Last Updated: November 22, 2023
Recently, we discovered a Section 21 claim dismissed on a deposit technicality relating to a ‘material change’ in the tenancy.
Our view is that this claim should not have been dismissed. Unfortunately, given the forecasted costs and time required to appeal the decision, the client opted to address the technicality and re-serve notice rather than challenge the finding. Therefore, whilst we have no authoritative findings on the matter, we consider it helpful to ensure that full compliance is observed to ensure that further or future challenges are kept to a minimum.
The landlord let their property to a tenant under an assured shorthold tenancy, beginning on 02/08/2018. The defendant paid a deposit of £1,488.00 on 31/07/2018, which was protected with the TDS Custodial scheme on 07/08/2018. The prescribed information relating to the deposit was provided to the relevant person on 01/08/2018.
A rent of £1,075.00 was payable in advance on the 2nd of each month, in accordance with the agreement. However, as of 02/08/2021, the rent was increased to £1,150.00 by mutual agreement between the first defendant and the claimant.
Notice pursuant to Section 21 of the Housing Act 1988 was served to the tenant and proceedings were issued and listed for hearing. At the hearing, it was agreed that the deposit had been protected and that the prescribed information regarding the deposit had been provided to the tenant at the start of the tenancy.
However, the duty solicitor, acting for the tenant at the hearing, alleged that the Tenancy Deposit Scheme required the landlord to have re-protected the deposit when the rent increased. The duty solicitor alleged that according to the TDS website, any deposit with TDS should be re-protected when there has been a ‘material change’. A material change for these purposes was said to be defined to include there being a ‘change to the rent or deposit value’.
Upon being referred to this fact, the court found that the Section 21 notice was invalid because of this technicality.
Landlords and agents will be aware that in order to serve a valid Section 21 notice to end a tenancy where a deposit has been received, the initial requirements of the scheme must be complied with; therefore, the prescribed information must be provided within 30 days.
Section 213(3) of the Housing Act 2004 states that:
Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements* of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 30 days beginning with the date on which it is received.
Section 213(4) provides:
For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving* such a tenancy deposit.
*our emphasis.
Section 213(6) requires: the prescribed information to be given to the tenant and any relevant person within 30 days of receipt of the deposit.
Section 215 of the 2004 Act provides that no Section 21 notice may be given at a time when Section 213(3) or 213(6) has not been complied with.
According to the TDS terms and conditions, to protect a deposit in TDS Custodial, the landlord or agent must:
The terms and conditions confirm that registering the deposit and paying the money into TDS Custodial are both ‘initial requirements’ of the scheme for the purposes of section 213 of the Housing Act 2004.
With reference to the above requirements, we consider that by registering and paying the deposit to the TDS Custodial within 30 days, the landlord had complied with the initial requirements of the scheme for the purposes of Section 213 of the 2004 Act. Therefore, regardless of whether there is a ‘material change’ to the tenancy, our view is that the landlord is compliant with the legislative requirements for serving Section 21 notice.
It is true that the terms and conditions of the authorised deposit protection schemes do require re-protection of deposits in certain circumstances. For instance, if there is a churn of tenants, the deposit is deemed to have been repaid; therefore, it needs to be re-protected within 30 days. However, as demonstrated above, where there is an increase of rent, we do not consider there is a need for fresh compliance with Section 213.
As ever, it is important to ensure that you are compliant with all of your obligations as a landlord and we would strongly advise you familiarise yourself with all of the terms and conditions applicable to the deposit protection scheme that you use to ensure compliance.
By ensuring you comply with all of the terms, such as re-protection/re-registration, there can be no question of compliance and no challenge to the validity of a possession claim under Section 21 of the Housing Act 1988.
Here at Legal for Lettings, we have experts to help you navigate the technicalities of ever-changing legislation and provide advice to ensure you have the best prospects of successfully recovering possession of your property. If you want to see how we can help, get in touch at contact@legalforlettings.co.uk.