Loveridge v London Borough of Lambeth [2014] UKSC 65

So, if a local authority unlawfully evicts a secure tenant (and yes, it happens) what should the measure of damages be? Under s.27 and s.28 Housing Act 1988, damages fall to be assessed under a valuation exercise, governed – so far as is relevant to this case – by s.28(1)

(1) The basis for the assessment of damages referred to in section 27(3) above is the difference in value, determined as at the time immediately before the residential occupier ceased to occupy the premises in question as his residence, between—
(a) the value of the interest of the landlord in default determined on the assumption that the residential occupier continues to have the same right to occupy the premises as before that time; and
(b) the value of that interest determined on the assumption that the residential occupier has ceased to have that right.

Mr L had been unlawfully evicted by Lambeth (sort of by accident). Damages for loss of belongings had been agreed, but the case stuck on what the s.28 damages would be. At first instance, the Judge had accepted valuation evidence that difference between the open market value of the property with the occupier in place and the market value without the occupier in place was some £90,500, because the market value with a secure tenant in place would be virtually nil.

The Court of Appeal [our report here] found that was wrong.

the valuer is equally obliged to take into account the inherent fragility of a secure tenancy to becoming downgraded by operation of law into an assured tenancy, on a sale of a local authority landlord’s interest to a private landlord purchaser. In the first example, the fragility of the occupier’s interest is assumed to be taken advantage of by the selling landlord in default. In the present case, the vulnerability of Mr Loveridge’s secure tenancy to becoming downgraded into an assured tenancy on an open market sale to the highest bidder is inherent in the nature of his rights.

Thus, as the secure tenancy would end on a sale to a private landlord, becoming an assured tenancy, that should be figured in. Thus the difference in sale value was probably nil. The Court of Appeal did add a few thousand to Mr L’s other damages, but the difference was still between some £16,000 and £90,000 odd.

Mr L went to the Supreme Court.

Briefly, the Supreme Court overturned the Court of Appeal, pointing to the express wording of s.28(1)(a) – ‘that the residential occupier ‘continues to have the same right to occupy the premises as before’. As the whole exercise was hypothetical, predicated on the unreality of selling a property that in any event had another secure tenant in the other flat, the ‘same right to occupy’ had to be taken to mean a continued secure tenancy, even if in practice such a thing was impossible.

What was the right which Mr Loveridge had to occupy the downstairs flat immediately prior to the eviction? It was the right of a secure tenant. Lambeth correctly argues that the consequence of a notional sale to a private landlord would be to convert the status of Mr Loveridge’s tenancy (and indeed that of the tenancy upstairs) from secured to assured. But in my view the notional exercise mandated by subsection 3(a) of section 28 does not extend to making the consequential adjustments to the nature of Mr Loveridge’s right (or indeed that of the tenant upstairs) consequent upon sale. For that is barred by the words of subsection 1(a). Within this highly artificial exercise, regard to the effect of one assumption is halted by the terms of another.

The first instance decision was right and the damages assessment restored.

That said, the Supreme Court was not entirely happy with this result. Noting that

Local authority landlords rarely perpetrate unlawful evictions of their tenants. When they do so, it is usually, as here, as a result of honest misjudgement and scarcely ever (although it was found to have occurred in AA v London Borough of Southwark [2014] EWHC 500 (QB)[our note]) as a result of any deliberate intention to act unlawfully.

the Court later added

Parliament might wish to revisit the application of section 27, and therefore of section 28, of the 1988 Act to unlawful evictions on the part of local authorities. No doubt all reasonable means of dissuading them from making unlawful evictions, whether by misjudgement or otherwise, should be in place. But the facts are that Lambeth did not realise a capital gain, and never aspired to realise a capital gain, as a result of its eviction of Mr Loveridge; and that its intention was always to re-let the flat and that, once it did so, even its notional gain was eliminated. In such circumstances it seems wrong that, by reference to a calculation of its notional gain, the law should require payment to Mr Loveridge out of public funds in an amount which is 12 times greater than that of his loss.

For now. s.28 applies as per this Judgment, unless and until Parliament gets around to amending it, meaning the possibility of very substantial damages for an unlawfully evicted secure tenant.