Leeds City Council v Broadley  EWCA Civ 1213
This was Leeds’ second appeal of a Valuation Tribunal decision on council tax liability. We covered the first High Court appeal here. Full disclosure, I acted for the intervener in this second appeal, the Residential Landlords Association, with Justin Bates (or as it turns out, Bate) as counsel.
The issue, in brief, was council tax liability where an (assured shorthold) tenant had left the property without the tenancy being terminated by either the tenant or the landlord. Mr Broadley’s tenancy agreements set out the term as
Whereas the landlord agrees to let the premises known as…..for a term of (6 or 12) months and thereafter continuing on a monthly basis unless terminated by either party under the provisions of Clause 3 (a termination clause)
In each of several cases, the tenant had left during the ‘monthly basis’ part of the tenancy. (We have previously called this a contractual periodic element, but this has caused some confusion, because of course, a tenancy may be a contractual periodic from the start, so let’s call it the ‘periodic element’ of the term).
Leeds’ case, both below and in the Court of Appeal, was founded on the view that such a ‘compound’ tenancy, with an initial fixed term and a subsequent periodic element, was void for uncertainty. As such, the contractual provisions of Mr B’s tenancy agreements could only be, alternatively i) two tenancies – a fixed term, then a new periodic tenancy – or ii) a periodic tenancy from the start, with a fetter on possession for the first 6 (or 12) months, or iii), that it was a contractual licence, not an interest in land that would be a tenancy.
Why does this matter? Because in the hierarchy of council tax liability, the tenant is liable for council tax so long as they are in occupation, or if they have a ‘material interest’ of 6 months or more, for the duration of the tenancy. Otherwise it is the landlord who is liable (section 6 Local Government Finance Act 1992).
If Leeds interpretation were right, then the ‘periodic element’ would be a new tenancy of less than 6 months term, or the tenancy would have been periodic from the start, and so less of 6 months term. Thus, when the tenant ceased to occupy the property, the landlord was liable for council tax. A contractual licence would not be an interest in land, no matter what the term, so not a ‘material interest’, so the tenant would only be liable when in occupation.
It is, of course, a lot easier for the council to pursue the landlord for council tax than a tenant who has moved without notice.
But all of this rested on the initial issue of whether such a tenancy was void for uncertainty, and that is exactly where the court of appeal focussed.
The nature of tenancies granted in this form is considered in Woodfall on Landlord & Tenant in its current edition (at para. 5.076); and the law is there stated (as broadly in all previous editions in my experience) as follows:
A demise for “one year from the date hereof, and so on from year to year, until determined by three months’ notice,” creates a tenancy for two years at the least, determinable at the end of the second or any subsequent year by notice expiring at the end of such year. A fortiori such a tenancy will be created where the words are “for the term of one year certain and so on from year to year.” A demise “for years” will also create a lease for two years. Similarly a demise “for six months, and so on from six months to six months until determined by either party,” will create a tenancy for one year at the least. A tenancy “for two years certain and thereafter from year to year” can only be determined at the end of the third or any subsequent year. But a tenancy for 12 months certain, and six months’ notice to quit afterwards, has been held to be determinable at the end of the first year, and a term of two years from a stated date, and the quarterly, subject to three months’ notice on either side expiring on any quarter day, was held to be a term for two years and then on a quarterly basis, subject to the three calendar months’ notice.
A demise may be made from two years to two years, or from three years to three years, or like. So a lease may be made for seven years, and afterwards from year to year. However, an agreement to let from year to year, for so long as the tenant pays rent, and the landlord has power to let, is void as lease and confers no particular estate beyond a tenancy from year to year.”
The authorities construing grants of this character in this fashion, referred to in the footnotes to this paragraph of the textbook date back to 1605.
In Doe d. Chadbourn v Green (1839) 9 A & E 658 a tenancy for a “term of one year, from the date hereof, and so on from year to year” was said by Lord Denman CJ (for himself, Littledale, Williams and Coleridge JJ) to “give…a term for a year and so on from year to year…for the language of the contract clearly contemplates a term longer than one year”, i.e. a single term.
In R v The Inhabitants of Chawton (1841) 1 QB 247, the question arose whether a letting was for at least one year. The grant was “for the term of six months from the 1st day of January next…and so on for six months to six months, until one of the said parties shall give to the other of them six calendar months’ notice in writing to determine the tenancy”. It was held to be a letting for at least one year.
