Hanoman v London Borough of Southwark

For the right to buy, rent paid through housing benefit counts as rent paid for the purposes of sections 153A, 153B and 155(3A) of the Housing Act 1985. The statutory reduction for landlord delay is not confined to reimbursement of rent paid from the tenant’s own resources. A tenant may also make a collateral contract reserving the right to have an outstanding statutory dispute determined after completion. Such a contract is enforceable where it operates alongside the lease rather than altering its terms, and the tenant’s agreement to complete earlier supplies consideration. The county court’s jurisdiction under section 181 remains available where that post-completion right has been preserved.

HHJ Simpson, sitting in the Mayor’s and City of London County Court, dismissed Mr Hanoman’s claim concerning the premium payable for a right-to-buy lease. An earlier decision by Peter Smith J had held that Mr Hanoman’s notice exercising the right to buy was valid and that Southwark had to deal with the application: [2005] 1 All ER 795.

The appeal concerned whether housing benefit counted as rent for the statutory delay reduction, whether the parties had made a collateral contract preserving post-completion rights, whether that contract was affected by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, whether there was consideration, and whether the county court retained jurisdiction after the lease had been executed.

1. The Court of Appeal allowed the appeal on issues (1) to (4), granted Southwark permission to raise the jurisdiction issue, dismissed its respondent’s notice, and refused permission on the remaining grounds.
2. Under sections 153A(5), 153B and 155(3A) of the Housing Act 1985, rent paid by a third party on behalf of the tenant includes housing benefit. Direct credit to the tenant’s rent account has the same legal effect as payment by the tenant after receiving the benefit in cash. The express exclusions in section 153B(2) did not exclude housing benefit, and section 143A showed that Parliament knew how to exclude housing benefit expressly. The tenant remained liable for the full reserved rent.
3. The delay provisions were not confined to compensation for rent paid from the tenant’s own resources. Delay could cause other loss, including delay in improving the property or raising a loan. The provisions could provide flat-rate compensation and act as a deterrent. The Hansard passages relied on did not give a clear answer and were therefore not admissible for the interpretive issue, applying [2001] 2 AC 349.
4. The parties had objectively agreed that Mr Hanoman could preserve and enforce any outstanding right to have the statutory dispute determined after completion. The objective factors identified in [2000] 2 LI.L.R 611 and applied in [2007] LT & R 389 supported an intention to create legal relations.
5. The collateral contract did not itself prescribe the terms of the lease. It operated in parallel with the lease and supported a personal remedy such as damages or restitution. It therefore fell outside section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, provided rectification was not sought. Mr Hanoman supplied consideration by agreeing to complete without first litigating the outstanding disputes.
6. The dispute fell within section 181 of the Housing Act 1985. [1998] 1 WLR 1591 established only that a post-completion challenge could not reopen a question on which the parties had already agreed. Here, the parties had agreed to preserve adjudication, but had not agreed the answer to the housing benefit question. The county court therefore retained jurisdiction after completion.

• Court of Appeal (Civil Division): allowed the appeal on issues (1) to (4), dismissed Southwark’s respondent’s notice on jurisdiction, and refused permission on the remaining grounds: [2008] EWCA Civ 624.
• Mayor’s and City of London County Court: HHJ Simpson dismissed Mr Hanoman’s claim on 27 February 2007.
• Earlier appeal: Peter Smith J, on appeal from the Central London County Court, held that Mr Hanoman’s right-to-buy notice was valid and that Southwark was under a duty to deal with the application: [2005] 1 All ER 795.