Estoppel-a possible defence to possession proceedings?

Carmel Ferguson, Solicitor with Housing Rights Service discusses the possibility of using estoppel as a defence in possession proceedings. 

A recent query on our advice line raised the question of whether the principle of estoppel could be used as a defence to certain possession proceedings in the private sector.

We were recently contacted by a private tenant who had taken out a sizeable private loan to pay for a new kitchen in the home he was renting.  The client had taken out the loan and carried out the work after being promised a “life long” tenancy by the landlord.

The client contacted Housing Rights Service because he had been issued with Notice to Quit by the landlord who had decided to sell the property as the landlord had fallen behind on the mortgage payments.

What is estoppel?

Estoppel is a legal rule.  It prevents someone from relying upon certain rights, or upon a set of facts (e.g. words said or actions performed) which is different from an earlier set of facts. It is not set out in statute but arises from common law.

Propriety estoppel is said to arise when a person has acted in reliance of a belief that he will acquire rights in or over another’s land. Usually this would arise where a person has erected buildings or carried out improvements to another’s land

Even if the property owner just stood by and let another person act to their detriment under a misrepresentation or mistake, they can be stopped from later alleging a different state of affairs.

Tenant who has acted to their detriment on representation made by landlord

In this client’s case, the tenant had installed a new kitchen at a cost of £10,000. He had done this, he said, because the landlord had told him that he could live in the property as long as he wanted.

The landlord had then apparently run into financial problems and decided to sell the house. The tenant had complied with all his responsibilities under the tenancy agreement. The landlord had not offered to compensate the client for the money spent and the tenant was concerned that he would have to continue making payments on a loan without being able to enjoy the facilities that the loan had paid for.  He was further concerned that the landlord would now secure a much higher price for her property as a result of the improvements financed by the client.

Using estoppel as a defence at court

To evict this tenant the landlord must follow due process in seeking possession of the property. They must first serve the appropriate Notice to Quit, and then apply for a court hearing if the tenant has not left by the date this notice expires.

At court, the tenant could defend the proceedings and counterclaim on the grounds of proprietary estoppel. The tenant would argue that the landlord is not entitled to have possession of the property because of the earlier promises that the landlord had made.  The tenant had only taken out the loan because of his belief that he would acquire rights over the property; based on the landlord’s promise of a life long tenancy.

The tenant had fully complied with his duties under the tenancy agreement and carried out expensive refurbishment of the property on the specific understanding that he could stay there as long as he wanted.

How to use estoppel as a defence

To succeed in this defence the tenant must prove

1. that a promise was made and
2. that the tenant acted on that promise to their detriment.

This will be easily proven if there is a written agreement. Otherwise, the tenant will have to convince the court, on their evidence that a verbal agreement was entered into.

The tenant would need to provide receipts or other proof for work done at the tenant’s expense. If no receipts are available, the tenant could rely on photographic evidence, testimony from contractors who carried out the work, or their own testimony.

If a tenant believes that this defence may apply to them, they should seek legal advice. If the tenant defends proceedings and loses the case, the landlord’s legal costs would probably be awarded against the tenant.

What could this tenant do?

In this particular case, we suggested that the tenant attempt to negotiate further with the landlord, perhaps with the assistance of a solicitor, to try to find an acceptable arrangement. 

While estoppel could provide a defence to the eviction, this defence would not assist the client should the property be repossessed by the bank.  Regardless of the arrangements between tenant and landlord, the bank still had a right to repossess the property if the landlord fell into default.

The hazards of paying for improvements to rented properties

We strongly discourage private tenants from footing the bill for improvements to properties they rent.  The landlord is generally under no obligation to reimburse a tenant for any improvements the tenant has carried out.  In the past, we’ve spoken with periodic tenants who have paid for new floors, only for the rent to be increased or the landlord to issue notice to quit as soon as the work is complete.

If a tenant approaches you suggesting this type of arrangement, ensure they are fully aware of the associated risks of paying to improve the landlord’s property.  The work which they have carried out does not give them any stronger rights to remain in the property and does not entitle them to any compensation if the landlord decides to recover possession.