Landlord and tenant – Housing Act 1988 – Assured tenancy – Rent determination – Appellants occupying premises under tenancy agreement – Respondent landlord giving notice of rent increase in form prescribed by section 13 of Housing Act 1988 – Whether appellants entitled to refer notice to first-tier tribunal for determination of rent under section 14 of 1988 Act – Whether excluded by section 13(1)(b) on ground that tenancy agreement containing contractual mechanism for rent increases – Appeal dismissed
The appellants occupied part of a former headmaster’s house in the grounds of a school in Halesowen, West Midlands, under a weekly tenancy granted to the first appellant by the local authority and set out in a written tenancy agreement dating from 2002. Although a local authority could not grant an assured tenancy under the Housing Act 1988, and the tenancy therefore took effect as a secure tenancy under the Housing Act 1985, the tenancy agreement nonetheless described the tenancy as an “assured weekly tenancy” and contained a rent variation clause entitling the landlord to vary the rent by giving one calendar month’s notice, with any increase in rent not to exceed the amount that a rent assessment committee would fix if it had jurisdiction to determine the rent in accordance with section 14 of the 1988 Act.
The local authority subsequently transferred the freehold to the Official Custodian of Charities and the respondent became the appellants’ landlord in 2012 on acquiring a headlease of the property. In July 2015, it served a notice on the appellant, in the form prescribed by section 13 of the Housing Act 1988, proposing to increase the monthly rent from £395 to £520 with effect from October 2015. The appellants disputed the proposed new rent and referred the notice to the first-tier tribunal to determine the open market rent pursuant to section 14 of the 1988 Act.
The FTT took the view that it lacked jurisdiction to determine the rent, taking the view that the statutory procedure was excluded under section 13(1)(b) since the tenancy itself provided a binding contractual procedure for increasing the rent.
The appellants appealed, contending that the rent variation clause in the tenancy agreement was merely intended as a statement of the parties’ statutory rights and was not intended as a contractual rent review mechanism. They pointed to the practical difficulty of challenging a notice of proposed increase given under the tenancy agreement if they could not refer the notice to the appropriate tribunal under section 14 of the 1988 Act.
Held: The appeal was dismissed.
Section 13(1)(b) of the 1988 Act excluded from the ambit of the statutory rent determination procedure any tenancy that contained a contractual rent review mechanism binding for the time being on the tenant. While ambiguity could sometimes arise owing to the practice of some registered social landlords of summarising the statutory rights of their tenants in their standard tenancy agreements, there was no such ambiguity in the instant case.
When the tenancy agreement was first granted, the tenancy was a secure tenancy with a local authority landlord, so that neither sections 13 and 14 nor any other part of the 1988 Act had any application to it. The terms of the tenancy agreement sought to mimic the effect of the 1988 Act, even though the draftsman had clearly appreciated that the tenancy could not be an assured tenancy. Although it was understood that the 1988 Act did not apply, and that the appellants had no statutory rights to rely on sections 13 and 14, an attempt was made to create the same or similar rights by agreement. However, it was not possible for parties, by agreement, to confer jurisdiction on a court or statutory tribunal that parliament had said was not to have jurisdiction in the circumstances of their case.
The rent variation clause in the tenancy agreement did not simply record statutory rights that applied in any event because of the nature of the tenancy, but instead amounted to a binding contractual agreement between the parties regulating the manner in which the rent could be varied. Because the tenancy could not be an assured tenancy at the time when it was granted, the best that the parties could do was to rely on the level of rent which would be determined under section 14 by the appropriate tribunal, if it had had jurisdiction, as a contractual maximum limiting the rent that the landlord could propose under its notice of increase. It was also apparent from the terms of the rent variation clause that the landlord’s notice of increase was intended to be effective to change the rent, and was not to be capable of being referred to the appropriate tribunal under section 14. The purpose of referring to section 14 was therefore that it should be used as a contractual yardstick to regulate the level of rent increases and to prevent the landlord from requiring an increase above the level of the rent that would be determined by a rent assessment committee, or now by the FTT, “if” that body had jurisdiction. The landlord was free to specify such increase as it considered would leave the rent at or below the level which a rent assessment committee would determine if it had jurisdiction under section 14.
Although the tenancy had later become an assured tenancy when the local authority transferred the freehold, the statutory procedure under sections 13 and 14 of the 1988 Act still did not apply because the tenancy agreement contained a contractual provision under which the rent could be increased, within the meaning of the exclusion in section 13(1)(b); Helena Partnerships Ltd v Brown [2015] UKUT 324 (LC); [2015] PLSCS 220 distinguished.
The only way in which the appellants could challenge the new rent specified in a notice of increase given by the respondent was in proceedings before the county court. The court would have to determine whether the landlord had exceeded its contractual right by specifying an increase which caused the rent to be at a level above that which would be determined by the appropriate tribunal under section 14. That assessment was not beyond the competence of a county court judge and did not render the contractual rent review mechanism unworkable.
The appeal was determined on written representations.
Click here to read a transcript of Chouhan and another v The Earls High School
Sally Dobson, barrister