IN THE UPPER
TRIBUNAL Case No. CH/2062/2015
ADMINISTRATIVE
APPEALS CHAMBER
Before Judge Mark
Decision: The appeal is allowed. I set aside
the decision of the tribunal and I remit the matter to be reheard by a new
tribunal in accordance with the directions below. The new tribunal would be
assisted if the claimant’s son and landlord were to attend and give evidence
and, if he, or his letting agent, has any relevant documents helping to explain
some of the points raised below, it would be helpful if he were to provide
copies of them to the claimant for her to submit to the tribunal as soon as
possible.
REASONS FOR DECISION
- This appeal
is brought with the permission of an Upper Tribunal Judge from a decision
of the First-tier Tribunal dated 1 April 2014 disallowing the appeal of
the claimant from a decision of the council dated 12 September 2014 that
she was not entitled to housing benefit because her tenancy was
non-commercial.
- The letting
in question was of a four bedroom house (the house) owned by the
claimant’s son which he had previously let on the open market. According
to evidence given orally at the hearing by the claimant, the property had
been vacant for a week prior to June 2014 (file, p.75). She had
previously lived there for a time in 2013 and before that she had lived
with her son (p.76). I note that there is evidence at p.72 that the
claimant had previously stated on 4 September 2013 vacated the house on 2
September 2013 and that she had been living with her son who was still
there.
- The claimant
had been referred to a hospice for end of life care. According to a
letter from the hospice (p.67) she had been discharged to her new home at
the house on 10 June 2014 with a full care package for end of life care.
She had a hospital profile bed, walking frame, commode and oxygen included
in the care package. She had carers three times a day to assist with
personal care, she had difficulty mobilising and she required the
assistance of two people to transfer. Her previous home was unsuitable and
the house was currently vacant. At least when she was visited on 3 July
2014 she was noted to be experiencing episodes of confusion and poor
concentration. She appears to have had cognitive problems.
- There does
not appear to have been any evidence before the tribunal as to how long
the claimant was expected to live at the relevant time or, if that was
only a few months, why and how that expectancy changed.
- Because of
her problems, the claimant could only live on the ground floor of the
house, which had two stories, but after the addition of a stair lift in
about September 2014, she was able to use the first floor as well.
- The claim for
benefit was initially made on 3 July 2014, when the claimant stated that
she started renting the house from 16 June 2014 at a rent of £80 per
week. She stated that she lived with her son and they had a verbal
agreement about rent. The statement that she lived with her son was not
correct, as later established. She asked for backdating to 16 June 2014
because she was incapacitated and her hospice support worker had been on
holiday.
- Her son
completed the landlord’s form on 7 July referring to her severe health
problems and that she was having end of life care. He described the
tenancy as lifelong.
- There is a
standard form assured shorthold tenancy agreement which appears to have
been drafted on 31 May 2014 (p.23) but which was signed by the claimant
and her son only on 11 July 2014 (p.28). It seems to have been the
standard form of the son’s letting agent. This states that the tenancy
was for 12 months from 1 June 2014 at a rent of £80 per week, the first
payment to be made on the signing of the agreement. There was no deposit
provided for. Clause 4.1 permitted the landlord to break the tenancy after
6 months.
- The application
was initially rejected because the application form had stated that the
claimant was living with her son, the landlord (p.29). The claimant then
sought to submit proof that the son was not living with her and included
gas and electricity bills addressed to her covering periods from 10 June
2014.
- By letter
dated 1 September 2014 the claimant confirmed that no rent had yet been
paid and that the signing of the tenancy had been delayed because of her
illness and getting it written up. She also stated that no action had
been taken or arrangements made in respect of the unpaid rent and that she
had access to the whole property. It was following this that the decision
was taken to reject the application on the ground that the tenancy was not
commercial.
- Somewhat
curiously considering the history of the tenancy provided to the council
as above, by letter dated 1 July 2014, a date 6 days before the benefit
application was submitted and 10 days before the tenancy agreement was
signed, the letting agent wrote to the claimant giving notice that the
rent would be increased from £80 per week from 1 September 2014 “due to
inflation and increase in rental values” although “the proposed rent
remained in line with market value”. However, the enclosed notice under
s.13(2) of the Housing Act 1988 appears to have been signed by somebody as
landlord on 21 November 2014 (p.55). The signature at p.55 differs from
that of the son at p.20. For the reasons given below, I consider that the
letter dated 1 July was probably only generated from an earlier document
on or shortly before 21 November 2014. It also appears to me that the
letter was in a wholly inappropriate standard form which the letting
agency had not noticed.
