Letting to Illegal Immigrants – the New Restrictions

In 2014 the government brought in restrictions on letting residential property to illegal immigrants, but only applied them to a pilot area, made up of Birmingham, Dudley, Sandwell , Wolverhampton and Walsall. I wrote about it at the time, but as the restrictions are now being rolled out across the whole of England (but not Wales, Scotland or Northern Ireland) with effect from 1st February 2016 I need to do so again. I’ve cut and pasted a lot from my earlier piece, so don’t be too surprised if it looks familiar. However, the government has taken the opportunity of tweaking things here and there, so there are some changes too.

The Law

Immigration Act 2014 sets thing out in ss 20-37. It defines:

  • persons disqualified by immigration status –  who are, not terribly surprisingly, people who have no right to remain in the UK; and
  • persons with limited right to rent – who are people with time-limited rights to be in the UK, plus people exercising EU rights to be in the UK, but are not EU citizens.

and make a landlord liable to a penalty if they allow them to occupy residential property, either as tenants, or licensees, or indeed lodgers.

There are a number of exceptions for the people

  • only adults count;
  • and UK, EU, EEA and Swiss nationals are exempt.

and for the lettings

  • only residential lettings – ie which the adult will occupy as their only or main residence (even if the premises are also used for other purposes.)
  • leases of 7 years or more don’t count;
  • nor does social housing, hostels, care homes, student accommodation and a variety of other things that are set out in Sch3,

However, lettings include leases, licences, sub-leases and licences and agreements for them  (s20(3)). And the prohibition can be broken by the tenant, or any other adult authorised to live there, or any adult not named in the tenancy agreement who actually lives there unless reasonable enquiries were made and they were not disclosed.

All this starts on 1st December 2014 for the Midlands, and 1st February 2016 elsewhere, and relates to lettings (etc) starting on or after then. Existing tenancies and renewals aren’t affected.

The Code of Practice

Immigration law is notoriously complex, and so the Government, rather than giving all landlords a 3 year training course, and free legal assistance afterwards, has prescribed a Code of Conduct  and some Guidance for Landlords which landlords are meant to follow. If they carry out the procedure in the Code they won’t have to pay the penalties. All landlords really need to have access to the Code. And as it gets changed from time to time you need to check the on-line version each time.

Some of the procedure is obvious. The landlord or agent should interview all the prospective occupants and see if they are intending to live there. If there is any doubt about the age of a child then documentary evidence should be seen and a copy kept. And all the adults should produce appropriate original documents which should be checked in their presence and a copy taken.

And for some people the documents are easy too – UK, EU or EEA or Swiss passport, or EU/EEA/Swiss identity card. They don’t even need to be current.

However, it rapidly gets a lot harder – do you know what a biometric immigration document issued by the Home Office looks like? Me neither. Fortunately the Home Office has produced a guide with some illustrations, although as the tenant can produce identity cards (current or expired) from any of the EU or EEA  countries or Switzerland it would have been helpful if they had shown a more comprehensive selection.

And once you get onto the “acceptable document combinations” or the “Documents where a time-limited statutory excuse is established” – there is a long list of things that most landlords have never heard of, and will have no idea if they are genuine or not.

Finally, if there is an application in train at the Home Office for permission to remain the landlord has to contact the Home Office online (or by phone) quoting the reference number supplied by the applicant.

For time-limited occupants the landlord has to follow their cases up to make sure they don’t overstay their leave. And the document combinations need to be repeated every 12 months.

If a landlord finds that an occupant is there illegally they should report them to the Home Office right away. Provided of course that they have already followed the Code to the letter, or they are just going to bring down hefty penalties on themselves. And then evict them (using the existing legal framework – s22(9) of the Act says that the tenancy isn’t void because of the immigration illegality), or they may have more penalties to pay.

What’s going to happen?

There is a serious risk that a lot of landlords are going to avoid anybody who looks even slightly foreign. So there is another Code of Practice on Avoiding Discrimination which says in effect that landlords have to document-check everybody, and keep copies for inspection, or they can be accused of racial discrimination. So the revised expectation is that they will avoid anybody who can’t produce a UK passport, or possibly an EU one. How do you know if the other documents are real?

This is wrong, and very unfair on a lot of people who are having a hard enough time living in a strange land but are on the right side of the immigration line. But a family of four may cost a landlord £12,000 in penalties, so why take the risk? Mind you the £3,000/head level only kicks in if the landlord has already had one breach, and the occupant isn’t just a lodger.

