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 Don H

7:05 AM, 20th June 2013, About 9 years ago

As with many other Landlords who try to to be "decent landlords" to our tenants and also try to comply with the ever changing rules and regulations this current charade indicates the failings not only of the legislation but also those who are charged with applying it.

I - along with many others - have written to my MP asking his opinions and also requesting that he pass on my comments to the relative Minister for comment. I suggest that this is the first "port of call" for all of us.

It would appear that many Judges presiding over cases - covering many facets of life in general - nowdays have little appreciation of the real world and are more interested in inflating their own ego's further than considering the overall ramifications of their determinations.

With regard to the inadequacies of the legislation being handed down by "the powers that be", could it be that, given that many MP's are from legal backgrounds, one of the reasons for issuing ill considered legislation could be to ensure that there will be a guarenteed workload when they fail to get re-elected and return to their original profession.

Here's hoping for a little common sense clarification in the near future.

by Puzzler

7:36 AM, 20th June 2013, About 9 years ago

Robert - I don't think this forum is the place to be offensive. I'm glad you clarified that you're a legal practitioner (what does that mean? solicitor? barrister? paralegal?) as you would have an interest in churning the file.

Yes it was a new tenancy and so required a protected deposit. Of course it also applies to tenancies after that date (obviously) but if it's already protected (which it should be if it began afterwards) there is no issue.

Chris Best sums up the current situation very well and until there is a further ruling or somesuch, we should all go home and get on with whatever we were doing before.

by Mark Alexander

7:53 AM, 20th June 2013, About 9 years ago

Yunus said "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 ?"

That's the crux of the matter for me. The answer is no. The reason the answer is no is that the Localisation Act gave us 30 days to protect a deposit from receipt of the deposit. This case assumes the deposit is notionally repaid and received again when the SPT tenancy commences, regardless of whether the money physically moves or not. Therefore, re-protecting now will serve no purpose if a fixed term tenancy became an SPT more than 30 days ago.

The even crazier thing is this. Let's assume this happened for the first time just 29 days ago, i.e. you have one property only and your first ever fixed term tenancy ended 29 days ago. Then yes, you could protect the money again today and be safe. However, a new periodic term would start again tomorrow and monthly thereafter so it could be argued that you need to re-protect and re-serve prescribed information monthly.

I accept this is all theoretical as legislation remains very unclear to most reading it and none of has has had the benefit yet of having of a wise old judge having made a ruling so we all know where we stand.

Yunus also said "My deposits are being held in the tenants deposit scheme arranged by the letting agent – so is it not his responsibility to ensure that it satisfies the legal requirements whatever they be ?"

My answer to that one Yunus is that you can hold your letting agent responsible, however, you are ultimately accountable. What that means in real terms is that if your letting agent does something wrong then you get punished. This is for all of your responsibilities as a landlord, not just Deposit Protection but also things like making sure you have a valid EPC and Gas Safety Certificates. If you do end up being punished or you otherwise lose out financially due to your letting agent being found to be negligent then you can sue your letting agent. However, that's down to you. If your letting agents has no money and trades as a limited company he could just close his doors and liquidate his company. That's why it is important to ensure that your letting agent has professional indemnity insurance and client money protection. If he's a member of one of the following organisation you will probably be OK but remember that you are accountable but you may be able to hold your letting agent responsible. The organisations are ARLA, RICS, Law Society, NALS, SAFEagent and some but not all UKALA agents which is another issue altogether.

by Joe Bloggs

10:16 AM, 20th June 2013, About 9 years ago

@robert m - i admire your patience explaining this over and over again. think puzzler has finally got it...clearly puzzler by name, puzzler by nature. shame no apology for muddying the waters. if there is no legislation change then we will have to wait for a test case. until then there will be uncertainty, which is what most people realise.

by Robert M

10:30 AM, 20th June 2013, About 9 years ago

Chris Best

I think you are more or less right.

My main point is that the vast majority of tenancies that have turned periodic will have done so more than 30 days ago. Therefore, you are too late to protect the deposit now, so I cannot see anything to be gained from acting at this stage before clarification unless you need to issue notice.

