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Why lenders should note a landmark landlord and tenant decision

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01/11/2016

Andrew Beck highlights a recent housing case which could impact a lenders’ possession process following a borrower’s breach of suspended possession order.

In a recent landlord and tenant case, the Court of Appeal has confirmed that Civil Procedure Rule 83.2 requires a landlord to obtain permission from the court before applying for a warrant of possession where a tenant has allegedly breached a suspended possession order (SPO).  Andrew Beck explains why Cardiff County Council v Lee (Flowers) [1] is likely to impact upon lenders and their possession process in SPO cases.

Important judicial protection

The Court of Appeal noted that CPR 83.2 provides a layer of judicial protection for a tenant by requiring judicial scrutiny of the landlord’s claim that SPO conditions have been breached. That layer of protection means that, in practice, landlords must now undergo a two-stage process prior to recovering possession:

  1. applying, with evidence of the alleged breach[es], for the court’s permission to issue a warrant; and then
  2. applying for issue of the warrant itself.

In this case the landlord had conceded that, under CPR 83.2(3)(e), a landlord does need permission to enforce an SPO, so the point was not tested. It is, however, the Court of Appeal’s commentary which will be of interest to lenders, and which is likely to put them to the additional step of making an application for permission prior to enforcing an SPO in the event of a borrower’s breach.

Lady Justice Arden explained that, without the important protection of CPR 83.2, an unscrupulous landlord could take advantage of a claimed but unsubstantiated breach of an SPO to push through an eviction based on a warrant which has been issued via a merely administrative (as opposed to a judicial) process. She commented that the CPR 83.2 protection is not to be taken lightly and went so far as to advise that social landlords, county court offices and even the CPR committee should review their processes to ensure that, in SPO cases, warrants should not be issued where the court’s permission has not been obtained.

Practical advice for lenders

Although Cardiff v Lee deals with a landlord and tenant scenario, the legal provisions with which it is concerned are not restricted to that relationship.  It seems highly likely, by analogy, that the same requirement to obtain the court’s permission would apply to a lender looking to obtain a warrant against a borrower that is in breach of any SPO conditions.

Lenders should be aware that enforcement applications may now get returned by the court in SPO cases where the court’s permission has not been sought and obtained. Applying for the court’s permission is likely to involve an additional application, made with a witness statement in support, along with the additional court fee (currently £100) and legal preparation cost that such an application will entail.

Permission applications may be made without notice to the tenant/borrower and, in many cases, it is anticipated that such applications will be granted, and thereafter a warrant issued, without a hitch. However, by its very nature, any such application will be judged on its merits and some cases may require more evidence and judicial examination than others.  The court may list a hearing in cases where it feels that is necessary, which would involve yet further cost.

Exactly how lenders will adapt their processes, and how rigorously the courts will deal with enforcement in SPO cases now remains to be seen.  Walker Morris will continue to monitor and report on developments.

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[1] [2016] EWCA Civ 1034

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