Social landlords could face millions of pounds in rent losses after a Liverpool couple discovered a contractual loophole that will allow them to avoid increases in rent.
Gary and Ellen White, tenants at Riverside Housing’s Brampton Court in St Helens, have won a challenge to a possession order despite owing £900 in rent arrears, after a court ruled that the association’s past four annual rent increases were invalid.
The Court of Appeal upheld the Whites’ claim that Riverside had breached their tenancy by changing the annual rent review date from June to April to align with the financial year and Housing Corporation and local authority practice.
The ruling means that the Whites, together with 5,000 other tenants who hold the same assured tenancy agreement with Riverside, can go back to paying rents set in 1999 and may try to recoup the overpayments by withholding rent, a move that could cost Riverside an estimated £7m.
Tony Fearnley, of St Helens law firm Stephensons, which acted for the Whites said: “The decision has implications not only for the Whites and 5,000 tenants of Riverside, but for tens of thousands of tenants of other social landlords throughout the country.”
He added that local authorities, which will have provided benefits to many of the social tenants, may be under a fiduciary duty to recover overpayments.
In making the decision, all three appeal judges expressed “unease” at the “very serious consequences” for social landlords, but said that they were bound by precedent to rule that the unambiguous wording of the tenancy agreements did not allow Riverside to change the rent variation date.
They said that, although Riverside may have a defence of estoppel if the tenants attempt to recover the past overpayments, there was nothing to stop the tenants from withholding future rents to the value to which they had been overcharged.
Riverside’s solicitor, Bremners, declined to comment on the basis that it is seeking permission to appeal the ruling to the House of Lords.
Riverside Housing Association Ltd v White and another Court of Appeal (Auld and Hallett LJJ and Sir Peter Gibson) 6 December 2005.
Jan Luba QC and Adam Fullwood (instructed by Stephensons, of St Helens) appeared for the appellants; Andrew Arden QC and Iain Colville (instructed by Bremners, of Liverpool) appeared for the respondent.
References: EGi Legal News 09/12/05