Nessa v London Borough of Tower Hamlets

The question on this appeal of Mrs Nessa is whether the price payable for a long lease of her flat at 11 Silvester House, Varden Street, London, E1 2JD (“the Flat”) pursuant to her right to buy conferred by Part V Housing Act 1985 and exercised by her on 4th April 2006 is the sum of £159,000 specified in a notice under s.125 given by the London Borough of Tower Hamlets (“the Council”) on 9th May 2006 or the sum of £209,000 specified in a revised notice purportedly given by the Council under s.125 on 12th April 2007.

On 13th May 1996, the appellant, Mrs Refarun Nessa, and her husband, Mr Matab Uddin, became secure tenants of the Council in respect of the Flat. In due course, they became entitled to buy a long lease of the Flat under ‘the right to buy’ provisions originally enacted in the Housing Act 1980 and consolidated with amendments in the Housing Act 1985. On 4th April 2006 Mr Uddin and Mrs Nessa claimed to exercise that right pursuant to s.122 by completion of the prescribed form with the consequence that the price payable in due course would be based on the open market value of the Flat at the date of service of that notice. On 11th April 2006 the Council admitted their right and instructed Ese-Oghene Associates to carry out a ‘right to buy’ report on the Flat. In their report dated 19th April 2006 Ese-Oghene Associates valued a lease of the Flat for a term of 125 years as at 4th April 2006 at £175,000. On 9th May 2006 the Council gave the notice required by s.125 (“the First Notice”) specifying the open market value of the Flat as at 4th April 2006 to be £175,000, the discount to which Mr Uddin and Mrs Nessa were entitled to be £16,000 so that the net purchase price for a lease of the Flat for 125 years would be £159,000. By a notice dated 26th May 2006 signed by both of them Mr Uddin and Mrs Nessa accepted the Council’s offer.

On 19th December 2006 the Council received a report from another firm of valuers, Hilbery Chaplin, valuing seventeen properties subject to ‘right to buy’ applications at their respective relevant dates. Their valuation certificate dated 2nd January 2007 gave, in relation to a long leasehold interest in the Flat as at 4th April 2006, an open market value of £225,000. On 5th January 2007 the Council wrote to Mr Uddin and Mrs Nessa referring to the Quality Audit of which the revaluations formed part and stating:

“We now enclose a Revised Section 125 Notice. The revised notice reflects “Market Value” of your property at the time [of] your first valuation. You are required to accept this revised offer if you wish to continue with your Right to Buy.”

The letter went on to point out the three alternatives available to Mr Uddin and Mrs Nessa, namely to accept the Council’s offer, to seek a redetermination of value by the District Valuer or to withdraw their application. The revised s.125 Notice (“the Second Notice”) specified the market value of the Flat as at 4th April 2006 to be £225,000, the same discount of £16,000 and a net purchase price of £209,000. On the same day the Housing Directorate of the Council wrote a second letter to Mr Uddin and Mrs Nessa apologising for any inconvenience caused. It offered to reimburse any reasonable costs wasted as a result and to pay them £100 in any event. After a certain amount of intervening correspondence, on 22nd May 2007 Mr Uddin and Mrs Nessa accepted the revised offer of the Council. On 6th July 2007 the Council wrote to Mr Uddin and Mrs Nessa informing them that the Council’s legal section had been instructed to proceed to completion of the sale. Correspondence with solicitors instructed by Mr Uddin and Mrs Nessa followed but the arrangements made for completion on 20th August 2007 were not implemented.

On 14th November 2007 Mr Uddin and Mrs Nessa wrote in respect of “Right to buy Amendment – 11 Silvester House..”:

“With reference to our conversation regarding amendment to Section 125, I wish to remove my name “MR M UDDIN” from the right to buy offer letter. I would appreciate [it] if you could amend the above details accordingly and re-issue my wife “MRS R NESSA” with the amended offer letter.”

