The flexible tenancy, that marvellous and oxymoronic invention of the Localism Act, is now in place and in use by a number of Councils. The last time I considered flexible tenancies it was largely about how they were created and how they were terminated at the end of the fixed term (there was also this CPDCast. Which may or may not still be free).

Now, given that they exist, and given that people will do things like get into arrears or cause a bit of a nuisance, before the end of their fixed term, it is time to have a look at how flexible tenancies can be ended during the fixed term. I am prompted to do so by an excellent article in the Journal of Housing Law (Vol 17 Issue 1) by Andrew Dymond of Arden Chambers. His article really should be read – anything of interest in the following is due to him, and any errors are of course my own. (Also, if you are not reading the JHL, why not? It routinely has very good and useful pieces in it.)

The first thing to note is that because a flexible tenancy is not a weekly or monthly periodic secure tenancy, Housing Act 1985  s.82(1), (1A) and (2) do not apply. Instead sections (3) and (4) do.

(3) Where a secure tenancy is a tenancy for a term certain but with a provision for re-entry or forfeiture, the court shall not order possession of the dwelling-house in pursuance of that provision, but in a case where the court would have made such an order it shall instead make an order terminating the tenancy on a date specified in the order and section 86 (periodic tenancy arising on termination of fixed term) shall apply.

(4) Section 146 of the Law of Property Act 1925 (restriction on and relief against forfeiture), except subsection (4) (vesting in under-lessee), and any other enactment or rule of law relating to forfeiture, shall apply in relation to proceedings for an order under subsection (3) of this section as if they were proceedings to enforce a right of re-entry or forfeiture.

So, i) the tenancy agreement must have a provision for re-entry or forfeiture. ii) A possession claim is actually forfeiture proceedings. iii) when an order is made under s.82(3), it terminates the fixed term, but a periodic tenancy arises, via s.86:

(1)Where a secure tenancy (“the first tenancy”) is a tenancy for a term certain and comes to an end—
(a)by effluxion of time, or
(b)by an order of the court under section 82(3) (termination in pursuance of provision for re-entry or forfeiture),a periodic tenancy of the same dwelling-house arises by virtue of this section, unless the tenant is granted another secure tenancy of the same dwelling-house (whether a tenancy for a term certain or a periodic tenancy) to begin on the coming to an end of the first tenancy.
(2)Where a periodic tenancy arises by virtue of this section—
(a)the periods of the tenancy are the same as those for which rent was last payable under the first tenancy, and
(b)the parties and the terms of the tenancy are the same as those of the first tenancy at the end of it;except that the terms are confined to those which are compatible with a periodic tenancy and do not include any provision for re-entry or forfeiture.

This means, I think, that any claim to bring to an end a flexible (fixed term) secure tenancy as a forfeiture claim should also simultaneously be pleaded a claim for possession against the periodic tenancy that arises via s.86 on an order made under s.82(3). I suspect this may not be widely understood.

The grounds for possession are the familiar grounds of Schedule 2 Housing Act 1985, and there are the usual requirements for it to be reasonable to make a possession order and/or suitable alternative accommodation being available. But the notice seeking possession is in a different prescribed form, as per Part II of the Schedule to the Secure tenancies (Notices) Regulations 1987.

And then to the good bits. Remember s.82(4) HA 1985 above?

Section 146 of the Law of Property Act 1925 (restriction on and relief against forfeiture), except subsection (4) (vesting in under-lessee), and any other enactment or rule of law relating to forfeiture, shall apply in relation to proceedings for an order under subsection (3) of this section as if they were proceedings to enforce a right of re-entry or forfeiture.

I suspect not that many housing lawyers, let alone Council housing departments, will be altogether familiar with the enactments and rules surrounding forfeiture. A few quick points…

The forfeiture clause in the tenancy agreement, for rent arrears cases, must specify that the right to forfeit arises ‘whether rent has been formally demanded or not’. If it doesn’t then the landlord must formally demand the rent before the right to forfeit arises on arrears of rent.

Rent arrears claims do not require the additional step of a notice under s.146 Law of Property Act 1925, on which more below. But they are not without perils of their own for the landlord.

The provisions for relief from forfeiture in the County Courts Act 1984 apply.

