Summertime… but the living ain’t easy!

Andrew Arden QC & Robert Brown

The bedroom tax is now 16 months’ old. Publication of a new report shows that it is not working.

We considered part of the Government’s package of benefit reductions (or “reforms” as the Government insists on calling them) a few months ago, in ‘Being for the benefit of Mr Tight’. One of the key measures is the bedroom tax. To recap, the bedroom tax is implemented by regs A13 and B13 of the Housing Benefit Regulations 2006 (SI 2006/213) (as inserted by the Housing Benefit (Amendment) Regulations 2012 (SI 2012/3040)). It requires local housing authorities to calculate the housing benefit payable to social housing tenants by, inter alia, reference to the number of bedrooms for which the claimant is eligible, defined by the number of occupiers of the property – for instance, a couple are expected to share a bedroom; likewise, two children under the age of 10 are expected to share. If the property contains an extra bedroom, the housing benefit payable is reduced by 14 per cent; if two or more extra bedrooms, by 25 per cent.

As we noted back in April, the impact assessment supporting the amending regulations suggested no great financial savings, maybe even none. The theory behind the bedroom tax was that under-occupied social housing should be freed up in order to allow families to move out of over-crowded housing. As we said then

“In reality, it is not so simple: there are many more cases where an extra bedroom is legitimately required than the Regulations provide for; and, it is outright ignorant to assume that moving is simple or in many cases even possible, especially if a social landlord (offering an affordable rent) does not have (or is not willing to offer) an appropriate, smaller property. Thus, there is no qualification on the reduction that smaller, affordable accommodation is available, or that the local housing authority will make it available. …

“We do not need to rely on our experience of working with social landlords and tenants to know just how exceptional it is to be able to make this sort of home-swap. Not only is it general knowledge but it was also the predictable consequence of an increasingly-capped housing benefit system that more and more private landlords would cease to accommodate tenants dependent on it.”

You no longer need to just take our word for it: DWP has now published an interim report, Evaluation of Removal of the Spare Room Subsidy, which looks at the first six months of the bedroom tax. A final report is promised for 2015 but for now there is much to take from the interim report.

Discretionary housing payments (which, if Government is to be believed, are the solution to any discrimination caused by the bedroom tax) are not sufficient. The interim report notes that some disabled applicants for DHP have failed means tests applied by local authorities, because they are in receipt of disability benefits – even though those benefits are meant to help with some of the extra costs of having a long-term disability or health condition and are not intended to help with housing costs: see Burnip v Birmingham CC [2012] EWCA Civ 629; [2013] H.L.R. 1.

Another concern in relation to DHPs was that some benefit claimants affected by the bedroom tax had either failed to apply for a DHP altogether or failed to provide adequate evidence in support of their application, especially where there was a mental health condition.

Finally, so far as DHPs are concerned, awareness of their availability is too low: over half of those who were affected by the bedroom tax and had not applied for a DHP said that they were not aware of the possibility.

Tenants, meanwhile, are clearly struggling with the financial impacts: 57% say that they have spent less on household essentials, 21% that they have borrowed money from family or friends, 3% have borrowed money via a credit card, while 3% have borrowed money through a pay day loan. The researchers do not appear to have asked tenants whether they had borrowed from a loan shark, but we note that 2% of affected tenants said that they had taken some “other” action, which must raise concerns about the measures to which tenants are being forced to resort.

On the other hand, only 13% of tenants said that they had looked at moving to another social housing property. Just 3% said that they had looked at moving into the private rented sector although those who had done so did appear (according to the report) to have had some success: 1.4% of affected claimants (i.e. half those who had looked into it) moved out of social housing and into the private rented sector. The net result for the HB bill is fairly obvious.

Unsurprisingly, rent arrears have increased. While the interim report was careful not to attribute this directly to the bedroom tax, it is surely the most obvious candidate. The conclusion seems logical: 41% of affected tenants are reported as having paid the full shortfall; if 41% did…

And what does the interim report say about the grand aim of the bedroom tax: incentivising tenants to move to smaller properties and free up space for larger households? Very little, it seems. A mere 4.5% of affected claimants managed to move to a smaller property.

If the Government is concerned about wasted space, it is not even clear that the right people are being targeted. A recent research paper, ‘Quantifying the extent of space shortages: English dwellings’, has concluded that, if the Government wishes to identify oversized homes, the relationship between the number of inhabitants and the number of bedrooms is a poor metric to use. The researchers found that under-occupation was less common in dwellings where HB was paid and that most properties for which HB was paid were undersized when compared with the space standard adopted by the Greater London Authority for new-build homes. The researchers also found that, somewhat counter-intuitively, 75% of households who lost some HB due to the bedroom tax were undersized when compared with the space standard. Based on their analysis, only 19% of those affected by the bedroom tax actually had more space than they needed. One cause of the problem is that properties in the UK are simply too small: the UK has the smallest homes by floor area in Europe. As the research paper concludes

“the vast majority of homes are at or below acceptable space standards. This physical shortcoming has been mitigated by residents having low occupation rates, which are necessary and should not be regarded as a wasteful use of space.”

Assuming that the policy goal is a legitimate one, the bedroom tax fails to achieve it because the brute-force methodology does not identify those properties with excess space.

The future for the bedroom tax is uncertain. Labour have said that they would scrap it, while the Liberal Democrats have undergone a partial change of heart and no longer support its current implementation. Given the damage that is being done to tenants, and to the budgets of social landlords, the real question is whether change can await the final report and the general election.

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Measure Twice, Cut Once

Andrew Arden QC & Robert Brown

As Parliament prepares to amend legislation protecting tenancy deposits, we look at what this means for landlords and tenants and consider the lessons for legislators.

Tenancy deposit legislation: a brief history so far

The idea that a landlord taking a deposit from a tenant was free to do pretty much whatever he chose with the money have been around for a long time. In 1998, the National Association of Citizens Advice Bureaux published its report, Unsafe Deposit, which suggested that 48% of CAB clients surveyed had had a landlord unreasonably withhold some or all of the deposit in the previous five years. The Survey of English Housing for 2001/02 found that 69% of tenants who had not had any or all of their deposit returned felt that money had been unjustifiably withheld. While these figures should be treated with some caution – “after all, they would say that, wouldn’t they?” – they clearly gave rise to justified concern.

The sums involved are far from insignificant. In 2002, 70% of the 2.21 million private rented sector tenants had paid a deposit. The average deposit was around £510 (the equivalent of a month’s rent), leading to a calculation that around £790m was being held in deposits. As we have previously noted, the number of private rented sector tenancies has now risen to 4 million. The English Housing Survey reveals that the average rent in the private rented sector is now £163 per week, or a little over £700 per month. Assuming that the proportion of tenancies in which a deposit has been paid has remained stable at 70%, and assuming that the average deposit still represents a month’s rent, £1,960m is currently being held by way of tenancy deposits. Furthermore, as experience is that it is becoming increasingly common to ask for a deposit of more than one month’s rent (i.e. a second months’ deposit to cover the last month’s rent), the total is likely to be even higher.

The consequences for tenants can be more than just the obvious financial issues: Unsafe Deposit cited cases of households facing considerable hardship and even homelessness through their deposits being withheld, as they had no means to raise a deposit for the next property.

