Phillips v Garraway: rent payable in services and the Housing Act 1988

The Court of Appeal has dismissed an appeal concerning whether a tenancy requiring the provision of services without an expressly attributed monetary value constitutes a tenancy under which no rent is payable within the meaning of the Housing Act 1988.

Ms Tess Garraway occupied The Lodge in Kent under a tenancy agreement dated 23rd January 2023 with Mr Arthur and Mrs Janet Phillips. The agreement provided for rent to be paid through a minimum of two days' work per week on the estate, with hours from 9:00 to 17:00. No monetary value was attributed to these services. The landlords served notice to quit in September 2023, which Ms Garraway contested, arguing the tenancy was an assured tenancy under the Housing Act 1988 and therefore could not be terminated by notice alone.

The statutory framework

Under the Housing Act 1988, a tenancy under which no rent is payable cannot be an assured tenancy (Schedule 1, paragraph 3). Assured tenancies benefit from security of tenure and rent control provisions, meaning landlords must rely on specific statutory grounds for possession rather than simply serving notice.

The central question was whether 'rent' for the purposes of the 1988 Act includes the provision of services where the parties have not agreed a monetary value for those services.

The Rent Acts authorities

Lord Justice Males, giving the leading judgement, examined the established interpretation of 'rent' under the Rent Acts. In Hornsby v Maynard [1925] 1 KB 514, the Divisional Court held that rent under the 1920 Increase of Rent and Mortgage Interest (Restrictions) Act meant rent payable in money alone. Both Shearman J and Salter J expressly recognised this differed from the common law position, where rent could consist of services without monetary quantification.

This interpretation was affirmed by the Court of Appeal in Barnes v Barratt [1970] 2 QB 657. Lord Justice Sachs held that Parliament must be taken to have been aware of the courts' established interpretation when passing successive statutes using the same phraseology without fresh definition. He explained that the Rent Acts' provisions regarding rent restriction could only operate in practice if based on quantified sums. The 'good sense' of Hornsby v Maynard was 'patent'.

Lord Justice Sachs concluded that even if there was a tenancy, the Rent Acts could not apply where there was no agreed monetary quantification of the rent, nor any agreed method of quantification, nor any statutory substitute for such a method.

Application to the Housing Act 1988

The Court held that Parliament intended 'rent' in the Housing Act 1988 to bear the same meaning as under the Rent Acts. Several factors supported this conclusion.

First, one express purpose of the 1988 Act was to amend the Rent Act 1977. The Act contained no definition of 'rent' and no indication that any different meaning was intended. If Parliament had intended an alternative definition, it would have said so.

Second, paragraph 3 of Schedule 1 to the 1988 Act uses identical language to section 5 of the Rent Act 1977 in excluding 'a tenancy under which for the time being no rent is payable'. It would be inconceivable that Parliament intended a significant change in meaning.

Third, the rationale underlying the Rent Acts cases applied equally to the 1988 Act. Lord Justice Sachs in Barnes v Barratt had explained that provisions for increasing rent and recovery of overpaid rent required quantified sums. The 1988 Act contains equivalent provisions which would be unworkable if rent could consist of unquantified services. For example, it would make no sense for a tribunal to determine the rent at which a dwelling-house might reasonably be expected to be let in the open market otherwise than in money terms, or to consider repayment of services rendered in advance where a tenancy ends.

Fourth, when enacting the 1988 Act, Parliament inserted section 3A into the Protection from Eviction Act 1977, which expressly protects tenancies granted 'otherwise than for money or money's worth'. This demonstrated that Parliament was well aware of the possibility of extending statutory protection to tenancies granted in exchange for unquantified consideration, but chose not to adopt the same definition for assured tenancies under the 1988 Act itself.

Rejection of the appellant's arguments

The Court rejected Ms Garraway's submission that 'rent' should be interpreted in accordance with the common law and the Law of Property Act 1925 as referring to payment in money's worth. The fact that a court might be able to attribute a value to the services was beside the point, just as it had been in Hornsby v Maynard where the county court judge had been able to assess the value of the landlady's right to use rooms in the house.

The risk of exploitation of vulnerable tenants did not alter the position. Parliament must be taken to have been aware of such risks from observations in Hornsby v Maynard, yet did not adopt different language in succeeding Rent Acts or the Housing Act 1988.

The Court also rejected a late argument that payments for council tax, electricity, heating oil and water should be regarded as rent. Schedule 1, paragraph 2(2) of the 1988 Act expressly provides that 'rent' does not include sums payable in respect of such matters unless they could not have been regarded by the parties as sums so payable. There was every reason to think these payments would have been so regarded.

Decision

The Court dismissed the appeal. The tenancy was one under which no rent was payable within the meaning of the Housing Act 1988 and therefore could not be an assured tenancy. The landlords were entitled to possession following service of a valid notice to quit.

Lady Justice Falk agreed, noting that whilst she was somewhat less convinced that extending the concept of rent to include unquantified money's worth would be unworkable, the other factors comfortably supported the conclusion that Parliament had intended 'rent' to bear the same meaning as under the Rent Acts. Lord Justice Moylan agreed with Lord Justice Males' reasoning.

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