Essentially, the case centers on a landlord who did not protect his deposit because he didn’t think he needed to – tenancy deposit regulations came into force and the fixed term of this landlord’s tenancy ended after that time. (The rules state that landlords letting out homes on an assured shorthold tenancy
A Section 21 notice to quit, served to terminate the periodic tenancy, was ruled invalid. The Court of Appeal took the view that the landlord was at fault for not protecting the deposit, and ruled in favor of the tenant, giving two reasons why:
The fact that the tenant had stayed on beyond a fixed term effectively created a new tenancy.
The deposit would be treated as having been returned to the landlord and then repaid – so it had to be protected.
It’s the second point in particular that has left thousands of landlords wondering if they had acted properly and whether all other deposits paid need to be re-protected if tenants remain at a property after a fixed term ends.
There are two ways judges in the future could interpret the case:
1.) A narrow interpretation, that the rules only apply to deposits paid before April 2007, where they had not previously ever been protected
2.) A much wider interpretation – some are even suggesting that a deposit could need to be re-protected as often as every month in a monthly periodic tenancy.
What’s more, at appeal the Supreme Court could still overturn the ruling or interpret the regulations differently.
The reality of what all of this means is that landlords with tenancies hold an unprotected deposit, it may not be possible to issue a Section 21 notice to quit. However, those whose tenancies do not match this description should not feel any impact from this case.
Landlords who do have tenancies like this have the option to protect the deposit, return it, or simply do nothing, but operate a “wait and see” policy – especially since the Supreme Court can still overturn the judgement.