Recent case law means that where a tenant remains in occupation after the fixed term, and a new ‘statutory periodic tenancy’ arises, the obligations to deal with the deposit arise. This is the case even where a landlord complied with the obligations at the outset of the AST.
Since 6 April 2007, landlords of Assured Short-hold Tenancy (AST) tenants have certain obligations:
- Register a deposit with a designated tenancy deposit scheme (TDS) within 30 days of receipt.
- Provide to the tenant prescribed information confirming registration of the deposit, within the same 30 day period after receipt of the deposit.
- Comply with the initial requirements of the particular TDS used.
The potential penalties a landlord faces, if they fail to comply with these requirements include:
- Being prevented from relying on a section 21 Housing Act 1988 notice requiring possession.
- Tenant’s right to bring a claim requiring the landlord to register the deposit or repay it to the tenant, and seeking compensation of up to three times the amount of the deposit.
What happens when the fixed term tenancy ends?
Although there is no minimum term for an AST, most tenancies are entered into for an initial fixed term of six or twelve months. After the fixed term ends a tenant can remain in occupation of the property under a statutory periodic tenancy, unless the landlord takes steps to recover possession. The Courts have recently answered the question of what happens to deposits in this situation. The Court held that when the original fixed term expires, a new tenancy had come into existence which triggered the obligation on the tenant to pay a deposit. This, in turn, triggered the landlord’s obligation to comply with the deposit registration requirements. This is the case regardless of whether money actually changes hands.
Getting registration right
As a result of this decision, all landlords of AST tenants are required to comply with the deposit registration rules when a new tenancy arises upon expiry of the original fixed term, even where the deposit has already properly dealt with at the start of the fixed term. Failure to do so is likely to result in S21 notices being invalid, and exposure to claims by tenants for deposits to be protected, and compensation.