Landlord and tenant – Unlawful eviction – Damages – Sections 27 and 28 of Housing Act 1988 – Respondent tenant claiming damages for unlawful eviction against appellant local authority landlord – Damages calculated by reference to difference between landlord’s interest subject to respondent’s right to occupy and free from it – Hypothetical sale of landlord’s interest in open market – Whether valuation to assume that respondent’s secure tenancy converted into assured tenancy on sale to private landlord – Appeal allowed
The respondent brought a claim against the appellant council for damages, under sections 27 and 28 of the Housing Act 1988, for unlawful eviction from a one-bedroom flat that he had held from them on a secure tenancy. It was common ground that such damages fell to be calculated by reference to the profit accruing to the landlord by reason of the eviction rather than the loss to the tenant; by section 28, that was to be calculated as the difference in value between the landlord’s interest in the relevant building subject to the tenant’s rights and that interest free of those rights, at the time immediately prior to the unlawful eviction. The valuation was to be made on the basis of an open market sale to a willing purchaser other than the tenant or a member of his family.
The respondent contended that, in valuing the landlord’s reversion subject to his rights, the hypothetical purchaser of that interest should be deemed to take the building subject to an ongoing secure tenancy of the flat, which would depreciate the value of the building by £90,500. The appellants contended that, on a sale of the reversion to a private landlord, the rights of the tenant would be those of an assured tenancy, which would not affect the value of the building since a purchaser would pay the same for the building with one flat subject to an assured tenancy as it would for a vacant building.
That issue was determined in the respondent’s favour in the county court. The judge held that the tenant’s rights had to be assumed to be those of a secure tenant, even after a hypothetical sale to a private landlord, and awarded damages of £90,500 accordingly. He held that it would be inappropriate to assume the conversion of the secure tenancy to an assured tenancy for valuation purposes since that would ignore the nature of the right to occupy the premises immediately before the eviction took place. The appellants appealed.
Held: The appeal was allowed.
Section 28 required two valuations of the landlord’s interest in the building by reference to the date immediately prior to the eviction. Both valuations required it to be assumed that the landlord in default was selling its interest on the open market to a willing buyer. For that purpose, it was irrelevant that the appellant landlords would in fact face significant constraints on an open market sale of the block to a private landlord, since the valuation formula in section 28(3) required it to be assumed that the landlord in default, even if it was a local authority, had an unconstrained right to sell its interest on the open market: Tagro v Cafane [1991] 1 WLR 378; [1991] 1 EGLR 279 applied.
The valuation was to be based on the actual realities affecting the premises. There was no requirement that all landlords in default were to be penalised by a substantial fine in excess of the profit that they had derived from the unlawful eviction. In particular circumstances, the valuation might properly produce a nil outcome: Melville v Bruton (1996) 29 HLR 319; [1996] EGCS 57 applied. The assumption to be made under section 28(1)(a), that the residential occupier continued to have “the same right to occupy the premises as before that time”, did not require it to be assumed that those rights were set in stone thereafter and were immune from adverse change, whether by the landlord’s lawful action or by operation of law. If there was anything that the landlord in default could lawfully do to mitigate the adverse effect of those rights on an open market purchase, then that had to be taken into account: Wandsworth London Borough Council v Osei-Bonsu [1999] 1 All ER 265; [1999] 1 EGLR 26; [1999] 11 EG 167 applied. The valuer was obliged to take into account the inherent fragility of a secure tenancy so far as it was vulnerable to being downgraded by operation of law into an assured tenancy on a sale of a local authority landlord’s interest to a private landlord purchaser. On an open-market sale of the appellants’ interest, the highest bidder was likely to be a private rather than a local authority landlord, owing to the depressing effect on the value of the block to any buyer whose status was such that the respondent would continue to be a secure tenant after the sale. It made no difference that, at the moment of valuation, the landlord in default had not yet sold the building and might have no intention of doing so. Section 28(3) required the valuation to be carried out on the assumption of an open market sale of the landlord’s interest, whether or not it in fact intended to sell.
Contrary to the view of the judge below, a valuation that took full account of the conversion of the respondent’s rights from those of a secure tenant to those of an assured tenant on any sale did not ignore the nature of the right to occupy the premises immediately before the eviction took place. The respondent’s rights of occupation had, from the grant of his secure tenancy, been vulnerable to being downgraded on a sale by his local authority landlord to a private landlord. That vulnerability was inherent in the nature of his rights. Although the relevant interest to be valued at the prescribed date was that of the landlord in default, that interest was none the less to be valued by reference to the valuer’s assessment of the best price that it could reasonably be expected to obtain in the open market, on the specific assumptions set out in section 28.
It followed that the statutory damages under the 1988 Act were nil. Common law damages for unlawful eviction were instead awarded in the agreed sum of £7,400.
Sally Dobson, barrister
