Tag Archives: housing

Allocation schemes and unlawful discrimination

Sam Madge-Wyld looks at challenges to housing allocation schemes.

In Ahmad v Newham LBC [2009] UKHL 14; [2009] HLR 31, Lady Hale said of challenges to allocation schemes:

“[22]… Castigating a scheme as irrational is of little help to anyone unless a rational alternative can be suggested. Sometimes it may be possible to do this. But where the question is one of overall policy, as opposed to individual entitlement, it is very unlikely that judges will have the tools available to make the choices which Parliament has required a housing authority to make.”

That was because,

“[15]… The trouble is that any judicial decision, based as it is bound to be on the facts of the particular case, that greater weight should be given to one factor, or to a particular accumulation of factors, means that lesser weight will have to be given to other factors. The court is in no position to rewrite the whole policy and to weigh the claims of the multitude who are not before the court against the claims of the few who are.”

The previous coalition Government’s localism agenda also adopted a similar “hands off” approach in England. While every scheme would still have to give a reasonable preference to certain classes of people (e.g. the homeless and those in overcrowded accommodation), individual authorities could determine the priority each group were to be given within the scheme and could even exclude certain classes of people from the scheme: s.160ZA and s.166A, Housing Act 1996 (as inserted by Localism Act 2011). The new statutory guidance, issued in 2012 to accompany the changes made by the Localism Act 2011, also encouraged authorities to use this flexibility to support working households with a low income: Allocation of accommodation: guidance for local housing authorities in England, para.4.27.

One would have thought that the combination of Ahmad, the Localism Act 2011 amendment and the statutory guidance ought to have shut the door on the majority of successful challenges to authority’s allocation schemes. This was, by and large, the case for the first five years after Ahmad. For example, in R (Hillsden) v Epping Forest DC [2015] EWHC 98 (Admin), a scheme which prevented an applicant who had not been resident in the authority’s district for more than three years from ever joining the waiting list, whatever the circumstances, was lawful.

A “hands off” approach is not the same, however, as giving authorities carte blanche to frame schemes in any way they see fit. The 2012 Guidance reminded authorities that

“[3.20]… In framing their qualification criteria, authorities will need to have regard to their duties under the equalities legislation, as well as the requirement in s.166A(3) to give overall priority for an allocation to people in the reasonable preference categories.”

Two cases concerning Ealing’s scheme have illustrated the court’s increasing willingness to hold aspects of schemes as being unlawful which, on their face, appear to be following the statutory guidance.

R (H & others) v Ealing LBC [2016] EWHC 841 (Admin)

In R (H & others) v Ealing LBC, Ealing’s scheme was challenged for a second time (see below for the first challenge). Ealing’s scheme provided that 20% of allocations would be made to people who did not necessarily have a reasonable preference but who were either working at least 24 hours a week or who were an existing secure tenant who had complied with their terms of tenancy. This was therefore precisely the sort of scheme that the Government had encouraged authorities to adopt in its statutory guidance.   

H argued, however, that the scheme put women, the disabled and the elderly at a disadvantage because they were much less likely to be able to satisfy the qualifying criterion of working 24 hours per week. Accordingly, the scheme indirectly discriminated – under s.19, Equality Act 2010 and Art.14, ECHR – against such people and was discrimination which could not be justified. Ealing contended that the fact that those persons were still entitled to apply for the remaining 80% of council properties meant that the scheme as a whole did not discriminate against women, the disabled or the elderly or, if it did, it could be justified.

The High Court held, however, that the evidence showed that since the scheme had been amended the number of allocations made to disabled persons had fallen by 3%; in the absence of an explanation for this fall it followed that there was prima facie evidence of disadvantage to disabled persons. Nor could the discrimination be justified. Other authorities, who had adopted similar schemes, had adopted a “safety valve” which meant that people who could not work because of their age, disability or responsibility for caring for a disabled child were still eligible to bid for the same properties as those who had worked 24 hours a week. It followed that this less intrusive measure could have been adopted. The court found that the result was the same under both the Equality Act and the ECHR as the test for justification under the ECHR for policy made by local authorities was not whether the policy was “manifestly without reasonable foundation”.