And the future?

More restrictions are set out in the forthcoming Immigration Bill 2015-16. This is working its way through Parliament at the moment so the wording isn’t yet been set in stone. This is the present version, but it may change. However the key points are:

  • Landlords (or agents) who let to tenants (etc) in breach of the restrictions, and know, or have reasonable cause to believe that this is the case will be guilty of an offence and can be sent to prison for up to 5 years.
  • The Home Secretary can serve a notice on a landlord informing them that the occupiers of their premises, or all of them, are disqualified as a result of immigration status from occupying premises under a residential tenancy agreement. The landlord can then serve at least 28 days written notice on the occupants and the tenancy thereby comes to an end. The section goes on to say, rather cryptically

The Notice is enforceable as if it were an order of the High Court.

Presumably this means they can send in the HCEOs, without having to bother the courts themselves at all. Such tenancies are excluded from the protection of the Protection from Eviction Act 1977.

  • There are provisions to insert implied terms into ASTs allowing them to be terminated if the tenants are disqualified as a result of immigration status from occupying premises under a residential tenancy agreement, and to give new mandatory grounds for possession for assured and secure tenancies.


This is controversial stuff. Although the government said that the pilot scheme doesn’t show there was any increase in the difficulty non-white applicants had over white applicants when seeking accommodation, this seems to have been a very small sample, and a short time-period, and other surveys produced different results. Rolling it out over the whole country, including London, is bound to make things a lot more difficult.

In the meantime, if you are a landlord, check the paperwork carefully, keep good copies, and if you are in any doubt it may be prudent to say no. And if you are a tenant make sure that your paperwork is spotless, or you are going to find things a lot harder.

The provisions in the Immigration Bill are very doubtful. The ability to serve a notice that is enforceable as if it were an order of the High Court is going back to Victorian times, and the ability of a Secretary of State to issue a notice to trigger this, bypassing the courts altogether, is a serious attack on the rule of law, which the courts will not necesarrily take lying down. Watch this space.

As ever, there are more detailed commentaries on the Nearly Legal blog (this is a link to several posts on this subject)  and on Tessa Sanderson’s Landlord Law blog, and elsewhere.

More Changes for Landlords and Tenants – s21 Notices

One of the problems with the law, and especially with housing law, is that as soon as you have worked out what the law is in one particular corner, and how you have to act in order to comply with it, and have drafted the forms and prepared the advice, somebody comes along and changes it, and you have to start again, or at least revise things.
Well, this has happened with notices under s21 Housing Act 1988 following the coming into force of further parts of the Deregulation Act 2015 and some new regulations.

Things as they were

As you probably know, s21 HA provides a way of a landlord of an Assured Shorthold Tenancy – the most common kind of tenancy in the private rental market – to bring the tenancy to an end, basically by giving 2 months’ written notice. Provided this expired after the end of any fixed term (and originally at the end of any periodic tenancy period) then the landlord could bring possession proceedings and the Court had to make a possession order. There was no form of notice, and the procedure could go through the accelerated process, which meant that if you had got the paperwork right there wasn’t even a hearing, as the order was made on a paper application. This made it the most common way of ending a tenancy, as there was no argument about reasons or anything like that, and many thought that this guaranteed ability of landlords to bring tenancies to an end when they wanted was the one of the key things that set off the increase in private lettings.

The Changes

When tenants’ deposits had to be protected in 2007 the landlord had to enter the deposits into one of the approved schemes and give the tenants notice within a prescribed period (originally 14 days, but later changed to 30 days) and if they hadn’t done so (or couldn’t prove that they had done so) any s21 Notice was invalid. This encouraged landlords to comply, and after some considerable hiccups with the legislation (see here and here) this system now seems to be working satisfactorily.

This was encouraging – a self-enforcing piece of legislation – so the government has now imposed a number of additional requirements. For tenancies starting after 30th September 2015 a landlord also has to serve the tenants with:
• An energy performance certificate
• A gas safety certificate
• A copy of the current booklet “How to rent: the checklist for renting in England”
And if they don’t they can’t serve a s21 notice until they do. This only applies to new tenancies – not periodic  tenancies that come into force after that time on the expiry of a fixed term. Note however that it does apply to a contractual periodic tenancy, or a replacement tenancy which merely replaces a former tenancy of substantially the same premises and is between the same parties.

