There was an interesting article in today’s Guardian on the legacy of Right to Buy, not exactly an in-depth piece, but featuring a number of the issues familiar to anyone who practicises in housing – from dodgy short term letting to major works charges on leaseholders. And above all, the lack of available decent stock for renting.
Archive for September, 2008
Regular readers of this blog will have read our comments on (in our view) a fairly poor example of service charge management by an RSL, entitled On the Naughty Step. To my surprise the RSL in question — Stadium Housing — have decided to appeal the decision.
This should prove interesting as they appear (so my information goes) to be appealing against
- the refusal by the chair of the LVT to recuse himself because he is a member of the Housing Law Practitioners Association
- the application of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1991/2083)
- the refusal by the LVT to estimate (one might say “invent”) service charges where there was no evidence as to what, in fact, had been spent
The first ground will be of particular interest as many LVT’s have one or more HLPA members on the panel. The idea that such membership should normally require recusal would have far reaching consequences. The other two grounds of appeal may also produce interesting comment from the Lands Tribunal.
Doubtless the decision on appeal — when it comes — will be blogged here.
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Another in Nearly Legal’s sporadic attempts at being helpful to passing internet searchers. All the questions are genuine searches from the logs, including the rather puzzling ‘crinoline flint’, which perhaps gives more insight into the searcher than one might want. As ever, none of what follows constitutes legal advice and you should always consult a specialist solicitor before taking any steps.
So, by theme:
1. Disrepair
disrepair protocol costs
…are part of a claim. May I direct you to our post on Birmingham v Lee on recoverability of protocol costs where works are done pre-issue.
living in unihabitable property and the consequences for landlords
I would imagine a pretty substantial disrepair claim against them, depending on why the property is supposedly uninhabitable.
appeal housing flood
Appeal? Why appeal? Was there a claim? Floods are tricky things, though. Liability depends on the source and the cause. Landlords will usually be liable for the water supply and fittings in the property, but not where another tenant has caused the flood. The other tenant is then liable. But it is worth considering that even if the flood was caused by an upstairs tenant, if it has done damage to the structure of your property, the landlord is liable for that disrepair.
mice infestation qualifies as disrepair
By and large, no. An infestation of mice may count as nuisance, if they can be shown to be accessing the property from an area under the landlord’s control (common areas, service ducts etc.), which effectively rules out houses, or ground floor flats. An infestation might be part of a disrepair claim as a consequence of disrepair – if entry is gained through disrepair. Otherwise, nuisance is the best bet.
can i withhold rent disrepair
Only in very limited circumstances: where the landlord has been notified of the works required for which the landlord is responsible; failed to do them in a reasonable time; has been notified by the tenant that unless the works are done by a specified date, the tenant will do them, the landlord has been provided with an estimate of the costs and the tenant has notified the landlord that the costs will be deducted from the rent. The tenant can then deduct those costs and only those costs from the rent. Was that what you had in mind? I thought not. Otherwise, you cannot withhold rent and may face possession proceedings if you do. Compensation for disrepair is virtually always less than the rent in any event.
bed bugs tenancy agreement london
One of many, many searches on bed bugs. The trouble is that it is very unlikely that the landlord will be liable, or responsible for stopping the infestation. It is hard to claim nuisance, as it is very difficult to establish that the source of the infestation is an area under the landlord’s control. It will be a very rare tenancy agreement that would make the landlord responsible for stopping an infestation. For these reasons, it is also not a justification for breaking a tenancy agreement.
2. Possession
can the council in ealing evict me from my secured tenancy 3 bedroom house if my last son moves out
Probably not. Possession claims for under occupation can only be brought in very limited circumstances, where the tenant is a successor (but not to their spouse or civil partner) and notice was served between 6 and 12 months after the succession. Suitable alternative accommodation has to be available and it has to be reasonable for the Court to make the order. Note that this applies to secure tenancies only. Those with assured tenancies (eg, most housing association tenancies) can face possession proceedings if they refuse suitable alternative accommodation and suitable accommodation is available at the possession hearing.
staying a warrant mandatory ground
No. Can’t do it.