In any event, Ealing had also breached s.149, Equality Act 2010, i.e. the failure to have due regard to the public sector equality duty, because it had not made any real enquiry into the potential discriminatory effects of the part of the scheme that excluded people who were not working 24 hours a week or more. Ealing had not been entitled to consider the scheme as a whole when considering the impact the change would have. Likewise, Ealing had failed to have regard to the need to safeguard and promote the welfare of children under s.11, Children Act 2004. No consideration had been given to how children would be affected.

While it would be surprising if this was not appealed (the finding that an authority is unable to justify discrimination that arises under a local lettings policy by reference to the rest of the scheme is a particularly surprising development which appears to cut across the whole localism agenda), it does evidence the courts’ new willingness to interfere in questions of allocations policy that, post Ahmad, it had generally ceased to.

R (HA) v Ealing LBC [2015] EWHC 2375 (Admin)

The statutory guidance (referred to above) also envisaged that authorities had the power to exclude certain classes of people from an authority’s scheme who had a reasonable preference and explained that this might apply to persons who are guilty of anti-social behaviour and who did not have a local connection to the authority’s area: 2012 Guidance, paras 3.21-3.22. This power to adopt a residency requirement was emphasised in further guidance published in 2013 (Providing Social Housing for Local People).  In the 2013 Guidance the Secretary of State said that he believed “that including a residency requirement is appropriate and strongly encourages all housing authorities to adopt such an approach”: para.13.

Moreover, in R. (Jakimaviciute) v Hammersmith and Fulham LBC [2014] EWCA Civ 1438; [2015] HLR 5, the Court of Appeal held that such a requirement was lawful: authorities could exclude people with a reasonable preference from applying for accommodation provided that the reason for the exclusion was because of something that was unrelated to the circumstances that gave rise to their reasonable preference. Authorities could not, however, exclude people, as a class, from applying under the scheme by reference to their reasonable preference. One of the lawful examples given by the Court of Appeal was, however, where a scheme had a residency requirement.

Surprisingly, in R (HA) v Ealing LBC, the High Court held that a scheme that excluded people, other than in exceptional circumstances, from applying for accommodation who had not been resident in the borough for more than five years was unlawful because it excluded people with a reasonable preference. That, however, belies a total misunderstanding of the decision in Jakimaviciute and is in direct contradiction of the statutory guidance and Hillsden.

More interesting was the argument concerning discrimination. Ealing had, perhaps unwisely, not given effect to the statutory guidance which had suggested that:

 “[3.22] … [W]hen framing residency criteria, authorities may wish to consider the position of people who are moving into the district to take up work or to escape violence, or homeless applicants or children in care who are placed out of borough.”

HA had suffered domestic violence at an address in Hounslow. As a result, she had left this address and applied to Ealing for assistance under Part 7, Housing Act 1996. Ealing decided that it owed her the full duty under s.193(2). She subsequently applied to join Ealing’s housing register. Her application was, however, rejected because Ealing’s allocation scheme provided that, absent exceptional circumstances, applicants who had not lived in Ealing for the last five years could not apply for accommodation under Part 6. As in the latter case of H, HA argued that the scheme breached the Equality Act 2010, ECHR and s.11, Children Act 2004 on the basis that women are more likely to be victims of domestic violence than men and so are significantly less likely to be able to establish sufficient residency criteria to meet the blanket qualifying criteria.

The High Court agreed. The scheme had discriminated against women and the discrimination could not be justified. What was interesting was the court’s dismissal of the argument that the “exceptional circumstances” provision in the scheme prevented any discriminatory conduct, holding that “the residual discretion permitted by the policy does not save it if there is no justification for the difference”, at [30].

As there was no justification for the difference in treatment the scheme was held to be unlawful.

