Defective Rent Increase Notices
The Court of Appeal has recently given judgment in an interesting decision on s13 rent increase notices under the Housing Act 1988. These are used to increase the rent in periodic tenancies. It is possible for landlords and tenants to agree increases between them but the statutory process is there if no agreement can be reached.
It is important to point out that agreement on a rent increase means a genuine agreement. Too often I see situations where a landlord has simply told the tenant that a rent has been increased and then the tenant has paid the increased rent. There is real doubt as to whether an increase done in this way does constitute an agreement. However, that is a question for a future Court of Appeal!
Section 13 notices have a prescribed statutory form and also require that the tenant is given notice of the increase. The requirement is that the notice must be for at least one month and must also expire on the next day the rent is due. During that same time period the tenant is able to take the matter to the First Tier Tribunal (FTT) to say that the rent increase is excessive. If they do not go to the FTT before the date in the notice then the increase comes into effect automatically.
One of the unanswered questions in all this is what happens if the notice is defective in some way (for example the date is wrong) and the tenant does not take the matter to the FTT. In that case, does the rent increase take effect anyway?
This is the question the Court of Appeal has answered. In this case the landlord had increased the rent. The rent was required to be paid weekly on a Monday and the notice should have expired on that day of the week. However, the tenant had fallen into the habit, for various unimportant reasons, of paying on a Friday and so the landlord dated the s13 notice to expire on a Friday. The tenant refused to pay the increase and the landlord commenced
There were three arguments before the Court of Appeal, all of which failed. The first was that a reasonable tenant would understand that the landlord meant Monday and not Friday. There has of course been a line of cases in the Court of Appeal where the boundaries of reasonable tenant understanding have been pushed out. The Court of Appeal was not persuaded by this. The notice contains notes which set out the date the notice must expire. The Court of Appeal took the view that a reasonable tenant, having read the notes, would conclude that the notice was invalid. Second, the landlord argued that the correct date was a Friday. However, the Court of Appeal refused to engage with this argument as the landlord had already pleaded that the proper date was Monday.
The third argument was the most important. The landlord argued that the FTT was the proper venue for dealing with s13 notices and they could only deal with them when a tenant applied to them. As the tenant had not applied the rent increase stood and there was no scope for the tenant or the court to challenge the increase now. The Court of Appeal disagreed. It held that the FTT is there to determine the proper rent for the property and as a consequence may also determine validity of a notice. But that does not mean that the court cannot also determine the validity of a notice.
Therefore the Court of Appeal held the s13 notice was invalid and the rent increase it created did not apply. Therefore the tenant was not in arrears and could not be evicted.
This is an important matter. It is quite likely that the Renters Reform Bill will make s13 notices the only way to increase rent. If so, then it will be important that agents and landlords are getting the dates on them right.
As an aside, this case actually arises from Wales as that is where the property was. Ironically, since 1 December the s13 process no longer exists in Wales as it was removed by the coming into force of the Renting Homes (Wales) Act 2016. The judgment remains valid in England though and is an odd example of the curious effects of devolution in that a case about a Welsh property has changed the law for England but not that for Wales.