Tenancy Renewals – what are the complications?

by Mark Alexander

9:00 AM, 17th October 2012
About 8 years ago

Tenancy Renewals – what are the complications?

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Tenancy Renewals – what are the complications?

Tenancy RenewalsTenancy Renewals are causing landlords and letting agents problems and complications due to the new Deposit Protection rules requiring landlords to issue a new Deposit Protection Certificates whenever a new tenancy is created. This INCLUDES the provision of a new tenancy agreement for an existing Tenancy Renewals.

The consequences of failing to issue a new Deposit Protection Certificate are dire. Therefore, before I share the solution I want to be clear about the problem.

If a new tenancy is created, even for an existing tenant a new Deposit Protection Certificate must be issued within 30 days.

Once that period has passed the consequences are as follows:-

1) The landlord could be liable to be ordered to pay compensation to the tenant equal to three times the deposit

2) The landlord can not serve a section 21 notice agreement to re-gain possession of the property whilst a deposit is being held, regardless of any claims the landlord may have against the deposit in terms of damages or rent arrears.

It never ceases to amaze me how many landlords and letting are unaware of this law or simply forget to re-protect deposits and issue new Deposit Protection Certificates on renewal of tenancy agreements.

Renewing a tenancy is arguably not in a landlords best interests as both cost and administration are involved and the period whereby it is not possible to use section 21 notices to re-gain possession is extended to at least the length of the new tenancy term. However, some landlords choose to renew tenancies, presumably to establish whether tenants want to remain in the property for another six or 12 months.

It is common practice to letting agents to offer tenancy renewals as the associated administration provides a key element of their fee income.

I can also understand why tenants choose to pay for tenancy renewals, in many cases renewal is presented to them as a fait accompli but some tenants do actually request them to avoid being served two months notice to vacate a property at a most inconvenient time.

What I can’t understand is why landlords and letting agents waste so much time and expense on tenancy renewals and re-protecting deposits when a much more cost effective alternative exists.

The alternative to tenancy renewals, which agents can still charge fees to organise, is a Deed of Assurance – details of which are available HERE.



Comments

11:49 AM, 25th October 2012
About 8 years ago

According to PIMS (http://www.pims.co.uk/Deposit-Schemes-DPS-mydeposits-TDSL) only deposits with mydeposits require a new certificate to be issued whilst deposits with DPS continue to be protected if the tenancy is renewed and a new certificate is not needed. Can someone clarify if PIMS is correct ?


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