England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER DISTRICT REGISTRY
QUEEN'S BENCH DIVISION
(MR JUSTICE IRWIN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		26th June 2007

Lady Justice Arden:

1. The respondent, Mr Rowen, is a tenant of a property owned by the appellant, Contour, pursuant to an agreement dated 5 November 1998. This agreement provides for a weekly tenancy of Mr Rowen's home at 179 Wyndham Park, Clifton Road, Preston, M25. The principal question to which this appeal gives rise is the correct process for increasing the rent under this tenancy agreement. Irwin J, in his judgment given on 4 October 2006, held that, in order to increase rent, Contour had to follow the procedure in section 13 of the Housing Act 1988 ("the HA 1988"). Contour contends that the judge was in error and that section 13 of the HA 1988 does not apply because the tenancy agreement contains its own provisions for increasing rent. No argument to the contrary has been put forward in this appeal by Mr Rowen, although he has been duly served with the proceedings. Mr Rowen appeared in person below.
2. We have heard detailed arguments from Mr Jonathan Seitler QC. He informs us that the decision of the judge was capable of having far-reaching implications for Housing Associations who had served notice other than in the form required by section 13 in relation to tenancies which carried their own rent review clause.
3. In my judgment, for reasons which I will amplify below, Contour is correct in its interpretation of section 13 because that section excludes a tenancy where provision is made for an increase in rent, and this exclusion applies not simply as the judge thought to cases where the amount of the increase in the rent is set by the tenancy agreement, but also in cases where the tenancy agreement merely provides machinery for increasing the rent.
4. I amplify my reasons below, but before I do so I need to set out the background and the relative statutory provisions. I should add that there is a subsidiary question which arises in the light of my conclusion on the principal issue as to whether in the circumstances it was possible in law for Contour to be estopped from denying that the case fell outside section 13 of the HA 1988. In my judgment Contour could not, in law, be estopped from denying that section 13 did not apply because this would amount to conferring jurisdiction on a statutory tribunal which it is not possible to do. In the light of that conclusion I do not have to consider a third issue as to whether the actions of Contour could have amounted to an estoppel in any event.

The background

5. Rent is not defined in the statutory provisions with which we are concerned. Mr Rowen's tenancy agreement, which is an agreement for an assured tenancy sets out the rent which he was to pay and contained the following provisions as to changes in rent and, in addition, service charges:

"1.4 Changes in rent and service charges.

"The rent will be reviewed by the Association in April of each year. The Association shall give to the tenant no less than four weeks notice of the revised amount payable. The revised Net Rent shall be the amount specified in the notice of increase.

"The association agrees not to set a rent in excess of the prevailing market rent for the premises.

"1.4.2 The Service Charge, The Heating Charge and any other charges shall be reviewed by the Association on 1 April of each year. The association shall give the Tenant no less than four weeks notice of the revised amount payable. The revised charge being the amount specified in the notice of increase."

I have referred to both rent and service charges though, as I have pointed out, rent is not defined in the statutory provisions with which we are concerned. We are not concerned to consider the definition of that term and I express no view thereon.

6. Mr Seitler submits that Mr Rowen's tenancy is a tenancy to which section 13(1)(b) of the HA 1988 applies, and that this is not a statutory periodic tenancy to which section 13(1)(a) of that Act applies. I will be coming to those provisions below. It is unnecessary to go into the meaning of assured tenancy or statutory periodic tenancy.
7. With that explanation I return to the facts. By a letter dated 27 February 2006 Contour gave notice to Mr Rowen of an increase in his rent and service charges with effect from 3 April 2006. On 10 March 2006 Mr Rowen referred Contour's letter of 27 February to the Northern Rent Assessment Panel. I should add that rent assessment panels or committees are established pursuant to the Rent Act 1977 although they are not, it appears, defined in the HA 1988. It is, however, clear that a rent assessment committee is a statutory body set up by Parliament for particular statutory purposes. On 5 May 2006 the Northern Rent Assessment Panel gave its decision. In accordance with its practice, Contour did not appear before the panel and did not make submissions. In its decision, the Northern Rent Assessment Panel stated:

"The committee must first determine that the landlords notice under section 13 (2) satisfied the requirements of that section and was validly served.