- I note from
the claimant’s oral evidence at p.80 that she got a stair lift at about
the end of August or beginning of September. By clause 2.5 of the tenancy
agreement she was not permitted to make any alteration or addition to the
property. The addition of a stair lift would arguably be, or involve, an
alteration of or addition to the property, so that it could not be done
without the consent of the landlord. It would also enable her to use the
upper floor and a landlord might want more rent if this was to happen. It
would not be surprising if the rent increase was in some way connected
with the installation of the stair lift, although whether it was or not is
unclear.
- A rent
statement to 21 November 2014 is at p.57 and it shows no payments until 15
September 2014. The rent is shown as £80 per week from 1 June 2014 until
the week of 31 August 2014 and is then shown as £150 per week. A payment
of £300 cash is recorded on 15 September and subsequently payments in cash
of £50 per week are recorded, the last being on 17 November 2014. At
pp.59-64 there is a new standard form assured shorthold tenancy agreement apparently
prepared by the letting agent on 1 September 2014. The term was stated to
be for “12 months beginning on 1 September 2014 and expiring on 31 March
2015” with a rent of £150 per week. The first payment was to be made on
the signing of the agreement. The agreement is in fact signed and dated
by both parties on 21 November 2014 (p.64).
- A further
rent statement as at 8 December 2014 shows continuing cash payments of £50
per week plus a one off cash payment of £1000 on 28 November 2014.
- The claimant
attended the hearing and was represented by a welfare benefit adviser who
had signed the letter on behalf of the hospice starting at p.67 of the
file to which I have already referred.
- The tribunal
found that, despite the best of intentions, the tenancy was not on a
commercial basis. It did so for the following reasons, taken from the
decision notice:
(a)
The rent was not a
commercial one for a 4 bedroom property.
(b)
There were a lot of
inconsistencies with the paperwork.
(c)
A rent increase
would not occur midway in a commercial tenancy agreement and then go back to a
date prior to the date when the tenancy agreement was signed.
(d)
The original
agreement was for the whole of the property and so the landlord could not
increase the rent because the upstairs was being used when the original
agreement does not mention that only the downstairs could be used.
- While these
reasons could be factors in considering commerciality, (a) charging a low
rent does not on its own make an agreement non-commercial - charities and
voluntary organisations and some individuals choose to let at below market
rents without making the lettings uncommercial (R v Rugby BC v ex
p.Harrison (1994) 28 HLR 36, at 48-9); (b) inconsistencies in
paperwork are, in my experience, commonplace in agreements of this kind
and in many other commercial arrangements; and as to (c) and (d) there
was, on the evidence, an obvious possible reason why a landlord who has
initially agreed a very reduced rent for a disabled tenant who could not
use half the house, may want to seek an increase in return for permission
for alterations which would enable her to use it all.
- The statement
of reasons elaborated on the original reasons and added that the claimant
had objected to the landlord moving in other tenants into the top floor
and a commercial landlord would not refrain from doing so just because the
existing tenant did not want anyone else to be there. I have some
difficulty with this reasoning. If she was already the existing tenant of
the whole house, the landlord could not put other tenants in the top
floor. If the objection was raised before she moved in on the basis of an
oral agreement only later reduced to writing, then the landlord had to
make a decision, commercial or otherwise, whether he wished to let to his
dying mother on the basis that he would not be able, so long as she was
there, to use the upper part of the house. That was a decision that could
be influenced, for example, by her life expectancy at the time and by the
likely length of time it might take to let the property if it was not let
to her. There are other possible commercial factors as well such as the
landlord’s long term proposals for the house which may have made an
immediate letting that was unlikely to last 12 months more attractive than
waiting for a tenant who could pay the full rent. A letting can be on a
commercial basis even though the motivation for the letting is
non-commercial (CH/1097/2004).
