Sheriff Court case relating to a short assured tenancy of a flat on Laurence Street in Broughty Ferry. Ms Cordiner was the tenant and Mr Al-Shaibany, the landlord. In terms of the lease, the rent for the first and last months was payable in advance. The lease also provided that no deposit was required by the tenant. In terms of the Tenancy Deposit Scheme (Scotland) Regulations 2011, if a landlord fails to pay a tenancy deposit into an approved scheme within 30 days of the beginning of the lease, it may be liable to pay a penalty to the tenant for failing to comply with its duties.
The question for the court was whether payment of the last month’s rent fell within the definition of a “tenancy deposit” (provided in the Housing (Scotland) Act at s120).
The definition provides that:
“A tenancy deposit is a sum of money held as security for
(a) the performance of any of the occupant’s obligations arising under or in connection with a tenancy or an occupancy arrangement, or
(b) the discharge of any of the occupant’s liabilities which so arise.”
The sheriff found that the payments made by Ms Cordiner under the lease has been payments of rent and not payments held as security for the performance of any of the tenant’s obligations. In coming to that conclusion found the reasoning of the English Court of Appeal in Johnson v Old[1] to be persuasive. In particular, the sheriff noted that in that case:
“the Court made the crucial distinction between a payment discharging an obligation or liability and a payment made as security for that obligation or liability. A payment as security does not discharge the obligation or liability. Rather, it is an assurance that the obligation or liability will be discharged at a future time. The court concluded that a payment of rent in advance is a payment which discharges the obligation to pay rent and is not therefore a payment held in security for the discharge of any such obligation in the future”.
As regards the present case the sheriff stated:
“[Ms Cordiner] paid the first and last rental payment at the start of the lease. At that time she discharged her obligation to pay the first and last month’s rent in accordance with the lease. It seems to me to be wrong to describe that money as money held as security for the performance of an obligation, if that obligation has already been discharged. There was no evidence to suggest the rental payments were being held for any other purpose.
As the payment of the last month’s rent was not “held as security” for the performance of the obligations under the lease, the payment was not a tenancy deposit in terms of the 2006 Act and did not require to be paid into an approved scheme in terms of the 2011 Regulations.
The full judgement is available from Scottish Courts here.
All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.
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[1] [2013] EWCA 415; [2013] HLR 26.
