Right to buy and Housing Benefit rebates in the Lords

The House of Lords opinions in Hanoman (FC) (Respondent) v London Borough of Southwark (Appellants) [2009] UKHL 29 were handed down today. This was Southwark’s appeal of a Court of Appeal judgment we noted here.

Briefly, Mr Hanoman was a Southwark secure tenant. Southwark had failed to serve a counter notice to Mr Hanoman’s s.122 Notice of right to buy, served in 1999. In fact the counter notice wasn’t served until after a High Court hearing in 2004. S.153B Housing Act 1985 (as amended) kicks in where the tenant has served notice of delay, which Mr Hanoman had. The effect is that rent payable after the notice period in the notice of delay is set against the purchase price of the property – up a 12 months full rent, then 50% thereafter. In Mr Hanoman’s case this would have amounted to the full purchase price, after discount, of the property. Mr Hanoman had paid the purchase price in 2004, subject to this case going forward.

Mr Hanoman was in receipt of housing benefit. As a secure tenant of the housing authority, this was in the form of a rent rebate, rather than a payment of a rent allowance, section 134(1A) of the Social Security Administration Act 1992. Southwark’s contention was that a housing benefit rebate did not count as payment of rent for the purposes of s.153(B):

The purpose of section 153B(2) is, it is submitted, to compensate a tenant for having had to pay rent during the period of delay, not to provide the tenant with a windfall by restoring to him something he has never had. Mr Heather, who appeared for the Council, argued that in the context of section 153B the word “payment” contemplated the movement of money from the tenant to the landlord. He argued also that the payment had to be a payment of ‘rent’. Housing benefit is not ‘rent’ and the application of housing benefit in reduction of rent does not transform it into rent. [para 21]

Then Southwark went perhaps a little off piste, arguing that there were other credits to a rent account that would not count as payment of rent:

One such example was an award to a tenant of damages against a local authority landlord for breach of repairing obligations. It was, he said, often the case that such damages would be credited to the tenant’s rent account rather than paid to the tenant. Such credits, he said, would not amount to payments of rent for section 153B purposes. [para 22]

Heaven knows where Southwark thought they were going with that, but it didn’t get very far. Lord Scott, in the sole opinion, effectively told them not to be so silly.

First, the crediting of the damages to the tenant’s rent account could only be done with the tenant’s consent. Absent a successful set-off defence, a judge would have no power that I know of to impose such a thing on a successful claimant in a damages action. If and to the extent that the damages were then applied in discharge of rent due from the tenant the local authority would be acting as the tenant’s agent in so doing. The application of the damages in these circumstances would be no different from a payment of the damages to the tenant and the application of the money by the tenant in payment of rent due. And, although your Lordships do not need to decide the point, the same would, in my opinion, be so in the case of a successful set-off defence by the local authority. [para 22]

So the question was, given that both parties acknowledged that payment of a rent allowance would be payment of rent, whether the rebate could be payment of rent. Lord Scott finds that it can be.

To take it otherwise would be a) to fail to give effect to s.153A and B, such that the local authority would escape all or part of the penalty if the tenant received housing benefit; and b) would result in the anomalous situation where tenants of RSLs, Housing Action Trusts etc. would have the benefit of the penalty as they got rent allowance, whereas tenants of local authorities and new town corporations, getting HB as rebate wouldn’t:

This difference seems to me unprincipled, to be one that is not supported by any discernible policy and cannot be supposed to reflect any Parliamentary intention. [para 26].

Appeal dismissed and Mr Hanoman got his home for free after discount (and with interest on £17,000 since 2004).

Posted in Benefits, FLW case note, Housing law - All, right-to-buy and tagged , , , .

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +

0 Comments

  1. Does that mean that overpaid housing benefit can now be considered as rent arrears as well? Surely it’s effectively a ‘bounced rent cheque’?

    Something about that doesn’t sit well with me, but not sure why and I don’t have the time to delve through the Housing Benefit Regs.

    Anyone else have a view?

    • Not entirely sure if I have understood your question correctly, but with a local authority landlord HB ‘overpayments’ get debited from the rent account and become rent arrears rather quickly.

      • Oh really? That’s certainly not my (albeit limited) understanding. I believed that Overpayments were collected as debts, given the specific accelerated procedure for registering overpayments as awards in favour of a Local Authority at the County Court. Is collecting Housing Benefit Overpayments as rent arrears kind of, er, wrong?

        • Not sure I’m following you, Simon. A ‘bounced rent cheque’ is a failure to pay rent, so arrears would result. Isn’t this in line with the judgment?

          Unless what you are suggesting is that overpayments to RSL or private tenants (rent allowance) result in a personal debt – usually deductions from ongoing HB payments, whereas secure tenants can see the whole sum added to their arrears at once? But a lot of secure tenants also end up with deductions from their payments rather than a one off recovery, and also, as your bounced rent cheque analogy makes clear, even a full recuperation from the rent account is arguably recovery of a personal debt, via payment to/recovery from a third party on the tenant’s behalf.

          Or is this your point? Sorry Simon I’m being dense, but what are you getting at?

          • Let me try again.

            I was of the understanding that when a tenant received an ‘award’ of a HB overpayment this money was ordinarily either:
            A) deducted from any ongoing benefit entitlement, or
            B) registered as an enforceable award at the County Court and recovered as one might with a normal CCJ.

            I was under the illusion that debiting the sum of the overpayment from the tenant’s rent account so as to create arrears was not really cricket. Someone could be taken to court and potentially lose their house if the rent arrears were then of a significant level following this procedure.

            However, the Hanoman judgment seems to expressly say that HB payments are payments of rent, so is the converse therefore true that a HB overpayment can become arrears of rent, potentially leading to possession proceedings being commenced as a consequence??

            Does this help clarify what I’m driving at?

            • Thanks Simon. I grant that the HB regs are not my strongest point, but I’m not sure that your A & B are the only alternatives. My understanding was that an overpayment by way of ‘credit’ to the local authority’s rent account could simply be recovered in toto from the rent account. Your A & B alternatives are, I think, the case for ‘rent allowance’ payments to RSL or private tenants. These differences were in part the basis of Southwark’s argument in Hanoman. Although the finding was that a credit to the rent account counted as payment of rent, whatever the other conditions around it, it doesn’t mean that rent credits are the same in all respects of rent allowances to the tenant, I think.

              Hanoman is not about HB per se, but specifically about Housing Benefit paid as credit to a local authority’s tenant’s rent account, rather than a payment to the tenant in respect of their rent liability. Does that seem like an answer?

  2. Well done Mr H! You put the MPs expenses scams in the shade – they had to at least pretend to have a job.

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