[2024] UKUT 314 (LC)

My conclusion so far gives rise to a second question, the answer to which was assumed by the FTT without separate consideration. That is whether the consequence of Ms Atesheva’s failure to make an application to the FTT in the prescribed form or a form substantially to the same effect before 1 February 2024 is that the FTT had no jurisdiction to determine the rent payable under her tenancy with effect from that date.

Whether an application to the FTT is in substantially the same form as the prescribed form so as to comply with section 13(4) is a different question from whether an application which is neither in the prescribed form nor in a form substantially to the same effect( and so does not comply), nevertheless complies sufficiently with the requirements of the section so that, in law, it has the same effect as if there had been full compliance. The first question called for a comparison between the form and the information supplied; the second question requires a wider focus, on the purpose of the requirement and its function in the statutory scheme as a whole.

There is no doubt that a reference of a notice of increase received by the FTT on or after the date on which the proposed increase is due to take effect is not valid and does not give the FTT jurisdiction to determine a new rent. The decision of the Court of Appeal in R (Lester) v London Rent Assessment Committee [2003] 1 WLR 1449 puts that beyond argument. In Lester the tenant posted her application in the prescribed form two days before the new rent was due to commence, but it took two days to arrive and was received by the rent assessment committee on the date of the increase. The issue for the Court of Appeal was whether the notice was “referred” to the committee on the date it was posted or on the date it was received. The Court decided that the date of receipt was the critical date and it followed that the tenant’s reference had not been received in time and the increase had already taken effect.

The strictness of the requirement that a notice of increase must be referred to the FTT before the increase takes effect was reiterated by the Tribunal (Sir David Holgate, Chamber President) in Robertson v Webb [2018] UKUT 235 (LC), a case in which the tenant submitted his application in the prescribed form, but six weeks after the new rent had taken effect, having been unaware of it as he had been unwell and it was assumed to have been disposed of by a carer.

But the non-compliance with section 13(4) in this case is different from the non-compliance in Lester or in Robertson. In this case Ms Atesheva did refer the notice of increase to the FTT within the time limit set by section 13(4). She did so by her e-mail on 31 December, a month before the deadline, in which she asked the FTT to review the increase proposed by her landlord and provided details of the property, the increase, and the date from which it was due to take effect. What she failed to do, as I have already found, was to make her application in the prescribed form or in a form substantially to the same effect. The question which now arises is whether the consequence of that failure is the same as the consequence of making no application at all until after the deadline had passed.

I have previously mentioned the Tribunal’s decision in Johnson v Richmond Housing Partnership in which the tenant referred a notice of increase to the FTT but, instead of sending a copy of the notice for the current year, he sent a notice relating to a previous year. The Tribunal determined, at paragraph [12], that the prescribed form required that a copy of the correct notice of increase be provided. Despite that finding the Tribunal was satisfied that the FTT had jurisdiction to consider the referral and to determine the new rent. It gave two separate reasons. First, because the notice given was substantially to the same effect as the prescribed form and so was compliant with section 13(4). But alternatively, because the tenant had achieved “substantial compliance” with the statutory requirement, so that his application was valid but defective. Support for the proposition that substantial compliance with a statutory procedure can have the same effect as full compliance was found in the decision of the Court of Appeal in Natt v Osman [2013] EWCA Civ 584.

Since the Tribunal’s decision in Johnson v Richmond Housing Partnership the consequences of failing to comply fully with statutory procedures concerning property rights have been considered by the Supreme Court in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Company Ltd [2024] UKSC 27, which is now the leading authority on that subject.

A1 Sunderland concerned a claimby residential leaseholders to acquire the right to manage a block of flats under the Commonhold and Leasehold Reform Act 2002. The main issue was whether a failure to serve a claim notice on an intermediate landlord as required by section 79(6)(a) would always have the effect of invalidating a right to manage claim. A second issue was whether, on the facts of the case, the failure to serve the claim notice on one of the relevant landlords had invalidated the claim.

The decision of the Supreme Court was given by Lord Briggs and Lord Sales (with whom Lord Hamblen, Lord Leggatt and Lord Stephens agreed). They held that the leaseholders’ failure to serve a claim notice on the intermediate landlord did not invalidate the transfer of the right to manage. They explained by reference to the decision of the House of Lords in R v Soneji [2005] UKHL 49 that the correct approach to a failure to comply with a statutory provision requiring that some act be done before a power was exercised was to ask whether it was a purpose of the legislature that an act done in breach of that provision should be invalid.  At paragraph [61] of their judgment they explained that the effect of earlier authorities had been:

“[…] to move away from a rigid category-based approach to evaluating the consequences of a failure to comply with a statutory procedural requirement and to focus instead on (a) the purpose served by the requirement as assessed in light of a detailed analysis of the particular statute and (b) the specific facts of the case, having regard to whether any (and what) prejudice might be caused or whether any injustice might arise if the validity of the statutory process is affirmed notwithstanding the breach of the procedural requirement.”

