Private landlords – the Article 8 Defence and receivers’ powers

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In the recent case of McDonald and Others v McDonald [1], the Court of Appeal considered whether (1) an order giving a private landlord possession of a premises held on an assured shorthold tenancy would breach Article 8 of the European Convention on Human Rights (ECHR) after serving a statutory notice under section 21(4) of the Housing Act 1988, and (2) whether receivers appointed by a mortgage pursuant to the terms of a legal charge were afforded powers for which there was no express provision in the mortgage terms.

In this case, a married couple borrowed money by way of mortgage from a third party (the Funder) in order to acquire premises. Upon purchasing the premises, the borrowers (the Landlords) granted, in breach of the mortgage terms, an assured shorthold tenancy agreement to their disabled daughter.

The Landlord subsequently defaulted on their mortgage and as a result, the Funder appointed receivers (the Receivers) pursuant to the terms of the mortgage. The Receivers served upon the tenant a notice in their own name pursuant to section 21(4)(b) of the Housing Act 1988 and subsequently commenced possession proceedings in the name of the Landlord. At the initial hearing, the County Court made an order for possession of the premises as they were required to do by statute after having satisfied themselves that the tenancy had expired and that the appropriate notice had been served.

The tenant appealed against the initial decision arguing that the order for possession infringed her right to respect for her home as guaranteed by Article 8 of the ECHR (the Article 8 Defence). The tenant appealed in the alternative on the basis that the notice served pursuant to section 21(4)(b) of the Housing Act 1988 was invalid as it had been served by the Receivers who did not have the express power to serve such notice pursuant to the mortgage terms.

The Court of Appeal stated that in cases where a defendant invokes the Article 8 Defence and the claimant is a public authority, the court is required to consider the proportionality of making such a possession order. However, there had not been sufficient case law to establish that the Article 8 Defence was applicable in a case involving private parties. Notwithstanding this, the Court of Appeal stated that considerations of the private Landlord’s proprietary rights and the Funder’s financial disadvantage outweighed the consideration of the mental health circumstances of the tenant. Therefore, even if the Article 8 Defence had been applicable, it would have been bound to fail.

Secondly, the Court of Appeal ruled that the mortgage terms should be interpreted purposively. The mortgagee afforded the Receivers the power to enter possession of the premises. As such, the powers of the Receivers should be interpreted to include anything which was necessarily incidental to affect the sale of the premises, including the power to take possession of the premises and sell it. In this regard, the Court of Appeal stated that the service of a notice pursuant to section 21(4)(b) of the 1988 Act was necessary in order to enable the Receivers to gain vacant possession of the premises and subsequently realise its value on behalf of the Funder. On such an interpretation, the Court of Appeal found that the Receivers could pursue proceedings in the aforementioned manner in order to accomplish the aim for which they had been so appointed.

The Court of Appeal dismissed the tenant’s appeal.

The Court of Appeal’s judgment on the receivers’ statutory powers is a sensible one and should be welcomed. It demonstrates that receivers can exercise powers beyond those expressly given to them under the mortgage deed if what they are trying to achieve is “incidental” to the powers they do have. The case is also the latest in a succession of Article 8 defence cases that are coming before the courts.

[1] [2014] EWCA Civ 1049