In 2000, a voluntary tenancy deposit scheme was set up by the Independent Housing Ombudsman. Take-up was very slow. In 2002, the Office of the Deputy Prime Minister consulted on this issue in Tenancy money: probity and protection, saying that the failure of landlords to sign up to the voluntary scheme meant that a statutory scheme was being considered. Although a draft Housing Bill was published in March 2003, just a month after the consultation closed, it did not make any provision for tenancy deposits. In December 2003, a Bill was introduced to Parliament but there was still nothing covering tenancy deposits.

It was not until May 2004 that the then Minister for Housing and Planning announced that the Government would be bringing forward amendments to the Bill to cover tenancy deposits. Those amendments did not, however, materialise until a relatively late stage in the Bill’s passage through Parliament which had the unfortunate effect that, while the policy behind the measures had been consulted on, the technical detail of the legislation had not.

The tenancy deposit schemes provisions were ultimately passed as Pt 6, Ch.4, Housing Act 2004. Section 213(1) provided that where a landlord received a tenancy deposit in connection with an assured shorthold tenancy, he had to deal with the deposit in accordance with an authorised scheme. The initial requirements of the scheme had to be complied with within 14 days of receiving the deposit and a landlord had to provide his tenant with certain prescribed information within the same period. The prescribed information is to be found in the Housing (Tenancy Deposits) (Prescribed Information) Order 2007 (SI 2007/797). It includes such matters as the contact details and procedures for the deposit scheme and identifying features of the tenancy.

The sanctions for non-compliance are found in ss.214 & 215. Where a deposit has been paid, but the landlord has failed to deal with it properly, the tenant could apply to the county court. The county court is empowered either to order the landlord to pay the deposit into a custodial scheme or to repay it to the tenant. The court was obliged to order the landlord to pay the tenant a sum equal to three times the amount of the deposit. Section 215 provides that a landlord who had not complied with the requirements relating to a deposit is unable to serve a notice under Housing Act 1988, s.21.

There are two types of tenancy deposit scheme: custodial and insurance. In a custodial scheme, the landlord pays the deposit over to the scheme administrator. The scheme administrator then keeps the deposit until the end of the tenancy, at which point it is returned to the landlord or tenant, as appropriate. In an insurance scheme, the landlord keeps the deposit. At the end of the tenancy, the landlord is required to make the appropriate repayment to the tenant, via the scheme administrator. The scheme administrator is also required to maintain insurance, to cover any shortfall if the landlord does not cooperate. There are authorised schemes of both types.

The tenancy deposit provisions came fully into force on 6 April 2007. They have been the subject of much subsequent litigation. Two Court of Appeal decisions substantially reduced the effect of the protective measures. First, in Tiensia v Vision Enterprises Ltd (t/a Universal Estates) [2010] EWCA Civ 1224; [2012] 1 W.L.R. 94; [2011] H.L.R. 10, the Court of Appeal held that where a landlord has failed to comply with the initial requirements of an authorised scheme, he will not be liable to pay the statutory penalty if the deposit is protected before a county court hears the application under s.214. Secondly, in Gladehurst Properties Ltd v Hashemi [2011] EWCA Civ 604; [2011] H.L.R. 36, it was held that a county court could not order a landlord to pay the statutory penalty if the tenancy had come to an end.

Parliament sought to reverse the effects of both decisions through amendments in Localism Act 2011. The time for complying with the initial requirements of a scheme and for serving the prescribed information was extended from 14 days to 30 days. If the landlord fails to comply within that 30 day period, the county court can award a statutory penalty even if the landlord does subsequently comply. This has the effect of reversing Tiensia. Amendments were also made allowing a tenant to make an application under s.214 after the tenancy had come to an end, thus reversing Hashemi. The statutory penalty was itself amended, however, to give county courts a discretion as to how much to order the landlord to pay to the tenant (within a range of one to three times the deposit).

Litigation around the 2004 Act has not abated. In Superstrike Ltd v Rodgrigues [2013] EWCA Civ 669; [2013] 1 W.L.R. 3848; [2013] H.L.R. 42, the parties had entered into a tenancy on 8 January 2007 (i.e. before the provisions of the 2004 Act came into force) for a term of 364 days. A deposit had been paid by the tenant. In January 2008 (i.e. after the provisions came into force), the fixed term came to an end and a statutory periodic tenancy arose under Housing Act 1988, s.5. The landlords retained the deposit. The Court of Appeal held that this amounted to a new tenancy and that the tenant was to be treated as having paid a deposit at that time. As the landlords had failed to take any steps to comply with the tenancy deposit scheme provisions, they were prevented from relying on a s.21 notice.

Left unclear was what would happen where a fixed term tenancy was entered into after the 2004 Act came into force, and the provisions were properly complied with: did the commencement of the statutory periodic tenancy comprise a new tenancy with the result that the provisions had to be complied with afresh?

As a response, the Government is now bringing forward further amendments to the tenancy deposit schemes legislation, which have been introduced to the Deregulation Bill currently progressing through Parliament.

The Deregulation Bill

At first glance, the Deregulation Bill may seem an odd vehicle for amending the tenancy deposit legislation. That may be so but the long title of the Bill says that it is designed to make “provision for the reduction of burdens resulting from legislation for businesses or other organisations or for individuals.” Those in the business of being landlords will hope that the amendments do relieve them of the considerable burden that Superstrike threw their way.

In its current form, cl.31 of the Bill would introduce four new sections into the 2004 Act, as 215A-215D.

Importantly, the new s.215A provides that the requirements in s.213 will apply to any AST where a deposit was received before 6 April 2007 and a statutory periodic tenancy has arisen on or after that date: that adopts Superstrike. Time for compliance in those circumstances is, however, extended to 90 days from the commencement date of these amendments, during which there is a period of grace the effect of which is that the reversal of Tiensia does not apply, i.e. if the landlord complies within this period, there will – in these Superstrike cases – be no penalty.

The new s.215B will also reduce a landlord’s burdens. It provides that where a deposit has been received in relation to a fixed-term AST and has been dealt with properly, there is no need for the landlord to re-comply where a statutory periodic tenancy arises. The new s.215C makes similar provision where a new fixed-term or contractual period tenancy is entered into.

A wider problem?

It is just over seven years since the tenancy deposit schemes provisions in the 2004 Act came into force. In that time, Parliament has already had to use the Localism Act 2011 to amend the legislation once. The second set of amendments, contained in the Deregulation Bill, are likely to become law soon. These changes have not been caused by some change in policy. The changes have been brought forward because the original legislation was not working as it had been intended to. Having realised this, Parliament attempted to fix the problem in 2011. It is clear from the need for further amendment that this was not successful.

Our intention here is not to criticise the policy – we could argue that it should go further (Shelter’s suggestion, in response to the 2002 consultation, of a single, national custodial scheme which directly collects and holds all deposits has much going for it), but the general thrust of the policy is in the right direction.

The lesson that we would like to see learned from of all of this is that although it is all very well consulting on policy options, it is not enough to ensure good legislation. Housing law is complex. The technical application of the law is, in practice, at least as important as the policy. As we have already noted, there was no consultation on the wording of the tenancy deposit scheme provisions. Hindsight is, of course, 20/20. Nonetheless, we are confident that at least some of the problems that have befallen the tenancy deposit schemes legislation could have been avoided if draft legislation had been made available for public consultation.

