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SG v Epping Forest DC [2011] UKUT 41 (AAC) Contrived tenancies & commercial basis

Dan Manville
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Hi all

I have just been provided a copy of the above case; I’ve attached it for perusal.

I’d be interested in a more Housing centric view of it. In the decision; which isn’t mentioned in my copy of Findlay and I can’t find on here, Judge Turnbull held that a tenancy was not on a commercial basis, reasons at para 61 et seq cause a problem for pretty much anyone who’s related to their landlord and relations are cordial.

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Dan Manville
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Sorry that was shorter than I intended as someone phoned me up.

In the case I’ve got the landlords also have power of attorney for the tenant so they’d never need to invoke features of the tenancy to move him.

Following Judge Turnbull’s findings I think it might be fatal to our case so I thought I’d cast it out for an opinion.

Paul Stockton
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All these commerciality cases are very fact-specific. If your case doesn’t have all the features of this case, such as absence of planning permission, and the tribunal not believing the parents when they said they planned to rent the property out, then you may well have a chance. See paragraph 62 in particular.
I had a case where the landlord knew the tenant well, had rescued her from street homelessness. where the tenant regarded the landlord’s mother as more of a mother to her as her real mother to the extent that the tenant had changed her surname, and where the landlord would not have rented the premises out to anyone else, but the judge still accepted that the arrangement was commercial. It all depends on the facts.

Elliot Kent
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I think the case is omitted from the commentaries because its ultimately just an exercise in balancing the competing factors in an individual case. I am not sure it stands for anything novel or of application to future cases. These cases stand and fall on their own facts.

The judge at para 45-54 talks about whether a contractual liability existed at all. There needs to be a legal (usually contractual) liability before you can even look at commerciality, and for there to be a contractual liability, there needs to be a mutual intention to create legally enforceable obligations.

There is not much difficulty establishing a contract in circumstances where (say) a stranger is paying rent to another and has use of a property in return, because even if there is no written agreement, a contractual relationship can straightforwardly be inferred.  In this case, there was no written agreement, no rent was being paid, it was an agreement between close family and there was a question mark over whether the claimant would have been able to understand what he was agreeing to given his learning difficulties and the particular nature of what was going on. Each of these factors would cast doubt on whether a contract existed at all.

Whilst the judge was prepared to accept that a contract existed on the recollections of the parties, this ends up feeding into his balancing of the commerciality factors because given all of the complications to inferring a contractual liability in the case, commercial parties would probably not leave the enforceability of the arrangement down to whether or not a judge was prepared to look past all of that. 

All of which would have been avoided if there was a written agreement at the outset spelling out the nature of the relationship.

Paul_Treloar_AgeUK
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Dan Manville - 29 June 2021 04:06 PM

Sorry that was shorter than I intended as someone phoned me up.

In the case I’ve got the landlords also have power of attorney for the tenant so they’d never need to invoke features of the tenancy to move him.

Following Judge Turnbull’s findings I think it might be fatal to our case so I thought I’d cast it out for an opinion.

That does sound like a very odd set up i.e. your landlord also has lasting power of attorney for you. Given that they have to act in your client’s best interests, could they honestly say that they would evict him if he fails to pay the rent? And if they did evict him, how would they demonstrate that they’ve acted in his best interests in doing that?

Dan Manville
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Paul_Treloar_AgeUK - 30 June 2021 09:10 AM
Dan Manville - 29 June 2021 04:06 PM

Sorry that was shorter than I intended as someone phoned me up.

In the case I’ve got the landlords also have power of attorney for the tenant so they’d never need to invoke features of the tenancy to move him.

Following Judge Turnbull’s findings I think it might be fatal to our case so I thought I’d cast it out for an opinion.

That does sound like a very odd set up i.e. your landlord also has lasting power of attorney for you. Given that they have to act in your client’s best interests, could they honestly say that they would evict him if he fails to pay the rent? And if they did evict him, how would they demonstrate that they’ve acted in his best interests in doing that?

To be fair they’ve stumbled into the situation rather than it being created by design. It is very odd and it’s given our housing solicitor a headache as well.

Useful stuff to know is that a contract is not void if entered into with a person without capacity to do so but it is voidable at the person’s will.

There is conflicting caselaw that I’m yet to read about whether an Attorney could serve notice to quit on the person for whom they’re acting.

edit: in case this has done anyone else’s head in: https://nearlylegal.co.uk/2011/10/mental-capacity-act-and-tenancy-an-open-question/

[ Edited: 30 Jun 2021 at 01:00 pm by Dan Manville ]
HB Anorak
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Wychavon was set aside and redecided: https://administrativeappeals.decisions.tribunals.gov.uk/Aspx/view.aspx?id=3423.  I think the NL discussion predates the second version of Wychavon.

The second decision bypasses the issues around capacity to contract and instead relies on s7 of the Mental Capacity Act, as well as some Victorian case law predating the Act (In re Rhodes, Rhodes v Rhodes, I’m picturing ruddy cheeks and enormous moustaches) to decide that a person without capacity to contract, and with no court appointed deputy, may still be required to pay a fair price for essentials which, the UT concludes, can include accommodation.

Having established that, the Judge rather perfunctorily says there were good commercial reasons for the parents to charge her.  It is therefore not a particularly good case to rely on for a more in-depth analysis of commerciality.