OPINION

M (Applicant) v City of Edinburgh Council (Respondents)

Introduction

[1] This is a reference under section 71 of the Housing (Scotland) Act 1987 seeking a finding in terms of subsections (1)(d) and (2)(b). It is contended that the respondents have not calculated the correct discount under the right to purchase provisions as required by sections 62(3) and 63(2)(b). The applicant complains that the respondents’ offer to sell under those provisions has not contained the correct statutory discount on the price. He claims to be entitled to the discount as originally provided under section 62 of the 1987 Act (the “preserved” right to buy), whereas the offer reflected the less favourable provisions of section 62 as amended by section 49 of the Housing (Scotland) Act 2001 (the “modernised” right to buy). Central to the issue is the fact that the applicant’s tenancy of the house which he has applied to buy commenced in August 2015; being a date after he left the armed forces and after the commencement date of the 2001 Act viz. 30 September 2002.

Legislation

[2] Part III of the Housing (Scotland) Act 1987 (“The 1987 Act”)’ as amended, provides as follows:-

“Secure tenant’s right to purchase –

61(1) … a tenant of a house to which this section applies … shall, … have the right to purchase the house at a price fixed under section 62.

(2) This section applies to every house let under a Scottish secure tenancy where-

(a) the landlord is, or was when the tenancy was granted, either-

(i) a local authority …

(ia) a registered social landlord; or

(iia) Scottish Water …

(c) immediately prior to the date of service of an application to purchase, the tenant has been for not less than 5 years in occupation of a house (including accommodation mentioned in subsection (11) … (n)) or of a succession of houses provided by any persons mentioned in subsection (11) …

(10) In this section and section 62

(a) references to occupation of a house are to continuous occupation …

(b) for the purpose of determining the period of occupation … (iv) the landlord may, if it thinks fit, disregard as not affecting continuity any interruption in occupation which appears to it to result from circumstances outwith the control of the person in question.

(11) The persons providing houses referred to in subsection (2)(c) (occupation requirement for exercise of right to purchase) and in section 62(3)(b) (calculation of the discount from the market value) are-

(a) any local authority in Scotland …

(n) the Crown, in relation to accommodation provided in connection with service … by the tenant … as a member of the regular armed forces of the Crown; …

The price

62(1) … the price at which a tenant shall be entitled to purchase a house … shall be fixed as at the date of service of the application to purchase by subtracting a discount from the market value of the house …

(3) … the discount for the purposes of subsection (1) shall be –

(a) 20 per cent of the market value of the house, together with

(b) an additional one per cent. of the market value for every year beyond 5 of occupation by the appropriate person preceding the date of service of the application to purchase, of a house (including accommodation provided as mentioned in section 61(11) … (n) or of a succession of houses provided by any persons mentioned in section 61(11),

… up to a maximum discount of 35% (of the market value of the house) or £15,000, whichever is less.”

[3] The above sections reflect the “modernised” right to buy having been amended by sections 42 et seq of the Housing (Scotland) Act 2001 (“the 2001 Act”). Prior to the coming into effect of the 2001 Act the qualifying condition for the right to buy was not less than two years occupation of the house and, in a case of a flat as opposed to a house, the maximum discount was 70% of market value. Section 61(10)(a) and (b)(iv) as quoted above were first introduced by the 2001 Act.

[4] It is also appropriate to point out at this stage that the list of landlords susceptible to the right to buy mentioned in section 61(2)(a) was, in the legislative history of the 1987 Act, originally longer and included, for example, fire and police authorities in Scotland. At no stage did it include the Crown in relation to the armed forces. The definition of “secure tenancy” as it existed immediately prior to 30 September 2002, in terms of the now repealed section 44 of the 1987 Act, required the landlord to be one of the bodies mentioned in section 61(2)(a).

[5] Separate provision was made in order to save the “preserved” right to buy for secure tenancies in existence at the time of the passing of the 2001 Act. The Housing (Scotland) Act 2001 (Scottish Secure Tenancy etc) Order 2002 SSI 2002/ 318, (“the 2002 Order”) amended by SSI 2002/415 came into force on 30 September 2002. This provided:-

“Transitional provisions and savings – right to buy

4(1) - Where immediately before the conversion date, a tenant had a right to purchase under section 61 of the 1987 Act, the provisions of the 1987 Act and the 2001 Act shall, after the conversation date and until the earliest of -

(a) the termination of the tenancy (within the meaning of paragraph (3) below)

(b) the assignation of the tenancy; or

(c) the passing of the tenancy by operation of … (succession …) …

apply in relation to that tenancy subject to the modifications mentioned in paragraph (2) below.

