Attention: Landlords with Long-Term Tenants

Renting properties carries a number of significant legislative requirements that landlords must make every effort to adhere to or risk potentially significant issues should they wish to recover possession of their property. They may even face financial sanctions from the Courts if, for example, it can be shown that a landlord has acted in breach of its legislative requirements.  To reinforce this point, a recent Court of Appeal decision in the case of Superstrike Ltd v Rodrigues is likely to have a significant impact on many landlords with long-term tenants and further highlights the need for vigilance when dealing with landlord and tenant matters.

As many landlords will already be well aware, it has been mandatory since April 2007 for Landlords to join a Tenancy Deposit Scheme (“TDS”) on creation of a new residential Assured Shorthold Tenancy (“AST”) where a deposit is paid by the tenant to the landlord on commencement of the tenancy.   Most landlords will be equally aware that, by virtue of section 21 of the Housing Act 1988 (HA 1988), the landlord has the right to apply for possession of the premises once any fixed term has expired without giving any reason, subject only to giving not less than two months’ notice. However, the landlord cannot serve notice under section 21 of the HA 1988 if that deposit was not paid into an authorised TDS.

The key facts of the Superstrike case are that in January 2007 the tenant entered into a fixed term tenancy agreement for a year less one day. The deposit was not protected as the tenancy pre-dated the implementation of the compulsory tenancy deposit legislation. On the expiry of the fixed term the tenant remained in occupation, bringing about a statutory periodic agreement. The deposit continued to be unprotected.

In June 2011 a section 21 (‘s21’) notice was served and proceedings subsequently issued. Proceedings were defended on the basis that the s21 notice was not valid since it was served during a period while the deposit was unprotected.

The Court of Appeal held that tenancies created prior to the deposit protection legislation coming into force (i.e. 6th April 2007), which reverted to statutory periodic tenancies after that date, require deposit protection on the expiry of the fixed term.  Therefore, s21 notices will be invalid unless the landlord has complied with the statutory guidelines regarding deposits set out in the Housing Act 2004, namely that it was registered with a TDS within 30 days of the tenancy starting or the deposit being taken (whichever is earlier) and that the prescribed information has been provided to the tenant within the same 30 day period.

The obvious issue that this decision has created for landlords is that many may unwittingly now find themselves outside this 30-day period and so may be unable to recover possession via the accelerated procedure.  This may come as surprising news for landlords who have trusted their tenants to remain in occupation for years after a fixed term assured tenancy has expired.  It is therefore essential that landlords/agents take proper legal advice before attempting to seek a Possession Order which may, in actual fact, be doomed to failure.

For further advice on Landlord and Tenant issues please contact Patrick Jenkins or Simon Arneaud