Superstrike Ltd v Rodrigues

Landlord and tenant – Housing Act 2004 – Tenancy deposit scheme – Appellant tenant paying deposit at beginning of fixed-term assured shorthold tenancy – Respondent landlord retaining deposit after expiry of fixed term when statutory periodic tenancy arising – Respondent serving notice of possession under section 21 of Housing Act 1988 and obtaining possession order – Whether precluded from serving valid section 21 notice on ground that tenancy deposit not protected as required by 2004 Act – Whether deposit “paid” in relation to statutory periodic tenancy within meaning of 2004 Act – Appeal allowed In January 2007, the respondent let a residential property to the appellant on an assured shorthold tenancy for a fixed term of one year less one day at a monthly rent of £606.66. The appellant paid a deposit of one month’s rent under the terms of the tenancy agreement. On the expiry of the fixed term, the appellant acquired a statutory periodic tenancy, on equivalent terms to the previous fixed-term tenancy, by operation of section 5 of the Housing Act 1988. The respondent retained the original £606.66 deposit. In June 2011, the respondent served a notice of possession on the appellant under section 21 of the 1988 Act; it then brought a claim for possession in the county court in reliance on that notice. The appellant contended that the respondent was precluded from serving a valid section 21 notice by reason of section 215 of the Housing Act 2004, since it had not complied with the requirements of that Act regarding the protection of tenancy deposits and their payment into an authorised scheme. A possession order was made in the respondent’s favour, then set aside by a deputy district judge and finally reinstated by a judge; the judge held that the deposit had been paid before the relevant provisions of the 2004 Act came into force and that the legislation did not apply to a deposit paid before the commencement date. The appellant appealed. He contended that when the respondent had retained his deposit moneys at the beginning of the statutory periodic tenancy, that deposit should be regarded as being paid and received anew in respect of that new tenancy. The respondent contended that, so far as the provisions of the legislation, including section 213, applied to a tenancy deposit “paid” or “received” in connection with a shorthold tenancy, they applied only when the deposit was physically received by cash, cheque, bank transfer or some comparable way. Held: The appeal was allowed. At the end of the fixed-term tenancy, what had happened under the 1988 Act was the creation of a new and distinct statutory tenancy, rather than the continuation of the tenant’s previous status: N&D (London) Ltd v Gadson (1991) 24 HLR 64 applied. That being so, the new tenancy contained an equivalent provision as to the payment of a deposit, in replacement for the provision under the express tenancy. Although the respondent could, in theory, have required some of the deposit to be used as compensation for any breaches of the tenancy agreement during the fixed-term tenancy, it had not done so. Where the respondent had continued to hold the deposit moneys after January 2008, the legal position had to be that it held those moneys as security for the performance of the appellant’s obligations, or the discharge of any liability of his, arising under or in connection with the new statutory periodic tenancy. That situation had to have come about by the tenant’s right to be credited with the deposit at the end of the fixed-term tenancy, and his obligation to pay and the respondent’s right to receive an equivalent deposit under the new statutory periodic tenancy, being treated as satisfied by the respondent continuing to hold the same sum of money as before but by reference to the new tenancy.Section 213 of the 2004 Act did not apply only when the deposit was physically received. The 2004 Act had to be construed in light of the provisions of the 1988 Act regarding assured shorthold tenancies, including section 5. Once a new statutory periodic tenancy came into being after the commencement date of the 2004 Act, with a tenant’s deposit already being held, the respondent’s continued holding of the deposit moneys after January 2008 could only relate to those moneys being treated for the future as the deposit under the new tenancy instead of the old. That was what the parties would have agreed had they been aware of the legal position and discussed the matter. Although there was no evidence that the parties had said or done anything of that kind, or that they were aware of the nature and incidents of the legal process that took place when the fixed-term tenancy came to an end, the position between them should be treated in the same way as if they had. The appellant should therefore be treated as having paid the amount of the deposit to the respondent in respect of the new tenancy, by way of set-off against the respondent’s obligation to account to him for the deposit in respect of the previous tenancy. Where something was treated as a payment, there must also have been a corresponding receipt.Accordingly, the appellant had paid and the respondent had received the sum of £606.66 by way of a deposit under the new periodic tenancy in January 2008. The obligations under section 213 of the 2004 Act applied to the deposit so received and the respondent had not complied with them. It followed that the respondent could not validly give notice under section 21 of the 1988 Act and the grounds for possession were not made out. Martin Westgate QC and Ben Chataway (instructed by Howells LLP, in Hull) appeared for the appellant; Ranjit Bhose QC and Jennifer Oscroft (instructed by Coffin Mew LLP, of Southampton) appeared for the respondent. Sally Dobson, barrister