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Tenancy Deposits and s.21 Notices: the end of the road for defaulting landlords

Charalambous v Ng [2014] EWCA Civ 1604

Back in July 2013, I noted the case of Superstrike Ltd v Rodrigues [2013] EWCA Civ 669.  In that case, a fixed-term AST, which had started before the introduction of deposit protection schemes, became periodic after that date.  The periodic tenancy is a new tenancy (s.5(2) Housing Act 1988); and the Court of Appeal held that the deposit was notionally refunded and repaid when that new tenancy started.  It should therefore have been protected at that point; and as it had not been, s.215(1) Housing Act 2004 barred the landlord from serving a s.21 notice.

s.215(1) provides:

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 …

A question asked, but not answered, in Superstrike was: does this actually mean what it says?  Does any deposit have to be protected before a s.21 notice can be given, regardless of when it was taken?

We now have an answer.  In Charalambous v Ng [2014] EWCA Civ 1604, the Court of Appeal considered an AST which had become periodic in 2005; no further deposit was paid, actually or notionally, thereafter.  Given that paragraph 17 of the judgment starts “Let me begin by looking at what section 215(1) actually says”, it may come as little surprise that the answer is “yes”.  The literal meaning of the provision was straightforward, and did not engage any presumption against retrospective legislation.

Where does that leave landlords?  The amendments to the deposit protection scheme provisions made by the Localism Act to reverse the decision in Tiensa “apply in respect of any tenancy deposit received … where the tenancy was in effect on or after 6th April 2012.”  So it is no longer possible to rectify a failure to protect a deposit after the time to comply has passed.  It appears that landlords in the position of Mrs Ng – and there will be many of them – may well have no option but to repay any deposit to their tenants before serving a s.21 notice.

David Willink / 1st Mar 2015


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