First and last month advance rent instead of a Deposit?

First and last month advance rent instead of a Deposit?

9:56 AM, 10th September 2013, About 11 years ago 21

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I was talking to a friend of mine at the weekend who has one property she lets out and I asked which deposit scheme she uses.

She said she doesn’t take deposits, claiming it’s not necessary if you apply the “first and last month rent up front” method. First and last month advance rent instead of a Deposit

Although I’ve worked in the lettings industry I’ve never heard of this before – is she walking a dangerous line if she ever wanted to issue a S21 if she’s never provided any Prescribed Information, which she won’t have if she doesn’t consider it to be a deposit, or risking a punitive fine if she has a savvy tenant?

If it is acceptable, when could a S8 be used if the last month is paid in advance? If the AST goes periodic how is the last month determined?

Alternatively, is this an old practice which is now no longer acceptable and she urgently needs to be updated?

I look forward to reading your thoughts


Tilly Mint

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12:27 PM, 14th September 2013, About 11 years ago

Reply to the comment left by "Roger Lancaster" at "14/09/2013 - 10:42":

Regarding oral examinations.

The examination is not done by a judge, it is just a clerical exercise and the facts given are not checked. People lie. Therefore having any confidence in it revealing any secret off-shore bank accounts is a bit optimistic. The judgement creditor does have the option to set his own questions and they can be used to some good, but the system is far from foolproof.

lauren field

12:36 PM, 14th September 2013, About 11 years ago

Reply to the comment left by "Dave Reaney" at "10/09/2013 - 13:36":


This is an excellent post from Dave & extremely helpful, but as the solicitor points out in the blog, the case was heard at a lower court and is not a precedent. Also, I agree with him over the point in regards to section 21 notice. Had that Landlord chose to appeal the outcome may have been different.

Please refer to a similar case where taking six months’ rent up front is not a deposit, the Court of Appeal has ruled in Johnson & Ors v Old [2013] EWCA Civ 415.

Basically: the rent was expressed to be £950.00 per month, payable in advance (standard AST practice), with the first six months’ rent to be paid “up front” (also common practice for example where a tenant might have failed a credit check). When the landlord brought possession proceedings the judge at first instance threw the case out on the basis that the six months’ rent up front was a security deposit, which had not been registered and that therefore the section 21 notice was not valid. The landlord appealed and won; the tenant then appealed to the Court of Appeal, and lost.

So what does this mean, well in this case the rent in advance does not constitute a deposit

That said, it is really important to understand that all cases are different and the outcome gauged on the particular points of that individual case.

Afterall, depending on the cases individual arguments and evidence BOTH can be right. The trick is working out what applies to your own cases.

Overall, Tilly, your friend prefers to take the last and first months rent then that's fine provided she has a really well written tenancy agreement, clear receipts and both parties MUST be clear and shown to have understood what the money is being used for without exception. Meaning that the last month rent is to be used as rent and not as a deposit with reference backs to Dave's point re: dates he was absolutely correct.

There is nothing to fear by taking a security deposit as long as landlords understand the actual requirements and have a basic understanding of the law surrounding deposits and do what is necessary. You have to remember that the property is your investment. You should protect it the best you can.

By preferring to stick to guarantors, are you not limiting your tenant choice? For example, a company Director or even someone with a good job that has always paid their bills on time may very well be offended by the request for a guarantor and may not even be able to supply one.

But I understand the logic and that having one in all instances is a security net.

Also, you have to bear in mind that pursuing a guarantor has issues all of its it own and maybe expensive forcing a court to grant a warrant if they're better at you in working the system. Fortunately, the majority of consumers are not that savvy & hence guarantors usually pay up.

Roger Lancaster

21:00 PM, 14th September 2013, About 11 years ago

Reply to the comment left by "Dave Reaney" at "14/09/2013 - 12:27":

Hi David, Agree that it is by clerk rather than a judge but again in our experience the simple threat of being held criminally liable for the information they supply is enough to make our tenants and guarantors run for cover. In the main if we have done our job right as landlords and letting agents these individuals should be ones desperately concerned with preserving their status both credit wise and legal. It will be very rare cases that end up with some one lying about their assets in a court where they can be found in contempt for doing so.

15:57 PM, 16th September 2013, About 11 years ago

Having some 70 properties in my portfolio I have found that the deposit scheme is totally unworkable as it just takes too long for the deposit to be released. Because of this I don't take a deposit just charge a fee for giving over the keys (key money)
This way they get the key money when they leave. No keys, no return of money and as most renters who "bail out" don't usually stop to return the keys.
Down sides is that you cannot retain the key money for damages if they give you back the keys.
Personally the government should forget the deposit scheme and concentrate on accredited legislation to remove the unscrupulous landlords from giving the rest of us a bad name - in my area there are 3 bad landlords to every one good one.

