Done Up Like Kippers

by Mark Alexander

9:33 AM, 22nd December 2014
About 6 years ago

Done Up Like Kippers

Make Text Bigger
Done Up Like Kippers

EDITORS NOTE: The following article was submitted by George Crofts Llb (Hons), with whom I had a very educational and eye opening discussion last week regarding claims management and no-win-no-fee legal services for tenants. I personally invited George to submit an article so that our landlord, tenant and letting agent readers could ask George the types of question that I have done. George has very kindly dispelled several myths so please be kind to him and use this opportunity to learn more about the industry we are all so fearful of.  Over to George …. Done Up Like Kippers

“Done up like kippers” was how one landlord described the state of deposit protection law following the Superstrike ruling.

For any that have missed this development, this case meant that a claim could be made against the landlord if they had not provided the Prescribed Information when a Statutory Period Tenancy (SPT) arose.

Many landlords grant Assured Shorthold Tenancies (AST) and allow them to develop into SPT without the need for documentation. The tenancy continues as before, under the same conditions but the contract renews month to month.

This court of appeal ruling held that an SPT is a new tenancy, distinct from the original AST. As a matter of law, a new deposit must have been paid. The old contract ended (AST), and a new deposit was payable in regard to the SPT (which takes over under the same conditions). The fact no money changes hands means nothing. When the old contract ends, the old deposit becomes payable to the tenant. The new deposit (for the SPT) is paid by way of setoff against the landlord’s obligation to return the original deposit.

As a point of law, it makes sense. Clearly an AST is a different beast to a SPT. The practical application means that the new deposit should be dealt with as such, a new deposit. The landlord must protect the deposit and serve the Prescribed Information.

If the landlord has already protected the deposit, (s)he doesn’t need to re- protect the deposit (it’s already in a scheme!). But, for every deposit taken, the landlord needs to issue the Prescribed Information.

The case also paved the way for the argument that multiple claims could be made where there is a succession of ASTs granted to the same tenant. The argument runs: If a SPT is a new tenancy then clearly a new AST is a new tenancy. Following the Superstrike logic, it must be that a new deposit is paid. Again, if the landlord has failed to provide the Prescribed Information at the start of each new AST a breach occurs.

Again, as a matter of law it makes sense. An AST is a lease granted over residential premises at a rent for a defined period. When you grant further ASTs these are clearly separate and distinct from the original lease in that they are for different periods of time. It is a matter of common law that a lease cannot be extended and any attempt to do so takes effect as surrender and re-grant. Whatever way you view the situation, when the original AST ends and the tenant stays in occupation, it’s under a new agreement.

The prospect of having to pay out simply because the Prescribed Information wasn’t given again when a new AST is granted or when a SPT arose caused widespread criticism. Nobody had told landlords to reissue the Prescribed Information (although the schemes produced some meek guidance on the matter after Superstrike). Most of the frustration in relation to this matter comes from landlords that have played by the rules, protected deposits and followed all available advice and have still ended up in breach because of Superstrike.

At the time, the Housing Minister Mark Prisk responded to lobbying from the RLA with a letter explaining he was ‘urgently exploring whether new legislation is required to clarify the situation’. Fast forward one year and here we have it, the answer is contained within the Deregulation Bill 2014.

Essentially, this adds more amendments to the original Housing Act 2004 (yes, that’s in addition to the amendments bought in by the Localism Act 2011).

The new S 215 A Housing Act 2004 protects landlords from pure Superstrike claims. Any landlord that has received a deposit before the original legislation (Housing Act 2004) came into force (April 6th 2007) has a chance to protect the deposit and serve the Prescribed Information within 90 days. When they received the deposit, the requirement to protect did not exist. If the tenancy is on-going and they are still holding the deposit, they now need to protect the deposit. If they do so, no claim can be made.
The new S 215 B and S 215 C protect landlords that have either granted further ASTs or allowed ASTs to become SPT where the deposit was paid after April 6th 2007. So long as the original deposit was dealt with in accordance with an authorised protection scheme and the Prescribed Information was served within the time limits, no claim can be made if the Prescribed Information was not served when the replacement AST was grant or the SPT arose.

The ramifications of this new legislation are very wide. All landlords that have dealt with their deposit correctly (from April 6th 2007) can breathe a sigh of relief. If you have protected the deposit on time, and served the Prescribed Information correctly, you cannot be caught out. You are deemed to have re-issued the Prescribed Information when the replacement AST or SPT was granted and cannot be pursued for any breach of deposit protection law.

So, is this the magic bullet solution that will fix all the issues? The simple answer is no.

Where a landlord has failed to deal with a deposit properly when the tenancy was granted a claim can still be made for the original tenancy and further ASTs or SPT where the deposit remains unprotected. For tenancies granted after April 6th 2007 and before April 6th 2012 this means that if you failed to protect the deposit within 14 days or failed to provide the prescribed information within 14 days you are still at risk.