Housing Act 1988, section 14 requires the Committee to determine the rent which it considered that the subject property might reasonably be expected to be let on the open market by a willing landlord under an assured tenancy.

In so doing the Committee, is required by section 14(1) to ignore the effect on rental value of the property and of any relevant tenant's improvements as defined in section 14 (2) of that Act.

Section 14 (4) provides that for the purposes of section 14 'rent' includes amongst other things any sums payable to the landlord by the tenant in respect of council tax.

Section 14 (4) provides that for the purposes of section 14 'rent' does not include a 'service charge' within the meaning of section 18 Landlord and Tenant Act 1985 (i.e. where the service charge payable by the tenant is variable from time to time according to the relevant costs). However, it does not include a 'fixed' service charge…

The committee determined that the landlord's notice under section 13.2 did not satisfy the requirements of that section because it was not in the prescribed form and accordingly it was invalid. The committee did not, therefore, proceed to determine a rent under section 14 and therefore the application of the tenant was dismissed."

8. Contour appealed that decision under section 11 of the Tribunals and Inquiries Act 1992. On 4 October 2006 the appeal came before Irwin J. At the hearing Mr Rowen produced the letter dated 11 November 2005 referring to the right to appeal a rent review to the rent assessment tribunal. The judge dismissed the appeal. There were two bases for his decision. He held that the exclusion in section 13(1)(b), which I will come to in a moment, applied only to tenancies with a fixed agreed uplift, for example a yearly tenancy where the actual new level of rental for a specific period was actually set out in the tenancy agreement. The judge's reasoning was that:

"The number of tenancy agreements which do not provide for the landlord to propose a new rent must be miniscule."

9. The judge held that the statements made in the tenant's handbook, which came into Mr Rowen's hand, we are told, in about 1995 in connection to a previous tenancy, to the effect that a revised rent could be appealed to the rent assessment committee, meant that Contour was estopped from contending to the contrary in these proceedings.
10. Mr Seitler informs us that Contour has a range of tenancy agreements in force and that many, if not most of them, do not include contractual rent review provisions. He submits that the reviewed rent in a case like this is simply the rent proposed by Contour and it has to be, of course, a market rent. He submits that the general literature is directed at those tenancies in respect of which the rent assessment committee would have jurisdiction and section 13 would apply. He submits that the letter of 11 November 2005 was written in error, on the mistaken assumption that Mr Rowen's tenancy was one of those without a contractual rent review provision.

Statutory Provisions

11. I now turn to the statutory provisions. I start with section 13(1) of the HA 1988:

"13 Increases of rent under assured periodic tenancies

(1) This section applies to –

(a) a statutory periodic tenancy other than one which, by virtue of paragraph 11 or paragraph 12 in Part 1 of Schedule 1 to this Act, cannot for the time being be an assured tenancy; and

(b) any other periodic tenancy which is an assured tenancy, other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period."

12. As I have said, in this case the tenancy is an assured tenancy and not a statutory periodic tenancy (those are defined by section 5(3)), and so the critical words with which we are concerned are the remaining words in section 13, namely:

"… other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period."

Section 13(1) serves the function of defining the tenancies to which section 13 applies. Section 13(2) then deals with the procedure for increasing rent. The landlord must serve on the tenant a notice in the prescribed form and complying with the other requirements of section 13(2).

13. I can then go to subsection (4) of section 13 which provides that, when the tenant is served with that notice, he must make an application in the prescribed form to the rent assessment committee if he opposes the setting of the new rent. I should point out that the scheme of subsection (4) is that the new rent specified in the landlord's notice takes effect as mentioned in that notice unless the tenant takes that action or:

"The landlord and tenant agree on a variation of the rent which is different from that proposed in the agreement or agree that the rent should not be varied."

14. I can then go to section 14. Subsection (1) of section 14 provides that where under subsection 4(a) of section 13 a tenant refers to a rent assessment committee a notice which he has received from a landlord under section 13(2), the committee must determine the rent at which, subject to the other requirements of section 14, the committee consider that the dwelling house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy fulfilling the criteria in section 14. We are not concerned with the detail of the process by which rent is assessed. I note that rent is defined for the purpose of this section; it is not apparently defined for the purpose of section 13. There are two new sections, sections 14A and 14B, but we are not concerned with those provisions.

