Update: housing

In April 2010, the Tenants Services Authority became the regulator for both registered social landlords '“ or private registered social housing providers as they are now known '“ and local authority social housing. However, the TSA's tenure may well be short-lived.

The new housing minister, Grant Shapps, has given clear indications that he proposes to scrap the TSA.

Regulatory framework

Governance and finances of RSLs would be regulated by the Homes and Communities Agency. The regulation of tenancy services will apparently fall back on internal complaints procedures, elected officials and eventually the housing ombudsman. At the time of writing, no details for a timetable or of full proposals were available, but it appears that the TSA's days are indeed numbered.

The new government has also made some announcements about its proposals for regulation of the private rental sector '“ and, in short, they don't propose to do any more. The measures proposed by the previous government '“ a national landlord register, mandatory regulation of letting and managing agents and compulsory written tenancy agreements '“ will not be going ahead.

Somewhat less surprisingly, neither will the proposal for a website where tenants could rate their landlords.

One change which is still going ahead is the increase in the upper rent limit for assured and shorthold assured tenancies.

On 1 October 2010, the limit will rise from £25,000 to £100,000 per year. The proposed transitional provisions are that all existing contractual tenancies that began on or after

28 February 1997 with an annual rent of between £25,000 to £100,000 will automatically become assured shorthold tenancies on the implementation date. If the tenancy began after 15 January 1989 but before the 28 February 1997, it will become an assured tenancy on 1 October 2010. Any previous assured tenancies where security of tenure was lost when the rent was raised over £25,000 will again become assured tenancies.

This means that contractual tenancies for under £100,000 rent per year can, from 1 October 2010, only be ended by a notice complying with the Housing Act 1988 requirements. It is not clear what would happen, for instance, if a notice to quit was served before the implementation date with a notice period expiring afterwards. Could possession proceedings be brought based on the notice to quit, or would a further notice under section 21 or other Housing Act 1988 ground be required? Conversely, would a section 21 notice served before 1 October 2010 be effective?

Any deposit taken in relation to a contractual tenancy that will become an assured shorthold under the new limit will have to be protected in one of the deposit schemes in accordance with Housing Act 2004 and the required information provided to the tenant, presumably within 14 days of the implementation date, 1 October 2010. There may well be a sizeable number of landlords caught out by this.

Tenancy deposits

It is still not clear exactly when there is a breach of the tenancy deposit protection requirements of the Housing Act 2004, or when the penalty award of three times the deposit set out in section 214(4) should be made. Two particular issues stand out. One is what has come to be called 'late compliance'. The other is whether 'renewal tenancies' require the deposit to be protected if it was originally taken by the landlord prior to April 2007 in respect of a previous tenancy.

On 'late compliance' there has been a High Court case which is so far the only binding judgment on tenancy deposit issues. Draycott v Hannells Letting Limited [2010] EWHC 217 (QB), however, only made matters even more complex. Here, the tenancy deposit had not been protected and the required information provided to the tenant within the 14 days specified in section 213 Housing Act 2004. In fact, the deposit was not protected until some three months later. At first instance, the judge had held that the Act required compliance within 14 days and awarded the three times deposit penalty.

On appeal it was held that the penalty was only invoked where 'the initial requirements of the scheme' had not been met per section 213(4), rather than the 14 days specified in section 213(3). Thus compliance depended on the requirements of the particular scheme used. In this case, the scheme was the DPS scheme and the court found that at the relevant time the DPS scheme did not require the deposit to be protected within 14 days of receipt, although it did state that the landlord or agent was responsible for ensuring that the deposit was submitted for protection within 14 days of receipt. The 'late' compliance was not a breach of the initial requirements of the DPS scheme at that time and therefore the penalty under section 14 did not arise, at least as long as the deposit was protected before the tenant issued proceedings (or possibly as long it is was protected prior to hearing, although this was obiter).

This makes an already complicated situation even more so. Whether late compliance is possible now depends on the wording of the requirements of the individual scheme used by the landlord. I understand that the DPS requirements have since been amended and that the other two schemes rather more clearly identified the requirement to comply within 14 days. But the wording of the schemes could well fall to be tested in the future, if Draycott stands.

