Statutory damages for eviction

Michael Paget discusses the recent Supreme Court decision on the calculation of statutory damages for unlawful eviction under the Housing Act 1988.

On 3 December 2014, the Supreme Court handed down judgment in appeal of Loveridge v Lambeth LBC [2014] UKSC 66.

At the centre of this appeal was how to properly calculate damages for unlawful eviction under sections 27 and 28 of the Housing Act 1988 and the Supreme Court has held that it is the tenant’s security of tenure before eviction that is relevant to the calculation.

The Supreme Court has made it clear that the Housing Act 1988 applies to all landlords equally, with a potential heavy penalty when a tenant with significant security of tenure is unlawfully evicted. Trying to regain possession without using the courts may not be worth it.

Issues

An unlawfully evicted tenant is, in certain circumstances, entitled to statutory damages as an alternative to common law damages. As the Supreme Court notes statutory damages were introduced at the same time that the assured shorthold tenancy became the default tenancy for private landlords. Parliament recognised, following the changes made in the Housing Act 1988 and its predecessor the Housing Act 1980, that there was a temptation for certain unscrupulous landlords to evict protected tenants (where only a ‘fair’ rent could be charged) and replace them with assured tenants (where a higher ‘market’ rent could be charged). Nevertheless, local authority landlords were not excluded from the ambit of section 27 Housing Act 1988.

Statutory damages off-set any gain a landlord obtains from an unlawful eviction. If the landlord’s building is worth more after than before the unlawful eviction then the evicted tenant is entitled to that whole gain in damages.

Statutory damages are calculated by comparing two values of the building. First, with the tenant benefiting from security of tenure and secondly, without such security of tenure. The valuation is fixed by an assumption that the building is being sold on the open market to a willing buyer. It is a purely hypothetical process and does not require an actual sale to a willing buyer.

The Supreme Court grappled with how the assumptions in the statutory damages process worked.

Facts

Harry Loveridge, a secure tenant, was unlawfully evicted by Lambeth Council. Mr Loveridge was abroad but was still paying his rent and had all his personal possessions in the property.

After proceedings were issued a jointly instructed expert surveyor calculated statutory damages on the basis that the council’s interest in the building was encumbered, prior to eviction, with Mr Loveridge’s secure tenancy. Later the council obtained rival expert evidence that there would actually be nil statutory damages because if the building was bought by any willing buyer the secure tenancies would automatically convert into assured tenancies.

The trial judge rejected the rival expert evidence. Full statutory damages were awarded because, after entering the property, it was not reasonable for the council to believe Mr Loveridge was not living there; there was nothing in Mr Loveridge’s conduct which would warrant a reduction in damages and the council did not offer to reinstate Mr Loveridge in the property. Mr Loveridge was awarded £90,500 in statutory damages and £9,000 for the loss of his personal possessions.

The council’s appeal to the Court of Appeal was successful. The Court of Appeal concluded that any secure tenancy was always vulnerable to a change of landlord (for example, by way of a housing stock transfer) so that what a willing buyer obtained was a building whose value would never be depressed by the secure tenancy. This ‘inherent’ vulnerability in a secure tenant’s status should be included in the statutory damages calculation and it resulted in nil statutory damages.

Supreme Court ruling

The Supreme Court decided that the Court of Appeal was wrong to consider that what would actually happen after a sale to a willing buyer should be included in the statutory damages calculation. The fact that a secure tenancy would be downgraded to an assured tenancy after sale to a private sector buyer was irrelevant. The willing buyer valuation is only 'for the purposes of’ a damages calculation, the "notion that [the Council] would put the building… for sale is fanciful in the extreme." – Lord Wilson [paragraph 19]. The Supreme Court reached its unanimous decision because the section requires an assumption that the tenant "continues to have the same right to occupy the premises" as prior to the eviction. That right was as a secure tenant, any pre-eviction valuation of the building must be subject to the secure tenancy. The Supreme Court reinstated the original judgment award.

Lord Wilson expressed a concern that the Supreme Court’s decision means that even though Lambeth made no capital gain and never intended to make any capital gain it was required to pay statutory damages that were 12 times more than Mr Loveridge’s actual loss. He suggests "Parliament might wish to revisit the application of section 27, and therefore of section 28, of the 1988 Act to unlawful evictions on the part of local authorities." [paragraph 30].

I think it is unlikely that Parliament will have the inclination, even if it had the time, to revisit this bit of housing law. That is because the section already has substantial in-built safeguards which militate against ‘unfair’ statutory damages awards.

In practice the circumstances where full statutory damages are awarded should be very rare. First, no statutory damages are awarded if the landlord believed and had reasonable cause to believe that the tenant had stopped living in the property when the eviction took place. Secondly, the extent of the damages can be reduced where the court considers it reasonable to take account of the tenant’s behaviour prior to the eviction or if he or she has refused an offer of reinstatement. And thirdly, no statutory damages apply where the tenant is reinstated. Really no council should ever need to pay full statutory damages. If a mistake is made it needs to be corrected quickly. Lambeth is now liable for full statutory damages only because none of these defences or mitigating factors applied.

The award of full statutory damages against a local authority for unlawfully evicting a secure tenant is draconian but there is absolutely no reason at all why a local authority should end up subject to a full award. Where a mistake is made by the landlord it should be corrected as quickly as possible. Lawfully enforcing a possession order through the courts is by far the safest way to guarantee vacant possession.

Michael Paget is a barrister at Cornerstone Barristers and was one of the counsel for Mr Loveridge. He can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it..