A Cautionary Tale Reminds Landlords to Comply with the Tenancy Deposit Regulations

Since 6 April 2007 a landlord of a residential property has been required to register a tenant’s deposit with a designated Tenancy Deposit Scheme within 30 days of receipt and, within the same timeframe, formally provide the tenant with certain Prescribed Information.

A recent decision of Gardner v McCusker, 18 May 2014 Birmingham County Court, is a timely reminder that it is imperative for residential landlords to comply with the strict rules when holding a tenants deposit.

This particular case concerned an Assured Shorthold Tenancy agreement of 6 months entered into in November 2009 after the tenancy deposit regulations came into force.

In January 2010, a deposit was paid by tenant which was protected by the landlord by payment into an appropriate Tenancy Deposit Scheme.  The landlord also served the tenant with the appropriate Prescribed Information.  When the fixed term tenancy expired and the tenant remained in occupation a statutory periodic tenancy immediately arose by virtue of the 1988 Housing Act.

When the landlord attempted to obtain possession of the property, the court held that the notice seeking possession served by the landlord was invalid as the landlord had failed to comply with the tenancy deposit scheme regulations on the creation of the statutory periodic tenancy.

This case highlights perfectly the care landlords must take, if their tenant remains in occupation at the end of any fixed term tenancy, to comply with the requirements of the Tenancy Deposit Scheme and re-register the deposit and serve the Prescribed Information upon the tenant again.

This has serious implications for most residential landlords because the initial fixed term is generally only granted for a relatively short period of six months.  A landlord who fails to take this action will be unable to serve a valid notice to recover possession of their property and will be liable to a financial penalty of between one and three times the value of the deposit.