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Deregulation Act: Why tenancy deposits still need 're-protecting'

Following my previous post on the topic and further discussion with the excellent Nearly Legal on his blog (and by that I mean I somewhat “hijacked” his post…) I have realised that I have not done a very good job at putting my point across.

Therefore, here’s take two.

The Deregulation Act amends the Housing Act 2004 by adding a new section 215B intended at fixing the consequences of the Superstrike decision that clarified that the deposit had to be ‘re-protected’ and the prescribed information given again avery time a new tenancy was created (including a statutory periodic AST).

Here’s my claim: The Deregulation Act does not in fact remove the requirement to ‘re-protect’ the deposit.

What does ‘protecting’ the deposit mean?

First, perhaps a bit of semantics.

In relation to tenancy deposits, the law does not use the term ‘to protect’ the deposit. The way the term is generally used, I reckon it must colloquially mean ‘to comply with s.213(3)’, which states:

(3) Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 30 days beginning with the date on which it is received.

The Superstrike case has clarified that a landlord receives a tenancy deposit every time a new tenancy is created and the previous deposit carries over.

Furthermore, section 213(4) defines what initial requirements are:

“the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.

Therefore, in my view any actions the scheme requires for the deposit to remain ‘protected’ in relation with a new tenancy are initial requirements and complying with them is ‘further protecting’ or ‘re-protecting’ the deposit, whether such requirements are to pay a fee, update a status, full ‘re-protection’ (whatever that could mean), etc.

What does new section 215B state?

In short, section 215B states that the requirements of s.213(3) and requirements related to prescribed information are deemed to have been complied with in relation to a new tenancy if:

  • Those requirements have been complied with in relation to an initial tenancy, and,
  • when the new tenancy comes into being, the deposit continues to be held in connection with the new tenancy, in accordance with the same authorised scheme” (s.215B(1)(f)).

The second bullet is the crucial point: There is deemed compliance with the requirements only if the deposit continues to be held in accordance with the scheme.

So?

The deposit can only continue to be held in accordance with the scheme in relation to the new tenancy if the requirements of the scheme have been complied with.

As per s.213(4) any requirements are initial requirements.

Therefore, ‘further protection’ or ‘re-protection’ is still required if the scheme requires it. That is, the existing position is unchanged.

The deposit schemes hold the cards.

The net effect of section 215B is only to remove the requirement to give the prescribed information again (which is statutory and not a scheme’s requirement). Still a win but not as far reaching as often advertised.

I hear the critics point out that this would mean that section 215B in effect states that the initial requirements are deemed complied with only if the initial requirements have been complied with.
Well, that would be the conclusion, indeed…

In any case, landlords should not assume that they no longer have any action to take and should continue to make sure that they comply with any requirements imposed by the deposit scheme.