For tenancies granted after April 6th 2012, the time limit of 30 days applies but the same is true: if you have failed to protect the deposit correctly for the initial tenancy you will face the penalties for that tenancy and further AST’s/SPT.

It is suggested that those most at risk are landlords that have received deposits after April 6th 2007 and before April 6th 2012. At that time, case law suggested that so long as the deposit was protected before court action was commenced, no claim could be made. As such, some landlords failed to protect deposit knowing full well that if they were ever called to account, they could protect before the claim was issued and avoid the penalty.

These landlords could now be facing claims for the original tenancy and subsequent ASTs/SPT.

The most important thing to remember is that the Deregulation Bill 2014 will only give protection to those that have dealt with the deposit correctly from the start. If you failed to deal with the deposit correctly, a claim can be made for the original tenancy and for each new tenancy that follows.

Comments

Neil Robb

16:09 PM, 27th December 2014
About 6 years ago

Hi Alison

The tenant has 6 years to put in a claim I would think that the majority of people who have been treated fairly wont even think to claim it is now those who want to make a living out of this and have a free property to live in.

You can try and ask the tenant to sign a new lease then protect the deposit.

or you can return the deposit and hope that's is the end of it.

I would not advise them you have made an error just try do this discreetly.

And not mention the error that occurred before

Alison Winter

16:32 PM, 27th December 2014
About 6 years ago

Thanks Neil. I'm thinking of those who have left - can they claim once the bond is returned?

Neil Robb

16:41 PM, 27th December 2014
About 6 years ago

Reply to the comment left by "Jessie Jones" at "27/12/2014 - 09:54":

Hi Jessie

You are absolutely right it is easy to comply with the deposit rules, Now I know them As like many landlords we were doing this long before the deposit scheme came in.

When it did there was little or no information given and a lot of documents to read. I have learnt more about the deposit scheme thanks to this forum P118.

How many landlords knew to re-protect the deposit when it went periodic. Yet the money is in the scheme.

Why does the scheme keep the money when the fixed term is over and gone periodic if it is no longer protected.

The scheme want it all there own way. It say when you go through the scheme they write to the tenant and confirm their deposit is held but insist the landlord gives the prescribed information why don't they just do it when they are writing anyway.

What happens when the tenant says they did not get the information how does the landlord prove he did. I of course use email as well but I know in the past people say they never got it read it. I can send by mail again how do I prove this.

When there is a dispute the time and energy involved to be told sorry you did not have a 45 page independent detailed inventory. You pictures or video are not enough proof.

And the tenant is sitting there laughing there head of knowing full well what they have done in the property.

A lot of tenants now think they wont pay the rent as the deposit was not protected. I thought they still had to pay the rent as per the agreement.

I do think that landlords should be held to account for the standard of there properties and the way they treat tenants, but I also believe the tenant should also be accountable as well.

Why is it a criminal offence for not protecting the deposit or being a registered landlord.

I am sure they can still be penalties brought against bad landlords with it being criminal offence leading to a conviction.

So when you are then asked by the insurance company have you any convictions and you can no longer get insurance with out paying through the nose for it.

I am sure you understand where I am going with this. Jessie. Hope you have a great New Year

Neil Robb

16:52 PM, 27th December 2014
About 6 years ago

Hi Alison

The tenant has three months to claim under the deposit scheme after that time the deposit scheme can not deal with it.

The bad news is the tenant that has left may take you to court for up to 6 years even if the bond has been returned.

I would say most would not think about it. The problem in England is the penalty goes to the tenant over here it in Northern Ireland it goes to the Council. I cant remember where it goes to in Scotland. So I must check

Like the banks over charging fees and miss selling and where there is blame there is a claim culture. It wont be long before you have no win no fee groups encouraging tenants to see if they can claim for this.

Jessie Jones

23:59 PM, 27th December 2014
About 6 years ago

Reply to the comment left by "Neil Robb" at "27/12/2014 - 16:41":

Neil,
Yes, I wholeheartedly agree that the legislation is very much biased against landlords, with excessive penalties. I could cause GBH to a tenant and get a smaller penalty than if I had simply protected his deposit 2 days late.
Since the service of the deposit protection information is such a hot potato, I invite my tenants to sign and date a copy when I serve it on them. I cannot imagine anyone refusing to sign to acknowledge receipt. I would guess that sending a copy via recorded delivery would also be sufficient proof for a Court, but I would always err in preference of obtaining a signed and dated copy.

Ian Cognito

13:07 PM, 28th December 2014
About 6 years ago

Reply to the comment left by "Jessie Jones" at "27/12/2014 - 23:59":

I complete the DPS template, then scan and email it to my tenant or prospective tenant together with the T&C a couple of days before bringing along two hard copies for signing.

This at least gives a chance for him/her to read the the 15 pages of print before putting pen to paper.

My method seems to be appreciated and no one has yet hesitated to sign.

BTW, I highlight the paragraph which states "A copy of the DPS T&C must be attached to this document" and ask for a separate signature against this.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER

5 Top UK Buy To Let Property Investment Hotspots