Presumably, this means that an authority will have to identify all the potential ways in which the scheme may unlawfully discriminate against persons and prevent it accordingly unless it can be justified. While this may be possible in obvious cases of discrimination – and indeed ought to have obviously included those moving to escape domestic violence – it is impossible to identify every case of discrimination before it arises. Moreover, discrimination cannot be justified unless it is foreseen first or there is a residual discretion that can ameliorate its effect as and when it arises.

Therefore a scheme that contains has an exceptional circumstances provision ought to justify any discrimination provided the authority can show that it is exercised to prevent discrimination. In the bedroom tax cases (see The ever confusing tale of the bedroom tax), the Court of Appeal has held that a discriminatory scheme can be justified by the exercise of a residual discretion (in that case the provision of discretionary housing payments). After all, a scheme is only discriminatory (be it under Art.18, TFEU, Art.14, ECHR, or s.19, Equality Act 2010) if its effect is to actually disadvantage people of a certain class in comparison to those of another class. A scheme which permits officers to depart from the local residence provision is not discriminatory if in practice officers do so to prevent unlawful discrimination from occurring. This also accords with the needs of any scheme to be flexible enough to prevent injustice from occurring. This though appears to have been a point that was not considered in HA.

That is not to say that the result in HA was necessarily wrong. The failure to apply the exceptional circumstances provision to HA was both discriminatory and plainly irrational. However, that ought to have been the basis for the decision not that the scheme itself was unlawful.

Conclusion

Both cases, in addition to Jakimaviciute, illustrate the court’s re-found lack of deference to authorities’ allocation schemes. Although the arguments are dressed in new clothing they are not at all dissimilar to the arguments that preceded Ahmad, i.e. the court should intervene where an allocation scheme is not providing sufficient priority to the more vulnerable groups in society. It is certainly questionable, however, whether that is an approach that a court is equipped to take. Lady Hale certainly didn’t think so in Ahmad.

This should, however, be an encouraging development for advisers of applicants wishing to challenge schemes as almost every scheme will, by its nature, be discriminatory as it gives priority to some groups over others. Whether it accords with the underlying reasoning in Ahmad or was the intention of the Localism Act 2011 is another matter entirely.

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Water, water everywhere …

Sam Madge-Wyld considers the practice of local authorities charging tenants for water as part of the rent.

In 1989, the water industry was privatised. In London, the responsibility for providing, and charging for, the supply of water and wastewater services was transferred to Thames Water. Since 1989 many housing associations and local authorities, including the London Borough of Southwark, have entered into agreements with Thames Water – and other similar companies throughout the country – to collect the charges for water and wastewater services from many of their tenants (usually from tenants living in flats or in other unmetered properties). Authorities and associations do this by making it a condition of the tenancy agreement that the tenant pay, in addition to rent, water charges. This is a very common arrangement: Southwark alone has 37,000 tenants who live in properties that are not fitted with a water meter.

According to Thames Water, “the purpose of these arrangements is to enable [it] to collect charges from tenants in a more efficient way”, as the local authority assumes the risk for the non-payment of such charges and bad debts. As a result, Thames Water agrees to pay the authorities and associations that collect such charges for it a commission for doing so.

This method of collecting water charges has proved unpopular with some tenants on the ground that they believe they are required to pay more for the water they are supplied than those people whose charges are collected by Thames Water. This is especially true for those who pay regularly. Ms Jones – in Jones v Southwark LBC [2016] EWHC 457 (Ch) – is the latest tenant to challenge the legality of this arrangement. Happily for her, she is also the first so far to have been successful.

Previous challenges

Before considering the Jones case, it is first necessary to consider two earlier unsuccessful challenges. In Lambeth LBC v Thomas (1997) 30 HLR 89, Lambeth had entered into a similar agreement with Thames Water to collect the charges for the supply of water and wastewater services from its tenants. Twice a year Lambeth paid Thames Water the total water charges for all of the relevant properties. This sum was, however, discounted to take into account unoccupied properties and its cost of collection. This discount was retained by Lambeth and ensured that each year it obtained a surplus, which it used to off-set other costs in its housing revenue account. The Court of Appeal held that this arrangement was lawful and Ms Thomas was legally obliged, under the terms of her tenancy, to pay Lambeth the water charges. Moreover, if she failed to do she was at risk of being evicted.

