Johnson & Ors v Anne Alexander Old

Money is a tenancy deposit only where it is intended to be held as security for obligations or liabilities arising under the relevant tenancy. Rent paid to discharge an existing liability is not paid as security. A tenancy agreement must be construed as a whole. A term requiring several months’ rent in advance may prevail over apparently monthly payment provisions where the agreement makes that term operative until a specified condition is met. For the purposes of possession proceedings, the relevant question is whether money was held as security for obligations under the tenancy to which the notice relates.

The landlords sought possession of a flat let under successive assured shorthold tenancies. The final fixed term expired on 31 October 2010, after which a statutory periodic tenancy arose. The landlords served a notice under section 21(4)(a) of the Housing Act 1988.

A Deputy District Judge dismissed the possession claim, treating part of six months’ rent paid in advance as a tenancy deposit. On appeal, His Honour Judge Simpkiss reversed that decision and ordered possession. The tenant appealed to the Court of Appeal. The central issues were whether the tenancy agreement required six months’ rent to be paid in advance and whether the payment was a tenancy deposit under section 212(8) of the Housing Act 2004, so as to engage the statutory restrictions on a section 21 notice.

1. Appeal dismissed. The Court of Appeal unanimously upheld the possession order.
2. The relevant tenancy for section 215 of the Housing Act 2004 was the statutory periodic tenancy arising on 1 November 2010 under section 5 of the Housing Act 1988. The court distinguished money paid as security for obligations under earlier fixed-term tenancies from money connected with the later statutory periodic tenancy.
3. The May 2010 tenancy agreement had to be construed as a whole. Paragraph 1.7.8 required the first six months’ rent to be paid in advance. Paragraph 1.7.9 showed that this arrangement was to continue unless and until a satisfactory further credit reference was obtained. While paragraph 1.7.8 applied, it suspended the apparently monthly payment provisions in paragraphs 1.7.1, 1.7.3 and 1.7.4.
4. Under section 212(8) of the Housing Act 2004, a tenancy deposit requires an intention that money be held as security for the tenant’s obligations or liabilities. Money paid to discharge an existing rent liability is not held as security for that liability. The £6,000 paid on 29 April 2010 was rent payable under the fixed-term tenancy and was intended to be applied by 1 November 2010. No part of it was intended to remain as security for the statutory periodic tenancy.
5. The tenant’s credit risk, the agents’ practice of accounting to the landlords monthly, the later non-operation of the second limb of paragraph 1.7.8 and regulation 7 of the Consumer Contracts Regulations 1999 did not alter the clear contractual meaning. The court therefore rejected the tenancy-deposit ground. It was unnecessary to determine separately whether section 215(1) would have prevented reliance on the notice.

1. Court of Appeal (Civil Division): The appeal was dismissed and the possession order was upheld: [2013] EWCA Civ 415.
2. Brighton County Court: A Deputy District Judge dismissed the landlords’ possession claim. His Honour Judge Simpkiss allowed the landlords’ appeal, set aside that order and ordered the tenant to give possession by 11 September 2012.