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Housing or property? the dynamics of housing policy and property principles in the right to buy

Published online by Cambridge University Press:  02 January 2018

Nicholas Hopkins  and
Emma Laurie
Nicholas Hopkins
Affiliation:
University of Southampton
Emma Laurie
Affiliation:
University of Southampton
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Abstract

This paper examines the interplay and tension between housing law and policy and property law, in the specific context of the right to buy (RTB). It focuses on funding arrangements between the RTB tenant and another party. It first examines how courts determine the parties’ respective entitlements in the home, highlighting the difficulty of categorising, under traditional property law principles, a contribution in the form of the statutory discount conferred on the RTB tenant. Secondly, it considers possible exploitation of the RTB scheme, both at the macro level of exploitation of the policy underpinning the legislation and, at the micro level, of exploitation of the tenant. The measures contained in the Housing Act 2004 intended to curb exploitation of the RTB are analysed to determine what can be considered to be legitimate and illegitimate uses of the scheme. It is argued that, despite the government's implicit approval, certain funding arrangements by non-resident relatives fail to give effect to the spirit of the scheme.

Type
Research Article
Information
Legal Studies , Volume 26 , Issue 1 , March 2006 , pp. 65 - 87
Copyright
Copyright © Society of Legal Scholars 2006

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References

1. Precise figures on the number of houses and flats sold under the RTB in the UK since 1980 are difficult to locate, as the Office of the Deputy Prime Minister (ODPM) only collates figures for England and figures produced by the Scottish Executive combine all sales (including voluntary sales). Estimates range from 1.5 million (C Jones Exploitation of the Right to Buy Scheme by Companies (London: ODPM, 2003) para 1.3) to 2 million (R Goodlad and R Atkinson ‘Sacred cows, rational debates and the politics of the right to buy after devolution’ (2004) 19 Housing Studies 447 at 447). Forrest and Murie put the figure higher at 2.3 million (R Forrest and A Murie ‘The big sell-off’ in J Goodwin (ed) Built to Last? (London: Shelter, 1997) p 147).

2. The Law Commission Sharing Homes: A Discussion Paper (Report No 278, 2002).

3. The most comprehensive analysis of this area is provided by J Mee The Property Rights of Cohabitees (Oxford: Hart, 1999).

4. J Miles ‘Property law v family law: resolving the problems of family property’ (2003) 23 LS 624; J Mee ‘Property rights and personal relationships: reflections on reform’ (2004) 24 LS 414; A Hudson (ed) New Perspectives on Property Law, Human Rights and the Home (London: Cavendish, 2004) chs 1–4.

5. 976 HC Official Report (5th series) cols 1444–1445, 15 January 1980, Michael Heseltine. The Conservatives’ belief in owner occupation is a long-standing one. During the second reading debates of the Housing (Financial Provisions) Act 1924, it was claimed that ‘there was more happiness in the case of an owner than there ever can be in the case of a tenant’; 175 HC Official Report (5th series) col 134, 23 June 1924, Major Birchall. This claim is all the more remarkable when one considers that just 10% of the population were owner occupiers at that time; M Partington Landlord and Tenant (London: Weidenfeld and Nicholson, 2nd edn, 1980) p 11.

6. M Kerr The Right to Buy: A National Survey of Tenants and Buyers of Council Homes (London: HMSO, 1988) para 90.

7. Ibid, para 102.

8. Forrest and Murie, above n 1, p 153.

9. R Forrest and A Murie Selling the Welfare State (London: Routledge, 1988) pp 63–64.

10. Standing Committee E, col 574, 12 February 2004, Keith Hill.

11. Housing Act 1980, s 1(3).

12. Ibid, s 7(1). Where the purchase is by joint tenants, then the tenants’ discount is not added together but the period(s) attributable to the joint tenant that produces the greatest discount is applied; Housing Act 1985, s 129(3).

13. Housing and Planning Act 1986, s 2(2)(b). To simplify the text, percentages quoted in this paper refer to those for houses.

14. Housing and Building Control Act 1984, s 3(1) and (2), consolidated in Housing Act 1985, ss 119 and 129.

15. The terminology of ‘relevant disposal’ was introduced by Housing and Building Control Act 1984, s 5(2), which amended Housing Act 1980, s 8(3).