More recently, in Rochdale BC v Dixon [2011] EWCA Civ 1173; [2012] HLR 6, Rochdale had entered into an agreement with United Utilities for Rochdale to recover on behalf of United Utilities the water charges, already fixed by United Utilities, from its tenants. In 2005, Rochdale amended the terms of all of the tenancy agreements with its secure tenants so as to enable it to do so. Rochdale, in consideration for collecting the charges, were paid a commission, i.e. a fixed charge of £28 per property and a variable charge of 8 per cent of the water charges. The fixed charge was intended both to cover Rochdale’s costs of collection and to provide a profit. The variable charge of 8% was intended to allow for vacant properties and bad debt. On four dates in each financial year, the authority paid one quarter of the total water charges for the year and the company paid one quarter of the Commission.

Mr Dixon contended that Rochdale’s power to enter into an agreement with United Utilities was governed by s.1, Local Authorities (Goods and Services) Act 1970. Section 1, as amended by the Water Consolidation (Consequential Provisions) Act 1991, provided that while an authority could enter into an agreement with a water undertaker, it only had the power to enter into an agreement “for the collection and recovery by the authority, on behalf of any water undertaker or sewerage undertaker, of any charges fixed by the undertaker”. Mr Dixon argued that Rochdale had in effect purchased the supply of water and sewage services from United Utilities and was re-selling it to its tenants at a profit; it was not therefore collecting water charges on behalf of United Utilities. The Court of Appeal, however, disagreed and held that United Utilities remained the water undertaker, i.e. it still supplied the water to Rochdale’s tenants, and that Rochdale was simply its agent. The charges had been fixed by United Utilities and it was simply that the mechanism for the collection and recovery of those liabilities had been undertaken by Rochdale for United Utilities. It was irrelevant that Rochdale paid United Utilities in bulk or that it charged an additional sum for collecting the charges.

Jones v Southwark

Southwark had a similar arrangement with Thames Water, which had been entered into in 2000 (albeit had been subsequently amended in 2013 after another case was settled; the court did not consider the meaning of the latest agreement as Thames Water needed to be joined to the proceedings). Under the 2000 agreement, Thames Water determined the water and sewerage service charge for each “unmeasured property” that it was agreed Southwark would collect the charges from. Thames Water then billed Southwark the total sum of all such charges less two sums: for void allowances (5%) and a collection commission (18%). Southwark accepted in evidence that this was an important source of funding for it and that the void allowance did not always correspond to the actual number of voids, for example in one year the number of voids was around 1% but the void allowance assumed 5%.

The agreement described Thames Water as the provider and Southwark as the customer. It further provided that Southwark would pay for Thames Water to provide water and sewerage services to some of its premises.

Ms Jones argued, like Mr Dixon, that the 2000 Agreement involved Thames Water supplying Southwark with water and sewerage services and Southwark’s tenants in turn buying such services from Southwark. Ms Jones further argued, unlike Mr Dixon, that Southwark was a re-seller of water and sewerage services within the meaning of the Water Resale Order 2006. The 2006 Order defined a Re-seller as being any person, other than a relevant undertaker – i.e. a supplier of water and sewerage services under the Water Industry Act 1991 such as Thames Water – who provides to a Purchaser, i.e. a person who occupies any dwelling and who buys from a Re-seller any water or sewerage services, a supply of piped water or sewerage service which a Water Undertaker has supplied, directly or indirectly, to the Re-seller.

Ms Jones also argued that under Thames Water’s charging scheme that had persisted until 2010, she was not in any event liable to pay Thames Water for water or sewerage services as Thames Water’s charging scheme had provided that where the relevant premises to which the supply is made is let on a tenancy of less than twelve months or licence, the owner of the premises shall be regarded as the occupier and be liable for charges except where some other person has paid the charges or is liable by agreement with Thames Water. As Ms Jones was a weekly periodic tenant Southwark had been liable to pay Thames Water for the supply of water and sewerage services and had, in turn, passed the cost onto her.

