Rent in Advance Can be a Deposit
Piggott V Slaven Great Grimsby County Court, 23 February 2009
Mr Piggott granted a tenancy to Ms Slaven in 2005.
She paid a deposit of £600.00 for this tenancy. On 14 February 2008, another tenancy was granted for a different property. £75.00 from the earlier deposit was repaid to Ms Slaven, and Mr Piggott held the balance of £525.00.
He said that £105.00 was for the first week's rent and £420.00 was "rent in advance".
On 24 June 2008, Mr Piggott served a section 21 notice requiring possession on 27 August 2008.
Possession proceedings were commenced, and Ms Slaven defended those proceedings contending that the £420.00 was a deposit and the landlord had failed to protect the deposit as required by s.213 Housing Act 2004.
If that was the case, the landlord could not serve a section 21 notice at any time the deposit was not protected (or prescribed information given), and the notice was therefore invalid (s.215 Housing Act 2004).
She also counterclaimed an order for Mr Piggott to pay three times the deposit.
After referring to s.212(8), District Judge Richardson held that whether money is to be held as security is to be judged objectively.
It would be contrary to the Act's purpose to allow landlords to avoid its consequences by stating that they did not intend to hold money as a security.
He found that the sum of £420 was not paid as rent in advance but was intended to afford Mr Piggott security should Ms Slaven breach any future obligations to pay rent under the tenancy agreement.
It was accordingly a 'tenancy deposit' for s212(8). It had not been dealt with following an authorised scheme, as required by s213.
He dismissed the possession claim and ordered Mr Piggott to pay £1260 within 14 days.
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Deposits and Tenancy Deposit Schemes
Many landlords take a deposit from tenants to hold for the duration of the tenancy. When the tenant moves out, this is returned to the tenant less any deductions permitted: typically for damage (above fair wear and tear), additional cleaning, and cover any outstanding rent. Note: deposits can only be withheld if stipulated what the deposit is being held against in the contract.