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04 May 2018

‘Sitting tenants’ may not be what they seem

Background

Residential tenants with security of tenure under the Rent Acts (commonly known as sitting tenants) can retain their homes for life as long as they genuinely live there and pay a low ‘fair’ rent.

This article deals with two cases where we acted for landlords of two residential properties against ‘sitting tenants’ in successful claims for possession. The cases were very different but provide interesting examples of the issues that can arise with sitting tenants.

Cheyne Mews and the two homes person

The case concerned a mews house in Cheyne Mews, Chelsea in which we acted for the landlord, Mr L, in his claim for possession. Mr L is the freehold owner of the mews house and a larger family home nearby. The tenant in this case, Mr C, was fortunate to benefit from what he claimed was a Rent Act tenancy dating from the 1960s and managed to keep the mews house as a very affordable pied a terre for nearly 50 years.

In addition to the mews house Mr C and his wife owned a 5 bedroom property in Surrey.

There is recognition in the case law that, in principle, a person may occupy two homes as a residence and be a sitting tenant of either property. The classic example of this is the person who lives in the country and also has a residence in town so that it is convenient for work, see for example Langford Property Co. Ltd v Tureman [1949] 1KB 29.

Mr L suspected that the mews house was not being occupied by Mr C in a way consistent with use as a home and started to gather evidence as to the occupational position, which took over two years.

Court proceedings were issued to recover possession of the mews house on two alternative grounds:

a) Mr C’s quality of occupation of the mews house did not satisfy the ‘residence’ requirement under the Rent Acts, alternatively;
b) It was reasonable for the court to make an order for possession because of suitable alternative accommodation being available to Mr C at his home in Surrey.

As expected Mr C deployed the ‘two homes’ defence in the court proceedings, and argued that the mews house was used as his second home. He also argued that his property in Surrey was not a suitable alternative to the mews house in Chelsea.

Suitable alternative accommodation

Paragraph 4 of Part IV of Schedule 15 of the Rent Act 1977 provides that:

‘… accommodation shall be deemed to be suitable… if it consists of either –

(a) premises which are to be let as a separate dwelling such that they will then be let on a protected tenancy… or
(b) premises to be let as a separate dwelling on terms which will, in the opinion of the court, afford to the tenant security of tenure reasonably equivalent to the security afforded by Part VII of this Act in the case of a protected tenancy of a kind mentioned in paragraph (a) above,

and, in the opinion of the court, the accommodation fulfils the relevant conditions as defined in paragraph 5 below’.

An interesting question in this case was whether a property which is not let on a protected tenancy or on terms with equivalent security for tenure can qualify as suitable alternative accommodation for the purposes of paragraph 4 of Part IV of Schedule 15. In other words are the terms of paragraph 4 exhaustive so as to exclude the Surrey property held on freehold tenure by the sitting tenant himself. The editors of Woodfall say that this question has not yet been definitively determined. However, they also say that paragraph 4 is not exhaustive and that there is some support in the case law for this. Whilst the trial Judge in our case appeared to accept the non-exhaustive test, he did not have to make a finding on this issue for the reasons set out below.

The Residence Test

The freehold of the property in Surrey was purchased by Mr C in 1980 under the Leasehold Reform Act 1967, whereby a long leaseholder can buy the freehold of his property (enfranchise) from the landlord subject to certain strict criteria, one of which in 1980 was that the property must have been the only or main home of the tenant for a period of at least 5 years before the tenant can buy the freehold.

The litigation process requires the parties to disclose all relevant documents to each other. Obtaining disclosure of documents from Mr C proved problematic throughout the proceedings, which involved both specific and third party disclosure court applications by Mr L.

The documents which came to light in the disclosure process were sourced from a third party and related to the purchase of the Surrey property in 1980. This information was not known by Mr L at the commencement of court proceedings but had a devastating effect on Mr C’s defence.

The issue which came into sharp focus only a week or so before the trial was whether, as a result of the late document disclosure, Mr C was ever a statutory tenant under the Rent Act. The documentary evidence showed that by the time Mr C’s short lease of the mews house came to an end in the 1960s he was not living in the property. The significance of this was that once the statutory tenancy had been lost it could not be regained by subsequent occupation. However, if in fact a statutory tenancy had arisen upon the expiry of the contractual tenancy in the 1960s, it would have been more difficult for the landlord because absences from the property by the tenant do not necessarily deprive the tenant of Rent Act protection.

Mr C did not attend the trial which troubled the Judge. Instead Mr C’s wife and son gave evidence in defence of the possession claim. Unfortunately for them they did not stand up to cross examination at all well and much of their oral evidence was contradictory and misleading.

Having reviewed the evidence the Judge held that Mr C and his family had moved out of the mews house in the 1960s and so no Rent Act tenancy had ever come into existence. That being so the trial Judge did not need to determine whether the Defendant had lost his statutory tenancy by not occupying the property in more recent years and nor did he need to determine the suitable alternative accommodation issue. Mr L was awarded possession of the mews house, indemnity costs and damages being the difference in the low registered rent and market rent for a period of some 4 years.

Cricketfield Road, Hackney

In this case the landlord, Mr L let a large four storey house in the early 1970s to individuals claiming to represent an association which benefits the Malaysian Community. The exact details of the letting were lost over time but the tenants were paying rent of £45.50 per month for the property for most of the 50 years they were in occupation. The rental was paid by the association by direct bank transfer to the landlord.

Mr L noticed that the property appeared to be in poor condition and was only partially occupied. Mr L began to gather evidence of the actual occupational position and in the course of this process found that his previous solicitors had in fact served a notice under S25 of the Landlord and Tenant Act 1954 terminating the tenant’s tenancy. The issue in this case was whether the tenancy was in fact a business tenancy under the 1954 Act or a residential Rent Act tenancy.

The landlord issued proceedings to recover possession of the property on the ground that the tenancy had come to an end because the tenant did not apply for a renewed tenancy after being served with the notice under S25. Initially the tenant defended the claim on the basis that they had protection under the Rent Acts and were not served with the S25 notice. However, the defence was abandoned when the landlord’s previous solicitor was able to show that he had served the S25 notice by hand delivery and by post at the property. With this the tenant’s defence was abandoned and an order for possession was obtained without opposition.

After 50 years of letting the property and recovering very little by way of rental income the landlord was able to recover his property.

Conclusion

All of these cases are fact sensitive and will therefore be judged on their own merit, but it is possible to recover possession of a valuable asset in the right circumstances. If there is a suspicion that the sitting tenant no longer lives at the property landlords should look carefully at the occupational position and then seek legal advice from a specialist.

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