Solicitors confirm rent in advance case is good news for landlords

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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