The Court of Appeal decision in the Johnson v Old case is unquestionably good news for landlords and agents, the winning legal team has said.
It has also emerged that hundreds of landlords may have held off serving Section 21 notices pending the outcome of the case.
One firm alone, Landlord Action, has 200 clients who were in this position.
Paul Shamplina, of Landlord Action, said they had been nervous about initiating action for possession. He said: “The outcome of this case is great news for landlords. They can now go ahead with confidence, knowing where they stand.
“We receive calls to our helpline daily regarding the holding of deposits and advance rents stated on many tenancy agreements. We are very pleased at the ruling and feel it will provide a much needed boost of confidence.”
Shoosmiths represented the landlord and its view on the complicated case comes after considerable debate on LAT as to whether the court ruling really did clarify whether rent in advance should, or should not, be treated as a deposit.
Linda Howard, from Shoosmith Access Legal’s team, managed the case all the way through to the Court of Appeal and says the judgement does clarify what was a potential loophole in the law that could have been very bad news for landlords.
The leading judgment was made by Sir John Chadwick at the Court of Appeal, upholding the decision of HHJ Simkiss, “much to the relief of landlords everywhere”, says Howard.
She said: “We’re delighted with this result. The Court of Appeal has applied a bit of common sense in this case. Lots of landlords take payments up front from tenants who fail referencing. If these payments were all at risk of being treated as a deposit, all sorts of problem would ensue.”
However, she added: “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.”
The case stemmed from an initial decision by a District Judge that successive payments of six months rent up-front made by Ms Old, the tenant, were in reality deposits.
As the landlord had failed to protect them, this prevented Mr Johnson, the landlord, from being able to serve a valid Section 21 notice.
The matter then went to appeal on July 31, 2012, where the decision was overturned by His Honour Judge Simkiss, saying that the payment was rent and not a security.
Ms Old then secured legal aid which allowed her to take that decision to the Court of Appeal – which ruled in the landlord’s favour.
The Shoosmiths’ blog goes into the case in some detail, and can be read on this site today.
For those who want to read the entire transcript of the case, here is the link:
http://www.bailii.org/ew/cases/EWCA/Civ/2013/415.html
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Comments
It appears that in this case there was a dispute as to whether the deposit money was actually a deposit or ‘future rent’ as alleged by the landlord. The Judge decided that the regulations say that any money paid (although in this case it was money from a former deposit paid to the same landlord in respect of a previous property) will be deemed to be paid as security, and therefore will be covered by the tenancy deposit regulations.
I can work out what May is saying but is it possible for you to give a straight answer that leaves out all the linguistic detritus that is preventing me from understanding anything you are typing?
Your POV is very clear to you but all this song title lyric cleverness is masking any point you are trying to get across (yes your posts could be clearer) I can’t see you have answered any but one of his questions. They are not unreasonable questions even if he is using them to turn your posts back on you. Your failure to respond with anything other than more clever retorts simply lets us all conclude he is right even though it is way above my comprehension to know for sure.
You are obviously the bloke that disagrees with anything that IO posts but as both Robert May and IO are trying hard to debate this when others are avoiding the subject altogether, perhaps others feel unable to post for fear of your antagonistic posts.
For what it’s worth someone with authority ought to try to understand what May is trying to convey, it might be he is shouting Wolf but if there is one in the field it won’t be him who suffers.
Good for him that he won’t shut up when it is obvious you want him to, he is posting under his own name and has obvious conviction to this. On here that is a brave/stupid thing to do. Reading his resume that I am guessing you described as “a good CV” I don’t think he can be stupid.
Brother, I don't think what I just posted could have been more clearer so I'm going to let someone else cut in because your two left feet are killing me!
This bit about you being optimisitic, would you like to explain how you think the public are going to react to this positive news. On a scale 0-10, 0 being ignorant or oblivious to the fact there was ever a case let alone an appeal, 10 be overjoyed, where do you think public opinion will be?
In our other discussion it was you who doubted whether any improvement in standards within the industry was possible without legislation, here is a bit of legislation which you and others are claiming to be positive news. Given that J Public don't really lose out if an agent can not serve the appropriate Section 21 notice can you explain what is positive about this case.
We established you don't condone Agents who misuse client or tenant monies yet you see legislation that helps facilitate such misuse as good news. That is just confusing.
You can dance around the issue with fancy words and phrases, I will even let you claim to be Mr Glass Half Full but you have yet to explain how this clarification which has created the potential for an unprotected pot of money will help steer those tempted/forced by circumstance to do wrong with Client and Tenant monies away from doing just that.
The appeal court judges looked at the law pertaining the case and and ruled on it, that's their legal jurisdiction and so to expect them to consider every single possible impact of their ruling and let that affect their decision is fantastically inane.
