This was a possession case to recover properties which were security for mortgage loans for which the Claimant contended sums were due and / or other terms of the mortgage agreement had been breached. A case management conference listed for 26th March 2020 did not take place on that day as the parties agreed directions for trial of the case. The agreed order was sealed on 27th March 2020, which was the day that Practice Direction 51Z came into force. The parties made written submissions to Judge Parfitt as to whether the stay imposed by PD 51Z applied to the proceedings. Judge Parfitt decided that the proceedings were stayed and that he had no power to lift the stay.
The Claimant appealed that decision. The appeal was transferred to the Court of Appeal by Kerr J pursuant to CPR 52.23.
The issues for the Court of Appeal to decide were:
“(1) Does this court have jurisdiction to consider the vires of PD 51Z, and should it do so?
(2) If so:
(3) Does PD 51Z apply to cases allocated to the multi-track in which case management directions had been given before it was introduced?
(4) Does the court have jurisdiction to lift the stay imposed by paragraph 2 of PD 51Z?
(5) If so, should the Judge have lifted the stay in this case?”
In summary the court’s decisions on the above questions, which have wider implication for possession cases, are as follows:
Housing and Property practitioners will be aware that PD 51Z comes to an end on 30th October 2020. Whether it continues beyond October, is modified or replaced by something entirely different is anybody’s guess at the time of writing. As lockdown eases it may be that more guidance as to the practical operation of PD 51Z will be released. However at the time of writing the government has announced that the stay on possession proceedings of 90 days in PD 51Z will be increased by 2 months to the end of August [https://www.gov.uk/government/news/ban-on-evictions-extended-by-2-months-to-further-protect-renters]. Additionally the mortgage holiday has been extended for a further three months at the time of writing [https://www.bbc.co.uk/news/business-52767058]. As such it seems likely the current situation will continue for the foreseeable future.
When will possession orders be made once more by the courts?
Although the government has allowed individuals to start buying houses again, the resumption of the making of possession orders and the expiration of PD 51Z are likely to ultimately depend on the stage which the pandemic has reached and overall assessments of public health risks. If there is a ‘second spike’ of infections the current restrictions could conceivably extend beyond the 30th October 2020.
Potential effects on possession cases under the Housing Acts 1985 and 1988.
In cases under the Housing Act 1985 (‘HA 1985’) and 1988 (‘HA 1988’) where possession is sought on a discretionary ground, the key test is taken from Cumming v Danson (1942) 2 All E.R. 653 CA “the duty of the judge is to take into account all relevant circumstances as they exist at the date of the hearing . . . in a broad, common sense way . . . giving weight as he thinks right to the various factors in the situation”.
Given the automatic stay on proceedings by paragraph 2 of PD 51Z and the significant difficulties in satisfying the test of “exceptional circumstances” to lift the stay, what sort of arguments are likely to emerge in the future as part of the reasonableness test?
Cases where possession is sought due to rent arrears
Given the implications of furlough and redundancies which may well arise from the fallout from Covid-19, the following arguments are likely to become relevant factors in the reasonableness test:
The basis of these financial affordability arguments will be familiar to social housing practitioners but the situation caused by Covid-19 magnifies and increases their scope.
As a result of Covid-19 there is likely to be an increase in cases where the order of the court is long-term suspension of possession orders. There is precedent for this in the case of Lambeth LBC v Henry (2000) 32 HLR 874, where the Court of Appeal upheld a decision to impose a suspended order for 23 years deciding that it was within the court’s discretion in the circumstances of that case.
One possibility is that as the stay does not apply to an application for case management directions which are agreed by all the parties (paragraph 2A(c) of PD 51Z) there may be scope for the parties to agree orders adjourning the case generally with terms for periodical repayments. It is difficult to see how paragraph 2A(c) could apply however to agreed orders for suspended possession orders disposing of the case during the stay, as this would require the court’s approval in the form of a Judgment, which the wording of PD 51Z does not appear to cover.
Cases where possession is sought due to anti-social behaviour
The effect of the stay on possession on grounds of antisocial behaviour (Ground 2 of Schedule 2 HA 1985 or Ground 14 Schedule 2 HA 1988) is another issue. Media reports suggest that anecdotally, with the lockdown having forced many to work from home or stay at home, incidences of noisy neighbours have increased [https://www.bbc.co.uk/news/newsbeat-52579586].
