Court of Appeal decision on tenancy deposit protection

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The Court of Appeal has set a new legal precedent for protection of deposits taken before 6 April 2007.

The circumstances of the case (Charalambous v NG - full judgement here) are now rare, but the decision changes the common view that tenancies starting before 6 April 2007 are exempt from all requirements relating to deposit protection.

The case in brief

  • A tenancy began in 2002, renewing annually until 2005 when it became statutory periodic.
  • In October 2012 the landlord (Ng) served a section 21 notice to end the tenancy.
  • The tenant (Charalambous) appealed against the section 21.
  • The Court of Appeal decided the notice was not valid because the deposit was not protected.

The Court ruled that whilst Ng was not obliged to protect the deposit under the Housing Act, the Act still applied in preventing her using a s.21 notice at a time when the deposit was not protected.

The details

It is section 213 of the Housing Act which requires deposits taken on tenancies starting on or after 6 April 2007 to be protected. Section 213 did not apply here because the tenancy began in 2005.

However, section 215 of the Housing Act 2004 states that:

(1) If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when–

(a) the deposit is not being held in accordance with an authorised scheme, or

(b) the initial requirements of such a scheme (see section 213(4)) have not been complied with in relation to the deposit.

The Court viewed (a) as entirely separate from (b). In other words, the deposit must be protected for a s.21 notice to be used, even if section 213 doesn't apply to the tenancy.

What do I need to do?

1. If you hold a deposit taken before 6 April 2007 ensure it is protected, or return it before issuing a section 21 notice. Otherwise the section 21 notice will not be valid.

2. Ensure prescribed information has been served - it is as important as protecting the deposit itself.

The circumstances of the case are now rare, now that deposit protection has been law for 7 years. However! The decision changes the existing view that a tenancy beginning before the Housing Act is simply outside of the regulations.

And remember! A statutory periodic tenancy is a new tenancy. We recommend serving new prescribed information when a tenancy turns periodic, even if no money changes hands. This requirement should change when the Deregulation Bill is passed next year.

What will TDS do?

We are in communication with the Department for Communities and Local Government to ask that the issues raised in Charalambous v Ng are addressed.

The Deregulation Bill is in its final stages through Parliament, requiring deposits taken before the Housing Act came into force to be protected if the tenancy became periodic afterwards. Unfortunately, it does not cover tenancies which became periodic before that date, as was the issue in Charalambous.

We will update you when further information is available.

Posted by Steve Harriott, Chief Executive on 29 December 2014

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