On 13th December 2007 the Council sent to Mrs Nessa a further s.125 Notice (“the Third Notice”). It was headed “Amended Offer – This Notice Supersedes any Previous Offer – 13th December 2007 – J.Collins”. But instead of setting out the details as to market value and purchase price contained in the Second Notice it stated them to be £175,000 and £159,000 respectively as set out in the First Notice. Mrs Nessa claimed to have accepted this offer on 2nd January 2008. On 4th January 2008 the Council served on Mrs Nessa’s solicitor a notice under s.140 to complete the transaction within two months.

On 13th February 2008 the Council wrote to Mrs Nessa enclosing a further amended s.125 Notice (“the Fourth Notice”). It is headed “Amended Offer – This Notice supersedes any previous offer. R.B.Ali 13/02/08” and is in the same form as the Third Notice save that the market value and the purchase price are stated to be as in the Second Notice, namely £225,000 and £209,000. On 18th February 2008 Mrs Nessa changed her solicitors. On 29th February 2008 her new solicitors, to whom the Council had sent the draft lease, wrote questioning the stated premium of £209,000 rather than £159,000 as stated in the Third Notice “which our client accepted on 2 January 2008”. They were not satisfied with the Council’s explanation and proceedings followed.

In those proceedings Mrs Nessa, relying on s.138(3), sought to enforce her right to buy at a price of £159,000. She relied on the First and Third Notices. The Council disputed her entitlement and relied on the Second and Fourth Notices. The action came before HH Judge Dight sitting in the Central London County Court. The evidence before him included an unchallenged witness statement of Jackie Odunoye to the effect that the Third Notice was the product of clerical error. In his judgment handed down on 28th September 2009 Judge Dight concluded that (1) the Council had no power to withdraw or amend a notice given under s.125 but that (2) as the market value given in the First and Third Notices was significantly understated the Council had no power to sell the Flat for £159,000 with the consequence that both the First and Third Notices were ultra vires and void. In those circumstances he dismissed Mrs Nessa’s claim.

Mrs Nessa appeals, with the permission of Sir Richard Buxton. She contends that the second conclusion of the judge is wrong. By its respondent’s notice the Council contends that the judge’s first conclusion was wrong. Before us counsel for Mrs Nessa abandoned any reliance on the Third Notice. Accordingly the Council did not need to rely on the Fourth Notice. In these circumstances the only issue for our determination is whether Mrs Nessa’s right to buy is governed by the Second Notice or the First Notice. I will deal with that issue in due course, but, first, it is necessary to consider the terms of the relevant provisions of the Housing Act 1985 in some detail.

As indicated above the right to buy now conferred by Housing Act 1985 was first granted by Housing Act 1980. S.118 of the former provides:

“(1)

A secure tenant has the right to buy, that is to say, the right, in the circumstances and subject to the conditions and exceptions stated in the following provisions of this Part—

(a)

if the dwelling-house is a house and the landlord owns the freehold, to acquire the freehold of the dwelling-house;

(b)

if the landlord does not own the freehold or if the dwelling-house is a flat (whether or not the landlord owns the freehold), to be granted a lease of the dwelling-house.”

Subsection (2) provides for the right to be exercised by one of two or more joint tenants by agreement with the other or others. Ss.119 to 121 make provision for a qualifying period as a secure tenant and for the exclusion of the right in specified circumstances.

S.122(1) provides for the secure tenant to exercise his right to buy by written notice to that effect served on the landlord. The date of such service is prescribed by subsection (2) as the relevant time which, as provided by ss.126(1) and 127(1), is the date as of which the open market value and the purchase price are to be ascertained. Subsection (3) enables a secure tenant to withdraw his notice at any time by the service on the landlord of a further notice in writing to that effect. S.124 requires the landlord to admit or deny the secure tenant’s right to buy within the period of 4 or 8 weeks specified in subsection (2).

S.125 (as later amended but in force at the relevant time) provides:

“(1)

Where a secure tenant has claimed to exercise the right to buy and that right has been established (whether by the landlord’s admission or otherwise), the landlord shall—

(a)

within eight weeks where the right is that mentioned in section 118(1)(a)(right to acquire freehold), and

(b)

within twelve weeks where the right is that mentioned in section 118(1)(b)(right to acquire leasehold interest),

serve on the tenant a notice complying with this section.