The Court went on, at paragraph [62], to place limits on this approach:

“This does not mean that application of procedural rules in every statutory context turns on detailed examination of the consequences arising from the particular facts of the case, nor that a test of substantial compliance is properly to be applied in relation to every procedural rule. Examination of the purpose served by a particular statutory procedural rule may indicate that Parliament intended that it should operate strictly, as a bright line rule, so that any failure to comply with it invalidates the procedure which follows.”

The correct approach was explained, at paragraph [68]:

“In our view the correct approach in a case where there is no express statement of the consequences of non-compliance with a statutory requirement is first to look carefully at the whole of the structure within which the requirement arises and ask what consequence of non-compliance best fits the structure as a whole.”

The Court had earlier cautioned against simplistic shortcuts, at paragraph [63]:

“But we would observe that reference to "substantial compliance" begs the question of what purpose was supposed to be served by the rule and expresses a conclusion arising from the relevant analysis, rather than stating a test in itself. Statutory regimes involving procedural obligations are many and are highly varied, and there is no simple shortcut which avoids the need to undertake the analysis referred to in Soneji having regard to the particular provisions, scheme and purposes served by the statute in question.”

Applying the approach explained by the Supreme Court in A1 Sunderland to the provisions of the 1988 Act concerning increases in rent, and to the specific facts of this case, it is necessary to begin by bearing two points in mind. The first is that the statutory regime of rent control under the 1988 Act is concerned with private property rights, where certainty is of general importance. The second is that the particular provision with which this appeal is concerned, section 13(4), is concerned with dispute resolution and access to justice. In A1 Sunderland the Supreme Court pointed out that a statutory regime “may reflect, and balance, a number of intersecting purposes” and said that “In that situation, a more nuanced analysis may be called for” (paragraph [63]). This may be an example of such a regime.

The 1988 Act interferes with the relationship between residential landlords and tenants to a limited extent. Since the assured shorthold tenancy became the default form of tenure following amendments made by the Housing Act 1996, in practice tenants have very limited security of tenure, the principal limitation on a landlord’s entitlement to recover possession being that they must first obtain an order of the court. Rent control is also relatively weak. Rents are determined by the market and in practice there is no restriction on the rent which parties may agree when entering into a tenancy (a tenant has the right under section 22, 1988 Act to refer an excessive rent to the FTT for consideration within the first six months of the letting but the absence of security of tenure means the right is very unlikely to be exercised).

The main limitations on increasing rent during the continuance of the tenancy are procedural. The parties are free to agree any increase in rent but unless they reach agreement informally, a landlord who wishes to secure an increase is required to serve notice under section 13(2) proposing a new rent and specifying the date from which it should take effect. The rent proposed by the landlord will then become the new rent, payable from the specified date unless, before that date, the tenant applies to the FTT under section 13(4). The effect of a tenant’s application to the FTT is to “freeze[..] the legal right generated by service of the landlord’s notice to recover the increased rent” (as it was put by Sedley LJ in Lester, at paragraph [40]). The amount of the increase is then in the hands of the FTT which will determine the rent at which the property would reasonably be expected to be let in the open market on certain limited assumptions directed in section 14.

I find it difficult to separate the question whether the statute contains an express statement of the consequences of non-compliance with the direction that an application to the FTT must be in the prescribed form, from the question whether it was the purpose of section 13(4) that an application to the FTT which was not in the prescribed form should be of no effect. The answer to both questions is to be found in section 13(4) itself, read in the context of the statute as a whole, and there seems to me to be a substantial overlap between them.

Section 13(4) specifies the consequence of making no application before the new rent takes effect, and it is readily understandable why that requirement should be interpreted strictly. The time at which the tenant’s notice is, or is not, served, is of significance in the way the statutory machinery operates. Unless a notice is served in time the statutory machinery for obtaining an increase comes to an end on the date specified in the landlord’s notice and the rights of the parties are changed. The Act does not provide any route back from that change.

But section 13(4) also requires the application to be made in the prescribed form. It is much more difficult to see that requirement as being of equivalent significance to the requirement of a timely application, or to imagine that Parliament intended that any departure from the prescribed form would be fatal to an application made in good time which achieved the stated object of referring the notice to the tribunal. A number of factors contribute to that conclusion.

First, the substance of the requirement for an application is that the landlord’s notice must be referred to the tribunal for consideration. It is obviously necessary that the notice be identified, since it is the notice which has to be referred to the tribunal. It is therefore likely to be essential that the tenant either provide a copy of the notice itself or, as in Johnson v Richmond Housing Partnership, sufficient information to enable the notice to be clearly identified. But it is difficult to see why any additional information might be necessary in order to achieve the objective of referring the notice to the tribunal. No information is required to be given to the landlord, who may not know whether the proposed increase has taken effect for some time (when they are contacted by the FTT which, as the automated messages received by Ms Atesheva indicate, may not be for many weeks).