(2) The modifications mentioned in paragraph (1) above are that …

(b) the qualifying period of occupation in relation to the tenant’s right to purchase shall be as provided for in section 61(2)(c) of the 1987 Act as that provision applied immediately before the conversation date;

(c) the discount in relation to the tenant’s right to purchase shall be as provided for in section 62(3) of the 1987 Act as that provision applied immediately before the conversation date; …

(3) For the purposes of this article, a tenancy is terminated if it is brought to an end under any of the circumstances listed in section 12(1) of the 2001 Act other than circumstances where —

(a) an order for recovery of possession has been made under section 16(2) of the 2001 Act and the ground on which proceedings for recovery of possession have been raised falls within grounds 9 to 15 of Schedule 2 to the 2001 Act; or

(b) the tenancy is terminated by written agreement between the landlord and the tenant and -

(i) the landlord has made a decision to demolish the house; and

(ii) as a result of that decision, the landlord has made other accommodation available to the tenant.”

In terms of Articles 2 and 3 of the 2002 Order, the conversion date of secure tenancies into Scottish secure tenancies was 30 September 2002. Article 2 further states:

“2(2) In determining, for the purposes of this Order, whether a tenant had a right to purchase a house, no account shall be taken of section 61(2)(c) of the 1987 Act.”

[6] Section 12 of the 2001 Act provides that a Scottish secure tenancy may not be brought to an end except by certain means. These include, for example, written agreement between landlord and tenant or 4 weeks’ notice given by the tenant to the landlord.

[7] The grounds of possession referred to in the 2002 Order referring to paragraphs 9 to 15 of Schedule 2 to the 2001 Act may be described as “management grounds” and include, for example, where the house has been designed or adapted for occupation by a person whose special needs require accommodation of the kind provided by the house and there is no longer a person with such special needs occupying the house. Under section 16 the court can make an order for recovery of possession where other accommodation will be available for the tenant. These grounds can be distinguished from what are described as “conduct grounds” referred to in paragraphs 1-8 of the Schedule.

[8] The 1987 Act was further amended by the Housing (Scotland) Act 2010 (“the 2010 Act”) which introduced the following section into the 1987 Act:

“61ZA Limitation on right to purchase: new tenants

(1) Section 61 applies to a house let under a Scottish secure tenancy created on or after the day on which section 141 of the Housing (Scotland) Act 2010 comes into force only if the tenant has, since that day, continuously been in occupation as a tenant of a house (including accommodation provided as mentioned in section 61(11) … (n)) or of a succession of houses provided by any persons mentioned in section 61(11).

(2) For the purpose of determining such a period of continuous occupation—

(b) the landlord may disregard any interruption in occupation which appears to it to result from circumstances outwith the control of the tenant in question.”

Section 141 of the 2010 Act came into force on 1 March 2011.

Authorities referred to

Rizza v Glasgow Housing Association 2008 SLT (Lands Tr) 13
Carey v Glasgow Housing Association LTS/TR/2010/05, 5.1.2011
Mark v City of Edinburgh Council LTS/TR/2014/03, 20.1.2015 Boyle v South Lanarkshire Council 2015 SLT (Lands Tr) 189

Procedure

[9] At the hearing the applicant represented himself. The respondents were represented by Ms Faqir, senior solicitor of the respondents’ legal department. Given that there appeared to be no significant factual dispute, we were prepared to proceed on the basis of the lodged written evidence and parties’ submissions. We reserved to parties the right to lead oral evidence should some significant factual issue emerge. As matters transpired we were able to dispose of the case without the need for hearing oral evidence. In doing so we have assumed for the purposes of this opinion that the applicant had been a tenant of the respondents or their statutory predecessors in 1983, which fact was not covered in the written evidence.

Factual background

[10] The applicant had been a tenant of the respondents’ statutory predecessors in 1983. He had accommodation at the Grassmarket in Edinburgh. He left that property and served in the armed forces between December 1983 and December 2005. He lived in army accommodation during this period. Prior to leaving the army he applied to the respondents for accommodation. The respondents were unable to provide accommodation at that time. As a result he became homeless and relied upon family and friends for accommodation. Eventually the respondents were able to find accommodation at the present subjects. A Scottish secure tenancy agreement was entered into with effect from 17 August 2015.

[11] The applicant applied to purchase this property by appropriate form dated 7 October 2015. A formal offer to sell was issued by the respondents on 3 December 2015. The statutory discount was calculated at £15,000 on the basis of the “modernised” right to purchase. Parties were already in dispute as to the correct discount. The respondents had set out their position in a letter dated 20 October 2015. This letter explained that although the council accepted that the applicant had a right to buy the flat, this was on the basis of the “modernised” and not the “preserved” right.

[12] The respondents accepted with reference to section 61(2)(c) that although the applicant had not been in five years continuous occupation of the house in question prior to service of the application to purchase, the previous army accommodation could count towards the five year period by virtue of the link to subsection (11)(n). They also accepted, quite properly, that interruption in continuous occupation between army accommodation and the present subjects between December 2005 and the new tenancy on 17 August 2015, should be disregarded. In terms of section 61(10)(b)(iv) this break could be disregarded because of circumstances outwith the control of the applicant. This was on the basis that he had applied for council accommodation prior to leaving the army but the respondents had been unable to provide such accommodation at the time.

