Update: landlord and tenant - part 1

Lease or licence?

In Clear Channel UK Ltd v Manchester City Council [2005] EWCA Civ 1304, C had an agreement with M whereby C would erect and maintain 13 large advertising displays at specified locations. In 2002, M invited C to tender for a new agreement. C claimed to have a business tenancy. M contended that C had a licence. M also argued that if a tenancy had been granted, it was not protected because there was no 'occupation' for the purposes of s 23 of the 1954 Act.

At first instance it was held that C had a mere licence. The Court of Appeal confirmed that the appropriate legal principles appeared in Street v Mountford [1985] AC 809, the nature of the legal relationship being governed by the substantive rights and obligations rather than the label applied and decided that the agreement between the parties did not contain a sufficient definition of the land that formed the subject of the alleged tenancy. The court pointed out that the agreement failed to identify the precise location of the concrete bases on which the advertising displays were erected. The fact that, before the agreement was concluded, the parties had agreed on the location of the 13 sites and marked them on the ground with spray paint was consistent with the grant of a licence over a wider area than the concrete bases themselves. There had never been any intention to grant exclusive possession to C and accordingly there could be no tenancy. The Court of Appeal declined to express a view on the alternative argument raised by M concerning lack of occupation.

Housing and secure tenancies

Islington LBC v Uckac [2006] EWCA Civ 340 concerned a claim for possession of a flat held under a secure tenancy. This case has shown that even after Ground 5 of Sched 2, Housing Act 1985 was extended by the Housing Act 1996 to include statements made by 'a person acting at the tenant's instigation', it can still be avoided by those willing to use fraud to obtain priority in public sector housing. The case goes beyond secure tenancies, however, as Ground 17 of Sched 1, Housing Act 1988 (assured tenancies), contains identical provisions for the recovery of possession where there has been fraudulent misrepresentation inducing the grant of the tenancy and it should be noted that housing association tenancies are normally granted on a social need basis.

Islington had granted D2 (husband) a tenancy after certain representations had been made, and declarations of truth given. D2 had then validly assigned to D1 (wife). The case was tried on preliminary points upon the assumption that Islington's subsequent allegations that the defendants' statements were fraudulently made, had been made out. Islington sought an order for possession based on rescission, alternatively under Ground 5.

A contract is voidable for misrepresentation and, in the case of fraudulent misrepresentation, rescission is almost a right. If the contract is rescinded, then the contract is treated as if it never had effect.

The judge at first instance construed Ground 5 strictly, holding it to be available only where the defendant from whom possession is sought is the person to whom the tenancy was granted. The unreasonable and potentially unjust effect of this interpretation is obvious. In essence, it means that no matter how deliberate the fraud perpetrated by the original tenant may be, and no matter whether or not the assignee was a party to that fraud (as, on the assumed facts in Uckac, the assignee was), the landlord cannot recover possession under Ground 5 once the tenancy has been assigned. The claim for rescission was also rejected. As the Court of Appeal pointed out, so much for the principle that a person should not be allowed to profit from his own fraud. The two points for appeal were whether: (1) Ground 5 is available where the tenancy has been validly assigned; and (2) rescission is available where the tenancy was granted after fraudulent misrepresentation made by or on behalf of the tenant.

Despite misgivings, the Court of Appeal felt unable to 'legislate' to close off this potential source of abuse of the housing list system. The court took the view that Ground 5 was 'clear and unambiguous' (which it is) and the phrase 'the tenant is the person, or one of the persons, to whom the tenancy was granted' is expressed in the present tense and must therefore refer to the current tenant, ie, the person from whom possession is sought. The first 17 words of the ground, 'the tenant is the person, or one of the persons, to whom the tenancy was granted and'¦', would serve no purpose if Parliament had intended to include misrepresentations by predecessors in title the ground, but would have provided that 'the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by: (a) the tenant or a predecessor in title; or (b) a person acting at the instigation of the tenant or his predecessor in title'. The court held that Parliament had intended to limit Ground 5 only to cases where the misrepresentation was made by or at the instigation of, the current tenant. Reference to predecessors in title in other grounds underlined this view. The case also confirms that the express language of s 82, read in conjunction with s 84, means that Sched 2 provides a detailed and exhaustive code of the grounds on which a landlord may terminate a secure tenancy and obtain possession. Dyson LJ pointed out that the court will not lightly conclude that Parliament has ousted common law and equitable rights, but thought it would have been surprising if, having included fraudulent misrepresentation as a ground for possession, Parliament had intended that a landlord could also claim possession for misrepresentation by a common law route that allowed the landlord to avoid the important statutory safeguard of reasonableness, thus leaving court with no choice but to order possession against a person who would, retrospectively, have become a trespasser.

Housing and human rights

Kay v Lambeth LBC: Price v Leeds CC [2006] UKHL 10 revisited the use of Art 8 ECHR as a defence to possession proceedings.

Price: Mr Price and family unlawfully moved their caravans on to land owned by Leeds. Leeds issued summary possession proceedings. There was no defence to the claim other than by arguing Art 8. It was generally believed that defence had been removed by the House of Lords in Harrow LB v Qazi [2003] UKHL 43, ie, Art 8 did not give rise to a defence to a properly constituted claim to possession.

