Defendants buying property under right to buy legislation – Covenant in conveyance relating to service charges – Defendants refusing to pay charges – Challenge to covenant on ground of unreasonableness and uncertainty – Judge finding covenant not void for uncertainty but upholding challenge to reasonableness – Council appealing – Whether challenge could be made post-conveyance – Appeal allowed
By a conveyance dated June 5 1989 the plaintiffs conveyed the freehold of 23 Selly Oak Road, Sheffield, to the defendants pursuant to the right to buy provisions contained in Part 4 of the Housing Act 1985. Section 139 of the Act provided that conveyances executed pursuant to the right to buy should conform with the provision of Schedule 6. Para 5 of Schedule 6 permitted the “inclusion of such covenants and conditions as are reasonable in the circumstances”. By clause 5(2) of the conveyance the defendants covenanted to pay by way of service charges “such reasonable contribution as the Council shall . . . require . . . in respect of the upkeep or regulation for the benefit of the locality” in respect of the “upkeep of landscaping and play areas”. The defendants refused to pay the charges levied and the council brought proceedings for their recovery. The defendants resisted the claim on three grounds: (1) that the covenant to pay the service charges was void for uncertainty and unreasonableness; (2) the council had not shown that the charges had been reasonably incurred; and (3) that the works were not of a reasonable standard. The first question was tried as a preliminary issue. The judge found that the covenant was not void for uncertainty, but held that it was unreasonable because it was unjust and that a challenge to its reasonableness could be made after the execution of the conveyance. The council appealed contending, inter alia, that any challenge to the reasonableness of the covenant had to be made before the execution of the conveyance.
Held The appeal was allowed.
1. Under section 125 of the Act the council were required to serve a notice setting out the proposed sale price and “the provisions which in the opinion of the landlord should be contained in the conveyance”. At that stage, if the tenant objected to any of the proposed terms, he could apply to the court to determine whether it should be included in the conveyance under section 181. The basis on which the court was to determine whether a covenant was to be included was that set out in Schedule 6 Part I para 5, namely whether it was “reasonable in all the circumstances”. Parliament, in formulating the statutory scheme, had not contemplated making such a challenge at any time after the making of the conveyance and had given the Secretary of State, by sections 167 and 168, the power to discharge or modify covenants under certain circumstances. The time for challenge was therefore before the execution of the conveyance and could only be made at a later stage by the procedures laid down in sections 167 and 168: see Coventry City Council v Cole [1994] 1 EGLR 63. Accordingly the judge had erred in holding that the time for mounting such a challenge had not passed.
2. No ground had been shown upon which the court could differ from the judge below on the question of whether the covenant was void for uncertainty.
Beverly-Ann Rogers (instructed by the solicitor to Sheffield City Council) appeared for the appellants; Alison Hampton (instructed by Irwin Mitchell, of Sheffield) appeared for the respondents.
