Are advance payments of rent caught by the Tenancy Deposit Scheme rules?

The short answer is in most cases probably not and I was a little surprised to find that this had been argued all the way to the Court of Appeal in Johnson and others v Old.

The claim arose after the tenant in this case had fallen behind with the rent and the landlord sought possession under section 21 of the Housing Act 1988. The tenancy had become a statutory periodic tenancy following on from several fixed term tenancies which had provided for payment by the tenant of both a fixed deposit sum and an advance payments of rent well in excess of the usual monthly payments in most agreements.

The Tenancy Deposit Scheme provisions of the Housing Act 2004 provide that where a landlord receives payment by the tenant of a sum of money intended to be held as security for the performance of the tenants obligations or discharging any liability of the tenant under the tenancy. Regular readers will remember that if a deposit is not protected then the landlord cannot rely upon any s21 noticed served.

In this case the landlord had protected the deposit element but it had been argued that the landlord ought to have also have protected the advance rent payments as well. The tenant had success with this argument at first instance, despite in my view the fact that the advance rent payment was not security for the performance of the tenants obligations but the actual performance of those obligations.

On appeal the judge went on to overturn the original decision and upon further appeal to the Court of Appeal, the tenant was defeated again. Relief for landlords that advance rental payments shouldn’t attract the requirement to register them in a scheme but there USA warning that the obligations of the tenancy need to be look at as a whole so it isn’t a hard and fast rule.

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