Kay: Lambeth granted L&Q licences of certain properties for occupation by persons owed a temporary housing duty by Lambeth and for single people owed no housing duty by Lambeth but who applied to L&Q for housing. In 1999, Bruton v L&Q [2000] 1 AC 406 had determined that sublicences granted by L&Q under these arrangements were actually tenancies. After that decision, Lambeth ended L&Q's licences and issued possession proceedings against the occupiers arguing that on termination of L&Q's licences the tenancies ended and they became trespassers. The defendants argued that even if they had become trespassers they were protected by Art 8. The defendants in both Price and Kay relied on a European Court decision (Connors v UK [2004] HLR 52) which appeared to contradict Qazi.

In Connors, the European Court had decided that C's Art 8 rights had been breached; he had been evicted without opportunity to challenge the reasons and as the summary procedure for eviction did not require the local authority to establish any substantive justification of the need for eviction, it could not be said that the procedure of summary eviction was 'justified'.

The Court of Appeal in Price held that the decision of the European Court in Connors was incompatible with Qazi, Connors did not turn on the fact that the applicant was a gypsy and therefore could not be confined to cases involving gypsies; but the court was bound to follow Qazi.

In Kay (decided before Price), the Court of Appeal held that Connors was restricted to gypsies and that there was no conflict between Connors and Qazi so that where domestic law provided an unqualified possession claim, Art 8 could not provide a defence.

Conclusion: In Kay and Price, the House of Lords decided that, in the light of Connors, in so far as Qazi had held that a claim to possession in accordance with a domestic law could never amount to a breach of Art 8, the position would have to be modified.

The effect of Kay and Price appears to be: (i) in cases where the right to possession is qualified, eg, where reasonableness must be considered, the case should proceed on the basis that domestic law strikes a fair balance and defendants will have had an opportunity to raise relevant matters. Accordingly, a decision that a possession order is justified is adequate for the purposes of Art 8(2); and (ii) that in cases where the landlord has an unqualified claim, the only circumstances in which Art 8 can be raised are that domestic law is incompatible or there has been a decision which is Wednesbury irrational.

Pirabkaran v Patel [2006] EWCA Civ 685 was an appeal against forfeiture of a lease of mixed business and residential premises. Landlord (L) had excluded P from the residential premises. P sought an injunction to restrain L from excluding him from either part of the premises. P relied on s 2 of the Protection From Eviction Act 1977 to show that forfeiture had been unlawful. The judge found that the demised premises were not let 'as a dwelling', that L was not restricted by the 1977 Act and, accordingly, the lease had been lawfully forfeited.

The Court of Appeal held that the phrase 'let as a dwelling' in s 2 of the Act meant 'let wholly or partly as a dwelling' and so applied to premises let for mixed purposes. The court held that the inclusion of a mixed purposes tenancy in s 8 of the Act excluded such a tenancy from s 3 of the Act because otherwise the phrase 'let as a dwelling' in s 3 would have included such a tenancy. The court took the view that an interpretation which prohibited a landlord from exercising a right of re-entry upon premises let for use as a dwelling as well as for business purposes otherwise than by court proceedings, was a Convention compatible interpretation (as required under the Human Rights Act 1998), and was in line with Connors and Kay and Price and, thereby, protected the tenant's Art 8 rights.

Rent review

Riverside Housing Association Ltd v White [2005] EWCA Civ 1385; [2006] HLR 15 is another case with worrying consequences for a provider of social housing. Rent increase procedures have caused some concern for housing associations, with a number of them being unsure of the relationship between their contractual provisions and the statutory procedure contained in s 13 of the Housing Act 1988. A number of issues arise from Riverside that need to be borne in mind when dealing with increases. Riverside is a reminder that contractual provisions must be adhered to. The tenancy provided that the rent could be increased annually with effect from the first Monday of June each year. Riverside claimed possession for rent arrears. In their defence, the defendant tenants asserted that rent increases over the preceding four years were invalid as the increase machinery had been applied defectively. If the rent increases had been invalid, there would be no rent arrears as virtually all arrears were attributable to the increases. The difficulty arose because the date on which rent increases took effect had been changed by Riverside. In order to harmonise rent levels, Riverside had not implemented an increase in June 2000 but had delayed to April 2001 instead. Riverside advanced six arguments:

(1) the parties had 'agreed' a variation of the clause;

(2) Riverside had followed the contractual procedure for variation;

(3) the increase provisions meant 'no earlier than' the first Monday in June; alternatively

(4) time was not of the essence for the June date;

(5) there had been a waiver of the date requirement; and alternatively

(6) The tenants were estopped from arguing that the increases were invalid.

The trial judge upheld the increases, but only on the basis that the time was not of the essence.

The Court of Appeal took the view (reluctantly) that the increases were invalid. On the facts, there had been no variation of the tenancy. On the date point, the rent variation date was clearly stated to be a particular date, and there was no room to interpret that as meaning a date 'no earlier than the first Monday in June'. The court disagreed with the trial judge on time not being of the essence, pointing out that a rent review date is a date that gives certainty from when rent is payable and there is no scope for any application of the presumption that time is not of the essence in relation to that date. The court pointed out that there was nothing in United Scientific Holdings Ltd v Burnley BC [1978] AC 904 that meant the rent variation date provisions were not to be regarded as mandatory. The court agreed with the trial judge that to argue estoppel was to use the estoppel as a 'sword' rather than as a 'shield', and was not permissible. Further, in dealing with waiver, it suggested that a court should be slow to find that tenants in social housing have given up their rights by failing to object to their landlord's actions. It is notable once again that the Court of Appeal was very unhappy with the decision, expressing 'regret', 'very considerable reluctance' and 'unease'.

Norman Joss and Nick Grundy are barristers specialising in property and housing law at 5 Paper Buildings, Temple. normanjoss@5paper.com; nicholasgrundy@5paper.com