Superstrike Ltd v Rodrigues  changes the previous thinking on certain aspects of tenancy deposit legislation and in particular the obligations of the landlord and agent.
The landlord granted a tenancy to the tenant on 8 January 2007 for a term of one year less a day at a rent of £606.66 per calendar month. The tenant also paid a deposit of the same amount. As tenancy deposit protection legislation took effect on 6 April 2007, the deposit did not need protecting at that time. The deposit was never protected by the landlord.
No new tenancy agreement was granted and the tenant was entitled to remain under a statutory periodic tenancy as per section 5 Housing Act 1988 after the fixed term had ended.
On 22 June 2011, the landlord served a section 21 notice on the tenant. This was defended on the grounds that when the tenancy became statutory periodic in 2008, a new tenancy was created and as a result, the deposit had in effect been paid to the landlord again under the new periodic tenancy and therefore should have been protected on or after 8 January 2008 (within 14 days as was required at that time).
The tenant argued that because the deposit was not protected when the section 21 notice was served in June 2011, then, the notice was invalid.
A brief reminder, section 213 Housing Act 2004 required any deposit as from the time when it is received be protected with an approved tenancy deposit scheme within 14 days. Where deposit had NOT been protected, the penalty was three times deposit plus return of the original amount. In addition, under section 215, no section 21 notice may be given in relation to the tenancy at a time when the deposit is not being held in accordance with an authorised scheme.
The court said (Paragraph 27) … It is clear from the 1988 Act that what happens at the end of the fixed period tenancy is the creation of a new and distinct statutory tenancy, rather than, for example, the continuation of the tenant’s previous status. I do not see that there can be any doubt as to that. …
As the statutory periodic tenancy is a new tenancy, the court held that in effect, the landlord had repaid the deposit to the tenant under the fixed term tenancy and then immediately the tenant had in effect paid a new deposit to the landlord for the new statutory periodic tenancy. This is the same as if a renewal had taken place:
… the new tenancy contained an equivalent provision as to a deposit, in replacement for the provision under the express tenancy … But the legal position after 8 January 2008 must have been that the deposit was held by the landlord as security for the performance of the tenant’s obligations, or for the discharge of any liability of his, arising under or in connection with the new statutory periodic tenancy, not (or not only) in respect of such obligations or liabilities arising under the original fixed term tenancy. How had that come about? It must have been on the basis that the tenant’s right to be credited with the deposit at the end of the fixed period tenancy, as well as his obligation to pay, and the landlord’s right to receive, an equivalent deposit under the new statutory periodic tenancy, were treated as satisfied by the landlord continuing to hold the same sum of money as before on the same basis as before but by reference to the new tenancy.
The landlord argued that the requirement to protect a deposit only applies when the deposit is “physically received” after 6 April 2007. By physical receipt he meant payment by cash, cheque, bank transfer or in some other way, such as occurred in January 2007 when the tenancy was first granted. However, the court didn’t agree (Paragraph 36):
The landlord was refused possession because on 8 January 2008 it was regarded that he had received a new deposit from the tenant for the new tenancy created by the Housing Act 1988. As this deposit was not protected, section 215 Housing Act 2004 prohibited the service of the notice which the landlord served in 2011 and as a result the notice was of no effect.