England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr Justice McCombe)

		Royal Courts of Justice Strand London WC2
		Tuesday, 10th July 2001

1. LORD JUSTICE THORPE:Lord Justice Dyson will give the first judgment.
2. LORD JUSTICE DYSON: The appellant was the tenant of a flat at 6A Royal Park Crescent, London W11, from about 1985. At the time the tenancy was granted Mr Falcke, who was the original landlord and the respondent's predecessor in title, was resident in another flat within the building. In 1990 the rent was varied and again increased in 1993. Mr Falcke was still resident in the flat at the date of those increases in rent. He left on a date between 1995 and 1997, when he transferred his interest in the premises to the respondent. After the date of transfer the respondent gave notice of an increase in the monthly rent from £472 to £1,085 with effect from 27th August 1999. The appellant did not pay that rent since she contended that it was not a valid increase because of the nature of the protection applicable to her tenancy. On 30th November 1999 the respondent served a notice under section 8 of the Housing Act 1988 alleging arrears of rent. Those arrears represented, either wholly or substantially, the unpaid and disputed increase in rent. The respondent commenced proceedings for possession in March 2000.
3. The Housing Act 1988 introduced a statutory structure for the protection of residential tenants, replacing that which had previously been afforded to tenants by the Rent Act 1977. The 1988 Act came into force on 15th January 1989. The broad position under the 1988 Act is that, if the appellant came within the protection provided by that Act as an assured tenant, the notice of increase would have been effective to increase the rent, and on that footing the appellant was in arrears amounting to some £7,567 at the date of the hearing on 6th December 2000. If, however, the appellant had protection within the Rent Act 1977 as a protected tenant in 1997, the notice of increase was of no effect and the appellant, it seems, far from being in arrears, was in credit at the date of trial.
4. On 6th December 2000 at the Wandsworth County Court His Honour Judge Rose held that the appellant was an assured tenant in 1997. He gave judgment for the respondent in the sum of £7,567.48 and ordered her to give up possession on 3rd January 2001. The appellant appealed to the High Court. The appeal was heard before Mr Justice McCombe on 6th March 2001. He dismissed her appeal in a reserved judgment that was given on 22nd March.
5. The relevant statutory provisions are these. The Rent Act 1977 provides, by section 12(1):

"Subject to sub-section (2) below, a tenancy of a dwelling-house granted on or after 14th August 1974 shall not be a protected tenancy at any time if ...

(b)the tenancy was granted by a person, who, at the time that he granted it, occupied as his residence another dwelling-house which also forms part of that building; ..."

6. Section 20 of that Act provides:

"If and so long as a tenancy is, by virtue only of section 12 of this Act, precluded from being a protected tenancy it shall be treated as a restricted contract notwithstanding that the rent may not include payment for the use of furniture or for services."

7. So far as material, the Housing Act 1988 provides as follows. Section 1 and paragraph 10 of Schedule 1 provide that tenancies commencing on or after 15th January 1989 are subject to specified exceptions to the assured tenancy. So long as there is a resident landlord, subject to the same permissible exceptions as under the Rent Act 1977, a tenancy cannot be an assured tenancy. I pause to observe that the issue that arises in this case turns on the transitional provisions in the 1988 Act which are relevant because the resident landlord transferred his interest to the respondent who is not, and has not been, a resident landlord.
8. Section 34(1) provides:

"A tenancy which is entered into on or after the commencement of this Act cannot be a protected tenancy, unless -

(a)it is entered into in pursuance of a contract made before the commencement of this Act; ..."

9. Section 36 provides:

"(1)A tenancy or other contract entered into after the commencement of this Act cannot be a restricted contract for the purposes of the Rent Act 1977 unless it is entered into in pursuance of a contract made before the commencement of this Act.

(2)If the terms of a restricted contract are varied after this Act comes into force then, subject to subsection (3) below -

(a)if the variation affects the amount of the rent which, under the contract, is payable for the dwelling in question, the contract shall be treated as a new contract entered into at the time of the variation (and subsection (1) above shall have effect accordingly); and

(b)if the variation does not affect the amount of the rent which, under the contract, is so payable, nothing in this section shall affect the determination of the question whether the variation is such as to give rise to a new contract.

