Landlord and tenant – Assured tenancy – Deposit – Defendant holding assured tenancy of flat owned by claimant – Claimant purporting to return defendant’s deposit prior to giving notice under section 21 of Housing Act 1988 – District judge making order for possession of premises against defendant – Defendant appealing – Whether delivery of cheque, not cashed by tenant, constituting return of deposit – Appeal allowed
The claimant owned a property known as Flat G, 94 Hornsey Lane, London, N6.
The defendant had held an assured shorthold tenancy of the flat for many years. A written tenancy agreement recorded the rent as £780 per month and a deposit payable in the sum of £780. It required the deposit to be paid on the date on signature of the agreement together with the first month’s rent. The tenancy would end if and when an order for possession was executed.
On 12 August 2022, the landlord presented a claim for possession of the property to the county court. The defendant confirmed that he had received a notice under section 21 of the Housing Act 1988 on 7 May 2022.
He also confirmed that he had received a cheque tendered earlier by the claimant in the sum of his original deposit but had not cashed it.
Section 215(1), (1A) and (2) of the Housing Act 2004 prevented a landlord from giving a section 21 notice until the tenancy deposit requirements were complied with. But those sanctions were lifted where the deposit had been returned in full before the giving of a section 21 notice: section 215(2A)(a).
A district judge made an order for possession of the property against the defendant. The defendant appealed, contending that the judge wrongly held that the defendant’s tenancy deposit had been returned to him within the meaning of section 215(2A)(a) where a cheque had been provided to the defendant, but not cashed.
Held: The appeal was allowed.
(1) In the statutory context in which it was used, the term “returned” in section 215(2A)(a) could not sensibly mean returning only the precise cash, or the original cheque or postal order, by which the deposit was first (perhaps many years ago) paid. It had to mean, in the context of the language used by the rest of the Part 6 Chapter 4 of the 2004 Act, the return of the amount of money that the tenant had first paid or given and that the landlord had originally received: Superstrike Ltd v Rodrigues [2013] 2 EGLR 91; [2013] EGILR 18 considered.
The judge was wrong to hold that any special or different approach was to be taken to the word “returned” as distinct from the use of the words “repaid” or “given back” or even “reimbursed”.
They all meant the same thing. To the extent that the judge drew any material distinction, she was in error.
(2) The dispute narrowed down to whether a deposit could ever be returned or repaid by cheque, in circumstances where it was not (for whatever reason) encashed or credited to the tenant’s account. The first step was to consider whether the law had, in any context, recognised that a payment or repayment of a sum might be made by the delivery of a cheque which had not in fact been encashed or credited on presentation to a bank.
Earlier authorities established that a payment, and a repayment, might be made by cheque either because of express agreement to accept payment by cheque or of the imputation of agreement by the absence of rejection within a reasonable time from receipt.
Further, if presented and honoured, the date of payment was the date of delivery of the cheque to the holder. Applying Day v Coltrane [2003] 2 EGLR 21; [2003] 2 EGLR 21, the sum due to be paid or repaid was treated as “paid”, even if the cheque was not yet presented to a bank by the material date on which payment or repayment fell to be tested: Felix Hadley & Co v Hadley [1898] 2 Ch 681, Marreco v Richardson [1908] 2 KB 584 and Homes v Smith [2000] Lloyds LR 139 considered.
A tenant might or might not be bound to accept a payment tendered by cheque. That depended on the facts. A failure to reject a cheque might be taken as an implied acceptance of satisfaction with payment by it.
Whether such time had passed as to amount to implied acceptance would depend on the facts and circumstances.
(3) If the cheque was simply not presented to a bank, that might not disable the landlord from reliance upon it. If a tenant, having expressly or impliedly agreed to accept payment by a cheque, simply tore up one properly tendered or sent it back, that too might not disable the landlord from reliance upon it as having achieved a repayment or “return” of the deposit.
It followed that there might be circumstances in which a landlord could be found to have returned a deposit by the delivery of a cheque for the full amount even if: (i) the cheque had not been presented to a bank by the tenant before a section 21 notice was served; and (ii) the cheque was not presented by the date by which it would have been honoured. The result in a particular case would need to be determined by the particular facts.
(4) In the absence of some prior express or implied agreement to accept payments by cheque, “non-communication of non-acceptance” after delivery might be properly considered by a trial judge as a relevant ingredient in determining whether a tenant was to be treated as having agreed to accept payment, or repayment, by cheque.
In this case, even if the judge correctly directed herself that a deposit could be returned by presentation to the tenant of a landlord’s cheque, followed by a reasonable period of non-communication of rejection of payment by cheque, her finding that there was such return in the present case could not stand.
If she had correctly directed herself to the question of whether the defendant had impliedly accepted payment by cheque, given the expiry of a reasonable period after its having come to his attention, it was difficult to see how the judge, on the sparse material she had, could have determined that question.
Further, she had no material on which to find that had the defendant presented the cheque within a reasonable period after accepting it (or being expressly or impliedly bound to accept it) it would have been honoured.
Mark Warwick KC (instructed by Bude Nathan Iwanier LLP) appeared for the claimant; Liz Davies KC and Angharad Monk (instructed by Hodge, Jones & Allen) appeared for the defendant.
Eileen O’Grady, barrister
