Superstrike Ltd v Rodrigues

When a fixed-term assured shorthold tenancy expires and a statutory periodic tenancy arises under section 5 of the Housing Act 1988, the periodic tenancy is a new and distinct tenancy. A deposit retained by the landlord is treated as repaid and received for that new tenancy, even though no money changes hands.

If the new tenancy arose after the commencement of the deposit-protection provisions of the Housing Act 2004, the landlord must comply with section 213. Failure to protect the deposit prevents the landlord from validly serving a section 21 notice. A notice served while section 215(1) applies is ineffective and cannot support a possession order.

The tenant paid a deposit under a fixed-term assured shorthold tenancy beginning before the deposit-protection provisions of the Housing Act 2004 came into force. When the fixed term expired, a statutory periodic tenancy arose under section 5 of the Housing Act 1988. The landlord retained the deposit without protecting it in an authorised scheme.

The landlord later served a section 21 notice and obtained a possession order. A deputy district judge set that order aside for non-compliance with the deposit provisions. His Honour Judge Winstanley allowed the landlord’s appeal on the basis that the deposit had been paid and received before the legislation commenced.

The tenant appealed. The central issue was whether the retained deposit was treated as paid and received afresh when the statutory periodic tenancy arose, thereby engaging sections 213 and 215 of the 2004 Act.

1. Appeal allowed. The statutory periodic tenancy arising under section 5 of the Housing Act 1988 was a new and distinct tenancy, rather than a continuation of the fixed-term tenancy. Its terms included an equivalent obligation concerning the deposit: paras [27]–[28].

2. The deposit retained by the landlord after the fixed term expired had to be treated as security for obligations and liabilities arising under the new periodic tenancy. That legal position could arise only by treating the tenant’s entitlement to the old deposit and obligation to provide a deposit for the new tenancy as satisfied through the landlord’s continued retention of the same money: paras [28]–[29].

3. Payment did not require the physical transfer of cash, a cheque or a bank transfer. The tenant was treated as paying the deposit for the new tenancy by setting it off against the landlord’s obligation to account for the deposit relating to the former tenancy. The landlord correspondingly received the deposit when the periodic tenancy arose: paras [30]–[39].

4. The deposit was therefore received in connection with the new tenancy after the statutory scheme had commenced. The obligations in section 213 of the Housing Act 2004 applied. Because the landlord did not comply, section 215(1) prevented it from validly serving a notice under section 21 of the 1988 Act. The notice was ineffective and the grounds for possession were not established: paras [39]–[41], [46].

5. The court left open whether section 215(1), independently of section 213, prevented service whenever an unprotected deposit was held: paras [43]–[45]. It also observed, without deciding, that following the 2012 amendments late protection might no longer cure a failure to protect the deposit and that returning the deposit might be the only means of escaping section 215(1): para [42].

Lewison and Gloster LJJ agreed with Lloyd LJ: paras [47]–[48].

1. Court of Appeal (Civil Division): The tenant’s appeal was allowed. The possession order was held not to have been justified because the section 21 notice was ineffective: [2013] EWCA Civ 669.
2. Wandsworth County Court, His Honour Judge Winstanley: The landlord’s appeal was allowed on the principal basis that the deposit had been paid and received before the deposit-protection legislation commenced.
3. Wandsworth County Court, Deputy District Judge Whiteley: The possession order was set aside for non-compliance with the tenant-deposit provisions.
4. Wandsworth County Court: A possession order had initially been made under the accelerated procedure.