Tenancy agreement – Variation – Registered social landlord – Tenancy agreement providing for method of variation – Claimant landlord proposing unilateral variation – Whether claimant having unilateral power of variation without approval of defendant tenant – Whether variation clause “not binding” on defendant as unfair term – Claim dismissed
The claimant was a registered social landlord and charity that provided low-cost residential accommodation to approximately 10,000 assured tenants. It did not charge for the services that it provided to tenants and argued that, as a result, it was losing around £1m pa. It therefore wanted to vary its standard tenancy agreement unilaterally to enable it to charge for its services.
Clause 5(a) of the claimant’s tenancy agreement provided that, with the exception of any changes in rent, the agreement might be altered only by written agreement between the tenant and the claimant. However, clause 5(b) provided that the claimant might vary the terms by a notice of variation served on the tenant and that section 103 of the Housing Act 1985 applied to the agreement as though the tenancy were a secure tenancy, as long as such a variation would not create a new tenancy.
Two questions arose for the court to determine, namely whether: (i) on its true construction, clause 5 gave the claimant the right to effect unilateral variations in the tenancy agreement using the procedure in section 103 of the 1985 Act incorporated by reference; and (ii) if the claimant had such a right, the clause was “not binding” on the tenant by reason of regulation 8 of the Unfair Terms in Consumer Contracts Regulations 1999.
The defendant was a representative tenant; the claimant agreed to pay his costs for taking part in this test case.
Held: The claim was dismissed.
(1) In construing clause 5, the court had to balance the fact that a right of unilateral variation would be useful to the claimant, and would avoid the risk of the claimant’s housing stock becoming unmanageable, against the fact that that was a risk that the legislature had chosen to allow registered social landlords to run, presumably on the basis that they would be able to manage without such a provision: Kilby v Basildon District Council [2007] EWCA Civ 479; [2007] HLR 39 considered.
In the light of the contradictory and apparently irreconcilable terms of clause 5, which gave rise to doubt as to its meaning as a whole, the court was obliged, in terms of regulation 7(2) of the 1999 Regulations, to adopt the interpretation that was most favourable to the consumer, in this case the defendant. Accordingly, that interpretation had to be that the tenancy agreement could not be varied without the written agreement of both parties.
(2) If that conclusion were wrong and tenancy agreement did allow for a unilateral variation, such a term would not be binding on a tenant pursuant to regulation 8 of the 1999 Regulations since it would be a contractual term that had not been individually negotiated and, contrary to the requirement of good faith, had caused a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the tenant as consumer.
In order to satisfy the requirements of the regulations, any such unilateral variation clause needed at least to take full and proper account of the common-sense guidelines set out by the Office of Fair Trading for tenancy agreements.
Alexander Bastin (instructed by the legal department of the Peabody Trust) appeared for the claimant; Zia Bhaloo (instructed by Collyer Bristow) appeared for the defendant.
Eileen O’Grady, barrister
