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02/11/2021

There’s a cheque on the table – s.21 and return of deposit

Gul v Bilal, Stratford Hearing Centre, 18 October 2021 (unreported. We’ve seen a note of hearing).

A County Court decision on a landlord’s application which adds to the not uncomplicated history of decisions on when a tenancy deposit counts as returned to the tenant for the purposes of s.215(2A) Housing Act 2004. (Previous cases here, here, and here). As a County Court decision, this is not binding, of course.

Mr G had brought a possession claim against Mr B in January 2020 on grounds 8, 10 and 11 (rent arrears). This had been met with a defence and counterclaim for, as far as I can tell, disrepair and penalty for breach of deposit requirements – an unprotected deposit. The proceedings had been caught by the PD 55C stay and a reactivation notice was filed in February 2021. The matter was then listed for a directions hearing, which was this hearing.

In the meantime, in June 2021, Mr G served a section 21 notice, and then, just over a week before this hearing (shortly after the expiry of the s.21 notice period), apparently made an application to be able to rely on the section 21 notice for a possession order at this hearing. (Unsurprisingly, the application had not made its way to the Court file.)

In support of the application, and the unsurprisingly contested validity of the section 21 notice, Mr G asserted that the deposit had been repaid to Mr B in January 2020, when he had attended the property with Mr B present and left a cheque for the deposit on the kitchen table. This was common ground, however, Mr B pointed out he had not accepted the cheque, didn’t want the deposit returned and had never cashed it. Mr G accepted that the cheque had never been cashed.

So, the question was did leaving a cheque with the tenant count as returning the deposit?

Mr Gul was represented by an ‘advocate’. It is fair to say he was not ready to engage with this issue (or indeed with anything apart from asking for a possession order, as will become clear).

Mr B’s counsel raised Chalmiston Properties Ltd v Boudia (our note) and Coltrane v Day (2003) EWCA Civ 342 – a ground 8 possession case – to the effect that a) the deposit had to have been received by the tenant before the service of the s.21 notice, and b) that a cheque did not represent payment unless accepted and then not until it was paid (although the payment date would then count as the date the cheque was given). As the cheque had not been accepted and not been paid, the deposit had not been returned.

The DDJ agreed and dismissed the application to amend to include section 21 on the basis that the amended claim had no prospects of success.

The claim was then given directions to trial of claim and counterclaim, on Mr B’s proposed directions, as the ‘advocate’ for Mr G had not prepared any directions.

Costs of the application and of the directions hearing awarded to Mr B, the latter on the basis that Mr G had made a last minute application to amend, failed to consider or agree directions, and failed to attend prepared for anything except a possession order.

Our thanks to Haroon Sarwar of TV Edwards for the note of hearing.

Comment

This decision, although non-binding, does rather leave Yeomans v Newell (our note) as something of the outlier on when a deposit is returned to the tenant. The general view appears to be that the deposit must not just be available to the tenant, or ‘on its way’ but received by the tenant before a s.21 can be served, if the deposit was not protected,

That said, Coltrane does raise the possibility that a landlord could hand a tenant a cheque, then serve a section 21, and if the tenant subsequently presented the cheque and it was paid, the s.21 would be valid as payment would count as of the delivering of the cheque. This would, it should go without saying, not be a tactic that any landlord should rely upon…

(Addendum – I’ve been referred to Lingfield Point No 2 Limited v Hodgson, High Court (Queen’s Bench Division), Sheffield District Registry, 30 July 2015. This was a permission to appeal decision refusing permission to appeal from a County Court judgment that delivering a cheque counted as repayment of the deposit, where the deposit had been paid by cheque in the first place. But this was a permission decision, so not in itself an authority for anything, and I can’t see that Coltrane was argued or part of the ratio. So I’m not convinced that goes anywhere except being another counterpoint on an unsettled issue.)

 

 

 

 

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.

11 Comments

  1. Arfan Bhatti

    Well this does now require a higher court to decide (or government clarification) how far does the LL have to go to return deposit.

    If the tenant accepts chq but doesn’t cash it, this would mean, barring direct payment made by other means and confirmation of the same, invalid s21.

    I mean not an insurmountable issue but can see some processes agents etc use for return of deposits need to be amended.

    Reply
    • Giles Peaker

      I think if the tenant has expressly accepted the cheque (eg, signed a receipt or such like) the position is a bit different. From Coltrane at 11:

      An uncleared cheque delivered to the landlord or his agent at or before the hearing and which is accepted by him, or which he is bound by earlier agreement to accept, is to be treated as payment at the date of delivery provided the cheque is subsequently paid on first presentation.

      The question is whether acceptance then implies an intention to present the cheque for payment, which I think it would. Consider it this way – could a landlord pursue ground 8 where a tenant had made a payment by cheque which the landlord had accepted, but then not cashed?

      Reply
  2. John-Paul Keates

    That represents a significant evolution in the treatment of cheques, and I suspect it might be wrong.

    A cheque isn’t simply a promise to pay someone some money, it’s an absolute commitment, which can’t be undone. I’d suggest that it’s one of the reasons that cheques still exist at all (the commitment aspect, not the use for returning deposits.)

    And it does mean that not protecting the deposit correctly can be fatal to a section 21, while not serving the Prescribed Information isn’t – which seems odd.

    Reply
    • Giles Peaker

      The decision appears to be in line with Coltrane, which itself contained a review of precedent on treatments of cheques. And a cheque might be a commitment, but is not payment until it is paid (albeit then retrospectively to date of delivery of the cheque). And it requires acceptance, express or by conduct. Even Lingfield Point made clear that the tenant had paid the deposit by cheque, so could not object to its return by that means.

      Reply
  3. Ben Reeve-Lewis

    18 Months ago I was assisting a tenant in Edmonton CC on a similar issue that went thus:-
    Judge: has the landlord given y9u a cheque to return the deposit?
    Tenant: Yes
    Judge: did you cash it?
    Tenant: No
    Judge:…..then CASH IT

    Reply
    • Giles Peaker

      There are a number of things in play, like ‘accepting’ the cheque. But HA 2004 is clear on deposit having been returned, not potentially returned assuming there is enough in the landlord’s account at the time to clear the cheque. But there are varied views on cheques. So, higher courts beckon…

      Reply
      • Sam

        That is the tricky bit. How do you know that there is sufficient funds in the landlord’s bank until the cheque is presented? On the other hand, very unattractive for a cheque to be given to a tenant who chooses not to cash it to gain an advantage given the alternative may only otherwise be lots of £20 notes (if bank details not given).

        Reply
        • Giles Peaker

          I do think tenant accepting the cheque is an element – as per Coltrane. Agree it would be hard for a tenant to rely on not having cashed the cheque if they had accepted it (as was not the case here).

  4. TS

    Appreciate the issue here is expressly cheques but could the same principal apply if the Landlord offers to return the money by cash or direct payment but it is refused by the tenant?

    Just thinking that could then end in a situation where the Landlord is unable to rectify the non-protection of deposit error if the tenant simply refuses all efforts to return the money (other than it going to court mind).

    Reply
    • Giles Peaker

      Landlord makes direct payment, deposit is returned. Landlord gives tenant cash, deposit is returned. I don’t think there is any issue there.

      Reply
      • TS

        Excellent thank you for clarifying.

        Reply

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  1. Housing Law Update 30 November 2021 | William Flack Blog - […] In this County Court case it was held that a deposit is not treated as having been returned where…

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