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Unlawful eviction: a cautionary tale

The Supreme Court has examined the issue of statutory damages under Sections 27 and 28 of the Housing Act 1988 in the context of the Secure Tenancy and found the law to be in need of reform.

The decision acts as a timely reminder of the potentially huge statutory damages implications of unlawful eviction.

What is the background to this decision?
Under sections 27 and 28 of the Housing Act 1988, a residential occupier who has been unlawfully evicted can claim, in addition to general and exemplary damages, statutory compensation on the basis of the “profit element” potentially available to a landlord as a result of that unlawful eviction (i.e. the difference in the value of the property with and without the tenant in situ) rather than the actual loss suffered by the tenant.

The historical background to these provisions of the Housing Act 1988 was the introduction of the assured shorthold tenancy in January 1989.

Parliament was concerned that there would be large financial incentives for rogue landlords to unlawfully remove any existing Rent Act protected tenants who enjoyed substantially better security of tenure and rent control, and replace them with new assured shorthold tenants who enjoyed no such rent control and relatively little security of tenure. The value of those rented properties, without a Rent Act tenant, would greatly increase.

A last minute amendment to the Act made provision for statutory damages reflecting that profit element of any wrongdoing.

It was perhaps not envisaged at the time that these damages would be used against social housing landlords (who might be rightfully assumed to have no such profit motive).

What happened in this case?
In Loveridge v London Borough of Lambeth [2014] UKSC 65 (3 December 2014), Mr Loveridge, a secure tenant of the London Borough of Lambeth, went to Ghana for five months.

In breach of his tenancy agreement, he didn’t notify the Council of his extended absence. The Council (unlawfully) cleared the flat, sold his belongings and found a new tenant.

Mr Loveridge brought proceedings in the Lambeth County Court and the Circuit Judge accepted that the correct approach was to value the building subject to an ongoing secure tenancy of the flat.

The Judge concluded this would depreciate the value of the building by £90,500 and the Council, in theory, could make a profit of £90,500 on the sale or reversion free of the tenant’s interest and consequently statutory damages were assessed in this amount – together with further damages of around £16,000 in relation to the distress and convenience of being evicted and the loss of his belongings.

What did the Court of Appeal say?
The Court of Appeal reversed the County Court’s decision. They determined that the change from a secure tenancy to an assured tenancy on the sale or reversion of a third party purchase should be factored into the hypothetical valuation of the landlord’s interest subject to the tenant’s rights.

What did the Supreme Court say?
The Supreme Court restored the County Court’s decision entitling Mr Loveridge to statutory damages of £90,500 in addition to any damages for loss he had actually suffered.

The Supreme Court was at pains to point out that this apparent windfall in the absence of any profit motive on the part of the Council should be revisited by Parliament.  An eviction as a result of incompetence or genuine mistake was not the mischief the statutory damages sought to address.

What could be learnt from this?
This case serves as a useful reminder of the need to be cautious when repossessing without a Court Order, and the need to ensure due process is followed.

The case may well provoke a re-examination of the damages situation by Parliament and there perhaps ought to be an exemption for Registered Providers generally, given they would be unlikely to make a profit as a private landlord might.

How can I found out more about this?
For further information on this issue and how it could apply to your organisation, please get in touch.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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