December 24, 2014

More deposit changes

Although the Government had promised legislative changes to deal with the Superstrike court cases, their original proposed changes had some serious flaws and so, following lobbying from the industry, the Government have made some further amendments to the proposed Deregulation Bill in respect of deposit protection.

The original changes were in four paragraphs. The first paragraph is essentially unchanged and requires ‘Superstrike deposits’, i.e. those received before April 2007 but going statutory periodic after April 2007, to be protected by a scheme. This was the essence of the Superstrike judgement so no real change anyway, just a clarification.

However, the logical implication of the Superstrike decision was that all statutory periodic tenancies and other renewals also needed to comply with deposit regulation, though it was a little less clear how a deposit held in the custodial scheme could be “re-protected”.

The originally proposed amendments report in the Autumn had two sets of rules for renewals, one for statutory periodic tenancies and another for all other renewals.

The latest amendment to the legislation on its way through Parliament has now simplified that situation by having a single set of rules around renewals. Therefore if the renewal is by statutory periodic or by granting a new fixed term, the same basic set of rules have to be followed.

There were a number of other shortcomings in the legislation that have not been changed and remain a significant hazard for landlords taking deposits. For example, the new legislation makes no reference to what happens to a deposit which was originally taken well before April 2007 and even the statutory periodic tenancy arose before April 2007.  The point in wanting clarification (a simple statement would have been enough) is to avoid expensive litigation. The safe advice has to be to ensure they comply with deposit protection until we know otherwise.

The new rules rely heavily on the original compliance with the initial requirements and the prescribed information. Both present their own problems with the ‘initial requirements’ being whatever the chosen scheme required. The prescribed information is often not correctly completed, with a failure to ask about a “Relevant Person”, defined in the legislation, and failure to include a ‘post tenancy contact address’ being two of the common failures.

The new rules say that provided you have complied with the initial requirements and prescribed information on the original tenancy, then it is not necessary to do it again for each renewal (though for some schemes a new insurance fee may be payable.

Whilst this is a step in the right direction, making life a little easier for landlords and agents, significant risks remain for the unwary and deposit protection is sure to continue to provide a stream of court arguments.

Immigration update

The Government have announced that councils in the West Midlands will be the first area to have to comply with the new Immigration Act compliance checking requirements. From the 1 December 2014 all landlords and agents letting property in Birmingham, Walsall, Sandwell,  Dudley and Wolverhampton will be required to check all new occupiers (note not just tenants).

This is not a “test area”, but rather a phased roll out with the rest of the UK expected to be required to comply during 2015. With immigration a highly political agenda item it would not be surprising if the new rules were rolled out nationwide in the Spring of 2015, critically before the next General Election in May 2015.

On the 4 November 2014 a number of guidance documents were released (they have now admitted at least one contains an error!) and those affected by these proposals should ensure they are familiar with the rules around the new requirements.

In order to avoid discrimination it is important to understand that these checks are required on all adult occupiers. Therefore if a tenant is allowed to have a friend come and live in the same property, Immigration Act checks should be conducted. The checks are required regardless of nationality and even UK citizens must be checked.