Wednesday, 30 January 2013

Shedding light on the meaining of a tenancy deposit

Conveyancing lawyers will no doubt be aware of the pitfalls in a landlord failing to comply with the requirements relating to tenancy deposits – i.e. the ability of a tenant to bring a claim for the value of the deposit, plus compensation of between one and three times the deposit.

The question as to what constitutes a rent deposit however remains something of a grey area. The Court of Appeal should shed some light in the case of Johnson v Old due before the Court of Appeal in March. The effect of the decision will be significant in tenancy deposit protection terms and could impact the way they future tenancy agreements are drafted.

In Johnson v Old a six months rent in advance had been paid, along with a separate sum which was taken as a deposit and duly protected.

Once the landlord sought possession of the property, the tenant argued that only part of the deposit had been registered as the rent taken in advance had constituted a deposit which had not been protected, and that the Section 21 Notice was therefore invalid.
At the hearing just over a year ago at Brighton County Court, which held that the advance rent was a deposit and that the Section 21 notice was invalid. Deputy District Judge Collins dismissed the landlord’s claim for possession and ordered the landlord to pay the tenant’s costs.
The judgment was overturned on an appeal by a Circuit Judge who decided that 6 months rent in advance did not constitute a deposit. As a result, possession and costs were awarded to the landlord. One set of facts, two Judges, two diametrically opposed judgments.

My view has always been that rent taken in advance is not a deposit. Watch this space to see what is reported in March.

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