Landlords who seek a payment of rent in advance as a means of reducing the chance of a tenant defaulting on its liabilities under a tenancy agreement will be reassured by a Court of Appeal decision. The court held that a sum representing six months' rent, paid at the start of an assured shorthold tenancy (AST), was not a deposit in this instance, but simply a payment of rent made in advance. As such, it did not have to be protected under the Tenancy Deposit Scheme (TDS).
The court made it clear that the character of an advance payment depends upon the circumstances. If a tenant under an AST pays a sum in advance, the true nature of which is a deposit, then that sum will fall within the TDS.