16. Housing Act 1980, s 8.

17. Leasehold Reform, Housing and Urban Development Act 1993, s 120 amends Housing Act 1985, s 155. The Housing Act 2004 reinstates the 5-year period, and this is discussed below n 83 and associated text.

18. Standing Committee F, col 7, 29 January 1980, John Stanley, Minister of State for Housing and Construction.

19. Standing Committee F, col 9, 29 January 1980, Tristan Garel-Jones.

20. Standing Committee F, col 7, 29 January 1980, John Stanley.

21. Ibid.

22. Ibid.

23. Straw was then opposition spokesperson on Treasury matters but took over the local government brief in 1983.

24. Standing Committee F, col 33, 29 January 1980, Jack Straw.

25. Housing Act 1985, Sch 4, para 1.

26. Ibid, Sch 4, para 2.

27. Forrest and Murie, above n 9, p 148.

28. Housing and Building Control Act 1984, s 3. A 5-year qualifying period was introduced by Housing Act 2004, s 180; see below n 82 and associated text.

29. Housing (Right to Buy) (Designated Rural Areas and Designated Region) (England) Order 2003, SI 2003/1105; Housing (Right to Buy) (Designated Rural Areas and Designated Regions) (England) Order 2004, SI 2004/418; and Housing (Right to Buy) (Designated Rural Areas and Designated Regions) (England) (No 2) Order 2004, SI 2004/2681.

30. Housing (Right to Buy) (Limits on Discount) Order 1998, SI 1998/2997.

31. Department of the Environment, Transport and the Regions Secure Tenants’ Right to Buy: A Consultation Paper (London: DETR, July 1998) para 18.

32. Housing (Right to Buy) (Limits on Discount) (Amendment) Order 2003, SI 2003/498. These areas come within the London, south-east and eastern regions.

33. Office of the Deputy Prime Minister Introduction and Background to the Right to Buy, available at http://www.odpm.gov.uk.

34. Goodlad and Atkinson, above n 1, at 449.

35. Housing Act 1985, s 123.

36. There are a number of powers of enforcement available to the tenant; Housing Act 1985, ss 138(3), 150(3), 153A and 153B. The Secretary of State also has enforcement powers; Housing Act 1985, ss 164–166 and 170.

37. This outline is provided as a framework for the discussion that follows. For a full exposition of these doctrines the reader is referred to N Hopkins The Informal Acquisition of Rights in Land (London: Sweet & Maxwell, 2000) chs 6 and 7; K Gray and SF Gray Elements of Land Law (London: Butterworths, 3rd edn, 2001) ch 7; P Sparkes A New Land Law (Oxford: Hart, 2nd edn, 2003) chs 17 and 23. A useful analysis of the problems in ascertaining shares under property law principles following the exercise of the RTB is provided by C Davis and C Hunter ‘Purchase of a family home under the right to buy provisions – problems of a joint purchase’ (1996) 8 CFLQ 313 at 314–319. While the authors note the difficulties in subsuming the discount into existing principles, they do not consider why these difficulties have arisen.

38. The basis of the trust is discussed by Hopkins, ibid, pp 92–95. The limitation to cash contributions is reflected in Eyre CB's explanation of the trust in Dyer v Dyer (1788) 2 Cox 92 at 93: ‘the clear result of all the cases, without a single exception, is that the trust of a legal estate…results to the man who advances the purchase money’. For a modern illustration of this restriction, see Mollo v Mollo (unreported) 8 October 1999 at para 22 per His Honour Judge Hunter: ‘where legal title is held by one party but another…has made a direct contribution to the purchase price, the party with legal title holds the property on resulting trust’ (emphasis added).

39. In Pettitt v Pettitt[1970] AC 777, the House of Lords cast doubt on the relevance of the presumption of advancement in a modern context and suggested that it would be readily displaced. However, these comments were directed at the operation of the presumption between husband and wife, and in other relationships to which the presumption applies it retains greater significance. See, eg, J Mowbray et al Lewin on Trusts (London: Sweet & Maxwell, 17th edn, 2000) para 9.06. In any event, in general terms, the presumption of advancement is more likely to apply to gifts from the older generation (eg father) to the younger (son). The presumption is therefore unlikely to be relevant in RTB cases, where the funding (the presumed gift) is provided by the younger generation to the older. The relationships to which the presumption applies are discussed in Mowbray et al, ibid, paras 9.22–9.33.

