Decision due on whether rent paid in advance is a deposit

Court of Appeal - Is rent paid in advance a deposit?

Court of Appeal – Is rent paid in advance a deposit?

The question of if rent that has been paid in advance is part of a tenant’s deposit is set to be decided by the Court of Appeal.

In Johnson v Old, six months rent had been paid by the tenant, in advance, along with a separate deposit sum – that had been put into a protected scheme. The tenant, who had been served a Section 21, argued that only part of their deposit had been registered as they believed that the rent taken in advance constituted as a deposit, which had not been protected, and that the Section 21 Notice was therefore invalid.

The case has had a convoluted legal history. It was originally heard last January, at Brighton County Court, which ruled that the advance rent was in fact a deposit and that the Section 21 notice was invalid. The Judge dismissed the landlord’s claim for possession and ordered the landlord to pay the tenant’s costs.

However, this judgement was then overturned on an appeal last July, when a different judge decided that advance rent was in fact not a deposit and, as a result, possession and costs were awarded to the landlord.

However, the tenant has subsequently applied directly to the Court of Appeal, using the same arguments as before, and now the case will now be determined by the Court of Appeal when it sits in early March. Though the judgement itself may not be released for some time afterwards.

The landlords solicitors have stated that the central issue for the court to decide upon is what constitutes a deposit and whether rent in advance is a deposit which should be protected.

The tenant is still living in the property concerned, although through agreement, and the landlord is receiving monthly payments.

The outcome of the case could also give implied or actual guidance as to the question of whether ‘holding deposits’ paid by tenants could also be deposits for the purposes of protection.

Young Group will be following this case with interest to see how the Court of Appeal rules.

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About Kelly Smith
Head of Contracts and Compliance at Young London

One Response to Decision due on whether rent paid in advance is a deposit

  1. Pingback: Court of Appeal ruling on rent paid in advance » PRSupdate Private Rented Sector Update

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