The Housing Act 1980 introduced the right to buy and one of its effects was to lead to local authority blocks becoming multi-tenure. Alongside their own tenants the legislation created not just lessees with a leasehold interest in the former council flat, but also private sector tenancies where the said lessees took the opportunity to become landlords themselves. This caused, amongst other changes, obvious administrative burdens and changes in repairing obligations. In respect of the latter, did it (and indeed does it) expose the local authority freeholder to a great risk of damages exposure?
In many respects the answer is ‘no’ though it is worth providing a brief overview of 3 different scenarios concerning damages available to local authority tenants, leaseholders (living at the premises) and private sector tenants (of the lessees).
Local Authority - Where a local authority is in breach of its repairing obligations owed to its own (primarily introductory and secure) tenants repairing covenant then the question of damages and its quantum is straightforward, commonplace and established. In terms of general damages it was said in Wallace v Manchester City Council (1998) 30 HLR 1111, 1121 by Morritt LJ that it was the discomfort and inconvenience that was being compensated, and further that it was advisable to “cross-check” any proposed award by reference to the rent payable for the disrepair period. For example, if there’s a one year actionable disrepair period and the rent for that period is £5200 any award should be referable to that figure – ‘minor’ defects may suggest a figure, for example, of around 5-10% of that figure (£260-£520), more serious problems would perforce move that figure higher up the percentage scale.
Litigation on such matters rarely reach final trial and the reality is that the tenant’s legal costs will usually exceed the damages award many times.
Long leases - In Earle v Charalambous [2007] HLR 8 the Court of Appeal determined that general damages in a long lease case should be assessed by using a notional market rent for the property given that the ground rent is often of limited or nominal amount. The most obvious effect of this is that they are therefore likely to obtain higher awards than the local authority tenants who enjoy social or affordable rents.
One of the most interesting disrepair cases of recent times was decided by the Court of Appeal in 2015. In Moorjani v Durban Estates Ltd [2016] 1 WLR. 2265 the question was whether the lessee can under a long lease of a residential flat ‘claim to have suffered loss arising from a period of disrepair affecting both the flat and the common parts in the building attributable to the lessor’s breach of its obligations to the lessee if, during that period, and for reasons unconnected with the disrepair, the lessee chooses to live elsewhere, leaving the flat vacant?’.
The Court of Appeal, with a lead judgment by Briggs LJ (now a Justice of the Supreme Court), answered that question in the affirmative. The logic was:
- a tenancy is a proprietary right;
- If its value to the lessee is reduced by any breach of the landlord’s repairing obligations, they are entitled to damages reflecting their loss of enjoyment of the asset;
- Where the tenant suffers discomfort and inconvenience as a result of the breach (cf Wallace v Manchester), damages should be awarded to reflect that loss; but,
- Even where there is no discomfort and inconvenience, the lessee is still entitled to damages reflecting loss of enjoyment of their rights (i.e. Mr Moorjani).
Briggs LJ ultimately concluded that the trial judge had been wrong to determine that the damages claim for loss of amenity could not succeed in light of Mr Moorjani’s non-occupation of the subject flat. It may be treated as ‘mitigation of loss’, even if unintended, and on the facts the revised awards were reduced by 50% for those periods where Mr Moorjani was not living at the flat.
Finally, if the lessee is caused loss by reason of not being able to let their property (or only at a reduced rate) because of any actionable disrepair then their claim against the local authority could include such a loss. The local authority freeholder may also be required to pay a contribution in any claim by the private tenant against the tenant’s landlord (who will have the primary liability).
Andrew Lane is a barrister at Cornerstone Barristers