The accidental landlord: make sure your tenant's deposit is protected

Victoria Whitlock warns landlords after an Appeal Court ruling on tenants' deposits
A law-abiding landlord, that’s me. I’d never deliberately ignore any rules or regulations. But a court ruling this week has turned me, and thousands of other landlords, into criminals.

And if you let a property, you could be breaking the law, too. Yes, YOU —even though you might not realise it yet. Bear with me and I’ll explain.

The Court of Appeal ruled this week that a landlord who takes a deposit from a tenant must re-protect it if the tenant remains in the property at the end of their lease on a statutory periodic tenancy. Landlords who have failed to re-protect deposits have broken the law and could be fined. They could also be ordered to pay tenants penalties amounting to several thousand pounds.

The court ruled that when a fixed-term tenancy ends and the tenant switches to a periodic tenancy (which is when they remain in the property on exactly the same terms, other than a possible increase in rent), this should be treated as a new tenancy rather than a continuation of the existing agreement, and so the landlord must re-protect the deposit.

This means the tenant must be issued with a new certificate and possibly all the prescribed information as well (although it is far from clear whether this is a legal requirement) within 30 days of the start of the new agreement — creating a lot more paperwork and killing several trees in the process —and all to protect something that was already protected.

Are you still with me? Well done. Now things are going to get even more confusing. You see, at the moment, none of the government-approved schemes set up to protect tenants’ deposits require landlords to re-protect deposits when their tenants switch to statutory periodic tenancies.

The Deposit Protection Service, The Tenancy Deposit Scheme and MyDeposits only require landlords to re-protect deposits each time they issue a new Assured Shorthold Tenancy.

This means that thousands of landlords who are fully compliant with the rules of the tenancy deposit schemes have nevertheless unwittingly fallen foul of the law. All of the deposit protection schemes are reviewing the judgment in the Superstrike v Rodrigues Court of Appeal case and consulting with the Department for Communities and Local Government on this, which may lead to changes to their rules.

But in the meantime, it seems that many landlords — myself included — are on shaky ground. Rather worryingly, a joint statement issued by the tenancy deposit schemes said landlords should obtain their own legal advice.

A cheaper option would be to swiftly re-protect all deposits for tenants on periodic tenancies, although technically speaking, tenants could still start legal action if their money wasn’t re-protected within 30 days of the start of the agreement.

Fortunately, in my experience, many tenants are still not aware that their landlord is obliged to protect their deposits in the first place, and the vast majority aren’t likely to take a decent landlord to court over a technicality. However, should a landlord who hasn’t re-protected a deposit on time attempt to evict a tenant, they may find they’re unable to do so because they haven’t complied with the law.

When I first started letting property you could take the tenants’ deposits and stuff the cash under your mattress if you wanted. I thought the introduction of deposit protection in 2007 was a good thing, but now I’m not so sure.

Follow our accidental landlord on Twitter at @VicWhitlock

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