Landlord and tenant – Assured shorthold tenancy – Deposit – Claimant flat-sharers seeking order penalising defendant landlord for failing to protect deposit at point of change which brought them into flat – District judge dismissing claim – Claimants appealing – Whether defendant required to protect tenancy deposit afresh under Housing Act 2004 at each change bringing new sharer into flat – Appeal allowed
The defendant landlord owned a three-bedroomed flat at 34 Sunderland Avenue, Maida Vale, London. In June 2004, he let the flat under a written assured shorthold tenancy agreement to four individual joint tenants. He took a deposit of £1,745 at the grant of the tenancy. The weekly rent was £349 and the deposit represented the equivalent of five weeks’ rent. At that time, there was no obligation on landlords to protect such deposits and it was not protected. Making deductions for breakages, etc, the defendant continued to hold a balance from the original deposit in the sum of £1,205.
The tenancy was essentially a “flat share”. The tenants made arrangements themselves for substitutions of occupiers from time to time. As individuals chose to move out, they would find a replacement who paid to the outgoing person a share of the deposit still held. The occupiers of the flat would decide between themselves who lived in which room and how much each should contribute towards the rent, which one of them would collect and pay to the landlord.
The consequence and legal effect of those changes were considered by the court when two relatively recent flat sharers applied for an order penalising the defendant for failing to protect their deposit at the point of the particular change which brought them into the flat. They argued that each change was a surrender and regrant so that section 214 of the Housing Act 2004 required the deposit to be protected. Therefore, the court was compelled by section 214(4) to impose a penalty of not less than the amount of the deposit and not more than three times that amount.
The district judge dismissed the claim but the claimants appealed.
Held: The appeal was allowed.
(1) The normal hallmarks of a tenancy were exclusive occupation, for a term, at a rent. There was no dispute that rent was sought and accepted in respect of the flat from those in occupation for the time being. The regular monetary payment was described as rent by all parties. The payee knew and accepted that it was being tendered by one on behalf of all in respect of the whole. Over time, it had increased from that originally sought from the initial tenants. Nothing was payable in respect of services. The obvious inference from the undisputed facts was that there was a monthly periodic tenancy. Moreover, the permitted occupiers collectively enjoyed exclusive possession of the flat to the exclusion of the defendant and anyone else.
The three necessary indicia all being in place, and there being nothing special or unusual in the nature of the arrangements between the parties, the court was driven inexorably to the conclusion that the occupiers were tenants, not licensees. There was no basis upon which the judge could properly have found otherwise than that the relationship between the occupiers and the owner was that of landlord and tenant.
(2) Having been told that an outgoing tenant had departed and a replacement installed, a landlord was thereafter fixed, by its conduct, with the new incumbent by surrender and regrant. The landlord’s acceptance of the new set up amounted to a completion of the process of surrender and regrant even where it had not known of the switch of occupiers when or before it took place. The authorities on surrender were infused by the concept of estoppel, ie, the landlord who had acted consistently with the termination of a tenancy and the acceptance of a new tenancy could not later resile. In the current context, it would be absurd to think that the defendant could insist that an individual who was a joint tenant before a change, and had left after it, was still a tenant even though he was accepting rent that he knew (or could be taken to have known) was being tendered on behalf of a new group: Tower Hamlets v Ayinde [1994] 26 HLR 631 and Sable v QFS Scaffolding Ltd [2010] EWCA Civ 682; [2010] PLSCS 166 followed.
(3) There could be circumstances in which the deposit taken at the inception of an original tenancy was treated as paid (again) and received (again) when a new tenancy followed immediately from an earlier one. Where a landlord had entered into a construct by which, at his own design, there was a single initial payment of a deposit and thereafter a change in the identities of tenants, he had to be treated as having been “paid”, by each new cohort, the amount held in respect of the original cohort and each subsequent cohort. Therefore, even though the replacement tenants did not pay their deposit to the defendant, they should be treated as having done so: Superstrike Ltd v Rodrigues [2013] 2 EGLR 91; [2013] EGILR 18 followed.
(4) On the question of the statutory penalty for failing to protect the deposit and the appropriate multiplier, following the guidance in Okadigbo v Chan [2014] EWHC 4729 (QB), the factors that were particularly attracting of weight in that exercise were: the deposit was first taken at a time when deposits did not require protection; the deposit had been retained, was still available and could now be protected; the defendant had not subsequently protected it because he believed that the informal nature of the changes did not require him to do so; those informal arrangements contained a method of ensuring each outgoing tenant received reimbursement of their share of the deposit from their replacement; and the defendant’s evidence, and the undertaking given that, if the claim succeeded, he would promptly take the steps necessary to protect the deposit which he had retained over 15 years.
Those features, and the other circumstances of this case, put this right at the bottom end of landlord “culpability”. Imposing any multiplier more than one times the deposit would be unjust. Accordingly, there would be judgment for the claimants in the sum of £3,615 (£1,205 in respect of each of the three changes which produced a new tenancy to which they were in turn either or both parties).
Winston Jacob (of counsel) appeared for the claimants; Georgia Purnell (of counsel) appeared for the first defendant; the second and fourth defendants appeared in person; the third defendant did not appear and was not represented.
Eileen O’Grady, barrister
Click here to read a transcript of Sturgiss and another v Boddy and others
