Calculation of Damages for Unlawful Eviction of a Secured Tenant by a Local Authority or Social Landlord following the Supreme Court Judgment in Loveridge v London Borough of Lambeth  UKSC 65 On appeal from:  EWCA Civ 494
On 3 December 2014, on appeal, the Supreme Court ruled in favour of a secured tenant, Mr Loveridge, against the decision of the Court of Appeal and restored an order of the County Court requiring the council as a landlord to pay damages of £90,500 to Mr Loveridge for unlawful eviction.
The case involved an assessment of section 27 and 28 of the Housing Act 1988, as to how damages for the unlawful eviction of a secured tenant should be calculated in accordance with the provisions contained in the these sections.
The decision of the Supreme Court provides a stark warning of the high cost implications that can precede an unlawful eviction of a secured tenant, and strengthens the argument that recovery of possession subject to a tenancy should not be undertaken without a Court Order.
Mr Loveridge had lived in the downstairs flat of a two story property owned by the London Borough of Lambeth (‘Lambeth’). Mr Loveridge had been in occupation of the flat as a secured tenant since November 2002. In July 2009 Mr Loveridge undertook a trip to Ghana and did not return until December 2009. In breach of his tenancy agreement Mr Loveridge did not inform Lambeth of his trip and that the property would be vacant during this time.
While Mr Loveridge was away Lambeth, erroneously believing Mr Loveridge had passed away, proceeded to clear the flat of Mr Loveridge’s possessions and change the locks.
Upon returning from his trip Mr Loveridge found that Lambeth had rented his flat to somebody else.
Basis of the Supreme Court’s Decision
Sections 27 and 28 of the Housing Act 1988 provide that a residential tenant who has been unlawfully evicted is entitled to be compensated. In accordance with section 27 and 28 the tenant is entitled to damages which are calculated by reference to the profits made by the landlord as a result of the unlawful eviction and not by reference to the tenant’s actual loss.
County Court - At the initial hearing of the matter at the Lambeth County Court, His Honour Judge Blunsdon found the correct approach to calculating the amount of damages to be awarded would be to value the property subject to the ongoing secure tenancy of the flat. It was concluded that the property value would have been depreciated by £90,500 if the secure tenancy granted to Mr Loveridge was to continue and the property sold. By evicting Mr Loveridge, Lambeth therefore stood to make a hypothetical profit of £90,500 should the property be sold free of Mr Loveridge’s tenancy. On this basis under section 28 of the Housing Act 1988, Lambeth County Court awarded Mr Loveridge statutory damages of £90,500 in addition to £9,000 in relation to trespass to his good which were removed from the property.
Court of Appeal – Lambeth subsequently appealed the amount of damages awarded to Mr Loveridge by the County Court. The Court of Appeal overturned the decision of the County Court and held that the statutory damages awarded to Mr Loveridge should have been calculated on the basis that any sale of the property to a private landlord would result in the secured tenancies being converted into assured tenancies and therefore the valuation of the property should have been calculated on the basis that it was subject to assured tenancies and not the secured tenancies that were in place. In light of this approach the Court of Appeal reduced Mr Loveridge’s statutory damages from £90,500 to £7,400.
Supreme Court – The Supreme Court unanimously allowed Mr Loveridge’s appeal. The Supreme Court ruled that prior to his eviction Mr Loveridge was a secured tenant and section 28 of the Housing Act 1988 specifically provides that the same rights are to continue. It was therefore held that no adjustments should be made or taken into account regarding the nature of the tenants’ rights should the property have been sold to a private landlord, and therefore the calculation of damages should be conducted on the basis that the tenancy remains a secured tenancy as opposed to an assured tenancy. The calculation of damages should therefore be assessed on the basis that the value of the property with the encumbrance of the secured tenancy was significantly less that the value of the property without it. On this basis the Supreme Court restored the County Court’s initial order for damages.
Formula for Calculation of Damages
The Supreme Court held that the statutory damages for the unlawful eviction of a secured tenant should be calculated on the basis of the principles set out in section 28 of the Housing Act 1988.
The basis for assessment should be the difference in value of the property should the tenant continue to have the same rights, those of a secured tenant, before eviction in comparison to the value of the property if the tenant ceased to have those rights. The calculation should be based on the assumption that the landlord who is in default is selling his interest in the property on the open market.
Although the Supreme Court ruled in favour of Mr Loveridge in reistating the initial order for damages awarded by His Honour Judge Blunsdon at Lambeth County Court, the comments made by Lord Wilson in the Supreme Court’s judgement should be noted.
Lord Wilson comments that ‘‘Parliament might wish to revisit the application of section 27, and therefore of section 28, of the 1988 Act to unlawful evictions on the part of local authorities."
Lord Wilson’sconcern seems to be that even though as it was not Lambeth’s intention to realise any gain from the unlawful eviction of Mr Loveridge, nor did it realise any, it was requires to pay Mr Loveridge an amount which is 12 timed great than his actual loss based on calculation on hypothetical gain.
In the meantime, it will be particularly important for local authority, social and private landlords to err on the side of caution when it comes to recovering possession of the premises and in the event that a mistake is made that the tenant is re-instated as soon as possible. Similarly private landlords will also need to be cautious when re-possessing premises where it appears the tenants have abandoned them as although damages are likely to be less than if the landlord is a local authority or social landlord, damages may still be substantial.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.