Sovereign Network Homes v Ms Vanessa East, Claim Number H01W1247 (13 May 2024, Central London County Court).

Thanks to Landmark Chambers for their note on this case.

This was a county court appeal of a first instance decision to allow an application to suspend a warrant, and vary a possession order, (Ms East had applied to set aside the possession order), obtained by Sovereign Network against its shared ownership lessee, Ms East.

In part, the set aside application was on the basis that proceedings had not been served on Ms East (due to an address error on the Court file) such that the first she knew of them was when she received notice of eviction.

Sovereign appealed the decision. Ms East was given permission to amend her application to set aside the possession order.

As far as applying too set aside because of lack of knowledge of proceedings, a fairly straightforward Forcelux v Binnie (our note) matter.

However, there was additional argument and findings that are potentially of considerable broader significance, despite this being a county court matter, not a binding precedent (although we should note the judgment is by HHJ Bloom, who certainly knows her housing law).

The possession claim itself was for rent arrears – rent on the ‘landlord’s share’ of the property, and had been made under Ground 8 Housing Act 1988 – the mandatory ground.

In the appeal Ms East argued that, as per Avon Ground Rents Limited v Canary Gateway (Block A) RTM Company Ltd (2023) EWCA Civ 616 (our note), section 76 Commonhold and Leasehold Reform Act 2002 defined a ‘long lease’ in such a way that a shared ownership lease that was not staircased to 100% counted as a long lease. (In that case, in the context of right to manage.)

Section 166 Commonhold and Leasehold Reform Act defined ‘long lease’ for the purposes of that section by reference to section 76. Section 166 required the landlord to serve a notice specifying

(a) the amount of the payment,

(b) the date on which the tenant is liable to make it, and

(c) if different from that date, the date on which he would have been liable to make it in accordance with the lease,

with a payment date to be between 30 and 60 days after the notice.

Crucially, if the landlord did not serve such a notice, the tenant is not liable to pay the rent.

In this case, there was no evidence that Sovereign had served section 166 notices for the relevant rent payments. On that basis, Ms East was not  (yet) liable for the rent payments and there were no arrears.

HHJ Bloom accepted this as an important point of law and a difficult argument, with sufficient conviction to enable the possession order to be set aside and the case remitted to a District Judge to hear full argument on the point.

Other relevant factors were that Ms East had acted promptly after receiving the notice of eviction, that Sovereign stood to make a substantial windfall of Ms East’s 35% share, and that Sovereign had failed to comply with the Pre-action Protocol for Possession claims by Social Landlords, despite treating the lease as an assured shorthold tenancy.

Comment

We will see if Sovereign appeal further, although given the Court of Appeal’s decision Avon Ground Rents v Canary Gateway, it would be hard to revisit the definition of ‘long lease’.

But what a mess. Since Midland Heart v Richardson (our note), it has been taken that shared ownership leases of less than 100% ownership were assured tenancies (or assured shorthold tenancies, the distinction makes no practical difference). Indeed, many non-shared ownership leases are potentially ASTs, depending on the facts of occupation and ground rent level.

And this creates an unholy mess as to what applies to such leases, as we’ve previously noted.

So, if this argument is right, which I think it quite possibly is, shared ownership landlords would have to provide the s.166 prescribed form of rent demand. But then s.167 – no re-entry or forfeiture for small amounts – expressly states

“long lease” has the meaning given by sections 76 and 77 of this Act, except that a shared ownership lease is a long lease whatever the tenant’s total share

Which just adds to the confusion over a definition of long lease elsewhere in the Act.

And, of course, forfeiture doesn’t apply to an assured tenancy, as it is expressly ruled out by Housing Act 1988.

The Renters (Reform) Bill had a simple one line solution to all of this. It added to the Housing Act 1988 list of tenancies that could not be an assured tenancy

“A fixed term tenancy of a term certain of more than seven years from the date of the grant of the tenancy.”

But the Renters (Reform) Bill is deceased, and with it this simple saving clause.

One can only hope the next government addresses this at the earliest possible moment, and makes it simply the case that a shared ownership lease is a long lease, with all that involves, not an assured tenancy (and of course the other long leases currently caught).

Shared Ownership has always been a Frankenstein’s monster of a tenure, sewn together out of various pre-existing forms of tenure, but without any thought as to how the bits might function as a whole. It is way past time to put it on an adequate legal footing, because the courts are going to be occupied with a lot of knotty, indeed Gordian, issues over the next few years if not.

In the meantime, it is at least possible that pretty much every housing association that has shared ownership lessees is not demanding rent properly, such that rent isn’t due…