Sanctions for late Electrical Condition Reports given to contract-holders in Wales: Coastal Housing Group Limited & Others v Mitchell & Others [2024] EWHC 2831 (Ch)

The Judgment of the Divisional Court of Griffiths J and HHJ Jarman KC (sitting as a Judge of the High Court) is the most significant treatment of the Renting Homes (Wales) Act 2016 (“RH(W)A”) and the wider regulatory regime for Electrical Condition Reports (“ECR”) and fitness for human habitation to date.

It makes clear the scope of the landlord’s duties in respect of the late provision of ECR and the extent to which a contract-holder (i.e. a person formerly called a tenant in Wales pre-commencement of the RH(W)A)) can withhold rent on that basis. Most significantly, it confirms that rent is not lawfully due for each day a landlord fails to give a copy of an extant ECR to the contract-holder.

However, it leaves other questions open, particularly whether a contract-holder can seek by way of restitution or moneys paid by mistake of law, to recover rent which was not, in fact, lawfully due but was nonetheless paid, whilst a landlord was in non-compliance with the ECR regime.

Facts

This was a test case brought by four Registered Social Landlords who collectively manage over 25,000 homes in Wales (roughly 15% of the NfP housing association housing stock in Wales). The claimant landlords sought various declarations about the state of the ECR regime in Wales. Various contract-holders agreed to act as defendants. The Welsh Ministers and two other institutional landlords intervened.

The ECR regime in Wales is made up of a number of pieces of legislation:

• The RH(W)A sets out the obligation of the landlord to ensure the dwelling is fit for human habitation (s91). It is also provides for the Welsh Ministers to prescribe matters to which regard must be had in determining whether a dwelling is fit for human habitation (s94).
• The Welsh Ministers have done so by way of the two sets of regulations (which also commenced on 1 December 2022 alongside the RH(W)A) The Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022 (“the Fitness Regulations”) and The Renting Homes (Supplementary Provisions) (Wales) regulations 2022 (“the Supplementary Regulations”).

The Fitness Regulations state that at Reg 6:

‘the landlord must ensure that the contract-holder is, before the end of the period of 14 days starting with the occupation date, given – a copy of the most recent electrical condition report…’; Reg 6(3)(a).

‘a dwelling is to be treated as unfit for human habitation at a time when the landlord is not in compliance with a requirement imposed by this regulation’; Reg 6(6).

The sanction for this non-compliance is then set out in the Supplementary Regulations:

‘the contract-holder is not required to pay rent in respect of any day or part day during which the dwelling is unfit for human habitation’; Reg 11.

In each of the test cases, the claimant landlords commissioned ECR but failed (through unintentional oversight) to provide the contract-holders with a copy for several months, thereby breaching Reg 6(3)(a) for a time. The defendants each paid their rent due for the period of non-compliance and did not avail themselves of the ability to withhold rent in Reg 11.

Decision

The court was asked to determine a number of issues, including:

1. Can a contract-holder withhold rent for a period when an extant ECR has not been given to the contract-holder?

The court answered, yes, the contract-holder can withhold rent for the period of non-compliance.

Compliance with section 91 required (a) the inspection of the dwelling; (b) the creation of the report (and the carrying out of any remedial works required by it) and (c) provision of the report. The statutory purpose in providing the ECR is to reassure the contract-holder of the dwelling’s fitness for human habitation (or make it clear what remedial works were required).

It was unhelpful to draw a sharp distinction, as the claimant landlords did, between “actual” breach (where as a matter of fact the dwelling is unfit for human habitation because of some electrical fault) and “deemed” breach (where the property is fit for human habitation because there are no electrical faults but the administrative failure to provide the certificate means the dwelling is “deemed” to be unfit).

If the landlords were right, and rent could not be withheld just in cases of non-provision of the ECR, there would be no incentive for a landlord to comply and the provisions would lack teeth.

Fundamentally, the court’s approach gave effect to the natural and ordinary meaning of the words and the obligations were not onerous.

2. If the answer is “yes”, even if the rent was not “required” for the purposes of Reg 11, can the contract-holder choose to pay rent, or does “not required to pay” mean rent is not lawfully due?

The court answered that it meant rent was not lawfully due. “Is not required to pay rent” was clear on ‘its own terms: the payment was not required before, and after, the point when it was paid, if it was paid.’

In effect, the wording is similar to the old statutory language of “rent not lawfully due” but the new wording was more desirable for its simplicity and clarity.

The court expressly declined to form a view on whether the rent paid by the contract-holders was recoverable.

3. Is the breach retrospective or prospective, i.e. once a landlord brings themselves into compliance with the regime, does any withheld rent become payable or is it lost forever to the landlord?

The court answered, no, the withheld rent cannot be recovered. The natural and ordinary meaning of “from the time” in Reg 6(7) (which deals with compliance), means looking forward, not backward.

Other cases dealing with statutory provisions with retrospective effect (e.g. the provision of late extant Gas Certificates under the Deregulation Act 2015 in Trecarrell House Ltd v Rouncefield [2020] 1 WLR 4712) are different statutory landscapes.

The court was asked to make declarations in respect of other issues (including the extent to which ECR have to cover common parts of a building and whether the legislation breached the landlords’ Article 1, Protocol 1 rights to property), but declined to do so. The latter has been deferred into resolution of the defendants’ counterclaims and will be a significant further judgment to watch out for.

Conclusions and significance

The judgment is clear: in Wales, rent is not lawfully due for the period a landlord fails to provide an ECR to a contract-holder and if a contract-holder who is aware of the breach withholds their rent, a landlord cannot seek to recover it later simply because they have brought themselves into compliance. This is very welcome clarification of the law in Wales for all concerned.

It is the currently unresolved counterclaims which is just as significant going forward. If a contract-holder has paid rent when it was not due during the period of non-compliance, can the contract-holder recover those sums by way of restitution or moneys paid over by mistake? If the answer is “yes” then this has huge implications for possession claims in Wales where contract-holders may offset arrears owed by repayments of rent paid when it was not lawfully due.

Article by William Golightly.