Superstrike Ltd vs Rodrigues Tenancy Deposit Protection Court of Appeal

Superstrike Ltd vs Rodrigues Tenancy Deposit Protection Court of Appeal

20:45 PM, 16th June 2013, About 9 years ago

Text Size

Superstike vs Rodrigues Tenancy Deposit Protection Court of AppealMy reading of a recent Court of Appeal ruling (Superstrike Ltd vs Rodrigues) is that thousands of possession orders may have been granted in error due to lack of clarity in Tenancy Deposit Protection legislation.

What’s worse is that the vast majority of landlords may have inadvertently broken the law and face bankruptcy!

Scary stuff hey?!

So what is it all about?

Well, in the case of Superstrike Ltd vs Rodrigues, a legal argument affecting Tenancy Deposit Protection, 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. The legal implications are that deposits paid by tenants needed to be re-protected within 30 days of the new statutory periodic tenancy being created.

How many landlords re-protect tenants deposits and re-issue a new tenancy deposit protection certificate and prescribed information within 30 days each time a fixed term AST ends and a Statutory Periodic Tenancy begins?

Very few I suspect.

The ramifications of this ruling are that landlords might be liable to be fined 3X the deposit plus the deposit and be prevented from enforcing a section 21 notice if a deposit was not returned to the tenant before the notice was served.

Getting worried?

You and me both!!!

It is too late to do anything for every tenancy that became statutory periodic more than 30 days ago.

This was not what I wanted to hear so I read the full details of the judgement

PLEASE, don’t shoot the messenger!!!

Hopefully, the legal eagles reading this will be able to pick holes in the legal argument. I’m also hoping a Supreme Court will eventually add the further clarity now required to the Court of Appeal decision or that new emergency legislation will be introduced to prevent the possible collapse of the Private Rented Sector as we know it.

Yes people, it’s that serious!

Can you afford to pay fines of up to four times the value of every deposit you or your letting agent has collected from tenants in the last six years in respect of fixed term tenancies which have become statutory periodic tenancies?

OK, so having now scared the pants off most of the people who read this, let me pose a few questions to the legal eagles and the politicians who are responsible for this mess. We must not forget that all of this has come about as a result of badly drafted legislation which was passed by politicians. Furthermore, it appears that judges may have been making bad decisions on possession cases due to incorrect interpretation for years. If politicians, judges, solicitors and deposit protection schemes have not been able to get clarity on what the law was meant to be then what hope for landlords and letting agents?

If the latest ruling is legally correct, how many possession orders have been granted which should not have been granted? Who is liable for these cock-ups? I suspect many of the people who have lost their homes will want compensation but who will they get it from?

Next question.

Might it be arguable that our tenants did not apply for a refund of their deposit at the end of their tenancy and that no deposit was in fact necessary for the new statutory periodic tenancy? Might this be a viable argument in that it was never written anywhere? If so I can’t see how landlords can be fined on that basis. That doesn’t help the possession argument but it might avoid mass bankruptcies amongst landlords.

Do landlords have any recourse to tenancy deposit protection providers where they have issued advice on forums like this one? The reason I ask this is that I can easily produce evidence to prove that all deposit protection providers interpretations of the law and their advice relating to this issue have clashed with the ruling in this Court of Appeal case.

Perhaps the most worrying aspect of all of this is that one ambulance chasing law firm have already set in place a “no win no fee” opportunity for tenants to begin making claims against their landlords.

Now, given that it will be in ALL landlords interest to unite at this point, please may I remind you of The GOOD Landlords Campaign and your ability to contribute to the work we do here when you become a member of Property118

Please post comments below. Comments from members are easily identifiable.

 



Comments

Mark Alexander - Founder of Property118 View Profile

22:58 PM, 17th June 2013, About 9 years ago

Doh! It's getting late and I've obviously been at this too long. I thought LJ Lloyd was referring to another case LOL

23:05 PM, 17th June 2013, About 9 years ago

Hi All
Sorry to ask a basic question but as a total newbie who is just about to take on their first tenant most of this is going above my knowledge level at the moment, but will this apply in Scotland? Thanks

23:19 PM, 17th June 2013, About 9 years ago

The judge in the Superstrike case stated that any failure to serve Prescribed Information can be rectified to allow the subsequent service of a Section 21.

This does not apply to any failure to register the deposit.

So if you have registered a deposit, and you're worried that a periodic tenancy is a new tenancy requiring new prescribed information, you can serve it late.

Panic over.

