(We are, as ever, hugely grateful to Mike Norman of Harrow Law Centre for his excellent updates on housing law in Wales. Here is Mike’s report on the fascinating denouement of the ‘Costal Housing Group’ litigation on the effect of not serving EICRs under Renting Homes (Wales) Act.)

The previous article on the Welsh litigation, “It must have consequences” – Nearly Legal: Housing Law News and Comment, addressed part 1 of the High Court action in the case of Coastal Housing Group v Mitchell and Ors.

Here, the second part of the judgment is addressed, being consideration of the adjourned counterclaims.

Since Coastal Housing had merged with RHA Wales in January to form Beacon Cymru, part 2 therefore becomes Beacon Cymru Group Ltd v Mitchell and Ors (2025) EWHC 2477 (Ch).

Background facts and relevant findings from part 1

As a reminder, the litigation was commenced by a group of Welsh Registered Social landlords (RSLs), against longstanding occupiers of theirs who agreed to be part of litigation for the purpose of the test case.

Common to each of the three cases that made it to this second part, were:

• Each occupation contract had a term in it stating that the property was required to be fit for human habitation. This is a default fundamental term of Welsh contracts, i.e. it is capable of removal in the very limited circumstance that its removal can be said to benefit a contract-holder.

• Each occupation contract had a term in it stating that rent was not ‘required’ when the property was not fit for human habitation. This is a default supplementary term of Welsh contracts, which is capable of removal by agreement between it’s parties. It wasn’t removed in these contracts.

• The landlords had obtained Electrical Inspection Condition Reports (EICRs) as required by the Fitness for Human Habitation regulations, but hadn’t served them on the occupiers within the prescribed required time period, or indeed for months afterwards.

• In part 1, the Court specifically decided that the regulations required both obtaining and service of the EICR in order to comply (issue 1A). Accordingly, the failure in (iii) was a breach, so the properties were unfit for human habitation.

• The occupiers themselves had no concept of either the fact of the breach, or the law behind it, until the landlord contacted them to appraise them of the situation and they’d taken legal advice. By that point, the landlords had already provided the EICRs previously obtained i.e. remedied the breach.

• The occupiers had continued (with one exception*) to pay the contractual rent during the period of breach, and through both initial and subsequence litigation.

• The Court had decided the fact of payment of the rent during the breach period didn’t alter that it was ‘not required’ (issue 1B). The Court left open what this meant for rent which was already paid, to part 2.

*The one exception being Mr Wadley, who had withheld one month’s worth of rent only, to test to if this could be ‘set off’ against the rent arrears he owed. This action was at the landlord’s suggestion.

Issues in part 2

There were the six issues the Court considered, as part of the question regarding whether the landlords had to return the rent. To paraphrase:

1. Were the Defendant’s payments during the breach periods, made on the basis of a mistake of law?
2. If yes, did this mean the claimants were unjustly enriched by the mistake?
3. Given there is an ongoing contractual relationship between the landlord and occupier, does this preclude a claim for unjust enrichment by the Defendants?
4. Can counter-restitution apply, to allow the Claimants to nevertheless retain the disputed rent?
5. Can Mr Wadley withhold his one month’s rent, by setting it off against his counterclaim?
6. If the Defendants won on the counterclaims, is Article 1, Protocol 1 of the ECHR engaged (i.e. the landlord’s human right to their property, in the form of rent)?

I hope I wasn’t alone, in keenly anticipating exactly how the court might deal with question 6.

The Court had, after all, specifically stated it wanted to hear more from the intervening Welsh Ministers, because of a paucity of input in part 1, so it appeared entirely possible that the Defendants would be able to establish the counterclaim in principle, engaging question 6 to form a significant part of the judgment.

Issue 1 – were the Defendant’s payments made on the basis of a mistake of law?

As a bit of a spoiler, the Court answered issue 1 negatively… so no, the Defendant’s payments were not made on the basis of a mistake of law.

