When an assured shorthold tenancy (AST) reaches the end of its term and the tenant continues to occupy the premises, a new tenancy is created. This has implications for landlords who have ASTs expiring which were entered into before 6 April 2007, the date on which the Government introduced tenancy deposit protection. In this circumstance, the deposit paid by the tenant under the original lease may have to be dealt with under the rules that came into effect on that date, which require such deposits to be protected by a tenancy deposit scheme (TDS).
One of the downsides of not dealing correctly with a deposit to which the TDS rules apply is that it may not then be possible to serve a valid possession notice on the tenant.
The Court of Appeal recently heard a case in which a pre-2007 tenancy, under which a deposit was paid by the tenant, was simply allowed to ‘run on’ by the landlord after it expired in 2008. The landlord did not transfer into a recognised TDS the deposit that had been paid by the tenant.
When the landlord sought possession of the property in 2011, the tenant resisted its attempts, arguing that its failure to protect the deposit on the expiry of the original tenancy invalidated its claim.
The Court agreed. A new tenancy had been created in 2008 and the landlord’s possession notice was therefore invalid because of non-compliance with the TDS rules.