Test case settles controversy over invalid rent increases

The ruling, in a test case brought by Hertfordshire-based Ridgehill Housing Association, ended 18 months of uncertainty over whether millions of HA tenants were entitled to the repayment of up to 14 years of rent increases.

The sector's potential liability was estimated to run into hundreds of millions of pounds, with some larger associations exposed by as much as £30m.

Watford County Court found that although Ridgehill, like most associations, had enforced rent increases that failed to comply with existing legislation, it should not be obliged to repay its tenants and could pursue arrears.

Ridgehill's solicitor, David Golten of Trowers & Hamlins, said: "We finally have an authoritative statement of the law from a court following detailed argument rather than yet another opinion or an evaluation from a retired judge.

"It is the best possible result, not only for Ridgehill but hopefully for all affected RSLs."

The case centred on section 13 of the 1988 Housing Act, which prescribes strict rules for rent increases. Rather than following these rules, many housing associations used modified rent notices to make them easier for tenants to understand and implemented increases in breach of the rule that required the passage of a full calendar year between increases.

In February, the government closed this legal loophole and allowed housing associations to set a fixed date on which to introduce rent increases. However, the change failed to settle the issue of association's historic liability for invalid rent increases.

The National Housing Federation refused to lend its support to Ridgehill's court case, and has expressed scepticism on the significance of the ruling.

Jim Coulter, chief executive of the federation, said: "We advised our members to correct the mistake in rent increase notices as soon as they noticed it. This is basically raising a dust storm that is not necessary."