“Housing law can be highly complex” – Private Rented Sector Offers and strict compliance with the statutory requirements
By Lindsay Johnson, Cornerstone Barristers
The pressure on local authorities to comply with the main housing duty under section 193(2) of the Housing Act 1996, in particular by decisions such as that in R (Elkundi) v Birmingham CC  EWCA Civ 601,  3 WLR 71, has led to an increase in reliance on the private rented sector to discharge the duty, in particular through Private Rented Sector Offers (PRSOs). Two recent decisions of the Court of Appeal have clarified the strict nature of the rules for using a PRSO.
The background to PRSOs
As is well known, where a local housing authority determines that they owe a homeless applicant the main housing duty, they remain subject to that duty until it ceases “by virtue of any of the following provisions of this section” (section 193(3)). The methods of discharge essentially fall into three categories: where the applicant ceases to be eligible for assistance or becomes homeless intentionally; accepting or securing accommodation; and, refusing or being evicted from accommodation provided in discharge (see Griffiths v St Helens Council  EWCA Civ 160,  HLR 29).
Prior to 2012, a homeless person could not be compelled to accept accommodation in the private sector as discharging the duty. Although the Homelessness Act 2002 introduced the concept of a “qualifying offer” (i.e. an offer of an assured shorthold tenancy from a private landlord), an applicant was free to reject such an offer without any adverse consequences.
The Localism Act 2011 introduced the concept of the PRSO, to provide that the refusal of certain offers of an assured shorthold tenancy from a private landlord would entitle the authority to discharge duty.
There are extensive procedural requirements that must be met in order for an offer to be a PRSO and therefore entitle an authority to discharge duty:
- the offer must be made by a private landlord pursuant to arrangements between the private landlord and the local housing authority section 193(7AC)(a);
- the offer must be approved by the local housing section 193(7AC)(b);
- the tenancy must be for a period of at least 12 months section 193(7AC)(c);
- the local authority must be satisfied that the property is suitable, with reference to the Homelessness (Suitability of Accommodation) Order 2012 section 193(7F);
- the applicant must not be under any contractual obligations that he is unable to bring to an end before being required to take up the offer section 193(8).
A local authority may discharge their duty regardless as to whether the applicant accepts or rejects the offer (section 193(7AA)) if they have notified him of the consequences of refusal and of his right to review and “the effect under section 195A of a further application to a local housing authority within two years of acceptance of the offer” (section 193(7AB)).
Section 195A(1) provides that an applicant may reapply within 2 years of the offer and, if he is unintentionally homeless and remains eligible for assistance he does not need to establish priority need. Section 195A(2) further provides that an applicant is homeless from the date of expiry of a notice under section 21 of the Housing Act 1988 and does not need to wait for an order for possession as would normally be the case – R. v Newham LBC Ex p. Sacupima (2001) 33 HLR 1.
Hajaj v City of Westminster  EWCA Civ 1688
In Hajaj the local authority sought to argue that they did not need to ensure for themselves compliance with the statutory requirements; it was sufficient that the offer of accommodation was made by a landlord of good standing who the local authority “trusted”. That argument was rejected by Bean LJ said, at §70:
“Section 193(7F) of the 1996 Act is quite clear. It says that the LHA shall not approve a PRSO unless they are satisfied that the accommodation is suitable. Suitability is a multi-faceted concept. It includes size, location, accessibility if the applicant is elderly or disabled, as well as the physical condition and other matters listed in Article 3(1) . The local housing authority must in my judgment be satisfied that none of the ten bars to suitability established by Article 3(1) applies. Moreover, I accept Mr Colville’s central submission that they must be satisfied on the basis of evidence rather than assumptions. Taking “reasonable physical condition” as an example, it is not enough to take the view that because the proposed landlord is established and respectable, therefore all properties owned by that landlord should be assumed to be in a reasonable physical condition unless a “red flag” is raised either by the applicant or by some other adverse information which happens to be to hand about the particular property.”
Thus, an authority must be positively satisfied that the criteria in the 2012 Order are met – it is not sufficient to make an assumption.
Norton v Haringey  EWCA Civ 1340
In Norton the appellant was offered accommodation under a PRSO. He contended that it was not a PRSO because:
- there was no evidence that the accommodation was suitable for him at the date it approved the PRSO (i.e. the date of the offer);
- while the offer letter told him about the effect of section 195A(1) of a further application by him within two years of his acceptance of the PRSO, it did not tell him about the effect of section 195A(2); and,
- he was required to sign the tenancy for it and become liable for rent under its terms before his notice to quit his previous temporary accommodation had expired.
In light of the decision in Hajaj the first point regarding suitability was unsurprisingly accepted by the Court of Appeal. The court arguably went further than it had done in Hajaj because in Norton the landlord was a Benefit Society that the local authority had set up specifically for the purpose of granting PRSOs and the Society’s properties were managed by the local authority’s managing agent. Notwithstanding the closeness of that relationship, the Court repeated that the authority had to be positively satisfied in relation to each of the suitability criteria in the 2012 Order on the basis of evidence.
In relation to section 195A, the court held that the requirement to notify “the effect” of section 195A includes an obligation to tell the applicant about the effect of section 195A(1) and 195A(2).
Although not part of their decision, the court also raised the question as to whether “the effect” of section 195A also required a homeless person to be notified about the effect of section 195A(6), i.e. that deemed priority need on a repeat application only applies once and not on a second PRSO.
On the third point, the court took a strict contractual view: if a licence agreement for temporary accommodation contains an obligation to pay a licence fee, that obligation must have come to an end before the PRSO starts. It is not sufficient for a local authority to state that the practical reality is that the licence fee would not be charged; it is the licence agreement itself which is determinative.
Practical effect and learning
The Court of Appeal in Norton acknowledged that the PRSO regime contained “rather technical requirements” but noted that “they are, however, the requirements which Parliament has imposed on local housing authorities in order to protect the statutory rights of people who are or may be homeless”.
That is an admirably clear statement and warning to local authorities to make sure that they get the process for discharge via a PRSO right for fear of a finding that the accommodation has not finally discharged the duty but rather has simply temporarily discharged that duty.
It is perhaps therefore worth remembering –
- the offer must come from the landlord, not the local authority;
- that offer must be made pursuant to an arrangement with the local authority to discharge the main housing duty – there will need to be some evidence provided of this arrangement;
- prior to approval, the local authority must comply with the requirements of the 2012 Order, including the fairly onerous requirements as to suitability – any such compliance must be on the basis of evidence, not assumption;
- note the requirement to have a copy of the tenancy agreement to be used – while a signed copy is unlikely necessary, a copy which has the specific details for this property is likely to be needed;
- the authority must ensure that there is a sufficient period between offer and commencement of the tenancy for the applicant to terminate his contractual obligations under his existing licence/tenancy – a statement from the landlord/licensor releasing the applicant is likely to suffice;
- any decision offering the applicant accommodation must set out the effect of section 195A(1) and (2). It would be advisable to also set out the effect of 195A(6) – a belt and braces approach would be to set out all of section 195A and explain the effect of each sub-section.
Perhaps most importantly: these errors cannot be rectified on review. If the approved offer was not a PRSO, it cannot be made one by subsequent compliance with the statutory requirements. It is one of those occasions – as often come up in housing law – where it is necessary to get it right first time. That can be challenging because, as those who practice in this area have long known, and Males LJ accepted in Norton: “housing law can be highly complex”.