If you have a tenancy that has just turned periodic or is just about to, I would be tempted to re-protect it. However, in doing so I suspect in a few months time I would look back and see I gained nothing from taking that step.

However, if you can be bothered on such an esoteric point, I think you need to re-read the 1988 Act to distinguish the finer points between fixed term tenancies and stautorty periodic tenancies. Whilst a fixed term tenancy is in force you can give notice for any date after the end of the fixed term. When a periodic tenancy is in force you can only give notice for the end of one of the periods. Why? Because, strictly speaking, each period is itself a new mini fixed term contract. It is precisely for this reason that the notice requirements are different. [eg see HA 1988 s5(3)(d)]

I am not very religious, but I think I am beginning to understand the stress some incur waiting for white smoke to emerge from the Vatican. Also I am glad that I have not had any tenancies end or renew since April 2007 that would appear to be caught in this fiasco!

by Robert M

10:40 AM, 20th June 2013, About 9 years ago

Puzzler

Robert – I don’t think this forum is the place to be offensive ….. you would have an interest in churning the file.

Oh the irony!

I'm not even going to tell you what law I used to specialise in.

I see that you now seem to accept the ruling on the law in the case potentially affects others. Where we agree can be best summarised by the line in "Blockbuster" by The Sweet:

"We just haven't got a clue what to do!"

Just watch this space and remember who is to blame next time Shelter shove a collection tin under your nose!

by Michael Barnes

11:03 AM, 20th June 2013, About 9 years ago

@Mark Alexander

The 1988 Act, section 5 (which the judge referenced in this case) is explicit that a SP tenancy arises exactly once, at the end of the term of the original tenancy. There is nothing to state that a new tenancy arises at the end of every subsequent rent period.

Therefore
1. There is no foundation for your fears that action might need to be taken monthly (or weekly if that was the original rent period), and therefore that you could be open to penalties of three-times the deposit each month.
2. I agree with you that, following this judgement, there is the possibility that the letter of the law is that the deposit should be re-protected when a tenancy becomes SP, and that for most cases it is too late to achieve that..

However, it might be argued that the statement by the 'authorised scheme' that 'on going SP no further action need be taken' is an 'initial requirement' under sectrion 213(3) of the 2004 Act, and we are all OK (but being able to argue it doesn't mean the argument would be accepted).

If a custodial scheme (DPS) is used, then I think there is no problem because
a) the rules of the scheme are that the deposit belongs to the Tenant.
b) the LL does not hold the deposit, but has passed it on in accordance with the law.
c) The DPS cannot return the deposit without the agreement of the tenant.
d) therefore there cannot be an implied receipt of the deposit.
But that argument would not work for an insurance scheme because the LL does retain the deposit.

by Mark Alexander

11:30 AM, 20th June 2013, About 9 years ago

@Michael Barnes - if you are proven to be right that's a very good spot. I'm very short on time today, so would you be so kind please to point myself and other readers here to the specific numbered point in sect 5 HA 1988 to which you are referencing please?

Link to section 5 Housing act 1988 >>> http://www.legislation.gov.uk/ukpga/1988/50/section/5

Must go, next meeting calling.

Thanks in advance 🙂

by Puzzler

11:30 AM, 20th June 2013, About 9 years ago

That is a very good point, Mark, and we had all drifted away from it.

However, should that be the case, although absurd, it could all be automated (like bank statements) and be done by the protection agencies.

Joe Bloggs - you too are offensive. I have not "finally got it" as I have not changed my original assertion. I am not apologizing for suggesting people stop acting like headless chickens.

I have never had to give notice, so I don't know if it's true that it has to be to the end of a period but it is not so for the tenant unless in their agreement.

Interesting, Robert agrees with Chris but not with me, even though we have made the same points. I have not changed my view although clearly have put it better if he now thinks I agree but didn't before. Reading the below, it rather seems the other way round. I don't think the ruling, as given, affects newer deposit-protected tenancies, although your interpretation is that it is possible that it does. See my point above.

If you are correct then all deposits should be protected even those relating to tenancies beginning way before April 2007.

by Puzzler

11:32 AM, 20th June 2013, About 9 years ago

Michael Barnes

Thank you - you put it much better than I did.


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