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Counsels’ opinion on VRTB

Future Housing Review (supported by Joseph Rowntree Reform Trust) recently instructed Kelvin Rutledge QC and Ashley Bowes of Cornerstone Barristers in London to advise on the legal position concerning VRTB.

OPINION

Introduction

1) On 12th October 2015, the Secretary of State for Communities and Local Government presented a Written Statement to Parliament concerning an “agreement” the Government had reached with the National Housing Federation to “deliver [the Conservative Party’s] Manifesto commitment to extend the right to buy to housing association tenants”. The new position was to come into force “from next year” and the Government would work with the sector to “implement” it. The Minister undertook to update Parliament on the “next stage of implementation”.

2) HM Treasury have confirmed, in response to a Freedom of Information Act request, that the terms of this agreement (it is not clear if they were ever formally recorded) reflect a September 2015 document produced by the NHF entitled “An offer to extend Right to Buy discounts to housing association tenants1 which the Government accepted in lieu of legislation being introduced through the Housing and Planning Bill. This offer had been put to NHF members with 323 out of 584 (around 55%) voting for it. It is to be read in conjunction with a letter NHF’s Chief Executive Officer, David Orr, sent at the same time to housing associations.

3) According to the NHF’s offer document, the main features of the VRTB are as follows:

  • Every housing association tenant has the right to purchase her/his home at statutory right to buy discount levels.
  • Housing associations would have discretion not to sell, for example where the property is in a rural area and could not be replaced, or where it has been adapted for special needs tenants.
  • In such cases housing associations would offer tenants a “portable discount” which they can utilise in the purchase of alternative accommodation either with the same housing association or another.
  • The Government would “compensate” the housing association for the discount (subject to available funds). However, only 70% of the discount would be payable immediately, the remaining 30% to be paid upon stock replenishment.
  • The Government would implement “deregulatory measures” to assist housing associations achieve these objectives.
  • If a housing association tenant is dissatisfied with the offer, or with the time the process is taking, s/he may appeal to the Regulator, the Homes and Communities Agency.

4) During his Autumn Spending Statement, the Chancellor announced that the VRTB would be piloted by five housing associations. On 25th November 2015 L&Q, Riverside, Saffron Housing, Sovereign and Thames Valley Housing Associations released a joint press statement, explaining that they had volunteered to form part of that pilot. At or about the same time, the Government amended its Right to Buy website by confirming that, under the pilot, “successful applicants will be able to progress up to the point of sale, but would not be able to complete until the Housing and Planning Bill becomes law…”.

5) According to the House of Commons Library Briefing Paper No. 07224 dated 13th April 2016, “The pilot schemes are expected to run until January 2017 but a full evaluation will be published [by the Department of Communities & Local Government] in September 20162. The Paper continues (summary p.3): “No implementation date for the extended RTB has been announced. Negotiations on the detailed implementation of the voluntary RTB are ongoing; an Implementation Advisory Board has been established and an operational document will be published in due course”. A “sounding board” has been established by the NHF for this purpose3.

6) It follows that the VRTB is not yet in force. What essentially is underway is a pilot scheme with five housing associations and selected tenants, to determine a level of interest, alongside a broader consultation exercise through the NHF. Nothing can be done in terms of rolling out the scheme nationally until the DCLG has undertaken the “evaluation” it has promised. At that stage, consistent with his October 2015 Written Statement, the Minister should update Parliament setting out the proposed implementation of the VRTB.


Our instructions

7) Future Housing Review (“FHR”) has the twin aims of challenging the VRTB agreement and demonstrating to housing associations that they are not bound to implement it. We are instructed on behalf of FHR to advise it on the following matters:

(a) The extent, if any, to which housing associations are legally bound by the VRTB agreement;

(b) If legally bound, the circumstances in which housing associations may permissibly decline to sell their properties under that agreement; and

(c) From whom, and by what means, are non-compliant housing associations most likely to be challenged?

8) We are further asked to provide answers to what FHR expects to be frequently asked questions by housing associations.

