Landlord power can and will get Deposit Protection rules clarified

Landlord power can and will get Deposit Protection rules clarified

7:38 AM, 19th June 2013, About 9 years ago 66

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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

by Robert M

18:45 PM, 19th June 2013, About 9 years ago

Puzzler

I'll try a more simple approach for any still missing the point.

1) Assume that you rent a property under an AST for calendar year 2011. You agree the deposit should be protected and did the required steps in January 2011 using mydeposits.

2) Assume that you renewed the agreement for the calendar year 2012. Presumably, you accept that is a new tenancy and a new protection was required which you should have dealt with in January 2012.

3) Assume that instead of renewing again, you allowed the tenants to stay on a statutory periodic basis from January 2013. Mydeposits do not require a new protection where an initial agreement is allowed to continue on a statutory periodic basis, so you let the January 2012 protection to continue in place.

Now unless anyone objects, I assume the above is common ground.

4) On 14 June 2013 men in grey wigs rule that a Statutory Periodic Tenancy is not in fact a continuation of a fixed term tenancy and is in fact a brand new tenancy.

Given this, can you not you accept that there is serious question to be asked, namely, that with the benefit of hindsight, there is no difference between (2) and (3) and you should have taken out a new protection in January 2013?

It is obvious that the circumstances in the actual case the judges were ruling on are different. That is the whole point. The ruling the judges have made in different circumstances throw doubt over accepted practice for more recent tenancies.

I cannot think of any way of putting this more clearly.

by Robert M

18:53 PM, 19th June 2013, About 9 years ago

For those keeping up with the case so far, I have another point.

This ruling potentially affects all tenancy renewals, not just those going periodic.

The judges said in the ruling that you have to assume that the original deposit is returned to the tenant and immediately repaid to the landlord. If this is so, the date received on your re-protection should be the day that deemed transaction took place.

Now I wonder how many cases there are where a new re-protection certificate has the "wrong" date on it for when the deposit was "received" second time round.

Just a thought!

I'll collect my coat …….

by Anthony Endsor

19:49 PM, 19th June 2013, About 9 years ago

I think it is greatly unfair that, at every opportunity, the Landlord is deemed to be the bad guy. What are we supposed to have done to upset you all? All I, and thousands of landlords ever do, is provide a service and a home to people who cannot afford to buy their own homes. And why can they not afford to buy? Primarily because of mortgage restrictions, or many other reasons that are most certainly not any Landlord's fault.
I have chosen this route to make a living because property is my passion. I enjoy dealing with property so it makes sense that I should use it as a way to make a living, in the same way as someone who enjoys fixing cars chooses to be a mechanic for example.
I find it utterly despicable that landlords are persecuted in the manner we are being for having done nothing wrong. This issue is not the only issue where landlords are being unfairly treated. The amount of red tape in the rental market these days is ridiculous. Landlords get no help from anyone, government, homeless charities, or anyone else who they care to deal with. Do they not realise these are the very people they are actually working for? And yet the only thanks we ever get is more red tape, more persecution, more 'greedy landlord' accusations, and now for this matter.
In this case, what is a landlord supposed to do? Apparently something happened to change the law SIX years ago. Well it would have been nice to have known at least! How can a landlord possibly comply with the law when they don't even know what the law is? This is utterly disgraceful! So please can we at the very least have some clarity as to what we are supposed to do? I suppose it's a bit much to ask for some sort of support in doing this, but no harm in asking.
I am really disappointed it has come to this. I am a decent person, just trying to make an honest living. I want my tenants to be happy in my houses. This does not help anyone. Do you think by leaving landlords in the dark they will serve their tenants better? I somehow doubt it.

by Edwin Cowper

20:52 PM, 19th June 2013, About 9 years ago

KEEP IT SIMPLE

I expect most MPs will be concerned to help. But there is a danger that the government will think it has to repeal a whole chunk of legislation and change the rules, so they will say they can't do it now because they haven't enough parliamentary time.

However, this is SIMPLE matter to rectify. All that needs to be done is to change a few words in one section of an Act.

The Act needs to say: "Upon expiry of the fixed period of the Shorthold Tenancy, the tenancy continues upon the same terms and conditions until the expiry of a notice to terminate by the Landlord or Tenant to the other."

