Hanoman (FC) (Respondent) v London Borough of Southwark (Appellants)

When housing benefit is credited to a local authority tenant’s rent account as a rent rebate, thereby reducing or discharging the tenant’s liability, it constitutes a payment of rent for section 153B of the Housing Act 1985.

“Payment” takes its meaning from its statutory context and may encompass different methods of discharging an obligation. A narrower construction would frustrate the sanction against delay in processing a tenant’s right to buy. It would also create an anomalous and unprincipled distinction between tenants receiving housing benefit as rent rebates and those receiving rent allowances.

The respondent was a secure tenant entitled to exercise the statutory right to buy his flat. After he served the necessary notice, the appellant local authority maintained that it had been withdrawn. The High Court rejected that contention in Hanoman v Southwark London Borough Council [2004] EWHC 2039 (Ch), [2005] 1 All ER 795.

During the authority’s delay, the respondent served the notices required by sections 153A and 153B of the Housing Act 1985. His entire rent liability was discharged through housing benefit credited as a rent rebate. The Court of Appeal, in [2008] EWCA Civ 624, held that these credits were payments of rent under section 153B and ordered repayment of the £17,000 purchase premium with interest.

The central issue was whether housing benefit credited to a tenant’s rent account as a rebate constituted a “payment of rent” for the statutory purchase-price reduction.

1. Appeal dismissed unanimously. Lord Scott of Foscote delivered the leading speech. Lord Phillips, Lord Hoffmann, Lord Rodger and Lord Brown agreed that the appeal should be dismissed for the reasons he gave.

2. Per Lord Scott, “payment” is a context-sensitive expression capable of covering different methods of discharging an obligation. Where money or a credit belonging to a tenant is applied to discharge rent, the absence of a physical transfer from tenant to landlord does not prevent there being a payment of rent. The approach in White v Elmdene Estates Ltd [1960] 1 QB 1 was applied.

3. Sections 153A and 153B of the Housing Act 1985 were intended to penalise a local authority which delayed giving effect to a tenant’s right to buy. A literal construction requiring movement of money from the tenant to the landlord would allow an authority to escape that sanction whenever the tenant’s rent was discharged by housing benefit.

4. Section 134(1A) of the Social Security Administration Act 1992 required the respondent’s housing benefit to take the form of a rent rebate. The periodic credit reduced his rent liability to nil. Lord Scott held that this credit was a payment of rent for section 153B, although the benefit could not lawfully have been paid to him as a rent allowance.

5. The authority’s construction would create an anomalous distinction between tenants of authorities which provide housing benefit by rebate and tenants of other landlords who receive rent allowances and then pay their rent. Lord Scott found no discernible policy supporting that distinction. Lord Rodger particularly relied on its anomalous and unprincipled character.

6. Lord Scott added that damages or other money belonging to a tenant and applied, with the tenant’s consent or on the tenant’s behalf, to discharge rent would likewise constitute payment when applied. A credit not yet used to discharge rent would not do so.

1. House of Lords: The authority’s appeal was dismissed unanimously. The Court of Appeal’s conclusion that the housing-benefit credits fell within section 153B of the Housing Act 1985 was upheld.

2. Court of Appeal: In [2008] EWCA Civ 624, the court found for the tenant and ordered the authority to repay the £17,000 purchase premium with interest.

3. High Court: In Hanoman v Southwark London Borough Council [2004] EWHC 2039 (Ch), [2005] 1 All ER 795, Peter Smith J declared that the tenant’s right-to-buy application remained subsisting and that the authority was obliged to deal with it.