Since 6 April 2007, it has been mandatory for a landlord to protect a deposit paid in connection with an assured shorthold tenancy within an authorised tenancy deposit scheme (“TDS”)  and to provide certain prescribed information to the tenant within 30 days of receipt of the  deposit. If the landlord fails to do so, it will not be able to serve a valid section 21 notice to bring the tenancy to an end, and it may also be liable to financial  penalties.

In the 2013 case of Superstrike Ltd v Rodrigues [2013] EWCA Civ 669, the Court of Appeal considered what steps a landlord should take where a fixed term  tenancy, entered into before the tenancy deposit registration rules came into force, expires and  the tenant remains in occupation under  a statutory periodic tenancy after the rules came into  force. The Housing Act 2004 makes clear that such a periodic tenancy will be a new tenancy and so  the Court of Appeal decided that the landlord would be required to register the deposit (and provide the prescribed information to the tenant) at the time the statutory  periodic arises under the Act.

The recent Court of Appeal decision of Charalambous and another v NG and another [2014] EWCA Civ  1604 has taken this point further and will come as unwelcome news for a number of residential  landlords.

In Charalambous, the fixed term tenancy came to an end in August 2005 (some 20 months prior to the  tenancy deposit registration rules coming into force), and the tenant remained in occupation under a  statutory periodic tenancy. On 17 October 2012, the landlord served a section 21 notice requiring  possession of the property. The tenant challenged the validity of the section 21 notice as the  deposit paid by the tenant was never held under a statutory scheme. At first instance, the Court held that the notice was valid, however, the Court of Appeal allowed the tenant’s appeal and held that the notice was invalid even  though the tenancy had already become a statutory periodic tenancy and the landlord had already  taken the deposit before the tenancy deposit registration rules came into force.

The Court of Appeal held that, although the landlord was not required to comply with the  registration requirements at the time she received the deposit or at the time the statutory  periodic tenancy arose, the landlord was nevertheless required to comply with the requirements  before serving a valid section 21 notice. The landlord should have cleared the path to the service  of such a notice by either: 1) paying the deposit into a TDS; or 2) repaying the deposit to the  tenant.

In the light of this decision, residential landlords should review their portfolios and consider  protecting any tenancy deposits which have not yet been protected, even if they were received prior  to April 2007. Alternatively, they should return the deposit to the tenant in full (or subject to  agreed deductions) before serving a section 21 notice.