9) We base our advice on the position as it stands at the present time. However, as indicated above, the shape of the VRTB may well change as a result of the DCLG’s evaluation and/or any “deregulatory measures” which are introduced to facilitate it. Further, whereas we are able to consider the position of housing associations generally, ultimately issues of discretion and compliance will vary according to the nature and rules of individual associations, as will be seen below.


The statutory right to buy

10) It is necessary, for the purposes of this Opinion, to understand the essential similarities and differences between the VRTB and the statutory right to buy applicable to council tenants. For ease of reference we will refer to the latter as the “SRTB”. When council tenants were first given the right to buy this was achieved by means of primary legislation. Part I, Chapter I of the Housing Act 1980 made detailed provision for the scheme by prescribing, amongst other things, rules stating when the right accrues, how it applies respectively to freehold and leasehold titles, the rights of joint tenants and family members, how the purchase price and discount are to be fixed and when repayment of discount becomes due upon early disposal. Schedules 1 and 3 to that Act set out detailed exceptions to the SRTB and Schedule 2 made extensive provisions for the contents of SRTB conveyances and leases.

11) Those provisions were substantially re-enacted in Part V of the Housing Act 1985. On each subsequent occasion the SRTB has been amended or extended, this too has been achieved by legislative means. For example, the right was “preserved” for council tenants whose properties were subject to large scale voluntary transfer by the Housing and Planning Act 1986; “delay notices” were introduced by the Housing Act 1988; maximum discounts were introduced by the Housing (Right to Buy) (Limits on Discount) Order 1998/2997; the Housing Act 2004 increased the qualifying period from two to five years and the Deregulation Act 2015 reduced it to three years.

12) Two aspects of the SRTB require special mention: the treatment of housing association tenants and “exceptions”. Under the 1980 Act certain housing associations were expressly brought within the SRTB, by section 28(2)(b), and others were expressly excluded from it, by s.2(2). This demarcation was repeated in the 1985 Act, in s.120 and Schedule 5. Housing associations which are charities have always been excluded: see s.2(2)(a) of the 1980 Act and Schedule 5, paragraph 1 of the 1985 Act. Other exclusions include co-operative and certain grant-funded housing associations: see Schedule 5, paragraphs 2 and 3.

13) Turning to exceptions, the SRTB does not apply to certain tied accommodation (1985 Act, Schedule 5, para 5); specially adapted and warden assisted properties (paras 7, 9 & 10); properties held on Crown tenancies (para 12), properties due for demolition (paras 13-16), student lettings (Schedule 1, para 10); business tenancies (para 11) or almshouses (para 12). The SRTB cannot be exercised if the tenant is obliged to give up possession in pursuance of a court order or becomes bankrupt (1985 Act, s.121), and may be suspended because of anti-social behavior (s.121A).


Housing association powers of disposal

14) Housing associations do not have unfettered power to dispose of land in their ownership:

(1) Unregistered housing associations which are not charities. Such bodies cannot dispose of certain grant-aided land without the consent of the Regulator: see Housing Associations Act 1985, ss.9-10.

(2) Charitable housing associations. Section 117 of the Charities Act 2001 stipulates that, in the absence of “any statutory provision” or “scheme legally established”, housing associations which are charities for the purposes of that Act cannot dispose of any land held by them (save by way of a lease not exceeding 7 years) without complying with the procedural requirements of s.119 which envisage a competitive process intending to secure for the charity the best price reasonably obtainable.

(3) Registered providers. Under ss.171-2 of the Housing and Regeneration Act 2008, a housing association in England which is a registered provider may not dispose of any dwelling in its ownership which is social housing without the regulator’s consent. This provision has the effect of overriding any express or implied power the registered provider otherwise possesses to dispose of the land it holds. By reason of s.188 of the Act the giving of such consent relieves charitable trustees from their duty to secure best consideration for the land, but not of their duty to comply with the charitable objects: see s.189.   


