HANOMAN v SOUTHWARK BOROUGH COUNCIL

While the ‘right-to-buy’ scheme allows council tenants to purchase their properties for determinable discounts, there are additional safeguards designed to prevent administrative vacillation between the two parties to contract.

On this occasion, a local authority found itself on the wrong end of such an agreement, while the tenant was free to enjoy the fruits of an organised purchase.

In the autumn of 1999, a tenant served a right-to-buy notice under section 122 of the Housing Act 1988 for the purchase of his flat for a discounted price of £17,000. Under section 124 of the same Act, a landlord is required to respond in kind so as to allow the process to begin.

For one reason or another, the appellants chose not to acknowledge the respondent’s submission, on grounds that they believed he had withdrawn it; during which time, further legislation was enacted so as to penalise landlords delaying the purchase under section 153A(1) (as inserted by the Housing Act 1985) through a ‘notice of delay’.

On 24th March 2003, the respondent issued such a notice, whereupon the appellants again failed to respond with a counter-notice, at which point s.153B of the 1988 Act further allowed a tenant to submit an ‘operative notice of delay’, thereby converting any paid rents into purchase contribution for the period between the notice of delay and the date of the as yet undelivered counter notice.

Following a declaration by the respondent on 22nd June 2004 of the appellant’s failure to provide counter-notice, the parties went to court; during which, the respondent was finally granted his section 124 counter-notice by the appellants on 2nd July 2004, thus bringing to an end the period in which section 153B of the 1988 Act was in effect.

At the point of purchase, the effects of section 153B were left unresolved, at which point the local authority granted the respondent the right to pursue remedy through an appeal.

It was thus contended to the Court that during the period between 24th March 2003 and 2nd July 2004, sufficient rent had been paid so as to cover the £17,000 owed for the purchase of the flat, therefore no money was owed by the respondent, an argument supported by the Court, and one resulting in the appellants repaying the £17,000 paid with interest.

Taken to the House of Lords, the appellants argued that the respondent had relied upon housing benefits for his rent payments, and that as no money was passed between the respondent and the appellants, there was no evidence that any payment had been made nor received, as under those conditions a reduction in rent constituted the effect of such benefits, as opposed to an actual receipt of funds.

With examination of the Social Security Administration Act 1992, the House established that since its inception, Parliament had provided that under sections 140A to 140G, housing benefit was almost entirely subsidised through central government and not the local authorities, therefore despite any argument to the contrary, some form of payments were in effect, while for contextual purposes, the words of Lord Evershed MR in White v Elmdene Estates Ltd reminded that:

“[T]he word ‘payment’ in itself is one which, in an appropriate context, may cover many ways of discharging obligations.”

White v Eldmdene Estates Ltd

It was for this reason that the House upheld that regardless of exactly how the rent was realised, the effects of section 153B of the Housing Act 1988 existed to avoid the very problem the appellants had created, before dismissing the appeal and upholding the judgment of the Court, while reminding the parties that:

“[T]he crediting of housing benefit to the rent account of a local authority tenant as required by section 134(1A) of the Administration Act is a payment of rent for the purposes of section 153B of the Housing Act 1985.”