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Terminating flexible tenancies

Anneli Robins analyses the Court of Appeal's ruling in a case where the principal issue was whether a landlord can terminate a fixed term secure flexible tenancy agreement prior to the expiry of the fixed term if no express provision is made in the tenancy agreement for re-entry or forfeiture.

Overview

Upholding Tipples J’s decision in the High Court, albeit for slightly different reasons, Arnold LJ, with whom King LJ and Asplin LJ agreed, found in Croydon London Borough Council v Ms Chipo Kalonga [2021] EWCA Civ 77 that a fixed term secure flexible tenancy could only be brought to end by the landlord during its term, if the tenancy agreement contained a forfeiture clause.

The Court held that the tenancy agreement in this case did not contain a forfeiture clause and thereby the possession claim inevitably fell to be dismissed.

The court held that not only was a forfeiture clause required, but also a s.146 Law of Property Act 1925 (‘LPA 1925’) notice was required to be served thereby implicitly holding that the law pertaining to forfeiture, such as waiver and relief also applies: s.82(4) Housing Act 1985 (‘HA 1985’).

The ratio of the case applies to seeking possession of all secure fixed term tenancies, whether flexible or not.

Background

The Respondent tenant was granted a fixed term secure flexible tenancy of five years. Prior to the agreement’s expiry on 24 May 2020, the Appellant landlord issued a claim for possession on 29 August 2017. They claimed possession on the grounds of rent arrears and anti-social behaviour: Grounds 1 and 2, Schedule 2, HA 1985. A s.83 HA 1985 notice was served.

The landlord did obtain a possession order, but that was set aside on appeal (for reasons different to those that concern this appeal). The tenant then filed a Defence and Counterclaim arguing, amongst other defences, that the tenancy agreement did not include a forfeiture clause, no s.146 LPA 1925 notice had been served (in relation to the anti-social behaviour), and that the local authority had waived their right to forfeit in any event.  She sought relief from forfeiture.

The preliminary issue of “the correct manner in which to determine a secure flexible tenancy during the fixed term (including whether, and if so how, and principles relating to forfeiture apply)” was transferred to the High Court by HHJ Bailey.

The key provision that the court was asked to interpret was s.82(1)(b) HA 1985 (initially enacted by s.32 Housing Act 1980) “(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)” (emphasis added).

Tipples J found for the tenant in the High Court, deciding that a secure tenancy for a term certain was “subject to termination by the landlord” only if the tenancy agreement contained a forfeiture clause. Although she queried whether a break clause would suffice to bring a landlord’s action within s.82(1)(b) HA 1985. She also found obiter, that if there was a forfeiture clause, a landlord could use any of the routes in s.82(1A) HA 1985 to bring a tenancy to an ‘end’, namely:

“The tenancy may be brought to an end by the landlord–

(a)  obtaining–

(i)  an order of the court for the possession of the dwelling-house, and

(ii)  the execution of the order,

(b)  obtaining an order under subsection (3), or

(c)  obtaining a demotion order under section 82A.”

The landlord appealed, contending that (i) a forfeiture clause was not required, or in the alternative, (ii) the tenancy agreement included a forfeiture clause, condition, or break clause which would allow them to utilise s.82(1)(b) HA 1985 during the fixed term. 

The tenant by way of a respondent’s notice challenged the conclusion that any of the routes in s.82(1A) HA 1985 were permissible if there was a forfeiture clause. The tenant therefore argued, that the only way to obtain possession during the fixed term was to exercise a forfeiture clause, then to ask the court to bring the fixed term tenancy to end at an earlier date using s.82(3) HA 1985:

“(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”

The tenant then argued, that if the landlord so desired, the correct route to obtain possession of the then periodic tenancy was by utilising s.82(1)(a) HA 1985 and selecting s.82(1A)(a) to ask for “(i) an order of the court for the possession of the dwelling-house, and (ii)  the execution of the order”.

The decision

Arnold LJ reached the following conclusions:

  • “It is not in dispute that, broadly stated, its purpose [s.82 HA 1985] is to protect tenants by providing them with security of tenure. That being so, section 82 should be interpreted in the manner which best gives effect to that purpose”
  • “I consider that the Tenant is correct that the key question is the availability of an order for possession under section 82(1A)(a).”
  • “As counsel for the Tenant submitted, the answer to this question can be seen more clearly from section 32 of the 1980 Act. In that context, it seems reasonably clear that the legislative intention was that, as stated in Housing Law, 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 pursuant to section 29).”
  • “I cannot see that the changes in wording from what was section 32(1) to what are now section 82(1), (1A) and (2) make any real difference.”
  • “Just as a landlord cannot bring a fixed term secure tenancy to an end by recission, the landlord cannot do so by exercising a landlord’s break clause or by forfeiture for breach of a condition.  The only way in which the landlord can do so, which is only available if the tenancy agreement contains a forfeiture clause, is to obtain a termination order under section 82(3).”
  • “I therefore conclude, albeit for different reasons, that the judge was correct to hold that a fixed term flexible tenancy can only be terminated by the landlord if the tenancy agreement contains a forfeiture clause.”

In relation to ground 2:

  • The tenancy agreement did not contain a forfeiture clause as defined in Clays Lane Housing Co-Operative Ltd v Patrick (1984) 17 HLR 188. Further “Counsel for the Landlord also raised an argument, not advanced before the judge, that some of the other clauses in the Tenancy Agreement were conditions. For the reasons given in relation to ground 1, I do not consider that this argument assists the Landlord even if it is correct”.

In relation to the respondent’s notice:

  • “By her Respondent's notice the Tenant contends that, in addition to the requirement found by the judge for a forfeiture clause, the landlord must bring proceedings for an order terminating the tenancy under section 82(3) of the 1985 Act, having first served notice under section 146 of the 1925 Act where that section applies, before seeking possession. The judge rejected this contention, holding that, if a flexible tenancy contains a forfeiture clause, the landlord can bring it to an end if the tenant is in breach by any of the routes specified in section 82(1A).”
  • “For the reasons given above, I disagree with this. 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.”

Conclusion

Many local authorities have granted fixed term secure flexible tenancies since they were introduced by the Localism Act 2011 in 2012.  Many possession orders will have been made on the basis that a forfeiture clause was not required and merely a s.83 HA 1985 compliant notice needed to be served and then a possession order sought.  This is not good news for local authorities who did not protect themselves, or are still not protecting themselves, by having fixed term tenancy agreements containing forfeiture clauses.   

The law as it stands today, is that to determine a fixed term secure flexible tenancy requires a forfeiture proviso in the tenancy agreement, the service of a s.146 LPA 1925 notice in the requisite cases, and the principles of waiver and relief from forfeiture appear to apply.

The Respondent would very much like to thank the libraries at Lincoln’s Inn, Gray’s Inn, Middle Temple, and Inner Temple for their abundant assistance during lockdown.

Anneli Robins of 4-5 Gray’s Inn Square was led by Justin Bates of Landmark Chambers, instructed by Denise Phillips of GT Stewart Solicitors, and appeared on behalf of the successful Respondent.

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