Tenancy deposits and prescribed information where there has been a change of landlord

Background

This case involved an appeal by the tenant of a possession order made against her under s21 of the Housing Act 1988 on 18 December 2018. The issue raised by the case was whether a new landlord needs to provide a tenant with prescribed information in connection with his or her tenancy deposit, in circumstances where there has been a change in landlord and original landlord had provided the prescribed information previously.

The Appellant’s first tenancy commenced on 7 July 2007 and was for a fixed term of 12 months. A deposit of £1050 was paid. The deposit was protected with the Deposit Protection Service (DPS) on the same day. The original landlord, Mr Kadiwar, failed to provide the prescribed information during the course of the first fixed term. However, a further fixed term tenancy was entered into on 7 July 2008 and the prescribed information was provided to the Defendant in October 2008.

There followed a series of further 12-month fixed term tenancies ending in a fixed term tenancy commencing on 7 July 2011. This tenancy became a statutory periodic tenancy on 7 July 2012. The deposit was retained throughout. Then on 6 March 2014 (during the statutory periodic tenancy) the landlord, Mr Kadiwar, served updated prescribed information upon the Appellant. On 7 May 2014 Mr Kadiwar entered into a final 12 month fixed term tenancy with the Appellant. The deposit was again held over.

On 9 July 2014 the Respondents (Mr and Mrs Sebastiampillai) acquired the leasehold of the property, subject to the Appellant’s tenancy. By 10 or 11 September 2014 the deposit had been transferred from the DPS account in Mr Kadiwar’s name into a DPS account in the name of the 2^nd Respondent. On 7 May 2015 a statutory periodic tenancy arose. No further fixed term tenancies were entered into by the parties. It was common ground between the parties that the Respondents did not at any point serve any prescribed information upon the Appellant themselves following their purchase of the leasehold.

On 16 March 2018 the Claimants served notice under s21 Housing Act 1988 and a claim for possession was subsequently issued at the County Court at Willesden. The claim was heard on 18 December 2018. An outright possession order was made. The Appellant filed an appeal and was granted permission to appeal by His Honour Judge Parfitt on the single ground that the Respondents had not protected the deposit or provided the Appellant with the prescribed information within the statutory time limits.

Up to this point the Defendant had been unrepresented, but upon obtaining permission to appeal she instructed solicitors. The appeal was heard on 11 April 2019 before His Honour Judge Gerald. The parties agreed that the appeal should focus on whether or not the Respondents had been required to serve prescribed information at any point following the assignment to them of the previous landlord’s interest under the tenancy.

 

The legal principles

Central to the Appellant’s case was the case of Superstrike Ltd v Rodrigues [2013] EWCA Civ 669, in which it was held a landlord need not have physically received a tenancy deposit in order for the obligations under s213(3), (5) and (6) of the Housing Act 2004 to arise. It will be sufficient for the landlord to have acquired the right to use the deposit to obtain compensation for any breach of the tenancy agreement. For example, where the landlord has retained a deposit that was paid in connection with an earlier tenancy.

One of the potential consequences of the Superstrike decision was that a landlord who granted a tenant a series of tenancies, retaining the deposit throughout, would be taken to have received the deposit anew in relation to each new tenancy. Arguably this required him or her to comply with ss213(3), (5) and (6) Housing Act 2004 again and again in relation to each new tenancy. This potential ramification has been constrained, to a degree, by the insertion of s215B into the Housing Act 2004 by s32 Deregulation Act 2015:

215B Shorthold tenancies: deposit received on or after 6 April 2007

(1) This section applies where—

(a) on or after 6 April 2007, a tenancy deposit has been received by a landlord in connection with a shorthold tenancy (“the original tenancy”),

(b) the initial requirements of an authorised scheme have been complied with by the landlord in relation to the deposit (ignoring any requirement to take particular steps within any specified period),

(c) the requirements of section 213(5) and (6)(a) have been complied with by the landlord in relation to the deposit when it is held in connection with the original tenancy (ignoring any deemed compliance under section 215A(4)),

(d) a new shorthold tenancy comes into being on the coming to an end of the original tenancy or a tenancy that replaces the original tenancy (directly or indirectly),

(e) the new tenancy replaces the original tenancy (directly or indirectly), and

(f) 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 as when the requirements of section 213(5) and (6)(a) were last complied with by the landlord in relation to the deposit.

