Following the judgment in a recent case, an uncashed cheque may be capable of constituting the return of a deposit to a tenant under section 215(2A)(a) of the Housing Act 2004.
Richworth Ltd v Billingham [2023] EW Misc 8 (CC) (14 August 2023)
Background
The tenant (Mr Billingham) held an assured shorthold tenancy for a flat for several years. On 27 June 2011, a written tenancy agreement gave him a fixed term of 12 months. A deposit of £780 was paid to the landlord. However, the landlord did not protect the tenancy deposit in an authorised scheme which is required by the Housing Act 2004, Chapter 4.
On 26 April 2022, the landlord wrote a letter to Mr Billingham enclosing a cheque for £780, the letter indicated to Mr Billingham that the landlord was returning the defendant’s deposit in full. However, it’s important to note that Mr Billingham did not try to cash that cheque.
Richworth Limited’s solicitor on 5 May 2022 wrote to Mr Billingham, saying:
“we are advised your deposit was returned to you”
In this letter they enclosed a Section 21 notice, which was served by a process server on 6 May, due to the expiry of the notice, Richworth Limited decided to process a claim for possession. However, Mr Billingham filed a defence verifying receipt of the Section 21 notice as well as the cheque but stated:
- He didn’t accept the cheque given;
- Nor did he accept cheques because of prior bounced cheques;
- Nor did he cash the cheque; and
- In any occasion, the account had since closed making the cheque
Therefore, given the reasons listed above Mr Billingham claimed that the deposit was not “returned” to him as he had not been given the money. Richworth Limited argued that they had “returned” the deposit by enclosing a cheque, regardless of whether Mr Billingham cashed it.
The case was scheduled on 8 November 2022 for a possession hearing in which both individuals were represented by counsel. The Judge made an order for possession under the Housing Act Section 21 on the basis that the cheque given, coupled with no communication or acceptance, was enough to amount to a total return of the deposit on the grounds prescribed in the Housing Act 2004, Section 215(2A)(a).
However, Mr Billingham appealed this decision.
The Court’s decision
The Court allowed the appeal and found that the term “returned” defined under Section 215(2A)(a) means exactly what it states. The Judge stated that it:
“cannot sensibly mean returning only the precise cash, or the original cheque or postal order, by which the deposit was first “paid”. “It must mean…the return of the amount of money that the tenant had first paid or given and that the landlord had originally received”.
However, the Judge made clear that this does not mean deposits cannot be returned by cheque, the argument is whether a deposit can ever be returned if the tenant does not cash it into their account.
The Judge concluded that a cheque can be seen as a “conditional payment” and result in an express agreement or implied acceptance because of rejection or absence within a reasonable time. If that was the case the Judge said:
“the repayment date will be the date of delivery of the cheque where the date of “return” will be when the cheque is honoured. If the cheque is presented and not honoured, there will have been no valid repayment or return of the deposit at that earlier date and the landlord will be unable to rely on the section 21 notice.”
However, if the cheque does not become cashed, and if the tenant sends the cheque back, despite accepting payment by cheque, then this will not stop the landlord from relying on a returned deposit. It is clear this is dependent on the circumstances of each case.
What are the implications of this case?
Regarding this decision, professionals will need to consider any Section 21 possession proceedings in which there has been an alleged return of the deposit via cheque, but that cheque hasn’t been cashed, on a fact-specific basis.
It will depend on the circumstances of the case to decide where there has been direct or implied acceptance of the cheque from the tenant and whether the tenant has not presented the cheque within a reasonable amount of time which then is relevant to whether or not the deposit is reimbursed under the Housing Act 2004, Section 215(2A)(a).
This case shows that other cases are not likely to be suitable for summary disposal at a brief hearing due to consideration of the evidence, such evidence may address matters, including:
- The length of time of no communication or acceptance by the tenant;
- Any other form of communication between the tenant and landlord;
- Prior course of dealings regarding payment of money by cheque or otherwise; and
- whether the cheque would have been honoured if presented, etc.
How can Nelsons help
Simon Waterfield is a Partner in our expert Dispute Resolution team, specialising in property disputes, rights of way claims, landlord and tenant disputes and commercial disputes.
For more information on the subjects discussed in this article, get in touch with Simon or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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