Landlord’s mistake over rollover tenancy proves costly

A recent case before the Court of Appeal highlights the need for landlords to ensure that they have protected deposits from former fixed term tenants who went on to acquire statutory periodic tenancies.

Failure to do so could result in penalties and prevent the landlord from serving notice for possession.

The case involved a tenant who had taken an assured tenancy for a fixed term of one year less one day from January 8, 2007 and paid one month’s rent as a deposit. The arrangement preceded the Tenancy Deposit Scheme (TDS) which came into effect in April 2007. There was therefore no reason at that stage to protect the deposit in an approved scheme.

When the assured tenancy came to an end, the tenant remained in the property and became entitled to a statutory periodic tenancy.

Six months later, the landlord served notice for possession. Legal proceedings began and went all the way to the Court of Appeal which ruled in favour of the tenant.

It held that after the original fixed-period tenancy ended, a new tenancy began. This meant that although no new deposit was paid, the landlord retained the original deposit and was legally bound to protect it in an approved scheme as required by the new regulations which had since come into effect.

The landlord had failed to do so and was in breach of the regulations. The failure meant the landlord could be subject to penalties and it also prevented him from obtaining a possession order.

Please contact Santokh Singh if you would like more information about the issues raised in this article or any aspect of commercial property law or Matthew Melling if you would like more information on commercial property litigation.