Do note that landlords also have to fit smoke and carbon-monoxide alarms on all residential lettings (smoke alarms on every storey and CO alarms in rooms with a solid-fuel stove) from 1st October or they can be fined. This covers ASTs and all lettings for up to 7 years, apart from those shared with the landlord’s family and a few others. But it doesn’t affect the ability to serve a s21 Notice.

More Changes

There is now a prescribed form of s21 Notice. Not very different to the one that was normally used before. But if you don’t use the new one for a letting starting after 30th September 2015 then it isn’t valid. And if you use the new form on an existing letting it is misleading, because the explanatory notes are incorrect, so it is best not to use it. Please note that the first version of the Regulations (which also cover the requirements on energy performance certificates etc) messed up the form of notice and it had to be corrected. This new version is the form to use.

s21 Notices banned in first four months

For ASTs starting after 30th September  the s21 notice cannot be served in the first 4 months of the tenancy, or, if it follows on from an earier tenancy of the same property, within 4 months of the start of the earlier tenancy. Court proceedings must be started within 6 months of the notice (in most cases). So the old tactic of serving a notice with the tenancy is over.

And the end of retaliatory evictions

Well, that’s the intention. Landlords got into the habit of threatening to serve a s21 Notice on any tenants who looked as if they might be difficult, for example by complaining about defects in the property which the landlord ought to repair – say a leaky roof. This was clearly a bad thing, and unfair to tenants, and so s33 Deregulation Act says that s21 Notices can’t be served within 6 months:
• After an improvement notice, or an emergency remedial action notice, under the Housing Act 2004 has been served by the Local Authority; or
• After a tenant has written to complain about conditions, the landlord didn’t give a relevant response within 14 days and the tenant complained to the LA, and the LA served a notice.

There is argument in the legal press about whether the “relevant response”, which ought to be how the landlord proposes to address the problem, and a reasonable timescale for doing so, matters, or if a notice can be served anyway. The advice must be to respond, because it may persuade the LA that nothing further needs to be done.

Whether this will work very well in practice isn’t clear as most LA housing officers are very pressed and can barely keep up with their workload at present, but it is a start. We shall see.


This is a very simplified view of complicated law, which only applies to England, as Wales and Scotland have their own legislation. There is a lot more information on the Nearly Legal blog, and a whole series of very useful pieces on Tessa Shepperson’s Landlord Law blog. But at least you now know these changes have been made, and can go off and look things up. Job done.

All Change – s8 Notices, Superstrike and more

As I’ve mentioned before, the bane of writing these pieces is that no sooner have you written about something than they go and change it so you have to update things. I’ve been a bit slow off the mark this time, so all the spadework has been done by others, and all I hope to do is to point to their pristine furrows, and invite you to admire. In practice it may be a bit more complicated – it always is.

s8 Notices

These are the notices that you have to serve if you are a landlord to an Assured or Assured Shorthold Tenancy and want to bring it to an end prematurely, usually because the rent isn’t being paid, or the tenants are being antisocial, but there are lots of other possible reasons – grounds 1-17 + 7A, 14A and 14ZA of the Act* set them out.

Strictly speaking the notice is Form 3 under the Housing Act 1988* section 8 as amended by section 151 of the Housing Act 1996 and section 97 of the Anti-Social Behaviour, Crime and Policing Act 2014 but I’ll continue to use s8 Notice in the interests of saving my fingers.

The important thing is that the form of notice is prescribed, and the form of the notice has been (slightly) amended from 6.4.15, in this case by the Assured Tenancies and Agricultural Occupiers (Forms) (England) Regulations 2015 No 620 (different forms apply in Wales, it appears). So if you don’t use the right one the notice is ineffective and you’ll probably have to start the court proceedings all over again. You will certainly be returning to go without the court fee if you are using the most popular ground – Ground 8 (2 months’ arrears of rent) – because the court isn’t allowed to dispense with service of the notice in that case (see s8(5) HA 88).

There are also changes to some lesser-known forms such as a s13 form that allows a landlord to increase the rent.

So make sure that you use the right up-to-date form, or if you are a tenant or advising one, that the landlord has got it right.

There is more information on Tessa Shepperson’s useful blog and the forms themselves are in the Stat Ins and elsewhere. Do be careful – the last time that I looked several sites, including the government site still had the old invalid ones. The new forms have a note about ground 7A after section 5.

s21 Notices

These haven’t been changed. But do remember that you rarely need to use the s21(4) notice for periodical tenancies any more – the s21(1) fixed term notice is valid for all tenancies provided that they started off as a fixed term tenancy, as they nearly always do. This is all courtesy of Spencer v Taylor – more on this here.