Housing & Planning Act 2016

15) Chapter 1, Part 4 of this Act is entitled “Implementing the right to buy on a voluntary basis”. It contains no measures to introduce a statutory RTB for housing association tenants, or substantially to amend or repeal the existing statutory scheme. Sections 64-65 empower the Secretary of State (or in London the Greater London Authority) to make grants to private registered providers in respect of right to buy discounts. The Act provides a mechanism by which these grants will be funded.  In outline, local housing authorities will be required to make payments to the Secretary of State at the start of each financial year, calculated by reference to the value of their “higher value” social housing, which is likely to become vacant in the coming year. It is anticipated that local housing authorities will sell that housing to finance the payments required by the 2016 Act. Indeed, they are obliged to consider doing so. The payments will in turn be used to fund the grants payable to registered providers.

16) Section 66 of the Act is entitled “monitoring”. Its effect is to oblige the HCA, if requested to do so by the Secretary of State, to “monitor compliance with the home ownership criteria”, defined as meaning “the sale of dwellings by private registered providers to tenants otherwise than in exercise of a right conferred by an Act” and, when asked, to report to the Secretary of State accordingly. Subsection (6) provides that “the Secretary of State may publish information about a private registered provider that has not met the home ownership criteria.” 

17) Section 67 enlarges the HCA’s powers in relation to disposal consents and grants. Section 68 provides interpretative assistance including the following definition of “right to buy discount” (an expression which appears in sections 64 and 65): “a discount given to the tenant of a dwelling on the disposal of the dwelling to the tenant otherwise than in the exercise of a right conferred by an Act”. Neither section 64 nor 65 mentions the VRTB. Consequently, the definition could apply to any discount given to a tenant on a disposal in any circumstances whatsoever, other than pursuant to an Act.

18) Sections 64, 65, 67 and 68 of the Act all came into force on 26th May 2016 4. Section 66 will come into force on a date to be appointed. According to the Explanatory Notes to the Act 5:

160 The effect of this section is to ensure the Regulator has the power to monitor and report on how private registered providers are supporting their tenants into home ownership. It is envisaged that the criteria will initially be set with reference to the voluntary Right to Buy agreement that has been agreed between the Secretary of State and the private registered providers sector.”

19) It follows that the VRTB, as described in the offer document, is a scheme NHF members have adopted for themselves for which there is neither express statutory provision nor statutory compulsion (over and above the monitoring and reporting powers vested in the Secretary of State under section 66 which have been described as a “name and shame” provision 6). It is, as noted above, a scheme agreed by the representative body with the Government in lieu of a statutory right to buy.

20) Subject to one caveat, we concur with our Instructing Solicitor’s view that the VRTB agreement is the single source of potential legal authority for the scheme. The caveat is that Parliament, in receiving the Ministerial statement referred to in paragraph 1 above, if not passing the Act itself, has acknowledged the existence of the agreement. However, the point that is to be emphasised is that, in contrast to the SRTB, Parliament has not examined the VRTB agreement as part of a legislative process. 


The NHF’s powers of enforcement

We turn to the question whether the NHF has the legal power to force its members to comply with the VRTB. The NHF is a company limited by guarantee. It is regulated by the Companies Act 2006 and is registered in England. Members apply to join and pay a membership fee. Part of the constitution of the NHF is its Articles of Association. Those provide, so far as is relevant:

“Objects and powers

The Federation’s objects shall be to:

3.1.1 be the representative, coordinating and trade body in England for organisations which provide or manage homes, or provide associated services, and which do not trade for profit;

3.1.2 support and promote the work that housing associations do and campaign for better housing and neighbourhoods;

3.1.3 campaign and lobby on behalf of Federation members, and promote wide appreciation of their values, successes and vital future role;

3.1.4 represent the strategic interests of Federation members, as providers of affordable homes and other services to meet the nation’s housing, economic and social needs;

3.1.5 support Federation members with a range of events, conferences, training, briefings, journals, publications, network services, and other products and services;

3.1.6 promote unity, networking and exchange of knowledge and good practice among Federation members;