If your MP is told that despite this simplicity, government time won't be given, then ask your MP to approach one of the MPs who came at the top of the Private Members Bills, and ask him/her to put forward a two clause bill to put right the problem. I'm sure an MP can be found to do that.

by Puzzler

21:40 PM, 19th June 2013, About 9 years ago

Robert - It's not my intention to cause an argument or even a debate. I am not missing the point at all, please don't try to patronise me because I disagree with you.

Why does one set of circumstances throw doubt on another? The ruling only affects those circumstances. That is the way the law works, rightly or wrongly. You are extrapolating and over-interpreting. The lawyers can do that quite well for themselves.

I just want everyone to stop panicking as there are no grounds for your assumption at this time. An AST and SP have different legal effects whereas a rolling SP does not so is the same tenancy as long as it's in force.

Please read the ruling and/or article I linked below, which will give you some idea of the intention behind the ruling.

Even if you turn out to be right, the worst case is that the protection has to be re-certified each month. It's just admin which can probably be automated and would presumably be done by the protection companies. Perhaps tenants would like that reassurance?

by Michael Barnes

22:32 PM, 19th June 2013, About 9 years ago

@Puzzler.

It seems to me that the uncertainty that has been brought to our attention is caused by

1. The judges assertion in this case (which can then be applied to other cases) that when a tenancy goes SP it is a new tenancy.

2. The assertion that the LL is deemed to have received the already-held deposit when the SP starts.

3. The requirements of the 2004 Act to handle the deposit and provide the Prescribed Information within a time limit.

4. No decision or statute that for a tenancy going SP
a) an already protected deposit is deemed to satisfy the 2004/2011 Acts.
b) already served Prescribed Infomation is deemed to satisfy the 2004/2011 Acts.

Whilst I would like to believe that I am OK by doing nothing when a tenancy started after April 2007 goes SP (or doing nothing for a tenancy that was already SP before April 2007), there appears to be uncertainty here that could be challenged through the courts and go against me (and probably all LLs).

by Chris Best

0:14 AM, 20th June 2013, About 9 years ago

@Puzzler and Michael Barnes; everyone:

There seems to be a lot of debate about in which circumstances landlords need to take action to protect or reprotect deposits. From reading everyone's posts, and a bit of research, I believe that action is required by any landlord who has a lease which has converted from an assured shorthold tenancy to a statutory tenancy, and the conversion occurred after April 2007 when the deposit legislation came into effect.
Why? Have a careful look at the judgement in Superstrike. I think that the salient points are (in brackets are the words from the judgement):
1) Rolling over an assured shorthold tenancy into a statutory tenancy does create a new tenancy even if nobody does anything to mark the occasion ("It is clear from the 1988 Act that what happens at the end of the fixed period tenancy is the creation of a new and distinct statutory tenancy, rather than, for example, the continuation of the tenant's previous status.")
2) As a result, the new tenancy requires a deposit with an approved scheme in accordance with the legislation (see para 9 of the judgement where the judge quotes the Housing Act 1988)
3) Because, in the situation where an AST turns itself into a statutory tenancy because nobody does anything to stop it, the landlord is still holding the deposit via the approved scheme, and the tenant is deemed to have "paid" a deposit under the common law definition of payment. Therefore the landlord has to comply with his/her obligations in respect of the deposit schemes (if there had been no deemed payment, then I suspect that the judge would have ruled that no deposit existed - this particular point the judge actually refused to comment on)
4) This ruling would apply to any statutory tenancy created by rollover after the deposit legislation came into force. It would not apply to any statutory tenancy created by rollover prior to the legislation, as there is nothing in the judgement to suggest either retrospective application or that a statutory tenancy is periodically "recreated". Looking at the Housing Act 1988, Clause 5, the wording clearly states that a periodic statutory tenancy does not "end" at the end of the period, but only ends when either the tenant leaves or a court order is granted. I do therefore agree with Puzzler that there is no need to reprotect the deposit on a monthly statutory tenancy every month.
5) If a deposit has been taken from the tenant under any form of tenancy prior to the 2007 requirement to use a deposit protection scheme, and not protected, it is unlikely in my view that a court would rule that the deposit needed to be reprotected. However the judge in Superstrike declined to rule on the point, although his obiter dicta in para 44 of the judgement implies that he did not believe that this was the intent of the 2007 legislation.

