Alan Cameron | Partner

When Winners are Losers

This month, in the case of CD v AB  [2017] SAC (Civ) 32,  the Sheriff Appeal Court took the unusual step of finding in favour of a party at the same time as reporting their alleged criminal offences to the procurator fiscal and their local authority.

A tenant appealed the decision of the Sheriff to find them liable to pay their ‘Landlord’ £787.50 in respect of two months’ rent arrears less the deposit paid.  The tenant was questioning whether the court was right to find that the legal relationship between the parties was that of landlord and tenant given that:

*sums paid as a deposit were not placed in a Tenancy Deposit Scheme Account in contravention of Regulations 3 and 42 of the Tenancy Deposit Scheme (Scotland) Regulations 2011

*whilst the tenant was given a document headed ‘Tenant Information Pack’ but the document didn’t comply with the statutory requirements of section 30A of the Housing (Scotland) Act 1988

*The ‘Landlord’ wasn’t a registered landlord with the relevant local authority and so was in breach of part 8 of the Antisocial Behaviour etc (Scotland) Act 2004.

The appellant tenant argued that the breach of these various regulations meant that the lease was an illegal contract and no rent was in fact due.  The respondent landlord argued that the lease was not an illegal contract and therefore he was entitled to decree as granted by the sheriff at first instance.   He accepted he was in breach of statutory provisions but argued that this did not affect the validity of the lease.

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It was ultimately accepted by parties that the penalties imposed for failure to comply with the tenancy deposit scheme arrangements were civil in nature and did not render the contract unenforceable as an illegal contract.  The failures, however, to register as a landlord and give the tenant the required tenancy information both constituted statutory offences.  Did this render the contract void?  Sheriff Principal Murray concluded that the failures must be seen as breaches in the context of the formation of the contract but in neither case did the statutory illegality affect the contract itself:  the illegality was failing to be registered and to provide the tenant information pack.  The statutory regime provides for fines and specific circumstances where rent will not be payable without any expression that a contract shall not be valid.  Sheriff Principal Murray found that there is an exception here to the general proposition that where a contract is subject to a penalty its illegality and consequent avoidance is implied.  The appeal was therefore refused but the Landlord would be wise to delay his celebrations until such time as the Procurator Fiscal and local authority have concluded their investigations.

Jackson Boyd have a team of lawyers specialising in landlord tenant disputes. We are experienced in acting on behalf of both landlords and tenants and are happy to answer any questions in relation to the changes in the law and how it may impact you. Please contact us online by clicking here or speak to a member of our specialist team on 0333 222 1855.

Alan Cameron

Alan Cameron

Dispute Resolution Team

“My motto is: ‘First they ignore you, then they ridicule you, then they fight you, and then you win.’”

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