Romain Garcin

16:29 PM, 16th September 2013, About 11 years ago

Reply to the comment left by " " at "16/09/2013 - 15:57":

Be very careful as your arrangement does sound like a deposit... Ie. money must likely be protected.
Especially, I have a feeling that this 'fee' is more higher than the actual cost of the key.

Mark Alexander - Founder of Property118

16:33 PM, 16th September 2013, About 11 years ago

Reply to the comment left by " " at "16/09/2013 - 15:57":

Hi Shaun

How can you call it a fee if it is refundable?

In my opinion, the fact that you give the money back for return of the keys and do not deduct rent arrears or damages is immaterial so far as deposit protection legislation is concerned.

Call it what you want but if you take money off a tenant which is refundable then I think you will find it is a deposit in the eyes of a judge.

If you add together the value of all the "key money fees" you are holding and then multiply that figure by four the sum total is your potential liability.

If you wish to reduce your liability back to the sum of the deposits you are holding you will need to create new tenancy agreements and enter into a Deed of Compromise or an assignment of the "chose in action" from your tenants over to you. Either of these strategies will also require you to either refund the "key money fees" or protect them in either a custodial tenancy deposit protection scheme or via an insurance based tenancy deposit protection scheme such as my|deposits.

My lawyers came up with these strategies for my family to implement as a protective measure post "Superstrike Ltd vs Rodriguez". This was because many of my tenancies had reverted to statutory periodic (now ruled to be new tenancies by the Court of Appeal) and I had not re-protected the deposits or re-issued Prescribed Information within the required 30 days of the new tenancy. The assignment of the "Chose in Action" by way of deed was considered to be the more effective option.

The above strategy could work equally effectively to get you out of the very deep hole you have managed to dig for yourself too.

If you would like me to refer you to my professional advisers please drop me an email to They've already done all the work for me so it should cost a lot less for them to be in a position to advise you.

If you don't know what a chose in action is (I didn't) see >>>

For a definition of assignment of a chose in action see >>>

Barbara Thorning

15:07 PM, 17th September 2013, About 11 years ago

Update - I relayed all the wisdom offered on here and she is going to read further on the subject herself. I said I assumed that a S8 would have to be delayed until after month three, if there was always one month in hand, by which time of course many tenants would have absconded anyway. Whether or not the last month's rent is a deposit or not seems to be decided on each individual case, so she would need to take advice on the wording in the tenancy agreement before issuing a S21. Not that she has any plans to at the moment anyway.

On the matter of any damage or repairs she said the last tenant left some stains requiring the carpets to be cleaned and so the arrangement was that they were made to move out two weeks into the final month [which in theory they had paid for] and the balance of that month's rent paid for the cleaning.

Don't shoot the messenger....

Thanks for everyone's input.

Mark Alexander - Founder of Property118

15:12 PM, 17th September 2013, About 11 years ago

Reply to the comment left by "Tilly Mint" at "17/09/2013 - 15:07":

....... "they were made to move out two weeks into the final month" ..... ??? !!!

Are we to add illegal eviction to the ever growing list of your friends ignorance?

Oh dear, oh dear, oh dear!

Barbara Thorning

15:22 PM, 17th September 2013, About 11 years ago

Reply to the comment left by "Mark Alexander" at "17/09/2013 - 15:12":

I know!!! That's why I said, "Don't shoot the messenger".

She is only one, I bet there are probably many private and/or accidental landlords who have no idea of the regulations and rules they may be breaching. Mention of the 3 x deposit amount, plus return of the original deposit did shock her. I tried.

lauren field

17:33 PM, 17th September 2013, About 11 years ago

Reply to the comment left by "Tilly Mint" at "17/09/2013 - 15:22":

Well Tilly, hopefully now you've put her straight she'll think twice... maybe

And, yes there a plenty of well meaning but novice and amateur landlords who don''t know or understand the regulations but worse are the landlords who think that they know when they actually don't and don't listen or try to understand the potential consequences of not getting it right but even worse are the letting agents who proclaim to be experts and claim "to be the leading agents" but don't actually have a clue & are using brochures and agreements they've copied off someone else, whom are also more than likely inexperienced advising newbie landlords

Still without them, I wouldn't have a job so I can't complain.

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