Appeal No. UA-2025-000236-UHC
Between:
DB
Appellant
- v -
The Secretary of State for Work and Pensions
Respondent
Before: Deputy Upper Tribunal Judge Hocking
Decided on consideration of the papers
Representation:
Appellant: Citizens advice Southend
Respondent: C Gratrex, DWP
On appeal from
Tribunal: Social entitlement chamber
Tribunal Case No: 1668-4256-1795-5331
Tribunal Venue: Southend
Decision Date: 17 August 2023
DECISION
The decision of the Upper Tribunal is to allow the appeal
DIRECTIONS
This case is remitted to the First-tier Tribunal (“FtT”) for reconsideration at an oral hearing.
It must be heard by an entirely fresh panel.
The FtT must conduct a complete rehearing of the issues that are raised by the appeal and, subject to the FtT’s discretion under section 12(8)(a) of the Social Security Act 1998, any other issues that merit consideration. While the FtT will need to address the grounds on which I have set aside the decision, it should not limit itself to these but must consider all aspects of the case, both fact and law, entirely afresh.
The new FtT is not bound by the decision of the previous FtT. Depending on the findings of fact it makes, the new FtT may reach the same or a different conclusion to the previous FtT. The fact that this appeal has succeeded on a point of law carries no implication as to the likely outcome of the rehearing, which is entirely a matter for the FtT to which this case is remitted.
These Directions may be supplemented by later directions by a Tribunal Judge in the Social Entitlement Chamber of the FtT.
REASONS FOR DECISION
Decision on the papers
Neither party requests an oral hearing. I am satisfied that I can deal with the case fairly on the papers, and that it is in the interests of justice that I do so.
Factual background
The appellant has been awarded universal credit from 10 March 2021.
Initially she did not claim in respect of housing costs. On 9 May 2022 she reported a change of circumstances. She reported that while she remained at the same address she was now subject to a tenancy agreement, and had to pay £110 per week backdated to 1 January 2022. This was treated as a request to supersede her UC award to include a housing costs element.
That supersession was declined on 3 June 2022 on the grounds that the appellant did not have a liability on a commercial basis to make relevant payments, a condition for entitlement to the housing costs element under regulation 25(3)(a)(i) of the UC Regulations 2013. That decision was maintained on mandatory reconsideration and then on appeal to the FtT.
By a form UT1 received on 25 February 2025 the appellant appealed to the Upper Tribunal and on 11 March 2025 UT Judge Citron gave permission to appeal.
Grounds of appeal
Giving permission to appeal Judge Citron said this:
.In my view the FTT decision arguably erred at [14] when it stated that Ms B “had not provided any evidence as to the status” of “the landlord” (being Mr C, a private landlord), namely “in what capacity he is her landlord and whether he is a friend or a relative”, since there was evidence, at page 30 of the FTT’s bundle, which either directly, or by inference, touches on [those] matters
the FTT’s finding at [14] is arguably erroneous in law in relation to any oral evidence given by Ms B at the FTT oral hearing, since
if Ms B gave oral evidence at the hearing in relation to the matters at [14], it was arguably irrational or perverse for the FTT decision to have said at [14] that “no evidence” was provided; and
if Ms B did not give oral evidence at the hearing in relation to the matters at [14], that was arguably a material failure of the FTT to act inquisitorially – and ask Ms B about those matters – as they were matters that the FTT appears to have considered relevant to its decision.
I will call that the “no evidence point”. The judge went on:
In addition, the FTT decision arguably erred at [15] in repeatedly applying a test of the probability of “a commercial landlord” taking certain actions
He referred to Warwick DC v SSWP and CH (HB) [2020] UKUT 240 (AAC) which requires an FtT to ask “Why did this landlord do this in the particular circumstances of this case?” rather than “Would a commercial landlord have done this?” and explains or rather repeats that the statutory test is whether the tenancy or other agreement is “not on a commercial basis”, and it is an error of law to equate that to, or be unduly influenced by, the question of what a notional commercial landlord would have done. I will call this the “wrong test” point
The respondent’s reply
The respondent supports the appeal. On the no evidence point they say:
,the claimant provided a detailed background as to the origin of the tenancy agreement and the circumstances in which it arose when making her MR request (page 30 of the FtT Bundle):
“I have moved to this address in February 2021 being in very difficult situation… My friends recommended my present landlord as a person who helped a lot of people in similar to mine, very difficult financial situation… In January this year [that is, 2022] I have been told by my present landlord that if I do not find the place in next 2 - 3 months I can stay at his place on permanent basis but only on condition of paying rent.”
In addition, I submit that the FtT’s finding at paragraph [14], quoted above, is inconsistent with the finding at paragraph [8] of the SoR that the claimant had “stated she lived at the property with the landlord who was a close friend but was not related to him.” While the statement at paragraph [14] may have been intended to reflect an apparent conflict in the claimant’s evidence – at the time of making the claim, the claimant indicated that she was living at the same property with a “close relative” (paragraph [7] of the SoR) – in my submission, it was incumbent on the FtT to either make the necessary findings of fact at the oral hearing, or to identify and resolve the conflicting evidence on what it had identified as a material matter to its decision.
