01/08/2016

Council tax, periodic tenancies, and the end of L&T law avoided

We’ve seen the issue of who is liable for Council Tax when a tenant has left a property before the end of a periodic tenancy arise before. Here, the Upper Tribunal decided that a statutory periodic monthly tenancy following a 6 month fixed term did not amount to a ‘material interest’ of over six months such that the tenant would remain liable for Council Tax, while here in the Shropshire decision (and amusingly featuring NL) the Valuation Tribunal decided that a contractual periodic tenancy following on from a fixed term of 6 months did amount to a material interest such that the tenant remained liable.

Now this latter question – a contractual periodic tenancy following a 6 month (or 12 month) fixed term has been decided by the High Court. And could have brought the basic structure of landlord and tenant law crashing to the ground…

Leeds City Council v Broadley [2016] EWHC 1839 (Admin)

Mr B was the landlord of a number of properties, all let on tenancies which were for 6, or 12 month fixed terms followed (as a contractual provision) by monthly periodic terms. Leeds City Council had sought Council Tax for the properties from Mr B for periods when the tenants had left but the tenancies had not been formally ended (by either party)

A Valuation Tribunal, the Vice President had followed the Shropshire decision above (which he had also made) and found the tenancies were a continuous material interest of over 6 months. Leeds appealed. The parties’ contentions were broadly:

i) Mr. Broadley submits that the contract created a single tenancy whose term was 6 months and thereafter continuing as a monthly tenancy. This would have the same effect as a fixed term assured shorthold tenancy, but would be the result of the contract rather than the effect of statute at the conclusion of the fixed term.

ii) Ms. Bretherton QC (for Leeds) submits that a single tenancy cannot be both a fixed term and a periodic tenancy as this would offend the principle of uncertainty. Therefore she contends either

a) the words used must be construed against the legal context in which they were chosen and that the contractual term is a fixed term of 6 months at the conclusion of which a new statutory tenancy was created by statute and the conduct of the parties in continuing to pay and accept rent; or

b) the lease created a periodic monthly tenancy with a fetter on the giving of notice to terminate before the expiry of 6 months; or

c) Finally, and only in reply and somewhat faintly, she suggests that the parties created a contractual licence.

Leeds basically argued that such a tenancy would fall foul of the requirement for term certain. The roll call of Prudential Assurance Co Ltd v. LRB [1992] 2 AC 386, Mexfield Housing Co-Operative Ltd. v. Berrisford [2011] UKSC 52 and Hammersmith & Fulham LBC v. Monk [1992] 1 AC 478 was made. In addition, Superstrike Ltd. v. Rodrigues [2013] EWCA Civ 669 was relied on for the proposition that  periodic tenancy arising at the end of a fixed term was a new tenancy (a statutory periodic in that instance). The contention was that the tenancy agreements created two tenancies. First the fixed term, then a second periodic tenancy. Alternatively, it was a periodic tenancy from the start, with a fetter on giving notice for the first 6 (or 12) months, but the interest was therefore less than a six month term.

The High Court noted Baroness Hale’s exposition on periodic tenancies and certainty of term in Mexfield, and then went on to find:

30. The answer to Ms. Bretherton’s submission is that this tenancy as granted by the plain words of the agreement does not offend against the rule against uncertainty as I have just expressed it. This tenancy agreement created a term which is neither simply a fixed term nor a periodic tenancy, nor one followed by the other. It is a term which has the characteristics of a fixed term followed by a periodic tenancy. Fixed terms and periodic tenancies are both capable of being created under the Law of Property Act 1925 and are not void for uncertainty at common law. Why should a term become uncertain because it is comprised of two successive periods of time each of which is sufficiently certain for the purposes of the relevant rule? There is no prospect of the term being perpetual because its termination depends on an event which may never happen. Alternative constructions would be that (1) the agreement creates a monthly tenancy with a fetter on the giving of notice in the first 6 months, or (2) the agreement creates two tenancies a fixed term followed by a periodic tenancy. If those are not bad for uncertainty I do not see why the formulation used in the agreement should be. All three formulations have the same practical effect and legal consequences so far as the termination of the tenant’s holding is concerned. There is no basis for finding that one is repugnant and the other two not. They are all equally uncertain or, to put it another way, equally certain. For this reason I reject the appellant’s argument that it is legally impossible to have a single tenancy comprised of both a fixed and periodic term. The only reason for wishing to define a term in this way appears to be to secure a benefit for the landlord in relation to his Council Tax liability. It is a modern contrivance. Such a term has not therefore received the attention of the courts over the centuries. The uncertainty rule, which was developed long before anyone considered granting a tenancy in these terms, should not be extended to invalidate it.

