London Borough of Newham v Khatun & others [2004] EWCA Civ 55

Housing – suitable offer of accommodation –statutory guidance – unfair contract terms

The Court of Appeal overturned a High Court ruling that the council was acting unlawfully in not allowing prospective tenants the opportunity to view accommodation before signing a tenancy agreement, in discharge of its ‘homelessness’ responsibilities under Part VII Housing Act 1996.


The council appealed from a decision (see below) that its policy of requiring homeless persons to accept or decline accommodation offered under s193 (2) Housing Act 1996 without being able to view it was unlawful; and that the council providing such accommodation was a supplier and the homeless persons were consumers within the Unfair Terms in Consumer Contracts Regulations 1999 and Council Directive 93/13. The respondents had applied to the council for accommodation as homeless persons. The local authority made offers of private sector leased accommodation under the 1996 Act and in each case, in accordance with its policy, required the respondent to accept or decline the accommodation without seeing it first. One of the respondents accepted the accommodation. The other two declined, not on the basis that the accommodation was unsuitable, but because they claimed to have the right to see it first.


There was no express conferment of any right for an applicant for local authority housing under Part VII Housing Act 1996 to be heard, nor could such a right be implied from the statutory language


Procedural fairness did not require the court to confer such a right to be heard on applicants for Part VII accommodation. The applicant enjoyed only the right to take the benefit of an executive decision in his favour if the council so concluded. The fact that the applicant did not have the opportunity to view the property did not disable the council from an appreciation of all the factors relevant to its decision as to the suitability of the offered property. An applicant’s subjective view of suitability was not a factor that a reasonable local authority was obliged in principle to have regard to. It was not oppressive or perverse or disproportionate for the local authority to require an applicant, who had not viewed the offered property, to decide whether or not to accept it on pain of his bed and breakfast accommodation being cancelled if he did not.


The secretary of state’s guidance, which the local authority was obliged to have regard to by s182 Housing Act 1996, was not a source of law and if it was inconsistent with the statute it was incorrect. The council’s policy sufficiently complied with the guidance.


The council’s appeal with regard to the Unfair Terms in Consumer Contracts Regulations 1999 and Council Directive 93/13 was dismissed. The Court held that the Regulations and the Directive applied to contracts relating to land and to public authorities such as the local authority in respect of its Part VII functions, since the grant of a tenancy for rent was the sort of economic activity that could be carried on by a private undertaking in order to make a profit. Further, the local authority’s execution of its Part VII functions fell within the meaning of “trade, business or profession” in Art.2(c) of the Directive. Therefore the local authority was a supplier or seller and the respondents were consumers within the meaning of the Regulations and the Directive.





Khatun & ors v London Borough of Newham [2003] EWHC 2326 (ADMIN)


Three claimants, all of whom were homeless persons in respect of whom the council had acknowledged a duty to provide suitable accommodation, applied for judicial review of the council’s policy for allocating leased accommodation to homeless persons.


In seeking to achieve the government’s target of reducing use of Bed and Breakfast (B&B) hotels for homeless families, the council had adopted a policy whereby it gave families in B&Bs notice that they had been allocated private sector leased accommodation but the locations of the new homes were not disclosed until the families got to the council’s offices to sign non-secure tenancy agreements. Requests for an opportunity to view the premises or to consider offers of accommodation before required to accept it were refused. The families were told that the council considered the homes suitable and that if they disagreed they could seek a review after the tenancy had been accepted. If the tenancy was refused, the B&B would be cancelled.


K, a young Muslim, reluctantly accepted a home that turned out to be above a pub. She thought she had been unfairly treated and claimed that the specific terms of the tenancy were unfair. All three claimants argued that the policy was unlawful because Newham did not have regard to the statutory Code of Guidance issued in 2002 which stated that the housing authority had to allow the claimants a reasonable period for considering offers of accommodation; that they had been denied an opportunity to view the property, against the threat of cancellation of their current accommodation and notification that the authority’s legal obligations had been discharged; that the tenancy offered to each of them was a contractual agreement to which the provisions of the Unfair Terms in Consumer Contracts Regulations 1999; that the council’s twenty-one day review period was an inadequate remedy; and that the inspection of the physical conditions and precise location were relevant to reaching a decision to pay rent and assume legal obligations as a tenant.


The council submitted that its scheme was fair and that unfair contract laws did not apply to council tenancy agreements; that the purpose of the relevant provision in the Code was to ensure that the housing authority had been sufficiently informed of matters relevant to the suitability of the accommodation offered, and since the council had obtained the necessary information that requirement had been satisfied; and that allowing an applicant to view before signing the agreement was likely to increase the number of requests for reviews thereby delaying efficiency and speedy transfer from B&B accommodation.


The judge held that to depart from national guidance given under statute in order to achieve a national guidelines target, which had been set administratively, was to run the risk of acting unlawfully by failing to follow the guidance. The council should not have permitted the targets which had been set to deflect its attention from the importance of the guidance. It had failed when devising the policy to pay sufficient regard to the interests of the claimants. Fair administration entitled a person to an opportunity to view a home before being required to take a tenancy. The council’s sign-up letters were coercive and unfair and its policy was unlawful, the judge said. The judge also decided that the 1999 Unfair Terms in Consumer Contracts Regulations did apply to tenancies: in carrying out its housing activities, the council was a “seller or supplier” within the meaning of the regulations and as the claimants had not entered the tenancy agreement for the purpose of their “trade, business or profession” they were plainly consumers.


As a result of the decision, the Office of Fair Trading will be discussing with Newham Council the fairness of the terms of its tenancy agreement.

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