In the recent case of Helena Partnerships Limited v. Brown  the importance of sections 13 and 14 of the Housing Act 1988, (‘the Act’), to rent increases was put under the spotlight again.
The wording of these sections is somewhat complex, but, basically, where a tenancy is a periodic assured tenancy (either a contractual periodic tenancy or a statutory periodic tenancy), if a tenant disagrees with a proposed increase of rent, section 13 of the Act allows the tenant to ask a Tribunal to assess the open market rent for the property. However, if there is a ‘contractual provision’ in the tenancy agreement for increasing the rent, section 13 does not apply.
In 2007, in the case of Contour Homes Limited v. Rowen, the Court of Appeal decided that section 13 did not apply where the rent increase was set by the tenancy agreement and also where the tenancy agreement provided a mechanism for increasing the rent.
Mr. Brown was an assured periodic tenant of Helena Partnerships, (‘HP’) of a flat under a tenancy agreement dated 3 November 2003. His tenancy agreement, which was based on the NHF's model assured tenancy agreement, required him to pay rent and service charges and contained the following provisions in relation to rent increases:
1.10.1 We will increase your rent on the first Monday in April following the grant of this tenancy by no more than the change in the Retail Price Index (all items) for the previous 12 month period announced in the October before your rent increase ("RPI") plus half a percent.
1.10.2 Thereafter we can (in accordance with Sections 13 and 14 Housing Act 1988) increase your rent at any time if we give you at least one month's notice in writing of the increase. You must then pay the full amount shown in the notice unless either we and you agree to an alternative figure or you ask a rent assessment committee to set a rent for you. This rent will be the most we can charge for one year from the date specified in the notice unless you and we agree otherwise.
1.10.3 Save as set out in clause 1.10.1 above we will not increase your rent more than once a year and no increase shall take effect less than a year after the last increase.
1.12.1 We may increase your service charge (if it applies) at any time if we give you at least one month's notice in writing, but not more than once a year unless there is a change in the services provided or it is necessary to meet the actual cost of the services provided.
The remainder of clause 1.12 provided for an annual RPI increase in the service charge in April in the year following the grant of the tenancy and thereafter for Mr. Brown to pay "a service charge based on our estimate of the sum we are likely to spend in providing services to you over the coming year".
There was to be an adjustment of the service charge for the following year if it transpired that more or less had been spent "on providing services for you"; in other words, HP was operating a variable service charge regime.
At the commencement of his tenancy Mr. Brown paid a weekly rent of £48.56, which included a small service charge of £0.62 per week for grounds maintenance and communal lighting. Although the tenancy agreement provided space to record additional charges for a list of services comprising general counseling and support, "Care Line/Sheltered", heating and furniture, no charge was shown against any of those items in Mr. Brown's agreement.
In 2010 HP introduced additional services, which it described as "specialist housing related support to existing and new tenants who require advice and assistance to help them manage their tenancies". The cost of these additional services was initially met by HP from its general revenue but from 7 April 2014 HP sought to defray the expense by introducing a weekly service charge of £33.02, of which £0.97 was for the grounds maintenance and communal lighting and the balance for the new services.
At the same time HP gave notice to Mr. Brown proposing a new rent for the tenancy of £77.65 in place of the previous rent of £72.87. The effect was to increase the sum payable by Mr. Brown as rent and service charges from £73.81 a week to £110.67 a week.
Mr. Brown did not consider that he would benefit from the new services. He was not in need of housing related support, intensive or otherwise, and had successfully sustained his tenancy for more than ten years. He therefore referred the notice of increase of rent to the Tribunal using the form prescribed under section 13(4)(a) of the 1988 Act and in a subsequent letter to the Tribunal regarding the scope of his challenge he wrote “I agree to the rent of £77.65 but do not agree with the increase of £32.05 for services that are not required, agreed or used.”
The court was asked to consider whether the references in the tenancy agreement to sections 13 and 14 of the Act were to the effect that Mr. Brown was unable to ask a Tribunal to assess the open market rent for the property.
HP argued that Mr. Brown was unable to ask a Tribunal to assess the open market rent for the property but this was dismissed on the basis that "the tenancy agreement entitled the landlord to increase the services provided to the tenant and the service charge and the rent, but did not include a detailed formula for increasing either."
HP appealed, submitting that clauses 1.10.1 and 1.10.2 of the tenancy agreement constituted "...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" so that the rent could not be referred to a Tribunal by Mr. Brown.
The appeal was dismissed. It was decided that clause 1.10.1 of the agreement provided for a single increase with effect from 1 April 2004 and had no continuing effect after that date. When Mr. Brown referred the notice of rent increase clause 1.10.1 could not be said to be "a provision, for the time being binding on the tenant" because by that time the provision was spent and did not exclude the tenancy from the application of section 13.
This decision is of relevance for registered providers due to the fact that Mr. Brown's tenancy agreement is based on the NHF’s model agreement and thus in widespread use. It could mean that such landlords may not have complied with the strict requirements of the Act as regards the giving of notice of a proposed rent increase, thereby calling into question the validity of historic rent increases.
If you would like any advice about this case and how it may impact your organisation, or need any help in reviewing your tenancy agreements in light of this decision then please do not hesitate to contact me.