40. [1991] 1 AC 107.

41. In Lloyds Bank v Rosset, ibid, at 133 Lord Bridge of Harwich explained, ‘direct contributions to the purchase price…will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do’.

42. This is acknowledged in Oxley v Hiscock[2004] 3 WLR 715 at 721–722 and is illustrated by Day v Day[2005] EWHC 1455 (Ch) (unreported) 23 June 2005. There, the RTB tenant was entitled to a 60% discount and the remaining 40% of the purchase price was funded by her son. In the absence of an agreement to share on other terms the court imposed a resulting trust.

43. Lloyds Bank v Rosset[1991] 1 AC 107 at 132 per Lord Bridge of Harwich.

44. This formula is based on Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd[1982] 1 QB 133 and Gillett v Holt[2001] 3 Ch 210. The nature of the relationship between the express agreement constructive trust and proprietary estoppel continues to attract considerable academic and judicial comment. See, eg, S Nield ‘Constructive trusts and estoppel’ (2003) 23 LS 311. Opposing views are forwarded by D Hayton in ‘Equitable rights of co-habitees’[1990] Conv 370 and in ‘Constructive trusts of homes – a bold approach’ (1993) 109 LQR 485 on the one hand, and P Ferguson ‘Constructive trusts – a note of caution’ (1993) 109 LQR 114 on the other.

45. Above n 18 and associated text.

46. Where a joint tenancy exists, the RTB belongs jointly to all joint tenants or to one or more, as agreed between the parties; Housing Act 1985, s 118(2).

47. The Law Commission, above n 2, para 3.29(3).

48. [1992] 2 FLR 388.

49. Ibid, at 395.

50. [1986] 1 FLR 526.

51. [1995] 2 FLR 511.

52. [1986] 1 FLR 526 at 531.

53. Ibid, at 531.

54. [1995] 2 FLR 511 at 516.

55. See the discussion of these doctrines, above n 41 and associated text.

56. [2004] 3 WLR 715.

57. Ibid at 750.

58. As is noted above n 42 and associated text, the resulting trust is correctly applied where a direct cash contribution has been made, but no inference of an agreement is drawn.

59. See, eg, Midland Bank plc v Cooke[1995] 4 All ER 562. There, an agreement was inferred through a contribution to the purchase of approximately 6%. That contribution arose as the deposit for the purchase of the house was provided as a wedding gift and the claimant was attributed with half the value of that gift. The existence of the constructive trust having been established on this basis, the claimant's share was quantified at 50%, as the parties’ course of dealing demonstrated an intention to share everything equally.

60. Above n 30 and associated text. In 1997/98, both in London and the north-east, the discount represented 48% of the value of the purchase price, whereas in 2003/04 the figure for London had fallen to 24.5% but had remained relatively stable for the north-east at 41.9%. The 2003/04 figures do not take into account the reductions implemented in 2003, which further reduce the value of the discount in the London, south-east and eastern regions: HC Official Report (6th series) col 267W, 2 December 2004.

61. See further Humphreys v Humphreys[2004] EWHC 2201 (Ch), [2005] 1 FCR 712. In quantifying shares under an inferred agreement constructive trust the discount was treated as a contribution by the RTB tenant and the parties’ shares matched their respective contributions.

62. (Unreported) 18 October 2000.

63. [2004] EWHC 2201 (Ch), [2005] 1 FCR 712.

64. Re Densham[1975] 1 WLR 1519.

65. Oxley v Hiscock[2004] 3 WLR 715. There, as noted by MP Thompson ‘Constructive trusts, estoppel and the family home’[2004] Conv 496 at 502, the court's quantification of the parties’ shares where this matter was not dealt with by the parties’ agreement in fact matched their contributions. This included treating the discount as a contribution by the RTB tenant.

66. While presumed undue influence is more readily associated with challenges to an expressly declared trust, there seems no reason, in principle, why the claim should not be raised if the court enforces an express agreement through the imposition of a constructive trust.

67. [2003] EWHC 746 (Ch) (unreported) 7 April 2003

68. Ibid, at para 35.

69. [2001] EWCA Civ 1710 (unreported) 23 October 2001.

70. Ie, after expiration of the discount repayment period.

71. [1993] 1 FLR 755.