It is unfortunate that the Law Commission was not asked to become involved as by the time that it produced the draft Rented Homes Bill in 2006, it was already too late. In any event, while the Law Commission’s involvement would surely have been beneficial, this is not necessarily the type of work that it is designed for. While the Law Commission’s functions include law reform projects, these are invariably substantial, over-arching projects (such as “Renting Homes”). The tenancy deposit legislation called for something a bit different.

What would have been useful in the summer of 2004 is a consultative and advisory body that can focus on specific, discrete legislative topics while remaining able to consider them in the wider context. Perhaps the time has come for a Housing Law Commission? If the Government decides to proceed with legislation tackling retaliatory eviction, it will certainly be necessary to ensure that the legislation is both understandable and effective. Equally, we have previously suggested some areas of possible reform, such as licensing of landlords and letting agents and lettings to students.

You never know, if someone asks nicely we may even be persuaded to participate…

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Rent Control to Major Debt

(with apologies to David Bowie)


With house prices and rents unaffordably sky high, we wonder whether it is not time to think again about a method that was historically successful both for tenants and owner-occupiers – rent control.

As house prices sky-rocket and would-be owner-occupiers drift aimlessly in space with no hope of ever returning home, our thoughts turn wistfully to an era of rent controls when tenants could remain in accommodation at rents that they – and through housing benefit – the state could afford until they had saved enough to buy at a price that was not excessively inflated by scarcity.

When Ed Miliband recently spoke of tenancies with minimum terms of three years during which rent increases would be subject to an upper limit, the landlord lobby started to shriek “rent control” as a term of abuse. Strictly (oh so strictly) rent control in its legal sense referred back to the method of fixing rents abandoned in 1957 which had led to levels that were, we accept, unsustainable; but rent control in its popular sense, meaning controls on rent fixed either by realistic formula or an independent body (the Rent Officer), had much to recommend it and – if we look back now – we can see that it generated (over its tenure: 1965-1988) the climate in which the high rise in owner-occupation could follow

In short, if house-owners can make more money selling than renting, then hey, guess what, that’s what they’ll do. Market rents – under assured tenancies – will always go in only one direction (we won’t bother to say which – as if…!) unless and until building to rent is perceived as producing more profit for the construction industry which, we see historically time and time again, it never does, for the very simple reason that the return on investment takes so long – decades – that it is inherently uncertain, vulnerable both to financial market forces and to political shifts in residential landlord-tenant law.

With rent control, you know what you get; sure, it creates scarcity in the rental market, which is why fair rents (1965-1988) excluded scarcity value, and only functions if accompanied by relatively full security of tenure (1974-1988, following the abolition of the furnished tenancy exception) – i.e. exceptions for, e.g., truly temporary arrangements (holiday lettings, student lettings, fully-serviced lettings) and “personal” lettings (i.e. resident landlords, absentee owner-occupiers).

Traditionally, security has been applied to existing lettings: the flood of evictions would not be tolerable. The shrill cri de coeur of the small buy-to-let landlord is not politically acceptable in the run-up to an election but – if rents are properly set – the consequence is not that they lose money but that they lose the ability to make more each time the market rises and/or to evict in order to sell when that becomes their choix du jour. (Yes, one of us is just back from a holiday in France).

In any event, as an earlier post suggested – ALL IS FORGIVEN: BRING BACK THE FAIR RENT (and slash the social security bill, why don’t you?)! – it is not all or nothing: it would be possible to try out an exemption from security for, say, the landlord who only owns one or two properties (with appropriate definitions to minimise avoidance) while re-introducing fair rents.

There are as many houses beforehand as there are after rent control is introduced, and those which are not re-let are available for sale, at prices that, if not exactly affordable to everyone are a lot more affordable than now and that tenants will be able to save for if not having to pour every last penny into rent.

The point is this: the system worked; yes, there was homelessness, but nothing like today; yes, there were evasions and evictions but, again, nothing like now; just because it is an old system does not make it wrong – rent control didn’t cause the financial collapse – that was caused by bankers not landlords.

In some ways, it was all predictable and maybe even predicted. The Housing Act 1980 foreshadowed the end of protected tenancies – secure private lettings at fair rents – in two ways: it introduced the shorthold ground for possession, a mandatory ground fulfilled by compliance with procedural requirements; and, it introduced a new form of tenancy, in build-to-rent accommodation, based on Landlord and Tenant Act 1954 principles and as such let at market rents – they were called… “assured tenancies”.

This was the now forgotten first incarnation of the assured tenancy, forgotten not least because – and this is part of our core thesis (well, alright, if not thesis then story-line) – build to rent just does not work on any scale significant enough to make an impact. A massive failure, all that survived was the name, handed on like an unused wedding dress to a policy of market rents with no security, under the Housing Act 1988. (There is a tendency to treat assured shortholds as starting with the Housing Act 1996 presumption, but this really served to sweep up the few private landlords who had failed to keep pace with the practice adopted from 1988 by the better-informed).

A recent case in the Court of Appeal (Loveridge v. Lambeth LBC [2013] EWCA Civ 494; [2013] 1 W.L.R. 3390; [2013] H.L.R. 31, now en route to the Supreme Court) served to spotlight the intended effect: housing is as valuable when rented as to an owner-occupier; otherwise, the would-be owner-occupier could always outbid the would-be landlord. Again and again, with less rather than more sophistication than Charlie Brown, policy tries to drive house-building with promises of a rental return; again and again, it fails.

It didn’t work in 1980; it is not working now. Build to rent needs subsidies – and gets them (in the hands of social landlords); even the availability of social housing grants – subsidies – for otherwise unregistered landlords is not making any impact.

Everyone agrees we need more houses and that means building them. Everyone knows that to be sufficient, this means houses for sale. Common sense tells us that if people cannot save to buy, there will not be enough prospective owner-occupiers who can afford to buy, which means that there will be less available. It also tells us that if there is less available, it will cost more. True, house prices in many areas are not rising as fast as the foreign money-fed London market, but they are still rising back towards the peak prices of 2007 (as this chart shows) and the problem of people not being able to afford to buy is far, far from confined to the capital.

As our last post – There may be trouble ahead – focused on, the problem is going to get worse when bank rates start to rise and borrowers have to confront the consequences of unaffordable, major debt (well, at some point we had to justify the title, though we freely admit the title came before the post!).

The Government’s principal attempted solution so far, the Help to Buy Mortgage Guarantee Scheme, has had an effect in enabling some purchasers to get on the housing ladder but as Danny Dorling points out in All that is Solid: The Great Housing Disaster, one of the consequences is to support and possibly further increase house prices (in the first six months of the scheme, applicants were assisted to buy 31 properties valued at over £500,000; one in ten applicants had an annual household income of over £80,000). This in turn may contribute to financial risks (a point the International Monetary Fund recently noted). It will also allow rents to remain high. If rents are high, the housing benefit bill stays high.

