Termination trouble
The Supreme Court has recently handed down an important ruling for housing co-operatives on termination of tenancies. Clare Hardy analyses the judgment.
In the case of Mexfield Housing Co-operative Ltd v Berrisford [2011] All ER (D) 58 (Nov) the landlord was a fully mutual housing co-operative association founded by a bank as part of a mortgage rescue scheme with a view to buying mortgaged properties from borrowers in difficulty and letting the properties back to them. The borrowers were required by the landlord’s rules to become members of the association.
The tenant purchased a property (the premises) from the landlord and let it back under an occupancy agreement (the agreement). The agreement provided that rent was to be payable weekly in advance at £89 per week, subject to annual increases.
The express provisions of the agreement that dealt with its termination provided that it could be determined, under clause 5, by the tenant giving the landlord one month’s notice in writing and, under clause 6, by the landlord by the exercise of the right of re-entry specified in that clause but only in specified circumstances, which did not include the giving of notice to quit.
As the landlord was a mutual housing association, the only statutory protection from which the tenant benefited was a right to (a) not be evicted without a court order and (b) at least four weeks’ notice to quit.
The tenant complied with her obligations under the agreement until she fell into arrears with her rent but she soon paid off those arrears. The landlord did not invoke any of the provisions of clause 6 of the agreement but sought to end the tenant’s occupancy by serving a notice to quit.
The landlord applied for summary judgment on the basis that the agreement could not be a valid express tenancy because it was of uncertain duration. However, it said that an implied periodic tenancy arose by virtue of the payment and acceptance of rent since 1993, and the landlord was therefore entitled to determine such a tenancy by notice to quit.
At first instance the judge refused the landlord’s application for summary judgment. The landlord appealed and the Court of Appeal made an order for possession. The tenant appealed.
The appeal was allowed. It was held that:
- An agreement for a term whose maximum duration could be identified from the inception could give rise to a valid tenancy
- An agreement which gave rise to a periodic arrangement determinable by either party could also give rise to a valid tenancy
- An agreement could not give rise to a valid tenancy as a matter of law if it was for a term whose maximum duration was uncertain at the inception
- A fetter on a right to serve notice to determine a periodic tenancy was ineffective if the fetter was to endure for an uncertain period but a fetter for a specified period could be void.
It was necessary to determine whether the landlord was entitled to terminate the agreement on one month’s notice. Despite the fact that the agreement was expressed as a tenancy from month to month, as a matter of contractual interpretation, it seemed clear from the language of the agreement that the tenancy could only be determined by the tenant pursuant to clause 5 or by the landlord pursuant to clause 6 and in no other way.
In light of established authority, such an agreement could not take effect as a tenancy, as it was for a term of uncertain duration. On a true construction of the agreement, it was intended that the tenant enjoy the premises for life, subject to determination pursuant to clauses 5 and 6 of the agreement.
The effect of section 149(6) of the Law of Property Act 1925 was that the agreement was to be treated as a tenancy for a term of 90 years, determinable on the death of the tenant, subject to the rights of determination in clauses 5 and 6.
The tenant was still alive, and it was common ground that she had not served a notice under clause 5 and that the landlord was not relying on clause 6. In those circumstances, it followed that the tenant retained her tenancy of the premises and that the landlord was not entitled to possession.
Clare Hardy is a solicitor at Eversheds. She can be contacted on 0845 498 4355 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..
