Ker v Optima Community Association

Article

29 May, 2013

Since the rulings in Manchester City Council v Pinnock and Hounslow v Powell, a tenant facing possession proceedings has been able to defend proceedings by claiming that eviction is 'disproportionate' under Article 8 ECHR. In the latest case raising this defence the position for tenants who have entered into an option to purchase scheme has been clarified.

Ms Ker entered into an assured shorthold tenancy under Optima's FlexiBuy scheme in February 2009. The scheme granted tenants an assured shorthold tenancy at a market rent, along with an option to purchase at a later date under shared ownership. The tenant would then benefit from a contribution from the landlord towards the purchase price, representing the difference between the market rent, which the tenant had been paying, and the amount the landlord would have received from a social housing tenant. This is known as the deposit incentive.

In the beginning of 2010 Ms Ker began to accumulate substantial rent arrears and in April 2011 Optima began possession proceedings under s.21 Housing Act 1988. Ms Ker defended the proceedings, arguing that her eviction would be disproportionate and a breach of Article 8 ECHR, relying on the case of Manchester City Council v Pinnock. The trial judge, however, rejected Ms Ker's defence and made the possession order. Ms Ker then appealed the decision, claiming that the trial judge had viewed the tenancy agreement incorrectly and therefore the possession order was disproportionate. The Court of Appeal dismissed the appeal.

Key Points of Court of Appeal Judgment

  • It was proportionate for Optima to seek, and for the judge to grant, an order for possession. The property was not provided to Ms Ker as social housing but as part of a scheme allowing tenants to acquire ownership of property without having to enter into an immediate purchase with the financial commitment that would involve. Miss Ker's financial difficulties did not prevail over Optima's interest in using the premises as part of a shared ownership scheme. Also, her difficulties did not justify the conversion of the agreement to social housing. Therefore, the Court of Appeal decided that the possession order was proportionate.
  • Ms Ker did not have a right to a re-payment of the amount she had contributed to the deposit incentive. Although Ms Ker would lose the benefit of the deposit incentive if she was evicted, the terms of the agreement stated clearly that the entire amount of money the tenant paid each month was all reserved as rent. There was nothing in the agreement that gave the tenant a right to claim back the deposit incentive or placed an obligation on Optima to credit the tenant with the deposit incentive. The terms of the agreement allowed Optima to terminate the agreement in the event that the tenant was unable to proceed to pay the market rent. As Ms Ker had stated that she had read and understood the agreement the court decided that she had no right to the amount contributed towards the deposit incentive.
  • The deposit incentive could not affect the decision of whether or not it was disproportionate to evict Ms Ker unless the deposit incentive amounted to one of Ms Ker's possessions. However, there was nothing in the agreement that gave Ms Ker a right to the deposit incentive if she could not continue with the option to purchase. Ms Ker therefore failed to establish that she had been deprived of any property and had no defence to the claim for possession under Article 8 ECHR.
  • The tenancy agreement and option to purchase agreement had to be viewed together. Viewing the terms together, it was clear that the only intention to contract the parties had were the terms stated in the agreement. As Ms Ker had stated that she had read and understood the agreement it was impossible to infer that neither Ms Ker or Optima intended to contract on anything other than the terms stated in the agreement.

Overview

This case gives landlords some comfort following the Manchester City Council v Pinnock case, as it does not give shared ownership tenants the ability to defend proceedings under Article 8 ECHR. This case acknowledges the need of housing associations to retain property in order for it to be used as part of a shared ownership scheme by allowing landlords to secure possession where the tenant is no longer upholding the terms of the shared ownership agreement.

The case also highlights the importance of clearly constructed shared ownership agreements. Housing Associations must ensure that such agreements clearly state the circumstances in which the agreement can be terminated, how rent is to be apportioned and, in the case of option to purchase schemes, when the option can be exercised. The absence of a clearly constructed agreement could give rise to arguments over the intentions of the parties. This case also emphasises the importance of tenants both reading and understanding agreements that they enter into. The fact that Ms Ker had read and understood the agreement was mentioned several times in this judgment, highlighting the importance of obtaining a statement from tenants confirming that they have read and understood the agreement that they are entering into.

In summary it is vitally important that housing associations review their shared ownership and home buy agreements to ensure that the terms of the agreement are clearly constructed and there is confirmation that tenants have read and understood the agreement they are entering into in order to minimise the risk of the agreements causing legal problems in the future and to reserve the right to secure possession of shared ownership properties when needed.

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