A few weeks ago the CA decided the Superstrike case (Superstrike v Rodrigues  EWCA Civ 669) and held, to most parties’ horror, that not only did the Deposit Protection legislation apply to deposits received before the relevant Act came into force, but also did so in terms that mean that most AST landlords are in breach of the legislation and so liable to pay their tenants penalties of up to three times their deposits and can’t serve valid s21 Notices. Commentators had been hinting that this might be the case, but they rather assumed the courts would see a way round the poorly-drafted legislation. Sadly it was not to be.
The problem is that s5 Housing Act 1988 says that at the expiry of a fixed term AST tenancy a new periodic tenancy arises
“by virtue of this section”.
Thus it is not a continuation of the old fixed term tenancy, but a new tenancy. Hence any deposit that has already been received for the fixed term tenancy has to be transferred over to the new tenancy, or it couldn’t be used to pay arrears etc. This might in a few cases take place formally, with an exchange of cheques but in 99% of cases there is nothing like this, and the parties do nothing active at all. However Lloyd LJ decided in Superstrike that, as a matter of law, this is what happened, and that the landlord accordingly “received” the deposit again. This activated the requirement to protect it, to serve the appropriate notices on the tenant within 30 days, and triggered the penalties for not doing so, namely irrefutable claims for up to 3 times the deposit, and the inability to serve s21 notices until the deposit had been repaid in full. It was part of the essential part of the decision in Superstrike, the ratio decidendi, and so binding on all lower courts, even though the facts of the cases may differ in parts.
I wrote about this at the time (see Coventry View 20.6.13) and suggested a few possible ways round this. Well one of them, Guidance from the Deposit Takers, has just arrived. And it is a damp squib, or wet hen, or chocolate teapot. It is to be found at https://www.tds.gb.com/resources/files/Superstrike%20v%20Rodrigues%20Scheme%20Guidance.pdf
Unfortunately the DTs feel unable to provide any advice and certainly not any answers. They just set out the various options and then suggest interested parties take their own legal advice. So we’re really none the wiser. It may be that the DT could do little else, given their lack of formal powers in this area. But it takes us no further forward at all.
The present position can’t be the result that anybody wanted. But we could be stuck with it for some time, as I have heard no hint of anybody appealing Superstrike to the Supreme Court.
- For all new tenancies, if you are taking deposits, make sure that the scheme you use continues to protect the deposit once the periodic tenancy kicks in, and then serve the documentation again. But you may do better to insure or have a guarantor.
- For existing tenancies where the deposit is protected either serve the documentation again (risking a claim by the tenant as it will be out of time) or ignore it and hope for the best. Most tenancies after all end with an amicable departure. And if you want to serve a s21 notice return the deposit first.
- If the deposit isn’t protected then protect it asap, as this should reduce the amount of penalty that you have to pay – the courts can award between one and three times the deposit, and will take this into account.
But really, this is no way to run a village fete, let alone a country.