3.1.7 provide services and products to other organisations and individuals engaged in activities related to those of Federation members; and

3.1.8 carry out any other activities incidental or necessary to the achievement of the other objects listed above

Obligations of members

All members agree:

9.1.1 to uphold and support the objectives of the Federation as set out in article 3 and

9.1.2 to be bound by the obligations on them as set out in these articles and in any rules made under the articles

Termination of membership

A member shall cease to be a member if:

13.1.1 They are expelled by a board resolution passed by a majority of not less than three quarters of the board members present and entitled to vote in the following circumstances:

(a) …

(b) if the member, in the absolute opinion of the board whose decision shall be final and conclusive, acts in a manner contrary to the objects and values of the Federation and/or in a manner which is or is likely to be materially prejudicial to the interests, reputation or standing of the Federation or the interests of other members”

22) Housing associations are members of the company. Members are bound by the company’s constitution. The provisions of the NHF’s articles of association bind members as if they were covenants on the part of the NHF with each member (by operation of s.33(1) Companies Act 2006). By virtue of this statutory context, the constitution of the company becomes a contract between the NHF and its members.

23) There is a contractual obligation on members to support the objects of the association at Article 3. That obligation is enforced by the power of the Board to terminate membership at Article 13.

24) The Board could take the view that having a voluntary right to buy policy was a necessary part of being a member of the NHF, that objective having been adopted by a majority of members. Whilst we note the NHF is clear within its briefing note to members 7 that individual member housing associations will retain “independence” whether to sell, it is clear that there will be a “presumption” in favour of selling unless there is a “good reason”8.

25) Accordingly, we cannot exclude the possibility that a member who refuses without good reason to adopt a policy which provides for a right to buy in any form would face its membership being terminated on the basis of a breach of Article 9, or that it was thought to be acting in a way prejudicial to the reputation or standing of the NHF. As such, it is at least conceivable that a member of the NHF who elects to opt out entirely of the VRTB would be required to leave the NHF. We consider below the question whether housing associations can opt out of the VRTB by relinquishing their membership of the NHF.


Compliance

On the assumption that the agreement is binding on housing associations who are NHF members, we turn to two important compliance questions. The first is the extent of an association’s discretion not to sell and the second concerns “portable discounts”. As will be seen, these two issues are linked.

Discretion

27) The NHF’s offer provides the following examples of circumstances in which the VRTB would not apply:

• ” properties in certain rural areas;
• supported housing designed for people with specific needs;
• specialist properties of historic interest (almshouses);
• properties provided through charitable or public-benefit resources or bequeathed for charitable or public-benefit purposes;
• tied accommodation;
• where the landlord is a co-operative;
• where the landlord does not have sufficient interest to grant a lease of over 21 years;
• properties held in a Community Land Trust; and
• where there are clear restrictive covenants in existing resident contracts around the protection of rural homes.”

28) The NHF made it clear in its April 2016 briefing on the policy development process that this is not an exhaustive list, though no further examples were given. What is clear is that the authors of the VRTB envisage a number of situations where it would be inappropriate for housing associations to dispose of their properties in this way.

29) The striking similarity between the NHF’s exceptions and those contained in the Housing Acts of 1980 and 1985 with regard to the SRTB leads, in our view, to the inference that the VRTB is modelled, to an extent, on the SRTB. Given the clear public policy considerations underlying the statutory exceptions in the SRTB applicable to housing associations, or the properties they may hold, this makes good sense. Furthermore, it is consistent with the general principle that a party may not contract out of a statutory right, even one which benefits him: see Johnson and Another v Moreton [1980] A.C. 37.

30) This leads to the conclusion that, whereas housing associations are free, so far as their rules or constitutions permit, to dispose of properties under the VRTB, they are neither bound nor, on a fair reading of the NHF’s agreement, expected to do so in any case where, under the SRTB, a statutory exclusion would have applied (other than the inability to grant a secure tenancy). It is highly likely, therefore, that there will be housing associations that can for reasons of good housing management opt out entirely from the VRTB (save, possibly, for facilitating portable discounts, as discussed below). However, consistent with the VRTB agreement and advice subsequently published by the NHF, any such association would still have to “decide their policy for operating their discretion, and in due course, publish [it].”

