A London housing co-operative is facing the compulsory transfer of its housing stock to the governors of the Peabody Trust.
The High Court has backed a Housing Corporation decision to transfer the properties presently leased to members of the Clays Lane Housing Co-operative Ltd.
The transfer follows an inquiry into the affairs of Clays Lane, the UK’s second largest fully mutual co-operative housing association, which revealed “mismanagement in a number of areas”.
The co-operative leases 50 self-contained flats and 400 rooms in 57 houses from Newham London Borough Council. All the properties are situated in Clays Lane, Stratford, London E15.
In 2000, the Housing Corporation, which regulates the affairs of social landlords, received a report that indicated a lack of proper financial controls and proper day-to-day management and governance within the co-operative.
The report concluded that “the co-operative was being mismanaged to such an extent that its assets and the welfare of its tenants were at risk, unless urgent action was taken to address the failings of management and to bring good order to such fundamental tasks as collecting rent and controlling expenditure”.
As a result, the corporation proposed to transfer the co-operative’s housing stock to the governors of the Peabody Trust. Like Clays Lane, the Peabody Trust is a registered social landlord but it is not a co-operative. In March 2002, the Secretary of State consented to the transfer.
Clays Lane subsequently issued a claim for judicial review of the transfer direction, and of the Secretary of State’s consent. It sought a transfer to the Tenants First Housing Co-operative, a large social landlord registered in Scotland, so that its members could retain the benefits of belonging to a co-operative.
The co-operative claimed that the compulsory transfer of the housing stock to Peabody amounted to an interference with its property rights and its rights of association.
In dismissing the challenge, the High Court stated that the corporation’s board had been required to determine whether the transfer of the housing stock constituted a compelling case in the public interest. The corporation had to balance “the comparative benefits of a compulsory transfer to Peabody and a voluntary transfer to Tenants First”.
Keith J held: “It cannot be said that the board made the wrong judgment as to where the ‘fair balance’ lay, nor can it be said that the board did not have rational grounds for concluding that the public interest in favour of a transfer to Peabody was such that it outweighed the co-operative’s right to dispose of its housing stock as it wished.”
The judge noted that the board’s minutes showed that it had “identified the benefits that a transfer to Peabody would bring”, and added that “it is to be remembered that the co-operative provided social housing, and had been provided with public funds for that purpose”.
The court refused leave to appeal, but Clays Lane has indicated that it may apply to do so.
R (on the application of Clays Lane Housing Co-operative Ltd) v Housing Corporation Queen’s Bench Division: Administrative Court (Keith J) 14 May 2004.
David Wolfe (instructed by Bindmans) appeared for the claimant; Paul Stanley (instructed by Trowers & Hamlins) appeared for the defendant.
References: EGi Legal News 18/05/04