Homeless hostel VAT bill withdrawn

Readers may remember that in December I reported that a new homeless hostel in Newcastle was at risk because the VAT had ruled that it was a commercial building and not a hostel (mainly because they did not have a workable definition of a homeless persons hostel) and that therefore VAT was payable. The VAT bill (£315,000) would have put the company into liquidation and put other hostels at risk.

You will be pleased to learn that following an appeal by the company, the decision has been overturned and the VAT bill withdrawn. Phew!

Homeless hostel too comfortable says VAT man

Reading the recent issue of Roof Magazine, I came across this utterly bonkers decision by the VAT authorities.

Byker Housing Association has built a new 31 bed hostel for the homeless in Newcastle – however the VAT authorities have deemed it to be a commercial building (i.e. a hotel) rather than a residential one - because it is too comfortable! This means that it becomes liable for VAT of £315,000 – which will put Byker Bridge out of business.

Under the VAT rules, hostels should be exempt from VAT if they are for a residential use, designed as a dwelling, or used for a relevant charitable purpose. Despite this, because the VAT office does not have a workable definition of a homeless persons hostel, and because the new hostel is quite nice, they are treating it as if it were a hotel for tax purposes. Even though the building was partly developed with Housing Corporation finance which is only available for non commercial ventures!

Hopefully this decision will be set aside. Otherwise Byker Bridge will go out of business, there will be 1,500 per year more homeless on the streets of Newcastle, and it will have a knock on effect on other registered social landlords developing homeless hostels

In two minds about Malcolm

Speaking to a solicitor friend of mine recently who does housing association repossession work, she said bitterly that it seemed to be impossible nowadays to evict tenants who have any sort of disability. She is not going to be pleased with the recent Court of Appeal decision in London Borough of Lewisham -v- Malcolm.

Mr Malcolm was a tenant of Lewisham LB. He suffered from schizophrenia which initially was controlled by medication. He applied to buy his flat under his statutory right to buy. However there were delays. At about this time he stopped taking his medication, and his behaviour became erratic. Before his sale had gone through he let his property to tenants. By doing this he lost his security of tenure, and with it many of his statutory rights. Lewisham therefore decided to serve him with a Notice to Quit, and then issued proceedings for possession.

Normally there would be no defence to such as claim, Malcolm having lost his security of tenure. However Malcolm defended on the basis of the Disability Discrimination Act 1995, section 22(3) of which makes it unlawful to discriminate against a disabled person by evicting them, claiming that he had only parted possession with the flat as a result of his disability which led him to make irrational decisions.

At first instance the Judge found that (1) Malcolm was not disabled within the meaning of the act, (2) that the section would not apply anyway in a claim where the Judge had no discretion to refuse an order for possession, (3) that the subletting was not caused by his disability and (4) that the LA could not have discriminated as they had no knowledge of his disability. However the Court of Appeal did not agree.

Rather worryingly for landlords, the Court of Appeal found for the tenant on all four of the issues in question. Malcolm was disabled with in the meaning of the act. The subletting had been connected to his disability as it had affected his day to day activities (and by implication the subletting, even though there was no direct evidence on this point). A landlord does not have to know about the disability to discriminate against the disabled, and finally s23(3)(c) is unqualified and does not limit the unlawfulness to cases where Judges have a discretion to grant possession. The Judge refers in paragraph 52 to two County Court decisions, one of being a case where a Judge refused to make an order under s21 where the tenant was disabled, as examples of courts happily adapting to the DDA 95 without difficulty.

The thought of landlords being unable to evict tenants under section 21 because of the DDA will send a shiver down the spine of all private landlords, and may well result in a private determination not to knowingly let to any disabled tenant in future. This will do nothing to help the prospects of the disabled (particularly those suffering from mental illness) obtaining accommodation in the private sector.

I have to say that although I do not like discrimination and approve broadly of protective legislation, I am worried by this case. For example, the status of Malcolm’s current occupation is now uncertain. He presumably is now unevictable, but it is probable that he does not have a tenancy (if the notice to quit served on him is still valid). Does this mean for example that the repairing obligations in s11 of the Landlord and Tenant Act 1985 do not apply? Or would this also be a breach of the DDA?

Also, it is one thing to use this type of legislation against social landlords, who to a certain extent have a duty to look after those in society who are disadvantaged. However this case opens up the prospect of the DDA being used against private landlords, even if claims for possession are brought under section 21. Is it right that a private landlord, who may only have a few properties, should be forced unwillingly to continue to rent to a tenant, simply because he is disabled, even if the landlord was unaware of his disability, when he would normally be entitled to possession as of right? Or would the private landlord be able to use justification in such a case?

This case opens up a vista of uncertainly which will no doubt make private landlords (particularly those who rent to tenants who are disabled) most uneasy.

