The Johnson v Old appeal was in three parts: first looking at whether the tenancy agreement required the tenant to pay six months rent in advance.
The appeal judges maintained that it was correct to hold that, read as a whole, the May 2010 tenancy agreement between Johnson and Old did require that the first six months’ rent be paid in advance on or before May 1, 2010.
The judgement went on to point out that there are various ways of dealing with the perceived risk that a tenant whose credit references may be inadequate will not pay their rent month by month – one of which is to require payment of the rent ‘up-front’.
The fact that a landlord chooses to deal with any risk in this way (rather than taking a guarantee or a rent deposit, for example) is no reason for refusing to give effect to the terms of the tenancy agreement.
The second ground for the appeal was the allegation by Ms Old that the payment was actually a ‘security’ or deposit.
The Appeal Judges did not accept this argument either, stating that money paid in order to discharge a current liability is payment of that liability and not security. The liability is discharged by the payment itself, so there can be no need to provide security for the discharge of that liability in future.
The third ground of appeal was that the landlord had failed to comply with the tenancy deposit regulations with respect to the payment.
However, as the court had already held that this was not a deposit, there was no need to consider this.
So the landlord won, and the threat of having to pay back 18 months’ worth of rent to the tenant plus a penalty of up to three times that sum was removed – not just from Mr Johnson but for all landlords in future.
However, what this case does show is that landlords and their agents need to take care when drafting their tenancy agreements. We weren’t involved in drafting the original tenancy agreements in this case, but if it had it been a bit clearer, this litigation could probably have been avoided.
Tenancy agreements do need to be written so that ordinary people will be able to work out what they mean, but it's essential that they are also legally and linguistically precise so there is no room for misinterpretation of misunderstanding.
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