit or not.

The Court held that where money is paid in order to discharge a current liability (rent), it is not paid with the intention that it is to be held as security. The money taken in advance was to be allocated for rent only for the first 6 months and it was not to be allocated elsewhere or held as security for any breach of the tenancy agreement.

Importantly, the tenant had not been asked for further payment of rent within the first 6 months following the payment in advance. Had rent been demanded within that 6 month period, the landlord would clearly be seeking additional monies when rent had already been paid (by way of the advanced payment). An amount for further rent within that initial period is likely to render the advanced payment as a deposit.

Essentially, a landlord cannot take rent in advance and then ask for further rent to be allocated to the same period. If this is done, the advanced “rent” would need to be registered as a deposit.

Therefore, where a landlord is faced with a the tenant who cannot supply adequate referencing and the landlord wishes to request rent in advance, the landlord should ensure that no further rent is demanded for the period (already paid) unless the landlord is willing to treat the payment in advance as a deposit (and thus register and comply with the initial requirements).

Speaking to a number of landlords about tenancy deposits, many don’t take deposits now. As with many things, there are advantages and disadvantages of not taking the deposit but this recent case provides now some further scope for landlords and an option to take rent in advance.

There is a potential knock on effect of taking rent in advance which applies to the length of notice to be given pursuant to Section 21 of The Housing Act 1988. Landlords should take advice and I would be happy to offer some guidance in this respect.