Court Of Appeal To Decide Whether Rent In Advance Is Deposit

Date Published 30 January 2013

The critical question of whether rent paid in advance is a tenant’s deposit is to be decided by the Court of Appeal.

The case of Johnson v Old is due before the Court in March after the tenant in the case decided to appeal.

In Johnson v Old, six months rent in advance had been paid by the tenant, along with a separate sum which was taken as a deposit and duly protected.

When the landlord sought possession of the property, the tenant argued that only part of the deposit had been registered as the rent taken in advance had constituted a deposit which had not been protected, and that the Section 21 Notice was therefore invalid.

The case was heard last January at Brighton County Court, which held that the advance rent was a deposit and that the Section 21 notice was invalid. Deputy District Judge Collins dismissed the landlord’s claim for possession and ordered the landlord to pay the tenant’s costs.

However, this judgment was overturned on an appeal last July, also in Brighton County Court, by His Honour J Simpkiss, who decided that advance rent was not a deposit. As a result, possession and costs were awarded to the landlord – and the lettings industry breathed a sigh of collective relief.

However, Shoosmiths, solicitors for the landlord, confirm that the tenant – who was refused leave to appeal at the last hearing – subsequently applied direct to the Court of Appeal, using the same arguments as before. The tenant was then given leave to appeal.

The case will now be determined by the Court of Appeal, due to sit on March 5 or 6. The judgment itself may not be released for some time afterwards.

Eamonn Hogan of Shoosmiths said that the central issue for the court will be to decide what constitutes a deposit and whether rent in advance is a deposit which should be protected.

He also revealed that the tenant is still living in the property concerned, although through agreement, and the landlord is receiving monthly payments.

The outcome of the case could also give implied or actual guidance as to the question of whether `holding deposits` paid by tenants could also be deposits for the purposes of protection – an issue that has recently been the subject of debate on this site