It's not a deposit, honest

With thanks to Christopher Stockdale at John Barkers of Grimsby, we have had news of another Shorthold Assured Tenancy deposit case, Piggott v Slaven, Great Grimsby County Court 23 February 2009.

This one is of particular interest as the issue at stake was whether there was deposit at all, or just an advance payment of rent. There are a couple of side issues – one on transfer of deposit from one tenancy to another and the other on technical validity of notice. This is a County Court decision by a District Judge, so no precedents set, but the logic on the deposit question looks good to me.

The facts were that Ms Slaven had signed a six months AST on 14 Feb 08 at a weekly rent of £105 to be paid weekly in advance. On 24 June 08 the landlord, Mr Piggott served notice under s.21 (stated as s.21(1)(b)) with possession required on 27 August. An accelerated possession claim was issued on 9 September.

Before taking this tenancy, Ms Slaven was the tenant of another property at which her landlord was also Mr Piggott. A deposit of £600 was paid by Ms Slaven to Mr Piggott for that tenancy in April 2005. Ms Slaven defended on the basis that this £600 had been retained by Mr Piggott as deposit for the tenancy of the new property (there being no interruption between the tenancies) and that this deposit has not been put in a scheme, therefore the s.21 notice was invalid, or of no effect. Ms Slaven claimed the 3 x deposit penalty.

Mr Piggott said that the money was taken as advance rent and was therefore not a deposit so the HA 2004 provisions did not apply and the s.21 notice was valid.

At hearing, there was dispute over the amount of money and whether or not it was a deposit. The DJ found that there had been an amount of £525 taken by Mr Piggott, which had been described as advance rent.

On the deposit issue, the DJ noted that s.212(8) HA 2004 describes a deposit as meaning:
Any money intended to be held (by the landlord or otherwise) as security for –
(a) the performance of any obligations of the tenant, or
(b) the discharge of any liability of his arising under or in connection with the tenancy.

On ‘intended’ there is no indication in HA 2004 whether this is an objective or subjective test. But in view of the policy aim of protecting the tenant, it was surely not intended that the LL could avoid the scheme simply by saying that he did not intend to hold the money as security.

In the present case, any money over the first week’s rent was clearly being held as security against any potential future breach of rent liability, or other condition, by Mr Piggott, as it was not set off against the first five weeks rent liability. It was therefore, objectively, intended to be a security and was a deposit.

The deposit had not been put in a scheme as per s.213(1) and (6) HA 2004, and, by s.215(1) the s.21 Notice was not valid. 3 x deposit payment ordered and the return or protection of the deposit.

Arguably then, any money from the tenant held by the landlord over and above the immediate payments of rent due is construable as a deposit, where the landlord has not clearly indicated that it will not be used in relation to any breach of tenancy condition or tenant liability.

It is interesting to note that there is no issue at all about the deposit being ‘new’ and caught by the scheme, although no money had physically been given to Mr Piggott by Ms Slaven at or around the beginning of the tenancy (in fact he had returned £75 to her at the time). However, as this was a different property, it is not quite the same situation as a ‘renewed’ tenancy of the same property.

There was also an issue over the validity of the s.21 notice, which was in form 21(1)(b) when, it was alleged, it should have been in form 21(4). The DJ decided there was no need to find on this, but ‘would have taken a lot of persuading’ that the technical fault was important, when ‘the intention of the party serving the notice was clear to the party receiving it’. Call me an old pedant, but the technical requirements are just that and shouldn’t be waved away on the basis that ‘everyone knew what it meant’. But, as ever, one has to convince the particular DJ on the day.

[For all tenancy deposit case posts click here]

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Assured Shorthold tenancy, Deposits, Housing law - All and tagged , , , .

12 Comments

    • If the ‘two months in advance’ isn’t used in whole to cover the first two months rent, then yes. Anything held over rent due could fall under this. Although perhaps if it was for a specific purpose (last month’s rent, say) and could not be used for anything else, there may be an argument.

    • If it clearly is just a matter of the timing of payment rather than a security, then that’s probably OK. 2 months in advance would mean no payment in the last 2 months of the tenancy.

      But that would make it essentially useless as a deposit against tenant damage.

    • Exactly, advance of rent against specified periods (say month 1 and month 6) is probably OK, but could ONLY be used for EXACTLY that purpose. If used against any other default on rent due or is potentially being held against some putative default of rent, let alone anything else in breach of tenant’s conditions (damage etc.) = deposit.

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  4. I would be interested to know what costs orders are being made in S213 claims. In view of the fact the HMCS guidance is that these claims must be issued as Part 8 claims, and as Part 8 claims are treated as multi-track, what amounts are being awarded against the losing party? It will be a risky business for a tenant to pursue a S213 claim if the result could be a costs order against them for hundreds of pounds.

    • I’m not sure, Suzanne. I have heard of a few claims that have been lost following late (post issue) compliance by the landlord where the claimant tenant has still been awarded their costs of issue and no costs awarded against them, presumably on the basis that the claim was validly issued. But I take it that this is at the discretion of the individual court.

      Still, I think that here is a good chance this line would be followed, at least where there was post issue compliance by the landlord. If the tenant has issued on spurious grounds, though, or if the facts are disputed, the claim will most likely be knocked out of part 8 and re-allocated – probably to to Small Claims if under £5K, so the costs risk would be limited.

  5. I’ve just been directed to this as providing some sort of general precedent, but it doesn’t.

    The point here was that the agreement was for a rent paid weekly in advance, so anything extra held was treated as a deposit. But if the ASTA clearly says that rent is to be paid two months in advance, then the situation is different and there is nothing being held as a deposit.

  6. Peter, you were directed to this as a general precedent for what?

    You are right on the two months in advance, but only as long as no money is held over, so two months rent in advance means the next rent payment is in two months time. If however, the next rent payment is after one month, then there is a month worth of money being held over by the LL. Absent a specified and limited use for this payment (say for rent for month 6), it is likely to be construed as a deposit.

    But this isn’t a precedent, of course, it is a county court case, so not binding. The logic is clear though and I would be surprised if it wasn’t adopted by other courts.

  7. I charge 2 month’s rent in advance. I don’t charge a deposit as I can’t be bothered with the hassle of registering it. I specify that one month’s rent is for the present month. The other month’s rent is for the last month of the tenancy. Therefore, I don’t expect the tenant to pay any rent at the start of the last month – as he has already paid it.
    This arrangement protects me against the tenant leaving with rent unpaid, but not against tenant damage. Since my tenants never do significant damage and since I’ve only once in 30 years letting retained part of a deposit (and that was by agreement), this arrangement works satisfactorily for me.

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