Important changes to the law in England and Wales on rent deposits for assured shorthold tenancies

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Summary

For deposits for assured shorthold tenancies in England and Wales entered into pre-6 April 2007 that were never protected under the relevant statutory requirements, there is new legislation which means the requirements have to be complied with before the end of 23 June 2015, but it could be even earlier.

Detail

Since 6 April 2007, deposits for assured shorthold tenancies in England and Wales have had to be protected within prescribed periods in statutory schemes, either insurance or custodial. The schemes also entail obligations on the landlord to provide certain information about the relevant scheme and the tenancy to the tenant within prescribed periods and a failure to comply with the scheme's obligations may lead to a fine for the landlord or inability to regain possession of the premises.

In recent years, there have been a number of cases highlighting ambiguities in the legislation and the Government has sought to address some of those in the recently enacted Deregulation Act 2015. The changes to the tenancy deposit legislation apply to England and Wales and a few are particularly important.

There was uncertainty about what a landlord needed to do in relation to a deposit for a fixed term assured shorthold tenancy (AST) taken before the tenancy deposit legislation came into effect on 6 April 2007. When that fixed term AST ended and a new statutory periodic AST (automatically) began on or after 6 April 2007, were there any statutory requirements to protect the deposit (carried over and held in relation to the periodic tenancy)? The new Act now answers in the affirmative. If the deposit has not already been protected, the landlord is required to protect the deposit and provide the relevant prescribed information to the tenant before the end of 90 days starting with when the Act was passed. The Act was passed on 26 March 2015 and before the end of 90 days starting with that date is before the end of 23 June 2015 (although it makes sense to ensure compliance at least a day or two before to avoid arguments as to whether compliance was in time).

Note, also, that this compliance date may be earlier. It could be before the first day after 26 March 2015 on which a court does any of the following in respect of the periodic tenancy - determines an application under section 214 of the Housing Act 2004 (proceedings relating to tenancy deposits) or decides an appeal against a determination under that section; or makes a determination as to whether to make an order for possession in proceedings under section 21 of the Housing Act 1988 or decides an appeal against such a determination. So if the deposit has not already been protected and the relevant required information provided, there is a tight timeframe in which to do so.

A failure to comply with the timeframe means that the landlord will be unable to regain possession (unless the landlord has returned the deposit to the tenant, or the matter has been determined by a court or settled) and there is also a possible fine.

Of reassurance to landlords, if the landlord took a deposit before, on or after 6 April 2007 for an AST, which it protected in a tenancy deposit scheme and served the prescribed information in compliance with the statutory requirements, then if a new AST (including statutory periodic) came into being at the end of the first tenancy (with the same landlord and tenant of the same or substantially the same premises and the same statutory scheme), the landlord does not need to repeat the protection for the new tenancy. However, clearly, the landlord cannot benefit if he failed to protect the deposit for the original tenancy.

It is worth noting that the above changes will not be treated as retrospective where any claim has been settled or a court has finally determined proceedings before 26 March 2015.

Also any landlord of an AST that became periodic before the tenancy deposit scheme legislation came into force on 6 April 2007 should protect the deposit in order to be able to regain possession (unless the landlord has returned the deposit to the tenant, or the matter has been determined by a court or settled).