OPINION

James Neri & Others (applicants) v City of Edinburgh Council (respondents)

Subjects: 26 Kingston Avenue, Edinburgh

Introduction

1. The applicants, James Neri and Mrs Elaine Neri, are secure tenants of the respondents. They and their daughter have applied to purchase their house under the Housing (Scotland) Act 1987. The respondents, City of Edinburgh Council, have issued an offer to sell, but with a discount calculated on “modernised” basis. The applicants maintain that they should have received a larger discount on the “preserved” basis. They have applied for a finding in terms of section 71(2)(b) of the 1987 act to this effect.

2. The applicants also submit that they believe the District Valuer has taken into account tenants’ improvements in determining a market value of £150,000. They are aware there had been an earlier, lower valuation, and in the interim improvements had been carried out. They maintain the District Valuer should have ignored any increase in value as a result of improvements since otherwise the applicants would in effect be paying for the improvements twice over.

Procedure

3. At the hearing Mr Neri represented himself and his family members. The respondents were represented by Mr Matthew Clarke, solicitor. Mr Neri gave evidence himself. The respondents did not lead any evidence other than produce their documents. We restricted the hearing to the issue of the statutory discount as between the modernised and preserved right to buy.

4. We decided to continue the case regarding the issue of tenants’ improvements. The respondents were willing to obtain a supplementary report from the District Valuer to clarify whether or not any increase in value on account of the improvements mentioned in the application form submitted on 28 July 2016 was in fact disregarded. The improvements are not specified in terms in the report itself. We would expect a supplementary report to specify the disregards on site, and to address whether any alteration falls to be made to the existing report in terms of the assessment of market value.

Legislation

5. Part III of the Housing (Scotland) Act 1987 (“the 1987 Act”)’ as amended, provides as follows with regard to the statutory discount:-

“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

(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)…(ac)) or of a succession of houses provided by any persons mentioned in subsection (11) …

(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 …

(aa) a registered social landlord …

(ac) any person who provided the tenant with accommodation in pursuance of a decision by the landlord to demolish a house subject to a Scottish secure tenancy as a result of which-

(i) the tenancy was terminated by written agreement between the landlord and the tenant; and

(ii) the accommodation was made available to the tenant; …

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) … (ac) or of a succession of houses provided by any persons mentioned in section 61(11), … up to a maximum discount of 35 per cent (of the market value of the house) or £15,000, whichever is less.”

6. 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.

7. 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 within the grounds on which proceedings for recovery of possession have been raised falls within grounds 9 to 15 of Schedule 2 of 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.”

8. 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(1)(2)(c) of the 1987 Act.”

9. 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.

10. Turning to the provisions regarding determination of market value, the 1987 Act further provided:

“62 … (2) The market value for the purposes of this section shall be determined by either-

(a) a qualified valuer nominated by the landlord and accepted by the tenant; or

(b) the district valuer, as the landlord thinks fit as if the house were available for sale on the open market with vacant possession as at the date of service of the application to purchase.

For the purposes of this subsection, no account shall be taken of any element in the market value of the house which reflects an increase in value as a result of work the cost of which would qualify for a reimbursement under section 29 of the Housing (Scotland) Act 2001 (asp 10).

63 … (2) Where an application to purchase is served on a landlord, and the landlord does not serve a notice of refusal under sections 68 to 70 it shall, within 2 months after service of the application to purchase, serve on the tenant a notice (referred to in this Part as an “offer to sell”) containing—

(a) the market value of the house determined under section 62(2);…

71 … (1) Where-

(d) a landlord has served an offer to sell whose contents do not conform with the requirements of paragraphs (a) to (e) of section 63(2) (or where such contents were not obtained in accordance with the provisions specified in those paragraphs), the tenant (together with any joint purchaser) may refer the matter to the Lands Tribunal by serving on the clerk to that body a copy of any notice served and of any finding or determination made under this Part, together with a statement of his grievance.

(2) Where a matter has been referred to the Lands Tribunal under subsection (1), the Tribunal shall consider whether in its opinion—

(b) paragraph (d) of that subsection applies, and if it so finds it may order the landlord to serve on the tenant an offer to sell, in proper form, under section 63(2) within such time (not exceeding 2 months) as it may specify.”

