Court of Appeal decision made on when is a payment rent and when is it a deposit

Court of Appeal decision made on when is a payment rent and when is it a deposit

18:45 PM, 23rd April 2013, About 10 years ago 43

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Newsflash from Tessa Shepperson of Landlord Law.

There has been an important Court of Appeal decision on tenancy deposits.

In the case of Johnson v. Old the tenant claimed that the six months rent she had paid in advance was actually a deposit which the landlord had failed to protect. Therefore (she argued) he was in breach of the tenancy deposit regulations and the section 21 notice he had served was invalid.

This argument was successful at the first hearing but not at the second hearing, which was an appeal to the Judge. The case then went to the Court of Appeal – and we have just learned that the landlord has won the case.

So you should now be safe in accepting rent in advance, if your tenant fails to pass referencing.

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Comments from Mark Alexander

When I first heard the outcome of this case I got all excited as I thought it could spell the end of the Deposit Protection minefield which all landlords and letting agents can so easily fall foul of. Great I thought, I will just take rent in advance instead of deposits and continue to charge my tenants monthly. It’s not that simple though. If you read the judges decisions, one of they key points in this case was that Mr Old accepted 6 months rent up front. If the landlord had continued to collect rent monthly the six months rent would have been a deposit and not rent in advance. One of the key points in the case was that if the tenant (Oldfield) had been asked to continue to pay monthly rent during the six month period the reply would undoubtedly have been, I have already paid in advance for this month. In laymans terms, I take this to mean, “you can’t have your cake and eat it”. Therefore, if you think this case will allow you to call deposits rent in advance, forget it, that will not work.

The more I think about the case, the more questions pop into my mind. What if it had been a 12 month AST and only 6 months advance rent had been paid? At the end of month one, could the landlord reasonably insist upon another months rent being paid to top the rent in advance back up to six months? If this was allowed, presumably it would not be allowed after month 6 of a 12 month tenancy?

I am still looking for a better alternative to taking deposits. I’m getting there but the price isn’t right yet. Ideally I’m looking for monthly rent on the due date whether the tenant pays or not and insurance to indemnify me of and damage caused by the tenants to my property and cleaning of properties post tenancy. All of this is available but it comes at a cost which I can’t justify.

The search continues, in the meantime we either take a deposit or we take our chances. Either way there is a risk, especially if we fall foul of deposit protection legislation and I suspect a lot of landlords and letting agents will come a cropper on this.


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Robert M

16:27 PM, 29th April 2013, About 10 years ago


I think the whole purpose of the thread is for those who wish to protect their interests a little more. As an agent I am not sure that your method would be appreciated by my landlords. In fact I think that more use of rent in advance was advocated by some who wanted to avoid taking deposits. This seems possible so long as the agreement working is tight and that the advance payment is genuine rent.


Robert May is not a name I use.

Was I right about David?

Industry Observer

17:19 PM, 29th April 2013, About 10 years ago

Taking no deposit is of course an option.

As is taking rent in advance but making sure that is exactly what it is which means you need a deposit anyway assuming you want one. What everyone needs to be mindful of is the comment in Johnson para 20 about contrivances and also the fact that Johnson was found on those particular facts i.e. despite confusion because it was stated as a 6 monthly rent and the payment covered the immediate next periods due each time - not some payments due in 5 or 11 months time!!

I have had another legal opinion Robert again from a solicitor and a L&T law specialist who also believes that taking rent in advance for anything other than an immediately sequential period could be risky. I agree but that's only our opinions of course and you make a good popint on risk.

I never identify where comments from others have come from. On the post I made to Landlord Law on this subject today I didn't identify which TDP scheme's opinion it was.

Robert M

13:32 PM, 2nd May 2013, About 10 years ago

Shock horror! Solicitor gives advice following Court of Appeal case that the ruling might be different in different circumstances. Training in sitting on the fence comes with the territory. If I asked a solicitor to confirm what day it was today they would struggle to give you an unequivocal reply that today is Thursday. I would love to see this solicitor's opinion on Johnson v Old before the Court of Appeal ruling.

I think we have established that there is a difference between a payment held as security for that obligation and a payment for the actual obligation itself.

We have also established that my example is a slight variation on the facts of the case but:

1) there is a good commercial reason;
2) the tenancy is fixed term only;
3) the rate of rent is specified as £x per month (this is not the same as saying it is payable monthly);
4) the payment pattern is very clearly specified in the agreement;
5) there is a separate deposit correctly protected.

I do have a problem with suits that stand at the front on landlord courses but switch between facts with their opinions without distinguishing between the two. One I shall call David is a typical example, a lot to contribute but in this case needs to think first before offering opinions as facts.

