Chris Bazlinton

Reports suggest that the problem may have "devastating consequences" and "crippling financial results" for the sector. It concerns whether two London associations - Network and East Thames - have "unknowingly" implemented "unlawful" rent increases.

How can you do that? Simple. Say for convenience that you send out notices of increase on the first Monday of April each year. Well, that can mean you have sent it out after 364 days, and not a year as prescribed by law.

There's more. If, for convenience and efficiency, you want all increases to take effect at the same time, you can't: new tenants must have their first rent set for at least twelve months. Increases for them must wait until the next annual round. Unfortunately, it seems some associations may have missed this point.

It is spelled out in Section 13 of the 1988 Housing Act which says you must serve notice to tenants "in a prescribed form proposing a new rent to take effect at the beginning of a new period of the tenancy, being a period beginning not earlier than...the first anniversary of the date on which the first period of the tenancy began and, if the rent of the tenancy has been previously increased... the first anniversary of the date on which the increased rent took effect."

A touch of the Marx Brothers, and makes you wonder whether the contract should have a sanity clause.

There's also the way you tell 'em - that "prescribed form". Some associations have decided that they would rather their tenants understand what is going on and have decided to use plain English. This can be a big mistake. You change the words at your peril - case law suggests that departure from the official wording should be minimal.

Want another complication? Now that the cat is out of the bag, if landlords continue to collect rents to which they are not entitled or hold on to money wrongly collected in the past, they could be acting criminally.

That isn't all, but I'll spare you the difference between assured, secure, fixed term and periodic tenancies and the various combinations of them.

So what are the consequences of all this? Nobody seems to know. If the courts find in favour of tenants, do associations have to refund all the increases and how far back? And what about housing benefit? More than half of all tenants get it - in this case the cash should go to local authorities and government.

The National Housing Federation and Housing Corporation are asking associations to check how they stand and report back, take legal advice and inform lenders and insurers.

East Thames has said that in the worst case it should be able to cope, but it may not be so for others.

This is going to run and run. The test cases come up in the courts in October, and will probably go all the way to the House of Lords.

Of course there is a silver lining: m'learned friends will be rubbing their hands in glee.

Cuckoo in the nest
If that wasn't enough of a headache, the federation is now facing the first ever defection from its membership. Irwell Valley, sixtieth largest with 6000 homes in management, has decided to quit, effectively saying the NHF does not meet its needs.

The federation has been a strong cohesive force as the conscience and leader of the "voluntary housing movement", a description that has all but disappeared. It is now having to evolve rapidly into a trade organisation, to represent an increasingly diverse and competitive sector and "sustain its position as the single representative body". It is in the throes of its third restructuring since the late 1980s which will give it a national council of no fewer than 50 members to assuage different factions.

One of these is a potential cuckoo in the nest: large scale voluntary transfer associations which have taken over council stock account for 35% of membership by size.

While Irwell Valley's departure is unlikely to mark the start of a major exodus or breakaway, tensions have increased between north and south, and London region operates in an increasingly autonomous way.

Privately, some members say their attitudes have changed and there are others known to be disaffected and considering leaving. Attempts to dismiss Irwell Valley as a maverick could just confirm others in their belief that the federation is out of touch - and tip the balance.