Landlords Beware: It’s Double or Quits

Case Update : Gardner v McCusker

As from 6 April 2007, a landlord granting an Assured Shorthold Tenancy must ensure that any deposit taken from their tenant is registered with a deposit protection scheme. Landlords who fail to comply with this legal requirement face financial penalties and risk losing their rights to serve a Notice for Possession.

Last year, the Court ruled that a landlord is obliged to register a deposit if his tenant remains in occupation after 6 April 2007, even where the initial 6-month term of the tenancy was granted before the deposit protection rules came into force.

More recently, in the case of Gardner v McCusker, the Court has considered this earlier decision in light of tenancies created after 6 April 2007. It has concluded that even when a deposit has been correctly protected upon creation of the tenancy, a landlord must register this a second time, when the fixed term comes to an end and the tenancy rolls over.

This is not only unwelcome news for private landlords, but for Members of Parliament who have called for reform on the basis that this is an unintended interpretation of the Housing Act 2004. However, a draft Bill for reform of the private rented sector failed to complete its passage through Parliament before the end of session this year and there are no guarantees that any of the proposals it made will be brought into force in the near future.

For now, it is crucial that landlords are even more on the ball, ensuring their tenants’ deposits are registered not only at the beginning of the tenancy term, but at the end of it as well. They must also do this within 30 days of the start of the period – both times – and provide the necessary information to their tenants about the scheme in which the deposit is protected – both times.

If not, a savvy tenant may have a legitimate claim against their landlord, even though their deposit remains protected by the scheme.