The recent decision of the Court of Appeal in Ali v Khatib [2022] EWCA Civ 481 (“Khatib”) will have come as a nasty surprise to most insolvency practitioners who are seeking to recover an occupation rent from a wife or cohabitant who has continued living at a jointly owned property following their partner’s insolvency.
Prior to Khatib the recovery of such rents was almost axiomatic as a consequence of the judgment of Blackburne J in French v Barcham [2008] EWHC 1505 (Ch) (“Barcham”). A widely reported and widely followed decision that held that an occupation rent “…will ordinarily, if not invariably …” be awarded in such cases because trustees in bankruptcy enjoy no right to jointly occupy a co-owned property or, if they do, it would almost always be impractical for them to exercise it. Trustees did not need to show that they had been “ousted” from the salient property by the occupying co-owner (as was the case between solvent cohabitants) because their “exclusion” was a consequence of their office. The “rule” was not absolute but required the occupying co-owner to point to some pre-insolvency promise or understanding for their sole occupation if was to be avoid it; see Davis v Jackson [2017] EWHC 698 (Ch) (“Jackson”).
All that has now changed as a result of the judgments in Khatib. Adopting obiter dicta in the judgment of Snowden J (as he then was) in Jackson the Court of Appeal has disapproved or overruled Barcham and found that occupation rents are the exception and not the rule. Absent an act of ouster by the occupying co-owner or their renting out of the jointly owned property, trustees cannot expect to recover any rent unless they can point to some other instance of injustice. An exacting test which will not be satisfied in most cases where a spouse or cohabitant has just continued living at a jointly owned home.
Furthermore, the judgments in Khatib are likely to add grist to the mill of many a dispute between co-owners because they suggest that a rise in the value of a jointly owned property may provide a reason for not awarding an occupation rent in the court’s exercise of its “broad” discretion. As most properties have risen in value over the last decade and as Khatib found that it is not necessary for such a rise to equal or exceed the occupation rent that might otherwise have been payable, or for the excluded co-owner to have delayed in seeking a sale, occupying co-owners will now almost certainly cite this decision as a reason for not paying any rent.
Clifford Darton KC acted for the unsuccessful appellant in Khatib instructed by Mr Simon Care and Ms Keira-Anne Dowsell of Berry Smith. He is now instructed on the application for permission to appeal to the Supreme Court.