Court Set to Rule on Protected Deposits

1st February 2013

With recent changes in legislation affecting the registration of deposits the Court of Appeal is set to rules whether rent paid in advance is a tenant’s deposit and therefore it should be protected by the Tenancy Deposit Scheme.

The case, Johnson V Old, surrounds a payment of six month’s rent paid by the tenant in advance, along with a separate sum which was taken as a deposit and duly protected. The landlord sought possession of the property and issued a section 21 notice to his tenant requiring possession with two month’s notice. The tenant argued that since only part of the deposit had been registered the section 21 notice was invalid.

Brighton Country Court ruled in the tenant’s favour last January but a successful appeal by the landlord subsequently had the ruling over turned saying that advance rent was not a deposit. Now the tenant has opted to take his case to the Court of Appeal.

The central issue for the court to decide must be what constitutes a deposit and whether rent in advance is a deposit which should be protected. 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 purpose of protection.

The letting industry will be holding its breath awaiting the outcome of the case, which despite being heard in early March may not have judgement for some time after.

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