Q&A: Assured shorthold tenancies

Chloe Benson and Jennifer Meech update the position for landlords when handling deposits and protecting rights to obtain possession from assured shorthold tenants Question I am a private landlord and I intend to rent out my property on an assured shorthold tenancy (AST). I intend to obtain a rent deposit from my incoming tenant. I am aware that there have been some changes to the legislation in the past few years and I would like some clarification on my position. I want to ensure that I will be able to regain possession of my property in due course without any problems or delay. What are the new rules in relation to tenancy deposits? Is there anything else I need to be aware of before being able to regain possession? Answer There have been a number of key changes to the law in this area following the implementation of the Deregulation Act 2015. If you fail to comply with the new legislation you will be unable to serve a valid section 21 notice to terminate the tenancy, which will result in a delay in obtaining possession of your property. Explanation It is imperative for landlords to be aware of the changes to the legislation as they contain new restrictions on when and how notice can be served under section 21 of the Housing Act 1988 in order to bring an AST to an end. The first key change resulting from the Deregulation Act 2015 is that it has refined and clarified the provisions of tenancy deposits (by the insertion of new sections 215A to 215C into the Housing Act 2004). As you will be aware, it has been mandatory since 6 April 2007 to protect a tenant’s deposit in respect of an AST into an approved tenancy deposit scheme and to provide prescribed information to the tenant within 30 days of receipt of the deposit. If a landlord failed to comply with these requirements then the landlord would be unable to serve a valid section 21 notice and was at risk of paying the tenant a financial penalty of up to three times the deposit. A degree of uncertainty was created following two Court of Appeal decisions in the cases of Superstrike Ltd v Rodrigues [2013] EWCA Civ 669; [2013] 2 EGLR 91 and Charalambous and another v Ng and another [2014] EWCA Civ 1604; [2015] EGLR 13. The legislation was introduced in order to remove any uncertainty which had been created. On 26 March 2015, sections 30-32 of the Deregulation Act 2015 came into force. The main changes were as follows: λ Where a landlord took a deposit in respect of a fixed-term AST before 6 April 2007, which then became a statutory periodic tenancy before that date, the landlord had a grace period of 90 days (from 26 March 2015) to protect the deposit and serve the prescribed information on its tenant. If a landlord failed to carry out those steps then it would be unable to serve a valid section 21 notice on the tenant unless the deposit is returned to the tenant. In other words, a landlord is unable to retrospectively register the deposit after 24 June 2015. This also applies in circumstances where a deposit was taken before 6 April 2007 and where the tenancy became a statutory periodic tenancy after 26 March 2015. λ If a landlord took a deposit from a tenant on or after 6 April 2007 which it placed in a tenancy deposit scheme and served the prescribed information during the original terms of the tenancy then it will not be necessary for the landlord to re-protect the deposit when the fixed term ends and the tenancy became or becomes a statutory periodic tenancy. These amendments confer no protection on landlords who never protected the deposit during the original tenancy. There are further changes, which came into force on 1 October 2015, that you as a landlord need to be aware of prior to serving a section 21 notice: i) A new prescribed form of section 21 notice must be used for all new ASTs granted on or after this date. ii) Where a tenancy is periodic, there is no requirement for the section 21 notice to stipulate the termination date as the last day of a period of the tenancy (two months’ notice will suffice). iii) You are not able to serve a section 21 notice within the first four months of the tenancy. iv) A section 21 notice cannot be given until you have provided the tenant with an energy performance certificate and a current gas safety certificate. You must also provide a tenant with a copy of the document entitled “How to rent: the checklist for renting in England”. v) You are also not able to serve a section 21 notice where a local authority has served an enforcement notice on you or where your tenant has reported disrepair to you. vi) Once you have served a section 21 notice you must bring a claim for possession within six months of the date on which the notice is served, otherwise the notice will lapse. These changes represent an additional burden on landlords. Consequently it is imperative to ensure that the deposit is dealt with properly at the outset of a tenancy in order to limit possible issues which may arrive when you wish to serve a section 21 notice to regain possession. Chloe Benson is an associate in the property litigation team at Charles Russell Speechlys LLP and Jennifer Meech is a barrister at Enterprise Chambers Questions on any topic can be e-mailed to egq&a@crsblaw.com and egq&a@enterprisechambers.com