A private landlord is currently defending a tenancy deposit penalty claim in the County Court, Bromley, involving multiple assured shorthold tenancies (ASTs) and a dispute over whether payments made were deposits or advance rent. The case raises important questions about the application of penalty claims under the Housing Act 2004 and the interpretation of payments in tenancy agreements.

Background to the Case

The landlord let a flat in East London from November 2019 to February 2025 under five successive ASTs. Instead of taking a traditional deposit, the landlord agreed with the tenant in October 2019 to accept advance rent payments due to the tenant’s limited funds during referencing. An email from that time explicitly stated: “The deposit will go towards your advance rental payment.”

At the start of the second AST in October 2021, the landlord proposed a deposit scheme, but the tenant’s response described the payments as split advance rent instalments rather than a deposit. The subsequent AST signed shortly after did not include a deposit clause and labelled the payment as “Advance.” Notably, the payment was made before the contract was signed.

Further evidence includes a December 2019 WhatsApp message from the landlord acknowledging no deposit was taken, which the tenant confirmed. When the tenant vacated in March 2025, he requested the alleged deposit be used to cover a rent shortfall, but the tenancy agreement explicitly prohibited using the deposit for rent.

The Legal Claim and Defence

The claim, initially issued under CPR Part 8 and now transferred to Part 7, is based on penalty provisions under the Housing Act 2004. The claimant’s solicitors argue that the penalty applies to each of four ASTs, potentially amounting to £14,400, relying on the precedent set by Superstrike v Rodrigues (2013) and Szorad v Kohli (2023).

The landlord’s primary defence invokes the Court of Appeal decision in Johnson v Old (2013), which holds that the nature of a payment is determined by its function, not its label. The landlord points to multiple factors supporting the argument that the payments were advance rent rather than deposits:

• The WhatsApp admission from 2019 confirming no deposit was taken.
• The tenant’s own description of the payments as advance rent instalments in 2021.
• The timing of the payment before the tenancy agreement was signed.
• The absence of any deposit clause in the ASTs, which labelled payments as advance rent.
• The tenant’s request to use the payment for rent, which would be prohibited if it were a deposit.
• The final AST explicitly recording £2,400 as two months’ advance rent with no deposit clause.

Key Issues and Questions Raised

The landlord seeks insight from others who may have successfully challenged the application of the Superstrike penalty when the payment’s character as a deposit is disputed. The argument is that if the payment is proven to be advance rent, the basis for the penalty claim under Superstrike collapses, as that case presupposes the existence of a deposit.

Similarly, the landlord questions whether courts have distinguished the recent Szorad v Kohli ruling in situations where the deposit’s nature is disputed, as Szorad also assumes a deposit exists.

Another point of contention is the court’s track allocation. The claimants argue the claim exceeds £10,000, warranting Fast Track proceedings, while the landlord’s counterclaim is £6,222.30. If the landlord’s defence succeeds, the claim’s value would reduce to zero, raising the question of whether the court should allocate the case to Fast Track based on a theoretical maximum rather than the disputed characterisation.

Finally, the landlord inquires about the use of Okadigbo v Chan to limit penalties to a single multiple and what facts have been most persuasive in such cases.

What this means for landlords

This case highlights the importance of clear documentation and communication regarding deposits and rent payments. Landlords should ensure tenancy agreements explicitly state the nature of any payments and retain evidence of agreements made outside the contract. The distinction between deposits and advance rent can have significant legal and financial consequences, particularly in the context of penalty claims under the Housing Act 2004.

Landlords facing similar claims may consider the Johnson v Old precedent when disputing the characterisation of payments. However, the evolving case law, including Superstrike and Szorad, underscores the complexity of these disputes and the need for careful legal advice.

Source: Based on reporting from Property118

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