>> See the Court of Appeal decision on this case (23 April 2013)
In past posts on this blog, I and others have maintained that where a tenant pays six months rent in advance this is not a deposit.
I therefore need to mention a County Court decision which thinks otherwise:
Johnson v. Old
Brighton County Court – 20 January 2012
Here there were a succession of six month fixed term tenancy agreements. A deposit was paid (which was properly protected) and the landlord also required the tenant to pay rent in advance as she had not passed their credit checks.
When the tenancy fell became periodic at the end of the third fixed term, the tenant fell into arrears and the landlord served a section 21 notice and applied for possession.
The Judge however, DJ Collins, decided that all three payments of rent in advance had been a deposit and therefore the section 21 notice was invalid.
This is a County Court decision and is therefore not binding on anyone.
My view remains that a payment of rent up front cannot be a deposit. Provided it is credited to the rent account immediately, if fails to fall within the definition of a deposit in s212 of the Housing Act 2004 – as it will not be money intended to be held as security – it will be rent.
The rather brief report of this case in the June LAG Journal does not say why the Judge found that the payments fell within the definition of a deposit and it would be nice to know more about this. As one commentator pointed out on my earlier post – if six months rent paid in advance is a deposit then any rent paid in advance is a deposit.
Where do you stop? Is it a deposit if it is paid a month in advance? A week in advance? Two days in advance??
It would be helpful if a case on this point could go to one of the higher courts so we could get some clarification. The current state of affairs is most unsatisfactory.
If a payment of six months rent up front IS a deposit
- it would result in considerable unnecessary administration dealing with the tenancy deposit scheme requirements (as the ‘deposit’ would need to reduce on a monthly basis as rent is paid over) and
- as a result this would put landlords off taking tenants who fail credit checks but who can pay rent in advance. And I can’t see that this would do anyone any good.
It would be interesting to know what the tenancy deposit schemes have to say about this.