COVID-19 rent arrears: A tip for defending Ground 8 possession claims

For those on the frontline in defending possession proceedings post the Covid-19 stay, it is sadly all too common to be representing defendants with extremely high rent arrears. Where the possession claim is brought on the basis of Ground 8, Schedule 2 of the Housing Act 1988, it can be difficult to see a way through. 

Ground 8 provides that a possession order must be granted where:

Both at the date of the service of the notice under section 8 of this Act relating to the proceedings for possession and at the date of the hearing -

(a) if rent is payable weekly or fortnightly, at least eight weeks' rent is unpaid;

(b) if rent is payable monthly, at least two months' rent is unpaid...

and for the purposes of this ground "rent" means rent lawfully due from the tenant.

A normal, pre-pandemic tactic in resisting Ground 8 challenges was to bring a counterclaim (for example, for disrepair or failure to comply with the deposit protection provisions under the Housing Act 2004), and to off-set the damages from the counterclaim against the arrears outstanding. In many cases, that would be sufficient to bring the rent lawfully due at the date of the hearing below the threshold required for Ground 8 to apply.

Post-pandemic, we are seeing more cases where, even with substantial potential counterclaims, the arrears are too great for this to be effective.

This is where it is useful to be aware of the case of Baygreen Properties Ltd v Gil [2002] EWCA Civ 1340; [2003] HLR 12. Delivering the leading judgment, Clarke LJ observed at paras 25-6:

"Where there has been a breach by a landlord of repairing obligations, any damages awarded for the breach may be set off against the rears of rent by way of equitable set-off...

It is, I think, common ground that where a tenant asserts an arguable breach of such obligations the court must investigate them and the rent "lawfully due" from the tenant is the rent after deduction of the amount of any equitable set-off. In any event I would so hold because the basis of an equitable sett-off is that it impeaches the title to the legal demand." 

This is of practical use when we go back to consider the requirements of Ground 8, particularly that at the date of the service of notice at least two months' rent must be lawfully due from the tenant. The effect of Baygreen Properties is to confirm that, when determining whether there was sufficient rent lawfully due at the time the notice was served for Ground 8 to apply, you should deduct any set-off from a potential counterclaim.*

I am seeing more and more cases where the notice was served a long time ago, with hearing delayed by the stay and then the resulting backlog of cases. During that period of delay, often rent arrears have increased enormously. The rent arrears at the time the notice seeking possession was served are often much lower than the present arrears. Set-off may still be sufficient to bring the arrears, as they stood at the date of the notice, below the Ground 8 threshold so that this mandatory ground of possession can be resisted.

For example, consider a case where the rent arrears at the time of the notice were around £4,000, with monthly rent being £1,000. By the time of hearing, the arrears are over £20,000. Where there is a potential disrepair counterclaim worth, for example, £10,000 this is not sufficient to bring the current arrears below two months' rent. However, if we look at the rent lawfully due at the time of the notice, off-setting the counterclaim's value at that time, this would be sufficient to bring the arrears below £2,000 such that Ground 8 cannot apply.

Of course, possession will often also be sought on Grounds 10 and 11, and there will be difficult work in resisting possession on these grounds where arrears are now significant. Nevertheless, it is useful to know that there can be routes to defending the mandatory Ground 8 in cases of significant arrears, which can often feel un-defendable.

* Note: this should be the value of the counterclaim at the time of the notice, which is likely to be different than the value of the counterclaim at the time of hearing if there has been ongoing disrepair.