House shared, lessons shared
The recent case of Sturgiss v Boddy (2021) EW Misc 10 (CC) which came before His Honour Judge Luba QC, covered two very important issues common in the property world; flat-sharing and tenancy deposits. This case was heard on appeal.
In 2004, Mr Boddy had let his property on an assured shorthold tenancy to four individual joint tenants on a flat-share basis. The tenants had their own bedrooms but shared the kitchen and communal parts. A deposit had been collected (but not protected as statute at the time did not require this) and rent was collected on a monthly basis by the designated head tenant.
Over a course of time, the original tenants left after finding replacement tenants. The replacement tenants would reimburse the departing tenants for their share of the deposit and Mr Boddy would not get involved in this process; he simply accepted his monthly rental payments from the ever-changing cast of tenants and allowed them the flexibility to move on as and when they needed to.
Judgment was handed down on 19 July 2021. The legal issues decided in this case were as follows:
- The current occupiers of the property were tenants and not It was understood that Mr Boddy at all times referred to them as his tenants, he was paid rent on a monthly basis and they had exclusive occupation of the flat. It was not, therefore, relevant that Mr Boddy did not always have knowledge of the names of all of his tenants; the criteria as set out in the leading House of Lords case of Street v Mountford  AC 809 was satisfied.
- It was accepted that upon the cast of tenants changing that there was a surrender and re-grant of the tenancy.
- In reference to section 214 of the Housing Act 2004, it was held the original deposit held by the landlord is treated as having been paid by each new tenant and therefore the deposit should have been registered with an authorised tenancy deposit scheme, when the new tenancy arose. Mr Boddy was therefore exposed to a penalty for failing to protect the deposit correctly. As many of us already know, should a landlord fail to join a Tenancy Deposit Scheme then they may be liable to financial penalties and may be prevented from recovering possession of the property at a later date. This law has applied since 6 April 2007.
On the facts of this case, the court did not award three times the deposit but accepted a multiplier of 1. However, the penalty applied on each churn of tenants subsequent to April 2007 (because on each such occasion there was a grant of a new tenancy) where the tenant was making a claim. Thus, Mr Boddy ended up paying the claiming tenants three-times the value of the remaining deposit.
Lessons to be learnt for landlords
- The good news for landlords generally is that if they want to evict their tenants, they do not have to name the original tenants and serve possession proceedings on those people whose whereabouts is likely to be unknown in cases like this.
- Other lessons, however, include knowing the distinction between a tenant and a licensee.
- Landlords should get involved in the surrender and re-grant of a tenancy and should not just leave it for tenants to work matters out between themselves. As we have seen from this case, disorganisation could cost you.
- Ensure, as landlords, that you comply with legal requirements like protecting a deposit notwithstanding that you may be operating a long-standing informal flat-share arrangement.