S.138(2) provides that if the lessee (tenant) pays all the arrears of rent and the costs of the action into court or to the landlord not less than 5 clear days before the return day of the claim (first hearing), then the action shall cease and the tenancy continue without interruption. This is perhaps a little unclear, as forfeiture ends a tenancy on issue of claim – hence the emphasis on ‘without interruption’, but s.82(3) require an order of the court to end the tenancy. Quite what the courts ill make of that remains to be seen, but the best guess is that making the payments in s.138(2) 5 clear days ahead of hearing would stop the landlord obtaining an order ending the fixed term.

But, if this payment of arrears and costs is not made 5 clear days ahead of hearing, then s.138(3) applies. This means an order for possession must give at least 4 weeks before date of possession, and if the arrears and costs are paid within that 4 weeks, the possession order will not take effect. In terms of a flexible tenancy, this presumably (though not certainly) means that the fixed term would be re-instated.

For non-rent arrears claims (e.g ASB, or other breach of tenancy), there must be another step. S.146 Law of Property Act 1925 requires service of a notice, which must:

1. Specify the breach complained of
2. If the breach is capable of remedy, require the tenant to remedy it (no time period needs to be specified but a reasonable time must elapse before proceedings)
3. require compensation in money for the breach (though a failure to require compensation does not invalidate the notice)

This, it is worth noting, is in addition to the Notice Seeking Possession. It is a separate notice.

There is also a requirement, for non-rent forfeiture claims, for a court or tribunal (First Tier Tribunal (Property Chamber)) to have determined that a breach of tenancy conditions has occurred before a s.146 notice can be served (which is 14 days after the date for appeal of the determination has passed). As far as I can see, this would apply to flexible tenancies. So, for instance, a possession claim based on tenant nuisance would require a court or tribunal to have determined that a breach had occurred before a s.146 notice could be served – possibly at the same time as the Part II 1987 regulations notice – and then the possession claim commenced. So, a whole preliminary set of proceedings.

There is a whole set of case law on whether nuisance and annoyance is a remediable breach, entirely separate and quite different from the Housing Acts. I’m not going to go into detail here, but this is something people should be aware of.

It is also worth noting the very wide discretion of the court to grant relief from forfeiture under s.146(2):

Where a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture, the lessee may, in the lessor’s action, if any, or in any action brought by himself, apply to the court for relief; and the court may grant or refuse relief, as the court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court, in the circumstances of each case, thinks fit.

Again, relief from forfeiture would presumably mean that the fixed term tenancy continued. But if forfeiture is granted, as noted above, a periodic tenancy arises under s.86 Housing Act 1985. So the possession claim must deal with both.

Waiver. Now waiver is going to be an issue! If the law on forfeiture applies, as s.82(4) states, then the common law rules on waiver must also apply.

Once the landlord has elected to forfeit, any action incompatible with the decision to forfeit can (and often does) amount to the landlord having waived the breach. The most common example of waiver would be a demand for, or acceptance of rent after service of a s.146 notice.  So, if there is a demand for, or acceptance of rent by the landlord, in the period between electing to forfeit (service of notice seeking possession and/or a s.146 notice) and the issuing of proceedings, there is an arguable waiver of the right to forfeit.

While in rent arrears cases any payment will usually be appropriated to the arrears, and thus not be taken as an acceptance of post-election rent, it remains the case that a demand for rent – for example, a post-NSP letter demanding payment of arrears and current rent – could arguably be a form of waiver. If the courts do apply the law of forfeiture rigorously, this will present difficulties for the local authority landlord.

S.86 also has a curious effect on the mandatory ground for possession under s.107D Housing Act 1985 (as amended). This is the ground for possession at the end of the fixed term.  But consider the position if the landlord has brought possession proceedings during the fixed term (so not under s.107D), and has either not sought at the same time to terminate the periodic tenancy that arises under s.86, or perhaps the court has terminated the fixed term but made a suspended possession order on the periodic that arises.

The fixed term has been terminated, so s.107D is of no use to the landlord (including all the potential reasons for not granting a further term – earning too much, not being in employment or training etc.). But a periodic secure tenancy has raised by operation of s.86 and has not been terminated. The result is that the tenant has an old style secure periodic tenancy, albeit potentially one with an SPO hanging over it. Perversely, then, the former ‘flexible tenant’ who has faced possession proceedings may be in a rather better position than a flexible tenant who hasn’t.

Overall, there appears to be quite a lot of action in the courts ahead to be had.  Housing lawyers should be doing a crash course in forfeiture, for starters…