The entrepreneurialisation of social housing over the last twenty years has led to a diversity in the types of shared ownership. Of course, the standard leasehold type (what in the old days was called DIYSO) predominates, but there are a multitude of other types. In Ker v Optima Community Association  EWCA Civ 579, the Court of Appeal had to deal with one of these other types in Optima’s claim for possession; but in quite odd circumstances for, by the time of the hearing of the appeal, Ms Ker had accepted that the property was unaffordable for her so that she had to give up possession. What was in issue seems to have been whether she was entitled to return of some of the amounts she had paid. Patten LJ, who gave the only substantive judgment, held that she did not have such a claim and ordered possession.
The case appears, then, to lack significance: this was an unusual type of SO scheme, and effectively the possession claim was uncontested. However, it does give a number of indications about the potential for Art 8 and A1P1 defences to mandatory possession in shared ownership cases, and in that respect takes us a little bit further than Midland Heart v Richardson (links to our report, with lots of interesting comments). It is also significant because of the detail the Court goes into about shared ownership grants and about the potential mis-selling of the product when advertisers and marketers get hold of it.
Optima developed an estate with a mix of general needs and shared ownership housing. They were unfortunately hit by the housing “crisis” and could not shift at least some of the shared ownership properties. They got permission from the then Housing Corporation to offer some of the properties on what became known as a flexi-buy scheme. Under this scheme, first time buyers who could not afford a deposit for a property went into occupation of the property as an assured shorthold tenant, paying a market rent; when they were able to buy the property on a standard form shared ownership lease (between 25%-75% share), Optima would contribute to the deposit the difference between the market rent paid and the social rent (in this case around £320 pm). The advertisers wrote, “To make things even easier, you’ll get around £2,500 for every year you rent with us to use as your deposit”; the marketers wrote, “FlexiBuy is a route to home ownership. With FlexiBuy you can rent a property from us and then choose to buy later under Shared Ownership. We will give you a proportion of your rent back to you to use as a deposit when you choose to buy”.
What Ms Ker actually signed was two documents: the first was an AST with rent at £700 pm; the second was an option agreement in which the Optima contribution to purchase was described as a “deposit incentive”. She would receive the deposit incentive when she exercised the option to buy the property. The advertisers and marketers do not appear to have referred to the fact that the option agreement would terminate if the tenancy terminated (among others). Ms Ker said that she read and understood the option agreement before signing it. Furthermore, she knew that she could not afford the market rent on her own small salary, and would need housing benefit to top up; Optima did not know this (had they known, they would not have offered the property to her because it “was not intended for tenants dependent on housing benefit”). After a year or so, arrears began to accrue – Ms Ker had a car accident and she had become pregnant with her second child, both of which affected her ability to work. Housing benefit would only cover the social rent. Optima offered the possibility of going to intermediate rent, but Ms Ker would lose her option. In the event, Optima served a s. 21 notice and eventually claimed possession.
Ms Ker pursued a range of defences at the County Court, but possession was ordered. Before the Court of Appeal, the argument proceeded on the basis of Art 8 and A1P1. The latter would only be successful if the amount paid by Ms Ker over and above the social rent (which would be repaid in the event that she exercised her option) was her possessions. It was noted that this amount was about the same as the outstanding rent arrears. It was pointed out that none of the post-Pinnock case law deals with issues “… where the consequences of the loss of the tenancy are more than the loss of possession”, and it would not be proportionate to order possession where the arrears were represented by the deposit rather than the rental element.
The Art 8 defence was never a great runner, but it was argued that, if Ms Ker had paid up the full rent or was unable to get a mortgage to purchase a share in the property, and Optima had served a s 21 notice, then that notice would be bad. The Court agreed – it would be an act of bad faith on the part of Optima and an attempt to frustrate the shared ownership scheme, which would be challengeable on ordinary public law grounds (). But that was not this case and “It is difficult to see without more why Optima should be precluded from terminating the option agreement and the tenancy when the alternative is to allow the tenant to become a long-term tenant which is what neither party ever contemplated” .
But the key to the case was rightly analysed as whether the £700 pm rent also included a deposit, which was one of Ms Ker’s possessions for the purposes of A1P1. If it was, it was argued that this gave rise to an Art 8 right as well unless Optima was willing to repay that money to Ms Ker. It is on this argument that, in my humble opinion, Patten LJ makes an error for he argues that “there is nothing in the Strasbourg jurisprudence cited to us which suggests that the determination of what constitutes property is anything but a matter of domestic law”; and it is that point which colours his analysis. For, construing the AST and option together, Ms Ker’s case was hopeless on that narrow interpretation. Ms Ker had no proprietary claim to the deposit, and Ms Ker’s entitlement to it depended on her exercising the option which she clearly could not do. Here, Ms Ker’s counsel were, I think, quite clever, because, having been boxed into a corner, they tried to duck their way out of it by arguing that the agreement was a pretence (in the sense described by Lord Templeman in Antoniades v Villiers and extended by the Court of Appeal in Bankway Properties v Pensfold-Dunsfold  EWCA Civ 528): “In the present case there has been no attempt to evade the provisions of any statutory regime but Ms Ker’s case is that the judge should have considered all the circumstances (including the subsequent consequences of the agreements) in determining what rights they conferred on her. Her case in a nutshell is that the advertising material I have referred to spoke of allowing a tenant to save under the scheme for a deposit but the combination of the tenancy agreement and the option agreement, if literally construed, will result in the events which have happened in her losing the deposit she has saved for if possession is ordered” (). The Court of Appeal were having none of that argument, though, because the case was unlike Antoniades and other cases which had followed it, and Ms Ker had understood the product.
So, Ms Ker lost in the CA. But there are indications here that an A1P1 defence to a possession claim in a shared ownership matter might well have legs, so to speak, but there is an issue as to wether this will just enable the buyer to have a money claim or whether it will constitute a ground of defence to the possession claim – as we all know by now, proportionality is heavily fact-dependent, and the grantor is always in the box seat.