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Case law: Landlords who don't repay pre-April 2007 shorthold tenancy deposits not placed in protection scheme lose right to recover property

Following a Court of Appeal ruling on commercial properties and residential buildings, landlords who have not put pre-6 April 2007 assured shorthold tenancy deposits into government-approved deposit protection schemes should return them, or lose their right to recover possession of the property without giving a reason.

Legal Alert

This update was published in Legal Alert - February 2015

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

Under deposit protection rules introduced from 6 April 2007, landlords taking deposits from tenants holding assured shorthold tenancies must pass them to one of three government-approved schemes rather than hold the deposit themselves. The scheme then arbitrates in the event of any dispute over whether the deposit should be returned to the tenant at the end of the tenancy.

Previously, it was thought that any deposit taken before the deposit protection rules came into force did not have to be put into a government-approved scheme.

However, the Court of Appeal has ruled that while there is no obligation to put pre-6 April 2007 deposits into a such a scheme, failure to do so means the landlord loses the right to automatically repossess the property without having to give any reasons once the fixed term (usually of six months) is over. Landlords holding such deposits can therefore only automatically repossess their property if they return the tenant's deposit in full first.

Operative date

  • Now

Recommendations

  • Landlords holding pre-6 April 2007 assured shorthold tenancy deposits should consider whether to return them, to safeguard their right to recover their property automatically.
  • If they do, they may also wish to take new deposits, but must put these into a deposit protection scheme, so the scheme can arbitrate and allow deductions if the tenants have damaged the property.
Case ref: Charalambous & Anor v NG & Anor [2014] EWCA Civ 1604

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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