Welsh housing associations could have to repay £50m in rent following test case over failure to provide electrical condition reports
Welsh housing associations could face bills totalling £50m after a Divisional Court ruled that rents need not have been paid during a period in which landlords withheld electrical condition reports from tenants, known in Wales as contract holders.
Law firm Winckworth Sherwood’s housing management team, which acted for the defendant tenants, said the case focused on the obligation to give electrical condition reports to the defendants under the Renting Homes (Wales) Act 2016.
Although reports were obtained by the social landlords involved in the case, they were not physically provided to the contract holders by the due dates.
Although no residents withheld rent on this account it was arguable that they were entitled to, and the court heard this liability could total some £50m across Wales.
This was because the absence of the electrical report rendered their homes technically unfit.
Mr Justice Griffiths and HHJ Jarman KC, sitting as a judge of the High Court, held that the landlords’ failure to provide contract holders with electrical condition certificates meant that they were in breach of regulation 6 of the Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022, and therefore the dwellings were unfit for human habitation and payment of rent was not required during the unfitness.
Winckworth Sherwood commented: “This case is likely to have a huge impact on the Welsh housing sector. The defendants have issued counterclaims for payment of the rent back from the housing associations, with those counterclaims to be considered at another hearing.”
The case involved three claims. These were: Coastal Housing Group and Tai Calon Community Housing versus residents Dawn Mitchell and Helen Jones; Valleys To Coast Housing versus Andrew Wallbridge; Bron Afon Community Housing versus William John Wadley.
Judges heard that the claimant landlords were collectively responsible for more than 25,000 homes, around 15% of housing association homes in Wales.
The court was told the residents involved had agreed to be defendants so the issues the claimants wished to raise could be brought to court.
By the time the oversight of not providing the reports was spotted, they were several months overdue.
The claimant landlords recognised it was arguable that residents could therefore have withheld rent by reason of unfitness, and sought a definitive determination of whether that was correct and if so what the full implications were, as “we have been told that the claimants estimate that over £50 million may be at stake, when all their contract-holders (not just the defendants) are taken into account”, the judges said.
The first issue to be decided was whether the dwelling were unfit – and so rent payments were not liable – because the electrical reports had not been provided. The associations argued they were not since the reports existed but had simply not been sent to residents.
The second issue was whether the words “from the time” in regulation 6(7) of the Fitness Regulations have retrospective effect. Claimants argued that the effect of regulation 6(7) was that, once they had served the electrical reports – even if late – they were absolved of any consequences flowing from the previous breach.
A further ground concerned the meaning of the ‘occupation date”’in Regulation 6(5) of the Fitness Regulations in the case of converted contracts.
The court declined to rule on two other grounds concerning the extent to which electrical reports have to cover common parts – which affected only Ms Mitchell – and whether a decision against the claimants on the first two issues rendered the legislation incompatible with their rights under Article 1 Protocol 1 of the European Convention on Human Rights.
They said the human rights issue should wait until the outcome of counterclaims for repayments of rent paid during the periods of unfitness.
The judges found for the defendants on each of the decided issues.
A spokesperson for Community Housing Cymru (CHC), which represents housing associations in Wales, said: “We thank the court for its support in providing important clarification on a number of issues for the sector. As this is a lengthy and complex judgement, we will now be taking the time to carefully read it, to fully understand its implications.
“As soon as we have this understanding, we will continue to work with Welsh Government to understand next steps.”
CHC said the homes were and continue to be safe to live in and only a lack of paperwork had made them technically ‘unfit for human habitation’ under the law.
Mark Smulian