Coventry View

A litigation lawyer's perspective

Posts Tagged ‘tenancy deposit protection

All Change – s8 Notices, Superstrike and more

with one comment

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.

 

Superstrike – Guidance from the Deposit Holders

with 3 comments

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.

Written by Coventry Man

01/08/2013 at 16:31

More Deposit Problems – Superstrike Strikes.

with 3 comments

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/

Written by Coventry Man

20/06/2013 at 00:31

Beware of the Notice

leave a comment »

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.

More Trouble with Deposits

with 2 comments

You will remember that there has been a lot of fuss about the protection of the deposits paid to landlords of Assured Shorthold Tenancies. This matters because it is far and away the most common form of tenancy in the private rental sector and is growing all the time.

Before 2007 there was no protection. Landlords could do what they wanted with a deposit, and if the tenant reckoned they were entitled to have it back they had to sue in the County Court, and then, if successful, enforce it out of the landlord, which was not easy, and, given the relatively small sums at issue, and the financial state of many tenants, often they didn’t bother.

All changed in March 2007 when the Housing Act 2004 set up a compulsory scheme for protection by either paying the deposit to a prescribed body or taking out insurance with an approved scheme. each of these included an arbitration system to determine who was entitled to the deposit at the end of the lease, at no cost to the tenants. The deposit had to be protected within 14 days, and if it wasn’t the tenants were entitled to recover the deposit in full, plus 3 times the deposit as a penalty, and the landlord couldn’t serve a s 21 notice while they were in breach.

Unfortunately the initial legislation was badly drafted, potentially very unfair to landlords, who may have to pay large penalties for trivial errors, and the courts found it to have lots of holes, as shown by 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). These were largely corrected by the Localism Act 2011 and the present position is:

  • 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.

This all took effect from 6th April 2012, and covered all AST deposits taken since March 2007.

Ayannuga v Swindells (2012)

The real interest is to see whether the courts are now prepared to enforce the new regime. The indications are that they are. In Ayannuga v Swindells (2012) CA (Civ) 6 November 2012 the CA held that although the deposit had actually been protected the landlord had failed to serve the prescribed information (under the Housing (Tenancy Deposits) (Prescribed Information) Order 2007). The landlord argued that all this information was available from the scheme’s administrator or on their website, and so this was just a technicality.

The CA disagreed, taking the view that the whole scheme including the dispute resolution was important and that the tenant was entitled to know about it. So they awarded the tenant the full relief of return of the deposit and 3 times the deposit as a penalty, plus no doubt very significant costs.

They also apparently commented (the report is not yet on Bailii) that if there was a doubt on the validity of the notice it should be determined following the test in Ravenseft v Hall: is the notice to substantially the same effect in telling the tenants of their rights etc under the scheme.

There was a similar result in the HC case of Suurepere v Nice, and the moral is clear: these things matter. A landlord must therefore:

  • protect the deposit within 30 days; and
  • serve the prescribed notice on the tenant; and
  • be able to prove that they have done both.

Otherwise the tenant can resist a s 21 Notice claim, and use it as a counterclaim to reduce any money claim, or to resist a possession claim based on say arrears of rent.

Scotland catches up

This blog doesn’t cover Scottish law. But you might like to know that from 13th November 2012 there is very similar legislation on protecting deposits in force in Scotland. It is in fact stricter as landlords have to be registered with their local authorities at the time that they take the deposit. For a brief guide see http://www.property118.com/index.php/tenancy-deposit-protection-deadline-for-scottish-landlords/33510/

Written by Coventry Man

09/11/2012 at 18:39

All Change for Deposits

with 2 comments

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.

Written by Coventry Man

12/03/2012 at 23:44