The next proposed solution, Affordable Rent to Buy, has some attractive features: Government will provide loans to landlords to enable them to build new houses; and those properties will have to be let out at an “Affordable Rent” (i.e. 80% of market rent) for at least the first seven years. This may provide an opportunity for some would-be purchasers to save money that would otherwise be put towards the rent but it strikes us as falling far short of what is needed. In any event, the developer would be able to sell the property to anyone after seven years. This does not make building to rent profitable; it merely provides public funding to boost the profits of those willing to build for a deferred sale (at minimal risk – the loan will be provided at a low interest rate).

The nettle will of course not be grasped before 2015; we fear it will not be grasped afterwards. If not, then we do not expect to see any change in the current imbalance. Young people now draining their bank balances for rent or living at home hoping to save faster than prices rise may see their prospects disappearing further and further into space. Can you hear me, major debt? It is even a commonplace – “generation rent” will never own. Can you hear me, rent control?

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There may be trouble ahead

Andrew Arden QC and Robert Brown consider the future in store for borrowers and their tenants

The Bank of England’s “Bank Rate” (more commonly referred to as “base rate”) reached an historic low of 0.5% in March 2009. To put it in context, just a year beforehand, it had been 5.25%. Even that pales into insignificance compared to previous high points of 14.875% (October 1989) and 17% (November 1979). Since March 2009, however, it has remained rock-steady at 0.5%. This will not last.

It has been widely predicted that the Bank of England’s Monetary Policy Committee will soon start to raise the base rate. The minutes of the Committee’s May meeting suggest that the decision over whether to raise the rate is becoming more balanced and that some members considered that it might be necessary to start raising the rate earlier than previously expected. While we do not know when a rate rise will happen, it is fairly safe to assume that it will happen in the relatively near future.

What has all of this got to do with housing law? Our interest (sorry!) is what it means for borrowers and other occupiers when the interest rate rise starts to bite which is the point when economic policy will collide with housing law.

As rates rise, so will interest repayments on mortgages. This will affect even those on fixed rates because the rate will come to an end at some point, at which time those borrowers will move over to a tracker rate. Nor is it that far away: lenders are well aware of what is happening and, for a while now, longer periods available at a fixed rate have been less readily available.

Even though there is no reason to think that rates will rise as high as they did during the 1980s and 1990s, this is cause for concern. As pointed out by the Resolution Foundation in a recent briefing note, Mortgaged Future: Modelling household debt affordability and access to financing as interest rates rise,

“the continued debt exposure of many households, along with relatively modest expectations for income growth in the coming years, means that even modest rate rises could spark significant affordability pressures for some.”

Many of these are what has come to be known as “mortgage prisoners”, i.e. they are unable to access further credit (as they could have done before the financial crisis in 2008) and so cannot protect themselves from future rises by re-mortgaging. The Resolution Foundation identified that almost one in ten mortgagors might fall into this category.

A stark illustration of the size of the problem ahead can be found in the results of a new survey published by the HomeOwners Alliance, the 2014 Homeowner Survey which found that one in three homeowners fear that they will find it more difficult to afford payments on their mortgage or other debts if interest rates start to rise. In particular, 64% of those on interest-only mortgages were concerned. This echoes the findings of a 2013 HomeOwners Alliance research publication, On the Edge: Impact on Homeowners of Changes to Interest-Only Mortgages, which found that 400,000 people feared that they would no longer be able to afford their mortgage payments and that 300,000 were worried that they would need to sell their home in order to repay their mortgage.

There may be some crumbs of comfort in the Financial Conduct Authority’s guidance Dealing fairly with interest-only mortgage customers who risk being unable to pay their loan, although this assumes that lenders will follow the guidance which is probably an optimism too far: little attention has been paid by some lenders, especially secondary lenders, to the Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears in Respect of Residential Property which requires claimants to identify what alternatives to eviction they have considered (and which therefore contains a similar thrust to the guidance) – see Professor Susan Bright and Dr Lisa Whitehouse, Information, Advice & Representation in Housing Possession Cases.

It is inevitable that there will be an increase in the number of cases where borrowers find themselves in serious difficulty. It is at just such times that occupiers – borrowers themselves and, sometimes, their tenants – are most in need of legal assistance. It is no coincidence that many of the key authorities on mortgage possession defences all have their origins in the last big recession in the early 1990s, e.g.

  • Cheltenham & Gloucester Building Society v Norgan [1996] 1 W.L.R. 343; (1996) 28 H.L.R. 443, CA (proceedings issued May 1990).
  • Bristol and West Building Society v Ellis (1997) 29 H.L.R. 282, CA (proceedings issued August 1990).
  • Rahman v Sterling Credit Ltd [2001] 1 W.L.R. 496; (2001) 33 H.L.R. 708, CA (proceedings issued October 1990).
  • Southern & District Finance plc v Barnes (1995) 27 H.L.R. 691, CA (proceedings issued February, April & October 1993).
  • National & Provincial Building Society v Lloyd (1996) 28 H.L.R. 459, CA (proceedings issued July & August 1994).

The list could easily be five times longer!

What it means in practice – pious aspiration aside – is more and more possession claims. This will be observable in, primarily, two ways. The first will be an increase in the number of claims brought by mortgagees against owner-occupiers; the second, an increase in the number of claims brought by receivers against the tenants of buy-to-let properties.

All is, however, not always lost in either case. Many defences may be available to a borrower, even when in default. The first port of call is usually s.36, Administration of Justice Act 1970 read with s.8, Administration of Justice Act 1973, which between them grant the court power to adjourn the proceedings or suspend possession for such period as the court thinks reasonable. The effect of these provisions is that – at any time prior to the execution of a warrant – the court may adjourn proceedings, suspend the possession order or stay a warrant, if it is satisfied that the borrower is likely to be able to clear the arrears within a reasonable period of time, the starting-point for which is the remainder of the term.

Other arguments may be available under the Unfair Terms in Consumer Contracts Regulations 1999 (notwithstanding the decision in Office of Fair Trading v Abbey National plc [2009] UKSC 6; [2010] 1 A.C. 696) or the Consumer Credit Act 1974 (many mortgages are outside of the protection of the 1974 Act, but not all, and there are unresolved issues about the scope of ss.140A & 140B, which give the court wide powers where there has been an unfair relationship between a creditor and a debtor).

Another option may be to rely on Art.8. At one time, this only offered limited assistance as it had been held in Barclays Bank v Alcorn [2002] EWHC 498 (Ch), that s.36, Administration of Justice Act 1970, struck the right balance of interests and was not inconsistent with the Convention rights under Art.8 or A1/P1, so that the Convention added nothing. The law has, however, moved a long way since then (see Manchester CC v Pinnock [2010] UKSC 45; [2011] 2 A.C. 104; [2011] H.L.R. 7, Hounslow LBC v Powell [2011] UKSC 8; [2011] 2 A.C. 186; [2011] H.L.R. 23, and the obiter comments of Sir Alan Ward in Malik v Fassenfelt [2013] EWCA Civ 798, a case we have written about before): these cases suggest that Art.8 requires specific and individual consideration of the proportionality of a re-possession order in each case not merely recourse to a “balanced” law. We hear of district and circuit judges who are prepared to entertain such arguments –the April 2014 edition of Legal Action (available from LAG) includes a report of a case where a district judge was prepared to accept that Art.8 gave the court a wider discretion that s.36, 1970 Act.