Unfair - yes. Nonsensical - yes. But also a strict interpretation of the law as it stands. The legislators have constructed legislation which quite frankly doesn't work even after the amendments in the 2011 Localism Act. However, let's be clear on what the Superstrike judgement does say:

If you have an AST and it rolls over into a statutory tenancy, and the rollover occurs after the 2007 legislation was enacted, the deposit must be reprotected (or protected for the first time if it wasn't protected previously).
This is because a new tenancy is deemed to be created through the change from AST to statutory tenancy.

It doesn't say:
You must reprotect a monthly statutory tenancy every month; or
You must act to protect a deposit if you have a statutory tenancy created before the 2007 legislation.

So, as the legislation says, a deposit must be protected when a new tenancy is created. A new tenancy is created when a tenancy is rolled over and becomes a statutory tenancy. Under those circumstances, the landlord needs to act to ensure they can still use section 21 if it comes to the crunch

by Robert M

0:27 AM, 20th June 2013, About 9 years ago

Puzzler

I am assuming you are not being deliberately obtuse so I will try one last time.

The judges had in front of them a situation where a fixed term tenancy had turned periodic. They have decided that this process created a new tenancy.

Then, looking to the actual circumstances of the case in question they accepted the deposit was not protected when the original tenancy was taken out. This is not surprising as the deposit legislation came in later, during the fixed term.

However, as they have now decided that the automatic creation of a periodic tenancy following a fixed term contract is a new tenancy, they are saying that when this event took place the deposit should have been protected as, by then the deposit legislation had been enacted.

Now what makes this surprising as that the legislation for ASTs is in The Housing Act 1988, ie an Act dated 25 years ago. In all this time it appears to have been assumed that the automatic operation of law (the creation of the periodic tenancy) was a continuation of the original tenancy. However, until now the point has not seemed important.

The point you appear to me missing is this. The judges' ruling is that where a fixed term tenancy had turned periodic this creates a new tenancy. Having decided this point in law, they then moved on to the circumstances of the particular case.

[As an aside, this is the standard way cases are decided. Judges ask what are the points of law in question, then how do they apply to the circumstances of the actual case?]

You appear to be saying that because the tenancy in question started before April 2007, then the judges' ruling that a periodic tenancy is a new tenancy only applies to tenancies created before this date.

With all due respect that is absolute nonsense. There is nothing in The Housing Act 1988 or the ruling in this case that says the automatic creation of a periodic tenancy should be treated any differently depending on whether it occurs before or after April 2007.

You say that the ruling only affects the circumstances of the actual case in question. The logical (if ridiculous) extension of that argument is that the case should only apply to tenancies created on 8 January 2007.

So in summary, you are saying that because the case relates to a tenancy that started before April 2007, all the judges' decisions can only apply to such tenancies. In contrast everyone else is saying that now (until I suspect the inevitable further change!) we have to accept that where a fixed term tenancy had turned periodic, this creates a new tenancy.

From the decision in this case, we know what effect the Court of Appeal says this has on a tenancy where the fixed term straggles the introduction of the law on deposit protection. What we do not know is the effect on a tenancy that started after April 2007, hence the gist of my post above 19/06/13 18:45.

The reason we do not know is not (as you seem to say) because the ruling has no effect on tenancies that started after April 2007. I suggest that the real reason is that the judges did not have to address the situation where the deposit was originally protected when the fixed term tenancy was taken out, so they have not extended their judgment to these slightly different circumstances.

Now do you understand why there is doubt? I have to say this is a rhetorical question because if you still maintain that the ruling on the point of law only affects the circumstances of the particular case and that I am over-interpreting I shall give up, assume that I was wrong through all my years as a legal practitioner and promise not to patronise you again on this matter.

As I and others have already said in the other thread, I think there will be a change in the law or clarification to follow.

by

5:07 AM, 20th June 2013, About 9 years ago

My deposits are being held in the tenants deposit scheme arranged by the letting agent - so is it not his responsibilityto ensure that it satisfies the legal requirements whatever they be ? I have just alerted my agents who were not aware of this situation - even the deposit scheme managers have said they think the reversion of AST to periodic tenancy is just a continuation....?

by

5:40 AM, 20th June 2013, About 9 years ago

Clearly there are too many interpretations that can be made which would only be tested in court. The question landlords should be concerned with is what should we immediately do to cover ourselves with existing situations.....? If we have a tenant who has moved to a PT after being on AST can we simply get the paperwork done now to re-protect the deposit ?


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