Superstrike and AST Deposits

Deposits taken by landlords and their agents in relation to Assured Shorthold Tenencies have to be protected in one of the deposit protection schemes. However, what happens when the initial 6/12 month term expires and the tenancy goes over to being periodic? Surely you don’t need to protect it/serve all the notices all over again! Oh yes you do – courtesy of the CA in Superstrike v Rodrigues. This decision in 2013 made logical sense but no sense in the real world and we have been waiting for ages for it to be overturned by legislation.

Well, the time has come at last, and a clause or two have been slipped into the Deregulation Act 2015 to put us back to basically where we thought we were beforehand. Hence:

  •  s215A For deposits received before 6th April 2007 (when the original legislation had come into effect) provided the deposits are protected and the appropriate notices served by 23rd June 2015, or before any possession proceedings are started, they are deemed to have been properly protected.
  • s215B For deposits received on or after 6th April 2007 provided the deposit has been protected and the appropriate notices served for the fixed term, they don’t need to be repeated for any periodic tenancy that replaces it. It doesn’t matter if it is a statutory or contractual tenancy, but the landlord and tenant must be the same,  and the premises must be substantially the same, and the tenancy must come into being on the coming to an end of he original tenancy. And the section is treated as having had effect since 6th April 2007.

There are transitional provisions for claims by tenants for penalties under s214 or landlords for possession under s21. Basically, if the claims have been settled or finally determined (ie time for appealing expired) they are final, but if not the court will apply the new law from 26th March 2015, and the landlord will probably win. However, he won’t be allowed to recover any costs from the tenant it he has to rely on these provisions.

And finally, some bad drafting about notices giving agents’ details has been tidied up, so that agents can give their details or the landlords details if they wish. And the same transitional provisions apply for claims that have arisen because of this.

This is only a brief summary. For the exact wording go to ss30-32 Deregulation Act 2015 and for a more detailed explanation go to Tessa Shepperson’s blog where she breaks things up into digestible chunks.

This ought to sort things out, but it’s a complicated area and I have a feeling there may be some more problems in store. There is no excuse, however, for any landlords who haven’t protected and notified deposits taken before 6th March 2007: get things organised by 23rd June 2015 or have the sky fall on you!

More to come

I will leave the even more complicated bits in the Deregulation Act restricting retalitory evictions and changing the rules on s21 notices until another time. They only apply to fixed term ASTs that were granted on or after 1st October 2015, or periodic ASTs that immediately followed on from such tenancies. Until, that is 1st October 2018, when they will apply to all ASTs, whenever granted. So I’ve a little time to spare.


Spencer v Taylor update – Supreme Court refuse leave to appeal

Well this is just a short note, and the title says it all. On 24th July the Supreme Court refused the tenant leave to appeal against the CA decision which accordingly stands. This is all about ending Assured Shorthold Tenancies, and is in fact good news for both landlords (as you’d expect) and tenants as well, as it clarifies the law no end, so everybody knows where they are.

I wrote about this at the time, but in summary the CA had put an end to all those irritating problems caused by the complicated provisions of s21 Housing Act 1988. This provides for two forms of notice – one in s21(1)  for use with a fixed term tenancy which just needs to be 2 months expiring after the tenancy has come to an end, and one in s21(4) that is for use in periodic tenancies and needs a date after which possession is to be given that is on the last day of a period of the periodic tenancy, and at least 2 months ahead. There is lots of scope for getting this wrong, as the period of the tenancy may be different to the date when rent is paid, and many landlords forget that a tenancy starting on 5th May ends on 4th June, not 5th June.

Lewison LJ pointed out that s21(1) notices can be given in all cases

on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy

so as virtually all periodic ASTs start as a fixed term, and then run on, a s21(1) notice can be used for them as well. And the cleverest bit is that he pointed out that a s21(4) notice, is a perfectly valid s21(1) notice, just one with added bells & whistles.

So landlords can throw away their s21(4) notices and use the simple s21(1) version in every case apart from the rare ones when the AST was always a periodic tenancy, or where the conversion to the periodic tenancy is contractual rather than the normal statutory one.

Of course you still have to make sure the notices etc about the deposit have been reserved following Superstrike (my piece here) but not for long, as remedial legislation is on its way – here’s the current position as at 22nd July. More of that when it arrives.

No doubt there will be more detail and analysis from the usual sources – Nearly Legal has promised an extended piece shortly. But good news all round.


