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01st August 2014

Tenancy Deposits.

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AST deposit protection following expiry of the fixed term The requirements for protecting rent deposits for an assured shorthold tenancy (AST) can easily trip up residential landlords.

Under the Housing Act 2004, landlords must register a tenant’s deposit with a designated tenancy deposit scheme and give the tenant certain prescribed information within 30 days of receiving the deposit. If a landlord fails to do so he cannot validly serve a section 21 (“no fault”) notice to end the tenancy without first returning the deposit to the tenant and the tenant could seek compensation of up to three times the amount of the deposit, plus the return of the deposit itself.

The Court of Appeal held in the 2013 Superstrike case that, where a tenancy commenced before the rules had come into force, the landlord must register the deposit when the fixed term of the tenancy came to an end but the tenant remained in the property. This case was quite specific and had left open the question of whether a deposit already registered would need to be re-registered when the fixed term converted to a periodic term.

This question was considered by Birmingham County Court in May this year in Gardner v McCuster and the Court applied the principles of Superstrike directly to the case. So, if the tenant remains in occupation after the fixed term but the deposit is not registered in respect of the periodic tenancy and the prescribed information is not provided within 30 days of the fixed term expiring, the landlord will be in breach of the Housing Act and will not be able to validly serve a section 21 notice. Note however that this does not affect the section 8 regime for seeking possession.

Proposals to reform the rules are being put forward in Parliament but no timescale has yet been set down for this. Landlords must monitor their tenancy portfolios carefully and ensure they comply with registration requirements not only at the outset of an AST but also at the end of the fixed term.

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