Portable discounts

31) The offer letter states:

“Where a housing association exercises its discretion not to sell a home, the housing association would provide an alternative from its own stock (either existing or newly built) or that of another housing association. Housing associations would work together to develop joint arrangements to enable this to happen.”

32) To similar effect, the NHF briefing on the policy development process states:

“Where associations do operate their discretion not to sell, they will be expected to offer their tenants an alternative property to buy through the concept of a portable discount. They will also need to decide their portable discount policy alongside their policy on discretion not to sell.”

33) Referring to these, David Orr said in his evidence before the Public Accounts Committee 9:

“Our members have discretion about whether or not they will sell. That is not marginal; it is absolutely central. What we have crafted is something that is not the same as the local authority Right to Buy process.”

34) It can be seen how the portable discount policy would work in a larger housing association holding different types of housing stock. If, for example, a tenant’s existing home is not suitable for sale, he may be offered the next available property which suits his needs.

35) However, in the case of the smaller housing association with limited stock, nothing at all may be available for sale. As noted above, it is entirely conceivable that every property owned be an association is exempt. It is not clear whether the current pilot scheme is sufficiently representative to cast any light on this problem. The offer letter talks of joint arrangements between housing associations to facilitate portable discounts, but the reality may be that associations owning eligible properties may not wish to bind themselves in contract to associations who are unable to reciprocate.

36) We do not think the concept of portable discounts has been sufficiently thought through, or even tested properly under the current pilot. This is clearly an area where guidance is required from the Regulator.


Enforceability

37) In the absence of any express statutory powers, the VRTB is potentially enforceable by three bodies or persons: the NHF, the Regulator and the tenant wishing to exercise the right. We have already considered the position of the NHF.

By the Regulator

38) The HCA’s regulatory powers are vested in its Regulatory Committee: see Housing & Regeneration Act 2008, s.92B. The fundamental objectives of the regulator are set out in s.92K and they consist of “the economic regulation objective”, and “the consumer regulation objective”. The latter is:

“(a) to support the provision of social housing that is well-managed and of appropriate quality, (b) to ensure that actual or potential tenants of social housing have an appropriate degree of choice and protection, (c) to ensure that tenants of social housing have the opportunity to be involved in its management and to hold their landlords to account, and (d) to encourage registered providers of social housing to contribute to the environmental, social and economic wellbeing of the areas in which the housing is situated.”

39) It is by no means obvious that these powers extend to regulating the VRTB. The nearest they come to that is by referring to tenant “choice”, but even that is a qualified objective. At all events, Fiona MacGregor from the Regulatory Committee told the Communities and Local Government Committee that “it will not be our role to enforce the Right to Buy, because clearly at that point it is not voluntary, but we will gather some information around sales rates and what individual organisations are doing10.”

40) As noted above, an appeal process to the Regulator is envisaged whose powers are yet to be defined. The NHF’s offer letter implies that, if the Regulator upholds an appeal, the housing association concerned will offer an alternative property. Sensibly, the CLG Committee called for the monitoring role of the Regulator and the appeals process for tenants to be spelled out. Unless and until it is, the Regulator appears to have no powers to coerce housing associations to comply with the agreement.

By the tenant

41) What are the rights of the tenant? Can s/he force the landlord housing association to sell, or at least provide a portable discount? As noted above, there would be no statutory right on which a tenant could base such a claim. This highlights a further fundamental distinction between the VRTB and the SRTB. In relation to the latter, it is the statute which creates the right to a conveyance and not a contract: see Bristol City Council v Lovell [1998] 1 W.L.R. 446. A sale under the VRTB would be subject to normal conveyancing rules. Thus, a formal contract would be required pursuant to s.2 of the Law of Property (Miscellaneous Provisions) Act 1989. This means, contractually speaking, that the housing association could withdraw from the transaction at any stage prior to the exchange of contracts.