PS – Nearly Legal’s extended piece is here.

August 2013

Traditionally a quiet time of year. And looking at my blog, Twitter feed, emails and the world in general, it has been really. Just a few nuggets to comment on.


Still more fallout from the surprising decision that AST landlords need to re-serve the deposit-protection information at the beginning of the second (periodic) tenancy as well as at the beginning of the first (usually fixed) tenancy. The protection agencies have washed their hands of the problem, saying they can’t do anything, and even the housing minister Mark Prisk has admitted that it wasn’t what was intended and was a mess (here on the Landlord-Law Blog http://www.landlordlawblog.co.uk/2013/08/13/minister-confirms-that-superstrike-goes-against-the-intention-of-the-deposit-legislation/ ) He hints there might be legislation, but don’t hold your breath.


Not a housing or landlord matter, but an interesting example of the power and speed of modern media. Not only was the journalist’s friend and his detention (on 18th August) highlighted by the immediate media storm (largely on Twitter) but as I type this (20th August) his lawyer’s protocol letter has been published on Twitter more or less at the same time as it was sent, with requests for urgent response by 12.00 tomorrow. The legal argument seems to be whether there was power under the little-known Sch7 Terrorism Act 2000 to interrogate him and seize his belongings, in which case the power might be excessive, or whether there was no power to do so, in which case he should not have been held and has a claim for his detention. Neither are entirely satisfactory results. Too many references to give a lead – best Twitter comments by @JackofKent.

Richard III

An unusual litigant, in the person of some distant cousins, claiming Judicial Review of the decision to rebury his remains in Leicester Cathedral rather than elsewhere, such as in York which he might have preferred. Amazing decision from Haddon-Cave J on http://www.bailii.org/ew/cases/EWHC/Admin/2013/B13.html Permission to apply granted, much to Leicester Uni and Cathedral’s annoyance. And everybody’s considerable expense. Apparently one in six of us are indirect descendants of Richard III.


Yes, that sort of distress – by a landlord on a business tenant. The new rules on executions generally envisaged by the Tribunals, Courts and Enforcements Act 2007 look like they may at last be brought into effect from 6th April 2014. The regulations (Taking Control of Goods Regls 2013/1894) http://www.legislation.gov.uk/uksi/2013/1894/contents/made will replace all the old law for seizure by HCEOs, Court Bailiffs and private bailiffs. They are long and complicated and will be followed by two more sets, covering the costs and fees, and the certification regime, but broadly are much the same as the present, with distress (now called TCofG) being limited to business premises, and for rent and by certificated bailiffs only.

Part-Time Judicial Pensions

Following the success of a former Recorder who said that he was entitled to a pro-rata pension with the full-time judiciary, and who won in the SC in February (O’Brien v MoJ) the ET has now assessed how this is to be calculated, and so the case, that started in 2005, may be coming towards an end. Summary in Law Society Gazette http://www.lawgazette.co.uk/news/full-pension-part-time-judge-supreme-court-battle?utm_source=emailhosts&utm_medium=email&utm_campaign=GAZ+20%2F08%2F2013

HS2 Report

Living where I do I have a lot of interest in the proposed new line, which will pass a few miles from my door, and which may halve the train services from my local stations, without giving any benefit to me, or my region, at all. The cost is distressing, and having risen from some £33bn to some £42bn in the last few months it is even more upsetting to see a report that increases the likely cost to the region of £80bn, and confirm that it will lose money and achieve little. Perhaps somebody will see sense. Summary here http://highspeedrailuk.blogspot.co.uk/2013/08/network-rail-report-overlooks-cuts.html

Website and Publicity

I’ve spent some time recently working on our new website and in generating publicity for my firm. It all takes an age, but it’s the only way forward. Link here http://www.davidleesolicitors.co.uk  That’s the place to go for real lawyering, as opposed to this page of comment and speculation.

So I’m now looking forward to my holidays, and I’ll be back with you in September.

Superstrike – Guidance from the Deposit Holders

A few weeks ago the CA decided the Superstrike case (Superstrike v Rodrigues [2013] 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.

My opinion?

  • 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.

More Deposit Problems – Superstrike Strikes.

Superstrike v Rodrigues [2013] EWCA Civ 669

You might have thought that after the corrections made to the Deposit Protection legislation by the Localism Act 2011 and the recent case of Ayannuga v Swindells [2012] EWCA Civ 1789 matters would have settled down. You would have been wrong, and the CA has just tossed a particularly large and unpredictable cat among the legal pigeons in the form of the Superstrike case.