A green paper for green housing

The government published its Housing Green Paper recently, and I have now been able to have a quick flick through it. It looks pretty impressive at first glance.

A few points spring to mind. First of all, here’s hoping that they will be able find sufficient builders, bricklayers, electricians, and plumbers etc to do all the work. Second, although I am delighted that for the first time in years, funding is being put in place to allow new housing to be built by Local Authorities, I do hope that this will not then be all sold off at an undervalue to tenants, as happened to much of the previous LA stock under the right to buy.

However I am really pleased that they are looking to make all new housing environmentally friendly. Let us hope that they are able to resolve the planning problems so that on the one hand development is not thwarted by being stuck in the doldrums for years and years, and on the other hand things are not loosened up so much that inappropriate building is allowed (for example on flood plains …).

If you want to read the Green Paper you will find it here – if you want to respond note that you need to get it in by 15 October.

Housing more important now

An interesting snippet from the afternoon press briefing from No 10 for 28 June:

"On the role of the Minister for Housing, whilst the breadth of her responsibilities would stay the same, clearly the fact that she was in Cabinet sent a very clear message about the much greater importance of the Housing Minister and the role of Housing more generally in the Government's agenda."

It will be interesting to see how that works out. It will also be interesting to see if the new government takes up the Rented Homes Bill so carefully drafted by the Law Commission and published in May 2006.

Reflections on Riverside v. White

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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Housing associations, in particular Riverside Housing Association, will have been popping champagne corks recently, to celebrate the result of the recent House of Lords decision in the case of Riverside Housing Association v. White.

In this case Mr and Mrs White, who were being evicted by their landlords, Riverside, sought to claim that they were not really in rent arrears because Riverside had not complied properly with the rent review clause in their tenancy agreement for the past four years or so. Worryingly for the housing association, the Court of Appeal agreed with them. This had very serious implications for Riverside, as the Whites were not the only tenants whose tenancies contained this clause and whose rent had been increased in this way. They had no option but to appeal.

The House of Lords have now found in their favour, finding a slightly different way of interpreting the wording of the review clause. However there were some interesting points in this decision:

• Their Lordships made it clear that this case was being treated slightly differently because it was not like the normal run of rent review clauses which appear before them. The appellant is "a charity and a registered social landlord and it is publicly funded. Its tenants will be relatively poorly off individuals, no doubt normally with limited, if any, experience of interpreting legal documents."
  
  
• They also commented that the whole structure and drafting of the rent review provisions (which was criticised in the decision) was quite different from that which one would expect to find in any commercial lease.

This seems to be signalling that slightly different considerations will apply in future when interpreting rent review clauses in residential leases (particularly for social tenancies) as opposed to commercial leases.

However this does not mean that landlords can now take a relaxed view of rent review clauses. Riverside had to wait several years and go all the way to the House of Lords to get this decision. Even though their opponent has been ordered to pay their legal costs (another drain on the legal aid fund), it is likely that they will have suffered financially as a result of this case.

It is far better to do your utmost to avoid the possibility of any dispute, to draft clear and unequivocal rent review clauses in the first place (which do not make the parties go through too many hoops - all of which can become points for dispute later), to and ensure that the clause is followed to the letter every time the rent is reviewed.

Dealing with the empties

It looks as if some Councils at least are using the new Empty Dwelling Management Orders which came into force last year. I am delighted to see that my own local authority of Norwich seem to be in the van here, as reported in the Evening News, and their own web-site.

However it seems that they are not alone. David Ireland, the Chief Executive of the Empty Homes Agency, reports on his blog that other orders are being obtained in South Oxfordshire District Council. But, he reports, it is often enough just to threaten to use the order. Apparently Manchester have done this on no less than 15 occasions, each time the property was sold or let.

Its nice to hear of empty properties being brought back into use.

Social housing - a bad thing?

A recent report published by the Smith Institute (a 'think tank') covered in an article in The Times today (4 July) indicates that research has shown that social housing is a bad thing and that it is sustaining rather than reducing dependency and poverty.

"A social housing tenancy should no longer be regarded as a positive outcome", the report says, "because there is scant evidence that it improves a person’s life chances."

This may well be the case, but I can't help wondering whether this is an attempt to justify in retrospect the selling off of so much of our housing stock under Mrs Thatcher’s 'right to buy'. There is certainly still a huge demand for social housing, which is why Local Authorities are often unable to re-house homeless families until the bailiff is at the door.

The massive lack of social housing is also why so many local authorities are courting private landlords, desperately hoping that they will agree to lease them some of their properties, so they will have somewhere to put all these homeless families which they are obliged to house under their statutory re-housing duties.

It is very difficult for Local Authorities, as the (subsidised) price obtained for a council house sale is not nearly enough to build or buy a replacement. Deciding that social housing is a bad idea anyway and should be phased out is certainly a more convenient answer.