Paragraph 42 is the key part of the judgment on this point, repeated here;

Under the original version of section 215, as construed in Vision Enterprises v Tiensia, it was open to the landlord to comply with the requirement to have the deposit held in accordance with an authorised scheme, even though this was not done within the 14 days then stipulated.

That seems not to be the case now, given the amendment to section 215(1)(b) made in 2012.

I note that, as regards failure to provide the necessary information, under section 213(6), the sanction preventing service of a section 21 notice applies until the information is given, even if that is done late: see section 215(2) and its words: "until such time as section 213(6)(a) is complied with". The time stipulation is in section 213(6)(b), so in that case the distinction is clearly deliberate: the landlord can retrieve the position, as regards that failure to comply, by complying late.

Edwin Cowper

23:20 PM, 17th June 2013, About 9 years ago

Mark -I have now read this case.

There's no problem for most of us, in my view.

I believe its " panic over". The law is still straightforward, even though time limit compliance is required.

Case only is relevant to pre 2008 assured shortholds which continue after new deposit rules came in (either as assured shorthold ,or a statutory tenancy which arises automatically when shorthold finishes). There can't be many of them left can there? And you've got to have omitted to comply with stat rules about deposit.

If you've got one of these assured shortholds/ holding over, then check whether you've put the money held as deposit within a statutory scheme. Then you can panic.

Unless anyone can shoot down what I say by quoting from the case, I'll tell my MP we (thankfully) have got a false alarm

I suggest the case does not say or even imply that there has to be a repayment of deposit to the Tenant when an assured shorthold expires. The case was exceptional, as even the recital of facts at the beginning makes clear.

Unless anyone can shoot down what I say by quoting from the case, I'll have to tell my MP we (thankfully) have got a false alarm

As a matter of practice, I have actual deposits and I put them on the statutory deposit scheme. That means (according to the scheme) that the deposit remains with them and is protected until the end of the statutory tenancy, if the tenant remains beyond the end of the fixed assured shorthold.

Although some correspondents say thats a pain, I know and the Tenant knows exactly where we are :-protected.

HOWEVER, I came across a situation where the cover under another scheme was limited as to how long the insurance lasted. So when it expired the Landlord was in breach of the deposit rules.

Edwin Cowper

0:00 AM, 18th June 2013, About 9 years ago

Further to my previous post. Just to quote from para 20 of the Judgment:

"But the legal position after 8 January 2008 must have been that the deposit was

held by the landlord as security for the performance of the tenant's obligations,

or for the discharge of any liability of his, arising under or in connection with the

new statutory periodic tenancy, not (or not only) in respect of such obligations or

liabilities arising under the original fixed term tenancy. How had that come

about? It must have been on the basis that the tenant's right to be credited with

the deposit at the end of the fixed period tenancy, as well as his obligation to pay,

and the landlord's right to receive, an equivalent deposit under the new statutory

periodic tenancy, were treated as satisfied by the landlord continuing to hold the

same sum of money as before on the same basis as before but by reference to

the new tenancy."

I would say this does not suggest in any way shape or form that the deposit has to be repaid to the tenant and taken again. Quite the reverse. It can simply be carried over.

The only question , I suggest, is this: does the the money have to be taken off deposit and redeposited.

Answer I suggest: No

Why? Because the deposit was protected before and it still is protected. Which is the object of the legislation, however badly worded.

If however the terms are changed, then it is a new contract (as opposed to statutory tenancy extending the shorthold on the same terms) and the deposit will have to be repaid to T and taken back (I think T simply agreeing to it being moved to a new deposit would be effective PROVIDED the statutory notices were served on T)

7:39 AM, 18th June 2013, About 9 years ago

Sorry... I assumed that the Court of Appeal case had been accessed by those who had ben commenting on the judgment. The case is available free on the following link

http://www.bailii.org/ew/cases/EWCA/Civ/

Mark Alexander - Founder of Property118 View Profile

8:14 AM, 18th June 2013, About 9 years ago

@Lulu McCue - this particular thread relates to deposit protection in England and Wales. We do run news and other articles for landlords in Scotland though so please stick around, you're in the right place. As for advice on matters affecting Scotland I recommend you become a member of the Scottish Association of Landlords. The following is a link to their Member Profile here >>> http://www.property118.com/member/?id=290

@Simon - I also thought most people who have commented on this thread would have read the link to the case which I posted in the body text of my main article. Obviously I have read the case many time. Your link is fine but you will find this one takes you directly to the case >>> http://www.bailii.org/ew/cases/EWCA/Civ/2013/669.html

Rob

10:19 AM, 18th June 2013, About 9 years ago

Well I've had a very unsatisfactory reply from my deposits basically saying they are looking into it and I need to get my own legal advise on the matter! They also suggested that if I have any tenancies due to go onto stp shortly then I should re secure the deposit! I have responded asking what do I do with the tenancies that are already on stp and have been for quite some time where I have not re secured the deposit all I've done is tick the box on my account to confirm they are on stp,This was done in accordance with the advise given by my deposits?

