When does a housing disrepair settlement remain a housing disrepair claim?

The courts continue to grapple with allocation issues in housing claims, and a recent appeal decision provides important guidance for landlords, tenants and practitioners dealing with settlement agreements in housing disrepair disputes.

In the Smith v Sanctuary Housing Assoc – Judgment, His Honour Judge Salmon overturned a decision to allocate a claim to the small claims track, finding that a claim arising from an alleged breach of a housing disrepair settlement agreement remained, in substance, a housing disrepair claim and should be allocated to the fast track where the requirements of CPR 26.9(1)(b) regarding the existence of a claim for repair works and value remain satisfied.

The background

The claimant, a tenant of Sanctuary Housing Association, had originally raised allegations of disrepair at her property through the Housing Disrepair Pre-Action Protocol. Before proceedings were issued, the parties reached a compromise agreement under which the landlord agreed to carry out a schedule of remedial works within a specified timeframe.

The claimant later alleged that some of those works had either not been completed or had been carried out inadequately. Rather than pursuing the original disrepair claim, she brought proceedings seeking specific performance of the compromise agreement which included the requirement to complete repair works and damages for its alleged breach.

The key issue became one of allocation.

Small Claims or Fast Track?

At first instance, Deputy District Judge Chappell concluded that the claim was, at its core, a breach of contract claim. As the damages sought were below £10,000, the claim was allocated to the small claims track.

The claimant appealed, arguing that the court had wrongly characterised the claim. Although framed as a breach of a compromise agreement, the relief sought was still an order requiring the landlord to carry out repair works. As such, the claimant argued that CPR 26.9(1)(b), which governs allocation of tenant repair claims against landlords, remained engaged.

The Appeal decision

HHJ Salmon agreed.

The court held that the claim fell squarely within CPR 26.9(1)(b) because:

• the claimant was a tenant bringing a claim against her landlord;
• she was seeking an order requiring the landlord to carry out repairs to the property; and
• the repairs sought were those the landlord had already agreed to undertake under the compromise agreement.

Importantly, the judge rejected the suggestion that a housing disrepair claim loses its character simply because it is compromised before proceedings are issued and later pursued as a claim for breach of that settlement agreement.

The court noted that the dispute originated as a housing disrepair claim and that many of the same issues would still need to be determined, including expert evidence regarding the adequacy and completion of repair works and the losses flowing from any breach. In substance, the trial remained a housing disrepair dispute.

Why the claim was allocated to the Fast Track

Having allowed the appeal, the court considered allocation afresh.

HHJ Salmon concluded that the likely cost of repairs and damages exceeded the £1,000 threshold applicable to housing repair claims. He also found that:

• expert evidence would likely be required;
• there was a significant factual dispute regarding the repairs undertaken;
• recoverable expert fees on the small claims track would be inadequate; and
• a contested trial was likely to last a full day.

Taking those factors into account, the court determined that the fast track was the just and proportionate forum for the claim.

Comment

This decision is a useful reminder that the courts will look at the substance of a claim rather than simply the legal label attached to it.

Where a housing disrepair dispute is resolved through a compromise agreement, landlords should not assume that any later claim for breach of that agreement will automatically be treated as a straightforward contractual dispute and allocated by reference to the general £10,000 small claims threshold. If the claim still seeks to compel repair works and arises directly from allegations of disrepair, the court may well conclude that it remains a housing conditions claim for allocation purposes.

For practitioners, the judgment provides welcome clarification that parties cannot alter the procedural character of a housing disrepair dispute merely by settling it before proceedings are issued. The underlying nature of the claim remains a key consideration when determining the appropriate track.

Craig Leigh is a barrister and Managing Director at 8PP Barristers & Associates.