Don't forget:
New mandatory section 8/13 forms

Available here

Charalambous & Karali v Ng

16 December 2014

This case concerned tenants whose fixed term AST ended in 2005 and was then replaced by a statutory periodic AST, which arose under section 5 of the Housing Act 1988.
The tenancy deposit was never held in accordance with an authorised scheme.

On 17 October 2012, the landlord served a section 21 notice and, on expiry, sought a possession order in court.
The tenants argued that the notice was invalid as the tenancy deposit was not help in accordance with an authorised scheme.

In this case, the Court of Appeal held that the section 21 notice was indeed invalid.

None of the tenancies started at a time when the provisions of the Housing Act 2004 regarding tenancy deposits applied. Indeed these provisions came into effect on 6 April 2007.
The question was therefore section 215 of the Housing Act 2004 nevertheless applied. The section, as amended by section 184 of the Localism Act 2011 reads as follows:

215 Sanctions for non-compliance

(1) Subject to subsection (2A), 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, or

(b) section 213(3) has not been complied with in relation to the deposit.

The amendments were brought into force on 6 April 2012 by article 8 of the Localism Act 2011 (Commencement No. 4 and Transitional, Transitory and Saving Provisions) Order 2012, subject to article 16 which provides:

1) Subject to paragraph (2), the amendments made by section 184 of the Act apply in respect of any tenancy deposit received by a landlord in connection with a shorthold tenancy where the tenancy was in effect on or after 6th April 2012.

(2) Those amendments do not apply in respect of a tenancy deposit received by a landlord in connection with a shorthold tenancy where—

(a) the tenancy was in effect on or after 6th April 2012, and

(b) the landlord has, before the end of the period of 30 days beginning with that date—
(i) complied with the initial requirements of an authorised scheme in relation to the deposit, and
(ii) given to the tenant and any relevant person the information prescribed for the purposes of section 213(5) of the Housing Act 2004.

The Court based its reasoning on the wording above to conclude that section 215(1) applied to all ASTs and that consequently the section 21 notice was invalid since the condition of section 215(1)(a) was not met.

However, the Court did not offer a definitive opinion on whether section 213(3) also applied as it was not necessary.

Following this case, landlords holding deposits in relation to ASTs granted before 6 April 2007 and still in existence have two options in order to be able to section 21 notices:

  • Either to protect the tenancy deposit with an authorised scheme in order to comply with section 215(1)(a), or,
  • To refund the deposit altogether.

The Court did not offer a definitive opinion on the issue of the penalty for non-compliance (up to 3x deposit), which was related to the issue of section 213.

Update:
Amendments to the Housing Act 2004 included in the Deregulation Act 2015 took effect on the 26 March 2015.

Whilst confirming the requirement to protect or return the deposit in order to serve a valid section 21 notice, these amendments also definitively clarified that landlords are not liable for any non-compliance penalty.

First published , last edited 30/03/2015.