On the wrong test point they say:
In its SoR, at paragraph [15], the FtT made a number of observations that, in my respectful submission, erred in law in the sense discussed in Warwick (emphasis below added):
• “The Tribunal finds it improbable a commercial landlord would enter into and sign a tenancy agreement without first receiving a deposit and some documentary evidence a prospective tenant can pay rent arrears and make future rent payments…”
• “It is part of [the claimant’s] case she did not pay any rent because she was unable to do so until she received the [housing costs element] of UC. The Tribunal finds a commercial landlord would be unlikely to accept such a reason for non-payment of rent.”
• “[The claimant] states she started paying a minimum of £57 per month towards bills in respect of the property. The Tribunal finds a commercial landlord would be unlikely to accept such a sum instead of the monthly rent…”
Each of the points above, I submit, has in effect asked the first of the questions discussed by UT Judge Poynter at paragraph [55] of Warwick, rather than the second. I therefore respectfully agree with UT Judge Citron’s observations made on this point when granting permission to appeal.
Decision
There is little to add to what the respondent has said above. So far as the “no evidence” point is concerned, I would suggest any temptation to use that phrase might usefully be a warning flag to the FtT that the bind that Judge Citron identifies may apply. If the FtT feels that there really is no evidence on an important point such as this, did it exercise its powers inquisitorially to try to obtain the necessary evidence? If no, then it should do so. If yes, then of course the FtT should record its view that there is no evidence as the reason for its decision on an issue, but it would be wise to note what investigation took place or why it was concluded no further investigation was warranted.
If by “no evidence” an FtT means not that there is literally no evidence but that it is not convinced by such evidence as there is, then it needs to say that, explaining, it may be briefly, how such evidence as there is has been weighed. Otherwise it seems inevitable that any appeal that can identify any material evidence at all that goes to a point where it was said there was no evidence will be very likely to succeed.
As to the wrong test point it does appear probable that the FtT did not follow the approach required by Warwick. The quotes set out above are compelling. The problem is that what a commercial landlord would do is not the legal test. As UTJ Poynter said in Warwick:
The test that Warwick—and, on appeal, the Tribunal—had to apply was whether the “tenancy or other agreement” pursuant to which the claimant occupied her home was “not on a commercial basis”. The quoted words in the previous sentence are those which have been used by the legislator. The surest way for decision makers to make a legal mistake is to rely on a paraphrase of, or to place a gloss on, that statutory wording
He points out that relying on what it is thought a notional commercial landlord would do runs the risk of failing to take into account other relevant considerations. He quotes R(H) 1/03 as saying “The tribunal must analyse the constituent facts of the case as a composite whole. The significance of each factor cannot be considered in isolation. Each must be considered in the context of all the others.”
He adds that “commercial” in “not on a commercial basis” does not necessarily have the same shade of meaning as the same word when used in the phrase “commercial landlord”. And he says this about the difficulty of answering the question of what a commercial landlord would do in any event:
…, it is possible to make an argument that no commercial landlord would rent to a tenant who would have to rely on HB because a higher rent would be obtained renting to a tenant who would not. Despite that, thousands of landlords do in fact rent to claimants.
Similarly, I have seen examples—sometimes many examples—of commercial landlords who have let property on terms that were particular to an individual tenant; who have not taken a deposit; who have set rents at levels tenants could afford—or that were sufficient to cover the landlords outgoings on the property—and have not subsequently increased them; who have omitted to charge contractual interest; and who have allowed tenants huge latitude in relation to arrears of rent.
And I have also seen submissions that “no commercial landlord would do” each of those things.
So who is the notional commercial landlord who does none of these things?
It is possible that he is intended to exemplify a Platonic ideal of perfect, unalloyed, profit-maximising commerciality. I suspect, however, that the answer is more prosaic. It is that the notional commercial landlord is a self-fulfilling rationalisation: he is merely a person who—notionally—would not do the thing that the landlord this particular case has done. Rachman may not be the only model of a commercial landlord but, whenever local authorities or tribunals summon the notional commercial landlord to help with commerciality decisions, it is invariably Rachman or one of his successors who turns up
That is a vivid warning of the difficulty and danger of relying on the concept of a notional commercial landlord even as a guide to answer the quite different question of whether the tenancy (i.e., this specific tenancy between this landlord and this tenant) was not on a commercial basis.
The appeal must succeed on both grounds.
Conclusion
Under section 12(2)(a) and (b)(i) of the Tribunals, Courts and Enforcement Act 2007 I therefore set the FtT decision aside and remit the case to be reconsidered by a freshly constituted panel. I stress that this appeal having succeeded carries no implication for whether the FtT will or will not reach a decision that is more favourable to the appellant. That is a matter for it.
Stephen Hocking
Deputy Judge of the Upper Tribunal
Authorised by the Judge for issue on 18 September 2025