Percy Hughes & Roberts Solicitors

The Court of Appeal has rejected a novel attempt to claim that possession orders based on rent arrears were invalid against insolvent tenants.

The two recent cases of Christina Sharples v Places for People Homes Ltd and Stephen Godfrey v A2 Dominion Homes Ltd the Court of Appeal addressed the issues of whether either a bankruptcy order (Ms Sharples) or a Debt Relief Order (‘DRO’) (Mr Godfrey) prevented the making of an order for possession of a dwelling let on an assured tenancy on the ground of rent arrears.

Possession was granted against Mr Sharples under mandatory ground 8 of Sch2 HA 1988 as she was more than eight weeks in arrears with her rent. Possession was granted under discretionary ground 10 against Mr Godfrey because of unpaid rent and persistent delays in paying rent. At the times of the respective possession hearings Mrs Sharples was subject to a bankruptcy order and Mr Godfrey was subject to DRO.

Both tenants challenged the possession orders made against them. The tenants said that they were unlawful as they were based on debts (rent arrears) owed by persons who were subject to statutory insolvency protections.

The Court of Appeal rejected the argument that rent arrears-based possession orders cannot be made against tenants who are bankrupt or have DRO. Therefore, neither bankruptcy nor DRO prevent a court from making a possession claim on rent arrears grounds.

What the bankruptcy and DRO does affect is the courts ability to order money judgements for the payment of the rent arrears. Such money orders should not be made because they would undermine the statutory insolvency schemes of bankruptcy and DRO, which contain their own rules for dealing with the debts.

The Court of Appeal decided that both appeals failed save that the court substituted a suspended possession order in Mr Godfrey’s case. Lord Justice Etherton said:

‘It could be financially catastrophic for such landlords to be unable to recover possession from persistent non-payers and could threaten the availability of social housing to meet the great demand from the large number of people who are economically disadvantaged and seek suitable and affordable permanent accommodation.’
 
In my opinion the Court of Appeal got the decision completely correct, the ramifications of what the Tenants’ lawyers were seeking were extremely serious and had they succeeded it would have meant that any assured tenant could avoid a possession order being made against them purely by going bankrupt or entering into a DRO when still owing large arrears of rent.