Tenancy Deposit Schemes continue to trip up landlords in the residential sector with yet another court decision on how the scheme should work.
The legal framework requires landlords to do two things within 30 days of receiving the deposit: pay the deposit into a registered scheme; and give the tenant certain prescribed information about how their deposit is held.
The position is straightforward on a new letting. It is also clear that on an express renewal of the tenancy, the landlord has to make sure that the deposit is or remains protected and provide the tenant with the prescribed information afresh within 30 days of the renewal date. But what happens when the tenant is allowed to stay in the property, paying the rent as per the terms of the expired tenancy?
Last year, we blogged about the Court of Appeal decision in Superstrike Ltd v Rodrigues. The Court decided that where a tenancy was granted before the tenancy deposit scheme came into force in April 2007, and the tenant stayed in the property after the expiry date, the landlord was required to protect the deposit and give the tenant the prescribed information. This makes sense, as the deposit was not previously protected.
However, the recent court decision of Gardner v McCusker in the Birmingham County Court goes one step further. Now, landlords must renew the deposit protection within 30 days of the fixed term expiring, regardless of whether it was previously protected. In reality, the deposit will continue to be protected with whichever scheme it is registered, but there will be an additional burden on the landlord to provide the prescribed information within 30 days. Of course, the prescribed information will not tell the tenant anything new other than the start date of the new periodic tenancy which is created automatically on the expiry of the fixed term. Crucially, if the prescribed information is not provided in time, the landlord will be liable to pay the tenant a penalty of between one and three times the amount of the deposit. Additionally, the landlord will not be able to serve notice to bring the tenancy to an end until that information has been provided.
The result? No added benefit to the tenant but another administrative burden for landlords.
The lesson? Landlords should actively manage their portfolios and ensure that within 30 days of a fixed term tenancy expiring, the prescribed information is given to a tenant who stays in the property with the landlord’s agreement even if an express renewal has not been granted.
Case: Gardner –v- McCusker 3BM70525, Birmingham County Court