No.305
The Governors of the Peabody Trust v Reeve
June 5, 2008
High Court, Mr G Moses QC
The High Court has held that on a proper construction of a registered social landlord’s
assured tenancy agreement, the terms of that agreement could not be varied without the
tenant’s agreement.
Facts
Prior to the commencement of the Housing Act 1988
(15 January 1989), tenancies granted by housing
associations
were generally secure tenancies
governed by the Housing Act 1985. Once the 1988 Act
came into force, new tenancies granted by housing
associations - now referred to as registered social
landlords - are assured tenancies.
Under the Housing Act 1985, a landlord can vary the
terms of a secure tenancy by notice, following
consultation with the tenant: s.103, 1985 Act. The 1988
Act contains no equivalent power for the landlord to
vary the terms of an assured tenancy unilaterally.
The Unfair Terms in Consumer Contracts Regulations
1999 (“the 1999 Regulations”) provide that the supplier
under a written contract shall ensure that any written
term is expressed in plain, intelligible language and that
if there is any doubt about the meaning of a written
term, the interpretation which is most favourable to the
consumer prevails: reg.7. In addition, if a term is
“unfair”, it is of no effect: reg. 8. A term is unfair if it
“causes a significant imbalance in the parties’ rights and
obligations under the contract, to the detriment of the
consumer”: reg. 5(1). The requirement of fairness only
applies to a term “which has not been individually
negotiated”: reg. 5(1). The 1999 Regulations apply to
tenancy agreements: R (Khatun) v Newham LBC [2005]
QB 37; [2004] H.L.R. 29.
Clause 5 of the claimant Trust’s standard assured
tenancy agreement governed changes in the terms of
the tenancy agreement (other than changes in rent).
Clause 5(a) provided that the tenancy could only be
altered by written agreement between the parties,
whereas clause 5(b) purported to incorporate the
provisions of s.103, 1985 Act, into the agreement,
thereby enabling the Trust to vary the tenancy
agreement unilaterally.
The Trust brought a test case against the defendant,
who was one of its assured tenants, to determine two
issues:
(a) whether on its true construction clause 5
allowed the Trust to vary the tenancy
agreement unilaterally; and
(b) if so, whether or the clause was an unfair
term under the 1999 Regulations.
Mr G Moss QC dismissed the Trust’s claim on both
issues. Clauses 5(a) and 5(b) were contradictory. There
was therefore doubt as to the meaning of clause 5 as a
whole and applying reg.7, 1999 Regulations, clause
5(a) prevailed.
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No.305
Continued
He went on to consider whether clause 5(b) would have
constituted an unfair term. He held the it was unfair as it
was not individually negotiated and it gave rise to a
significant imbalance in the parties’ rights and
obligations arising under the contract, to the detriment
of the tenant as consumer.
2 John Street, London WC1N 2ES, DX 29 Chancery Lane Tel 020 7242 4244 Fax 020 7242 3224
clerks@ardenchambers.com www.ardenchambers.com/author
Disclaimer: Arden Chambers’ eflashes are no more than an immediate response to a recent decision (or other legal development), on
a selective basis, intended to help recipients keep up-to-date with information which may interest them without needing to await
publication of more considered material. Recipients should therefore seek advice or await fuller information if proposing to take action
in consequence of an eflash.