Landlord power can and will get Deposit Protection rules clarified

by Mark Alexander

7:38 AM, 19th June 2013
About 7 years ago

Landlord power can and will get Deposit Protection rules clarified

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Landlord power can and will get Deposit Protection rules clarified

Landlord power can and will get Deposit Protection rules clarifiedThe potential implications of the ruling that a Statutory Periodic Tenancy is a new tenancy, according to the Court of Appeal ruling in Superstrike Ltd vs Rodruigues, has reverberated around the industry at lightening speed. Every popular landlord forum, blog and Facebook group has carried articles and thousands have been motivated to express concern. Indeed, my own article had over 3,000 readers and 100 comments left within just one day.

My initial reaction was one of pure panic and terror for what the implications might be. However, with time I have come to realise that once the powers that be recognise the implications of not adding further clarity to the legislation, I suspect we will receive the clarity we need.

So what is the ideal outcome we should all be hoping for?

In my opinion it needs to be confirmed that once a deposit is protected, either in a custodial or by an insured scheme, than it remains protected until such time as it is unprotected. The roll-over to a new statutory periodic tenancy is deemed to be a create a new tenancy and is seamless in terms of paperwork. Therefore, the rollover of the deposit protection and the prescribed information needs to be equally seamless and to remain valid providing it was dealt with properly within 30 days of the original fixed term tenancy being created.

Anything else would be ludicrous in my opinion. For example, if the clarification is that it is necessary to re-serve prescribed information again when a new Statutory Periodic Tenancy is created then most landlords would have to re-serve notice monthly. This is because a statutory periodic term is the payment cycle of rent which is typically every month. Thus, a new statutory periodic tenancy is created with every payment.

There may be variations on my suggested theme but as I write this article I can not think of a more logical one.

One thing is for sure and that is WE NEED CLARITY.

The Deposit Protection Providers will, no doubt, be meeting with the law makers to explain the urgent need for this clarification. Remember, their business models are in jeopardy too if landlords and letting agents all decide to stop taking deposits and find alternatives. I suspect the Council of Mortgage lenders are worried too!

Landlords and letting agents must add pressure for clarity

We can’t just leave it to the Deposit Protection Schemes, we need to make our voices heard.

I thought about starting a petition but then I decided it would be better for the industry and the press to be able to read comments from landlords and letting agents about how strongly they feel about this.

This is YOUR opportunity to have YOUR say.

Please leave a comment below and encourage all other landlords and letting agents you know to do the same

 



Comments

Puzzler

17:34 PM, 19th June 2013
About 7 years ago

The ruling refers to when a tenancy began before the legislation came in but became a periodic tenancy after.

It does not say anywhere that a deposit has to be reprotected, it refers to one which was never protected in the first place because the landlord (understandably) assumed that the tenancy began when the AST began. Whilst that is still an odd ruling it will only affect tenancies which became periodic after April 2007, and where a deposit was taken before April 2007.

If the trend is to get all deposits protected then that is no bad thing.

The main point is that if a deposit is already protected no action is required. If any LL is in the position of also having that change occurring in a tenancy at that time then s/he needs to act.

Mark Alexander

17:43 PM, 19th June 2013
About 7 years ago

@Puzzler - At the risk of going around in circles, a deposit needs to be protected and prescribed information needs to served when a new tenancy commences. That's the law. The Court of Appeal ruled that a Statutory Periodic Tenancy is a new tenancy. Therefore, should the deposit be protected again or does the original protection roll over? Should the prescribed information be served again or does it roll over. You are entitled to you opinion and suspect we both want the same thing. However, until you can show me a Supreme Court Ruling or legislation which spells this out clearly I remain firmly of the opinion that clarification is required, or should I say fundamentally vital to the PRS..

17:43 PM, 19th June 2013
About 7 years ago

Many years ago i fell foul of the Barlow Clows affair. From that I learnt one very true fact. If you want to put pressure on Parliment you aggitate the MP's.

The most effective way to do this is to go see them and make them aware of the problem and / or justify their position as "Your represenative". The more grief they get the more likely they are to talk about it with collegues. Petitions are fine, open comments too, also letters, but making them respond in person and defend their position is by far the most effective way .........