72. Mr Savill had, however, contributed to the rent and other outgoings for several years prior to the purchase. While the discount is personal to the RTB tenant, arguably in applying equitable principles insofar as the discount reflects rent paid, the court would be justified in considering contributions to the rent.

73. Jones, above n 1, p 4.

74. Ibid, p 5.

75. Office of the Deputy Prime Minister Exploitation of the Right to Buy Scheme by Companies Research Summary 177 (London: ODPM, 2003).

76. Standing Committee E, cols 571–572, 12 February 2004, John Hayes, Shadow Minister for Local and Devolved Government; HL Official Report (5th series) col 1326, 16 September 2004, Lord Hanningfield, Opposition Spokesperson for the Office of the Deputy Prime Minister.

77. Standing Committee E, cols 573–574, 12 February 2004, Keith Hill.

78. Housing Act 2004, s 182 amends Housing Act 1985, Sch 5.

79. Housing Act 1985, s 39 as amended by Housing Act 1996, Sch 18, para 8. Exempted disposals are those made to a qualifying person under a will or through intestacy and those made in pursuance of orders made under Matrimonial Causes Act 1973, ss 24 or 24A; Inheritance (Provision for Family and Dependants) Act 1975, s 2; Matrimonial and Family Proceedings Act 1984, s 17; and Children Act 1989, Sch 1, para 1.

80. Explanatory notes to Housing Act 2004, s 187.

81. Standing Committee E, cols 559–560, 12 February 2004, Keith Hill.

82. Housing Act 2004, s 180.

83. Ibid, s 185. Five years was the original repayment period; see above n 17 and associated text.

84. Kerr, above n 6, para 119.

85. Jones, above n 1, para 6.75.

86. This issue also has important ramifications for social security law, in the context of the treatment of jointly owned capital for the purpose of assessing an individual's eligibility for means-tested benefits; N Wikeley ‘Co-ownership of property, valuation, vires and entitlement to benefits’ in F Meisel and P Cook (eds) Property & Protection (Oxford: Hart, 2000).

87. Jones, above n 1, p 15.

88. Ibid, para 6.76.

89. Ibid, p 5.

90. Ibid, para 2.27.

91. Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Committee The Draft Housing Bill Tenth Report of Session 2002–03, HC 751-I, vol 1, paras 181–182.

92. Ibid, para 182.

93. Ibid, para 182.

94. Office of the Deputy Prime Minister The Right to Buy and Right to Acquire Schemes & Voluntary Sales to Social Tenants: A Consultation Paper (London: ODPM, March 2003) Annex C, paras 25–26.

95. ODPM, above n 91, para 171.

96. Ibid, para 170.

97. Home Ownership Task Force A Home of My Own (London: The Housing Corporation, November 2003) para 6.39.

98. Standing Committee E, col 582, 12 February 2004, Keith Hill.

99. Housing Act 2004, s 198 amends Housing Act 1985, s 163A(5) to give powers to the Secretary of State to make such orders.

100. Standing Committee E, col 582, 12 February 2004, Keith Hill.

101. See the discussion of Singla v Bashir[2002] EWHC 883 (Ch) (unreported) 13 May 2002, below n 119 and associated text.

102. [2003] EWHC 746 (Ch) (unreported) 7 April 2003.

103. An argument by the claimants that they had, in fact, provided finance was rejected on the facts.

104. [2003] EWHC 746 (Ch) (unreported) 7 April 2003 at para 35.

105. Ibid, at para 35.

106. Ibid, at para 39.

107. [2003] EWHC 841 (Ch) (unreported) 16 April 2003.

108. Ibid, at para 102. The funders would be entitled to the remaining 30% in line with the parties’ contributions.

109. Opposing views on the basis of the estoppel remedy are provided by E Cooke ‘Estoppel and the protection of expectations’ (1997) 17 LS 258 and A Robertson ‘Reliance and expectation in estoppel remedies’ (1998) 18 LS 360. However, Robertson acknowledged that even an approach based on reliance, in theory, may still lead to the award of expectations in fact; A Robertson ‘The statute of frauds, equitable estoppel and the need for something more’ (2003) 19 JCL 173 at 187.

