A noticeable problem

Nobody wanted the problem of rent increase notices, and many wish it would go away. It is variously regarded as a threat to the sector’s viability, and a minor technical difficulty that can be managed away.

In fact, it is a series of potential problems that all housing associations must take seriously, particularly when preparing notices for this April.

We know there could be problems with the ‘provision’, with the section 13 notices, with annuality, and for some transfer associations’, with tenancy agreements.

Of these, annuality affects potentially up to 70 per cent of registered social landlords. Since the problems became visible a year ago, the National Housing Federation has alerted all members to the need to take a ‘safety first’ approach, advising that corrective notices should be served to ensure that there can be no question about their future practice.

This would also be vital as part of the defence against any future challenge, so the importance of taking corrective action, rather than doing nothing, cannot be over-emphasised.

At the same time, we have worked with the Housing Corporation and the DTLR to agree a new simpler section 13 notice, which has been published this week, that can be used for the future. The old form of notice, which was not user-friendly, can still be used until June 2002.

Housing minister Lord Falconer has also agreed to bring a deregulation order to confirm that the time between notices can be 52 weeks, rather than the calendar year, which is the source of the annuality problem. But this will take time, and in the interim all associations must make sure that there are at least 365 days between the last increase and the new one.

So corrective action by associations, and negotiation by the federation, will deal with the future. But what about retrospective problems?

Whether action needs to be taken to deal with these problems, and what form that action should take, has been the subject of much heated debate, not least among the lawyers. There is a range of legal opinions, but all make clear that corrective action must be taken.

They vary in their approach to defences in civil claims, and to the issue of criminal implications. The latter hinges on whether there is an intention to obtain or retain money to which a landlord believes it may not be entitled.

If the landlord is unsure, there is no criminality in retaining the money while the legal position is clarified, but they should do nothing that could be regarded as deception (for instance, by representing their legal position as watertight when they know there are doubts).

In practice, associations can address this by making clear the doubt and reducing the amount owed in possession cases.

Federation guidance has helped to establish workable procedures. However, if the legal position is not clarified sufficiently, risks remain.

The federation’s concern, shared by the corporation, is the future wellbeing of the sector as a whole. We are pursuing two strategies for the retrospective problems until the level of risk and chances of success in either becomes clearer.

Most people will be aware that there is a potential test case to be launched shortly by East Thames Housing Group and Network Housing Association.

As it is currently framed, this will not deal with all the issues. It is arguable that the existence of this case may be preventing other challenges, in county court possession cases, to retrospective problems with notices.

If this is true, then the case affects the future wellbeing of the whole sector, and it would make sense for other associations to ‘join’, so that the range of retrospective problems are resolved.

That would mean the federation considering the establishment of a fighting fund, for which a number of members have already expressed their support.

It also, critically, means identifying other associations with specific and different problems with section 13, annuality, provisions and the transfer issue, which are interested in joining the case.

If other associations are concerned about resolving the uncertainty of their issues, they should seek advice as shown below. Interest can be indicated without a firm commitment, as we are aiming to facilitate a discussion next month with Anthony Mann QC to assess the best range of cases and the chances of success.

Alternatively, it is arguable that the retrospective problems can be managed without the risk and cost of a test case.

Critical to this argument is the Early Neutral Evaluation carried out by Lord Bridge, which found that the courts would take a ‘common sense’ view of the past problem, provided the future problem had been corrected, and that the amounts in dispute would be very limited (Housing Today, 9 August).

This provides some comfort, but the federation is commissioning a further opinion from a QC seen as neutral, and therefore likely to influence lawyers with a range of views, to assess the remaining risk on the criminal implications.

The federation’s national council will consider what action is best next month.

www.housing.org.uk/information/policyshop/briefings