According to Housing Act 2004 for assured short hold tenancies (ASTs) a landlord has to submit the paid deposit of tenant in some recognised tenancy deposit scheme (TDS).If a landlord has not followed the correct tenancy deposit procedure, he cannot obtain possession order under section 215 of Housing Act 2004.
In Superstrike case on January 2007 the tenant entered into a 12 month fixed term tenancy (AST). According to the terms of the tenancy, the tenant paid one month's deposit. The landlord placed deposit in a tenancy scheme that has not yet come into force. At the end of the 12-month fixed term, the tenant remained in occupation and tenancy rolled into statutory periodic tenancy. Almost six months later, the landlord served a section 21 notice for possession and to end the periodic tenancy .on expiry of notice he obtained a possession order. The tenant challenged this .he argued that the possession order is not justified as the landlord had not protected the deposit as per the sanction in section 215 of Housing Act 2004. The court of appeal held that as the fixed term had expired and converted to a statutory periodic tenancy in January 2008. Hence the new tenancy was formed on a date after the deposit protection regulations under Housing Act 2004 had come into force. So the landlord was under an obligation to protect the deposit from that date which he had not done so the statutory regulations had been breached and the possession order overturned.
There can be serious implications on landlord of the decisions like this. The consequences of a court finding non-compliance mean that landlords may prevent from obtaining possession orders and can be made subject to financial penalties as well.
There may be possibility that the law will be clarified by Parliament who has addressed the issue in clause 31 of the Deregulation Bill 2013-2014 ("the Deregulation Bill").
Meantime the landlords should re-protect all deposits held with the TDS and shall re-serve the Prescribed Information relating to these deposits on all of their tenants whose tenancies have converted to statutory periodic tenancies.
The content of this blog is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances