By J
14/02/2021

Substantial debts are not substantial arrears

The decision of Master Dagnall in The Master, Wardens and Assistants of the Guild Fraternity of the Brotherhood of the Most Glorious and Undivided Trinity and St Clement in the Parish of Deptford Strond, commonly called the Corporation of the Trinity House of Deptford Strond v (1) Prescott (2) Byrne (2021) EWHC 283 (Ch), was, until Saturday night, at risk of being a footnote in housing law history, but, with the extension of the ban on (most) evictions in England being extended until the end of March (here, and see below), it’s now a bit more important.

First, a bit of background. The Coronavirus Act 2020 made provision for extended notice periods for most possession claims and had been varied and extended from time to time (and is presently due to expire at the end of March, whereupon we all go back to the pre-pandemic rules for notice periods). We’ve also had the Master of the Rolls and the CPR Rules Committee step in to cobble together two periods of stays on possession claims when the government finally realised that extended notice periods do not actually prevent evictions. This case is not (directly) about any of that. Rather, it is about the Public Health (Coronavirus) (Protection from Eviction) (England) Regulations 2021 SI 2021/15.

In outline, those regulations provide a bar on the enforcement of most residential writs or warrants of possession. There are, however, exceptions. One of those is where the court is “satisfied” that the case involves “substantial rent arrears” (defined as a case where the amount of unpaid rent arrears outstanding it at least an amount equivalent to 6 months rent) and the order for possession was made wholly or partly under Grounds 8, 10, 11, Sch.2, Housing Act 1988 (reg.2(3), (4)). They presently apply until 21 February 2021 (although there are now press reports that they will be extended, at least in some form, until the end of March).

In this case, the defendants were tenants under a contractual assured shorthold tenancy until 30 November 2019, whereafter they became statutory periodic tenants (s.5, HA 1988). Rent arrears began to accrue and, on 25 November 2019, the claimant issued a claim for possession and money judgment. The possession claim was based on s.21, HA 1988 (notice only, no fault), although an NSP had also been served relying on grounds 8, 10 and 11 (5 months arrears, it was said). Although the claimant sought permission to amend to rely on the s.8 notice, when the case came before the DDJ there was no order on the application. Instead, a possession order was made on the s.21 notice and money judgment was entered for arrears of just under £28,000. Possession was to be given up on or before 24 January 2020.

Then, of course, the pandemic hit. A date for execution of the order was issued (14 February 2020) but the order was not executed. Instead, in December 2020, the claim was transferred to the High Court and a writ issued. That was not enforced because of the 2021 SI. By this time, the arrears were said to be over £70,000. The claimant therefore issued an application (which the court treated as an application for a declaration) that the “substantial rent arrears” exception in reg.2 of the 2021 regulations was met.

Now, I know what you are thinking. This is a possession order made under s.21. The regulations provide for an exception where the order is made under Grounds 8, 10 or 11. Those are different things. And you would be right. But, faced with over £70K owing, the landlord had a cunning argument. The policy of the regulations was, it was argued, to provide that landlords were entitled to recover possession where there were substantial arrears. The form of the possession order could not be determinative of whether or not there was a right to proceed with an eviction. Given the Art.1, Protocol No.1 rights of the landlord (i.e. the right to receive the rent; to deal with the property which they owned), the rent arrears exception had to be read as including cases made under s.21 where there was a money judgment for substantial arrears and to do otherwise would amount to unlawful discrimination contrary to Art.14, ECHR.

Before we turn to the decision, a few points to note here. First, the landlord didn’t challenge the underlying vires  of the regulations or mount any public law challenge (hardly surprisingly since a JR of the regs wouldn’t have got on in time to make any difference to this landlord). Secondly, the landlord didn’t bring an Art.6 challenge. That seems like one that might be worth a punt in the future. The execution of a judgment within a reasonable time is included within Art.6: Immobiliare Saffi v Italy App. No. 22774/93; (2000) 30 E.H.R.R. 756. Thirdly, the landlord didn’t rely on the (now very long) line of Maltese cases where low rents and an inabiltiy to recover possession have been held to violate A1/P1. As against that, the tenants, as litigants in person, didn’t refer to Nemeth v Hungary App. No. 73303/14 (moratorium on evictions lawful given the economic meltdown). All of those points remain live, perhaps for an appeal or for any future challenge to these regulations (which might happen now that they’re being extended).

The court was content that the 2021 regulations amounted to an interference with A1/P1 and was prepared to assume (‘tho with some doubts) that the distinction between landlords which relied on s.21 and s.8 grounds could be held to amount to discrimination for Art.14 purposes. The critical question was whether any interference was justified. The court was satisfied that it was. The effect of the pandemic was well-known. There was a distinction between a case where the reason, as determined by the court, for the possession order was the arrears and a case under s.21. The latter simply reflected the fact that the landlord wanted to recover possession. The former was predicated on the tenant having done something which the law did not tolerate. That was a legitimate distinction for the legislation to draw.

Comment

Faced with arrears of over £70K, I can understand why the LL thought this was worth a shot. It’s a tough argument, but worth a roll of the dice. As noted above, there are additional arguments that could be deployed on both sides. I also wonder if there might be a different outcome where the LL is a single individual whose own financial survival depends on receiving the rent? And whether such arguments should really come via JR, rather than private law proceedings (‘tho cf the discussion in Arkin about this, back at the start of the pandemic). But, for now, we have a High Court Master who has held that s.21 claims are excluded from the exception and so cannot be enforced whilst the 2021 regulations remain in force. We also have the government announcing that the ban will be extended until at least 31 March 2021 (here).

Of course the real problem is that delays to evictions do nothing to solve the affordability problem. Rent arrears are contractual debts and need to be repaid. Tenants will lose deposits and/or fall into bankruptcy. Landlords – many of whom are quite “small scale” – are unlikely to be able to absorb significant losses. It’s striking that both Wales and Scotland have come up with financial aid packages (loans to LL – Scotland, loans to tenants – Wales) to try and ameliorate this position. Will England eventually do the same?

 

 

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.

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