Bankway Properties Ltd v Pensfold-Dunsford [2001] 1 WLR 1369...

Facts

• The parties entered an assured tenancy agreement under the Housing Act 1988, with an initial annual rent of £4,680.
• The tenancy conferred statutory protections, specifically security of tenure, on the tenants.
• The agreement included a rent review clause controlled by the landlord, permitting an increase to £25,000 per annum.
• The tenants were in receipt of housing benefits, with rent paid by the local authority.
• The full written agreement was allegedly provided after the tenants took possession.
• The landlord attempted to enforce the clause, demanded increased rent, and sought possession when the tenants could not pay.

Issues

1. Whether a rent review clause in an assured tenancy agreement that permits an unrealistic increase in rent is enforceable if it undermines statutory tenant protections under the Housing Act 1988.
2. Whether such a clause constituted a sham or device intended to circumvent security of tenure.
3. Whether contractual freedom allows parties to agree to any rent, regardless of the statutory framework.

Decision

• The Court of Appeal held the rent review clause invalid as it was inconsistent with the purposes of the Housing Act 1988.
• The purported rent increase to £25,000 was viewed as a device to improperly bypass statutory protections, and was never realistically intended to be paid.
• The possession order was set aside.
• The court emphasized that contractual terms cannot be used to undermine security of tenure granted by statute.

Legal Principles

• Statutory protections in the Housing Act 1988 take precedence over contractual agreements where the two conflict.
• Clauses intended to evade or weaken statutory tenant protections, even if agreed by parties, are invalid.
• The intent and realistic application of rent review clauses are key to determining their validity.
• Freedom of contract does not extend to agreements that contravene the protective aims of relevant legislation.

Conclusion

The Court of Appeal clarified that contractual mechanisms, such as excessive rent review clauses, cannot be used to defeat the statutory protections afforded to tenants under the Housing Act 1988. Contractual freedom is subordinate to legislative intent where assured tenancies are concerned.