what happens when a tolerated trespasser clears arrears and court cost
At the moment, nothing, except , by and large, they lose the ability to apply to the court to revive the tenancy [Edit Feb 09 - the House of Lords Judgment in White v Knowsley has now changed this. A tolerated trespasser who has paid off all the arrears can apply to Court to revive their tenancy, or rarely and depending on the wording of the original order, may already have their tenancy automatically revive]. Equally, the landlord can’t enforce the possession order. There is no new tenancy unless the landlord decides to give one. These are what has become known as entrenched trespassers. This should change when some sections of the Housing & Regeneration Act 2008 come into force. Trespassers should get a ‘replacement’ tenancy automatically. Much more on this when it happens, which should be in April 2009. The whole thing remains messy – get specialist advice and bring your possession order with you (see the comments below).
3. Homelessness issues
caselaw ending interim accommodation with reasonable notice
You’ll be wanting Conville v London Borough of Richmond-Upon-Thames [2006] EWCA Civ 718.
legal rights when 1 party wants out of a mortgage leaving 1 person homeless
A joint mortgage? The other person can’t just get out of the mortgage. They can stop paying, which, although it would leave a claim against them, obviously makes the situation practically difficult. In a joint mortgage you are each liable for any and all of the mortgage payments. Can you end up losing the property? Yes – so you should get advice on your position as soon as possible, as it can be complex.
powerpoint on homelessness law uk
A bit lazy, no?
4. Funding
small claims defence southwark public funding
Very doubtful. Public funding is not available for small claims, with very limited exceptions.
how much legal aid is released to solicitors dealing with housing issues
Err. Do you mean for a case – then it depends. Or do you mean what part of the civil legal aid budget this year goes to housing matters? That I don’t know, off hand. In any case, legal aid is not ‘released’ to solicitors – they don’t get the money ahead of doing the work (in fact usually not for quite some time afterwards), and the LSC sets strict limits on the amount of work that can be done. The solicitor has to apply for and justify each increase in the limit. Then their bill is assessed at the end.
public funding cost of works disrepair
In order to be a potential fast track matter and so get public funding, the rule is that where there are works required either the cost of works or the likely damages must be over £1000. So if the damages are over £1000, the only requirement is that there are works outstanding, the works do not have to be over £1000 in cost.
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NL may well feature more news of upcoming housing law events, seminars, workshops etc. etc. in the future. I have more or less decided that we’ll have a separate page for them. Anyone who wants their event etc. etc. listed on Nearly Legal is welcome to email the editor (use the ‘about’ page). But in the meantime…
Free Housing Law seminars in Oxford. At Nuffield College.
Large Lecture Room 1pm – 2.30 pm
21 October 2008
Professor Peter King – The Future of Social Housing
4 November 2008
Professor Steve Nickell – Housing Supply
18 November 2008
Professor John Muellbauer and Dr Anthony Murphy – House Prices
27 January 2009
Professor Peter Kemp – Private Renting
10 February 2009
Professor Susan Bright – The Changing Legal Landscape
24 February 2009
Professor Suzanne Fitzpatrick – Homelessness
5 May 2009
Professor John Ermisch – Household Formation
19 May 2009
Dr Mark Hinnells – Climate Change and Housing
Email events@socres.ox.ac.uk for booking, or download the PDF Flyer. (Which helpfully includes a map for those of us who went elsewhere).
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The earlier post on this shared ownership possession case, Richardson v Midland Heart Ltd, (November 2007 Birmingham) attracted a lot of comment, some of it excitable and ill-informed (and much of that from me). Nearly Legal now has a copy of the judgment, and the benefit of time and reflection to go on.
Before we start, this was a County Court case, and apparently the appeal in this case is due to be heard on 5 & 6 November 2008. Also, apparently Midland Heart has not made the ‘voluntary payment’ of initial premium less arrears and costs (so not a lot) that was touted in previous press reports. (Thanks Michael Paget.)
The facts are largely as previously mentioned. Ms Richardson paid a premium of £29,500 for a 50% shared ownership lease in 1995. The freeholder was Focus Two, later Midland Heart Ltd The lease gave a rent of £1,456 per annum (with indexed increases). There were staircasing provisions to enable Ms Richardson to acquire further shares up to 100%, each time with a reduction in rent. Once she had acquired 100% of the shares, she could acquire the freehold. Ms Richardson did not exercise the staircasing provisions.
