Member Article

Court case could cost landlords thousands

A “scary” court ruling which could cost unwitting landlords thousands of pounds in compensation has been described by one North East property expert as “the clearest possible sign that deposits have had their day”.

Ruling in the case of Superstrike v Marino Rodrigues the Court of Appeal this week ruled that when a renter remains in a property after the end of a fixed term tenancy their landlord must renew the protection of their deposit as if this was a new tenancy.

If landlords fail to do this, the court ruled they will have contravened deposit protection laws and could face paying their tenants thousands of pounds in compensation while also losing the right to evict them from the property.

When entering into a new tenancy landlords must, by law, protect their tenant’s deposit by placing it into a government approved deposit protection scheme.

It had previously been assumed that if a tenant remained in the property on a month-to-month basis this was simply a continuation of the original fixed term agreement and as a result the deposit was already protected.

Ajay Jagota of KIS Lettings,who manage properties for some 700 landlords from branches in Sunderland, South Shields, North Shields and Welwyn Garden City.

He said: “The court’s ruling has scary implications for landlords, who believed they were following the correct legal procedure and through no fault of their own could now face compensation claims in the thousands while also being unable to evict trouble tenants from their properties.

“It is the majority of landlords rent out no more than one or two properties, generally managing family assets as best they can or modestly investing for their retirement who will be hit hardest by this ruling which cannot have been what lawmakers had in mind at all and I hope the Supreme Court has the opportunity to clarify the situation at the earliest opportunity.

“Nonetheless, cases like this carry some crucial lessons for landlords. First, they must renew any protected deposits immediately. Second, they have to remember that in the eyes of the law they are liable even if they have used an agent to manage the deposit on their behalf.

“Above all, this is the clearest possible sign that deposits have had their day. At KIS we carefully considered the situation and decided to do away with deposits all together. We have instead devised a pioneering system of asking new renters to provide a property-owning guarantor to guarantee their rent and offering a unique landlord insurance policy to give our clients piece of mind – a system which enjoys a 100% success rate.

“In the vast majority of tenancies the deposit is never required. When it is, the value of the deposit is almost never be enough to put right any damage caused or meet any legal expenses incurred.

“When rulings like this threaten to leave landlords both seriously out of pocket and powerless to take socially-responsible action against the troublemakers who blight communities you have to ask if there is any point to deposits at all.”

This was posted in Bdaily's Members' News section by Ajay Jagota .