As we have previously reported the maximum rent threshold for Housing Act 1988 tenancies is to be altered on 1 October from £25,000 to £100,000.
One of the key questions has been what the position will be for tenancy deposits taken in respect of tenancies which start prior to 1 October and are not ASTs but which will become ASTs on 1 October. There has been some uncertainty as to whether these tenancy deposits will need registration with an authorised scheme or not. If they do need registration then there is some doubt as to when that will need to occur.
It seems that DCLG thinks they will need registration. They have been advising stakeholders that:
Our intention is that these new assured shorthold tenants should have the same protection as existing tenants, so if the tenancy started after 6 April 2007, the landlord will have to protect the deposit.
It is debatable whether they can, in fact, achieve this as the trigger for the protection of a deposit is receipt in connection with an AST. These deposits were received prior to the change and were not received in accordance with an AST and so did not require protection as at the time they were received. Clearly, however, the DCLG thinks different and will seek to encourage the Courts to rule on this basis.
The DCLG recognises that landlords will not have been able to register deposits within 14 days of receipt but states that
we would expect them to protect the deposit as soon as possible.
Apparently they will ask the Courts to give landlords leeway on this issue although after the ruling in Draycott v Hannells the Courts should not be acting on late registration anyway so it is hard to see what useful guidance can be provided.
While we have some doubts about the validity of the DCLG position the message is clear. Protect all tenancy deposits as soon as possible and definitely promptly after 1 October. We hope the deposit protection schemes are prepared for the rush.