(2)

The notice shall describe the dwelling-house, shall state the price at which, in the opinion of the landlord, the tenant is entitled to have the freehold conveyed or, as the case may be, the lease granted to him and shall, for the purpose of showing how the price has been arrived at, state—

(a)

the value at the relevant time,

(b)

the improvements disregarded in pursuance of section 127 (improvements to be disregarded in determining value), and

(c)

the discount to which the tenant is entitled, stating the period to be taken into account under section 129 (discount) and, where applicable, the amount mentioned in section 130(1)(reduction for previous discount) or section 131(1) or (2)(limits on amount of discount).

(3)

The notice shall state the provisions which, in the opinion of the landlord, should be contained in the conveyance or grant.

(4)

Where the notice states provisions which would enable the landlord to recover from the tenant—

(a)

service charges, or

(b)

improvement contributions,

the notice shall also contain the estimates and other information required by section 125A (service charges) or 125B (improvement contributions).

(4A) The notice shall contain a description of any structural defect known to the landlord affecting the dwelling-house or the building in which it is situated or any other building over which the tenant will have rights under the conveyance or lease.

(5)

The notice shall also inform the tenant of—

(a)

the effect of sections 125D and 125E(1) and (4)(tenant’s notice of intention, landlord’s notice in default and effect of failure to comply),

(b)

his right under section 128 to have the value of the dwelling-house at the relevant time determined or re-determined by the district valuer,

(c)

the effect of section 136(2)(change of tenant after service of notice under section 125),

(d)

the effect of sections 140 and 141(1), (2) and (4)(landlord’s notices to complete and effect of failure to comply),

(e)

the effect of the provisions of this Part relating to the right to acquire on rent to mortgage terms, and

(f)

the relevant amount and multipliers for the time being declared by the Secretary of State for the purposes of section 143B.”

Ss. 125A to s.125C contain provisions relating to estimates of service charges and improvement contributions. S.125D requires the secure tenant within the period of 12 weeks commencing on the day specified in subsection (2) to serve written notice on the landlord stating whether or not he intends to proceed with his claim of a right to buy. S.126 provides that the purchase price shall be the value of the dwelling-house, ascertained in accordance with s.127, less the discount to which the secure tenant is entitled under other provisions of the Act.

S.127, so far as material, provides:

“(1)

The value of a dwelling-house at the relevant time shall be taken to be the price which at that time it would realise if sold on the open market by a willing vendor—

(a)

on the assumptions stated for a conveyance in subsection (2) and for a grant in subsection (3), . . .

(b)

disregarding any improvements made by any of the persons specified in subsection (4) and any failure by any of those persons to keep the dwelling-house in good internal repair, and

(c)

on the assumption that any service charges or improvement contributions payable will not be less than the amounts to be expected in accordance with the estimates contained in the landlord’s notice under section 125.”

Questions as to value of a dwelling-house at a relevant time are, by s.128(1), to be determined by the district valuer. Subsection (2) entitles a secure tenant, within 3 months of the service on him of the s.125 notice, to require the district valuer to determine the value. Following any such determination the landlord is obliged to serve a notice on the secure tenant indicating the effect of the determination and some of the other matters which s.125 requires the notice under that section to state. Subsections (2) and (3) make it clear that there may be more than one such determination. Ss.128A and B deal with reviews of such determinations.

Ss. 129 to 137 deal with the discount to which a secure tenant is entitled and with changes in the identity of the landlord or secure tenant. Ss.138(1) and (3) provide:

“(1)

Where a secure tenant has claimed to exercise the right to buy and that right has been established, then, as soon as all matters relating to the grant . . . have been agreed or determined, the landlord shall make to the tenant—

(a)

if the dwelling-house is a house and the landlord owns the freehold, a grant of the dwelling-house for an estate in fee simple absolute, or

(b)

if the landlord does not own the freehold or if the dwelling-house is a flat (whether or not the landlord owns the freehold), a grant of a lease of the dwelling-house,

in accordance with the following provisions of this Part.