In 2003, Ms Richardson had to leave the property, following threats to her family. For a while housing benefit paid the rent on the property and her refuge place, but after a year this ended in Feb 2005. Arrears built up. At the end of Aug 2005, Ms Richardson decided to sell the property. Evidently Midland Heart, who would most likely have had the right of first refusal or to refuse, agreed to a sale and valued the property at £151,000. The property did not sell. In October 2005 (some two months later!) the HA issued possession proceedings, having served Notice on 15 Sept 2005 (a fortnight after agreeing to the sale!).
The Claim was under ground 8 Sch 2 HA 1988 and in Jan 2006 an outright order made on the basis that Ms Richardson was an assured tenant. In Dec 2006, Ms Richardson brought proceedings for a declaration as to the extent of her interest in the property and an order for sale or account for 50% of the proceeds of sale.
Ms Richardson, via Counsel Michael Paget argued that:
She had two tenancies, a long leasehold, subject to forfeiture, and an assured tenancy, protected by (and subject to) Housing Act 1988. The possession proceedings had terminated the assured tenancy, but not the lease. No notice under s.166 Commonhold & Leasehold Reform Act 2002 had been served and ‘forfeiture’ was not ticked on the claim form, so there was no proper procedural termination of the lease.
The Court did not accept the ‘two tenancies’ argument. There was one – of term certain – which fall under HA 1988 as an assured tenancy. No exceptions applied. As an assured tenancy, possession via forfeiture is ruled out – possession can only be under one of the grounds of the act. However, for possession for rent arrears, the HA 1988 provides that it is sufficient for the lease/tenancy to include provision for forfeiture for arrears, which Ms Richardson’s lease did.
S.166 & 167 CLRA 2002, on the requirement of a prescribed sum for arrears before forfeiture was possible did not apply as the definition of a ‘long lease’ in s.76 required a ‘total share’ of 100% for shared ownership leases. Ms Richardson’s was only 50%. In any case, the arrears were too large for s.167 to halt forfeiture. Additionally, there was no need to tick the forfeiture box on the claim form , as this was, strictly, a claim for possession.
There was no mortgage at the time of the possession hearing, so the requirements of Practice Direction 55.2.4 on identifying mortgagees, etc. did not apply.
Secondly Ms Richardson argued that there was a trust. She conceded it was not a trust of the leasehold, but argued that the freehold was held on trust by the Housing Association for itself and Ms Richardson.
The Court did not pay much attention to this, stating simply that there was no foundation for the argument. The relation was simply that of landlord and tenant, with an option to obtain the freehold via staircasing, which was not exercised.
The Court said it was troubled by its own finding, particularly given the windfall that resulted for the Housing Association, and in view of the Housing Association’s actions at a time when they knew Ms Richardson was attempting to sell and were supposedly pursuing that sale on her behalf (and look again at the time scale above, two weeks after agreeing to sell there is service of Notice and a possession claim brought at the earliest opportunity after that. Some might consider that cynical behaviour, given that the HA ended up with a property worth £151,000). But that was the law.
I have noted in comments before that the apparent threat to a mortgagee’s security raied by this case is mitigated by the usual form of these leases which requires a lender to be notified by the landlord prior to any possession/forfeiture proceedings being brought for rent arrears. Thus the lender can pay off the arrears, secure the interest and either add the arrears to the loan or bring repossession proceedings against the tenant themselves. So that is cleared up. But this does still mean that the tenant’s interest, and the significant premium paid for it, can simply disappear with no remedy or recourse in the face of Ground 8 proceedings.
On reflection, I am not wholly convinced by the Court’s dismissal of a trust argument. I have no strong counter argument as yet, but there are a number of factors that go against the ’simple relationship’ of landlord and tenant that the Court found. For instance, the Land Registry registers the lease with a ‘no sole disposition’ restriction, typically entered for ‘tenants-in-common’ trusts. If a shared ownership property is sold, then the division of equity is in accordance with the ’share’ (I believe), and so on. It will be very interesting to see what the appeal brings up.