42) More generally, a tenant is unlikely to be able to point to any contractual obligation on the part of the landlord housing association whereby the latter is obliged to comply with the VRTB. In relation to existing tenancy arrangements, such an implied term would be neither obvious nor necessary in order to give business efficacy to the agreement as a contract for the letting of land as distinct from a contract to sell the land. Any subsequent undertaking (express or implied) by the landlord to sell the dwelling would not constitute a lawful variation of contract in the absence of valuable consideration passing from tenant to landlord. As regards new lettings, provided the housing association publishes clearly its position on the VRTB, there is no reason why a contrary term should be implied.

43) The most likely form of challenge from an individual is judicial review and the most likely ground is legitimate expectation giving rise to unfairness. However, three potential obstacles stand in the way of any tenant seeking to pursue such a claim. The first is to establish that the housing association is a body which is amenable to judicial review as a public body in relation to any decision it makes not to sell; the second is to make out a case for showing that any such refusal is unlawful, and the third is to show that, in passing s.66 of the 2016 Act, Parliament has neither ousted the remedy of judicial review, nor provided tenants with a suitable alternative remedy.

44) On the first question, there is no bright line rule as to whether a housing association is or is not amenable to judicial review. In R(Weaver) v London and Quadrant Housing Trust [2010] 1 W.L.R. 363, the Court of Appeal, in considering whether the trust’s decision to evict the claimant was a public function, looked at various factors including the trust’s reliance on public finance enabling it to achieve its objectives, its operation in close harmony with the local authority assisting the latter to meet its statutory duties, and the trust’s freedom to allocate properties being circumscribed by the allocation agreements with the local authority, the cumulative effect of which established in that case a “sufficient public flavour to bring the provision of social housing by this particular RSL within that concept”.

45) On the other hand, the Administrative Court in R(Macleod) v Governors of the Peabody Trust [2016] EWHC 737 (Admin) dismissed an application for judicial review of the decision of the defendant housing association with charitable status to decline to approve the exchange of the claimant’s assured tenancy. On the facts of the case, Peabody had not been exercising a public function in relation to the claimant’s tenancy. The court held there were four key factors in Peabody’s favour: (i) Open market – Peabody purchased the properties using funds raised on the open market, not via any public subsidy or grant; (ii) Not pure social housing – although the properties were not let at full market rent, they were not pure social housing: (iii) No allocation relationship – unlike the housing trust in Weaver, Peabody had no allocation relationship with any local authority; (iv) Treatment of rents – Peabody’s rents were not subject to the same level of statutory regulation as social housing in general.

46) We see force in the argument that there is a public interest in extending the right to buy to housing association tenants, and that it is the objective of the VRTB to provide parity of rights between local authority and housing association tenants. We further see the argument that public money is to be used to facilitate such rights. For those reasons, we are of the view that a court is likely to hold that a decision of a housing association not to sell a property to a tenant lies on the Weaver side of the line and is accordingly one that is amenable to judicial review.

47) On the second question, the most likely grounds for judicial review by an aggrieved tenant would be breach of legitimate expectation giving rise to unfairness and/or unreasonableness.

48) In R(Bhatt Murphy) v The Independent Assessor [2008] EWCA Civ 755, Laws LJ provided (at [50]) the following “very broad summary of the place of legitimate expectations in public law”:

“The power of public authorities to change policy is constrained by the legal duty to be fair (and other constraints which the law imposes). A change of policy which would otherwise be legally unexceptionable may be held unfair by reason of prior action, or inaction, by the authority. If it has distinctly promised to consult those affected or potentially affected, then ordinarily it must consult (the paradigm case of procedural expectation). If it has distinctly promised to preserve existing policy for a specific person or group who would be substantially affected by the change, then ordinarily it must keep its promise (substantive expectation). If, without any promise, it has established a policy distinctly and substantially affecting a specific person or group who in the circumstances was in reason entitled to rely on its continuance and did so, then ordinarily it must consult before effecting any change (the secondary case of procedural expectation). To do otherwise, in any of these instances, would be to act so unfairly as to perpetrate an abuse of power.”