[(2)-(2E)]

(3)

The duty imposed on the landlord by subsection (1) is enforceable by injunction.”

S.139 sets out by reference to schedule 6 the terms and effect of the conveyance or grant for which subsection (1) of that section provides. It is clear from the terms of schedule 6 that there are many matters to be agreed or, in default of agreement, to be determined by the County Court under s.181. Ss.140 and 141 enable the landlord to serve notices to complete. By s.141(4) if the secure tenant fails to comply with the second of those notices he is deemed to have withdrawn his claim to exercise the right to buy.

Part V then continues with a number of sections dealing with matters the details of which are irrelevant to this appeal. They include a right to acquire on rent to mortgage terms (s.142A to 153), tenant’s sanctions for landlord’s delays and registration of title (ss.153A to 154), provisions affecting future disposals (ss. 155 to 163A) and powers of the Secretary of State and other matters (ss.164 to 175). There follow what are described as “Supplementary provisions”. So far as relevant ss.176 and 177 provide:

“176 Notices.

(1)

The Secretary of State may by regulations prescribe the form of any notice under this Part and the particulars to be contained in the notice.

(2)

Where the form of, and the particulars to be contained in, a notice under this Part are so prescribed, a tenant who proposes to claim, or has claimed, to exercise the right to buy may request the landlord to supply him with a form for use in giving such notice; and the landlord shall do so within seven days of the request.

[(3) – (5)]

177 Errors and omissions in notices.

(1)

A notice served by a tenant under this Part is not invalidated by an error in, or omission from, the particulars which are required by regulations under section 176 to be contained in the notice.

(2)

Where as a result of such an error or omission—

(a)

the landlord has mistakenly admitted or denied the right to buy or theright to acquire on rent to mortgage terms in a notice under section 124 or 146, or

(b)

the landlord . . .has formed a mistaken opinion as to any matter required to be stated in a notice by any of the provisions mentioned in subsection (3) and has stated that opinion in the notice,

the parties shall, as soon as practicable after they become aware of the mistake, take all such steps (whether by way of amending, withdrawing or re-serving any notice or extending any period or otherwise) as may be requisite for the purpose of securing that all parties are, as nearly as may be, in the same position as they would have been if the mistake had not been made.

(3)

The provisions referred to in subsection (2)(b) are—

section 125 (notice of purchase price, etc.),

. . .

section 146 (landlord’s notice admitting or denying right to acquire on rent to mortgage terms).

. . .

(4)

Subsection (2) does not apply where the tenant has exercised the right to which the notice relates before the parties become aware of the mistake.”

In the light of certain arguments addressed to the judge and to us by counsel for Mrs Nessa it is important to appreciate that, whereas a provision to the same effect as s.176 was contained in Housing Act 1980, s.177 was added by Housing and Building Control Act 1984 s.32. Thus, whatever the effect of s.177, it was absent from the original legislation conferring the right to buy on secure tenants. Finally I should refer to s.181 which confers on the County Court jurisdiction to entertain any proceedings brought under part V or to determine any question arising under it but subject to the provisions referring matters of value to the district valuer.

It is appropriate at this stage to refer to three decided cases in relation to some aspects of the legislation. First, it is clear that s.138 confers rights and imposes duties on the secure tenant and the landlord which are statutory not contractual, see Bristol City Council v Lovell [1998] 1 WLR 446 at 453, 456 and 458. Second, although s.122(3) entitles a secure tenant to withdraw his application to exercise his right to buy by a notice in writing served on his landlord that does not exclude withdrawal or abandonment by other means, see Copping v Surrey County Council [2006] HLR 307, 316 para 25. Third, in consequence, a secure tenant may abandon or waive his right to buy under normal principles of common law and equity or may be estopped from continuing to exercise it, see Martin v Medina Housing Association Ltd [2006] HLR 763, 773 para 13 per Wilson LJ.

