Regaining possession of a property – the impact of statutory deposit schemes article banner image

A recent case highlights the issue of statutory deposit schemes and how these can affect a landlord’s ability to regain possession of their property.

Family houses

A landlord who receives a deposit for an assured shorthold tenancy must comply with the requirements of a statutory deposit scheme, within 30 days of receiving the deposit, under the terms of the Housing Act 2004. If not, a section 21 notice to quit cannot be served on the tenant. However, such a notice can be given if the deposit has been returned to the tenant in full or with agreed deductions.

Recent case law

In a recent case from December 2014 (Charalambous and another v Maureen Rosairie Ng and another [2014]) the tenant entered into a tenancy in 2002 and paid a deposit of £1,560. The tenancy expired and was renewed a couple of times with the original deposit being subsequently used when new tenancies were created. When the last tenancy ended in 2005, a statutory periodic tenancy arose. In 2012, the landlord, served a notice under section 21 of the Housing Act 1988 requiring the tenant to give up possession. By then, statutory regulation of tenancy deposits had been introduced with effect from 6 April 2007. The tenant’s deposit had never been held under a tenancy deposit scheme. The Court of Appeal decided that the landlord’s section 21 notice was invalid and the landlord was unable to regain possession.

Implications for landlords

The case highlights that if a landlord’s key goal is to regain possession and he/she has not complied with the legislation, it may be advisable to repay the deposit to the tenant. The landlord was not required to comply with the legislation at the time when she received the deposit or when the statutory periodic tenancy arose, since on each occasion the legislation had yet to come into force. However, despite this, the legislation targeted cases where the deposit was not being held in a statutory deposit scheme, even though at the time of receiving the deposit or the relevant tenancy arising, the landlord had no obligation to deal with the deposit in a particular way.

Potential trap for landlords: section 21 notices served at the start of the term

The Court of Appeal was quite clear that, when considering the Housing Act 2004, it is necessary to look at the position when the notice is actually served. It is common for landlords to serve section 21 notices at the very start of an assured shorthold tenancy, specifying that the tenancy will finish at the end of the fixed term, and so preventing the statutory periodic tenancy from arising.

Any landlord, or someone acting for a landlord, doing this must ensure that the Housing Act 2004 is satisfied at the point at which the section 21 notice is served. While the landlord has 30 days in which to protect the deposit, it seems that protection must actually take place before the section 21 notice can be served.

Michael Davies is an Associate in Stephen Scown LLP’s dispute resolution team in Exeter. He is an expert in property and land disputes and advises both landlords and tenants (commercial and residential) on a wide variety of matters. To contact Michael, please call 01392 210700 email or visit