Deduct During Delays says House of Lords in Right to Buy Claim

Article

19 June, 2009

Right to buy claims may be dealt with on a regular basis by large landlords and by practitioners but they are potentially fraught with problems. One such issue is reaching agreement over the purchase price of the property. The case of Hanoman v Southwark London Borough Council (No.2) [2009] UKHL 29 concerned whether housing benefit credit was equivalent to the payment of rent, which could then be deducted from the purchase price to leave a discounted price of £17,000.

The Facts

An appeal was brought by the Council (S) against the decision of the Court of Appeal to award damages to a tenant (H) arising out of the exercise by him of the right to buy provisions of the Housing Act 1985.

H had been the secure tenant of a flat owned by S and the rent in relation to the tenancy was paid fully through housing benefit. H served a right to buy notice under the 1985 Act, but a dispute arose about whether he had withdrawn the notice. This argument continued for approximately four and a half years before the High Court decided the matter in H's favour.

Because of this dispute, S had not served a counter-notice upon H as required by the 1985 Act until after the High Court ruling. Before this date however, H had served a notice of delay upon S. This meant that unless S accepted or denied his right to buy the property, H would set off any rent paid during any following delay against the purchase price.

The issue to be decided by the House of Lords was whether the crediting of housing benefit to a tenant's rent account could constitute a 'payment of rent' for the purposes of the Housing Act 1985. S argued that pursuant to the Social Security Administration Act 1992, the housing benefit which H was entitled to was in the form of a rent rebate which reduced the amount of rent he was liable to pay to zero, rather than a rent allowance. This rebate could therefore not constitute a rent payment under the 1985 Act.

The House of Lords' Decision

The appeal brought by S was rejected. The House of Lords held that the definition forwarded by S of what constituted a payment of rent was not accepted. Their Lordships provided a number of points as to why a periodic crediting of a tenant's rent account could be described as a payment of rent:

  1. The word 'payment' varied within the context in which it was used and its meaning or definition was not rigid;
  2. The purpose of the relevant provisions of the 1985 Act were to provide a sanction to penalise local authorities who 'dragged their feet' and delayed giving effect to a tenant's attempts to exercise their right to buy. Giving a liberal and wide interpretation of the phrase 'payment of rent' would enable authorities to evade such sanctions and would fail to give effect to the purpose of the sections;
  3. A broad definition would also produce irregular differences between different tenants. Those who had landlords classified as local authorities and New Town Corporations could provide housing benefit by rent rebate, whereas individuals with housing associations, Housing Action Trusts and Housing Co-Operatives could not. Furthermore, the latter class of tenants, whose rent would have to be provided by payment of rent allowance, would be entitled to the assistance offered by the 1985 Act but the former would not. Their Lordships were of the view that such a difference was unprincipled, did not reflect Parliamentary intention and was not supported by any distinct policy.
Summary

The decision in Hanoman shows how important it is for landlords to ensure that they follow the correct legal procedures in all circumstances. A failure or delay to serve notices or other documents upon a tenant may lead to a court to find in favour of the individual.

The case has also shown how the court will look to protect the interests of tenants and may prevent landlords from evading sanctions such as in Hanoman where delays prevented rights being exercised.

For more information and assistance on these issues, please contact the Housing Litigation Department at Forbes Solicitors on 01772 220200 or contact Stuart Penswick by email.

Back

Make an enquiry