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Or an RSL behaving badly, again. And this time it’s personal…
21 Press House, Press Road LON/00AE/LSC/2007/0292 [pdf], an LVT decision. The landlord, Stadium Housing Association, were facing an application over hefty service charges made on an shorthold assured tenancy which was Part VII temporary accommodation for Brent Council.
How did Stadium Housing decide to defend the case? By attacking the integrity of the Tribunal. Stadium pointed out that the chair, Nik Nicol, was a member of the Housing Law Practioner’s Association (yes, Hlpa!). Stadium, via their counsel Mr Grundy, alleged that:
the purpose of Hlpa was to promote the interests of tenants [...] and it was as plain as a pikestaff that an “ordinary member of the public” would perceive members of Hlpa as biased in favour of tenants.
Nik Nicol pointed out that he was not just a member, but had been on the executive of Hlpa for 9 years and helped to write the constitution. In addition, another member of the sitting Tribunal, Mel Cairns, was also a founder member of Hlpa and is currently on the committee.
Stadium, it was pointed out, had utterly failed to understand the difference between ‘promoting the rights of tenants’ (Hlpa aim) and promoting the interests of tenants. Finding in favour if a tenant without basis in evidence and law would not be promoting the rights of the tenant. In addition Hlpa’s code of conduct commits its members to professional behaviour. There could be little that was more unprofessional than judicial bias, which was what was being suggested.
Hlpa’s stated objectives were notably similar to those of most RSLs and would not look out of place on Stadium’s website, so it would be hard to see how a member of the public could perceive bias.
Mr Grundy’s submissions would mean that no member of Hlpa could ever hold judicial position, simply by that membership and that would make a mockery of the rigorous selection process. There was no bias or appearance of bias.
Just why Stadium might have taken this utterly ridiculous approach is clear in the rest of the Judgment. They were levying a walloping £129.72 per week service charge. However:
- It was improperly apportioned under the tenancy agreement
- Services had been changed without notification or consultation
- Stadium could provide no breakdown of the charge
- Charges weren’t audited, despite Housing Corp requirements
- The charge was very high in comparison to others, for no reason, but it was usually paid by Housing Benefit, so nobody cared (except the applicant, who was working).
- The contract was not individually negotiated so the Unfair Terms in Consumer Contract Regulations were engaged
- The applicant was being asked to pay a charge for things that “no assured shorthold tenant in the private sector would even think of paying, even if the landlord were minded to try to impose it”.
- On reasonableness of other charges, there was simply no evidence provided of the actual costs incurred by the respondent. The Tribunal wasn’t prepared to guesstimate on no evidence.
The result, service charges of £42.75 per week payable, a drop of £87 per week. This amount to be retrospective. No subsequent changes to the service charge made by the respondent were valid.
Oh dear, oh dear. Probably best not to impugn the professionalism of the Tribunal when it is your utter lack of professionalism that is about to come to light.
This challenge to service charges for temporary accommodation under Part VII is worth bearing in mind when, for example a client is facing a ‘rent arrears’ possession from temporary accommodation, if a service charge component is levied, at least. Stadium are far from alone in their cack-handed handling of the charge.
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Harvey v Bamforth 8PA13344, HHJ Bullimore, Sheffield County Court, 8 Aug 2008
When we first commented on this case (here) we provoked quite a response. Thanks to to Mr Jones of Bury Walkers (who acted for Ms Harvey) we have now been provied with a transcript of the judgment. So – here is what it says.
Mr Bamforth was the assured shorthold tenant of a property owned by Ms Harvey. A deposit was paid to Ms Harvey via her letting agents. The deposit was lodged with TDS within 14 days of the start of the tenancy.
Rent arrears began to accumulate and, in January 2008 (the transcript says 2007, but I think that must be a typo) possession proceedings were issued. The proceedings were defended on the basis that the prescribed information (s.213(5) and (6), Housing Act 2004) had not been provided. It was accepted by the landlord that the prescribed information had not been provided within the time specified in s.213(5) and (6), but was said that it had been provided at a later date. However, it seems that the landlord withdrew the possession claim, leaving only a money claim for rent arrears.