Meanwhile, advisers of tenants who face possession proceedings brought by their landlord’s mortgagee or by receivers appointed by the mortgagee also have a range of possible defences open to them. Not only is the argument that Art.8 is available strong, but there are also more traditional domestic law points that can be taken. Has the correct notice been served? Is the notice valid (even after Taylor v Spencer [2013] EWCA Civ 1600; [2014] H.L.R. 9, there is still scope for challenging many s.21 notices)? Has the right party brought the claim? Is there an issue with any deposit paid for the tenancy? Even if none of these works, there may be some limited assistance to be found in the Mortgage Repossessions (Protection of Tenants etc) Act 2010 which can give tenants up to an extra two months in the property.

There may be trouble ahead; the law may be able to help, if only for a while.

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Being for the benefit of Mr Tight

(with apologies to The Beatles & Sgt Pepper alike)

Andrew Arden QC and Robert Brown consider the Government’s continuing programme of welfare reform and its effects on tenants and landlords

Welfare reform is always contentious, not least because it starts with the euphemism ‘reform’ where what is meant is ‘reduction’. The argument in favour of reduction is characterised by rhetoric, pitting ‘hard-working taxpayers’ against ‘scroungers’ and ‘spongers’or worse. Reduction, in one form or another, has not been off the agenda for many years.

Budget and Spending Review 2010
The present Government has upped the ante. In its June 2010 Budget Statement, it announced ‘£11 billion of welfare reform savings designed to reward work and protect the most vulnerable’, including an intention to

“…introduce a package of reforms to Housing Benefit from April 2011 onwards. This includes changing the percentile of market rents used to calculate Local Housing Allowance rates, and uprating these rates by [Consumer Price Index] from 2013-14, capping the maximum Local Housing Allowance payable for each property size, time-limiting the receipt of full Housing Benefit for claimants who can be expected to look for work, and restricting Housing Benefit for working age claimants in the social rented sector who are occupying a larger property than their household size warrants.”

In its Spending Review of October that year, the Government said that it would focus on ‘reducing welfare costs’ and would promote ‘work and personal responsibility’. It was said that this would save £7 billion a year.

The key elements, in terms of those savings, were directed at changes to Employment and Support Allowance and to Child Benefit, from which total savings of £4.51 billion per year were planned. A further planned change was to cap household benefit payments

“… so that no family can receive more in welfare than median after tax earnings for working households.”

The total planned saving to the welfare bill from the cap was £270 million a year.

The only reform in that Spending Review that was directly aimed at housing benefit was to reduce the amount paid to single claimants. It was anticipated that this would save £215 million a year.

As the programme of reduction has rolled on, however, most of the key changes to housing benefit in the 2010 Budget have been made, while the benefit cap proposed in the Spending Review has itself been implemented through (what is left of) housing benefit.

Bedroom tax
The first of the key changes is the social sector size criteria, also referred to by the Department for Work and Pensions (DWP) as the ‘removal of the spare room subsidy’ and characterised by its critics as the ‘bedroom tax': it is not really a tax but the name has stuck, so we shall use it here.

The bedroom tax is implemented by regs A13 and B13 of the Housing Benefit Regulations 2006 (SI No 213) (as amended). It requires local housing authorities to calculate the housing benefit payable to social housing tenants by, inter alia, reference to the number of bedrooms for which the claimant is eligible, defined by the number of occupiers of the property – for instance, a couple are expected to share a bedroom; likewise, two children under the age of 10 are expected to share. If the property contains an extra bedroom, the housing benefit payable is reduced by 14 per cent; if two or more extra bedrooms, by 25 per cent.

The impact assessment suggests no great financial savings from this, maybe none. The theory behind it is that under-occupied social housing should be freed up in order to allow families to move out of over-crowded housing. In reality, it is not so simple: there are many more cases where an extra bedroom is legitimately required than the Regulations provide for; and, it is outright ignorant to assume that moving is simple or in many cases even possible, especially if a social landlord (offering an affordable rent) does not have (or is not willing to offer) an appropriate, smaller property. Thus, there is no qualification on the reduction that smaller, affordable accommodation is available, or that the local housing authority will make it available.

Of course, it is also economic nonsense: given that most social housing rents have not yet risen to the putatively affordable level of 80 per cent, a move to smaller private rented accommodation is likely to mean an increase in housing benefit (at least until the cap is hit).

As an aside, as a housing policy, it is also dubiously a legitimate purpose for social security legislation (notwithstanding the name). Furthermore, it conflicts with Housing Act 1985 s84 and Sch 2, Grounds 15A (England) and 16 (Wales), ie under-occupation is only a ground for possession – freeing up local authority housing – on the death of a tenant.

Keen to publicise the positive options available to those affected by the bedroom tax, the DWP has launched some information videos.

The videos only serve to highlight the paucity of options. Those affected by the bedroom tax are told in one video that they could either move to a smaller property, find a job or take on extra hours at work (as in that’s their choice, not one for their employers?), or apply for a Discretionary Housing Payment (a payment from a limited pot of money which is, as the name indicates, entirely discretionary and which, largely, veers between a tight-fisted approach at one authority to outright refusal at another; it is also almost invariably provided for only a limited period of time). In another – self-congratulatory – video, DWP have managed to find one housing benefit claimant who had moved to a smaller property. The fact that he is such a rare example of how the policy can work reminds us of the way government criticises campaigners for using isolated cases in place of hard evidence, when lobby groups proffer victims of cuts – welfare, housing, education and health – to make their point for media coverage.

We do not need to rely on our experience of working with social landlords and tenants to know just how exceptional it is to be able to make this sort of home-swap. Not only is it general knowledge but it was also the predictable consequence of an increasingly-capped housing benefit system that more and more private landlords would cease to accommodate tenants dependent on it.

Benefit cap
The second key change to housing benefit is the wider benefit cap. This was set out in the 2010 Spending Review although it was not clear at the time that it would be operated by what is in effect deduction from housing benefit. The cap is governed by Welfare Reform Act 2012 s96 and regs 75A to 75H of the 2006 Regulations. It kicks in where a claimant’s total entitlement to welfare benefits (with only a limited number of disregards) is more than £350.00 per week for single claimants or more than £500.00 per week for all other claimants. The cap reduces the housing benefit payable to that claimant so that the total of (non-disregarded) benefits paid does not exceed £350.00 or £500.00 as the case may be.

Again, this is far from unproblematic. It can lead in some cases to significant reductions: in one case that came before the courts, the claimant’s weekly benefit was reduced by £176.75 per week; this is not the highest we have seen. The effect is heightened in cases of homelessness, where applicants are placed in temporary accommodation. While social housing rents are considerably lower than private sector market rents, this is not true of temporary housing. Much temporary housing does not belong to local authorities, but is rented by them from the private sector and then made available to homeless applicants. It is not uncommon, at least in London, to find rents for temporary accommodation that are three or four times higher than the comparable rent for a secure tenant.

