Tenancy Deposit Scheme – Double trouble for landlords

Landlords of residential properties, and their agents, who may have thought they were up to speed on the regulations governing registration of tenants’ deposits, need to be aware of a potentially nasty surprise resulting from the recent County Court case of Gardner v McCusker.

Since 6th April 2007, landlords letting residential properties have had to register the tenant’s deposit using a designated Tenancy Deposit Scheme, the current time limit being within 30 days of receipt of the deposit.  Prescribed information confirming the registration details has to be served upon the tenant within the same period.  Failure to comply exposes the landlord to the risk of being prevented from relying upon notice served to terminate the tenancy and of the tenant being able to seek compensation of up to three times the amount of the deposit.

The fixed term assured shorthold tenancy (commonly of 6 months) is still the most popular form of tenancy agreement and it is not unusual for landlords to allow satisfactory tenants to remain in occupation once the fixed term expires.  This gives rise to a statutory periodic tenancy.  The Court decision in Gardner v McCusker means not only must landlords register deposits and provide their tenants with the prescribed information at the start of the fixed term tenancy, but also to go through the same process again within 30 days of the fixed term ending and the statutory periodic tenancy beginning.  Failure to do so means the landlord risks the same penalties in terms of compensation to the tenant and being unable to rely upon notice served to recover possession of the property.

This ruling will be particularly onerous for landlords with large portfolios of let properties but, unless and until a draft bill to remove the requirement to re-register deposits is made law, landlords will have no option but to monitor their lettings carefully to ensure deposit registration requirements are complied with fully both at the start of the fixed term tenancy and again if the tenant is allowed to remain in occupation when the fixed term ends.

If you have any questions or queries about the above, please contact the Residential Property team to discuss how we can help you.

Back to index