49) As regards substantive legitimate expectation, three points in particular emerge from the authorities. First, such an expectation is more likely to arise where the class it is said to benefit is small and readily identifiable. Secondly, not every open-ended policy or practice an authority adopts will give rise to such an expectation. It only applies to situations in which the withdrawal of the policy or practice would be so unfair as to amount to an abuse of power. Third, once a substantive legitimate expectation has been established, only an overriding public interest will defeat it.

50) In our view, no housing association tenant (outside the pilot scheme) would currently have a legitimate expectation (procedural or substantive) that his or her housing association will sell them their property under the VRTB. This is because the VRTB remains a trial scheme which could be modified or even abandoned altogether during the remainder of the pilot and pending “evaluation” by the DCLG. The only legitimate expectation capable of arising at this stage is that a housing association would consider and consult with its membership with regard to fashioning its own policy on the VRTB should it apply generally.

51) If, in due course, the scheme is rolled out nationally, tenants would in our view have a legitimate expectation that their landlord housing associations (i) have a policy on the VRTB and apply it consistently; (ii) base any exercise of discretion not to permit a sale on good housing management grounds and not, for example, on the fact that the association simply does not agree with the VRTB 11, and (iii) give adequate reasons why, in a particular case, a sale is not feasible. Similar considerations apply in relation to portable discounts.

52) A reasonableness challenge is most likely to arise, post-implementation, either in relation to the policy not to treat particular properties as falling within the VRTB, or the exercise of discretion in a particular case. In either event, given that this is a voluntary scheme, we would expect the courts to confer on housing associations a wide margin of discretion.

53) The third question concerns the effect of s.66 of the 2016 Act. Post-Anisminic 12, the courts are generally reluctant to give effect to any legislative provision that attempts to exclude their jurisdiction in judicial review. Even when such an exclusion is clearly-worded, the courts will usually hold that it does not preclude them from scrutinising the decision on an error of law and quashing it when such an error occurs. Consequently, we do not consider the wording of s.66 is sufficiently clear to be capable of ousting the jurisdiction of the court.

54) There is, however, a respectable argument that, for the time being at least, Parliament has intended this to be a purely voluntary scheme which is subject to monitoring by the Regulator under s.66, and report by the Secretary of State, but no further coercive powers from any quarter. Consequently, a housing association which fairly and rationally declines to sell a property under the NHF agreement should not be ordered to do so. We see a deference argument that, because Parliament has not imposed any legal obligation on housing associations to comply with the VRTB, the courts should not do so. It is entirely consistent with the NHF’s agreement, and its attendant publicity, that it is from start to finish a voluntary scheme.


The position of housing associations who elect to leave the NHF
  

55) Is it within the lawful powers of a housing association to opt out of the VRTB by relinquishing its membership of the NHF? As shown above, members are contractually bound under the Articles of Association to uphold and support the objects of the Federation. Consequently, and for the reasons we have set out above, for so long as an association remains a member, the Articles bind it to the VRTB agreement subject to its discretion not to sell where good housing management grounds exist.

56) Once an association leaves the NHF, it is no longer contractually bound in this way. On the face of it, the association is thereafter free to conduct its business as it chooses. Furthermore, as we have noted, the HCA has no obvious current powers to compel an association to comply with the VRTB, and they have disavowed any role as an enforcement body.

57) However, the question we have to consider is whether an association that leaves the NHF may, as a matter of public law, disassociate itself from the VRTB. This raises again the question of substantive legitimate expectation.

58) We can see force in an argument that any substantive legitimate expectation shown to exist in relation to the VRTB would derive from the fact that the housing association in question was a member of the NHF at the time the agreement was made, irrespective of how that association voted. A tenant could argue that the VRTB was the collective decision of a representative body to which his or her landlord association was signed up. Consequently, applying case law on legitimate expectation, once established only an overriding public interest would justify any departure from the expectation that the association would continue to honour the agreement. We do not think that either withdrawal from the NHF or disagreement with the VRTB itself would be a sufficient reason for these purposes.