Very briefly, the matter concerns the protection of deposits paid for Assured Shorthold Tenancies (ASTs). From March 2007 the Housing Act 2004 requires these to be protected by the landlord by using one of several approved schemes, and for the tenants to be given prescribed information confirming this and setting out the way to use the free arbitration system included in the deal. This was a good idea in general, but very badly executed, as the legislation was full of enormous holes, and these had to be plugged by s184 of the Localism Act 2011, which took effect from 6th April 2012.  I have written about this before in November 2012 https://alanlodge.wordpress.com/2012/11/09/more-trouble-with-deposits/  and indeed in March 2012 https://alanlodge.wordpress.com/2012/03/12/all-change-for-deposits/ but it still won’t go away.

The Facts

The facts are remarkably simple.  In January 2007 Mr Rodrigues entered into an AST with the Landlords. It was for a fixed term of 6 months. He paid a deposit of one month’s rent, £600 odd, which was not protected as the compulsory scheme did not come into effect until 4 months later, in April 2007. When the fixed term ended Mr Rodrigues stayed as a statutory periodic tenant. All went well until 22nd June 2011 when the Landlord served a s21 notice requiring possession in 2 months, and possession proceedings followed.

By the time matters got to the CA (the Landlord having lost before the District Judge and won before the Circuit Judge on appeal) the issue was whether the deposit was “received” after the scheme came into force in April 2007, and so should have been protected. Clearly it hadn’t been physically received  – it was paid in January 2007 – but when the fixed term came to an end a periodic tenancy arose and the deposit was being used in relation to that. So in a sense it had been received then.

The Decision

Lloyd LJ in the CA started by deciding that the periodic tenancy that arose at the end of the fixed term under s5 Housing Act 1988 was a new tenancy, and not just a continuation of the fixed term. The wording of the section was quite clear.

The court then turned to the deposit and decided that it was as a matter of law paid at that point, because it had to be transferred from the old tenancy to the new one. Otherwise it couldn’t be used to cover liabilities under the new tenancy, as it was clearly intended to do. So, although the parties clearly hadn’t discussed matters in this way, and indeed almost certainly had not thought about the point at all:

The tenant should be treated as having paid the amount of the deposit to the landlord in respect of the new tenancy, by way of set-off against the landlord’s obligation to account to the tenant for the deposit in respect of the previous tenancy, given that the landlord did not seek payment out of the prior deposit for the consequences of any prior breach of the tenancy agreement.

Hence a payment had been received, the protection was triggered, and the deposit had to be protected and the prescribed information served. As it hadn’t been then s215 Housing Act 2004 meant that no valid s 21 notice could be served, and the claim for possession failed. Furthermore the Landlords had laid themselves open to a claim for the return of the deposit plus a penalty of up to 3 times the deposit under s214 HA 2004, should Mr Rodrigues choose to make one.

The Implications

The case related to an AST dating from 2007 and given the mobility of many tenants there are only a limited number of these still around. If you have one and you haven’t protected the deposit then you have a problem, and will need to return the deposit in full (or subject to any deduction agreed by the tenant) in order to make use of the escape clause under s215 (2A). If you have protected it and not given the appropriate prescribed information then you need to do so before the s21 notice can be served.

In either case you can still have a claim against you for penalties, because you will be many years out of time and although the limit was increased from 14 days of receipt it is still only 30 days of receipt, so you are very late indeed.

However, the real bombshell is that if the periodic tenancy that follows all fixed AST tenancies is a new tenancy, and the payment is deemed to be made by way of set-off as the CA has now decided, then all ASTs have the same problem. If you receive a deposit in say May 2012 and protect it right away and pass over the information in plenty of time you will have to do this again in November 2012 when the fixed term expires. And you probably haven’t because you didn’t realise that you needed to. So if you are thinking of serving a s21 notice think again.

Most of the schemes should continue to protect the deposit once the periodic tenancy kicks in, but very few landlords will have bothered to re-serve the information, when nothing has changed. And if you haven’t then you can’t serve a s21 notice until you do so, which will remind the tenant, who isn’t feeling too pleased with you at this point as you are trying to evict them, that you are out of time and that he can ask the court for the windfall of the penalties.

This is the bombshell – it affects virtually all ASTs and there is no real solution open to landlords except to hope. To say nothing of the thousands of possession actions that could be brought to a grinding halt, and the prospect of a multi-million pound series of claims being brought by tenants (egged on by litigation solicitors who are presently falling on hard times) who had an AST in the last 6 years and didn’t get two sets of information.

