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Property: Johnson & Others v Old [2013] EWCA Civ 415

On 1st May 2009 the defendant tenant entered into a 6 month assured shorthold tenancy of a flat.

By clause 1.7.1 of the agreement she was obliged to pay rent of £950 per calendar month. However, D had been ascertained to be a poor credit risk and it was further agreed that the 6 months’ rent for the tenancy should be paid up front before the tenancy commenced. Accordingly, by clause 1.7.8 it was provided that 6 months’ rent was to be paid in advance, and by clause 1.7.9 the tenant would be re-referenced at the end of the 6 month period and if her reference proved satisfactory, she would be permitted to resume monthly rental payments. By clause 1.8.1 the tenant was obliged to pay a security deposit of £1,485.00 which it was common ground had been properly protected under one of the statutory schemes.At the end of the initial 6 months, the tenant was not re-referenced but rather, a second six month agreement was entered into in identical terms to the first save for the dates. That term in turn expired and a third 6 month tenancy was entered into, again in the same terms as the first two agreements but with a small rent increase. When that term expired, the tenant remained in occupation as a statutory periodic tenant, paying her rent monthly. Eventually, the landlord served her with a notice pursuant to s.21(4)(a) Housing Act 1988 and claimed possession.

D, with the benefit of public funding, defended the claim on the basis that, in relation to the advance payments of rent, those extra payments of 5 months’ rent (in addition to the 1 month’s rent due on the commencement date) were a deposit within the meaning of s.212(8) and 213(8) Housing Act 2004, in that they were paid as security for the tenant’s continuing obligation to pay rent every month. It was submitted that the “deposit” dwindled month by month as the tenant failed to pay the rent month by month. As these sums had not been protected under one of the statutory schemes for the protection of tenancy deposits, then by virtue of s.215 of the 2004 Act the landlord’s section 21 notice was invalid. This argument persuaded the deputy district judge at first instance to dismiss the claim for possession. The landlord then appealed successfully to the circuit judge, who made an order for possession. The tenant then obtained permission for a second appeal to the Court of Appeal.

The Court of Appeal unanimously dismissed the appeal. Crucial to the concept of what amounts to a tenancy deposit is that there must be an ongoing obligation the performance of which is secured by the money said to be a “deposit”. Here, there was no genuine expectation that the tenant was under any obligation to pay rent on a monthly basis. The payment of rent in advance had discharged the obligation to pay rent for the entirety of the 6 month period once and for all. James Browne appeared for the successful landlords in both appeals.

James Browne / 1st Jun 2013


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