Judge declaring anything in advance as a DEPOSIT?

Reply to the comment left by Graham Bowcock at 17/10/2022 - 12:05
Thank you. They had used up the LAST MONTHS payment, within 5 months, as they stopped paying properly after just 2 months of being in the house (DEC 2019). Owe over one years rent now

WORDING OF THE AGREEMENT

TERM
A term certain of 12 (Twelve) Months from the Commencement Date;

RENTAL PERIOD
Monthly

RENT
£ 1,400 (One Thousand, Four Hundred Pounds)
For each Rental Period payable in advance on the first day of each such Rental Period by Standing Order.
2 months rent in advance for first and last month, payable on signing, minus any holding deposit.

DEPOSIT (if any)
The Tenant shall pay on the signing thereof a deposit of £0 zero to the Landlord (Landlord Agents) to be dealt with in accordance with clause 2 (vi) and clause 4.4 hereof. NO DEPOSIT AGAINST DAMAGES.
ANY MONEY IN ADVANCE TO BE RETURNED IN FULL AT END OF PROPER NOTICE PERIOD, IF APPLICABLE (i.e. IF IT IS NOT USED FOR LAST MONTH AFTER PROPER NOTICE IS GIVEN).

As you know, this hinges on what you meant by "last month" and whether you can prove that you intended that this would mean the last month of the fixed term. If there is any doubt about this in the mind of the judge, then the money taken cannot be rent because its for an unknown period and the legislation tells us that anything taken to discharge a future indeterminate liability is a deposit.

Reply to the comment left by LP at 17/10/2022 - 15:54
Based on the information given, the additional month's rent was clearly paid as security for rent due on a future unspecified date and was therefore a deposit within the meaning of the legislation.

You say yourself that "They had used up the LAST MONTHS payment, within 5 months" - how could that be true if the money was to cover the final month of a 12 month tenancy, which would quite possibly roll over into a statutory periodic tenancy (and presumably has done so). What you describe is a deposit being used to reduce the arrears.

The final part quoted: "ANY MONEY IN ADVANCE TO BE RETURNED IN FULL AT END OF PROPER NOTICE PERIOD, IF APPLICABLE (i.e. IF IT IS NOT USED FOR LAST MONTH AFTER PROPER NOTICE IS GIVEN)" is a clear description of how a deposit is treated.

If you read the Court of Appeal judgement in Johnson v Olds you will see that the tenancy agreement was analysed in great detail and the decision based on the particular facts of the case, which were unusual to say the least and bear no resemblance to your situation.

Reply to the comment left by Seething Landlord at 20/10/2022 - 01:40
Thank you. Appears that, even with the tenants owing a whole year in rent, the last months payment will have to be classed as a deposit. I wish legislation made that clearer (websites said at the time in advance was ok).

Should I put the money in a deposit in a protection scheme now, before the hearing, where they will no doubt confirm your view, or will it not help?

Reply to the comment left by LP at 20/10/2022 - 10:34
In Johnson v Olds the validity of the S21 notice that had been served was the real issue and this depended in part on whether the rent paid in advance was or was not a deposit.

In your case you are using S8 so presumably the question is whether or not the tenant is entitled as part of their counterclaim to compensation for your failure to protect what they claim was a deposit. I am not able to advise what you should do but if you were to protect the money at this stage you would effectively be conceding the point.

There is also the counterclaim for disrepair to contend with.

None of this should affect your ability to obtain a possession order but you have entered a legal minefield and should perhaps be paying for professional advice on how to achieve the best outcome.

Reply to the comment left by Seething Landlord at 20/10/2022 - 13:25
Thank you.

Yes been trying to find a Solicitor to deal with just the counterclaim... of the few that reply they appear very busy & uninterested. Hence your replies being so gratefully received.

Yes, securing the 'payment' will mean giving the tenant another £1,400 on top of the £20,000 (1 Year of payments), they are in arrears. But thought it might reduce any fine, the Judge & Duty Solicitor didn't appear to like Landlords, even accidental ones (My mum with Dementia came to live with us & rental was supposed to pay for a bigger place).

Might be 'wishful crazy thinking', but maybe some 'deposit' might be returned, as they have housed over 40 cats there as a cattery and admitted they had caused damage from damp by keeping the house closed up.

Access was almost impossible, has been refused for almost a year after they verbally abused the last builder and demanded they find the next one, which they didn't. Not sure if that will be a defense against any repairs (which are few & new, since they moved in).

Reply to the comment left by LP at 20/10/2022 - 17:33
You won't be able to get a solicitor to represent you on only one part of the case, the claim and counterclaim are not separate actions and have to be dealt with together.

I think I read in one of her posts that Tessa Shepperson of Landlord Law has a list of solicitors who specialise in property related litigation so it might be worth contacting her or perhaps NRLA could recommend somebody.

Reply to the comment left by Seething Landlord at 20/10/2022 - 19:53
Thank you. Will ask Tessa Shepperson.

It will be good to get a Solicitor, skilled in defending the REPAIRS defence, due to lack of access and reducing the outcome/fine, if they do decide 'money in advance' is a DEPOSIT.

Reply to the comment left by Graham Bowcock at 17/10/2022 - 12:05UPDATE
The tenants are almost 20k in arrears now,
accelerated it, by not having paid anything in the 4 months of the court process
In the 21st SEPT Hearing the Judge gave them 3 weeks ending 19th OCTOBER
The court replied via email today:
To date, no Defence or Counterclaim has been filed in this matter.

Can we presume the tenants time is up and we should email the Court
ASKING FOR A JUDGEMENT IN DEFAULT?

any advice would be appreciated

this is an interesting post - though I am unable to give any comment as to the OP's predicament.

I was wondering about the whole rent in advance and last months rent in advance bit as I;ve come across a similar situation but this time it is to avoid the issue over the lack of the last months payment as a direct result of the tenants rent being paid directly by the DWP.

The whole month BAP rule is a nightmare. It ASSUMES a tenant will give proper notice (a month) and will be done in alignment with their BAP dates (so that the day they leave is the day after the BAP date cutoff so that you get paid the month in arrears to the da, but after the tenant has actually left).

This never happens and more likely I am left with the last month of rent missing entirely. (yes it is possible to take out of the deposit but that is ASSUMING there is no damage or other rent arrears totalling the deposit amount. If that is the case the deposit wipes that out)

So, to ensure that if the tenant does not leave with a missing last month's rent, is this not a viable solution to having the last months rent paid at the start for that exact eventuality? It is clear this is rent and not a deposit (as a 5 week deposit would also be taken)