Although I have a tenuous grasp of the law relating to financial transactions, every fibre of my being cries out that this is a tenancy deposit, not 'property' and should be protected.
Isn't it the same as giving someone your debit card and PIN number (not recommended, I know), or uncashed travellers' cheques, or a load of euros? They are all means of allowing the recipient to relieve you of pounds sterling, although until exchanged/used to get money out, they are just bits of paper or plastic. It is not the same as a coconut (and I hope someone tells George Osborne that before he reads this forum, gets the wrong end of the stick and starts paying teachers and doctors in coconuts or mangoes).
If it looks, smells and behaves like a deposit...
'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations
This does not mean that the cheque will not bounce of course. But in such case, there's no defence in law and the recipient would quickly get a summary judgement against the issuer of the cheque.
Obviously for deposits, etc. it is wise to wait until the cheque has complete cleared.
This is because the cheque might bounce in which case the money becomes due again.
Allow tenants to protect their own deposits. I want free money when they do it wrong
I am no expert on all this, but my take on it follows.
If we want a definition of a cheque we can find one in the Bills of Exchange Act 1882:
A cheque is a bill of exchange drawn on a banker payable on demand.
A bill of exchange is defined as follows:
A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.
The word "unconditional" may be noted. "Unconditional" means that a cheque cannot be cancelled. Whilst of little practical significance these days since nearly all cheques are crossed "a/c payee only", cheques are negotiable instruments. The right to sue on one does not depend on the validity of any transaction. So, if you hand a cheque to A to pay for goods and A endorses the cheque over to B, B can sue on the cheque even if A fails to deliver the goods. Accordingly, so long as there are sufficient funds to meet the cheque when presented, handing someone a cheque is tantamount to handing them cash in the sense that if you had paid cash for the goods and they were not delivered you could not demand the bank notes back from anyone A had given them to.
In the ordinary course of business, subject to any agreement to the contrary, (a) no one is obliged to accept a cheque and (b) if a cheque is accepted payment is deemed to have been made when the cheque is handed over subject only to the cheque being met on presentation. It is the payment that is conditional, not the cheque.
"Money" is one of those concepts which we think we know what it means, but gets a bit slippery when you come to define it. Clearly it has to mean more than just bank notes and coins. If your bank current account has a credit balance it does not quite mean that you have a pile of cash at the bank. If you pay for something by cheque you have given money for it even though neither you nor the supplier actually touch any cash.
In a normal situation it must be the case that if a tenant hands over a cheque for a deposit that he has paid over money and that, subject to clearance, the date it was paid is the date he handed over the cheque.
A tenant handing a landlord a cheque which the landlord agrees not to bank until the tenant is in default is not a normal situation. There has not actually been a transfer of property as required by section 213(8) HA 2004. I think that we have to distinguish between the piece of paper and what the piece of paper represents, which is an order to pay money, rather than money as such. A cheque is not like a bank note even if negotiable.
In cases such as this one can never be sure what a court will decide. Certainly courts are keen to discourage anything seen as a way of getting round statutory protection.
To quote form the second link in post #18:
When a cheque is tendered in payment for goods or services, there are two distinct contracts. The contract for the supply of the goods or services is separate from the contract represented by the cheque. That second contract is an unconditional promise to pay the recipient.
Am I repeating the same thing again and again?
The recipient might promise not to bank the cheque, but that does not change the fact that a cheque is unconditional.
I have no idea what remedy could be sought if the recipient were to bank the cheque any way apart from requesting the money back after the fact.
In my view, such a scenario applied to a tenancy deposit suggests that deposit must be considered as paid when cheque is received to comply with the spirit of the tenancy deposit laws.
I have no idea legally but my opinion would be that it shouldn't be considered a deposit from a DPS point of view. The cheque was provided with the understanding that it wouldn't be cashed except in agreed circumstances. The cheque could be cancelled at any time if the tenant chose to do this. No actual money has changed hands and it seems to be a piece of paper that promises to pay but there is no guarantee that it will ever be paid, i.e. if the cheque has been cancelled, insufficient funds etc. A tenancy agreement could have a clause that says the tenant agrees to pay a sum requested at the end of a tenancy to cover anything that would normally be covered under a deposit. The agreement sets out a promise but isn't a deposit. To my mind a cheque isn't either
Found another article on payments of rent by cheque, which quote several legal precedents on the issue, including Home v Smith already mentioned:
It basically states the same as the LawGazette's articles.
Interestingly it also states that if sending a cheque by post the deemed date of payment is when the cheque is posted.