In the red
Debt relief orders cannot be used by tenants to wipe out rent arrears, says Heather Tomlinson
In an extremely important decision for housing associations, the Court of Appeal has dismissed an application by a tenant to appeal against the finding of Altrincham County Court.
An Irwell Valley Housing Association tenant had significant rent arrears. After she refused numerous opportunities to enter into reasonable payment plans, Irwell took action for possession of the property. A possession order was obtained, but the tenant applied to set aside the warrant because she had obtained a debt relief order, which included the arrears.
DROs are an alternative to bankruptcy and last 12 months, preventing creditors from taking action to recover debts subject to the order. After 12 months, debts are discharged.
The tenant’s arguments, if successful, would have had major implications for all housing providers. A tenant could incur arrears, get a DRO and hide behind it knowing their landlord could not recover possession of the property. The court dismissed the tenant’s application on the grounds that a DRO did not ‘wipe out’ the debt, and, in any event, the arrears had increased since the making of the possession order. The warrant had been issued on the back of an enforceable order. The tenant appealed but was unsuccessful.
The tenant then went on to apply twice to the Court of Appeal for permission to appeal, and all applications were defeated, avoiding the significant costs of a full Court of Appeal hearing. The tenant’s actions meant that a possession order originally obtained in 2008 can only now be enforced.
Heather Tomlinson is an associate at Eversheds