Does an automatic Periodic Renewal require an AST deposit held pre Apr07 to be Lodged or Insured?
I started a new AST Agreement with a tenant of a small house on 14 Aug 06. The term was 12 months and the Period was 12 monthly so the Tenant paid a Year's rent in advance and 3 months Deposit. She had sold her house and had funds to spare. She has a teenage daughter living with her and the daughter's baby but the Agreement is just with her.
She phoned me in April 07 to tell me she could no longer afford to pay annually and did I object to her obtaining monthly Housing Benefit? I agreed verbally, in principle only, to monthly rent in advance from 14Aug07 as long as the Council's payments were made to her and she paid me. If the Council pays me it makes me legally responsible for returning any or all rents if the tenant has lied or absconds – unacceptable to me.
In June I was advised that even a verbally agreed change of Periodicity could be deemed to constitute a new Agreement and therefore I would have to lodge or insure the Deposit, else face a fine to the Tenant of 3 times the Deposit. I no longer take Deposits and rely on a householder's Guaranty back by the Guarantor's good credit standing.
I therefore gave formal Section 21 Notice of Possession for an Expired Term on 13 June 2007, with a witness, and obtained a receipt from the Tenant. My cover letter explained that, for business reasons, I could not change the terms of the Agreement signed 14 Aug 06, as she had requested.
I was then contacted by the Council who agreed that the Periodicity change would constitute a new Agreement and incur a potential fine if the Deposit was not treated as post-Apr07. I said I would refund the Deposit if the Tenant obtained an appropriate Guarantor.
The council said they might a find a way to pay the Tenant one year's Benefit in advance so she could keep to her original Agreement terms with me.
Now I'm told by another landlord that, despite there being no written renewal, and my treating the original 2006 Agreement as still in force simply by it becoming an annual periodic automatic extension, I am obliged to join the Deposit scheme.
Is this true?
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