August 15, 2014

Warning for landlords on tenancy deposit schemes

As a responsible landlord you will have protected your tenants’ deposit at the start of the tenancy by putting it into a tenancy deposit scheme and provided your tenants with the information of the scheme within the 30 day timescale.

You have perfect tenants paying their rent and the tenancy runs smoothly. In fact, the landlord and tenant relationship is so harmonious that upon the expiry of the fixed term you decide to simply let the tenancy roll over and a ‘statutory periodic tenancy’ is created.

You have ensured the tenancy deposit is properly registered at the start of the fixed term tenancy and surely you have nothing further to worry about? Wrong! You can still be penalised if you do not ensure that the deposit is properly re-registered with the tenancy deposit scheme when your tenant remains in occupation of the property after the initial fixed term of the tenancy has expired.

In the Appeal case of Superstrike Ltd v Rodrigues [2013] and followed more recently in Gardner v McCusker (unreported) the court determined that when the original fixed term of a tenancy has expired, a ‘new tenancy’ comes into being which means the tenant needs to pay a deposit and the landlord should comply with the tenancy deposit scheme registration requirements in relation to the ‘new tenancy’.

How does this work in practice?
In practical terms, in cases where a tenant remains in occupation following the expiry of the initial fixed term, the landlord will continue to hold the deposit paid over at the outset. However, as there is a ‘new tenancy’ in place (the statutory periodic tenancy), the protected deposit can stay within the original tenancy deposit scheme, but you will need to re-issue the scheme information within 30 days of the end of the original fixed-term tenancy.

Unless this is done you won’t be able to seek possession of your property. You may also face an unwelcome financial penalty of up to three times the amount of the deposit as compensation to your tenant for not complying with the law.

This means it is essential that you monitor your tenancy portfolios carefully to ensure that you have complied with tenancy deposit scheme registration requirements not only at the start of a fixed-term tenancy but also at the end!

Our Property Disputes team regularly work with landlords and tenants to resolve issues related to rented property. If you would like to find out more about your requirements as a landlord contact the team on 0800 923 2070 or email [email protected].

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