(2) In their application to the new tenancy, the requirements of section 213(3), (5) and (6) are treated as if they had been complied with by the landlord in relation to the deposit.

(3) The condition in subsection (1)(a) may be met in respect of a tenancy even if the tenancy deposit was first received in connection with an earlier tenancy (including where it was first received before 6 April 2007).

(4) For the purposes of this section, a tenancy replaces an earlier tenancy if—

(a) the landlord and tenant immediately before the coming to an end of the earlier tenancy are the same as the landlord and tenant at the start of the new tenancy, and

(b) the premises let under both tenancies are the same or substantially the same.]

The effect of s215B Housing Act 2004 is that a landlord who has complied with the requirements of s213(3), (5) and (6) Housing Act 2004 in respect of a tenancy and then retains the deposit in respect of one or more subsequent tenancies, does not have to comply with the requirements of ss213(3), (5) and (6) in respect of each new tenancy. This is achieved by means of s215B(2) Housing Act 2004 which provides that a landlord is deemed to have complied with the requirements of s213(3), (5) and (6), in circumstances where the criteria in s215B(1) are satisfied.

Where there has been no compliance (whether actual or deemed) with s213 Housing Act 2004, s215 imposes a series of sanctions restricting the landlord’s ability to recover possession of the property pursuant to s21 Housing Act 1988.

 

The competing cases

Receipt of the deposit

Before His Honour Judge Gerald the Appellant argued that since the Respondents now had access to the tenancy deposit it must be the case that the Respondents had received a tenancy deposit at some point after becoming the landlords, taking over the 2014 fixed term tenancy from Mr Kadiwar. The Appellant argued, applying the principles from the Superstrike decision, that the Respondents had either ‘received’ the tenancy on or around 9 July 2014, when they had acquired the legal right to retain the deposit in the event of a breach of tenancy, or on or around 10-11 September 2014 (the date on which the deposit was transferred to their DPS account), when they have obtained the practical ability to access the deposit to complement their legal right to do so. Alternatively, the deposit had been received on 7 May 2015 when the final statutory periodic tenancy arose and they retained the deposit which had been received in connection with the earlier tenancy.

The Respondents argued that the deposit had not been received by them during the course of the 2014 fixed term tenancy. The deposit had been received at the outset of that tenancy and the change in landlord part way through the tenancy did not mean that it had been received again. However, they accepted that Superstrike principles meant that they did receive the deposit at the point the statutory periodic tenancy arose on 7 May 2015.

The need to serve prescribed information

It was acknowledged by the Respondents that they had never themselves complied with s213(3), (5) and (6) Housing Act 2004 in relation to the May 2014 fixed term tenancy. However, there had been compliance with these provisions by the previous landlord, Mr Kadiwar, most recently on 6 March 2014. The question was whether this was sufficient to amount to deemed compliance under s215B Housing Act 2004.

The Appellant’s argued that the wording of s215B meant that it could not be relied upon by the Respondents as there had been a change in landlord. The Appellant made two alternative arguments in support of this.

The first point raised was that the language of s215B requires continuity of landlord. Section 215B Housing Act 2004 applies where, among other things, ‘a tenancy deposit has been received by ‘a landlord’ in connection with a shorthold tenancy (“the original tenancy”)’. See s215B(1)(a). Sections 215B(1)(b) and (c) then go on to refer to ‘the landlord’ having complied with the initial requirements of the tenancy deposit scheme and having provided the prescribed information to the tenant. The switch to the definite article suggests that these provisions are referring to the same person: it is the landlord who received the deposit who needs to have complied with these requirements, for these purposes. The same form of words is carried through to the deeming provision in s215B(2). If all the criteria in s215B(1) are met then ‘the requirements of section 213(3), (5) and (6) are treated as if they had been complied with by the landlord in relation to the deposit’. So it can only be the landlord who received the deposit, and provided the prescribed information who is deemed to have complied with s213. Applying this in the context of the present case, Mr Kadiwar was a landlord who received a deposit in connection with a shorthold tenancy. Further, it was he who had complied with the initial requirements of the DPS and provided the prescribed information. As such he was the landlord who could benefit from s215B(2) in respect of any replacement tenancy. But the language of s215B(2) could not be stretched so as to encompass the Respondents as well. The reference to ‘the landlord’ could not refer to multiple different landlords. This interpretation of s215B was in accordance with the legislative purpose of providing prescribed information which is to ensure the parties to a tenancy have the information they need to resolve disputes about tenancy deposits. Where the landlord changes, the information required to resolve a dispute would change and so it was no surprise that the legislative scheme required fresh compliance.

