Fixed terms that then aren’t

Livewest Homes Ltd v Bamber (2019) EWCA Civ 1174

This was the Court of Appeal hearing of a second appeal on the issue of when six months notice of intention to terminate a tenancy must be given under section 21(1B). We noted the first appeal here.

The brief facts.

Ms B was granted a 7 year fixed term tenancy by Livewest, a private registered provider of social housing. The tenancy agreement provided for a 12 month ‘starter’ period (extendable to 18 months), and that during the ‘starter’ period there was a break clause:

2.1 “Break clauses”: We may end the fixed term of the tenancy in the following circumstances. These are called “break clauses”.

2.1.1 During the starter period, or extended starter period, we may give you two months’ written notice ending the tenancy. If we do this we will give you our reasons and you will have the right to have the decision reviewed in line with our published procedure …

2.2 Format of notices: A notice under clause 2.1 may be in any written form.

Following accusations of ASB, and about 6 months in to the starter period, Livewest served a notice ending the tenancy and a section 21 notice with two months notice. Livewest then commenced possession proceedings some three months later.

One of Ms B’s defences was that as her tenancy was for a fixed 7 year term and her landlord was a private registered provider, section 21(1B) Housing Act 1988 applied, such that she had to have been given six months notice of intention not to grant a furthr term. This was unsuccessful on first appeal, as we noted. Ms B appealed to the Court of Appeal.

We noted that the first appeal decision was hard to follow. The Court of Appeal seems to think the same. Most of the argument, it appears centred on the wording of s.21(1B) that “it is a fixed term tenancy for a term certain of not less than two years”. Ms B argued that the first appeal finding that that wording must have effect at the date of the possession hearing would make s.21(1B) pointless, as pretty much by definition, the fixed term would not be in existence at the date of any possession hearing, so that should be read as “it was a fixed term of… “. The key  point, Ms B argued, must therefore be the date of grant, not the date of possession hearing.

After considering material from debates and statements during the passage of the Localism Act 2011, the Court of Appeal said

Against this background I can return to ss.21(1A)-(1B) and to the construction which Dingmans J relied upon. The judge was, I think, wrong to construe the word “is” in s.21(1A) as importing a requirement that the tenancy should remain a fixed term tenancy for a term certain of not less than two years as at the date of the hearing or the date of issue of the possession proceedings. I agree with Mr James (and with Judge Mitchell) that this would make the new statutory provisions inoperable and cannot have been what Parliament intended. Dingmans J’s view that the word “is” should be applied literally would also cause difficulties in a case where a fixed term tenancy granted for a term of two years or more was allowed to expire by effluxion of time before the landlord served a s.21(1B) notice. It seems unlikely to me that Parliament can have intended that the RPSH should be able to avoid giving six months’ notice under s.21(1B) simply by waiting until the contractual expiry of the term. A more rational explanation is that s.21(1A) does no more than to identify the type of tenancy to which the notice provisions in s.21(1B) apply. Looked at in that way, the use of the word “is” makes sense. The use of the present tense was not itself intended to provide a condition which had to be satisfied as at the date of the possession hearing. In the case of a fixed term tenancy of the type described in s.21(1A), the operative provisions are those contained in s.21(1B) which restrict the Court’s power to make the possession order sought unless the notice provisions it contains have been complied with.

Livewest’s argument that the problem with the wording of ‘is a fixed term tenancy’ meant that s.21(1A) and s.21(1B) were inoperable and of no effect, however, got short shrift

I am not attracted to this approach. It is certainly true that the format adopted by the legislation does give rise to some difficulties. If s.21(1B) is intended to be engaged only when the fixed term has expired by effluxion of time there is nothing express in the provisions which limits the obligation to serve the notice to such circumstances. Mr Grundy criticised the appellant’s construction of these provisions under which the requirements of s.21(1B) apply in every case so that the six months’ notice must have been served on Ms Bamber as a pre-condition to the making of a possession order, even though her tenancy did not expire by effluxion of time and the contents of the notice would have no application to the circumstances of her case. But, in my view, these difficulties can be overcome without giving s.21(1B) a strained meaning and without rendering the provisions as a whole inoperable.

The purpose of the requirement to give six months’ notice to a tenant of an AST comprising a fixed term of at least two years is relatively obvious. In such cases it is desirable for the tenant to be given adequate notice of the fact that he or she will need to find alternative accommodation and to make any other arrangements consequent on having to move. The longer the tenant has been there, the more complicated those arrangements are likely to be. The need for the service of a notice informing the tenant that the landlord does not propose to grant him another tenancy is much less obvious in the break clause case. The break notice itself (which is likely to be at least two months’ notice so as to comply with s.21(1)(b)) will of necessity provide that information.