Mr Bamforth then issued an application for the return of his deposit and for damages of three times the value of the deposit. His application was heard by a Deputy District Judge who ordered that the deposit to be returned pursuant to s.214(3)(b) HA 2004 and ordered damages of three times the value of the deposit pursuant to s.214(4) HA 2004. Both sums set off against agreed rent arrears. The DDJ granted permission to appeal.
Ms Harvey therefore appealed both the order for the return of the deposit and the damages award.
s.213 Housing Act 2004 provides (insofar as is material):
213 Requirements relating to tenancy deposits
(1) Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.
(2) No person may require the payment of a tenancy deposit in connection with a shorthold tenancy which is not to be subject to the requirement in subsection (1).
(3) Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received.
(4) For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.
(5) A landlord who has received such a tenancy deposit must give the tenant and any relevant person such information relating to—
(a) the authorised scheme applying to the deposit,
(b) compliance by the landlord with the initial requirements of the scheme in relation to the deposit, and
(c) the operation of provisions of this Chapter in relation to the deposit,
as may be prescribed.
(6) The information required by subsection (5) must be given to the tenant and any relevant person—
(a) in the prescribed form or in a form substantially to the same effect, and
(b) within the period of 14 days beginning with the date on which the deposit is received by the landlord.
…
Section 214 Housing Act 2004 provides (again, so far as it material):
214 Proceedings relating to tenancy deposits
(1) Where a tenancy deposit has been paid in connection with a shorthold tenancy, the tenant or any relevant person (as defined by section 213(10)) may make an application to a county court on the grounds—
(a) that the initial requirements of an authorised scheme (see section 213(4)) have not, or section 213(6)(a) has not, been complied with in relation to the deposit; or
(b) that he has been notified by the landlord that a particular authorised scheme applies to the deposit but has been unable to obtain confirmation from the scheme administrator that the deposit is being held in accordance with the scheme.
(2) Subsections (3) and (4) apply if on such an application the court—
(a) is satisfied that those requirements have not, or section 213(6)(a) has not, been complied with in relation to the deposit, or
(b) is not satisfied that the deposit is being held in accordance with an authorised scheme,
as the case may be.
(3) The court must, as it thinks fit, either—
(a) order the person who appears to the court to be holding the deposit to repay it to the applicant, or
(b) order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme,
within the period of 14 days beginning with the date of the making of the order.
(4) The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.
…
Ms Harvey contended that the power to order the return of a deposit and damaged pursuant to s.214(3) and (4) only arose if the court was satisfied that s.213(6)(a) had not been satisfied and that compliance with s.213(6)(b) was irrelevant for these purposes. So – the power to order the return of the deposit and damages only arises if the landlord has failed to provide the prescribed information in the prescribed form (or one in similar effect). It is irrelevant, for the purposes of s.214(3) and (4) when that information is provided.
HHJ Bullimore accepted this argument. In his judgment:
[t]he failure on the landlord’s part was not that ‘the prescribed information was not given’ but that it was not given within the fourteen days. The district judge… took the view that [s.213(6)(a) and s.213(6)(b)] were so closely connected that they only made sense if they were read together but I think that was an error. I think that the draftsman in dealing with proceedings relating to tenancy deposits in Section 214 was very clear in differentiating between the requirements of giving information and giving the information after a specified period.
There were, to his mind, sound policy arguments for this conclusion:
… they are very serious powers to be exercised against a landlord… one can well see that in the minds of the legislators, it was one thing to deal with a landlord who had not provided the prescribed information at all and to deal with it in that way with a landlord who had provided the prescribed information but had not done it within that short period laid down by the Act.
Accordingly, as the information had been given before the tenant made his application, the application should have failed. The appeal was allowed and the order for the return of the deposit and the damages was overturned.
A final word of caution. This was only a decision of a county court and one that was only argued on one side (Mr Bamforth didn’t appear at the appeal). It is not a binding decision and other judges are perfectly free to come to other conclusions. As to whether or not it is right – I’ll leave that to you all to comment on!