The Solution

Don’t expect too much sympathy from the CA. Lloyd LJ said to the hapless landlord’s counsel in Superstrike:

I am willing to accept that the need to comply may not have been foreseen. Unfortunately, several points under this legislation turned out not to be as may have been expected or intended.

There are however some possibilities:

  • Somebody may appeal to the Supreme Court. But I haven’t heard anything about this, and the cost will be a serious discouragement.
  • Most deposits should be protected. The protection schemes are considering their position and promise to release a joint statement shortly. So the only problem may relate to the information.
  • And a court may be more sympathetic to the argument that if information has been supplied and hasn’t changed then does it need to be given again (although s213(6) does require it to be given “within the period of [30] days beginning with the date on which the deposit is received by the landlord.”) In Superstrike the CA pointed out that the deposit had not been protected at all, and this was a basic part of the requirement.
  • Landlords can consider bringing claims on other grounds – say arrears of rent. This is not barred by the 2004 Act, although a wise tenant would counter claim for the penalties and set them off against the rent.

In the longer term the fiasco may be tidied up yet again by legislation. This government is unlikely to be pleased with the prospect of a new “whiplash” culture discouraging the supply of homes for rent, and making more work for struggling lawyers.

Failing this there are various ways forward:

  • Bite the bullet, re-serve the information, defend the claims and hope for the best in the short term.
  • In future serve the information twice. And hope for the best again.
  • Don’t take deposits in the future – insure if the tenant’s credit is good enough, or get a guarantor in many more cases.
  • Don’t have a fixed term at all in the AST. This has not been strictly necessary since 1996 (it was previously) but as s21 can’t be used until the tenancy is 6 months old it remains almost universal. But if you start with a monthly periodic tenancy this just runs on in the normal way, and there is never any ending of the tenancy and so no statutory periodic tenancy, and no requirement for any deposit to be transferred in this way. You just have to accept (and tell the tenant if you like by way of a note of the law set out on the tenancy agreement) that no order for possession can take effect until the tenancy is 6 months old.

But the way things have gone I wouldn’t be surprised if this problem comes back to bite us all before too long.

There are more detailed analyses of Superstrike in the Nearly Legal Blog http://nearlylegal.co.uk/blog/2013/06/deposit-received-one-way-or-another/ and the Painsmith L & T Blog http://blog.painsmith.co.uk/2013/06/17/another-deposit-case/ and on Tessa Shepperson’s Landlord Law Blog http://www.landlordlawblog.co.uk/2013/06/17/new-case-on-tenancy-deposits-received-before-april/

Beware of the Notice

Landlords have to know about all sorts of notices if they are going to be able to manage their properties effectively. I haven’t had time to even try to find them all, but even a brief search turns up a surprising number.

s47 L&TA 87 – Notice of the Name and Address of the landlord, which must be given on all demands for rent or other monies due under the lease, together with an address for service in England and Wales if the address is otherwise abroad. The notice can of course be given by their agent, who can give their details as well but not instead of the landlord’s. This is where the landlord in Beitov Properties v Elliston Martin [2012] UKUT 133 (LC) came unstuck. Until the details are given any monies other than rent that are claimed are not legally due.

s48 L&TA 87 – Address for service in England and Wales of any notices to the landlord, which must be given to the tenant before any monies including rent are due. Doesn’t have to be landlord’s true address (as in s47) and can be the agent’s address – and normally is. This, like s 47, applies to all residential tenancies that are not business tenancies.

s153 C&LRA 02 – Notice in prescribed form (including size of print – no smaller than 10 point) of tenant’s rights in relation to service charges, and which must be delivered with any demand for service charges, otherwise they are not due. There is a similar notice (although with slightly different prescribed wording) which must be delivered with any demand for administrative charges, such as a demand for the costs. This applies to all long residential leases.

s146 LPA 25 –Notice warning of threat of forfeiture. The most famous of the notices, certainly the statutory ones. Applies to all tenancies where the landlord is seeking to enforce a right of re-entry or forfeiture because of the breach of a term of the lease, other than to pay rent. Must inform the tenant of the alleged breach, require it to be remedies within a reasonable time if it is capable of remedy, and require compensation for the breach. Can’t be served in long residential leases unless the matter complained of is admitted, or determined by a court or the LVT beforehand.

