The claimant, Mr Hanoman, was a secure tenant of a property in south east London owned by the defendant local authority, Southwark London Borough Council. The tenant received housing benefit from the authority taking the form of a rent rebate. This, in effect, allowed him to live rent-free at the property. Mr Hanoman (exercising his right-to-buy contained in Part V Housing Act 1985) served a notice on his landlord, the authority, in October 1999. The authority did not admit or deny his right but argued that the notice had been withdrawn. After the tenant served a number of notices of delay, it was eventually resolved in 2004 by the High Court that Mr Hanoman's right to buy was still subsisting and the authority was under a duty to deal with it. Following this judgment, the authority served a notice admitting the tenant's right to buy.
The statutory right to buy scheme was amended in 1988 to include provisions serving to reduce the purchase price in the event of delay by the landlord. s153B provides that "where a secure tenant has served on this landlord an operative notice of delay, this section applies to any payment of rent which is made on or after the default date". In this case, the authority failed to admit or deny Mr Hanoman's right to buy within the required four or eight week period and no counter-notice was served. Further, the authority lost in the High Court on the argument that the notice had been withdrawn. Mr Hanoman's notice of delay was therefore effective and meant that the provisions in s153B came into play on the 'default date', this being the end of the period within which the authority could have served a counter-notice to the original application.
The issue to be decided in the House of Lords, therefore, was what exactly constituted a 'payment of rent' for the purposes of s153B and more specifically whether housing benefit acting as a rent rebate would constitute such a payment. In 2004 the purchase price was agreed at £17,000 (including a £38,000 statutory discount from the market value of £55,000). The parties agreed that the discount would not prevent Mr Hanover from pursuing the issue under s153B. If the housing benefit did constitute a payment of rent, the £17,000 purchase price would be treated as having been paid. The Court of Appeal ruled in favour of Mr Hanoman, and it fell to the House of Lords to consider on appeal from the authority whether housing benefit could in fact constitute a 'payment of rent'.
Mr Hanoman's income allowed him to qualify for housing benefit which covered the whole amount of his rent and this was paid by the local authority. It was argued that the act of the authority crediting housing benefit to his rent account could not count as a positive payment of rent by Mr Hanoman as there was no movement of money. Lord Scott of Foscote took a purposive approach, highlighting the purpose of the amended sections of the Act as being "a sanction that penalised any local authority that dragged its feet". He made the further point that this benefit to a secure tenant should not discriminate against a class of tenants receiving housing benefit.
The House of Lords decided that in this case housing benefit did constitute a payment of rent, and the authority was ordered to pay back the £17,000 to Mr Hanoman.
Local authorities and registered social landlords should make it a priority to respond to right-to-buy notices within the given deadlines to avoid the purchase price being reduced in the event of a delay. This case has widened the scope of this reduction, and should alert landlords subject to the right to buy or the preserved right to buy to the dangers of delay in such situations.