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Race is on for long-term landlords to avoid fines caused by changes to AST deposit rules

14 April 2015

Landlords have until June 2015 to avoid potentially significant fines under rules set out in the new Deregulation Act 2015

Since 6 April 2007, landlords of most Assured Shorthold Tenancies (“ASTs”) have been required by law to register their tenants’ deposits with an authorised independent protection scheme and to provide the tenants with full details of where the deposit is held.

A decision by the Court of Appeal in 2013 (Superstrike Ltd v Rodrigues) meant that these rules were given an unexpected retrospective effect – requiring compliance by landlords who let their properties before 6 April 2007 but allowed the tenancy to “roll over” after that date. (Allowing tenants to continue to occupy a property after 6 April 2007 without completing a new AST agreement created a new statutory periodic tenancy and the Court held that the landlords in these circumstances should have taken steps to register their tenants’ deposit at that point.)

The “Superstrike problem” meant that many landlords of properties let before 6 April 2007 faced difficulties in regaining possession of their properties, as well as the prospect of a fine of up to three times the value of the deposit. Some landlords sought to address the issue by effecting late registration of the deposit. However, this caused its own problems because the deposit schemes create hurdles for returning the deposit to the tenant – which is often the safest course for landlords who want to serve notice to terminate an AST where the deposit rules were not complied with.

There is some good news for these landlords – at least those of them who are able to act quickly. The Deregulation Act 2015, which received Royal Assent on 26 March 2015, confirms the decision in Superstrike but gives the affected landlords a 90-day grace period from when the Bill received Royal Assent to register tenants’ deposits in an authorised independent protection scheme and serve the prescribed information. If a landlord fails to register the deposit in an appropriate scheme by the cut-off date in June 2015 they risk being fined up to three times the value of the deposit and will face difficulties in recovering possession of their property.

If you are concerned that you may be affected by the issues outlined here, or would like any advice in connection with your tenancy or other property issues, please contact Emma Humphreys or your usual Charles Russell Speechlys contact.