Council tenant should not have had to pay for flat, Lords rule

Housing benefit should be deducted from the purchase price of right to buy council homes where sales are delayed by local authorities, the House of Lords has unanimously ruled.

The ruling in Hanoman v London Borough of Southwark [2009] UKHL 29 means that Mr Hanoman will be entitled to a full refund on the £17,000 purchase price he paid for his flat, plus interest. Giving the leading judgment, Lord Scott went further and said that in cases of delay, damages awards against councils for failing to carry out repairs credited to the tenant’s account, should also be deducted. Lord Scott said that “whether it was in order to discourage any politically-motivated dragging of feet by hostile Labour-controlled councils or on account simply of second thoughts” the right to buy scheme was amended in 1988 to provide further reductions in cases of delay to those already granted under the Housing Act 1985. Mr Hanoman was involved in a dispute with Southwark council over whether he had withdrawn his right-to-buy notice. The High Court held in 2004 that the council was under a duty to deal with the application. The previous year Hanoman had served a notice of delay.

The question was whether the crediting of housing benefit to his tenant’s account constituted a “payment of rent” which should be deducted from the purchase price of his flat under Section 153B of the 1985 Act. Lord Scott said that Hanoman had already received a £38,000 statutory deduction from the £55,000 purchase price, reducing it to £17,000. The council offered him a lease at this price, but the transaction was put on hold pending the appeal. The Court of Appeal ruled that the £17,000 should be refunded to him by the council, with interest, to take into account the housing benefit he had received during the years of delay. Lord Scott argued that if “payment of rent” in s.153B was interpreted literally, it would produce “anomalous differences” between tenants who landlords could provide housing benefit by rent rebate and those, such as Housing Action Trusts, who could not. “This difference seems to me unprincipled, to be one that is not supported by any discernible policy and cannot be supposed to reflect any parliamentary intention.” Lord Scott dismissed the council’s appeal. Lords Phillips, Hoffman, Rodger and Brown agreed.

His report is due later this year. “I know that the SRA board, like other legal regulators, faces significant challenges in developing its approach to ensure it is an effective, modern regulator of firms of all shapes and sizes, including Alternative Business Structures,” Plant said. He is currently a consultant at Herbert Smith and chairman of the governors of the College of Law.