Tenancy deposit trap for landlords

A residential landlord usually requires a deposit to be paid by the tenant at the grant of an assured shorthold tenancy as security for the payment of rent and for the tenant looking after the property. If the tenant’s occupation of the property is then extended, either by entering into a new agreement or by the tenant simply remaining in the property beyond the original fixed term (as a statutory periodic tenant), the original deposit will commonly be ‘rolled over’ or continuously held by the landlord.

The Housing Act 2004 (as amended) requires a landlord of an assured shorthold tenant to protect a tenant’s deposit in a government-authorised tenancy deposit scheme within 30 days of the date of receipt and to provide the tenant with prescribed information in respect of that scheme. Should a landlord fail to meet the above requirements, the Housing Act provides that the landlord cannot serve a valid notice to terminate the tenancy under section 21 of the Housing Act 1988 until the terms of the Housing Act have been satisfied. 

Questions have arisen as to whether the landlord’s retention of a deposit received prior to 6 April 2007 (the date the Housing Act came into force) is subject to section 213 of the Housing Act, which requires a landlord to place a deposit into an authorised scheme, and what happens in the case of an extended, or continuation, tenancy…

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