Landlord and tenant – Possession – Housing Act 2004 – Tenancy deposit – Appellant tenant paying deposit plus six months’ rent in advance at commencement of assured shorthold tenancy – Appellant remaining in possession at end of six-month fixed term under statutory periodic tenancy – Respondent landlords serving notice of possession under section 21 of Housing Act 1988 – Whether precluded from relying on notice by section 215 of Housing Act 2004 on ground of non-compliance with statutory requirements for protection of tenancy deposit – Whether six months’ advance rent a tenancy deposit for that purpose – Appeal dismissed
The respondent landlords let a flat to the appellant tenant under a series of six-month assured shorthold tenancies from May 2009. The rent payable under each tenancy agreement was expressed as an amount per calendar month, payable in advance. Each agreement required the payment of an initial deposit plus the first six months’ rent in advance. The appellant paid those sums to the respondents’ agent, which transferred the initial deposit into an authorised deposit protection scheme but held the rest of the funds in its account and made rent payments to the respondents out of them at monthly intervals.
The last of the tenancy agreements, dated May 2010, defined the term of the tenancy to include not only the six-month fixed term but also any statutory periodic tenancy that followed it. When the fixed term expired at the end of October 2010, the appellant remained in possession under the statutory periodic tenancy that then arose by virtue of section 5 of the Housing Act 1988.
The appellant later fell into arrears with her rent. The respondents served a notice, under section 21 of the 1988 Act, requiring her to give up possession of the flat; they then brought possession proceedings in reliance on that notice. The appellant contended that the respondents’ section 21 notice had been invalid by virtue of section 215 of the Housing Act 2004, since the respondents had not complied with the requirements of that Act regarding the protection of tenancy deposits; she contended that not only her initial deposit, but also the six months’ advance rent payment, was a tenancy deposit for those purposes.
The possession claim was dismissed by a deputy district judge, who held that an advance payment of six months’ rent, where the tenancy agreement only provided for the payment of rent monthly in advance, represented, as to five months’ rent, a security for the performance of the tenant’s obligations so as to constitute a tenancy deposit within section 212(8) of the 2004 Act. That decision was reversed by a judge on appeal. The appellant appealed.
Held: The appeal was dismissed.
Section 215 of the 2004 Act applied to prohibit the service of a valid section 21 notice where the landlord had failed to comply with the requirements of the Act regarding the protection of a tenancy deposit “paid in connection with” the tenancy on which the dwelling was then held. The payment of six months’ advance rent at the beginning of each of the earlier fixed-term tenancies related to the obligation to pay rent under that particular tenancy agreement; it was not intended to be held as security for any obligation of the tenant in respect of the statutory periodic tenancy that had arisen in November 2010 and under which the appellant held the flat at the time when the section 21 notice was served.
As to the last of the fixed-term tenancies from May 2010, the tenancy agreement, properly construed, required the first six months’ rent, for May to October 2010, to be paid in advance at or before the commencement of that tenancy. The arrangement between the respondents and their agent, whereby the agent held the advance rent and paid it over to the respondents monthly, did not affect the obligations of the parties in that regard or indicate any understanding between them that the rent was only due monthly. The parties’ obligations were to be determined by construing the tenancy agreement into which they entered, rather than by reference to later events.
In those circumstances, and on the true construction of the May 2010 tenancy agreement, the payment of six months’ advance rent had been made, at the time of payment, to discharge an existing obligation of the appellant under the tenancy agreement. Money paid in order to discharge a current liability was not paid with the intention that it be held as security for the discharge of that liability. The payer’s intention was that the liability would be discharged by the payment itself, so that there was no need to provide security for the discharge of the liability in future. Moreover, the parties must have intended that, by November 2010, the whole of the six months’ advance rent paid at the start of the May 2010 tenancy would have been applied in the discharge of the rent payable under the fixed-term tenancy. They would not have contemplated that any part of that sum would remain to be available as security for obligations arising on or after 1 November 2010. For those reasons, no part of the six months’ advance rent paid at the commencement of the May 2010 tenancy had been paid with the intention of securing the tenant’s liability to pay rent or perform any other obligation under the statutory periodic tenancy that arose in November 2010.
Consequently, no part of the six months’ advance rent paid to the respondents at the commencement of the May 2010 tenancy had been paid with the intention that it be held by the respondents, or by their agent or anyone else, as security for the performance of any obligations of the tenant, or as security for the discharge any liability of the tenant, arising under or in connection with the relevant tenancy.
Since the payment of six months’ rent was not intended to be held as security for the performance of any liabilities of the tenant arising under or in connection with the tenancy to which the section 21 notice related, section 212(8) of the 2004 Act did not preclude the respondents from relying on that notice in seeking possession.
Liz Davies (instructed by Brighton Housing Trust) appeared for the appellant; James Browne (instructed by Access Legal) appeared for the respondents.
Sally Dobson, barrister
