Commentary on Sections Section 32: Tenancy deposits: deemed compliance with requirements
165.This section inserts three new sections into Chapter 4 of Part 6 of the Housing Act 2004 (“the 2004 Act”) which makes provision about the protection of tenancy deposits in the private rented sector.
166.By way of background, the tenancy deposit protection provisions in the 2004 Act require that where a deposit is paid in connection with an assured shorthold tenancy (the most common form of tenancy in the private rented sector) it must be protected by the landlord or agent in a government authorised scheme and certain information (“the prescribed information”) must be sent to the tenant within 30 days of the deposit being received. Landlords who fail to comply are liable for a financial penalty of between 1 and 3 times the amount of the deposit, payable to the tenant, on the tenant bringing court proceedings under section 214 of the 2004 Act. Landlords who fail to protect deposits also lose the ability to rely on the no-fault ground for possession in section 21 of the Housing Act 1988 unless they return the deposit to the tenant in full (or with deductions agreed by the tenant) or until court proceedings under section 214 have been resolved. Chapter 4 of Part 6 of the 2004 Act came into force on 6th April 2007 and certain amendments were subsequently made by section 184 of the Localism Act 2011.
167.The purpose of the new provisions is to deal with certain issues arising out of the Court of Appeal’s decision in the case of Superstrike v Rodrigues [2013] EWCA Civ 669. That case concerned a deposit which was received in connection with a fixed term tenancy prior to commencement on 6th April 2007. When the fixed term tenancy expired sometime after that date, the tenant continued to occupy the property under a statutory periodic tenancy in accordance with section 5 of the Housing Act 1988 and the landlord continued to hold the same deposit in connection with the periodic tenancy. The landlord in the case argued that the tenancy deposit protection legislation only applied if the deposit was physically received on or after 6th April 2007. However, the Court did not agree and found that the deposit must be treated as having been paid by the tenant and received by the landlord afresh at the start of the statutory periodic tenancy. As such, section 213 of the 2004 Act (requirements relating to tenancy deposits) applied and the landlord was required, at the point the tenancy became periodic, to make arrangements for the deposit to be held in accordance with an authorised scheme and to send the prescribed information to the tenant. This is contrary to the original guidance for landlords issued by the government that in this specific situation the legislation would not apply to the deposit. New section 215A is intended to deal with this issue.
168.The Court of Appeal’s decision also has implications for deposits which have been protected. This is because it has been interpreted by some as meaning that every time a tenancy becomes a statutory periodic tenancy or is renewed the duty on the landlord to comply with the tenancy deposit protection requirements arises afresh at the start of the new tenancy, even though the deposit remains protected in accordance with the same authorised scheme from one tenancy to the next. New section 215B is intended to deal with this issue.
169.The new section forms part of the law of England and Wales. It comes into force on the day on which the Act is passed.