Tenant’s appeal to recover £14,000 deposit from landlord rejected by Upper Tribunal

The Upper Tribunal for Scotland refused an appeal against a decision of the First-tier Tribunal for Scotland (Housing and Property Chamber), which had rejected the tenant’s claim after finding that he requested the arrangement. 

‘Pre-payment agreement’

Sheriff Nigel Ross heard that the appellant James Malloch was formerly a tenant of the respondent Bernisdale Homes Ltd in relation to a residential dwelling in Edinburgh. 

The parties entered into a short assured tenancy agreement dated 8 November 2016, which was also the date of entry, with the initial term of the tenancy due to expire on 7 November 2017 but with a provision that the tenancy would continue thereafter on a monthly basis until terminated by either party. 

The appellant thereafter occupied the property in terms of the tenancy agreement until the respondent served notice to quit, in terms of which the tenancy was terminated in December 2018.

The monthly rent was £1,165 a month, but prior to the commencement of the tenancy, the parties came to an arrangement whereby the appellant would pay an advance of 12 months’ rent, in the sum of £13,980, prior to entry. 

The appellant was concerned that he would not pass an “affordability” test if the respondent were to assess his means, owing to his low income. 

To meet this, he offered to pay 12 months’ rent in advance to secure the property, and the respondent accepted his proposal.

‘Prohibited requirement’

However, at the end of the tenancy, the appellant raised an application for repayment to him of the sum of £13,980.

The appellant relied on section 89 of the Rent (Scotland) Act 1984, which prohibits premiums or loans payable by rent in order to prevent landlords demanding extra payment over and above rent, and also provides that any requirement imposed to pay rent in advance in excess of six months is void and unenforceable.

The FtT accepted that the appellant had paid the sum of £13,980 before the commencement of the lease, but dismissed his application after ruling that the pre-payment was not imposed by the respondent. 

The FtT found that it was an arrangement suggested by the appellant, and acceded to by the respondent, to address the appellant’s personal financial difficulties. 

The appellant challenged that decision, claiming that the provision in the tenancy agreement, which required him to make a 12-month pre-payment, was a prohibited requirement - even though it was his idea.

The appellant also relied on a published article by a legal practitioner which supported his claim, and argued that the FtT ought to have followed that “expert” view.

‘Tenant not entitled to repayment’

Refusing the appeal, the sheriff ruled that the appellant was “not entitled” to payment of £13,980 from the respondent.

In a written decision notice, Sheriff Ross said: “The FtT found in fact that the respondent had entered into an arrangement with the appellant, for a 12-month pre-payment of rent, at the instance and request of the appellant.

“The appellant made that request, to get around the fact that his income was insufficient to meet the financial requirements which the respondent would otherwise impose. On an ordinary reading of s.89(1), the section strikes at any ‘requirement’ which was ‘imposed’, whether as a condition of the grant, renewal or continuance of the tenancy or under the terms thereof.

“The FtT’s findings were that the pre-payment arrangement was neither a ‘requirement’, nor was ‘imposed’. Where the appellant requested such an arrangement, he could not argue that the requirement was ‘imposed’ upon him, or that the respondent made pre-payment a ‘condition of the grant’ of the tenancy. 

“The appellant argues that only the terms of the written agreement may be looked at. It is clear, however, that s.89 contemplates that pre-contract discussions will be relevant. To that extent the appellant’s argument is incorrect.

“The terms of clause 3 of the tenancy agreement stipulate ‘The first twelve months’ rent is payable at or before the entry date’. That requirement is absolute. 

“On the evidence, however, the pre-payment was not imposed ‘under the terms thereof’ for the purposes of s.89(1). Clause 3 reflects the parties’ agreement, upon which the FtT made findings. 

“It did and does not separately operate to impose a different or additional requirement. It makes no new requirement or imposition. It reflects the parties’ consensus. Accordingly, s.89(4) is not triggered.”

He added: “The appellant relies on a published article by a legal practitioner who he describes as an expert, and criticises the FtT for not following that view. 

“The FtT, however, required to come to their own conclusion on the law, and did not err in not considering itself bound by the opinion of a commentator. 

“The FtT would have been in error if they delegated their own interpretation of the law to nay other source. They did not do so.”