A private landlord is contesting a tenancy deposit penalty claim in the County Court, Bromley, involving multiple assured shorthold tenancies (ASTs) and the classification of payments as either deposits or advance rent. The case raises important legal questions about the application of deposit protection penalties and the interpretation of payments made before tenancy agreements were signed.

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 take advance rent due to the tenant’s limited funds at referencing. An email from the landlord at that time stated: “The deposit will go towards your advance rental payment.”

In October 2021, at the start of the second AST, the landlord proposed a deposit scheme, but the tenant responded describing payments as split advance rent instalments, to be returned if notice was served. The subsequent AST, signed four days later, labelled the payment as “Advance” with no deposit clause, and the payment was made five days before the contract was signed.

Further evidence includes a December 2019 WhatsApp message from the landlord to the tenant confirming no deposit had been taken, which the tenant acknowledged. When the tenant vacated in March 2025, he requested the use of the alleged deposit to cover a rent shortfall, but the AST explicitly forbade using the deposit for rent.

The final AST, covering November 2023 to November 2024, clearly records £2,400 as two months’ advance rent with no mention of a deposit. The tenant’s own emails refer to an alleged deposit of £1,250, while the claim is for £1,200.

The Deposit Penalty Claim

The claim was initially issued under CPR Part 8 but has since been transferred to Part 7. The claimant’s solicitors, operating on a no-win-no-fee basis with a 25% fee, argue under the precedent of Superstrike v Rodrigues [2013] and Szorad v Kohli [2023] that a penalty applies to each of the four ASTs, potentially amounting to £14,400.

The landlord’s primary defence relies on the Court of Appeal decision in Johnson v Old [2013] EWCA Civ 415, which holds that the nature of a payment is determined by its function rather than its label. The landlord points to the WhatsApp admission of no deposit, the tenant’s description of payments as advance rent, the timing of payments before contract signing, the absence of deposit clauses in the ASTs, and the tenant’s request to use the funds for rent as evidence that the payments were advance rent, not deposits.

Legal Questions and Challenges

The landlord seeks insight from others who have successfully argued that the Superstrike penalty cannot apply where the characterisation of the payment as a deposit is disputed. The Superstrike argument presupposes the existence of a deposit, so if the payment is proven to be advance rent, the penalty claim should collapse.

Similarly, the landlord questions whether the multi-AST penalty approach in Szorad v Kohli can be defeated by an advance rent defence, noting that Szorad assumes the existence of a deposit. The landlord also requests feedback on the strength of the advance rent defence under Johnson v Old given the facts, particularly the early WhatsApp admission and pre-contract payment.

Regarding court procedure, the landlord notes that the claim exceeds £10,000, which would usually place it on the Fast Track. However, the landlord’s counterclaim is £6,222.30, and if the advance rent defence succeeds, the claim’s value would reduce to zero. The landlord queries whether it is appropriate for the court to allocate the case to Fast Track based on a theoretical maximum value when the claim’s validity hinges on a disputed payment characterisation.

Finally, the landlord asks if anyone has successfully used the Okadigbo v Chan case to limit the penalty to a single amount and what facts were most persuasive in that context.

What this means for landlords

This case highlights the critical importance of clear documentation and communication regarding deposits and advance rent payments. Landlords should ensure tenancy agreements explicitly state the nature of any payments and maintain records of all communications with tenants. The legal distinction between deposits and advance rent can have significant financial consequences, especially where multiple tenancies are involved.

Landlords facing similar claims may find the Johnson v Old precedent useful in arguing that the payment’s function, not its label, determines its status. However, the evolving case law around multi-AST penalties under Superstrike and Szorad means landlords should seek tailored legal advice and consider all available defences carefully.

Source: Based on reporting from Property118

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