[For all tenancy deposit case posts click here]
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The Housing Law Practitioners’ Association annual conference is being held on the 10th December 2008 at the Royal Institute of British Architects, London. Those of you who subscribe to Legal Action should already have had your application forms, but, for everyone else, details can be found here. The speakers include:
- Rabinder Singh QC on equality and discrimination law after Malcolm;
- Andrew Arden QC, Jan Luba QC and Caroline Hunter on current issues in homelessness;
- Robert Latham and Christopher Baker on allocation schemes;
- James Stark, Derek McConnell and Bob Lawrence (CLG) on possession proceedings;
- Matthew Hutchings and Stephen Cottle on housing and human rights.
The conference lasts from 9am till 6pm, is fully catered and attracts 6 CPD points. A day of housing law. With food. And CPD points. What more could you ask for?
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The Hlpa meeting tonight (17/9/08) was a particularly interesting one, on the topic of disrepair. Talks were from Mel Cairns, Andrew Brookes of Anthony Gold and Marina Sergides of Garden Court.
Among the end of meeting news items were:
- The current intent is that the main body of the Housing & Regeneration Act, including the tolerated trespasser provisions, will come into force on 6 April 2009.
- New Housing Benefit regs coming into force on 6 October 2008 mean that HB backdating claims can only be made for 6 months (for those of working age) and 3 months (for pensioners). Not good news.
There were a few surprises for me arising out of discussions of the talks.
One was that relatively few people have much experience of CFA funding for disrepair claims, despite the effect of the new regulations in easing the requirements and therefore subsequent costs challenges to the validity of the CFA. Given the large proportion of social tenants who will not be leigible for legal aid, I would have thought that, as Andrew Brookes suggested, this was a clear option for funding claims that the tenants otherwise have no way of bringing.
The other surprise was that basically no-one in London/the SE is bringing EPA 1990 private prosecutions anymore. The history, which was news to me, was that there were great swathes of prosections in the 1980s, mostly in east London, and that a batch process was in place, which still operates in Birmingham, apparently. But recent experience seems to be that they are difficult, massively unpredictable in the Magistrates Court, and prone to unexpected detonations or collapses. I’ve not done an EPA, though I’ve been slightly involved in someone else’s. I can appreciate that focussing on the Criminal standard of proof is a hefty adjustment for civil litigators. I can also appreciate that it an be difficult presenting the Magistrates, or a DJ in the Mags, with an unusual and unfamiliar prosecution, but it may be a chicken and egg thing. More solicitors and Counsel wth experience of EPAs and more Magistrates Courts used to dealing with them could bring a different approach.
Marina Sergides did a useful run down of recent(ish) cases. Most, I am pleased to say, were previously reported on Nearly Legal. Some were unreported (anywhere) and I shall shamelessly purloin those, with attribution, for notes over the next few days.
Levels of damages were a topic at Hlpa and, as I have noted before, we seem to be in something of a state of stasis (or even a real terms fall on these), partly due the lack of higher court cases, and for that reason, I’m all for some upward pressure. A commentor at Hlpa suggested that he was seeing settlement figures routinely higher than many recent reported County Court cases. I could probably say the same, but even non-binding County Court cases aren’t helpful in making the argument.
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[Edit 15/09/08. It now looks like the following judgment is a) being appealed shortly and b) may only have been a County Court judgment, not High Court - this latter point is not clear but reliable sources say County Court]
[Edit 18/09/08. In the comments to this post, a few people, mostly being me, were wondering why any lender would touch shared ownership if their security could vanish this way. I've had a look at a few shared ownership leases now. They typically carry a clause requiring the landlord to notify the lender of any forthcoming possession/forfeiture proceedings for rent arrears. So the lender has the opportunity to pay off the arrears, protecting its security, and then take possession proceedings against the tenant/leaseholder themselves for breach of mortgage conditions. So there is a measure of security for the mortgagee written in, which is presumably why lending still takes place.]
[Edit 23/09/08. Updating post, with benefit of transcript here.]
I may well be a little late to the party on this one, having only picked up on it via a report in September’s Legal Action, but this is a very significant case for the increasing number of shared ownership occupiers – a number that may well sky rocket as the result of policy on rescuing people from mortgage arrears.
Richardson v Midland Heart Limited High Court (Chancery) 12/11/2007, unreported, concerned a shared ownership lease taken out in 1995. Accounts of the case can be found here and, a more detailed report from Forbes Solicitors here. There is also apparently a detailed report in [2008] NLJ 327, which I will look up on Monday.