Two challenges, by way of judicial review to the reforms have, so far, failed: R (MA) v Secretary of State for Work and Pensions [2014] EWCA Civ 13, on the bedroom tax; and, R (SG) v Secretary of State for Work and Pensions [2014] EWCA Civ 156, on the benefit cap. An appeal against the Court of Appeal’s decision in the latter case has been heard by the Supreme Court yesterday and today, with a telling intervention by Shelter making some of these points, emphasising as a common theme the want of choice available to tenants. The result is keenly awaited and we may return to it in a future post.

Meanwhile, the House of Commons Work and Pensions Committee has this month published a detailed and wide-ranging report, Support for housing costs in the reformed welfare system, containing a number of clear recommendations to the Government none of which is likely to be followed.

The Committee begins by noting a concern that rents in the private sector are becoming unaffordable for housing benefit claimants and that ‘Private sector properties which remain affordable to LHA recipients are increasingly of poor quality’. We touched on the issue of the quality of stock in the private rented sector in a previous post. It is apparent that for many people there is no choice other than to accept substandard housing. Quite simply, it is all that they can afford and if they complain about the condition, they risk being evicted.

Closely connected to affordability, the Committee also notes evidence that housing benefit reforms are actively increasing the level of homelessness in certain parts of the country. There are obvious concerns here for those households that are affected but there are consequences for local housing authority resources as well.

The Committee moves on to consider the bedroom tax.

“We understand the Government’s wish to use social housing stock more efficiently and to reduce overcrowding. However, the SSSC [social sector size criteria] so far seems to be a blunt instrument for achieving this. In many areas there is insufficient smaller social housing stock to which affected tenants can move, meaning that they remain in housing deemed to be too large and pay the SSSC. This is likely to be causing financial hardship to a significant number of households. We recommend that the Government carries out a detailed assessment of the available social housing stock in each local authority area. If there is clear evidence that there is insufficient smaller housing stock and that those who are willing to move cannot do so, the Government should consider allowing affected households more time to find ways of adjusting to the SSSC before the reduction in benefit is applied. Where a household is under-occupying but there is no suitable, reasonable alternative available, the SSSC reduction in benefit should not be applied.”

In other words, contrary to the Government’s apparent expectations, there is no vast, previously untapped, reserve of tenants who merely lack the impetus to push through a move.

The Committee’s report goes on to the size-blindness of the Regulations, eg a room may only be large enough to accommodate one child, yet the Regulations would appear to assume that two children should share it – and the absence of sufficient provision for disabled people. We pause to note that there has been a number of First-tier Tribunal decisions where the application of the bedroom tax has been challenged, both in respect of size and the needs of a disabled claimant. The outcomes appear to vary wildly and there is a marked degree of uncertainty in this area.

The Committee is also critical of the implementation of the benefit cap: a wider exception is called for in cases where disability is involved; and, the Committee draws attention to the difficult issue of temporary accommodation.

“Local authorities often have no option but to use more expensive temporary accommodation to house homeless households. These households often then fall within the scope of the Benefit Cap. We recommend that the Government exempt households in temporary accommodation from the Benefit Cap because these claimants have no choice about where they are housed and few options for reducing their housing costs. Moreover, local authorities often then have to fund the difference between the capped benefit paid and the rent due, and so there is likely to be no overall saving in public funds from the inclusion of these claimants in temporary accommodation within the scope of the Cap.”

Housing benefit is an important resource for many tenants. The proper assessment and distribution of housing benefit is important stuff. Difficulties – substantive and administrative – with benefits have long led to rent arrears, at which point the next stop is a claim for possession. That process is explored in a recent research report from Professor Susan Bright and Dr Lisa Whitehouse, Information, Advice & Representation in Housing Possession Cases. It is inevitable that taking away part of a claimant’s HB, whether under the bedroom tax or the benefit cap, will lead to more tenants in arrears.

The upshot of these reforms is that social landlords and tenants are both faced with difficult decisions as both are left to bear the brunt of aggressive populist posturing masquerading as policy making.

This takes us back to one of the Committee’s crucial recommendations, which is for a

“…full cost-effectiveness analysis of the SSSC policy, taking into account the funding for Discretionary Housing Payments and the additional costs incurred by local authorities and social housing providers as a result of the SSSC, to assess the overall impact of the policy on the public purse.”

It is precisely the analysis that should have been undertaken before the present policy was adopted.

We are left to wonder what the purpose of these reforms really is. The proposed savings – even if realised – are, in the big picture, relatively small: between little and nothing for the bedroom tax and £270 million on the benefit cap, neither of which factors in the consequential costs (increase in DHPs, court costs, homelessness applications, not to mention longer-term consequences to health and education).

It is policy change for the sake of it. Put another way, all that it achieves for the ‘hard-working taxpayer’ is the targeting (of benefit claimants) itself: it makes the former feel better because the latter are feeling worse but does not actually save any amount of expenditure that makes a difference.

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Factionalism and Housing Law

Andrew Arden QC reflects on the persistence with which housing law appears to prefer factionalism to co-operation between all those involved in the task of securing housing for people most in need of it.

I have railed against factionalism in housing law for so long now – in articles, editorials and lectures – that there probably isn’t much point in doing so again: to name but a few, see A Talk to the Housing Law Practitioner Association, December 14, 2005 [2006] JHL 17, A Plague on Partisanship [2007] JHL 69 and Social Housing Law Association – January 24, 2008 – The Future Role of the Housing Lawyer [2008] JHL 39.

In particular, I have expressed concern that such factionalism allows those who oppose publicly funded housing and publicly funded housing law to exploit divisions. To me, it seems self-evident that an attack on any element of the housing law process is an attack on all: the constituents of housing law are not only those who need social housing but also those who provide it. Without revisiting all the arguments, cutting public funding for housing does not only hurt tenants and the homeless but deprives social landlords of the input they (also) provide in relation to the subject – without that check or balance, housing becomes one-sided: just because it is about the occupation of homes, housing law is about a continuing relationship as much as, say, family law – it only needs saying to appreciate the point and its implications.

I founded Arden Chambers on this principle. In the first 15 years or so of my practice, long before I did so, it had been believed that I, too, acted only on one “side” – for tenants and the homeless. In response to accusations of breach of the cab rank rule, I wrote – on behalf of the Chambers of which I was then a member – an article in the LAG Bulletin in the late 1970s entitled “Some People Can’t Afford Taxis” (or something like that – I cannot even find a copy now!). I claim no great credit for doing so: it was relatively easy to make a living on legal aid in those days: yes, it earned less than private work, but it was freely available, the rates of pay were far better than they now are and the legal aid authorities did not (as they do now) impose utterly unrealistic limits on the amount of time one could devote to a case.

There was, however, a clear point to what those of us engaged in that work, from that perspective, were doing: housing law barely existed as a subject, referring only to statutes conferring powers (few duties) on local authorities. To defend private tenants meant digging deeply into areas of landlord and tenant law that were nothing to do with how tenants at the poorer end of the rented sector actually lived or even about residential accommodation; to defend local authority tenants required burrowing into an ill-developed body of public law that was extremely resistant to challenge; courts were openly hostile to tenants – there was no homelessness law until 1977. Standing up for tenants and the homeless loudly and unqualifiedly – commensurate with a partisan approach – was, I believe, essential to the exercise of establishing the subject as one in which they had at least as loud a voice as that of the landlords and authorities whose claim on the terrain was as historically well-established as it was legally well-resourced.

