Shared ownership, long leases and setting aside an order for possession

On 13 May 2024, Her Honour Judge Bloom (“HHJ Bloom”), sitting in the Central London County Court, handed down judgment in Sovereign Network Homes v Ms Vanessa East, Claim Number H01W1247. The central issue in the case was whether a landlord under a shared ownership lease needed to serve notice under s.166, Commonhold and Leasehold Reform Act 2002, in respect of the rent payable on the share of the property which the leaseholder had not yet purchased (i.e. the “unstaircased” element, as it is sometimes called). This turned on the effect of the decision in Ground Rents Limited v Canary Gateway (Block A) RTM Company Ltd [2023] EWCA Civ 616.

Although only a county court decision, the case raises important questions of wider implication for possession proceedings concerning shared ownership leases.

Facts leading to the application:

In April 2022, Sovereign Network Homes obtained an outright possession order pursuant to Ground 8, Schedule 2 to the Housing Act 1988. However, due to an error on the court file, Ms East was only made aware of the order when she received a notice of eviction in February 2023.

Ms East applied for a stay of execution and to set aside the possession order.

On 2 March 2023, Deputy District Judge Lawrence discharged the warrant for possession and varied the date for possession. Sovereign Network Homes appealed that order.

Kate was instructed via Advocate to appear at the appeal hearing, and following submissions, HHJ Bloom gave permission for Ms East to amend the application to set aside. On amendment, it was argued that Ms East held a long lease within the meaning of s.76 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) and ought to have been served a prescribed notice under s.166; since no such notice had been served, the rent was not yet due and so there was no proper basis for a possession order of any sort, let alone one under Ground 8.

Judgment:

HHJ Bloom concluded that following Canary Gateway (Block A), a shared ownership lease where the tenant has not staircased to 100% interest but which were granted for a term more than 21 years is a long lease for the purpose of s.76 of the 2002 Act. Thus, when s.166 of the 2002 Act defines a long lease by reference to s.76 of the 2002, it should be interpreted in the manner the Court of Appeal said. It was therefore plainly arguable that shared owners had the benefit of s.166 (and ss.167-168).

In applying the principles under CPR 3.1(2)(m) and CPR 39.5, to set aside the possession order HHJ Bloom found:

1. On the specific facts of the case, Ms East had acted promptly in bringing the application after receiving notice of the order in February 2023, and she had good reason for non-attendance.
2. The case raised a novel and important point of law with far-reaching consequences.
3. Even if CPR 39.5 had not been satisfied, the case was akin to Forcelux Ltd v Binnie [2009] EWCA Civ 854, as Ms East would lose 35% equity, and Sovereign Network Homes would have a windfall, in a case in which the arrears (if any) were nominal and less than two months.
4. The lack of compliance with the Pre-action Protocol for Possession claims by Social Landlords should be considered a compelling reason, particularly when Sovereign Network Homes treated the shared ownership lease as if it were an AST.

Implications:

The practical impact is clear. It is plainly arguable that s.166 applies to the rent charged by the housing association in respect of the proportion of the shared ownership property which the association retains. It follows that housing associations are likely to need to plead and prove compliance with s.166. Failure to do so risks seeing the claim dismissed or the possession order set aside

Katherine Traynor appeared for the Applicant, Ms East, instructed by Advocate, and secured a pro bono costs order payable to the Access to Justice Foundation.