In modern day towns and cities with high house prices and young, mobile populations, house or flat-sharing arrangements have become increasingly common. Such arrangements are often not as set in stone as more formal, traditional rental arrangements and so are ideal for those not wanting to be tied to the same place long term.

But is this kind of arrangement adequately covered under housing legislation? In England and Wales this tends to focus on more traditional relationships between landlord and defined original tenants. Where there is such fluidity in the occupiers included in the tenancy, do current tenancy agreements adequately protect landlords and tenants alike.

This was the focus of a recent appeal judgement, which looked at a case relating to a house sharing agreement commenced in 2004, and a decision by a deputy district judge to dismiss a claim from recent occupiers relating to the landlord’s failure to protect their deposits on the dual grounds that they were licensees rather than tenants and that they themselves had not indeed paid any deposit to the landlord.

What is House-Sharing

A house-sharing arrangement is where a property owner lets a house to several individuals, usually unrelated, on a joint tenancy with a rent agreed for the whole property. The tenants agree between themselves who takes which room and the contributions each make to cover the total rent and household bills, usually with one tenant collecting these and ensuring the regular rental payments are made to the landlord and the utility bills paid.

When one occupier wishes to leave, they find a replacement for their room, be it somebody they know or via an ad. Once vetted by the other occupiers to see if they make a good fit, the original occupier moves out, with the original deposit proportion paid to the original occupier by the incoming replacement, and payments to the property owner remaining unchanged, via the assigned tenant.

This is beneficial for the tenants as, so long as they can find a suitable replacement, they are not bound by standard notice periods, and beneficial for property owners, who continue to receive steady rental payments without having to advertise for tenants.

But what happens when, several years down the line, an occupant wishes or has cause to leave without finding a replacement? What are their rights, and where do landlords stand?

The Case –  Sturgiss & Anor v Boddy & Ors [2021]

In one such arrangement, two occupants had left a property, and made enquiries under different circumstances with the property owner as to the return of their deposits. One seeking the return of this from the landlord, and the other requesting he use this to cover rent due through her notice period following her urgent return to Australia ahead of COVID lockdown.

On being advised the property owner did not hold deposit for them, the occupants issued a claim, seeking to penalise him for not having protected this as is required under sections 213 and 214 of the Housing Act 2004.

The property owner contended that he had only taken a deposit from the original occupiers at the onset of the house share, and this was in 2004, before the requirement to protect deposits was introduced.

Over a hearing that had been allocated just 90 minutes, the Deputy District judge dismissed the case, on the grounds that the occupants were licensees rather than tenants, and that they themselves had not indeed paid any deposit to the landlord.

Appeal

The occupiers applied to appeal the decision, claiming that they were not merely licensees, but held an assured shorthold tenancy which had been surrendered at each change of occupancy, replaced by a new assured shorthold.

As the change of occupancies in which they were involved took place after 2007, they argued the property owner should have protected their deposits, and as this hadn’t happened.

The appeal judge considered the claim and sided with the occupiers on these points. The original agreement was that of an assured shorthold tenancy and no such change had been made to this agreement other than the identity of the occupants of the house. As such they were to be considered tenants under an assured shorthold and this was to be determined to have been surrendered and replaced with a new one on each change of occupancy.

Given this to be the case, the landlord should have protected deposits for tenants commencing occupancy since 2007. However the landlord had set out in his original defence that he had not received a deposit from any of the occupants since the original letting in 2004.

So in order to be entitled to claim under Section 214, the tenants would be required to prove that they had either paid, or are to be treated as having paid a deposit to the landlord. Whilst they clearly hadn’t paid anything directly to the property owner, he still held the original deposits the occupants had paid at the onset of the tenancy back in 2004. As the arrangement he had setup with the occupants was that any incoming tenant paid the proportion of deposit to the outgoing tenant, the appeal judge considered that their doing so meant their share of the original deposit was treated as paid and received again on the immediate commencement of a new tenancy, citing a precedent, Superstrike Ltd vs Rodrigues [2013].

Accordingly, the occupiers were tenants under an assured shorthold, the landlord had an obligation to protect their deposit, and they were to be considered to have paid such a deposit. Accordingly they were entitled to claim statutory penalty for the landlord not having protected their deposit.

Section 214 of the Housing Act 2004 determines such statutory penalty as: –

The court must order the landlord to pay to the applicant a sum of money not less than the amount of the deposit and not more than three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order

The appeal judge determined that the landlord could not be held particularly culpable for the breach of his obligations, and set the award at the bottom end of that available, that being the amount of the deposit.

Our View

This is an interesting case, says Jonathan Leach, highlighting issues presented in the modern rental world. The right decision was probably reached on appeal, but the deputy district judge overseeing the original case had a very difficult job given the complexity of the matter and the 90 minute time constraints.

Both Landlords and Tenants benefit from early, practical and sensible advice on such matters.

If you need advice on any area of housing law, whether you are a landlord or tenant, we’ve Got Your Back

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