Again, the imposition not only of PD51Z but also the various versions of The Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 (of which there have been 3 versions at the time of writing) are likely to impact the reasonableness test on any attempts to seek possession:
One key aspect of the reasonableness test in anti-social behaviour cases is the structured discretion (in section 85A(2) of HA 1985 and section 9A of HA 1988):
“The court must consider, in particular–
(a) the effect that the nuisance or annoyance has had on persons other than the person against whom the order is sought;
(b) any continuing effect the nuisance or annoyance is likely to have on such persons;
(c) the effect that the nuisance or annoyance would be likely to have on such persons if the conduct is repeated.”
The question may very well be whether or not part of the contributing factors for the nuisance are borne out of the lockdown regulations, for instance neighbours may experience more noise from tenants if they have been restricted to being at home or having to work from home. A court may well consider that in individual cases that if the timing of the increase in noise reported by neighbours correlates with the lockdown measures, this can be expected to improve once the lockdown rules are sufficiently relaxed for people to be able to leave their homes again.
When considering whether any possession order should be postponed or suspended, the law indicates that there needs to be an assessment of the future conduct of the tenant, which includes assessing past behaviour, circumstances of any promise to comply and the reliance which the court can place on the word of the promisor (Leeds & Yorkshire Housing Association v Vertigan (2011) HLR 13). The imposition of the stay on possession proceedings by PD 51Z may well result in situations where tenants have an opportunity to prove their conduct can improve during the period of the lockdown.
Taking into account the above comments in anti-social behaviour cases it appears that in the current pandemic an application for an injunction under the Anti-Social Behaviour, Crime and Policing Act 2014 will be the best remedy for landlords under the PD 51Z regime. It appears that such an application for an injunction can still be made under PD 51Z. Paragraph 3 of the Practice Direction reads: “For the avoidance of doubt, claims for injunctive relief are not subject to the stay in paragraph 2, and the fact that a claim to which paragraph 2 applies will be stayed does not preclude the issue of such a claim”. Applying for an injunction has the added advantage for landlords of showing to a court that other methods have been attempted before having to resort to possession proceedings.
Effect on mortgage possession cases
Currently, in cases where possession is sought by a mortgagee against a mortgagor for a dwelling house, the court has a discretion under the Administration of Justice Acts of 1970 (section 36) and 1973 (section 8) to either adjourn the proceedings or stay or suspend any possession order or postpone possession. Section 8(2) of the 1973 Act sets out the key test:
“A court shall not exercise by virtue of subsection (1) above the powers conferred by section 36 of the Administration of Justice Act 1970 unless it appears to the court not only that the mortgagor is likely to be able within a reasonable period to pay any amounts regarded (in accordance with subsection (1) above) as due on account of the principal sum secured, together with the interest on those amounts, but also that he is likely to be able by the end of that period to pay any further amounts that he would have expected to be required to pay by then on account of that sum and of interest on it if there had been no such provision as is referred to in subsection (1) above for earlier payment”.
The central test is what is a reasonable period, but how might this be interpreted in the time of Covid-19? The factors for the court to apply come from Cheltenham Building Society v Norgan (1996) 1 WLR 343:
In the light of the answers to the above, the court can proceed to exercise its overall discretion, taking account also of any further factors which may arise in the particular case…”
In cases of furlough or redundancy caused by Covid-19, factors (b) and (c) are likely to become highly relevant; relevant questions are how long is furlough likely to last? If there is redundancy how likely is the mortgagor to obtain further employment and when? Have the arrears occurred due to the furlough or redundancy? It is also highly likely that the mortgage holiday and the imposition of PD 51Z by themselves will count as being ‘further factors’ which arise in such cases coming out of the Covid-19 lockdown.
Given the continuing uncertainty as to what the ‘new normal’ will be and given the public health concerns which caused the introduction of PD 51Z practitioners in this area of housing law can expect an interesting time in dealing with the application and effect of PD 51Z over the coming months.
This article on ‘The practical application of Practice Direction 51Z; Issues that may arise’ was written by James Byrne. For further on how to instruct James or another member of the Property team please contact our clerks via the switchboard on 020 7353 0711 or via email: email@example.com