Cases

MacLeod v Ross and Cromarty District Council 1983 SLT (Lands Tr) 5
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
Maloney v City of Edinburgh Council LTS/TR/ 2016/04, 5.7.2017
McCallum v City of Edinburgh Council 2017 SLT 466; 2017 SLT (Lands Tr) 9

Background Facts & Circumstances

11. There is no dispute that the applicants have the right to purchase their current property 26 Kingston Avenue, Edinburgh. Whether their right has been saved on the preserved basis depends upon an analysis of the history.

12. Mr Neri and his wife were tenants of Edinburgh Council for many years since 1982, as specified in the application to buy. They were tenants of 32 Niddrie Marischal Road between 1987 and 1990. This tenancy was brought to an end since the council wished to demolish the flats in the area including the applicants’ house.

13. There were various meetings at that time involving the local tenants and both officials and members of the council. The intention was for the tenants to be decanted during the period of demolition and new build. They would then be returned to a new build house on the old site. Mr Neri was clearly of the view that his willingness to be decanted had been made on the basis that the landlords of the new property would be Edinburgh Council, and that he would continue to have the right to buy the new property when it was completed. Mr Neri and his wife were decanted to 8 Niddrie Marischal Drive between 1990 and 1995. Mr Neri indicated that this was a much inferior property and that he had only expected to live there for one year, not the five or so years which transpired. At some point it also transpired that the landlords of the new build property would not be the council but a housing association. He found this situation objectionable and went to the decant property under protest and refused to sign the relevant tenancy agreement.

14. Mr and Mrs Neri moved in to the new build property in 1995 or 1996. The property was 78 Niddrie Marischal Grove and the landlords were Manor Estates Housing Association. We understood this, like the previous tenancies, to have been a secure tenancy. There was a written tenancy agreement. This tenancy lasted until 2009. Mr Neri indicated that at no time had he had the right to buy the new property. He indicated there had been a ten year limitation on the right to buy, which had subsequently been extended indefinitely. At this point we should say that it was not explored or explained by either party on what basis the applicants may have had their right to buy limited or lost during the Manor Estates tenancy between about 1995 and 2009. It is very possible Mr Neri was referring to a situation brought about by section 61A of the 1987 Act, introduced by the 2001 Act, which limited the right to purchase from registered social landlords for a period of ten years, and potentially for a further period determined by Scottish Ministers. However this would not explain a limitation period from 1995 until the coming into effect of section 61A for the landlords in question. It is quite possible there were other reasons why there might not have been a right to buy during the earlier part of the tenancy, but we are unable to make a finding on the point. However this does not affect our conclusion on this branch of the case.

15. Mr and Mrs Neri entered into a new tenancy agreement with the respondents on 1 October 2009 for their present property. The basis for the new tenancy appears to have been an application for a mutual exchange of house which had been submitted by Mr Neri to the respondents on 25 August 2009. Although the application form refers to the reason as a desire for a smaller house, Mr Neri indicated that he needed a house without stairs for health reasons. Mr Neri and his wife signed a Scottish secure tenancy agreement with the respondents. Mr Neri also signed a “Scottish secure tenancy sign up checklist” which indicates that his right to buy would be the “modernised” right to buy. Mr Neri disputed that this matter was discussed in his presence. The document also indicates that he was made aware of the need to give 28 days’ notice before giving up of his existing house.

16. In summary it is clear that the tenancy in existence at the conversion date of 30th September 2002 was for 78 Niddrie Marischal Grove, and that this was subsequently terminated with the agreement of all parties concerned. The present tenancy was not in existence at that date.

Submissions for Respondents

17. The Respondents submitted that it was clear that the preserved right to buy depended upon the provisions of the 2002 Order. This had come into effect on 30 September 2002. The history of Tribunal decisions, namely Carey, Rizza, Mark, Boyle and McCallum were clear that the preserved right could only be saved if the 2002 Order was engaged. New tenancies including those created as a result of transfers or exchanges after 30 September 2002 were generally only able to exercise the right to buy on modernised terms and conditions. Where the termination was due to a decision to demolish the house, and other accommodation was made available, then the right to buy would apply to the other accommodation. However that was not the case here. The decision to demolish 32 Niddrie Marischal Road and decant the applicants had occurred before the coming into effect of the 2001 Act and 2002 Order. These provisions brought in the modernised right to buy including saving provisions. The decision to demolish therefore had no impact upon the saving provisions since there were no saving provisions and no modernised right in play at the time.

