Listening to reason

Most practitioners assume that security of tenure for tenants in the private residential sector is a thing of the past. Since the almost universal adoption of the assured shorthold tenancy via the 1988 Housing Act (as amended by The Housing Act 1996) we have become used to great flexibility in this area with tenants moving voluntarily with increased frequency and landlords also quickly regaining possession of their property through the serving of a section 21 notice '“ effectively giving the tenant two months notice to quit. Even when a tenant is hostile or reluctant to leave securing possession is not usually problematic even if it can take a number of months through the operation of a section 8 application.

The situation is, however, very different if a tenancy was granted before the 15 January 1989 as these are generally governed by the Rent Act 1977. Among other matters, this guarantees both wide-ranging security of tenure to the tenants and also rent control where the rent is fixed by the 'rent officer' at a 'fair rent' which is considerably lower than market value. Landlords can only regain possession of these properties under a small number of grounds detailed in schedule 15, part 1 of the Act for issues largely consisting of tenant misbehaviour like the non-payment of rent or serious and persistent nuisance caused by the tenant. If this is not the case and the tenant fulfils their duties then the only way to remove them is through section 98(1)(a). This section requires that suitable alternative accommodation must be provided for the tenants '“ subject to the court considering it reasonable to do so '“ before possession is granted to the landlord.

The reasonableness test

The test in section 98 of the Rent Act 1977 is one of reasonableness. This is a most familiar word to litigators but, as in other examples of its use, it is subject to judicial interpretation. The recent case of Whitehouse v Lee [2009] EWCA Civ 375 concerns such a case. At first instance, the respondent had been granted an order for possession of a property after having found suitable alternative accommodation for their elderly tenants, arguing that they wished to realise the maximum value from their property to fund their pensions. Properties subject to protected tenancies are, of course, worth considerably less than the equivalent property offered with vacant possession. The landlord obtained a similar property about a mile away from the property in question and also offered a number of other 'sweeteners' so that the tenants would not be financially disadvantaged in any way, including an offer of £3,000-£4,000 for the purchase of additional furniture.

Considering the 'reasonableness' of the order the judge balanced the understandable desire of the elderly tenants, aged 79 and 75-years-old at the date of the trial, to remain in the same flat that they had lived in since 1963 with the reasonableness of the landlord's desire to provide as best a pension as they could for their retirement. The original trial judge accepted these arrangements and made the order for possession. The tenants appealed.

At the Court of Appeal Rimer LJ, giving the judgment, stated that the test of reasonableness must effectively be considered in the round, looking at the effect not only if the order were made but also if it were not made. Crucially, the trial judge had failed to consider the key issue of what effect failure to obtain an order would have upon the owner. The landlord, and her siblings who had a beneficial interest in the property, were reasonably affluent and had not brought forward any suggestion that failing to obtain an order would cause them financial hardship.

Further, there was nothing preventing them from realising the asset immediately, albeit at a lower amount, with the tenants remaining in situ or waiting for a time in the future when the property would naturally become vacant. Importantly, too, when they purchased the property in 1969 the property was even then subject to a protected tenancy and so there was no certainty that they would ever be able to evict the tenants. Contrasting this with the tenants' situation, who would suffer great emotional and social difficulties if forced to move, the case for allowing the appeal was compelling and therefore the order for possession was set aside.

It is clear from this case, which is a decision of the Court of Appeal and therefore binding on lower courts, that paternalism is alive and well. It is clear that that the courts will take a considerably different view of a landlord's property rights when residential, as opposed to commercial, tenancies are involved. Any attempt to find suitable alternative accommodation for protected tenancies should be effectively in the same locality. As the vast majority of protected tenants are elderly, as in the case above, the courts are clearly loathe to force elderly people away from their friends and familiar environment. In short, solicitors need to advise their clients realistically regarding the possibility of obtaining an order for possession of a property with a protected tenancy and should probably advise investor clients to avoid the purchase of them at all.