It therefore is only the findings on issue 1, which form the ratio precedent in the case. The Court commented on issues 2 and 3, but I’m afraid issues 4, 5 and 6 had no comment.

The Court considered the judgment of Lord Hope of Craighead in Klienwort Benson Ltd v Lincoln City Council (1999) 2 AC 349, 407-8, in asking questions to establish a mistake of law case as being (1) Was there a mistake? (2) Did the mistake cause the payment? (3) Did the payee have a right to receive the sum paid to them?

The Court found that (1) yes, there was a mistake and on (3) no, the landlord wasn’t entitled to receive the rent. The difficulty  for the Defendants was on (2) whether it was the mistake that caused the payment.

Since the agreed facts were that the occupiers didn’t actually know about the breach until their landlord told them, the Court considered how the Defendants would have approached the situation, had they had known about the breach, and leant into that hypothetical question on the evidence before it.

All occupiers in the case referenced their gratitude to their RSL.

Ms Mitchell had been encouraged by her landlord to participate in community schemes, leading to her become a board member of the landlord. She recognised the stress on them of potential large-scale rent withholding.

Ms Jones’s tenancy (as was) gave her a feeling of belonging and safety at a time of difficult circumstances. She had been encouraged to participate in a green space improvement project.

Mr Wadley was happy in his property, and he volunteered on various communities of Bron Afon. He couldn’t fault his landlord.

In summary, the occupiers in this case all had excellent relationships with their landlord. They were risk-averse, and would only have contemplated not paying rent had their landlord told them they were entitled not to do so. That assurance wouldn’t have been given, because the RSL’s themselves weren’t sure that this was the position and maintained they believed rent was due. The Court therefore concluded payment wasn’t made as a result of the mistake of law, as it would have been paid anyway, so issue 1 was decided for the Claimant.

Comment

In respect of the ratio decision, I think it’s important that it is a feature rather than a bug of this litigation, that the occupiers had very substantial loyalty to their landlord and held positions within them. None had rent arrears, and a successful rent return would have been a windfall for them.

The judgment on issue 1 leads to at least a default position in the courts bound (i.e. the County Court) that even if an occupier could in principle show landlord breach in respect of human habitation legislation, at least a presumption would apply that rent that has already been paid, cannot be returned. Looking at this from the point of view of the sheer amount of money potentially on the table, such a position being the starting point is probably going to feel a lot more comfortable in the sector all round.

It might not, however, take a particularly herculean jump of imagination to a Court faced with a very different prospect – a disgruntled occupier who had a poor relationship with their landlord.

Issue 1 being resolved on the facts of the particular occupiers before it, different occupiers who could demonstrate they *would* have withheld rent had they known of the breach (and much more so, an occupier who in fact did), would surely be able to distinguish their facts from issue 1 here, without having to argue that issue 1 resulted in an error of law applied. Surely the presumption  would be rebuttable, rather than the ratio on issue 1 equating to blanket consideration that rent paid could never be returned, once paid.

Issue 2 – were the Claimants ‘unjustly enriched’ by the payments?

The disgruntled occupier distinguishing their facts on issue 1, however, would run into how the Court approached issues 2 and 3. Whilst obiter, it will of course be highly persuasive to the Courts below.

The Court considered that the gateway question, were the Claimants ‘enriched’ by being paid rent during a period when rent wasn’t required, could clearly be answered positively. It could therefore go on to considered whether the enrichment was ‘unjust.’

The Court considered the statutory purpose of the relevant legislation. It was to incentivise landlords to engage with their obligations. Once the EICR was provided, that statutory purpose was met. In the instant case, this had been done even before the occupiers knew about the breach.

For this reason, the Court considered it wasn’t necessary for rent to need to be returned, in order to meet that statutory purpose. No such any motivation was needed, because the landlord had already done it. Allowing an effective a rent rebate for the breach period, would not be proportionate. The Court also considered how the legislation could have, but didn’t, include a specific procedure or rule about reclaiming rent already paid.

