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"Following a recent Court of Appeal ruling on a recent case Superstrike v Rodridues, there is now confusion over deposits having to be returned and regestered every time a tenancy is renewed or becomes periodic. In my opinion, not a process intended by the legislation in the first place. An interetsing read if manage property" Stephen Bowden
Article Source: Landlord Today
The latest Court of Appeal ruling could mean that new tenancies have to be created monthly, and tenants’ deposits re-protected every time.
It could also mean that deposits which the law now says were not protected properly would have to be returned to the tenant before a Section 21 notice for possession could be served.
Lawyers are citing these as among the potential outcomes of the Superstrike v Rodrigues case.
Justin Selig, of Landlord Action, is among those calling for the case to go to the Supreme Court and is meanwhile advising landlords and agents to take advice from their respective tenancy deposit schemes.
However, there is a difficulty here: the three main tenancy deposit schemes have so far been unable to provide any advice following the ruling last week.
The Superstrike judgment specifically referred to a tenancy deposit taken by a landlord prior to April 6, 2007, when mandatory protection came in.
However, because it says that when a fixed period tenancy rolls over into a period tenancy it becomes a new tenancy, there are major implications for many thousands of tenancies.
In the Superstrike v Rodrigues case, it was ruled that the landlord should have protected the deposit, and because this was not done, had no right to use a Section 21 notice to seek possession of the property.
Earlier this week, DPS, MyDeposits and TDS issued a joint statement: “Whilst landlords and lettings agents take their own legal advice, we will be considering the implications of this judgment for deposit protection and the service of prescribed information.
“We will also need to consult the DCLG on this and we will be issuing a further joint statement when we have fully considered the matter.”
Yesterday, all three of the services – which may have to rewrite their own procedures –said there was no update.
However, lawyers are beginning to issue their own commentary on a case which could see thousands of landlords faced with the prospect of legal action from tenants, going back six years.
Selig, a solicitor and director at Landlord Action, urged Superstrike, as landlord, to take the case to the Supreme Court for further clarification.
He confirmed that the case has implications for every landlord and agent whose tenant occupies a property under an Assured Shorthold Tenancy and where a deposit has been taken.
He said: “The question is, where you are holding a protected deposit, do you need to re-protect it each time there is a renewal of a tenancy? At present, I think the answer to that is, yes.
“There is a further problem. A periodic tenancy is deemed to be renewed at the expiry of each period.
“Therefore, if you follow the argument – this would mean that the deposit would need to be re-protected at the beginning of each period. Most periodic tenancies are monthly – so the deposit would need to be re-protected monthly.
“Obviously this does not make sense, nor I am sure is this the intention of the legislation.”
He advised: “The first thing I would do is to obtain written clarification from the deposit protection company you are using as to their take on the ruling, and comply with their recommendations.
“Secondly, as a minimum, and you have a fixed term tenancy about to go on to a periodic, you should at least protect your deposit again when it goes periodic. (Personally, I would actually return the deposit to the tenant – but I appreciate that this is not always practical.)
“Thirdly, and for belt and braces protection – where you are still holding the deposit, you may want to consider not allowing the tenancy to go on to periodic, but to reissue the tenant with a new fixed term – and re-protecting the deposit for that fixed term.”
Nigel Rowley, head of litigation at Mackrell Turner Garrett in Surrey and London, said it was possible that a deposit might not have to be re-protected at periodic stages, but that a fresh set of prescribed information might have to be given out each time.
He said: “Since the Court of Appeal has held that a statutory periodic tenancy is not a continuation of a fixed term tenancy but a new tenancy, the significance of this does create a knock-on effect with all ASTs including those entered into post-April 2007.
“A deposit is essentially ‘re-taken’ by the landlord upon a statutory periodic tenancy and renewal. There does not seem to be any suggestion that a deposit needs unprotecting and then re-protecting at the stage of statutory periodic and renewals, though we would not risk suggesting otherwise until there is some judgment on this.
“However, this might mean that new prescribed information must be given not only at the time of physically receiving the deposit but also whenever a tenancy becomes statutory periodic or a renewal is provided.
“Another knock-on effect may result in the TDP schemes having to be rewritten.
“According to their own individual rules, a deposit remains protected if the tenancy agreement continues on a statutory periodic tenancy after the end of the fixed term – provided, for example, that landlords reflect this on the TDS database before the last day of the fixed term.”
A colleague of Rowley’s, Tony Kent, said that landlords who had inadvertently failed to comply might have to return a tenant’s deposit if they wanted to serve a Section 21 notice.
He said: “The Court suggested this but did not make a decision on that point.”
He too thought the case should be further appealed
"Monthly Rents are forecast to hit an average of £800 in England & Wales in two years time and one in five people will live in private rented accommodation" Alison O'Connor
Article Source: Letting Agent Today:
Monthly rents will hit an average of £800 in England and Wales in two years’ time, while one in five people will be living in private rented accommodation.
The claims came from Lucy Jones, operations director at LSL, speaking yesterday at a Council of Mortgage Lenders conference.
She said the rise would represent a 21% hike since 2010.
“While economic expectations have changed, and even as rents in many areas have risen rapidly, the private rented sector has actually been surprisingly stable.
“Meanwhile, the purchase market has resembled a broken rollercoaster.
“First-time buyers have seen a boost from new government schemes this year, but the ability to raise any deposit at all has been severely reduced by the recession. As house prices accelerate, this long-term trend towards renting will continue.”
“Whatever the regulatory outlook, the economic fundamentals will remain the same. Landlords will be critical in providing more homes for millions of people who are no longer able to buy. Not just rents will rise.
“Gross yields are set to increase, too, and that should encourage investment from landlords – but they will need finance to continue to keep pace with such demand.
“More finance can allow more homes, and that’s slowly happening. Buy-to-let advances are growing gradually, at what should prove a sustainable rate. And long may that continue. This year, buy-to-let looks set to return to the same proportion of mortgage lending as it was in 2007.
“The private rented sector is set to flourish in the recovery, if anything more vigorously than its performance in the recession.”
"BTL lender BM Solutions, owned by Lloyds, has removed its minimum income requirement on all BTL mortgages" Stephen Bowden
Article Source: Choices News
BM Solutions, owned by Lloyds, has removed its minimum income requirement of £25,000 for all its buy-to-let mortgages.
Instead, the lender will look at rental income, rather than a borrower’s other earnings.
The mortgage affordability calculation remains at 125% of rental income, but the criteria have been tightened.
A spokesperson for BM Solutions said: “We regularly review our buy-to-let policy to ensure that we can support the increasingly important role of the private rental sector.
“Our move to take away the minimum income requirement acknowledges that as buy-to-let affordability is based on rental income, rather than personal income, we can make it more accessible to more landlords. They will now simply need to include income details on their application.
“At the same time, we are updating our BTL affordability criteria. This remains at 125% of rental income, but at the higher of either the initial pay rate or a notional rate which is currently 5%.
“We believe that this is the right thing to do to ensure borrowers are in the best possible position to be able to manage future payments if their circumstances change.”
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