And so, on the interpretation of s.21(1B)

The purpose of a s.21(1B) notice is to inform the tenant under the AST that the tenancy will not be renewed at the end of the contractual term: not on its termination at any earlier point in time. That information is of no relevance to a tenant whose tenancy is brought to an end on notice or by forfeiture earlier during its term. It seems to me that s.21(1B) should therefore be read as a bar to the Court making an order for possession only where the term of the AST has expired by effluxion of time. The careful draftsman might have chosen to insert into s.21(1B) after the word “unless” words such as “where applicable”. But that reading of s.21(1B) arises by necessary implication given the obvious purpose and limitation of the s.21(1B) notice itself. This, I think, was the view taken by Judge Mitchell and, in my judgment, it is the correct construction of these provisions. It also avoids giving s.21(1A) a construction which would render the intended purpose of the amendments unachievable.

The appeal failed on this point, with the Court of Appeal not accepting the arguments of either the appellant or the respondent. The Court of Appeal then went on to deal with some arguments advanced by Livewest, which did not need to be addressed for the disposal of the appeal, but on which the Court of Appeal felt it necessary to express a view.

Livewest raised the question of whether a housing association landlord could ever bring possession claim if it was late in serving the s.21(1B) notice of intention (ie after six months from the end of the fixed term). The Court of Appeal said that did not fall to be decided in this appeal, expressing a tenantive (and obiter) view that the notice could be served late, then proceedings brought.

Livewest also advanced a curious argument that a fixed term tenancy with a break clause “allowing it to be terminated during the first year is not a tenancy for a “term certain” within the meaning of s.21(1A)(a).”

While this was not necessary for disposal of the appeal, the Court of Appeal set out its view on this.

A tenancy granted for a fixed term of, say, two years is limited by grant to a term certain of that duration notwithstanding that it may be brought to an end sooner by forfeiture or by the operation of a break clause. The word “certain” does not mean certain to last for the duration of the term. It means that the lease was granted for a term expressed to expire on a certain as opposed to an uncertain date. A lease granted for two years but with a break clause is nonetheless granted for a term certain of two years. It will end with certainty on that date regardless of any other circumstances.

And on periodic tenancies

The principle that a yearly tenancy (and indeed any periodic tenancy) is “saved from being uncertain” because each party has power to determine the tenancy at the end of each term is an important point, to which I will return below. Suffice it to say at this juncture that the law is settled in this area: the Supreme Court having reconsidered the requirement that all tenancies must be for a term certain, and giving the rule renewed (if, it must be said, grudging) approval in Mexfield Housing Co-operative Ltd v Berrisford(2012) 1 AC 955.

Livewest argued that ‘term certain’ in s.21(1A) must mean something more than the common law definition:

While accepting the existence of this requirement that all tenancies must have certainty of term, Mr Grundy submitted that the words “term certain” are otiose in the context of s.21(1A) HA 1988, such that the draftsman must have intended those words to import some additional meaning aside from the proper understanding of those words at common law. Mr Grundy submitted that, in the context of HA 1988, “term certain” must accordingly be read as excluding any fixed term open to early determination by the operation of a break clause. In making that submission, he placed some reliance on the definition of a “term of years absolute” contained in s.205(1)(xxvii) of the Law of Property Act 1925. He submitted that s.205(1)(xxvii) contrasts a term certain with one which is liable to determination by notice. Section 205(1)(xxvii) states (my emphasis added):

“Term of years absolute” means a term of years (taking effect either in possession or in reversion whether or not at a rent) with or without impeachment for waste, subject or not to another legal estate, and 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); but does not include any term of years determinable with life or lives or with the cesser of a determinable life interest, nor, if created after the commencement of this Act, a term of years which is not expressed to take effect in possession within twenty-one years after the creation thereof where required by this Act to take effect within that period; 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;”

In my view, Mr Grundy’s approach involves a misreading of the statutory definition. Section 205(1)(xxvii) has never, to my knowledge, been read so as to preclude a term from being certain if it can be determined by a break clause. On the contrary, s.205(1)(xxvii) was cited in both Prudential and Mexfield as supporting the common law understanding of those words: see Lord Templeman at p. 391B (in Prudential) and Lord Neuberger at (36) in Mexfield.

In the light of those authorities, I take the view that the definition in s.205(1)(xxvii) does not seek to distinguish tenancies of a certain term from those that are liable to determination by notice. The section is merely attempting to include within its definition of a term of years absolute (at a time when the case law on the certainty of periodic tenancies was far from settled) both those tenancies whose term is fixed with certainty from the outset and those periodic tenancies whose maximum term (in practical reality) is unclear but which are nonetheless saved from uncertainty because each party has the power to determine the tenancy at the end of each term. As Lord Neuberger observed at (33) in Mexfield, the law in this area is now both clear and intellectually coherent.

So, a fixed term tenancy with a break clause is not for an uncertain term. Which is a relief because it would be terrible for all of landlord and tenant law to be wrong because the Supreme Court has misinterpreted s.2015(1) Law of Property Act 1925.

 

About Giles Peaker

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, and still is Nearly Legal on Google +.
Posted in Assured Shorthold tenancy, assured-tenancy, Housing law - All, Possession.

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