The facts were as follows.
Ms Richardson acquired a 99 year shared ownership lease from Focus Two HA (later Midland Heart). She paid £29,500 – 50% of the then market value – with a rent of £1,456 pa. Following personal difficulties that meant she could not live in the property for over a year, housing benefit stopped and the rent wasn’t paid. Ms Richardson tried to sell the property, now worth £151,000. Midland Heart sought possession under HA 1988 Sch 2 Ground 8 on the basis on 16 months rent arrears.
At County Court, a request for an adjournment was refused and an outright possession order made.
Ms Richardson made an application to the High Court for a declaration of her interest in the property and either an order for sale or an accounting for 50% of the proceeds.
Ms Richardson argued that
a) there were two tenancies – an assured tenancy under HA 1988 and a long lease subject to forfeiture. The possession order had only ended the assured tenancy.
b) The freehold of the property was held by Midland Heart on trust for itself and her on 50% beneficial interest. Even if the lease had been terminated, she was entitled to return of the capital payment in respect of her beneficial interest.
The High Court held that:
The capital payment did not purchase a half share of the property. The relationship was that of landlord and tenant not trustee and beneficiary. Ms Richardson had a right to lay claim to the freehold, but only if she had followed the staircasing process to ‘purchase’ increased shares of the property. She had not done so. Her interest was restricted to that of the lease.
The lease was a 99 year term certain. There were not two tenancies but rather one. The tenancy created fell under s.1 HA 1988 as it was a tenancy of a dwelling house let as a separate dwelling to an individual who occupied it as her only or principal home. It did not fall within any of the exclusions. It was therefore a fixed term assured tenancy. As such, the provisions of Ground 8 applied. the possession order was validly made, the lease determined, and her interest in the property was extinguished.
Apparently Midland Trust did repay Ms Richardson the initial premium, but this was entirely voluntary. There was no increase to match the increase in the value of the property, but there was no requirement to pay anything.
There is no news of any appeal.
So, just to be clear, a shared ownership lease, at least if it doesn’t fall outside the HA 1988 limits which many won’t, is functionally nothing more than an assured tenancy with an option to eventually purchase the freehold, or, I suppose, at least a 100% interest in the lease if a leasehold property. The premium for the percentage of the lease does not bring about any greater or other interest in the property.
Practically, the only difference between this and the dodgy sell and rent back schemes floating around is the difference between an assured and shorthold assured tenancy, if you don’t count the possibility of freehold/100% purchase eventually.
After some rapid education (thanks Francis), not having actually dealt with shared ownership lease possession proceedings, this makes a certain sense.
A residential lease which meets the requirements of Sch 1 Part 1 HA 1988 on rateable value (below £1500 in London, below £750 elsewhere) and rent level (more than two thirds of the rateable value) will be an assured tenancy.
This means that s.5(1) HA 1988 prevents the lease being ended by forfeiture proceedings, it has to be via HA 1988 grounds. HA 1988 s.7(6)(b) says that there has to be provision in the tenancy agreement for the tenancy to be ended on that ground (but a provision for forfeiture for non-payment of rent suffices to enable a ground 8 possession).
This means that the forfeiture for arrears provisions in shared ownership leases are unenforceable, because forfeiture is excluded as a valid means of ending the tenancy, but the provision is sufficient to enable a ground 8 possession claim under HA 1988. Artesian Residential Investments ltd v Beck [2000] QB 541
Standard shared ownership leases do contain forfeiture on non-payment of rent provisions, but assuming the rateable value/rent conditions are met, which they may well be, those provisions are unenforceable by the forfeiture proceedings route, and s.138 County Courts Act 1984 provisions on relief from forfeiture are unavailable to the tenant.
Oddly, on registration of the shared ownership lease at the Land Registry in the name of the tenant, there is a ‘no disposition by sole proprietor’ restriction, which normally indicates a trust – typically a trust for tenants-in-common who are also title holders. Here its purpose is to ensure no sale without the landlord’s consent, but it would indicate that there are split definite beneficial interests in the property, which accords with the (say) 50% tenant interest of a shared ownership scheme. But what is being held in trust – perhaps the leasehold interest, rather than freehold – could be a messy point to take on appeal.
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