Lord Justice Lloyd delivered judgement on an appeal from Wandsworth County Court for the case of Superstrike Ltd v Marino Rodrigues on the 14th June 2013 and since then conflicting advice has been offered by different landlord associations.
The Residential Landlords Association (RLA) told its members that they will be issuing updates shortly, after they have sought advice from its deposit protection partner the Tenancy Deposit Scheme (TDS).
By contrast, the National Landlords Association (NLA), who have business links with MyDeposits and the UK Association of Letting Agents (UKALA) have condemned the speculation and online reporting of the case.
The NLA issued advice to members stating that the Superstrike case also only relates to landlords within a particular timeframe, who used Section 21 notices. In reality the case will have little effect on landlords and insist that the ruling only pertains to tenancies started before April 6, 2007, and which have subsequently become periodic.
The NLA are discussing the matter with officials responsible for tenancy deposit protection (TDP) legislation within the Department for Communities and Local Government (DCLG) and legal professionals.
It is important to understand that appeal judges only consider the case presented to them, not a similar set of circumstances, or a variation on a theme.
The precedent they set is therefore only applicable to cases subject to the same set of circumstances. This fact is crucial in this instance as the case of Superstrike Ltd v Rodrigues is not representative of all landlords or private tenancies.
The specifics are as follows:
- The tenancy (an AST) began in January 2007, before the 6 April introduction of TDP
- The tenancy persisted, on a statutory period basis, without renewal or changes from January 2008
- No deposit was ever protected in relation to this tenancy, as it was received prior to this becoming a requirement
- A Section 21 notice was served in June 2011 to end the periodic tenancy
The Judgement concludes:
- A statutory periodic tenancy is a new and distinct tenancy, not a continuation of the tenant’s previous status.
- The legal position was that the deposit held by the landlord at the end of the fixed term was deemed to have been received in relation to the periodic tenancy in January 2008.
- As it was received in January 2008, after the introduction of TDP, it should have been protected.
- As the landlord did not comply with Section 213 of the Housing Act 2004, they did not have the right to serve a Section 21. This rules the Section 21 invalid.
What It Does Not Conclude:
- The ruling does not apply to any deposits taken after 6 April 2007.
i.e. It does not introduce a requirement to re-protect deposits held lawfully in accordance with a TDP scheme’s rules when a tenancy becomes periodic.
- The ruling does not look into financial sanctions; this case only focused on whether the landlord’s Section 21 notice was valid.
- The ruling does not look into the need to provide prescribed information.
What does all of this mean for landlords?
- If landlords have any tenancies which began before 6 April 2007 and became periodic after 6 April 2007, for which they hold a deposit which was not protected, then the landlord may not be able to issue a Section 21 notice.
- If landlords don’t have any tenancies which match this description, this judgement should have no impact whatsoever.
- Depending on the TDP scheme used, landlords may receive correspondence in the near future asking to confirm the status of tenancies for which the fixed term has ended but a request to unprotect the deposit has not been received.
- Landlords may, in future, be asked to let the tenancy deposit protection scheme provider know when tenancies become periodic.
There isn’t a clear answer as to what landlords should do if they have tenancies that started before 2007 as due to the nature of appeals, only the exact circumstances of the particular case in question would be examined.
However, there are ways to mitigate the risk of being caught out by the precedent set by Lord Justice Lloyd:
- Return the deposit.
This should remove the risk of a future Section 21 being deemed invalid and is implied by the judgement. However, Justice Lloyd deliberately reserves judgement on this matter.
- Protect the deposit.
This should show intention to comply with the law and remove the risk. However, given the recent amendment to Section 215 of the Housing Act 2004, this may not be sufficient to avoid sanctions. Only a further legal case could determine this.
Or landlords can just wait and see what happens if the case is taken to the Supreme Court, which could overturn the judgement.
The NLA is keen to speak to the landlord in this case and is seeking legal advice to determine what options may be available to challenge the decision.
Furthermore, the NLA are keen to impress upon ministers at DCLG that it has a responsibility to regain control over this legislation and should act swiftly to amend the Housing Act 2004 to remove this uncertainty, in the same way it did in 2011 following the Tiensia case.
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