Assured tenancy – Rent review – Rent assessment panel – Tenancy providing for annual rent increase – Tenants continuing to occupy property following expiry of lease as statutory periodic tenants – Managing agents proposing substantial rent increase – Whether statutory periodic tenancy incorporating rent review clause in original assured tenancy – Appeal allowed
The respondents were tenants of a flat under a lease dated 14 June 2001 for a term of three years at an agreed rent of £7,148 pa payable monthly in advance. The first respondent had previously occupied the property under a three-year lease from 1 January 1999. Both tenancies were assured tenancies and, following the expiry of the lease, the respondents continued to occupy the flat, becoming statutory periodic tenants.
Clause 6 of the 2001 lease provided for the rent to increase “with effect from each anniversary of the commencement of the term hereby created (whether during the said term or during the currency of any subsequent statutory periodic tenancy) the yearly rent payable hereunder (and accordingly the periodic payments of rent) shall increase by five per cent.”
The appellant landlords did not raise the rent by 5% annually. However, on 25 September 2008, the first appellant managing agent served a notice under section 13(2) of the Housing Act 1988, proposing a new rent of £1,400 per month (£16,800 pa). The respondents referred the proposed increase to the London Rent Assessment Panel for determination.
The panel found that the tenancy came within section 13(1)(b) of the 1988 Act, which referred to “any periodic tenancy other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period.” The terms of the lease were therefore paramount and the panel had no jurisdiction to determine the application.
Challenging that decision under section 11 of the Tribunals and Inquiries Act 1992, the appellants submitted that the panel had erred in suggesting that the rent review was governed by section 13(1)(b). They argued that it was governed by section 13(1)(a), so that any rent review clause in the original assured tenancy was not incorporated into the subsequent statutory periodic tenancy.
Held: The appeal was allowed.
Having found that the tenancy was a statutory periodic tenancy, the panel had erred in determining that section 13(1)(b) of the 1988 Act, rather than section 13(1)(a), was the relevant section.
There was no doubt that on the expiry of the assured tenancy a statutory periodic tenancy came into being by virtue of section 5(2) of the 1988 Act. The statutory periodic tenancy had the same terms as the anterior assured tenancy “subject to the following provisions of this Part of this Act”: section 5(3)(e). Section 13 was within the same part of the 1988 Act and provided a statutory scheme governing the increase of rent under assured periodic tenancies.
Section 13(1) drew a clear distinction between two different categories of assured periodic tenancy. Section 13(1)(a) was concerned with statutory periodic tenancies, other than those that could not be an assured tenancy by virtue of paras 11 and 12 of Schedule 1; those were Crown tenancies and local authority tenancies. Section 13(1)(b) was concerned with any other periodic tenancy that was an assured tenancy, that is, a contractual assured periodic tenancy. The statutory scheme expressly did not apply where a contractual rent review clause was binding on the tenant. The natural reading of section 13, given the contrast between section 13(1)(a) and (b), was that a rent review clause in the original assured tenancy did not oust the mechanism for increasing rent found in section 13 once that assured tenancy had been superseded by a statutory periodic tenancy.
Section 5(3) of the 1988 Act preserved the pre-existing terms subject to, inter alia, section 13. It followed that a rent review clause in the original assured tenancy purporting to govern the position once it had been superseded by a statutory periodic tenancy was of no effect. The “subject to” proviso excluded any rent review clause from the statutory periodic tenancy. In its place, the statutory scheme came into effect.
Therefore, in the absence of any agreement regarding an increase in rent of a statutory periodic tenancy (section 13(5)), the landlord had to use the notice provisions in section 13(2), which enabled the tenant to seek an assessment. For other periodic tenancies the rent increase clause prevailed, whereas for statutory periodic tenancies the statutory system prevailed.
Gabriel Buttimore (instructed by Healys) appeared for the appellants; the respondents appeared in person.
Eileen O’Grady, barrister
