Overcoming the challenges of sub-letting by assured tenants

Under section 1 of the Housing Act 1988, an assured tenant is required to “occupy the dwelling-house as his only or principal home.” At first glance, the assumption would be that if the tenant has moved into a different property, they can no longer occupy the property as their only or principal home. However, it is not quite that clear.

This assumption has been interpreted by case law over the years, however, and the tenants can raise following two defences to maintain assured tenancy.

1. The tenant has an “intention to return” to the property. The tenant need only demonstrate “a real possibility” of their intention to return within a reasonable time, accompanied by an outward sign of this intention to return (“Defence One”); and

2. The tenant returns to the property between service and expiry of the landlord’s notice to quit, as the tenant has to have ceased to occupy the property as their only or principal home at the expiry date of the notice to quit (“Defence Two”).

In October 2013 the Prevention of Social Housing Fraud Act (“Fraud Act”) came into force to “strengthen the powers of social landlords when tackling tenancy fraud”. The Fraud Act added section 15A into the Housing Act 1988, which states that if an assured tenant “sub-lets” or “parts with possession of the dwelling-house”, the “tenancy ceases to be an assured tenancy and cannot subsequently become an assured tenancy.” This means that if a tenant sub-lets or parts with possession of a property, then security of tenure is lost and can never be regained.

Section 15A seems to assist in defeating “Defence Two”, as security of tenure is lost when sub-letting or parting with possession occurs, not when the landlord’s notice to quit expires. However, there is no case law specifically on this point yet. Sub-letting is much easier to prove of course (e.g. by producing the tenancy agreement) but “parting with possession” can revolve around a factual dispute.

Defence One is usually fact-specific, you should expect to have to produce and argue about documents proving occupation and intention. There are no conclusive cases regarding whether the Fraud Act defeats “Defence One”, so tenants can simply argue that they always had the intention to return to the property.

The case of Ansa Logistics Limited v Towerbeg Limited [2012] can be interpreted in two ways.  The case which confirmed that “the acid test for possession…lies in the right of the person in occupation to exclude others, including the tenant, from the premises.” A tenant must relinquish possession unambiguously and absolutely, i.e. with no intention of returning at some future date.  If this is applied, then the intention defence will still be available to tenants.

On the other hand, under the Fraud Act, it could be argued that it has achieved its intention and that a tenant’s possible future intention is no longer relevant. Certainly, the Ansa Logistics case states nothing in relation to future intention being a plausible defence to parting with possession of a property. This is despite the issue of parting with possession being considered for some ten paragraphs within the Judgment. Allowing tenants an “intention to return” defence would also defeat the object of the legislation as it would allow a tenant who had sub-let or parted with possession of a property under, say, a one-year tenancy, to argue that they fully intended to return to the property at the expiry of such an agreement.

Even if the wording within Ansa Logistics is preferred so that tenants can only part with possession should they have no intention of returning, the case could be distinguished.  Ansa Logistics was to do with commercial leases rather than social housing, and Towerbeg and Ford were large businesses, meaning that the relationship was strictly commercial. In social housing, parting with possession or sub-letting nearly always takes place between two individuals and is a situation from which the Fraud Act specifically aims to protect social landlords.

Landlords have been given hope in this area by the recent case of Dove v London Borough of Havering [2017], judgment for which was given on 22 March 2017. Two sisters spent the majority of their time living at other properties with their respective partners. The Judge stated that when considering whether tenants occupied a property as their only or principal home, “there are two parts to the question (a) does the person in question occupy the dwelling as a home and (b) if so, does he or she occupy it as his or her only or principal home?”.

The Judge also stated that the “question of an intention to return (which often features in these cases) is, in reality, an intention to revert to a previous pattern of existence” and that the question is “is the pattern of residence such that the tenant is occupying the property as her principal home”. The conclusion was that, whilst the property remained the sisters’ home, it was not the principal home for either of them. Utility bills were relied on to prove this.

Whilst the uncertainty regarding whether a tenant “parting with possession” or “sub-letting” a property can use an “intention to return” defence remains, we suggest taking a cautious approach. Landlords could serve a notice of seeking possession at the same time as, and without prejudice to, a notice to quit. Should a Judge determine that an “intention to return” defence is applicable, possession of the property could still be awarded on the discretionary ground 12, which applies should a tenant breach any obligation of the tenancy (other than one related to rent).

If you have any questions about the issues surrounding subletting or would like any further information about this article, please contact Katherine Raison.

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