s8 HA 88 – Notice Seeking Possession. The necessary first step to recover possession of an Assured Tenancy, including an Assured Shorthold Tenancy. Has to specify the breach and also set out in full the ground under Sch 2 that is being relied upon, and if more than one, all of them. It also has to give the date after which the proceedings may be issued, and it runs for 12 months, so you can rely on an old notice provided that they still apply.

s21 HA 88 – Notice Requiring Possession. Not to be confused with the above. 2 months’ notice ending on the end of a rental period means that the court must grant possession on an AST provided everything is in order. Date for notice crucial – note a tenancy that runs from the 1st of the month ends on the 31st (or whatever) of the month, and that is the date that must be given. There is a different form if the notice is served during any fixed term. And the notice is invalid if the tenant’s deposit hasn’t been properly protected and the appropriate notices etc haven’t been served in time  – ie within 30 days of the deposit being received.

And finally the Notice to Quit – which is a creature of common law and the oldest by a long way. It brings a periodic tenancy to an end, provided that it isn’t an assured or secure one, or a business tenancy protected by Part II of the Landlord and Tenant Act 1954 (which has its own forms of notices). The most common reason for serving one is to terminate a periodic assured tenancy where the tenant is no longer living in the property as their principal dwelling house, and so it is no longer assured.

There is one common thread to all these notices: they have to be served on the tenant. And then the landlord has to be able to prove that they have done so. Most tenants will deny receiving them, so just sticking them in the post is not a good idea on the whole. The best way is personal service, with a signed acknowledgement, failing which with a witness or a professional server. However, a well-drawn lease will include the deemed service provisions from s23 L&TA 1927 that allows a notice sent by Recorded Delivery to the tenant’s last know place of abode in England and Wales to be good service on posting, as decided by the ChD in Beanby Estates Ltd v Egg Stores (Stamford Hill) Ltd.

Not the most exciting topic, I’m sure you’ll agree. But an important one.

All Change for Deposits

Now readers are a pretty select bunch, and will know that there is an important change to the rules on protecting deposits for Assured Shorthold Tenancies coming into effect on 6th April 2012.  They will also know that in many ways the changes are about restoring things to the position that the legislators thought they were when they enacted the current rules in the Housing Act 2004. But it is an important change that will no doubt catch various people unawares, so it does no harm to set it out again.

The theory is unchanged: deposits paid by AST tenants have to be protected by putting them into a scheme that will

  • pay up if the landlord does a runner, or goes bust, and
  • provides an adjudication process to deal with arguments about deductions for damage etc.

The problem was that the method the government used to make sure that landlords actually did this, rather than using the deposit money as working capital (or the holiday in the Bahamas fund) as they did previously, was not only to stop a defaulting landlord serving a s21 notice, but also to allow tenants to claim draconian penalties of three times the deposit for even trivial failures, and this caused landlords and their lawyers to be inventive and persistent. The result was a series of cases that ruled that a landlord was not at risk of penalties if he protected the deposit by the day of the court hearing (Tiensia v Vision Enterprises) or if the tenancy had ended (Gladehurst v Hashemi). As it takes a remarkably stupid landlord not to notice the first of these, and most claims arise in practice after the tenant moves out and wants his deposit back, this rather ruined the scheme. Other commentators used much more colourful language.

So here’s the legislator’s second attempt. The key changes are:

  • Landlords have 30 days to protect the deposits instead of 14 days as before,
  • Courts have a discretion to pay between one and three times the deposit as a penalty,
  • If the deposit is not protected in time late protection won’t stop the penalty, and won’t let the landlord serve a s21 notice until he repays the deposit, or concludes the tenant’s court action,
  • Ex-tenants can make claims unless their deposits have been returned to them.

Note the rules apply to ALL ASTs that are in force on 6th April, so if a deposit (paid since 2007) has not been protected by then the landlord has until 6th May to sort things out.

I think that the thinking is that if you provide a more reasonable scheme then landlords won’t try so hard to get round it. Time will tell it this is right.

This is just a flag so you know you’re entering a minefield. If you or your clients merely want to operate things then get in touch with one of the Deposit Protection Schemes and they will provide all the notices etc that they need.

If you want lots of detailed advice then look on The Landlord Law Blog written by Tessa Shepperson http://www.landlordlawblog.co.uk  who is helpfully running lots of articles about this for the next week or so. Or go to Nearly Legal  http://nearlylegal.co.uk/blog/ who will analyse the law into fancy shapes in a thoroughly understandable way.