Property Law – To Pay or Not To Pay? – That is the question

By : Arthur Moore

In an action for possession of property brought by a local authority landlord on the basis of rent arrears, the most common outcome is the making of a suspended possession order. Frequently the terms of suspension are then broken within months, if not weeks, of the order being made. At that stage the familiar round of issuing warrants, and applications to suspend them, starts. What if the tenant pays off all the arrears (albeit not entirely in accordance with the terms of the order) and the costs of the action as well? What is his status? These questions have recently been considered again in the case of Swindon Borough Council v Aston [2002] EWCA Civ 1850 19/12/02 CA.

In January 1987 Mr Aston went into occupation of a house as a secure tenant of Swindon’s predecessor in title (“Thamesdown”). In December 1991, Thamesdown obtained a suspended possession order on terms of payment of current rent plus £2 per week. The final paragraph of the Order provided: “AND also the judgment shall cease to be enforceable when (the arrears of rent….and) costs referred to above are satisfied.” Mr Aston breached the terms of suspension almost immediately. He went on paying the rent and arrears, but rather erratically. Thamesdown issued a number of warrants for possession, but compromises were reached each time. On the 8/1/96, Mr Aston paid off all the arrears. He also apparently paid off all the costs.

In 1997, Thamesdown ceased to exist, and Swindon became the landlords. Mr Aston continued paying erratically. He was frequently in arrears, but paid the arrears off in full on five occasions up to 1998. Swindon had increased the rent due from Mr Aston year on year. In 1998, Mr Aston’s neighbours started complaining to Swindon about the state of his garden, and in particular the collection of washing machines. Mr Aston claimed he ran a business fixing the machines.

After much communication, Swindon wrote a letter to Mr Aston pointing out that he was in breach of his tenancy agreement by running a business from his property. Swindon served a simple notice to quit on Mr Aston, and a s.83 notice “without prejudice”. Possession proceedings were commenced which alleged, amongst other things, that the tenancy had come to an end in 1991 by virtue of the breaches of the suspended possession order.

By his defence, Mr Aston contended that the 1991 order was unenforceable against him as he had, in fact, paid off all the arrears and the costs under it. There was a trial of the preliminary issue as to whether a tenancy existed at the date of the notice to quit. It was found that there was not. Mr Aston challenged this on appeal, and lost. However, he also applied to set aside the possession order under s.83(4) HA ’85. The district judge refused the application, and the Circuit judge on appeal dismissed the appeal. The matter was then considered by the Court of Appeal. The Court held that the final paragraph of the 1991 Order, referred to above, meant what it said: once the arrears and costs were paid off, the order became unenforceable.

However, the Court went on to hold that, once the arrears and costs were paid off, Mr Aston’s status as a tolerated trespasser then ended. He became effectively a bare trespasser. The rationale for this was that, because the sums had not been paid in accordance with the Order, Mr Aston could not use s.85(4) HA ’85 to set aside the order. Moreover, the Court’s power under s.85(2) (to postpone the date for possession) was not available to Mr Aston either, because the order was unenforceable and there was therefore no date for possession which could be postponed. The Court held that, on the facts, a new tenancy had been created. Swindon had demanded and received an increased rent, and had sought to impose the terms of the tenancy on Mr Aston in respect of his use of the garden.

Conclusion At first blush, this decision seems a good one for tenants in that if, at any time after the suspended order is made they pay off all the arrears, and the costs, the landlord will not be able to enforce the order for possession, even if the tenant subsequently falls into arrears again.

However, the reality is rather different. It seems now that the tenant loses his “tolerated” trespasser status once he pays off all the arrears and the costs. He cannot therefore set aside the possession order under s.85(4) HA ’85 or indeed apply to postpone the date for possession under s.85(2). It seems, on the Court of Appeal’s analysis, that the tenant can NEVER revive his old tenancy. He can only hope to persuade a Court that a new tenancy has been created.

This decision raises far more questions than it answers. In particular, the distinction that has been drawn between tolerated trespassers and non-tolerated trespassers (after all the arrears have been paid off) is a new one, and must be entirely false. They are not different animals; a trespasser is a trespasser. Moreover, why should the fact that the order has become unenforceable preclude an application to postpone the date of possession under s.85(2)? The distinction between an order and the ability to enforce that order is an age old one. The fact that an order may be unenforceable cannot affect the validity of the order itself, or, by extension, the Court’s powers to vary the terms of the order.

The decision is all the more curious since Schiemann LJ (who gave a concurring judgement) also gave a concurring judgment in Marshall v Bradford [2002] 22 HLR 428. The two decisions do not sit easily together. The overall impact is that a tenant who has paid off all his arrears, and costs of the action, will be in a worse position than one who has failed to pay off the arrears and costs completely. This anomaly is so glaring that that it would seem that only the House of Lords can sort it out. However, neither side have, appealed. In the meantime, tenant’s representatives can only advise clients NOT to pay arrears off in full before applying to the Court to suspend possession, or set aside the order.