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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Industry Observer

9:38 AM, 3rd May 2013, About 10 years ago

Oops forgot to paste after copying!!


RENT £1000.00p per calendar month and the rent payable during this tenancy or any continuation or renewal thereof shall never be less than this figure unless the Landlord agrees to any such reduced figure.

Rent is payable in advance and the Rent Payment date is mutually agreed to be the day of each calendar month
and the first payment (or proportionate part) is to be made on or before the signing of this agreement. Subsequent monthly payments must be received by the agent in cleared funds on or before the date in the month stated immediately above.


For a 6 monthly rental period all paid up front and LL doesn’t mind if tenancy goes periodic
I repeat on a 6 month tenancy £1000 a month £6000 paid up front make the tenancy 7 months 1.1.13 to 31.7.13. State the £6000 covers 1.1.13 to 30.6.13 rent is £1000 for 1.7.13 to 31.7.13 and £1000 monthly thereafter payable 1st monthly.
This enables the tenancy to go statutory periodic but with monthly rent so 2 month 21(4)(a) can safely be served


If LL is very time sensitive and does not want the tenancy to roll over, just state rent is £6000 for the period 1.1.13 to 30.6.13 make no mention of monthly payments and serve s21(1)(b) soon as any deposit has been protected. If tenant does linger then a contractual periodic is in force, notice has already been served and almost expired and rent is due on a daily basis until vacant possession achieved.

Robert M

10:48 AM, 3rd May 2013, About 10 years ago

I would want to think about drafting an agreement with up front loaded rent payments where there was any question of going periodic. I am sure it is possible to do so and meet Johnson v Old requirements. However the agreements I am talking about are all strictly fixed term, which I think makes the position much more clear.

Industry Observer

11:10 AM, 3rd May 2013, About 10 years ago

Agreed Robert and I can assure you the system I posted does work.

I understand your point - but all tenancies can and will of course go periodic if the tenants don' vacate. However in your student cases as you have said before I am sure they usually do.

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