So, there was no uncertainty of term. And the terms were of over 6 months, and as such a valid material interest. The Council Tax liability remained with the tenant.

And landlord and tenant lawyers in general heave a sigh of relief that some of the basic principles of tenure were not abandoned for a few hundred quid in Council Tax, despite Leeds best efforts. If this had gone the other way, imagine would it would have done to any concept of a fixed term with monthly rent. Or all the statute around deposit protection. Or indeed Housing Act 1988 itself.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

18 Comments

  1. Romain

    I think urgent to clarify that a ‘contractual periodic tenancy’ is just a periodic tenancy. The term ‘contractual’ is added to make clear that the tenancy is not statutory, which is the more common type of periodic tenancy in the context of the Housing Act 1988.

    Certainly a contractual periodic tenancy can follow a fixed term tenancy in the same way as a statutory periodic tenancy does, i.e. as a separate tenancy, and will be treated in the same way.

    Reply
    • Giles Peaker

      Yes – I think this was clear from the post – what is at issue are tenancies with an initial fixed term (here 6 or 12 months) followed by a periodic specified in the tenancy agreement. These are NOT new tenancies but are contractual periodic after the fixed term.

      Reply
    • Romain

      Maybe I am being pedantic but the post suggests “a statutory periodic monthly tenancy following a 6 month fixed term” vs. “a contractual periodic tenancy following on from a fixed term of 6 months”, which is misleading at best.

      Even “an initial fixed term (here 6 or 12 months) followed by a periodic specified in the tenancy agreement” is not completely clear in my view as, to me, this also suggests a second tenancy following the initial fixed term tenancy.

      It is really about a single tenancy starting with a fixed term and _continuing_ periodically. My point is that this single tenancy shouldn’t be referred to as “contractual periodic tenancy”.

      Reply
      • Giles Peaker

        Not only pedantic, but a bit wrong.
        Those are two different situations – that is the point of this judgment. A statutory periodic is a new tenancy (for the reasons set out in Superstrike – the actual wording of statute). On the other hand, a tenancy agreement which says ‘6 months and monthly thereafter’ is one tenancy – with the period after 6 months being a contractual periodic.

        It is not that the whole of such a tenancy is a contractual periodic, obviously. But there is one contract – for a fixed term then periodic continuation.

        (And is routinely called a ‘contractual periodic’ by everyone, because that is what it is)

        That actually is the law, as per this judgment…

        Reply
    • Romain

      I don’t think I am wrong.

      If an agreement provides that a new periodic tenancy is to be created after the end of the fixed term tenancy then that second, separate tenancy may be accurately called a “contractual periodic tenancy”.
      This is the exact contractual equivalent of the case when the periodic tenancy is created by statute.

      But if an agreement is that a single tenancy be created, and to start by a fixed term then continuing periodically then the periodic term, or indeed the whole tenancy, should be called “contractual periodic tenancy” if only for the sake a clarity but also because that’s not the case.

      You will have noticed that the judgement is careful in its use of terms, and does not use the term “contractual periodic tenancy” but rather “periodic term”.

      I have already read and heard many times that the tenant remains liable for council tax if the tenancy is a “contractual periodic tenancy”, which is not the case at all. Hence why I’m keen to be strict on proper terms.

      Reply
  2. Nick Parkin

    Thank you for this welcome news, at least today there can be no doubt on a Landlord’s responsibility for Council Tax when a tenant goes but the tenancy isn’t ended.

    Unfortunately this is of little help in the permanent battle with councils over Council Tax, they know the law, and know that they can’t be made to follow it.

    In my own problem with my Council – they clearly have a policy that Landlords are much easier to chase for rent than tenants, and so every chance that they get they issue a Council Tax Demand, and then a Summons, and once there is a Court Order the Landlord is sunk, there is no route that can appeal it.