- The statement
of reasons goes on to state that a commercial landlord would not let his
premises without some kind of a firm tenancy agreement in place especially
as no deposit had been paid. Again, this is an expression of opinion on
the part of the tribunal for which I can see no basis. It may well be the
case where there is a substantial landlord letting to a stranger, but a
commercial landlord may well make a commercial deal with a tenant who is
known to him without either a deposit or, initially, a written agreement.
In Wychavon DC v EM [2012] UKUT 12 (AAC), [2012] AACR 41,
accommodation was provided by parents to their very disabled daughter in
circumstances in which the daughter came under an obligation at common law
to pay a reasonable sum for the accommodation. There was not, and could
not be, any written agreement with the daughter because of her
disabilities. The contention that this was non-commercial was rejected on
the very special circumstances of that case. So too, if the letting had
been made by a commercial landlord to a person lacking capacity to
understand a contract, there could, to the knowledge of the landlord, be
no contract or only a voidable one, but the letting, if there was a
letting rather than an obligation to pay a reasonable sum, would still be
a commercial one.
- The third
reason in the statement of reasons is that when asked to complete the
landlord section of the form the landlord stated that the tenancy began on
4 April 2015 and the claimant moved in on 1 June 2015. It is pointed out
that a commercial landlord would know when his tenant moved in as this
would affect official paperwork concerning council tax and utilities.
This is correct, but the date of 4 April 2015 is plainly an error as the
form was completed in July 2014. The date of 1 June 2014 was not the date
on which the claimant moved in, but it does appear to have been the date
from which the tenancy was agreed in the later agreement to have begun.
It is possible, although it does not appear to have been investigated,
that the landlord simply took the date from the tenancy agreement which,
although not signed until a few days later, appears to have been drafted
on 31 May 2014.
- The fourth
ground given in the statement of reasons is that a commercial landlord
would not allow a tenant to move in without any agreement on rent
initially and would not be so sympathetic on determining rent based on the
claimant’s ability to afford as opposed to the market rent for a 4 bedroom
property. In fact, there was evidence that £80 per week had been agreed
before she moved in, even if not in writing and the agreement had been
drafted on that basis. Further, it does not appear to me that the
tribunal here took into account that this was an empty house and that the
claimant was terminally ill. Nor did it take into account the matters set
out in paragraphs 17 and 18 above.
- The fifth
reason given was that a commercial landlord would not produce such
incoherent documents. The documents were certainly very flawed and that
is a matter for comment, but they were prepared by commercial letting
agents and there is no evidence that they were aware of the
inconsistencies or that they were significantly worse drafted than similar
standard form documents drafted by the same agents for indisputably
commercial lettings. The statement of reasons also manages to find that
because the rent increase letter had a typed date of 1 July 2015 the
increase was effectively notified before the original tenancy agreement
had been signed. This is despite the fact that the documents accompanying
the letter are dated by hand 21 November 2014. This ignores the obvious
alternative explanation that the standard form letter used had been
adapted from an earlier letter of 1 July 2014 but the date had not been
altered – a common oversight when using an old document as the template
for a new one on a computer.
- I note in
considering the incoherence of the documents that it even extends in the
second tenancy agreement to the description of the tenancy as a 12 months
tenancy yet with a termination date 6 months after the commencement date,
an error which appears to me symptomatic of a general inability on the
part of the letting agency to produce coherent documents rather than
indicating that the incoherence was connected with the non-commercial
nature of the tenancy. By that date, and bearing in mind the scrutiny to
which the agreement was likely to be subject by the council and
potentially by a tribunal, one might have expected any competent person,
letting agent or landlord, to have scrutinised the document sufficiently
at least to enable defects of that magnitude to be picked up.
- The sixth
reason repeats the proposition that a commercial landlord could not would
not legally increase the rent during the tenancy, but again overlooks that
there could have been a reason for this connected with the installation of
the chair lift which probably required his permission. The circumstances
surrounding the installation of the chair lift and its possible
relationship to the rent increase were not considered.
- Finally, it
is said that a commercial landlord would not have allowed arrears of over
£2000 to have built up without formal action being taken despite the fact
that the claimant was unwell since the landlord would be losing money. It
was not reasonable for a commercial landlord to await a tribunal decision
as he would only be concerned about his money and not whether his tenant
would receive their housing benefit at some uncertain time in the future.