The second point related to the definition of a replacement tenancy in s215B(4) which provides that ‘a tenancy replaces an earlier tenancy’ where (among other things) ‘the landlord and tenant immediately before the coming to an end of the earlier tenancy are the same as the landlord and tenant at the start of the new tenancy’. This definition of a replacement tenancy was relevant to the question, posed by s215B(1)(e), of whether ‘the new tenancy’ (being the tenancy in respect of which compliance with the statutory requirements is in issue) replaced the ‘original tenancy’ (being the tenancy where the statutory requirements were complied with) ‘directly or indirectly’. If the ‘new’ May 2015 statutory periodic tenancy could properly be characterised as having replaced either the ‘original’ July 2012 statutory periodic tenancy or the ‘original’ July 2008 fixed term tenancy, during which prescribed information had been served, then the parties agreed that s215B(1)(e) – which is one of the essential requirements for reliance on the deeming provision in s215B(2) – would be satisfied. If not, it would not be.

The Appellant’s case was that the definition of a replacement tenancy in s215B(4) – as with the language of s215B(1) and (2) – also requires continuity of landlord. Applying that definition in the context of s215B(1)(e), the ‘new’ May 2015 statutory periodic tenancy had not replaced either of the possible ‘original’ tenancies, since the landlord at the beginning of the May 2015 tenancy was the Respondents, whereas the landlord at the end of the July 2012 statutory periodic tenancy and the July 2008 fixed term tenancy was Mr Kadiwar. This meant that s215B(1)(e) was not satisfied.

The Respondents argued that the Appellant was making the wrong comparison in advancing this argument. Section 215B(4) invited consideration of whether a ‘tenancy replaces an earlier tenancy’. The use of the phrase ‘earlier tenancy’ – in contrast to ‘original tenancy’ –suggested that the new tenancy might need to be compared with tenancies other than the original tenancy. This could only mean that the ‘new’ tenancy should be compared with every tenancy that came before it, going back to the ‘original’ tenancy. In this case, the landlord at the beginning of each tenancy had been the same as the landlord at the end of the previous one going back to the original tenancy, because the property had changed hands mid-way through a tenancy. Therefore the May 2015 tenancy had replaced the July 2012 statutory periodic tenancy.

The Appellant’s response was that the language of s215B(1)(e) expressly mandated a comparison between the new and original tenancy and that the use of the word ‘indirectly’ in that provision obviated the need to consider each intervening tenancy.

 

The decision

His Honour Judge Gerald allowed the appeal. The deposit had certainly been received by the Respondents by 11 September 2014. He noted that if an assignor had held a deposit in his own bank account, and then re-designated that bank account into the name of an assignee, and provided the relevant information to the assignee to access that account, then that would be treated as receipt of the deposit by the assignee. This was analogous to what had happened with the DPS, and the deposit had therefore been received by the Respondents, thus triggering the duties under s213 Housing Act 2004. Without deciding the point, he also expressed the view that the assignment of the previous landlord’s interest under the tenancy to the Respondents in July 2014, and the consequent transfer of the legal right to retain the deposit in the event of a breach of tenancy, would probably also have constituted receipt of the deposit.

The receipt of the deposit triggered the obligations under s213(3), (5) and (6). These had not been complied with as the Respondents had not served the prescribed information. And previous compliance with these obligations by Mr Kadiwar did not amount to deemed compliance by the Respondents for the purposes of s215B(2). The language of s215B indicates that it is only the landlord who has given the prescribed information who should be treated in future as having complied with that requirement. In addition, in the context of s215B(1)(e), the new tenancy should be compared with the original tenancy and not the intervening tenancies, meaning s215B(1)(e) was not satisfied as the change in landlord meant that the former had not replaced the latter within the meaning of s215B(4) as there had been a change in landlord. This interpretation of the statutory scheme was in accordance with the objective of providing prescribed information, which was that the parties should have the information they needed to contact each other to resolve disputes.

 

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