The London Borough of Lambeth v Loveridge  EWCA Civ 494 (10 May 2013)
This was a successful appeal by the local authority landlord against a county court award of statutory damages (under section 28 of the Housing Act 1988) in the sum of £90,500 to a secure tenant for unlawful eviction from his flat.
L, the secure tenant, had a history of making lengthy trips abroad. Without giving notice to the authority, L left the UK on another extended trip. On this occasion, over two months after his departure, the authority re-entered the flat, changed the locks and served a notice to quit. After another two months, without going to court to obtain an order for possession, the authority then disposed of L’s belongings and re-let the flat to an introductory tenant. L returned too late to the UK to prevent the grant of the new tenancy.
The authority accepted that it was liable to pay damages to L for unlawful eviction and destruction of his possessions. At trial, damages at common law for the eviction were agreed at £7,400 and damages for trespass to goods were agreed at £9,000. The key issues were whether L was entitled to statutory damages for the eviction and, in particular, if he was so entitled, what was the correct amount of damages when assessed according to the assumptions set out in section 28 of the Housing Act 1988?. This requires the landlord to pay to the evicted tenant, as damages, the difference between the value of the landlord’s interest subject to the tenant’s rights (‘the encumbered valuation’) and the value of the landlord’s interest free of those rights (‘the vacant possession valuation’).
The parties differed in their approach to the encumbered valuation. L’s valuer approached the valuation on the basis that the purchaser was deemed to take the building subject to an ongoing secure tenancy of that flat, ie. with the tenant continuing to pay a low secure tenancy rent into the future. This produced a value which was £90,500 lower than the open market vacant possession valuation.
By contrast, the authority’s valuer’s encumbered valuation took into account the fact that a secure periodic tenancy is vulnerable to being converted to an assured periodic tenancy if a local authority landlord sells or transfers the reversion on the secure tenancy to a private landlord. On such a sale or transfer, the new landlord becomes entitled to increase the rent to a market rent under the statutory provisions for increasing rent laid down in the Housing Act 1988. The authority’s valuer therefore concluded that L’s rights had no adverse effect upon the value of the authority’s interest because a private purchaser would pay the same for the building with the flat subject to an assured tenancy as it would pay for it with the flat vacant, ie. the amount of statutory damages would be zero.
At trial, the judge ruled that L was entitled to statutory damages of £90,500. He further held that L’s valuer had adopted the correct approach to valuation. He therefore awarded damages of £90,500 to L for the eviction.
The authority appealed on the valuation issue. The Court of Appeal held that, for the purposes of the encumbered valuation (required by s.28(1)(a) of the 1988 Act), the assumption that the residential occupier continued to have “the same right to occupy the premises as before that time” did not require an assumption that those rights were thereafter immune from adverse change. The valuer was obliged to take into account the inherent vulnerability of a secure tenancy to becoming downgraded by operation of law into an assured tenancy, on a sale of a local authority landlord’s interest to a private landlord purchaser. The authority’s valuer was therefore correct and the Court reduced the award of damages for the eviction to £7,400 (the agreed damages at common law).