    Landlords tend not to see the Council Tax Demand, Summons, or Court Order, because the tenants don’t forward them. I have on one occasion gone to Court to challenge the Summons, but that is pointless because the truth is that there is no Court, and no Judge. In the Court building is a team of Council Employees settling Council Tax debts, or issuing Court Orders, so you are better off just phoning the Council.

    In my most recent case the Council decided set a Council Tax rate for each room in an HMO (because of private facilities), and to back date the change. I gave them complete details of dates and addresses for all the tenants who were due to pay the Council Tax, and terminated my own Direct Debit paying the Council Tax.

    I am now being pursued by Debt Agency Bailiffs for the Council Tax for 6 different rooms. I suspect that they may not have sent out any paperwork because I don’t see how 6 sets of Council Tax Demand, Summons, and Court Orders can disappear. However it seems that our legal system does not offer a easy cheap way of appealing a Local Authority action that is clearly wrong.

    I made an appeal to the Local Authority Ombudsman to be told that they do not have any authority, and I need to present a case to the Valuation Tribunal.

    It’s all very well having clear laws, but what we need is some legal mechanism to force Local Authorities to obey the law.

    Reply
    • Giles Peaker

      Just to be clear – the landlord will be liable if the tenant departs in a statutory periodic tenancy arising after a fixed term – that counts as a new tenancy and not granted for 6 months or more. See http://nearlylegal.co.uk/2014/01/shorthold-tenancies-and-council-tax-liability/

      The CT summons can be contested. The operation is set up for the mass processing of uncontested demands. But the Magistrates must hear a contested case. That said, procedure is complex is what is being made is a challenge to a liability order already made – See http://nearlylegal.co.uk/2016/04/misc-taxes-council-bedroom/

      A lot of the time, people don;t take steps – or assume a letter will do the trick and get rolled over. The time to seriously dispute is before a liability order is made.

      Reply
    • Nick Parkin

      Not easy if the Council don’t send you the Summons!

      Reply
  3. kjetilniki

    There was nothing wrong in Leeds approach insofar as it claimed there were 2 tenancies — para 5[a][i] (altho’ without the submission that a single tenancy cannot be both a fixed term and a periodic tenancy) — the fixed term followed by the periodic tenancy. (There were alternative propositions.) As to the subsequent periodic tenancy the term (period) would be the everspringing (until terminated) month and thus not granted for a term certain of 6 months or longer and thus not a “material interest” and thus when it was not the tenant’s main or only home the Landlord (unless not an “owner”) would be liable for the Council Tax.

    I don’t read that part of the submission should result in

    “And landlord and tenant lawyers in general heave a sigh of relief that some of the basic principles of tenure were not abandoned for a few hundred quid in Council Tax, despite Leeds best efforts. If this had gone the other way, imagine would it would have done to any concept of a fixed term with monthly rent.”

    Reply
    • Giles Peaker

      Yes, it was the alternative ‘always periodic’ submission I was referring to. But I think there was a lot wrong with the ‘two tenancies’ position too, considering in particular that Superstrike relied on the precise wording of HA 1988 to establish a stat periodic as a new tenancy.

      Reply
  4. Claire

    Thank you for this post.

    Would the clause below be deemed contractual as it is specified in the agreement even though references statutory?

    If on the coming to the end of the fixed term agreed above, the Landlord does not seek possession and the Tenant remains in the property, they will be considered, by virtue of section 5 of the Housing Act 1988, to have a statutory periodic tenancy. This will continue till ended by either party.”

    Reply
  5. Giles Peaker

    Leeds CC appeal to Court of Appeal dismissed 16/11/2016. Judgment to follow.

    Reply
    • Giles Peaker

      Will be a post as soon as CoA judgment available.

      Reply
  6. Arnold Kruger

    Do I understand correctly that it is only when a tenant leaves before the end of a statutory periodic tenancy that the landlord becomes responsible for the council tax? I ask because the Landlord Law website seems to state that now in a statutory periodic the landlord is entirely responsible for payment of council tax from the beginning of the periodic period.

    Reply
    • Giles Peaker

      Yes, only when the tenant leaves. If the tenant is in occupation, they are liable.

      Reply

Trackbacks/Pingbacks

  1. The significant advantages of contractual periodic tenancies - […] is set out in the Nearly Legal blog post here. Where you have a fixed term, the tenant is…

Leave a Reply (We can't offer advice on individual issues)

This site uses Akismet to reduce spam. Learn how your comment data is processed.