Bankway Properties Ltd v Pensfold-Dunsford

Bankway Properties Ltd v Pensfold-Dunsford [2001] 1 WLR 1369

Landlord and tenant; assured tenancy; rent review clauses and security of tenure

Facts

The landlord’s predecessor in title granted the tenants an assured tenancy under the Housing Act 1988 at an initial rent of £4680 per annum. The tenants were in receipt of housing benefit and the rent was paid by the local authority. The agreement contained a rent review clause under which the rent could be increased to £25000 per annum. The landlord increased the rent to £25000 and obtained a possession order when the tenant fell into arrears. The tenant appealed.

Issues

The tenant argued the rent review clause was invalid because the parties cannot have realistically expected the tenant to pay rent of £25000. The clause was a sham and a pretence designed to obtain possession, whilst avoiding the provisions of the Housing Act 1988 which gave the tenant security of tenure. Further, the tenant claimed the written agreement was not provided until after they had taken possession and the existence of such an onerous clause should have been explicitly brought to their attention. The landlord contended the clause was not a sham to avoid the statutory provisions, and there was nothing in the Housing Act to prevent parties agreeing to a particular rent. Further, a party was bound by a contract they had signed, irrespective of whether they had read its terms.

Decision/Outcome

The order for possession was set aside. A purported increase in rent which was inconsistent and repugnant to the purpose of the statute was to be ignored. Parties to an assured tenancy agreement could not alter the terms of the statutory scheme to reduce the protections afforded to tenants. The increased level of rent was never realistically expected to be paid and was, therefore, an unlawful device to avoid the statute.