(3)Any reference in subsection (2) above to a variation affecting the amount of the rent which, under a contract, is payable for a dwelling does not include a reference to -

(a)a reduction or increase effected under section 78 of the Rent Act 1977 (power of rent tribunal); or

(b)a variation which is made by the parties and has the effect of making the rent expressed to be payable under the contract the same as the rent for the dwelling which is entered in the register under section 79 of the Rent Act 1977."

10. The position on 15th January 1989 when the Housing Act 1988 came into force was that this was not, and never had been, a protected tenancy. It was a restricted contract: see sections 12 and 20 of the Rent Act 1977.
11. What was the effect of the change that occurred in about 1995 when the landlord ceased to be a resident landlord? It is common ground that it continued to be a restricted contract until the rent was varied, whereupon the contract was treated as a new contract entered into at the time of the variation: see section 36(2)(a). The issue in this case is what was the effect of that so far as the status of the appellant as a protected tenant was concerned.
12. On behalf of the applicant, Mr Short submits that the effect of the variation in rent and the resultant new contract was to convert the nature of the appellant's interest into a protected tenancy. He says that that is the effect of reading section 36(2)(a) and 34(1) together.
13. The learned judge rejected that submission and gave his reasons, which included the following at paragraph 25 of his judgment:

"I think that the scheme of these transitional provisions is properly to be read as removing this tenancy from its status as a restricted contract with effect from the 1990 rent variation. The old contract went and the defendant must be regarded as having entered into a new contract of tenancy at the time of the variation. That tenancy, therefore, was entered into after the commencement of the 1988 Act. Thus, by virtue of section 34, it cannot be a protected tenancy. That is not, in my view, failing to have regard to the separate phasing provisions of chapter 5. This contract was never a protected tenancy. It was a `restricted contract' under the 1977 Act. When it lost its status as such, section 34 prevented it gaining some other 1977 Act protection, which it had never had, and which the 1988 Act ordained should no longer be capable of arising after 15 January 1989."

14. Mr Short submits that that is to take an altogether too narrow view of the effect of the two statutory provisions to which I have referred. In particular, he makes three points. He submits that the policy and purpose that lay behind section 34 was to preserve existing rights and potential rights to protected tenancies. Secondly, he relies on the fact that the words in parenthesis at the end of section 36(2)(a) refer back to section 36(1) and not to section 34(1). He submits that this indicates that the intention of section 36(2)(a) was that, following an increase in the amount of rent payable, the interest should be treated as a new contract for the purposes only of section 36 and not section 34. Finally, he makes a wider policy submission. He submits that, when one looks particularly at section 36(2)(b) and (3), it is clear that the focus in section 36 is on rent. Thus, he contends, the provision was not intended to have any wider effect than with regard to rent and, in particular, it was not intended to have any effect on the security of tenure that a tenant might otherwise have had.
15. I fully recognise that the issue Mr Short seeks to raise is one of some importance. Nevertheless, in my judgment it would not be right to give permission to appeal unless there were some reasonable prospects that the appeal would succeed. I have carefully considered the arguments advanced orally today and, indeed, Mr Short's comprehensive skeleton argument. I remain of the view that I held when I considered the matter on paper. What I said when refusing permission to appeal on paper was this:

"... I see no answer to the judge's reasoning. On 15th January 1989, this was a `restricted contract'. It was not, and never had been a `protected tenancy'. The effect of the rent variation was that the contract was treated as a new contract for all purposes (section 36(2)(a)). In any event, the contingent possibility of a protected tenancy is insufficient to engage section 34(1)(a)."

16. Despite the very cogent arguments advanced by Mr Short, I am wholly unpersuaded that the view that I expressed on paper is incorrect. I would accordingly refuse this application for permission to appeal.
17. LORD JUSTICE THORPE: I agree.
Order: application for permission to appeal dismissed; public funding costs assessment.