18. It was clear that the applicants’ current tenancy commenced after 30 September 2002 and the circumstances of the case did fall within the exceptions of Art 4(3)(a) or (b) of 2002 Order. The council had no discretion in terms of the 2002 Order other than to offer the modernised discount.

19. The respondents moved for the application to be dismissed but did not seek an award of expenses.

Submissions for Applicants

20. We understood the applicants to take the position that their right to buy on the preserved basis should have carried through to the present property, since they had had no right to buy 78 Niddrie Marischal Grove, contrary to what they understood at the time of the proposed demolition of 32 Niddrie Marischal Road. The applicants had been assured the right to buy would continue to the 78 Marischal Grove tenancy, but this had not happened.

Tribunal’s Consideration

21. 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, or where the transfer is being made as a result of a decision to demolish the existing house. 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.

22. As summarised by Lord Malcolm in the Inner House in McCallum at para [11]:-

“In practical terms, the overall result was as follows: if an applicant enjoyed a right to purchase a particular property when the new regime came in to force (or a prospective right to purchase the subjects when the residence requirements were met) then, for so long as the tenancy persisted, not only would that regime continue, but the discount entitlement would be unchanged. However, once any such tenancy was at an end, any new tenancy would be subject to the less generous terms.”

23. In the present case it is doubtful that the applicants had a “right to purchase under section 61” the 78 Niddrie Marischal Grove property immediately prior to 30 September 2002, in terms of Art 4(1) of the 2002 Order. It was expressly part of the applicants’ narrative that at no time did they have the right to purchase this property. As we have said, the statutory basis for this position was not made clear to us by either party. However, what is clear is that this tenancy came to an end, and not for any reason specified in sub-para (3) of Art 4 of the 2002 Order. There was no suggestion, for example, of any order for recovery of possession on “management grounds” or for demolition of the property. On the contrary, the evidence indicates that the termination and transfer were voluntary. It follows that any preserved basis right to buy has not been saved.

24. It seemed to us that the applicants’ grievance very much related to the decanting and new build arrangements in the 1990s alongside an expectation that the right to buy would continue on the same basis indefinitely. Clearly this did not happen on account of legislative changes brought about the Scottish Parliament under the 2001 Act and subsequent Acts.

Conclusion

25. Accordingly we conclude that the 2002 Order was not engaged so as to save any right to buy on the “preserved” basis. The applicants only have the right to buy on the “modernised” basis of the 1987 Act.

Decision

26. Accordingly we dismiss the application in as much as its grounds seek a larger discount based upon the “preserved” right to buy.

Further Procedure and Jurisdiction

27. We shall continue the case to allow the respondents to obtain a supplementary report on behalf of the District Valuer expressly commenting upon the issue of tenants’ improvements as discussed at paragraphs 2 and 4 above.

28. At this point we should mention that the respondents queried - we put it no higher than that – whether the Tribunals’ jurisdiction extended to an assessment of market value. Reference was made to MacLeod v Ross and Cromarty District Council. That case decided that under the Tenants’ Rights, Etc (Scotland) Act 1980, the Tribunal did not have jurisdiction to re-examine market value as determined by an agreed valuer or the district valuer in terms of a provision very similar to section 62(2) of the 1987 Act. In particular it was held that “market value” specified in an offer was not a “condition” for the purposes of the 1980 Act which could be challenged under certain provisions also similar to those in the 1987 Act.

29. We note that the 1980 Act did not have an equivalent to subsections 71(1)(d) and (2)(b) of the 1987 Act. This is a significant difference to the legislation which the Tribunal were considering in MacLeod. In particular, section 71(1)(d) and its reference to section 63(2)(a) and “the provisions specified in those paragraphs” – i.e. section 62(2) referring to determination of market value - do appear to give the Tribunal a certain jurisdiction. It is true that the overall wording does not easily lend itself to the possibility of the Tribunal’s substituting their own view of market value for that of the District Valuer. On the other hand, it seems clear enough that the Tribunal has jurisdiction to ensure that the calculation of market value was carried out correctly and in accordance with section 62(2). This makes provision as to the ignoring of any increase in value for work which would qualify for reimbursement under section 29 of the 2001 Act. While we would reserve our position on jurisdiction lest the matter requires to be fully argued, we are provisionally satisfied that we are able to continue to deal with the case for the purpose discussed above.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 31 January 2018

Neil M Tainsh – Clerk to the Tribunal