Flat sharing (or house sharing) by unrelated individuals has become a commonplace way of living. Sturgiss and another v Boddy and others [2021] EW Misc. (CC) illustrates the legal effect of a landlord allowing informal changes of such flat sharers and the consequence this may have on a landlord’s obligation to protect a deposit.
Flat 5, 34 Sunderland Avenue, Maida Vale, London was a three-bedroom flat which was let by Mr Boddy (the landlord) to a group of unrelated individuals. The assured shorthold tenancy was in writing and began on 19 June 2004. At that time there was no obligation to protect the deposit and the deposit of £1745 was simply held by the landlord. Over the years there were some breakages at the flat such that the deposit balance reduced to £1,205.
As individuals chose to move out of the flat they would find a replacement and that replacement would pay to the outgoing person a share of the deposit still held. The occupiers of the flat would decide between themselves who lived in what room and how much each should contribute towards the rent, which one of them would collect and pay to the landlord. Each of the changes in the identities of those living in the flat was described by Judge Luba QC as a “churn” and over the years since the flat was first let there were many churns. The consequence and legal effect of these fell to be considered by the court when two individuals applied for an order penalising the landlord for failing to protect their deposit at the point of the particular churns which brought them each into the flat. They argued that each churn was actually a surrender and regrant and therefore section 214 of the Housing Act 2004 required the deposit held to be protected. If they were correct, subsection (4) would compel the court to impose a penalty of not less than the amount of the deposit and not more that three times the amount of the deposit.
The claim was rejected by the district judge but succeeded on appeal before Judge Luba. He had no doubt that there was a relationship of landlord and tenant rather than some sort of licence. Following Sable v QFS Scaffolding Ltd [2010] L&TR 30 and Tower Hamlets v Ayinde [1994] 26 HLR 631, he further found that when a landlord was told that an outgoing tenant had departed and had installed a replacement, a landlord was thereafter fixed by its conduct with the incumbent by surrender and regrant. The landlord’s acceptance of the new set-up amounted to a completion of the process of surrender and regrant even in circumstances where it had not known of the switch of occupiers when or before it took place. The authorities on surrender are infused with the concept of estoppel – a landlord who has acted consistently with a termination of a tenancy and the acceptance of a new tenancy cannot later resile.
Judge Luba was also satisfied that though the replacement tenants did not pay their deposit to the landlord they should be treated as having done so. Dicta in Superstrike Ltd v Rodrigues [2013] 1 WLR 3848 supported the view that there could be circumstances in which a deposit taken at inception of an original tenancy is treated as paid (again) and received (again) when a new tenancy follows immediately from an earlier one. Where a landlord has entered a construct by which, at his own design, there is a single payment of a deposit and thereafter a churning in the identities of tenants, he must be treated as having been “paid” by each new cohort the amount held in respect of the original cohort and each subsequent cohort.
As to the penalty for failing to protect the deposit, the court had to decide whether the multiplier following the guidance given in Okadigbo v Chan [2014] EWHC 4729 (QB) applied. The factors that led the court to conclude that the landlord in this case was right at the bottom end of culpability were that the deposit did not require protecting at the time it was taken, the deposit was retained and still available, the landlord had not subsequently protected the deposit because he thought that the informality of the arrangements meant that it was not required (and this view was supported by legal advisers and by the district judge who heard the claim at first instance), the informal arrangement had allowed outgoing tenants to receive their “share” of the deposit and he would promptly protect the deposit if ultimately required (having held it for over 15 years). The multiplier should just be one. However, there had been three churns when the deposit of the claimants should have been protected and so the award was £3,615 that is the deposit sum.
This decision resulted in the claimants receiving a penalty based on the entirety of the deposit. The judge commented that if that were more than equity would suggest should be recovered by the two claimants alone it had always been open to the other co-tenants to join the claim but they had elected not to do so.
Elizabeth Haggerty is a barrister