59) Leaving the NHF may therefore release an association from its contractual obligations to the NHF, but will not guarantee immunity from suit by one or more of its tenants.   


Overall conclusions

60) The VRTB is a non-statutory scheme for which there is no legal compulsion contained in either the Housing and Planning Act 2016 or other legislation. The NHF’s powers are confined to its contractual rights vis-à-vis its membership and the HCA’s stated position is that it currently has no intention of enforcing compliance with the NHF’s agreement. The inclusion of s.66 in the 2016 Act strongly suggests that Parliament regards the VRTB essentially as a consensual scheme.

61) It is clear, in our view, that the Government acted in accordance with prerogative powers in entering into the agreement with the NHF, as the representative body, and that in making the offer the latter did not act in excess of its objects.      

62) The agreement itself recognises that housing associations may elect not to sell their properties where good housing management reasons apply. In this respect it appears that the authors of the agreement were influenced by the exceptions which apply to the statutory right to buy, in relation to council tenants. Consequently, housing associations may lawfully fashion their VRTB policies according to those exceptions. It is highly likely that some associations will be entitled to claim exemption altogether, for example because of their charitable objects. They would, however, still have to adopt a policy which accepts the principle of the VRTB and explains why it does not apply in their case.

63) However, housing associations would not be immune from action. If rolled out nationally, tenants refused the right to buy (certainly for reasons not associated with good housing management) may have grounds (and standing) to challenge their landlord association’s policy on the bases of legitimate expectation and reasonableness. Likewise, a housing association which elects to leave the NHF simply because it does not agree with the VRTB, may be challenged for acting with improper or illegitimate motive in the Wednesbury sense. Whereas such an association may have objections to the VRTB which are rational in themselves, its discretion to sell has effectively been fettered by the NHF vote.

64) The scheme itself cannot be adopted nationally until the announced consultation and evaluation processes have been completed. Interested parties, such as local authorities, must be adequately consulted. Other interested bodies, such as FHR, are also entitled to their say. Before the scheme can be adopted as Government policy, an impact assessment would have to be carried out for the purposes of the Equality Act 2010. Any decision to implement the scheme nationally following the “evaluation” promised by September 2016 could be challenged if these steps have not been taken, or if the weight of the evidence (including that collected from the pilot) is inadequate.

 

Kelvin Rutledge QC
Ashley Bowes

Cornerstone Barristers
London
6th June 2016

 

  1. http://s3-eu-west-1.amazonaws.com/doc.housing.org.uk/Editorial/RTB/Fed_RTB_Offer.pdf.  See also NHF Briefing Note published of 5th April 2016 entitled “Voluntary Right to Buy Key principles of the agreement” at: http://s3-eu-west-1.amazonaws.com/pub.housing.org.uk/VRTB_Agreement_Briefing.pdf
  2. http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7224
  3. http://www.housing.org.uk/topics/asset-management/right-to-buy/right-to-buy-advisory-groups/
  4. Housing and Planning Act 2016 (Commencement No. 1) Regulations 2016/609
  5. http://www.legislation.gov.uk/ukpga/2016/22/pdfs/ukpgaen_20160022_en.pdf
  6. Inside Housing, 20th October 2015
  7. “Voluntary Right to Buy” (5 April 2016).
  8. Ibid., §2.
  9. 9th March 2016, HC 880, Q17.
  10. Second Report of Session 2015-16, HC370, para 111
  11. Whilst it is not a complete analogy, it is to be noted that mere disagreement with statutory guidance is unlikely to amount to a cogent reason for departing from it: see R(X) v Tower Hamlets LBC [2013] EWHC 480 (Admin), per Males J at [35].
  12. Anisminic v Foreign Compensation Commission [1969] 2 AC 147 (HL)