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New residential landlords need to re-register deposit

A recent case has held that a change of landlord triggered the requirement for new deposit information to be given to residential tenants.

This case applies to assured shorthold tenancies (AST) which are a type of residential tenancy with minimal security of tenure. A landlord can terminate an AST on or after expiry of the fixed term granted. If it does not do so, a statutory periodic tenancy arises which permits the tenant to stay in occupation.

Background

When a tenant pays a deposit to its landlord at the start of an AST as security for the tenant’s liabilities, section 213 of the Housing Act 2004 (HA) requires the landlord to protect that deposit within an authorised tenancy deposit scheme (TDS). Since 6 April 2012, the same section requires a landlord to comply with certain ''initial requirements'' within 30 days of receiving the deposit. These include the service of ‘prescribed information’ telling the tenant where and how the deposit is being held.

These obligations are particularly important because a landlord cannot serve a ‘no fault’ section 21 notice to terminate an AST where the deposit is not held in a TDS or where the initial requirements have not been complied with. This is the case even if the landlord later takes steps to protect the deposit out of time.

Prescribed information need not be sent afresh when a new tenancy is granted which replaces a previous AST in respect of which the landlord complied with the initial requirements and continues to hold the deposit in the same TDS (section 215B HA).

Also, under the Deregulation Act 2015, if a landlord complies with its obligations at the outset of a enancy in relation to the deposit and the initial requirements, there is no need to serve prescribed information again if the AST should later become a statutory periodic tenancy.

Facts of the case

In Sebastiampillai v Parr, the tenant P had occupied a flat since 2007 under a series of ASTs and the deposit she paid at the outset was retained throughout the period of each letting. Her landlord, K, complied with his obligations in relation to the deposit and the initial requirements. He was not alleged or found to be at fault in this respect.

In July 2014, part-way through a twelve month AST, K sold his investment and in September 2014 the deposit was transferred to an account in the name of the new landlord (S). When the AST expired in May 2015 a statutory periodic tenancy arose.

In March 2018 S served a section 21 notice to terminate the tenancy and later issued possession proceedings.

Possession was granted but P appealed. She argued that the deposit had been received anew by S when they became landlord. Accordingly, under section 213 HA, prescribed information should have been given afresh to P.

It was agreed that if K had remained the landlord, section 215B would have operated so that he would not have needed to serve any further prescribed information. But, because the identity of the landlord had changed, P argued that the requirement applied to S.

S resisted the argument that the deposit had been ‘received’ by them as a result of their purchase but admitted that it had been received at the point when the statutory periodic tenancy arose. However, S asserted that section 215B operated such that K’s earlier compliance amounted to deemed compliance by S too.

Decision

HHJ Gerald held that:

  • The deposit had been received by S by September 2014 (at least) when the deposit was transferred to their named account.
  • This receipt triggered the section 213 obligations, which S had not complied with because they had not served the prescribed information at any point
  • K’s previous compliance with the section 213 obligations did not amount to deemed compliance by S for the purposes of section 215B. The language of section 215B indicated that it is only the specific landlord who has given the prescribed information who should be treated, in future, as having complied with the statutory requirements.
  • For the purposes of section 215B, the new tenancy should be compared with the original tenancy and not any intervening tenancies. In this case the new tenancy was the statutory periodic tenancy which arose in May 2015, at a time when S owned the property. The original tenancy was that in place when the HA came into force in 2012. Comparing the two showed a change in landlord rather than a continuance of the status quo and, therefore, fresh prescribed information should have been served.

P’s appeal was therefore allowed: S’s section 21 notice was not valid and the possession order was quashed.

Comment

This decision comes as no surprise given the recent string of decisions concerning the need for compliance in order to retain the ability to serve section 21 notices. The message is clear: get it right in time or lose the ability to terminate using a ‘no fault’ section 21 notice.

Sebastiampillai v Parr, Central London County Court, 11 April 2019.

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