This case was decided by our peers and jurisprudence dictates they cannot sway a legal decision based on the facts before them because of the possible actions of some who may choose to manipulate it for their own purpose, it just doesn't work that way. It's often argued that guns aren't dangerous but rather those who use them, see where I'm going with this…
Questions about 'agents using client money for whatever purpose', 'situations beyond their control', 'holes in their account they can't explain' and back to 'unauthorised use of client cash', jeez, careful how you swing the bat Rob. Listen, whatever the reason I doubt very much that when asked to explain 'discrepancies' that using this ruling as a defence is the way to go, you just can't mitigate that, just as you can't proclaim faith in agents ability for self improvement only to predicate a case based on their potential to do the opposite. Perhaps your faith will out but I think your driving of fumes there buddy.
Maybe I'm a glass half full kind of guy but this decision has to be a positive for the industry, at the very least for common sense. In an era of anti-agent mentality where its apparently cool to bandy about the word 'Shelter' you would look to strike this victory from the books on account that our 'Minority Report' says we 'could' be cheats! By all means take solace in your epiphany but you might want to sprinkle a little of that perspective...
You might have gotten the point but there are 3 appeal court judges who didn't even give it a thought.
Last week you doubted standards can be improved from within and here you are albeit just 1 person who now agrees that there is potentially lucrative loophole created by this case law.
Eventually one of the regulating stakeholders will either close down this loophole by pre-emptive action or they will allow one of their members to walk into a career/ reputation demolishing situation that is beyond their control.
I was happy to let the discussion rest with the story last week but a headline claiming this decision is positive for the Industry had to be challenged. Some business principal will end up with holes in their account they can not explain and the industry reputation will be further harmed as a direct result of this case law. I am sure the public is far less concerned about isolated incidents of agents incorrectly modifying a tenancy agreement or serving the wrong notice to quit than ever they will be when they find the unauthorised use of their cash has been legitimised by bit of legal short-sightedness.
Rob, you can't quote perspective and then ask a closed question?? The answer is obviously no and I welcome your lateral thinking but I was merely pointing out that you opened this up on a different thread and the only one discussing it now is us.
Trust me, valid point but we get it now.
Sorry but if you are the same fellow who I was chatting with last week about standards I would suggest it is only right that someone looks at things from a different perspective.
It might be over analysis but here is money which is now definitely not a deposit and definitely does not need protecting and it is not due to be paid to the landlord until the rent due date. In your opinion is it alright for an agent to use this money for whatever purpose they like as an un-secured, interest free loan? (closed question which requires you to give a YES/No answer)
No idea what that means fella but as least you agree in this particular case it's not a deposit. Just bear in mind that the essence of 'case law' dictates that the decision is transferable...
We may never quite see eye to eye on this so probably best to part here but all I was saying is lets stick a fork in this now.
Dekete "advance" end of first para, or insert "a deposit".
says it all really...
NO IT DOES NOT - this case does not say rent in advance is not a deposit, it says rent in advance in the circumstances presnted in Johnson, confusion notwithstanding, is not advance.
For the umpteenth time can I repeat I have no vested interest and could not care less which way any of the issues I discuss are legally decided, I just want them decided with no loose ends.
I really do not care, honest. Prideful - moi?!!
Skeptic - no I just ask questions if I think they need asking.
Come on guys enough already. Whilst its hard to legislate for any given situation at least this one has been clarified so move on.
IO I dont know if your naturally a skeptic or prideful to concede that it didn't go as you thought. Robert you're over analysing this with an overt 'unallocated client money' perspective.
As I said this decision doesn't cover every aspect or every agent trying to circumvent it but then it was never meant to, what it does clarify is that rent in advance is not a deposit. We can hypothesise and explore every aspect of this case and its impact in minute detail but we're no Socrates so lets put this one to bed and move on.
The penny has dropped, the court of appeal decision has clarified that advanced rent is not a deposit for the purposes of serving Section 21 but in doing so it has removed the necessity to protect unallocated tenant monies held by an agent. My mistake was to think the Tenancy Deposit legislation that created this confusion in 2007 was intended to protect client and tenant money, rather than being a badly named bit of notice to quit regulation
In the case of a tenant gone bad isn't a Section 8 notice the more appropriate way of gaining possession? By way of education for me and I suspect many others who will no doubt read this but not comment which of you with legal opinion wants to clarify that? Was it possible to serve section 8 on non paying tenants of Periodic tenancies or was that adversely affected prior to this clarification too?
"CoA has applied a bit of common sense in this case " - actually the CoA has reached the only decision it could once it had decided the initial lump sum payments were in respect of a 6 monthly rent payment period.
If Landlord Action (and with respect Shoosmiths) think like the TDS that this decision legitimises all rent taken in advance tenancy I fear they are sadly mistaken and need to be careful with advice given.
Read para 20 of the decision and references to Landlords using creativity trying to evade the TDP regime. This decison has not legitimised any such attempts.
It is a good and sensible decision as far as it goes, but dig deeper and you will find it also opens up other cans of worms, or rather has not clarifies them.
Priome example - does the payment period have to follow immediately after the payment made, or can the payment cover say final month in a year's time. Johnson does not answer that question, it only says that the rent paid in advance for a period immediately following is not a deposit, which is a start.