Where a tenancy deposit has been paid in connection with an assured shorthold tenancy and in order to be able to serve a section 21 notice, the deposit must have been protected – normally within 30 days. Where this is not the case, the only way to be able to serve a section 21 is by repaying the deposit in full or agreeing deductions before service. How to repay the deposit can be difficult because we don’t want to pay by cash in case the tenant denies receiving the money and if we send a cheque, what if it’s not presented? Has the deposit been returned in full? Our advice has been to issue a bankers draft or postal order as that is the safest way.
The High Court has now had to answer the question whether a cheque representing the deposit must be cashed in order to have been returned in full.
In Lingfield Point No. 2 v Hodgson High Court (Queen’s Bench Division) Sheffield District Registry 30 July 2015, the landlord was a company and granted an assured shorthold tenancy from 21 May 2012. The tenant paid a deposit of £375.00 by cheque which wasn’t protected by the landlord.
The landlord wanted to serve a section 21 notice but was unable to do so unless the deposit was returned in full due to the failure to protect within 30 days. The landlord posted a cheque for £375.00 to the tenant on 28 July 2014.
The tenants’ solicitor returned the cheque saying payment by that method was not acceptable and as such was never presented.
On 31 July 2014, the landlord served a section 21 notice which was later followed by a possession claim. The claim was defended on the grounds that the deposit had not been protected nor returned in full as required by section 215 Housing Act 2004. The tenant argued that the section 21 notice could not have been served and was therefore invalid.
The County Court held that payment of the deposit by cheque was an adequate means of returning the deposit and ordered possession. The tenant sought permission to appeal.
The High Court refused permission to appeal and stated that the statutory provisions were there to protect tenants and could not be used as a blunt instrument to defeat landlords’ interests. The tenants had indicated that payment by cheque was acceptable because when they originally paid the deposit it was by cheque. As such there was no real prospect of success if an appeal were held.
According to reports, the court further commented that the absence of authorities on this question arose not from the fact that this was a novel point but because it was a matter of common sense.
Comment
In addition to being “common sense”, we think that this is legally correct anyway when considering the law of cheques. In the article referred to earlier about returning the deposit, we go on to conclude in respect of cheques and bankers drafts:
As a further argument that the sending of the instrument is the return of the deposit, the law of cheques is that a cheque is deemed payment on the day it was received and not on the day it actually clears, assuming it clears on first presentation Coltrane v Day [2003] EWCA Civ 342.
Very briefly, Coltrane was a case where a tenant gave the landlord a cheque on the morning of a rent arrears possession hearing in the County Court. In order to be ordered possession, the landlord had to show the tenant was two months in arrears “on the day of the hearing”. If the cheque was deemed paid on the day it was cleared (for example in three days time) then the landlord would be successful. If however payment was deemed upon receipt, the claim would fail.
It was held that payment of a cheque was deemed to be paid on the day of receipt (in this case the day of the hearing) assuming it cleared on first presentation. The hearing was adjourned for seven days to see if it did clear.
I let my property to a friend whos wife left him living in car with their children. We set uo tennancy agreement off the Internet so that he could get rent oaid. He now is back with her not paying rent we knew nothing of deposit holding. He is refusibg to talj to ud as wants a council house abd wants us to evict him. We have no money as we are not working after losing our jobs. He is manipukating the system. Lide has becone a nightmare.
i have just experienced a similar scenario.i returned the deposit via cheque and S21 form in same envelope to the tenant who confirmed receipt. due to cheque not being ‘cashed’ untill 2 weeks later, the judge through out the case saying that the monies were not given back to the tenant before serving the s21. clearly ridiculous i thought
Although the judge was clearly wrong on the cashing 2 weeks later point, we don’t think putting in same envelope with the 21 is sufficient. The deposit needs to have been returned “before” the section 21 is served – not “at the same time”.
Is there a set length of time between returning the deposit and serving the s21 as my tenant has said she took advise when the deposit was returned and there must be a 30 day grace
Did this on my phone spelling errors sorry
Has this been tested elsewhere and is now a given in county court?
This is a decision of the High Court and so binding in the County Court.
I don’t understand why do landlords bother in the first place to take a deposit? it does make things much more difficult afterwards and in any case most landlords having problem here are returning full amount and nothing deducted, assuming they were to deduct some part of it, then that can start another dispute with tenants prolonging serving S21 as well as cases get thrown out. So do yourself a favour, a months worth of rent as a deposit is not worth the hassle and never ever take one and no need to then go through hell. However mention very clearly that you do not take any deposit from any tenants and that No Deposit has been taken in any form and therefore prescribed instructions are not required to be given to any tenant.