This is another thread where I have gone from being shot down in flames using quotes from anonymous "experts" to an almost begrudging acceptance that I may have a case.
My methods are not a complete copy of Johnson, they are a variation, but from the facts in Johnson I think I have a defence.

Industry Observer

13:47 PM, 2nd May 2013, About 10 years ago


One thing I will never understand is why anyone has to resort to sarcasm and smart cracks either here, or on Landlord Law blog (much lesser extent) or other property forums.

Comments are made, certainly by me, for a wider consumption and information that someone like yourself who clearly knows what they are doing.

You'll have to explain to me the significance of your points 1,2 and 5 below because my response to those would be "so what". Points 3 and 4 are far more significant.

You clearly believe what you do is compliant, or at least poses an acceptable risk for the benefits derived, so go for it. But don't throw your toys out of the pram Robert just because someone else questions whether you are 100% correct.

Over and out - I'm too busy for all this pro bono stuff anyway

Robert M

14:19 PM, 2nd May 2013, About 10 years ago

I don't resort to sarcasm; I exaggerate to make a point.

All these experts offering concrete opinions on forums when the ink is hardly dry on the ruling and they are anonymous. Then, when the opinions are challenged as maybe open to a different interpretation, out come the credentials to impress - but anonymity remains.

I am not the one who has ever claimed to be 100% correct – I have challenged those who told me that they are 100% correct. I suggest you re-read the thread if you disagree.

I'm not the one throwing my toys out of the pram – you are the one who wants to leave the debate. I seem to recognise that approach as weli.

Industry Observer

15:21 PM, 2nd May 2013, About 10 years ago

I see you on LL blog now too.

Can I ask you to explain to me in very simple terms why a Judge would not regard a statement that rent is £1000 a month as being different to £1000 monthly as I don't see it.

Robert M

15:47 PM, 2nd May 2013, About 10 years ago


Well I posted on the LL Blog as well so that is not too skewed.

I have already addressed the rate question - see above.

My plumber may be £25 an hour. This does not mean each hour I give him £25, because we have a separate agreement about invoicing.

In tenancy agreements you state the rate of rent (usually in definitions) and then specify (usually separately) the rules for payment. (eg £x per month in advance on the first of each month). However, if I want the last three months' rent early this is clearly stated in the payment section.

Actually, thinking about it my student tenancies usually express the rate of rent in weekly terms, and the payments are monthly or quarterly, so it is even more clear that the rate of rent and payment terms are different provisions.

If you cannot separate the concepts of of a rate from pattern of payments I hope I am never behind you at the petrol filling station. I have this vision of you running in and paying £1.35 separately for each litre.

Industry Observer

17:37 PM, 2nd May 2013, About 10 years ago


No not a matter of separating the concepts and don't worry you won't queue for ages behind me while I pay a litre at a time while you wait to buy your packet of crisps.

No it was that somewhere much earlier I had seen you, or I think it was you, commenting on the necessity of kepping reference to the rent and monthly payments well apart in the agreement wording, which is the correct method as per the RLA system.

It was the reference to month and then monthly rent in the same context as rent in advance that threw me.

Speaking of Tess's site can you clarify where this reference you make is to Johnson saying something about payment periods as I can't see it. I asked you about it on that site

23:40 PM, 2nd May 2013, About 10 years ago

Appreciating the semantics of this debate; could you experts give us amateur LL a suggested or recommended way of quoting on an AST the best phrasing for describing rent payment; amounts , when to be paid etc.
For the vast majority of us that would be rent paid monthly in advance on a 6 month AST.
But also would be helpful to quote the situation where rent is for a 6 month AST but with paid in advance on a 6 monthly period.
and I don't know whether it would work; but the situation where rent is taken in 1 6 month amount but rent is still to be paid monthly and in advance.
I don't know if I have mangled things up here; am just trying to establish the effect if the ruling has on how e couch our AST's........................any answers would be most welcome!!

Industry Observer

9:36 AM, 3rd May 2013, About 10 years ago

Hi Paul

The first below is normal monthly rent and typical of a standard tenancy

Second is GRELA method and I think RLA too and is for 6 months in advance Landlord doesn't mind itf tenancy goes periodic

Third is where LL doesn't want tenant to stay on just to let for whatever fixed term.

Your last suggestion there is no example because it was always debateable and Johnson in paras 34-38 kicked this methood into the long grass. Collect monthly rent where you are also holding advance rent and the waters become murky again which is what Robert and me have been discussing here and elsewhere. One minute I think his method works, next I have doubts.

That's just what you might find in a Court scenario, one Judge happy, another not. As in Johnson in Lower Courts

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