[13] As quoted above the right to purchase was further restricted by the 2010 Act which introduced section 61ZA to the 1987 Act, limiting the right to purchase for “new” tenants. In particular, tenancies created after 1 March 2011 would not provide the right to purchase unless the tenant had since that day been continuously in occupation of a house including of a type mentioned in Section 61(11)(n). However, under subsection (2) the respondents similarly had a discretion to disregard any interruption in occupation which appeared to result from circumstances outwith the control of the tenant. The respondents exercised that discretion so as to disregard the break in occupation for the above reason.

[14] It follows that the only dispute between the parties is whether the admitted right to purchase is upon the “modernised” or “preserved” terms.

Applicant’s submission

[15] In summary the applicant’s position was that as the respondents had conceded continuity of occupation after the coming into effect of the 2002 Order, he was entitled to purchase on the preserved terms. Section 61(2)(c) allowed for the occupancy of armed forces accommodation to contribute to the right to purchase. He contended that he had never “given up” a tenancy which is what was required to lose the preserved rights under the 2002 Order. He referred to certain passages in the Scottish Government guidance circular HAR1/2011 which he argued supported his position.

Respondents’ submission

[16] The respondents submitted that the applicant only had a modernised right to buy because the tenancy of the present house started after 30 September 2002, being the date of the 2002 Order. Under reference to Article 4 the applicant did not have a right to buy in 2002, since there was no right to purchase the armed forces accommodation. There was accordingly no right to purchase to be saved by Article 4. Section 61(2)(c) of the 1987 Act dealt with the calculation of the qualifying period for the right to buy, and subsection (10) allowed the respondents to disregard interruptions in occupation for the purposes of the calculation of that requirement and for the calculation of the discount. These provisions were separate to the 2002 Order. The preserved right to purchase could only be saved if the 2002 Order was engaged, and it was not engaged in the present case. Reference was made to Rizza, Carey, Mark and Boyle; particularly the latter in which it was held that the landlords’ discretion under Section 61(10)(b)(iv) was not relevant to Article 4 of the 2002 Order. The respondents had no discretion to overlook the requirements of Article 4. The respondents also referred to certain passages in guidance document HAR 1/2011.

Discussion

[17] In our opinion the respondents’ submissions are correct. Whether the “preserved” right to purchase has been saved depends upon the application of Article 4 of the 2002 Order. Essentially this provides that the right to purchase a house in a Scottish secure tenancy only continued on the preserved terms after 30 September 2002 while that tenancy was not terminated, assigned or passed by succession to certain persons. There are certain limited exceptions to this as provided by sub-paragraph (3) where the termination related to certain management issues of the property in question. In this event, as we said in Rizza, the Order requires to be read as if the preserved right carries over to a substituted tenancy.

[18] In the present case it is clear that the applicant cannot come within the meaning of Article 4(1) as a tenant

“where immediately before the conversion date, a tenant had a right to purchase under section 61 of the 1987 Act …”.

[19] Immediately before 30 September 2002, the applicant did not have a secure tenancy with the right to purchase a house within the meaning of the Act. Since 1983 his landlords were no longer the respondents or their statutory predecessors. Any right would depend upon his gaining a future secure tenancy with a relevant landlord. His 2002 landlord was the Crown and not one of the bodies mentioned in Section 61(2)(a). Article 4 was not engaged.

[20] The fact that the respondents have disregarded the break between army accommodation and subsequent council tenancy is only relevant for the purposes of sections 61(2)(c) and 62(3). These sections are only relevant for the purposes of calculating the fulfilment of the occupation requirement for the exercise of the right and for the calculation of the discount. The disregard is also relevant to potential application of Section 61ZA. As we said in Boyle:

“[21] … nevertheless in Rizza and in Carey, the Tribunal was clear that the main effect of the 2002 Order is that existing secure tenants continue to have the benefit of the old rights until the tenancy was terminated. But tenants of new tenancies including those created as a result of transfers or exchanges are generally only able to exercise a right to buy on the ‘modernised’ terms and conditions …

[31] We are also of the view that the reference to section 61(10)(b)(iv) of the 1987 Act is of no relevance to the saving of the preserved right to buy. The saving provisions are contained in the 2002 Order and there is no link between that section and the Order. There are just no words to provide such a link. Section 61(10)(b)(iv) is designed to give discretion to the landlord in certain circumstances in the calculation of the entitlement to buy, and a discount. However it does not assist in determining whether the preserved right to buy has been saved in any given case. It would be odd for the 2002 Order to provide for the strict circumstances in which the preserved right to buy can be retained, but for section 61 to introduce a discretion to the landlord.”

[21] We would only add that the 2002 Order expressly provides, in Article 2(2) that in determining whether a tenant had a right to purchase a house for the purposes of the Order, no account shall be taken of section 61(2)(c). That is, of course, the section which provides the five years’ occupation requirement, the application of which may or may not require the disregard of certain interruptions in occupation. In other words what appears to be critical to Article 4 is not the continuous occupation requirement but the requirement under the remainder of section 61(2) namely a secure tenancy with certain landlords as at the conversion date.

Decision

[22] In these circumstances we dismiss the application.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 14 July 2016

Neil M Tainsh – Clerk to the Tribunal