RLA : RPI : Tenant wins right to set off

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Tenant wins right to set off - August / September 2003

A landlord who bought arrears of rent as part of the purchase of a property also assumed the obligation to put right disrepair. This meant that a tenant could set off rent arrears against damages for disrepair incurred both before and after the sale.

This was the effect of a Court of Appeal ruling in the case of Muscat v Smith.

John Smith had a statutory tenancy of a terraced house in Beckenham which was in poor repair and had in 1995 been the subject to a disrepair notice served on the then landlord.

Smith withheld the rent.

Four years later the property was sold and the rent arrears assigned to the new owner. Smith continued to withhold rent and only started paying again when possession proceedings were brought against him.

Possession was granted although the judge decided Smith could offset £2,000 against rent arrears of £3,860 in respect of damages for dilapidation since the property had come into the hands of the new landlord. Smith appealed.

The Court of Appeal came down on his side. It said it would be inequitable for rent arrears to be carried forward but not the obligation that went with renting. Rent today is correctly regarded as consideration not merely for possession but for undertaking obligations to the tenant, said Lord Justice Sedley. When the new landlord was assigned the rent arrears he also took on the obligations that went with the tenancy and was therefore responsible for damages for disrepair during the entire period of rent arrears. The tenant was entitled to set these damages against the arrears.

other artilces from the August / September 2003 issue

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