A recent case in the Court of Appeal has ended with a ruling in favour of making lawful bankrupt tenant possession orders on grounds of rent arrears. The litigation involved two separate tenants, a Ms Sharples and a Mr Godfrey.
In the first case, Ms Sharples was an assured tenant of the social landlord Places for People Homes Limited who, on May 14th 2009, was made bankrupt by her own bankruptcy petition. Her rent arrears were a debt provable in the bankruptcy. Those rent arrears were such that they constituted ‘mandatory’ rent arrears (ground 8 of the ‘Mandatory Grounds for Possession’ with at least 8 weeks’ rent unpaid at date of possession notice and at date of hearing). This led Places for People to pursue a possession order.
In the proceedings that followed, Places for People proved the necessary 8 weeks of rent arrears referred to in the Mandatory Ground for Possession and on 19th May 2009 the county court made a possession order against Ms Sharples.
The second case concerned Mr Godfrey, who was an assured tenant of A2 Dominion Homes Limited, also in rent arrears. On 27th April 2009, Mr Godfrey was made the subject of a Debt Relief Order (DRO), a new legal mechanism which is designed to help low-income small-scale debtors become debt free, to include his rent arrears. After one year, any debts included within the DRO are essentially cancelled.
In August 2009, the county court considered Dominion Homes’ possession claim and eventually granted the landlord a possession order. This order was suspended on conditions which required him to make regular payments towards his arrears.
In both cases, the tenants appealed against the possession orders made, stating that they were founded on debts owed by persons who were subject to statutory insolvency protections (ie. Bankruptcy law and the new DROs).
This argument was rejected by the Court of Appeal, meaning that an assured tenancy’s bankruptcy, or a tenant’s DRO, cannot prevent a court from making a possession claim on rent arrears grounds.
Consequently, there is an inference that when mandatory grounds for possession are fulfilled on rent arrears grounds, then the county court must continue to grant possession orders.
This is a decision which could go some way to depleting substantial statutory insolvency protections which some critics believe provide too much of a comfort blanket to debtors in the UK.