Robert M

17:45 PM, 19th June 2013
About 7 years ago

I think you have missed out the previous thread. In case others are in the same position it is worth repeating:

1) The Court of Appeal has held that a Statutory Periodic Tenancy is not in fact a continuation of a fixed term tenancy and is in fact a brand new tenancy.

2) Therefore, they say you must act as though the landlord has returned the deposit to the tenant and then had it repaid back to him.

3) Because the case they were addressing related to a fixed term tenancy that started on 8 January 2007 (ie before April 2007 when deposit protection started) but became periodic on 7 January 2008 (ie after April 2007), the effects of (1) and (2) are that the deposit should have been protected ideally within 14 days of 7 January 2008.

4) Because of (1) any fixed term agreement rolling over to a Statutory Periodic Tenancy is not in fact a continuation of a fixed term tenancy and is in fact a brand new tenancy.

What the Court has not decided, because it did not need to, was whether the position is different where the original tenancy was created after 6 April 2007 and the deposit was correctly protected.

There are two options:

A) The original protection should be cancelled and a new protection taken out.

B) The Court could decide that as the original certificate covers the date the deposit was received it remains valid.

Which way would the Court jump? I've no idea. However, as we all accept that if a second fixed period agreement was signed this requires a new protection; given the ruling in (1) above it seems quite possible that new protection would be required.

This then leads us to the rather unattractive logical conclusion that you need to re-protect the deposit for a Statutory Periodic Tenancy every period. Therefore, if you are paid rent monthly you need to re-protect the deposit every month.

Is this a fair summary?

17:47 PM, 19th June 2013
About 7 years ago

I think it should be understood that good LL just want to be able to comply with the law.
we do our best; but are ill equipped against big govt to defend ourselves.
we all genuinely believe we are doing the correct thing; ONLY to be advised that we have all been breaking the law; as have deposit schemes; judges, solicitors, bailiffs.........................the list goes on.
Surely govt could step in here and alleviate the PRS concerns in a timely fashion.
After all is't that what govt's are supposed to do.......................govern!!
We are a major part of the the UK economy and a vital one at that.
Surely we could expect a govt minister to administer to our fevered brows to to calm us all down and state no it won't affect LL who use the deposit schemes as laid down in their conditions.
Govt should have reacted at lightening speed to this judgement to allay all reasonable PRS LL concerns.
All I hear presently is the Sound of silence!!!!

Puzzler

17:57 PM, 19th June 2013
About 7 years ago

Mark, I understand your question but the ruling refers to a particular case where the original AST deposit was not protected as the requirement was not yet in force. It's an odd decision but the periodic tenancy began after the scheme came in and the judge ruled that the deposit should have been protected as it was a new tenancy. It does not mean that every time a periodic tenancy begins you have to renew the protection. In this case there was no protection. The ruling is clear enough. Unless you have a tenancy which began in the 6 or 12 months prior to April 2007 you will not be affected.

Mark Alexander

17:58 PM, 19th June 2013
About 7 years ago

@Robert M - superb summary of the former monster thread. THANK YOU 🙂

@Puzzler - please read the comment left by Robert M

Puzzler

18:17 PM, 19th June 2013
About 7 years ago

Robert M - you have further interpreted the ruling and repeated Mark's article not analysed the ruling. It only refers to that one situation. Nowhere does it say you have to reprotect a deposit and to interpret that it does is scaremongering. What it does say is that you have to protect a deposit in any tenancy beginning after April 2007 even if it's a SP one where it was not protected before. I agree it is daft. It would be simpler if all deposits were protected.

andrew townshend

18:31 PM, 19th June 2013
About 7 years ago

just forget about deposits, take out additional insurance to cover tenant damage and add cost to rent, problem solved.

18:32 PM, 19th June 2013
About 7 years ago

I have asked my letting agency to confirm or otherwise if this relates to Scotland as well. Whether it does or not, it certainly appears to be a moving of the goalposts (after the game has started), and needs clarification. Again, a ruling being made without considering the potential ramifications

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