Analysis

15. I now turn to my analysis on the issues in this appeal.

Issue

(i)The exclusion in section 13(1)(b) of the 1998 Act applies not simply to cases where the amount of the increase in rent is set by the tenancy agreement but also in cases where the tenancy agreement merely provides a machinery for increasing the rent.

16. As I have explained, the crucial question is the meaning of the following words in section 13(1)(b), namely:

"… other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period."

17. I start with a textual approach. On their face, the words which I have just quoted are APT to exclude a contractual provision of one of two kinds. The first kind of contractual provision is one which stipulates for a particular specified increase in rent, such as an increase of £10. The second kind of contractual provision is one which provides only for the possibility of an increase in rent. The judge held that clauses of the first kind but not the second kind were within section 13(1)(b). In my judgment, this is not correct. Both kinds of rent review clause are within the exclusion in section 13(1)(b) because of the words "will or may be" in subsection 13(1)(b). What the judge did was to limit the type of clauses to which the exclusion applied to provisions which provided for a fixed uplift in the rent. A fixed uplift provision would generally provide for an increase to come into effect automatically on a particular date. But it could also be one which only provides for an increase which "may" take effect because the provision may be drafted on a contingent basis, such as an increase of £10 contingent upon an increase of a certain amount in the rate of interest set by a particular bank. That sort of clause would be the sort of clause referred to by the judge and it would fulfil the statutory wording. However, there is nothing as I see it within section 13(1)(b) to limit rent review clauses to clauses which provide for an increase of a fixed amount as opposed to clauses which provide for increases of unspecified amounts to be arrived at in a particular way, for example, as here, by the landlord serving a notice which complies with the tenancy agreement.
18. As I see it, to reach the conclusion that the only sort of contingent rent review clause which is included is one which provides for an increase of a specified fixed amount upon the happening on the contingency involves writing words into section 13(1)(b), and I would therefore hold the judge was wrong to limit the clause to fixed amount rent review clauses. In my judgment, the wording used is also apt to include a provision of the kind we have here which provides that rent may be increased if certain events occur, in this case the service by the landlord of a notice. I would add that I find it difficult to see any evidential basis in the judge's observation set out above that the number of tenancy agreements that do not provide the landlord to propose a new rent of a fixed amount must be "miniscule". As I see it, there is no evidential basis for that in the papers before us, and it may be said to be a surprising conclusion.
19. I now turn to a more purposive approach. If the judge's interpretation is right, it would mean that Parliament had interfered with the agreement between the parties as to how rent increases were to be assessed. That would involve interference with the freedom of contract. I appreciate that in the area of residential tenancies there is statutory rent control in certain cases, but it needs clear wording. There are textual indications that it was not intended because when we go to section 13(4)(b), which I referred to above, the process of going to a rent assessment tribunal is stopped in its tracks if the landlord and tenant agree on the variation of rent before the rent assessment tribunal has to assess it. This supports the view that in the context of these tenancies Parliament wished to uphold the freedom of the parties to agree their own provisions for increases in rent.
20. Likewise, subsection (5) of subsection 13 says that nothing in this section or section 14 below affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy, including any term as to rent. This provision also supports the view that Parliament intended to uphold freedom of contract because under this provision the parties could agree to vary the rent each year and, if they did so, the tenant would have no right to go to the rent assessment committee. That scheme shows that reference to the rent assessment committee is intended in this context to be a default procedure if the parties themselves have not agreed on a process for reviewing rent or on an amount which the increased rent is to be in a later period.
21. I should add for completeness that the text book authorities to which we have been taken make the point, for instance in Hill & Redman that:

"A clause which reviews the rent to an excessive sum in order to exceed the current limit, specifically for the purposes of excluding security of tenure, is unenforceable and ineffective."

There is a reference there to another decision of this court to another decision of this court in Bankway Properties Ltd v Pensfold Dunsford [2001] 1WLR 1369 on which I sat with my Lord, Lord Justice Pill. In other words, it must not be taken by my referring to freedom of contracts in this context that there may not be limits in other cases on freedom of contract, but in principle, as it seems to me looking at this section purposively, Parliament has intended to uphold the freedom of parties to agree as to how rent reviews should take place.

