Landlords Beware of Implications of Accepting Cheque When Possession Procedures Pending
t is common for landlords to agree expressly or implicitly to accept payment by cheque. In a recent case of Coltrane –v- Day (2003), a case involving residential letting the Court of appeal applied general principles of law relating to payment of debt by cheque to payment of rent.
The Facts.
The tenant of residential flat who had an assured tenancy under Housing Act 1988 (“the Act”) had fallen into arrears of rent for 11 weeks. He habitually paid rent by cheque. His landlord served a pre-requisite notice before bringing proceedings for possession under Section 8 of the Act as to landlord's intention to claim possession. Following sending the notice the landlord commenced proceedings relying on the ground 8 (arrears for at least 8 weeks) of the Act. This ground is mandatory which means it does not give the Judge discretion to refuse possession if the ground is established. Section 9 of the Act prevents the judge from ordering an adjournment in such circumstances.
Few days before the hearing the tenant sent in a cheque to the landlord for the full amount of the arrears. The landlord accepted the cheque and presented it for clearance.
The District Judge upon the hearing adjourned the hearing to see whether the cheque cleared. The landlord appealed against the grant of the adjournment and won and obtained an order for possession. The tenant appealed that decision before the Court of Appeal.
Court of Appeal.
The court of appeal allowed the tenants appeal and set aside the possession order, holding that the District Judge had acted correctly in adjourning the hearing to see whether the cheque cleared. He could not be satisfied at that stage that the landlord was entitled to possession i.e. whether ground 8 had been established. The parties had agreed to payment of rent by cheque. There was no reason why general principles in relation to payment by cheque should not apply to such cases i.e. acceptance of cheque in payment of debt suspends the right to sue upon the debt while the cheque is in the process of clearing. If it clears then the debt is treated as having been paid upon the date when the cheque was delivered (not when it cleared). It was for that reason the landlord was unable to establish ground 8 (whether at the date of the hearing at least eight weeks' rent was outstanding). If the cheque had bounced in the first instances then the landlord would have obtained an order for possession
Lesson to be learnt by Landlords.
Tenants in such a situation can save the day by delivering a cheque at any time up to the date of hearing. Landlords should therefore be conscious of the possible consequence of accepting a cheque at that point, tempting though it might be to collect arrears if possession is paramount.
This article gives a general overview only and the legal position at the time of writing this article. It cannot be relied upon in any particular case. Specific legal advice must always be considered to include consideration as to whether the legal position contained in this article has changed since going to print. For further information and advice, please contact Nita King or Marianne Johns on 01793 527141 or alternatively by email on Nita.King@lemon-co.co.uk or Marianne.Johns@lemon-co.co.uk.
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<p><strong><a href="http://www.lemon-co.co.uk/article_landlords-beware.php">Landlords Beware of Implications of Accepting Cheque When Possession Procedures Pending</a></strong><br />
It is common for landlords to agree expressly or implicitly to accept payment by cheque. In a recent case of Coltrane –v- Day (2003), a case involving residential letting the Court of appeal applied general principles of law relating to payment of debt by cheque to payment of rent....</p>
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