Off the debt hook
Arrears are irrelevant to possession proceedings if they form part of a bankruptcy order, explains Helen Tucker, partner at Anthony Collins Solictiors
A significant test case has just been decided in relation to how arrears subject to a bankruptcy order or debt relief order will affect rent possession cases. This will require a change of approach to the terms of suspended orders sought every day.
The Court of Appeal combined the two cases of Sharples v Places for People Homes Limited and Godfrey v A2 Dominion Homes Limited and ruled on 15 July. The facts of the Sharples case were that the assured tenant - who was subject to a bankruptcy order made after the rent possession proceedings had begun - had had an outright possession order made against them. The facts of the Godfrey case were that a DRO was made after rent possession proceedings had begun, but before a hearing. A suspended possession order was made suspended on payment of the current rent plus an amount each week towards the arrears and costs.
The combined judgement is a helpful consideration of how insolvency law interacts with rent possession proceedings regarding assured tenancies. The principal points are that:
- Insolvency law does not prevent rent arrears which were included in a bankruptcy order, or DRO, being relied upon to prove the rent arrears ground to obtain a possession order;
- A bankruptcy order/DRO does not have the effect of automatically halting possession proceedings based on rent arrears against an assured tenant;
- On the hearing of possession proceedings, no money judgement order (an order to recover the debt) can be made for payment of the rent arrears;
- A suspended order for possession cannot be made conditional on payment of the arrears subject to any DRO or bankruptcy order. However, a suspended order for possession can be made conditional on payment of any other arrears which were not in the bankruptcy order/DRO and current rent and costs.
The outcome of the case means that assured tenancies will be treated the same as secure tenancies.
There are rarely grounds to object to a DRO being made when a landlord is served with an application. However, this combined case helps by clearly confirming that a DRO or a bankruptcy order is no obstacle to possession order being made based on the rent arrears grounds, even if the arrears are included within the bankruptcy order/DRO.
The key new point of significance is that landlords cannot seek suspended orders suspended on payment of the arrears. They should instead only seek suspended possession orders suspended on payment of the current rent and the costs only (or any arrears not within the bankruptcy order/DRO).