Ker v Optima Community Association

A contractual payment described as rent does not become a deposit or protected possession merely because a scheme calculates a future credit by reference to rent paid. The court construes the tenancy and option agreements together, considering relevant circumstances including subsequent conduct. Anti-evasion principles apply where documents disguise the true arrangement or evade statutory protection; they do not rewrite genuine agreements. In a public authority’s possession claim, proportionality must be assessed, but domestic entitlement to possession, property-management duties and housing resources ordinarily weigh strongly in favour of possession. A conditional deposit incentive, unavailable unless the tenant exercises and completes the option, is not a protected possession where the agreements confer no proprietary or unconditional right.

Optima granted Ms Ker an assured shorthold tenancy and a separate FlexiBuy option. The monthly payment was £700, while the option calculated a deposit incentive as the difference between market and social rent, credited only on completion of a purchase.

After rent arrears accrued, Optima served a section 21 notice and obtained an order for possession and judgment for arrears in Birmingham County Court on 15 May 2012. Ms Ker accepted that she could not afford the property but argued that the rent was a composite payment, that termination would deprive her of a protected deposit right, and that possession was disproportionate under Article 8 and Article 1 of Protocol 1.

The central issue was whether the contractual arrangements conferred a possession or other right whose loss altered the outcome.

The appeal was dismissed. The possession order and judgment for arrears therefore stood.

1. Sham and contractual construction. Applying the definition in Snook v London and West Riding Investments Limited [1967] 2 QB 786, there was no evidence of a common intention to deceive third parties or the court. The tenancy was not a sham. The tenancy and option agreements had to be read together, but their terms did not show that the £700 payment was partly held beneficially for Ms Ker or repayable if she did not buy.
2. Tenancy authorities. The principles in Street v Mountford [1985] AC 809 and Antoniades v Villiers [1990] 1 AC 417, concerning pretences designed to evade the Rent Acts, did not assist. This was a genuine FlexiBuy arrangement and involved no attempt to evade a statutory regime. Bankway Properties Ltd v Pensfold-Dunsford [2001] EWCA Civ 528 confirmed that relevant circumstances, including subsequent conduct, could be considered, but its statutory-avoidance context was materially different.
3. Convention proportionality. Under Manchester City Council v Pinnock [2010] UKSC 45; [2011] 2 AC 104, possession proceedings by a public authority require consideration of proportionality. Domestic entitlement to possession, the authority’s property rights, and its duty to manage limited housing resources strongly supported possession. Ms Ker’s accident, pregnancy and financial difficulties did not outweigh those interests, particularly as she accepted that she could not afford the property.
4. Property rights. Article 1 of Protocol 1 did not assist. The deposit incentive was calculated under the option agreement, was conditional on exercising and completing the purchase, and gave Ms Ker no proprietary claim to the money. It was therefore not a possession whose loss engaged the asserted defence or supported her counterclaim. A hypothetical termination by a public authority solely to defeat a fully paid tenant’s option might raise bad-faith or Wednesbury issues, but that was materially different from termination following inability to pay.

• Court of Appeal (Civil Division). Appeal against the order of HH Judge Victor Hall dated 15 May 2012 dismissed.
• Birmingham County Court. Ordered possession of the property and entered judgment for rent arrears of £9,046.82, with continuing arrears at the stated daily rate.