Charalambous & Anor v NG & Anor

A landlord cannot serve a section 21 notice while a tenancy deposit paid in connection with a shorthold tenancy is not being held in an authorised scheme. This applies even where the deposit was received, and the tenancy began, before the statutory tenancy-deposit regime came into force. Section 215(1)(a) operates prospectively because it regulates notices served after commencement, although it affects existing tenancies and deposits. The condition is distinct from compliance with the initial requirements under section 213(3). The court left open the separate question whether section 215(1)(b) applies to deposits received before the statutory regime. The appeal was allowed because the deposit had never been protected.

The appellants became tenants of a property in 2002 and paid a deposit. After successive renewals, a statutory periodic tenancy arose in 2005. The deposit was never protected under a statutory scheme.

In 2012 the respondents served a notice under section 21 of the Housing Act 1988. The county court held that the notice was valid. The appeal concerned whether the tenancy-deposit provisions in the Housing Act 2004, as amended by the Localism Act 2011, applied to the existing tenancy and old deposit.

The Court of Appeal allowed the appeal. Lewison LJ gave the leading judgment, with Black and King LJJ agreeing.

1. Section 215(1)(a). The first condition is that a tenancy deposit has been paid in connection with a shorthold tenancy. That is a past event. The relevant alternative condition is that the deposit is not being held in accordance with an authorised scheme. That condition is expressed in the present tense and concerns the current state of affairs.
2. The prohibition on serving a section 21 notice therefore applied even though the deposit had been received before the statutory scheme existed and the tenancy had become periodic before the legislation came into force. The provision operated prospectively because it affected only notices served after commencement. It did not retrospectively invalidate notices already served.
3. The court rejected an alleged precise correlation between section 215(1)(a) and the duty in section 213(1). Section 215(1)(a) addressed deposits that were not in fact protected, whether or not the landlord had previously been under an obligation to deal with the deposit in a particular way. The present-tense reasoning in Vision Enterprises Ltd v Tiensa [2010] EWCA Civ 1224 remained relevant, although the amendments had reversed that case’s actual result.
4. The presumption against retrospectivity was approached through practical fairness. Relevant considerations included the nature and value of the affected right, the purpose of the legislation, hardship, the degree of retrospectivity and the clarity of the statutory language. The right to serve a notice while holding an unprotected deposit was procedural, of no particular value, and could be restored by protecting or returning the deposit.
5. Article 16 of the commencement Order confirmed that the amended regime applied to tenancies in existence on 6 April 2012 and gave landlords a prospective period in which to comply. The court expressed no final view on the separate application of section 215(1)(b) to a deposit received before section 213 came into force.

Because the deposit had never been held in accordance with an authorised scheme, the section 21 notice was invalid.

1. Court of Appeal (Civil Division): Appeal allowed. The section 21 notice was held invalid.
2. Clerkenwell & Shoreditch County Court: District Judge Manners held that the notice was valid.