Student landlords need to safeguard rents paid in advance to avoid penalties under deposit protection laws, following a new court ruling.
Failing to protect the rent could lead to a fine of up to three times the rent amount and restrictions on court action to repossess a home if rent is not paid or the tenancy agreement is broken.
The warning comes from the Guild of Residential Landlords following a case at Brighton County Court.
The landlord had granted a succession of tenancies to the same tenant.
At the start of the first tenancy and at each renewal, the landlord was paid six months rent in advance because the tenant had a poor credit record.
The tenant also paid an initial deposit of £1,425 which was protected.
At the end of the third fixed term agreement, the tenancy continued as a statutory periodic tenancy, but the tenant fell in to arrears, so the landlord issued a Section 21 notice to gain possession of the property.
Deputy District Judge Collins decided that each of the three payments of rent in advance were a tenancy deposit and required protecting.
The judge ruled as the rent paid in advance was not protected, the Section 21 notice had not been validly served and dismissed the claim for possession.
“We have always maintained that the taking of multiple periods of rent in advance - for example six months rent in advance - could well be a deposit and therefore needs protecting and it seems the county court have agreed with that view,” said a Guild of Residential Landlords spokesman.
“If you think about this case and assume the £1,425 rent is the same as the deposit, five months rent in advance has presumably been deemed a deposit which totals £7,125. This happened three times, so total deposits received were £21,375.
“The penalty at the time of the hearing was three times deposit plus return of the deposit so, the potential penalty that the landlord could have had to pay in this case had the tenant claimed would have been a whopping £85,500.”