Comment

In part 1 (the Coastal case), the Court had found that a landlord couldn’t retrospectively comply with the regulations, having breached them – that ‘it must have consequences.’ It also noted that providing a document was important as obtaining it.

For me, the judgment in part 2 pivots, in finding that despite a breach, rent already paid wouldn’t need to be returned where the issue is remedied prior to the occupier noticing the breach. In effect, actually, it needn’t have consequences.

My observation on issue 2, would be that whilst the Act does cover a huge amount of ground, and whilst it’s true that the Act doesn’t specifically provide for return of rent once paid, I think it could argued in a future case – of a very different type to the immediate one – that the Act doesn’t provide a complete code in respect of causes and remedies. I will explore this further in issue 3, below.

I will note here, how much Wales is screaming out for more case law in respect of the Act generally; in it’s absence, interpretations of law will be piecemeal and it would be very helpful to get binding precedent. Obiter will of course be very persuasive in its absence.

Issue 3 – subsisting relationship

Again obiter, but of course persuasive.

The Court considered that restitution isn’t ordinarily available for an ongoing contractual relationship. Moreover, rent not being ‘required’ basically gave the contract-holder a choice about paying rent, however once it is paid, there wasn’t a mechanism providing for it’s return. The only basis on which the occupier had paid, was because of the contract i.e. there was no other reason why the occupier paid.

As with issue 2, occupation contracts didn’t giving the contract-holder an express right of repayment for rent already paid. I  In support of the express right point, the Court noted s87 of the Act gives detailed compensation provisions in respect of breaches of statements of contract provisions. It gives a matrix of damages, starting with the type of breach, and around the landlord’s culpability (i.e. intentional conduct). On top of this, s88 specifically provides for a contract-holder’s ability to set-off any such damages a court might award, against their rent.

Since the Act doesn’t provide a cause of action or the remedy of the right of set-off, it seems the Court considers that neither apply (see para 67 of the judgment).

Comment

I’ve tended to consider the Renting Homes (Wales) Act as pretty comprehensive, in terms of setting out the application of how it wants contracts to work. I’ve noted above, that I’m not sure however that it provides a complete code of remedies.

I had originally considered the implications of the judgment on issue 3 with great concern, being that it might be considered as an authority for the proposition that since section 88 is the only section in the Act which provides a contractual right of set off, this would mean that any other type of set-off couldn’t apply (because it isn’t in the contract). This would represent a significant departure from the pre-Act position i.e. if the principle of British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd (1980) QB 137 were displaced in cases where set-off hadn’t been placed on a contractual footing.

On reflection, I’ve realised that I don’t think the judgment goes that far, but is (again, at para 67) in a more limited way, referring to the Act not extending to providing a remedy e.g. set-off, where there is no cause of action, i.e. rent not required to be returned.

However, I do think the point is ripe for addressing further, on a case with different facts. Whilst s87/s88 is comprehensive in respect of a particular issue- statement of contract breaches – otherwise I think it’s arguable the Act doesn’t provide a complete code of causes and remedies.

For example, the Act also makes no provision for the contractual right of setting off of rent in conventional disrepair counterclaims, or set-off for breach of deposit scheme (tenancy deposit) claims either. If these were somehow disapplied for lack of provision in the Act, that could have significant consequences, particularly in mandatory ground rent eviction cases for deposit or disrepair. Assuming set-off is still properly arguable, I think this pierces into the Act not being a complete code.

Of course, the facts of the instant occupiers in the Beacon litigation, didn’t involve a desperate (and/or disgruntled) occupier facing eviction for rent arrears. I feel a better test case for those to explore these issues would be a case of that nature, because it would be crucial to address these in order to resolve the dispute.

Additional comment

We’ve also mentioned previously that Prof. David Cowan (Cardiff University) has an excellent housing law blog, dedicated to and providing regular comment on Welsh housing issues. His very interesting take on the case is here Coastal 2: Some observations – Housing law and policy in Wales – Cardiff University.