Hanoman v Southwark Borough Council (2009)

English Property Law

Hanoman v Southwark Borough Council
Image: ‘Southwark, London’ by Rob Adams

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 s.122 of the Housing Act 1988 for the purchase of his flat for a discounted price of £17,000. Under s.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or another, the appellants chose not to acknowledge the respondent’s submission, on grounds that they believed he had withdrawn it, during which time further legislation was enacted so as to penalise landlords delaying the purchase under s.153A(1) (as inserted by the Housing Act 1985) through a ‘notice of delay’.

On 24 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 22 June 2004 of the appellant’s failure to provide counter-notice, the parties went to court, during which the respondent was finally granted his s.124 counter-notice by the appellants on 2 July 2004, thus bringing to an end the period in which s.153B of the 1988 Act was in effect.

At the point of purchase, the effects of s.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 24 March 2003 and 2 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 ss.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.”

It was for this reason that the House upheld that regardless of exactly how the rent was realised, the effects of s.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.

Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd

English Contract Law

Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd
‘The Junction’ by Elias Gayles

Law of contract operates in a world that extends well beyond the niceties of discourse, and in doing so, relies upon certainty of both intention and expression. In this appeal case, the confused and often assumptive approach to business between a property owner’s asset manager and developer, left the judges with no choice but to re-assess the contracting parties interpretations, in order to establish conclusive judgment.

As part of an ongoing development agreement, the two companies had outlined very specific terms to their arrangement, and which due to their complex nature, commanded considerate specificity. While the majority of the schedules to the contract were secure and without contention, the subject of rental values remained less certain, due to the poor wording (or at least absent text) within the respondent’s letter.

Much like the ‘elephant in the room’, the discussion around whether unoccupied properties were subject to an expected target rental figure or market-driven rates, was left improperly addressed, while in the letter from the respondents, there was also a tone of trying to set the terms of the contract. Clause 18.2.1 of the development agreement required that the developers were bound to seek open market occupation of the properties as soon as possible, and that the target rents (as defined in sch.4 of the agreement) set down by the owners were to be achieved where reasonable. In addition to this, clause 19.8.1 stated clearly that where no occupation occurred within an agreed period, the appellants would agree to pay a calculable sum, based upon the open market rent value at the time.

Unfortunately, during the exchange of letter and email, it was implied by the developer that the sum awarded would be based upon the pre-agreed target rent values and not, (as was expressed within the above clause) the open market value. By the appellant explaining that the proposed terms within the letter were ‘acceptable’, it was also argued that they had, by virtue of their response, agreed to be bound by the principle that the target rent values were those in effect, and not that of any (as yet undeterminable) open market rent rate.

After consideration of the assumptive wording of the letter, it was concluded within the Supreme Court that no reasonable person, including those with inside knowledge of the working arrangement, would have construed that such a statement was (i) expressed (ii) openly agreed to, and for those two reasons the appeal was upheld.