Assured tenancies – Improvements – Legislative intention – Tenancies

Cherry Sheila Hughes v Borodex Ltd: CA (Civ Div) (Sir Andrew Morritt (chancellor), Lady Justice Arden, Lord Justice Patten): 27 April 2010

The appellant tenant (H) appealed against a decision that improvements she had made to a flat owned by the respondent landlord (B), under a long residential tenancy, were not to be ­disregarded when fixing rent under the new assured periodic tenancy that arose following the expiry of the first tenancy.

The long residential tenancy had expired following the introduction of the Local Government and Housing Act 1989 and B had served a notice upon H, proposing a new assured periodic tenancy. H did not accept the level of rent proposed by B, and the matter was referred to the rent assessment committee which determined the rent and in doing so, disregarded the improvements. Over three years later, B served H with a further notice proposing a new rent. The rent was determined by the rent assessment committee again and it concluded that it was not entitled to disregard the improvements. On appeal, the judge agreed and held that it was not possible to be satisfied that the removal, by the 1989 act, of the protection of former tenants under long residential tenancies was inadvertent. H submitted that (1) it was difficult to believe that parliament had intended to take away from tenants the right to a disregard of improvements which had existed under the Rent Act 1977 and the Landlord and Tenant Act 1954, and schedule 10 of the Local Government and Housing Act 1989 should be construed accordingly; (2) paragraph 9 of schedule 10 established a set of principles that would continue to apply throughout the life of the new assured tenancy and sections 13 and 14 of the Housing Act 1988 were to be given effect in accordance with those principles.

Held: (1) Under schedule 14(2) and 14(3) of the 1988 act, which generally applied to assured tenancies, improvements made by a tenant under a previous tenancy of the same premises were not to be disregarded unless that previous tenancy was an assured ­tenancy. If improvements were to be disregarded under the new form of tenancy, that result therefore had to be achieved on the interpretation of schedule 10. However, the effect of paragraphs 9 and 11 of schedule 10 in relation to rent was clear. Their function was limited to enabling the initial rent to be fixed at the outset. Once the initial terms were fixed, those paragraphs were spent and it was open to the landlord to serve a notice and start the procedure for ­fixing a new rent under section 13 of the Housing Act 1988. It was not open to the court to adopt a contrary ­interpretation. The mere fact that no policy reason for the change in the treatment of improvements had been forthcoming did not mean that there was no reason for it and it was not for the court to assume that parliament had intended to produce the opposite result.

(2) It was impossible to read sections 13 and 14 of the 1988 act as providing for the assessment of rent on the principles laid down by paragraph 9(2)(e) of schedule 10 of the 1989 act. If that had been the intention of parliament there would have been some indication of that inserted into the 1988 act when the 1989 act was passed. There was no warrant to read a further principle deduced from schedule 10 into sections 13 and 14 of the 1988 act. It would be unusual for a statute to set out principles rather than operative provisions without that being made clear. If paragraph 9(2)(e) of schedule 10 of the 1989 act laid down an overriding principle, that contradicted the express provisions of section 14(3) of the 1988 act which set out the definition of ‘relevant improvement’. The absence of guidance on that point in either the 1988 act or the 1989 act was a strong ­indication that the interpretation ­proposed by H was not correct. Furthermore, if H’s interpretation was correct, the heading to paragraphs 10 to 12 of schedule 10, ‘initial rent under and terms of assured periodic ­tenancy’, was a materially incomplete statement of the scope of the provisions of those paragraphs. That heading was in fact an indication that the correct way of reading paragraph 9 of schedule 10 was that it applied to that moment in time when the long residential tenancy expired and that it filled that void. Paragraphs 10 to 12 merely applied in the period immediately after the creation of the new assured tenancies, before their terms had been fully ascertained, and not throughout their duration.

Appeal dismissed.

Martin Rodger QC, Victoria Williams (instructed by David Tagg & Co) for the appellant; Philip Rainey QC, Christopher Heather (instructed by Forsters) for the respondent.