For myself, I began to work with local authorities during the 1980s, in a lengthy, high profile enquiry into housing associations for the GLC and in relation to housing policies and local government finance, leading me to work closely and to form relationships with some of the most committed and – above all – most principled people I have had the privilege of knowing. Gradually, my focus expanded to include (and to appreciate and respect) what local authorities and housing associations were doing to provide housing – and to manage it better by way of, e.g., more tenant involvement, more transparency, improvement, re-development and even new developments which took full account of what those who would live in the accommodation wanted. (I am reminded of a memorandum disclosed during litigation in the late 1970s over disrepair in a large local authority estate, the design of which had won awards for its Borough Architect. The memo was from him to the Director of Housing and protested that “There was nothing wrong with these houses until you put tenants in them”).

Whether this analysis is self-justification for a form of “selling out” or a genuine evolution I do not know and I am not sure it matters – my point is that an approach which acknowledges and accommodates all housing’s constituents is far more likely to succeed in a sustainable way than keeping a score card as to which side has won the most skirmishes.

I should make clear, however, that when I refer to factionalism, I do not only mean on the tenant/homeless persons side. Some landlords’ lawyers – even those whose work is exclusively in the social housing sector – have been just as guilty of partisanship, some perhaps more so. I and my Chambers have more than occasionally suffered the withholding of work by a client local authority which took offence because we had appeared for a tenant, homeless person or waiting-list applicant against it, even where there has been absolutely no basis on which we could have refused to do so, commensurate either with cab rank or with our own sense of professionalism and purpose.

Be that potted history as it may, I had begun to think that times were a’changin’ and that the tendency towards factionalism was softening. Partly, I ascribed this to housing law starting to come of age and more of its practitioners appreciating that the most meretricious position rarely serves any useful long-term end. Partly, it was evident that the current pressure on public funding in housing was leading some practitioners to modify their publicised principles, whether one wants to call this financial realism or opportunism likewise does not really matter. (Not long ago, I was – rather painfully at the time – accused of selling out by an old friend, for whom I once had a profound admiration, now running his own firm of solicitors; a – very – few weeks later, I read an article by him, identifying his firm, in the pages of a magazine directed to – and read almost exclusively by – social landlords, given over to solicitors seeking to promote their profiles within that market. In the same vein, some of the lawyers who have made their names acting for tenants and the homeless nonetheless add to their incomes by advising social landlords, even if they are unwilling to be seen to do so and will not appear in court on their behalves).

I was, therefore, surprised and disheartened to receive information about a meeting to be held by housing practitioners, to consider making the same sort of public protest as our criminal colleagues have made about the continued reduction in public funding, possibly leading to similar action by way of “strike” that has attracted so much attention, generated so much support and is already having an effect on policy.

What has been most striking (sorry!) about this action on the part of the criminal bar is the support it has enjoyed from across the profession, from the most junior barristers to the law’s most established institutions, as indeed the information itself makes clear. Opposition to the cuts is virtually universal across the profession and rightly so: the plain and simple fact of the matter is that, as a society, we have an adversarial system of justice (criminal and civil); we don’t have to do so – we could have a more inquisitorial approach, or even one modelled more closely on a starting-point of consensus; we choose to do so and in making that choice, it requires us to ensure equality of arms – nothing else could even remotely, even arguably, comprise a system of justice. It follows as night follows day that there is a duty to ensure representation (as, in my view, Strasbourg will ultimately hold).

Which brings me – meandering as I may – to the point of this post. I congratulate the organisers of the meeting and hope that, perhaps by the time this appears on the LAG site, it proves as productive as it deserves to be. Nonetheless, organisation of the meeting was self-evidently and gratuitously partisan, drawing in three sets of chambers whose housing work is oriented towards tenants and the homeless (publicly funded) while leaving out altogether both Arden Chambers, which is the largest housing law set in the country and which routinely acts for tenants and the homeless at a volume at least commensurate with some of those involved but which also acts for landlords and local authorities, and others who may likewise confidently have been expected to make both a significant contribution to the discussion and – I am right at the core now! – to afford any action the level of support and credibility that it will need if it is to be as successful as that opposing the criminal legal aid cuts instead of being seen as self-interested and one-sided if not an opportunity to draw attention to some – but not all – those who participate in the process itself.

Of course, the meeting invites others to attend but let us not ignore reality: the foundations are laid by its organisation; the tenor is set by its proponents. After some 40 years of practising housing law – yes, I really am that old! – there is, to my mind, no greater failure than to have to witness continued partisanship amongst lawyers still being preferred to co-operation in the interests of occupiers: the cosy comfort of like-minded people rarely pushes the envelope of what is achievable.

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We shall not be moved

Andrew Arden QC and Robert Brown consider the rise and rise of the private rented sector and the corresponding need to afford more protection to tenants

Earlier this year, the English Housing Survey revealed that, for what it claims is the first time, the private rented sector was larger than the social rented sector; how accurate this is may be in doubt as, while concerned with stock rather than households, DCLG’s Live Table 104 identifies that the private rented sector was larger than the social rented sector in 1961. Be that as it may, in 2012-13, 4.0 million households in England rented from private sector landlords, while 3.7 million rented from social landlords. While the private rented sector is still considerably smaller than the owner-occupier group (comprising 14.3 million households in England), it is the largest growth area, having doubled in size since the turn of the century. The present government is keen to see this growth continue; the enhanced ability for local housing authorities to discharge their homelessness duties by placing applicants in the private sector is testament to this: Localism Act 2011, s.148 amending Housing Act 1996, s.193.

The rapid growth of the private rented has not been without problems. Rent aside, the two most important problems are security and conditions.

Tenants in the private rented sector have negligible security of tenure. Lettings are, by default, assured shorthold: Housing Act 1988, s.19A. All that is required before eviction is service of a notice telling the tenant that the landlord wants the property back after two months (HA 1988, s.21) followed by application to court for a possession order which, provided the right procedure is followed, can even be obtained without the need for a hearing (CPR 55.11-19).

While some of the private rented housing is very good, the sector also contains some of the worst stock: 9.3% of private rented homes have some form of damp problem (compared to 2.6% for owner-occupied properties and 5.4% across the social rented sector) – English Housing Survey, p.69. Indeed, 33% of dwellings in the private rented sector fail to meet the decent homes standard: English Housing Survey, p.42. By way of comparison, the equivalent proportions are 20% for owner-occupiers and 15% in the social rented sector.

Concerns have been raised about placing homeless applicants in such accommodation, to the point where the Minister for Housing, Kris Hopkins MP, felt compelled to write to the leaders of a number of local housing authorities, reminding them about the Homelessness (Suitability of Accommodation) (England) Order 2012, which includes the requirement that properties used to accommodate homeless households should be in reasonable physical condition, and about the “Gold Standard” scheme, “which aims to help local authorities raise the standard of their services to homeless people”.

It should not be like this. Tenants, whether renting in the private or social sectors and whether placed in it as homeless or not, have much the same rights so far as repair of their homes is concerned: s.11 of the Landlord and Tenant Act 1985 imposes an obligation on landlords of most residential tenancies to keep various parts of the dwelling in repair.

