Repairs and stock transfer

Mr Smith was a Rent Act-protected tenant. His landlord, Mr Walker, failed to keep the house in repair. Smith responded by withholding his rent. Walker then sold the property to a Mr Muscat and transferred to him the benefit of the arrears of rent. Mr Smith did not pay his rent to Muscat as the repairs remained outstanding.

Muscat brought a claim for possession based on the arrears of rent. Smith defended the claim on the basis that he could set against the arrears of rent the compensation he was due as a result of Walker's failure to repair. Muscat said Smith had to take a case against Walker in respect of that.

The Court of Appeal decided that "setting-off" compensation accruing against the old landlord in a claim brought by a new landlord was legally permissible. The new owner took the benefit of the old arrears and with them the burden of the previous landlord's default. It sent the case back to the local county court to decide how much compensation was due and what proportion of the arrears that would extinguish.