Whether Southwark was a re-seller of water within the meaning of the 2006 Order was important because the 2006 Order imposed a maximum charge for water and sewerage services that could be levied by the re-seller. It did not allow a re-seller to recover a commission for collecting unpaid charges or to make a profit on the voids allowance. Ms Jones argued that she, and all of Southwark’s other tenants who paid Southwark for water and sewerage services, had therefore been overcharged.

Southwark argued that, as in Thomas and Dixon, the 2000 agreement provided for it to collect the water charges on Thames Water’s behalf and that it was merely Thames Water’s agent. Newey J, however, disagreed.  The 2000 agreement was different to the one between Rochdale and United Utilities: it contained no reference to tenants being liable to pay water or sewerage charges to Thames Water, to Thames Water authorising Southwark to collect such charges on its behalf, to Southwark owing any duty of skill and care or to Southwark having any obligation to invoice tenants or in respect of complaints from them. Moreover, the commission paid to Southwark was nothing of the sort; it simply reduced what Southwark had to pay Thames Water and was not conditional on a service being performed.

Perhaps most importantly, however, until 2010 it was Southwark who had been liable to pay Thames Water for water charges; it could not therefore have been Thames Water’s agent during that time as its tenants were not liable to pay Thames Water.

That final point seems the most important as it is hard to see any real distinction between the arrangement in Rochdale, Lambeth and Southwark. They all proceeded on the same model of agreement.

The impact of this decision

Obviously for Southwark this decision has very wide-ranging implications. Some 37,000 of its tenants appear to have been over-charged for water and sewerage services over a period of 10 years. Although the decision does not quantify the amount at stake, one bill from 2005 put the discount (i.e. the commission and void allowance) at £126,000. It is not just Southwark, however, who this may affect. Thames Water gave evidence that it had “commercial agency arrangements” in place with 69 local authorities and housing associations that covered 375,000 properties.

It is important to note at this stage two points: this decision will almost certainly be appealed and seeing as contrary decisions were reached in Thomas and Dixon the prospects are not fanciful. Secondly, the decision only concerned whether Southwark had been entitled to levy the charges that it did. The decision did not decide whether or how much Southwark had to reimburse tenants who had been overcharged. Ordinarily, where money has been paid to another in circumstances where it was not due such money can be recovered by a restitutionary claim. Such a claim can, however, be defended on the basis that the authority has, in good faith, paid the money to a third party and, but for the payment by the tenant, would not have paid the third party. Any surplus, one assumes, has been credited to the housing revenue account and used to pay third parties, e.g. contractors.

However, this defence is unlikely to apply to Southwark, because s.150(5), Water Industry Act 1991 gives Ms Jones, and other tenants in her position, an express statutory right to recover from Southwark any overpayment she has made. It does not appear therefore that she will need to rely on the law of restitution to recover the sums paid. Presumably, however, as s.9, Limitation Act 1980 will apply, any sum that can be recovered will be limited to six years from the date that her claim was issued.

In the meantime, tenants with arrears who are being brought to court by Southwark in possession proceedings, or indeed any other association or authority with a similar agreement with Thames Water, would be wise to dispute the level of the arrears in respect of any water charges and to put Southwark to proof. Presumably, any such defence would also include a counterclaim. It is going to very difficult for Southwark, for the time being at least, to be able to prove what water rates were payable before 2013. This is likely to cause Southwark some difficulty in litigating possession claims unless it agrees to waive the water charge.

Finally, if Southwark has been using this revenue to off-set the housing revenue account, it will have to find other ways of doing so. Historically, the easiest and most obvious way of doing so would have been to increase the rents of its secure tenants. However, this will soon no longer be an option, as the Welfare Reform and Work Bill, once passed, will require it to cut rents by 1% per year for four years.

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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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Rent Control to Major Debt

(with apologies to David Bowie)

ANDREW ARDEN QC AND ROBERT BROWN

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.

Dissent
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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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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