Before the judge and in this court counsel for Mrs Nessa submitted that the Council had no power to withdraw or amend the First Notice. He relied on the terms of s.177 which, as was common ground, applied only to mistakes made by the landlord “as a result of an error or omission” made by the secure tenant in his notice required by s.122. As it was not contended that the mistake of the Council arose from any such error or omission the power conferred by s.177(2) was not exercisable. In paragraphs 28 and 29 of his judgment Judge Dight said:

“28.

..... For the reasons which I have already given, it seems to me that the legislation does not contain any provision entitling the landlord to amend or withdraw a S.125 notice. The Legislature did not intend it to be able to do so. Where the Act contains an express provision entitling amendment in certain limited circumstances it seems to me to be an inevitable conclusion that amendments in other circumstances not specified by the Act are intended to be excluded.

29.

The scheme is a statutory scheme and I agree with the claimant that the absence of a power on the part of a landlord to amend the S.125 notice in circumstances other than those specified in S.177(2) means that it has no power to do so.”

I cannot accept the judge’s conclusion. S.177 was introduced for the first time by s.32 Housing and Building Control Act 1984. Accordingly for the first three to four years of the existence of the right to buy there was no statutory provision which might be so construed as to exclude any power to correct mistakes which might be implied. Further when s.32 was introduced it would only limit the implication of any other power to amend in the case of mistakes made by a landlord “as a result of an error or omission” of the secure tenant in his notice. Given the detailed information the landlord was required to give in his s.125 notice I would have little difficulty in implying a power to amend to correct clerical mistakes made by the landlord in his s.125 notice. The landlord would be bound to correct any such mistake coming to his attention by informing the secure tenant lest the latter was misled and acted to his detriment in the absence of any such correction. I can see no reason why he should not do so by serving a corrective s.125 notice. But there would be limits to such a power not least in terms of the time within which it could be exercised. Those limits will have to be explored in future cases in which the point arises. It is not necessary to do so in this appeal.

In paragraph 3 above I have set out the details surrounding the service of the Second Notice and its acceptance by Mr Uddin and Mrs Nessa. Given the general principles recognised by Wilson LJ in Martin v Medina Housing Association Ltd [2006] HLR 763, 773 para 13 and the ability of a secure tenant to abandon or withdraw his application to exercise his right to buy otherwise than by service of the written notice for which s.122(3) provides established in Copping v Surrey County Council [2006] HLR 307 it appears to me to be plain that the acceptance of the Second Notice on 22nd May 2007 discharged by mutual agreement any rights or obligations of either party arising from the First Notice. The acceptance was on the form attached to the Second Notice, it was signed by both Mr Uddin and Mrs Nessa and stated, by ticking that alternative, “we accept the Council’s offer to purchase my/our home”. They were in receipt of legal advice at the time and the details of the solicitor acting for them are given on the acceptance. The acceptance was given after the queries on the validity of the Second Notice had been raised by Mr Uddin and Mrs Nessa with Councillor Asad who had sought and received the explanation of the Council. There is no suggestion that their acceptance of the Second Notice was not freely given.

In these circumstances it is unnecessary to deal with the issue of ultra vires. It only arose in respect of the First and Third Notices. But reliance on the Third Notice was abandoned and for the reasons given in paragraph 21 the First Notice was superseded by the Second Notice.

Accordingly I reach the same conclusion as the judge but for very different reasons. I would dismiss this appeal.

I agree. I also agree with the observations of Stanley Burnton LJ in [26] below.

I agree that the appeal should be dismissed for the reasons set out by the Chancellor in paragraph 21 of his judgment.

It is clear that the price stated in a notice served under section 125 is not set in stone. It may, for example, be affected by the variation of terms of the proposed lease with the consent of the parties or as a result of the determination by the county court of a dispute between them as to those terms: see, for example, paragraph 14 of Schedule 6. I note, also that section 126, which identifies the price to be paid on a conveyance or grant of a lease, does not define it by reference to the price stated in a notice under section 125. However, I would prefer to leave open the question whether there is any and if so what limit on the power of a landlord to vary the price stated in its section 125 notice for decision in a case in which the tenant has not abandoned the purchase originally proposed or agreed to proceed on the basis of a subsequent section 125 notice.