110. In Jennings v Rice (2003) 85 P&CR 100 at 114 Robert Walker LJ noted that outside a limited category of case where the parties have reached a mutual understanding, the courts exercise ‘wide judgmental discretion’. The court rejected counsel's argument (at 104) that the award of expectations is the ‘basic rule’.

111. [2003] EWCA Civ 1176 (unreported) 31 July 2003.

112. Ibid, at para 61.

113. Unconscionable bargain was raised unsuccessfully in Humphreys v Humphreys[2004] EWHC 2201 (Ch), [2005] 1 FCR 712 (where a claim to presumed undue influence succeeded) and in Singla v Bashir[2002] EWHC 883 (Ch) (unreported) 13 May 2002. Mistake and misrepresentation are briefly considered in Humphreys v Humphreys, although failed on the facts.

114. Davis and Hunter, above n 37, pp 322–324 consider the possibility of a claim to undue influence to set aside the sale itself, rather than the parties’ agreement determining their respective entitlement to the property. Hence, they consider when circumstances may arise in which the actual sale would be ‘disadvantageous’ to the tenant. Their discussion is speculative (as the authors acknowledge, p 324) and the case-law that has subsequently arisen has involved challenges to the agreement concerning the parties’ entitlement, rather than challenges to the sale. Hence, it is that agreement that has been subject to an assessment of ‘disadvantage’.

115. As noted in Singla v Bashir[2002] EWHC 883 (Ch) (unreported) 13 May 2002 at para 27.

116. Above n 66 and associated text.

117. This is clearly so in Singla v Bashir[2002] EWHC 883 (Ch) (unreported) 13 May 2002, which involved an individual commercial investor. In Humphreys v Humphreys[2004] EWHC 2201 (Ch), [2005] 1 FCR 712 finance was provided by a non-resident relative. Popowski v Popowski[2004] EWHC 668 (Ch) (unreported) 26 March 2004 is more ambiguous in this regard. Finance was provided by the son of the RTB tenant who was working abroad at the time (and therefore strictly non-resident), although the house appeared to be his home during visits to England.

118. [2002] 2 AC 773.

119. [2002] EWHC 883 (Ch) (unreported) 13 May 2002.

120. While it is correct to describe Dr Singla as a private investor on the facts of the case, the court did note, at para 5, that this was a unique transaction for him.

121. [2002] EWHC 883 (Ch) (unreported) 13 May 2002 at para 7.

122. Ibid, at para 7.

123. Ibid, at para 15.

124. See, eg, Humphreys v Humphreys[2004] EWHC 2201 (Ch), [2005] 1 FCR 712 at para 106. There, Rimer J noted that while he had held that the transaction was disadvantageous to the RTB tenant in the context of a (successful) claim to presumed undue influence, he considered it ‘questionable whether it was sufficiently disadvantageous’ to constitute an unconscionable bargain.

125. [2002] EWHC 883 (Ch) (unreported) 13 May 2002 at para 28.

126. A relationship of trust and confidence was also absent on the facts in Papouis v Gibson-West[2004] EWHC 396 (Ch) (unreported) 4 March 2004, where half the remaining finance for a purchase (following the deduction of the discount) had been provided by a non-resident relative of the RTB tenant. However, there, the agreement as to entitlement (an express trust) was not challenged by the RTB tenant herself, but by her nephew following her death.

127. [2004] EWHC 668 (Ch) (unreported) 26 March 2004.

128. [2004] EWHC 2201 (Ch), [2005] 1 FCR 712.

129. Ibid, at para 95.

130. Ibid, at para 95.

131. Ibid, at para 95.

132. [2004] EWHC 668 (Ch) (unreported) 26 March 2004 at paras 31 and 32.

133. This may be seen as a further illustration of the courts’ uncertainty in weighing the value of the discount; cf the discussion of the treatment of the discount in property law principles in part 1, third section, above.

134. [2004] EWHC 668 (Ch) (unreported) 26 March 2004 at para 34.

135. [2004] EWHC 2201 (Ch), [2005] 1 FCR 712 at para 92.

136. Ibid, at paras 94 and 96. Rimer J noted that while the tenant's son had, in fact, maintained the property there was no obligation for him to do so under the terms of the parties’ agreement.

137. Ibid, at para 98. Rimer J considered that, in light of the circumstances, this could only have been achieved by demonstrating that the tenant had been given ‘comprehensive and independent’ legal advice.

138. Jones, above n 1.