Secondly, the statutory procedure interferes with the parties’ original contractual agreement; unless she makes her application, the tenant is assumed to agree to the proposed increase and the legal relationship between the parties is varied, whether she in fact agrees to it or not. In a statute which interferes with freedom of contract to only a limited extent, it seems likely that Parliament would not have intended to make it more difficult than necessary for a tenant to avoid a unilateral change to the rent they are required to pay.

Thirdly, as Lester demonstrates, the Act puts the risk of non-delivery of the landlord’s notice, or a delay in receipt by the tribunal of the tenant’s application, firmly on the tenant. Parliament is unlikely to have intended to multiply the risk of an inadvertent increase in rent by insisting on every detail of the prescribed form being completed before independent scrutiny of the landlord’s proposal becomes possible.

Fourthly, the consequences for the landlord of an application being accepted by the FTT are not harsh or unpalatable. The FTT will determine the open market rent, which will become payable (other than in cases of undue hardship) as from the date specified in the landlord’s notice. In contrast, the consequence for the tenant of failing to bring the proposed increase before the FTT are that it will take effect without scrutiny, leaving the tenant to pay whatever rent the landlord had proposed, whether it was at a market level or not.

Fifthly, the 1988 Act itself does not lay down the detail of the required application. That is left to the Secretary of State in making order prescribing the form. In other words, the statute requires a prescribed form but not necessarily this prescribed form, which suggests that the contents of the form are of lesser significance. Although the Supreme Court in A1 Sunderland did not agree entirely with the approach taken by the Court of Appeal in Elim Court RTM Company Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89, it quoted extensively from the judgment of Lewison LJ and did not express any disagreement with the following passage, at paragraph [52]:

“The intention of the legislature as to the consequences of non-compliance with the statutory procedures (where not expressly stated in the statute) is to be ascertained in the light of the statutory scheme as a whole: […]. Where the notice or the information which is missing from it is of critical importance in the context of the scheme the non-compliance with the statute will generally result in the invalidity of the notice. Where, on the other hand the information missing from the statutory notice is of secondary importance or merely ancillary, the notice may be held to have been valid: […]. One useful pointer is whether the information required is particularised in the statute as opposed to being required by general provisions of the statute. In the latter case the information is also likely to be viewed as of secondary importance. Another is whether the information is required by the statute itself or by subordinate legislation. In the latter case the information is likely to be viewed as of secondary importance. In this connection it must not be forgotten that while the substantive provisions of a bill may be debated clause by clause, a draft statutory instrument is not subject to any detailed Parliamentary scrutiny. It is either accepted or rejected as a whole. A third is whether the server of the notice may immediately serve another one if the impugned notice is invalid. If he can, that is a pointer towards invalidity.”

Sixthly, the 1988 Act gives the tribunal power to require that information be supplied by the tenant (or the landlord) and exposes them to the risk of a fine if they do not comply (section 41(2), 1988 Act). That is a different procedure, and a different form of sanction, to the provision of detailed information as a condition of referring the matter to the tribunal. It also suggests that Parliament did not envisage that the information contained in the tenant’s application would be all that the tribunal would have to rely on but would be introductory only.

As far as the facts of this case are concerned no prejudice was caused to the landlord by the fact that the prescribed form was not submitted until 7 February. It did not know whether an application had been made or not until it received its first communication from the FTT which, as far as I can tell from the FTT’s decision, was after the file had been reviewed by a judge on 15 February 2024.

There will be no injustice to the landlord if Ms Atesheva’s e-mail of 31 December 2023 is accepted as having validly invoked the assistance of the FTT; the result, as I have said, will simply be that the increase in rent will be no more than necessary to reflect the open market value of the property on 1 February 2024. If the figure proposed in the landlord’s notice of increase was greater than the open market value of the property, I do not consider that having to forego the difference can be regarded as an injustice.

There would be injustice, or at least the risk of injustice, to Ms Atesheva, if the FTT’s decision that it has no jurisdiction in this case were to be affirmed. The prescribed form of notice of increase which she received from her landlord directed her to the FTT to obtain the necessary form of application. Whilst the FTT’s automated “do not disturb” response of 31 December did include a link to a website at which a version of the form could be found, that information was not conveyed in a way which would necessarily cause a tenant to attempt to follow the link, especially when they were told they could expect to receive a response within 10 working days. Had that indication proved accurate there would still have been at least 2 weeks for Ms Atesheva to submit a completed version of the form. Having waited until 22 January she tried again and was told that there was a five week backlog; she was not directed by that response to the FTT’s website. She telephoned but got no response. It might be thought that Ms Atesheva did all that could reasonably be expected of a lay person to comply with the statutory procedure and that it would be unjust if, despite that, she was now at risk of being required to pay more than the open market rent for her home.