Not only is this extremely uncharitable to landlords, it leaves one
wondering whether the tribunal has had any experience of the many cases in
which landlords who let to tenants who are known to be reliant on housing
benefit to pay the rent not only await the outcome of an application for benefit
and of any appeal, but often deal with the appeal for the tenant while
allowing the tenant to remain pending the outcome of the appeal.
- In
CH/206/2004, Mr Commissioner Jacobs, as he was then, stated:
“26. … I was impressed by the
evidence from the claimant’s father when I asked him if he would evict his son.
The difficulty of the choice was immediately apparent from his demeanour and
what he had to say. Clearly, he does not want to evict his son. I can
understand that he does not want to consider this possibility or acknowledge
it, even to himself. I can understand that he would want to postpone thinking
about it until the appeal process is complete. In the end, I suspect that the
question of eviction is an artificial one. The claimant has income from
benefits and from wages. He can afford to pay, and is paying, something towards
rent and that amount is significant. His father may decide that reducing the
contractual rent to the amount his son can afford is preferable to evicting his
son. That would be bowing to reality. It would not mean that the arrangement
was not commercial. Rackman is not the only model of a commercial landlord.
There are many landlords who are prepared to accept the rent that can be
obtained rather than insist on the full contractual rent and others who are
prepared to be patient while the claim and appeal process is in process.
27. Left to my own devices, I would
have decided that the arrangement between the claimant and his father was on a
commercial basis. However, I have to remind myself that that is not enough to
show that the tribunal, which came to the opposite conclusion, went wrong in
law. I have re-read the tribunal’s decision with that in mind. It emphasised
the intimate and personal aspects of the arrangement. I have come to the
conclusion that in doing so, the tribunal overemphasised the care and support
aspects of the arrangement. It did not refer to, and as far as I can see was
not referred to, the service charge provisions which show that that aspect of
an arrangement is not necessarily incompatible with it being on a commercial
basis.”
- The decision
also deals in general with the effect on commerciality of a letting
between father and son. It appears to me that it would assist the new
tribunal and the parties if a copy of that decision were to be added to
the hearing bundle.
- I consider
that the tribunal’s reasoning was in error of law for the reasons given. I
am unable, however, to substitute my own decision for that of the
tribunal. Explanations are needed as to why the rent was increased and
whether or not it was related to the stair lift being installed.
Explanations are also needed as to other matters as noted above. Evidence
from the claimant’s son could well assist the new tribunal, particularly
if he could attend to give oral evidence and if he and the letting agents
made available any documents they have showing more clearly when the
various steps were taken and not leaving them to be deduced from the
documents. This is all the more the case bearing in mind the evidence as
to the cognitive difficulties the claimant is said to have been suffering
from at the time.
- The fact that
I have criticised the tribunal’s approach to the various matters that it
has relied on does not mean that those matters are to be totally ignored
in assessing whether this letting was on a commercial basis. The
relationship between the landlord and the claimant is relevant, as is the
low rent and the effect of the letting on the landlord’s ability to obtain
a rack rent. So too the inconsistencies may, but need not, point to a
non-commercial agreement depending on whether the cause is incompetence or
the written agreements being, for example, simply concocted to mislead. But,
there are no rigid rules in determining what is commercial and as Mr.
Commissioner Jacobs pointed out in CH/296/2004, a letting may still be
commercial even if it is one that the landlord would only contemplate with
a relative or close friend.
- Although not
commented on by the tribunal, in addition to the matters raised above, I
am unclear as to why, if £80 was agreed on as a rent the claimant could
pay out of the benefits she received (see the foot of p.78), no rent at
all was paid until mid-September when £300 was paid in cash, or why only
£50 per week, and not £80 per week, was paid after that, except for the
payment of £1000 in cash on 28 November. Nor was there any inquiry as to
the source in particular of the £300 on 15 September and £1000 on 28
November. If the claimant was paying out of her benefits, why did she not
pay the agreed £80 per week, and where did she get the £300 and £1000? If
the money was provided, for example, by her son, this would be a
significant factor pointing to the arrangement not being commercial.
These are matters which the new tribunal may wish to enquire into.
(signed) Michael
Mark
Judge
of the Upper Tribunal
20
October 2015