Brown v Trumper (1858) 2 Beav. 11 concerned a lease for seven years and afterwards from year to year if notice were not given to terminate at the end of seven years. It was held by Romilly MR that the lease was a “… a demise for seven years certain, and for so much longer as they should think fit, with liberty to either party to put an end to it”.
It seems to me that all these authorities point to the result that grants in the form such as those made by the present agreements are single grants for a fixed term followed by a periodic tenancy thereafter. They were valid grants at common law and no doubt was ever cast upon that.
Did the Law of Property Act 1925 make any difference to this prior common law position? Section 1(1) LPA provides that only fee simple or a term of years absolute can be created as estates in land. Section 205(1)(xxvii) states
“Term of years absolute’ means a term of years . . . either certain or liable to determination by notice, re-entry, operation of law, or by a provision for cesser on redemption, or in any other event (other than the dropping of a life, or the determination of a determinable life interest); . . . and in this definition the expression ‘term of years’ includes a term for less than a year, or for a year or years and a fraction of a year or from year to year; …”
Leeds argued that while a fixed term, or a periodic tenancy was within the terms of the LPA, “an amalgam of the two is invalid as being void for uncertainty and/or as not being within the contemplation of the 1925 Act.”
The Court of Appeal referred to Prudential Assurance Co. ltd. v London Residuary Body & ors.  2 AC 386 and Mexfield Housing Co-operative Ltd. v Berrisford  UKSC 52 as both taking the view that the LPA 1925 “seemed to underwrite the established common law position”, rather than invalidating the previous common law position on ‘hybrid’ tenancies.
Leeds’ follow up argument that an ‘invalid’ fixed term and subsequent periodic hybrid agreement would be rescued by s.5 Housing Act 1988, so a statutory periodic (and new) tenancy would arise after the fixed term, was therefore also dismissed. The situation, on these agreements, simply did not arise.
So, in dismissing the appeal
In essence, therefore, I agree with the solution to the present problem arrived at by the Tribunal and by the judge. However, I disagree with the judge’s comment (at paragraph 31) that the definition of the tenant’s term is a “modern contrivance”; it is not, as the textbooks and authorities demonstrate. Further, quite apart from any advantage with regard to council tax that the judge perceived, there is obvious benefit to both parties to the lease in giving a degree of initial certainty of the term’s duration, with a degree of flexibility thereafter. This is a commercial advantage to which Mr Broadley speaks from his own experience as a landlord on the sixth page of his skeleton argument (p.35K of the appeal bundle). It is, however, an obvious commercial reality, quite apart from any fiscal issues, to which I think we are entitled to have regard in construing the agreements.
And, because I acted for the intervenor, I have to quote
I would add that the conclusion to which I have come is essentially that for which Mr Bate contends in his written submissions for the intervener. I found those submissions most cogent.
I have to say (as I would) that this is the right result. If certainty of term is satisfied by a fixed term, or by a periodic tenancy, it is surely satisfied by an initial specified term followed by a periodic one. This was the common law position and the LPA 1925 does not displace it.
Of course, unless any landlords reading this get over excited, the argument does not apply to a tenancy for a fixed term, followed by a statutory periodic tenancy arising by way of s.5 HA 1988. We know from Superstrike that a statutory periodic is a new tenancy, and it is for a term of less than 6 months. So if the tenant ceases to occupy during the statutory periodic, without formally ending the tenancy, the landlord will indeed be liable for the council tax. The issue here is solely liability where the tenancy agreement is for an initial term (of at least 6 months) followed by a periodic term.
It should also be noted that Leeds conducted the appeal on an eminently civilised and proper basis. The sums at issue in respect of Mr Broadley were relatively small – a few hundred pounds – though the sums involved in the principle for Leeds and all other councils will more likely run into six figures.
Leeds took the view that this was an issue of law and principle that required deciding and that costs would not be sought from Mr B if Leeds were successful. It was also agreed by appellant, respondent and intervenor that no costs would be sought on the intervention, either way. Mr Broadley was in person thoughout, and of course won the Tribunal and first appeal, but counsel for Leeds actively sought to ensure that the legal issues were fully argued before the court of appeal.