However, at the beginning of May, the Court of Appeal heard two joined appeals, Universal Estates v Tiensia and Honeysuckle Properties v Fletcher, at least one of which concerns late compliance. Judgment is imminent and will hopefully provide some clarity and certainty.

The issue with renewal tenancies is that often a deposit taken for a previous tenancy is simply held over by the landlord for the renewal tenancy. Where the deposit was originally taken before 6 April 2007, there was no requirement to protect it for a tenancy that extended beyond 6 April 2007. But, where a renewal tenancy has been granted, has the deposit been 'received' by the landlord for the purposes of section 213 of the Housing Act 2004? No money has physically changed hands. There are some county court cases that say the deposit has been received, most recently Qurat-Ul-Ain Zia v Mourtada Central London County Court (9 February 2010), but nothing binding. The question potentially also arises where a fixed-term assured shorthold tenancy ends and a statutory periodic tenancy arises after 6 April 2007, but this awaits testing in the courts.

It is still not possible to advise either tenants or landlords on tenancy deposit issues with any degree of certainty. One can only practically advise on the risks.

Social landlords, public law and human rights

The difficulties for RSLs continue. In Eastland Homes Partnership Limited v Sandra Whyte [2010] EWHC 695 (QB), Eastland Homes' decision to seek possession under the accelerated procedure following a section 21 notice, which normally means a mandatory possession order, was held to be unlawful. Ms Whyte had a 'starter' tenancy, which is an assured shorthold tenancy.

Her defence was, in part, that the decision to bring possession proceedings was unlawful as Eastland had failed to follow its own announced procedures and policy, and had informed her that a second review of the decision was available when, in fact, there was no such procedure.

Eastland accepted that the court was bound by Weaver and did not challenge the assertion that it was a public body, reserving its position for a higher court.

The High Court held that a public law defence extended beyond grounds of Wednesbury unreasonableness. The public body was required to keep their decision under regular review, but, once the decision was one that no reasonable person could consider justifiable, it was unlawful and could not be remedied by subsequent default of the tenant.

On the cumulative evidence of various failures to follow procedure, procedural unfairness and not following policy, the decision to seek possession was unlawful and the claim dismissed. Permission to appeal was granted but was not in the end pursued by Eastland.

As Eastland didn't appeal and as a High Court case on possession proceedings on a shared ownership property, which also raised the issue of public body status, has been dropped by the landlord, Catalyst Communities Housing Association, there are no extant cases that would be an obvious candidate to go to the Supreme Court on the public body issue. Weaver stands.

The scope of the public law defence was at issue in five cases that were joined before the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336. Two concerned the termination of non-secure tenancies/ licences provided as temporary accommodation under section 193 of the Housing Act 1996 and the remaining three concerned termination of introductory tenancies, under part 5 of the Housing Act 1996.

In view of its own precedents, the Court of Appeal held that statutory constructions meant the gateway b public law defence was not available to those facing possession on an introductory tenancy, while it was available to those facing possession proceedings of temporary accommodation provided under the homeless duties, albeit not if another route of challenge, say by section 202 review, was available.

The Court of Appeal picked two cases, one introductory and one homeless, to go to the Supreme Court, clearly intending them to be joined with Manchester CC v Pinnock for hearing in July. The Supreme Court had other ideas and has listed them for hearing in November. The imminent Supreme Court hearing in Pinnock, a demoted tenancy case in front of a nine-judge panel, remains the most likely opportunity for the Supreme Court to revisit the applicability and extent of the public law defence, hopefully including whether it can extend to the review of proportionality that has been repeatedly set out as necessary by the European Court of Human Rights. Unless that happens, the position in the county courts is that possession proceedings against introductory and demoted tenants cannot be defended on public law grounds.

If the local authority has correctly followed the review process, a possession order is mandatory. If the procedure has not been followed properly, the only option is to seek judicial review. Tenants' advisers need to have the time limits for such an application clearly in mind.