22. Pursuing that line, it seems to me that there would be no logic in the distinction which the judge's judgment draws between increases in future periods of a fixed amount and increases of amounts which are to be fixed in accordance with an agreed procedure. If Parliament is prepared to uphold the one form, it is difficult to see why it should draw a distinction between that, and what I would respectfully suggest might be a more common form, namely a formula or a system whereby the landlord gives notice. So approaching the matter on a purposive approach as well, I consider that Contour was right that the judge was wrong in law on his interpretation.
23. I should add that Mr Seitler cited a number of textbooks in support of his submission. They were Woodfall's Law of Landlord and Tenant at paragraph 24-040, Hill and Redman's Law of Landlord and Tenant at paragraph C [2099] and the Encyclopaedia of Housing Law and Practice paragraph 1-2409.
24. The conclusion that I have reached as to the interpretation of section 13(1)(b) means that, if Mr Rowen wishes to pursue his challenge to the increase of rent, he would not be able to go to the rent assessment committee under section 13, he would have to start a separate action in the county court. If I had reached the contrary view on the statutory interpretation, the question would have arisen as to whether the landlord could give another notice for the purposes of the rent payable as from April 2006, and I wish to record that we have not heard argument on that issue. It would turn upon the true interpretation of the tenancy agreement.

Issue

(ii)Contour could not be estropped from denying that section 13 applied because this would amount to conferring jurisdiction on the statutory rent assessment tribunal, which it is not possible to do.

25. The jurisdiction of a rent assessment committee is entirely statutory. As a matter of law, statutory jurisdiction cannot, unless the statute so provides, be reduced or enlarged by parties by consent. This can be seen from the judgment of Lord Reid in Essex County Council v Essex Incorporated Church Union [1963] AC 808 at 821. It can also be seen from the speech of Lord Thankerton in J and F Stone Lighting & Radio Ltd v Levitt [1947] AC 209 at 216. Lord Thankerton said:

"…it would be idle to suggest that either estoppel or res judicata can give a court jurisdiction under the Rent Restriction Acts, which the statute says it is not to have."

26. We are concerned here of course not with a court but with a tribunal, but by implication Parliament has provided that it is only to have jurisdiction to determine the rent if the landlord has served a notice complying with section 13(2), which can only be done where the tenancy complies with section 13(1). As neither of those requirements was, in my judgment, satisfied, it was not possible for the parties to agree to confer jurisdiction on the Northern Rent Assessment Panel and likewise Contour could not, in my judgment, by analogy be estropped from denying that it did not have jurisdiction for those reasons.
27. For the reasons given above I would allow this appeal.

Lord Justice Lawrence Collins:

28. I agree that the appeal should be allowed. I have no doubt that on the plain meaning of the rent review clause in section 13(1)(b) of the 1998 Act, the rent review clause is in the words of the section:

"a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period."

Nor can there be any doubt that the jurisdiction of a statutory tribunal cannot be enlarged by agreement or estoppel.

Lord Justice Pill:

29. I also agree. In paragraph 19 of his judgment the judge has relied on the expression in section 13(1)(b) a "particular period of the tenancy" as indicating that the exception in the paragraph applies only to tenancies for a term where, during that term, provision is made for rent increases. I agree with Lady Justice Arden and Lord Justice Lawrence Collins that that is not the correct construction. The opening words of the subsection are "any other periodic tenancy". The exception in the paragraph also applies to any other periodic tenancy and includes a weekly tenancy such as that in the present case. The expression "particular period of a tenancy" in the paragraph is used in a non-technical sense, not confined to tenancies for a term. It includes the case of a weekly tenancy which contains a provision binding on the tenant permitting the landlord to have an annual rent review on terms, and thereby to impose a rent increase. The period of the tenancy within the meaning of the paragraph may include the year for which the rent review is provided by the contract. For those reasons, and the reasons given by Lady Justice Arden and Lord Justice Lawrence Collins, I too would allow this appeal.

Order: Appeal allowed.