Croydon London Borough Council v Kalonga (2021) EWCA Civ 77
This is the Court of Appeal judgment of Croydon’s appeal from the High Court decision that we noted here. The issue was what was required for determination of a flexible tenancy during the fixed term and whether a forfeiture clause was required. The detailed factual background and the High Court’s findings are in the earlier post. Suffice it to say that Croydon had sought possession during the fixed term of a flexible tenancy by serving a notice seeking possession on grounds 1 and 2 Schedule 2 Housing Act 1985. In the possession claim, Croydon had served a reply to defence stating that it did not rely upon forfeiture as a ground of possession. The possession claim was dismissed in the High Court.
The issues for the Court of Appeal were:
i) the meaning of “a tenancy for a term certain but subject to termination by the landlord” in section 82(1)(b) of the 1985 Act. Section 82(1) reads:
82.(1) A secure tenancy which is either—
(a) a weekly or other periodic tenancy, or
(b) a tenancy for a term certain but subject to termination by the landlord,
cannot be brought to an end by the landlord except as mentioned in subsection (1A).
As the Court of Appeal decided, this went to the issue of whether a forfeiture clause was required, as “a periodic tenancy could only be brought to an end by obtaining an order for possession, while a fixed term tenancy could only be brought to an end by obtaining an order for termination pursuant to a forfeiture clause (whereupon a periodic tenancy would come into effect”, and subsection 82(1A)(a) – a possession order – did not apply. Rather 82(1A)(b) and 82(3) applied – thus:
(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.
So, a forfeiture clause was needed, because both a termination order by way of forfeiture and a possession order against the arising periodic tenancy were required.
ii) Was a s.146 notice required?
The Court of Appeal said yes.
Such a tenancy agreement can only be brought to an end by the route specified in section 82(1A)(b), that is to say, pursuant to section 82(3). Section 82(4) is clear that, where applicable, a notice under section 146 of the 1925 Act must be served. As counsel for the Tenant pointed out, there is nothing to stop a landlord from serving a notice under section 146 and a notice under section 83(1)(a) of the 1985 Act, and then bringing proceedings both for termination of the fixed term tenancy and possession against the periodic tenancy which will then arise.
iii) Did Croydon’s tenancy agreement contain a forfeiture clause?
The High Court had found that the tenancy agreement did not contain what could be a forfeiture clause. The Court of Appeal agreed:
It is common ground that a forfeiture clause must satisfy the test laid down by Fox LJ giving the judgment of the Court of Appeal in Clays Lane Housing Co-Operative Ltd v Patrick (1984) 17 HLR 188 at 193:
“… a right to determine a lease by a landlord is a right of forfeiture if (a) when exercised, it operates to bring the lease to an end earlier than it would ‘naturally’ terminate; and (b) it is exercisable in the event of some default by the tenant.
The reference to ‘natural’ termination in this definition means in the case of a lease for a fixed term, the contractual expiry date …”
The Landlord contends that at least clauses 3 and 10 of the Tenancy Agreement constitute forfeiture clauses. The judge did not accept this. As she concisely put it at (22): “the service of a notice seeking possession or the application to the court for a possession order is not the same thing as the exercise by a landlord of its right to determine the tenancy agreement before the end of the fixed term in the event of default by the tenant”.
Notwithstanding the arguments to the contrary advanced by counsel for the Landlord, I agree with this.
This has been going on for some time – we first noted the argument about forfeiture almost exactly seven years ago – but what this judgment means is as follows:
A flexible tenancy can only be ended during the fixed term by both a) terminating the fixed term by way of forfeiture, and b) a possession order on the periodic tenancy that then arises.
This can be done at the same time, by service of s.146 notice and NSP at the same time and by possession proceedings for both termination and possession.
But – crucially – forfeiture requires a forfeiture clause in the tenancy agreement. If that is missing, as here (and doubtless other council flexible tenancy agreements) then the tenancy cannot be ended during the fixed term.
We did always say flexible tenancies were a silly idea. And it is one that has likely rebounded on those few councils who adopted the idea with enthusiasm.