A judge has more clearly defined the law over whether landlords should treat advance rent as a deposit and put the cash on protection.
The case surrounds a Brighton County Court dispute between the landlord (Johnson) and the tenant (Old), who was trying to claim rent paid in advance was a deposit.
Ms Old returned to the UK from Germany to rent the home, but failed a reference test, so the letting agents requested a deposit of £1,425 and six month’s rent in advance. The deposit was protected.
The tenancy was renewed twice, with the agents taking a total of £17,400 in advance rent.
The landlord served notices to end the tenancy, but Old claimed that the advance rent was a deposit and should have been protected - and as it was not, she was entitled to three times the amount in compensation from the landlord.
The judge in the original hearing agreed with the argument - and dismissed the landlord’s possession proceedings.
The case was appealed by the landlord and went back to Brighton County Court, where the new judge overturned the decision and awarded the landlord possession and costs.
The judge also found:
● Rent paid in advance is not a security to ensure the tenant paid rent, but was the rent due
● Rent paid in advance was not refundable at any time and no additional monthly rent payments were sought or paid
● The intention of both parties was always that the advance rent was in place of monthly rent payments
This case leaves the advance rent situation quite clear for landlords.
Advance rent is not a deposit and does not need protecting - but landlords need to watch out if they take a cheque that covers advance rent and the deposit.
The 30-day limit to cover the deposit starts from the date on the cheque, not the date the cheque is paid in to a bank account, according to lawyers.
If a sum for rent and deposit is transferred electronically, then the protection clock for the deposit starts when the transfer hits the bank.
