>> See the Court of Appeal decision on this case (23 April 2013)
Regular readers of this blog may remember my report on the case of Johnson v. Old where a County Court Judge held that in a tenancy where rent was paid six months in advance, this was actually a deposit.
As this had not been protected, he found the section 21 notice to be invalid and dismissed the possession proceedings based on it.
The post evoked a lively discussion in the comments section, with some people agreeing with the Judge saying that ANY rent paid in advance must be a deposit which needs protecting, and others saying ‘rubbish, it can’t be a deposit, its rent’.
I am therefore very grateful to Linda Howard, from the Residential Property Litigation team at Shoosmiths Solicitors who was the solicitor in the case., for giving me some further background information and bringing me up to date with the inevitable appeal.
This is what she told me.
The Defendant, Ms Old, came to this country from Germany and wanted to rent out the Claimants property. Unfortunately due to her recent relocation to the UK she did not pass the referencing process so the Agents took a deposit of £1425.00 (which was duly registered) and six months rent in advance.
Subsequently the tenancy was renewed twice, both times with six months rent being paid in advance. Over this period the total rent taken up front was £17400.00.
From the 1st May 2011 the tenancy ran on a periodic basis with the rent payable monthly at £1,000.00 per month.
The possession claim
On the 15th August 2011, a Section 21 (4) (a) Notice was served to expire on the 31st October 2011. As the Defendant did not vacate the premises, on the 8th November 2011 accelerated possession proceedings were instigated.
On 12th December 2011 the Defendant entered the defence that only part of the security deposit had been registered as the rent taken in advance constituted a deposit and was not registered and therefore the Section 21 Notice had been served invalidly.
The Defendant also claimed that the prescribed information had not been served. However this claim that was later dropped as the prescribed information had been contained within the tenancy agreement – each page of which she had initialled.
The first hearing
The hearing took place on the 20th January 2012 at the Brighton County Court. The matter was heard in front of Deputy District Judge Collins who agreed that the rent paid in advance was, in fact, a deposit and made the following Order :
- The claim for possession be and is hereby dismissed.
- The Claimant do pay the Defendant’s costs to be the subject of detailed assessment if not agreed.
The basis of the Deputy District Judge arriving at that decision was that he considered that the rent paid in advance constituted a security for the rent during the tenancy and therefore a deposit which should have been registered. That it was not, meant that the section 21 Notice was invalid and could not be relied upon.
The appeal hearing
The Claimant appealed that Order and the appeal was heard in the Brighton County Court in front of HHJ Simpkiss on the 31st July who overturned the decision of DDJ Collins and awarded possession and costs.
At that hearing HHJ Simpkiss found as follows:
- the rent paid in advance was not a ” security” to ensure that the Defendant fulfilled the obligation to pay rent but was actually the obligation itself.
- the rent paid in advance was never intended to be returnable at any time during the tenancy or once it had ended and that the monthly rent was never sought from the Defendant on a monthly basis in addition to the up front payments.
- He also found that whilst the rental clause was convoluted, the intention of the parties was obvious from the out set.
The claimants dilemma
In the meantime the defendant had remained in the property and had stopped paying rent.
However the claimants felt that they had no alternative but to continue with this claim, as opposed to proceeding down the section 8 route, as if they did not they were at risk of an order to pay the defendant (via a clam for the penalty under the deposit regulations) of up to some £53,625.
At the time of writing the defendant has not appealed and her time for doing so has run out. However as she is publicly funded it is possible that her application could still be under consideration and she might apply out of time.
I have asked Linda to keep me informed and I will let you know if there are any further developments.
However all landlords will be relieved at the decision made by HHJ Simpkiss.