I suspect my deposits are being very carefull what they say at the moment as to not admit any blame for any of this! I will post there reply,if I get one!

Robert M

10:24 AM, 18th June 2013, About 9 years ago

To pick from the two postings after 20:00 last night.

"The judge in the Superstrike case stated that any failure to serve Prescribed Information can be rectified to allow the subsequent service of a Section 21. So if you have registered a deposit, and you’re worried that a periodic tenancy is a new tenancy requiring new prescribed information, you can serve it late."

Why on earth anyone would register a deposit but not deal with serving the paperwork on time after Ayannuga v Swindells is beyond me, but no doubt it will happen. I think Glenn has recognised the deposit cannot be safely registered late, but then got diverted onto the issue of the prescribed information?

________________________

"I suggest the case does not say or even imply that there has to be a repayment of deposit to the Tenant when an assured shorthold expires."

Precisely. The case says there is a deemed repayment to the tenant and return to the landlord with no actual transaction (see paragraph 38). This deemed payment is sufficient to trigger the need to protect the deposit, where no such need existed before.

________________________

"The case was exceptional, as even the recital of facts at the beginning makes clear."

In as much as the original tenancy in the actual case was dated before April 2007 I agree. However, I suspect there are thousands of fixed term tenancies that started after April 2007 and have since turned periodic so the possible knock on effect on these tenancies can hardly be dismissed so lightly.

________________________

"Unless anyone can shoot down what I say by quoting from the case, I’ll have to tell my MP we (thankfully) have got a false alarm."

The fact that the deposit administration companies have all developed a case of loose bowels would seem significant.

________________________

"As a matter of practice, I have actual deposits and I put them on the statutory deposit scheme. That means (according to the scheme) that the deposit remains with them and is protected until the end of the statutory tenancy, if the tenant remains beyond the end of the fixed assured shorthold."

No doubt you serve the papers on the tenant at the start. However, the point is that a Court of Appeal judge has suggested you may need to re-register the deposit when the tenancy turns periodic. Do you do this? Now do you see the doubt?

________________________

"However, I came across a situation where the cover under another scheme was limited as to how long the insurance lasted. So when it expired the Landlord was in breach of the deposit rules."

Most insurance cover is limited to a period. I think you may have misunderstood the way that scheme worked.

________________________

"I would say this does not suggest in any way shape or form that the deposit has to be repaid to the tenant and taken again. Quite the reverse. It can simply be carried over."

Agreed.

"The only question, I suggest, is this: does the money have to be taken off deposit and re-deposited."

Let's reword that: The only question, I suggest, is this: does the deposit have to be taken off protection and re-protected.

"Answer I suggest: No
Why? Because the deposit was protected before and it still is protected. Which is the object of the legislation, however badly worded."

I support the logic your position and join in the hope you are correct. However, unless you have indemnity cover and are willing to put this down in writing so we can all rely on it, or you wear a wig to work in the Supreme Court, it remains what we thought was the position and is now in doubt.

Chris Sheldon

10:27 AM, 18th June 2013, About 9 years ago

@Glenn Ackroyd – we have been following this thread with interest and your post certainly appears to offer a glimmer of hope and an insight into best practice moving forwards. I am wondering what, if anything, EweMove will be doing differently?

I read your comment with interest as I had come to a similar conclusion and I just wanted to clarify the process which I believe you have suggested. Presumably you will be writing to each tenant who is in a statutory periodic tenancy saying something along the lines of …..

“further to the Court of Appeal ruling in the Superstrike vs Rodrigues case, the law regarding tenancy deposit protection has changed. Now, once a tenancy finishes its fixed term and becomes a periodic tenancy it is considered by law to be a new tenancy. Therefore, I now serve you with the relevant prescribed information relating to your new tenancy, please could you sign and return this as soon as possible”

I believe we are all coming to a similar conclusion which is that we will not have to go through the process, particularly if deposits are held in a custodial scheme, of returning the deposit to the tenant only to then receive it and re-register it and then serve new prescribed information with it. Is that your conclusion too?

One thing this has brought to light is that we have had several landlords contact us this morning enquiring about Zero Deposit options.

1 2 3 4 5 6 7 8 9 10 11 12 13
Landlord Tax Planning Book Now