The difficulty for tenants in the private rented sector is enforcement, at which point the problems of security and condition collide. While it is not always plain sailing for those in the social sector, in the end a social landlord will normally carry out the necessary works. Lack of security of tenure in the private sector gives landlords an easy way out. Eviction is often a cheaper and easier option than carrying out repairs, especially given the growing demand for rental properties.

This blog has touched on the problem of “retaliatory eviction” before. Perhaps others are listening! The Government has launched a Review of Property Conditions in the Private Rented Sector. This not a full-blown consultation or any indication of policy direction. It is described as a “discussion document” and is the first stage of a review into property conditions. The Government is at pains to point out that the purpose of the discussion document is to stimulate debate. The discussion document sets out six areas of concern:

i. rights and responsibilities of tenants and landlords;

ii. retaliatory eviction;

iii. rent repayment orders;

iv. safety conditions;

v. licensing of rented housing; and

vi. the Housing Health and Safety Rating System.

It is the second of these with which this post is concerned.

The discussion document notes that there is

“anecdotal evidence to suggest that some tenants are concerned that if they request a repair or improvement to the property, their landlord will decide that the easiest course of action is to simply evict the tenant, rather than carrying out the repair or improvement.”

To say that there is “anecdotal evidence” downplays the problem: in housing terms, it is a given that to complain runs the risk of eviction, and it is sufficiently commonplace that every housing adviser has to factor it in when suggesting remedies to occupiers. For the first time, there is also now some – quite stunning – data. A recent investigation by Shelter suggests that 200,000 people had faced eviction in the previous year for having asked their landlord to fix a problem in their home. While it is true that (as pointed out by the Residential Landlords Association when it accused Shelter of “needlessly playing to people’s fears”) this figure includes those who weren’t actually evicted, it is still a staggeringly high number; nor is there any reason why people who complain about housing conditions should have to risk uncertainty and even distress especially now, when the private rented sector contains many, many more families with children than has been the case over the previous five decades.

If a tenant believes, rightly or wrongly, that eviction could be the result, it would be a bold move to complain. While the tenant could get a better (i.e. repaired) home, he could also end up with none at all. In some cases, tenants choose to keep quiet, even if they have a landlord who would be prepared to carry out repairs if asked. The fear is inherent to the nature of the relationship: however far we have travelled since all landlords wielded absolute, arbitrary authority, the relationship is one rooted in power imbalance – so deeply that it still has a psychological hangover which commonly ( not occasionally) inhibits tenants.

The suggestion put forward in the discussion document is to extend the restrictions on relying on a s.21 notice until the repairs have been carried out. At present, a landlord cannot rely on a s.21 notice where the property should have been licensed by a local authority but has not been (Housing Act 2004, ss 75 & 98) or where a deposit has been taken and not protected in accordance with a tenancy deposit scheme (Housing Act 2004, s.215). These prohibitions have been in force since in April 6, 2006, and April 6, 2007, respectively, and the sky has not fallen in on the private rented world. The discussion document considers the possibility of a similar prohibition applying where a property is in serious disrepair or needs major improvements.

A landlord would still be able to rely on any of the discretionary grounds for possession. It might be thought that this is acceptable on the basis that the court can consider the overall reasonableness of making an order for possession, as part of which the court would be able to take into account proceedings motivated by spite. In practice, however, this is marginal because the starting-point remains a level of default (arrears or ASB) sufficient to justify outright eviction (in the case of arrears, after any deduction for the counterclaim) before the issue of spite is relevant; many courts – maybe most – will take the view that what they will view as two wrongs don’t make a right; and, it is not difficult for the landlord to rebut the accusation with the simple answer that it is cheaper to repair vacant than occupied.

The landlord would also still be able to rely on the mandatory ground for possession for rent arrears, Ground 8. This applies where, broadly speaking, the tenant is two months’ behind on the rent, likewise subject to any disrepair counterclaim. In those cases, the court has no discretion and must make an order for possession. Restrictions on retaliatory eviction therefore do not come into play.

In both cases, therefore, the tenant who seeks repairs will need to be careful not to give rise to putatively legitimate grounds.

The two difficulties identified in the discussion document are how to identify an appropriate “trigger” for introducing a restriction and how to prevent spurious or vexatious complaints (which presumably would include those raised after the landlord has already begun – or threatened – eviction). The discussion document suggests that the appropriate trigger might be “following a local authority inspection or even later in the enforcement process.” It appears to be suggested that this sort of trigger would prevent spurious complaints that are designed merely to frustrate a landlord’s entitlement to possession.

To suggest that such an important protection as is being proposed should only apply once there has been a local authority inspection (or even later in the enforcement process) is surely to create yet another postcode lottery, in which the degree of protection afforded to tenants depends entirely on the relevant local authority’s willingness or ability to take action: many authorities now routinely fail to enforce lower level planning breaches simply because of cost; few authorities (if any) have reinforced their Tenancy Relations services to reflect the increase in the private rented sector; EHOs are massively overstretched (and were never in living memory one of those services which authorities resourced generously).

The better option could be to leave this as a matter for a court to adjudicate on: if it turns out that there is no disrepair, the court would be able to make an order for possession in the usual way; if, on the other hand, the tenant has made a complaint about disrepair and the landlord then serves a s.21 notice, the court should be able to presume that the notice is retaliatory and dismiss the claim for possession unless the landlord can satisfy it that the notice was not given to the tenant because of the exercise of his rights. A model, of sorts, can be found in employment law, where an employee who is dismissed because of whistleblowing (a “protected disclosure”) is treated as having been unfairly dismissed: Employment Rights Act 1996, Pt 4A & s.103A.

One possible problem with this is that many landlords serve a s.21 notice at the start of a tenancy, which they can then rely on at any point later on. The answer to that would be to implement the proposal put forward by the Law Commission in Renting Homes, so that a s.21 notice (or its equivalent under those proposals) lapses after four months if proceedings have not been commenced.

The alternative, as we have discussed previously, is for the courts to develop a positive defence of retaliatory eviction. One way to do this would be to acknowledge that an art.8 defence can be raised in the private sector, as the overwhelming body of Strasbourg law now seems to suggest (see, e.g., Tysiąc v. Poland (2007) 45 EHRR 42, Zehentner v. Austria (2011) 52 EHRR 22, Zrilić v. Croatia, Application no. 46726/11, 3 October 2013, and Brežec v Croatia [2014] HLR 3), and as the High Court has recently held (although, on the facts of the case it did not assist the occupiers): Manchester Ship Canal Developments v Persons Unknown [2014] EWHC 645 (Ch). See also the minority judgment of Sir Alan Ward in Malik v. Fassenfelt [2013] EWCA Civ 798. On this scenario, retaliatory eviction would be deemed to be a disproportionate response to a (valid) complaint about disrepair.

The blog previously bemoaned the lack of legislative development on the issue of retaliatory eviction: while the discussion document states that it does not recommend any policy or legal changes, any measure to address retaliatory eviction will necessarily require the latter. Whether the implicit premise of the proposal – that (once the works have had to be carried out) most landlords, as reasonable people, will allow the tenant to remain and enjoy the benefit of the works – is correct is something only time could tell; for the moment, the proposal is not unattractive and – re-introduction of security and/or enhanced local authority resources aside – probably the best that is likely to be on offer.

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