Residential landlords will no doubt welcome a recent decision from the Court of Appeal in the case of Christina Sharples v Places for People Homes Limited.
Ms Sharples held an assured tenancy under the Housing Act 1988. She fell behind with her rent, and the landlords commenced possession proceedings. Five days before the scheduled hearing of the possession proceedings, Ms Sharples filed a bankruptcy petition and was made bankrupt.
She argued that, since the rent arrears were a debt which was provable in her bankruptcy, then the proceedings could not be brought. She claimed that the purpose of section 285 of the Insolvency Act (which restricts proceedings against bankrupts) was to prevent one creditor getting in through the back door, and gaining an advantage over others. She argued that possession proceedings were a means by which landlords forced tenants to cough up rent arrears, and that if she paid the arrears in order to avoid repossession then the landlord would gain an advantage over other creditors.
Happily, at least from the landlord’s perspective, the Court of Appeal was having none of it. It decided that possession proceedings were not to enforce payment, but to allow a landlord to regain possession of his property. Any payment of arrears would only be an indirect result of possession proceedings, and the proceedings were not therefore a means to extract payment ahead of other creditors.
Good news for landlords, then. Even so, possession proceedings can often be long, drawn out and costly affairs, so much better to apply diligent credit control principles to make sure that arrears don’t arise in the first place.