How can a flexible tenancy be brought to an end during the currency of the fixed term? Elizabeth Dwomoh finds the answer in a Supreme Court decision.
Key point
- A flexible tenancy can be brought to an end during the fixed term by validly operating the forfeiture or break clause contained in the tenancy agreement
A flexible tenancy is a species of secure tenancy granted by local authorities. It was introduced by the Localism Act 2011, which amended the Housing Act 1985. A flexible tenancy must be granted for a term certain of not less than two years. On expiry of the fixed term, the landlord can terminate the tenancy if the conditions set out in section 107D of the 1985 Act are met. In London Borough of Croydon v Kalonga [2022] UKSC 7; [2022] PLSCS 45 the Supreme Court was asked to determine how a landlord could lawfully terminate a flexible tenancy during the currency of the fixed term.
The background
Chipo Kalonga was granted a flexible tenancy by the London Borough of Croydon. Kalonga’s flexible tenancy was granted for a fixed-term period of five years. Kalonga’s tenancy agreement contained provisions that allowed the council to seek possession if she breached her tenancy conditions, or in circumstances where one or more of the statutory grounds of possession under Schedule 2 to the 1985 Act arose.
In August 2017, the council served Kalonga with a notice of its intention to terminate her tenancy. Grounds 1 and 2 of Schedule 2 were relied on arising from Kalonga’s alleged accrual of rent arrears and antisocial behaviour.
At trial, the parties agreed that the question of how a flexible tenancy could be brought to an end during the fixed-term period would be determined as a preliminary issue. The council argued that, in the event of default, a flexible tenancy could be terminated during the fixed-term period in accordance with section 82(1A) of the 1985 Act. Further reliance on that section did not require the tenancy agreement to contain a provision for forfeiture.
Section 82(1)(b) and section 82(1A) permitted a secure tenancy which was “a tenancy for a term certain but subject to termination by the landlord” to be brought to an end by either:
(a) obtaining a possession order and executing the same;
(b) obtaining a demotion order; or
(c) in the case of a tenancy for a term certain, but with a provision for re-entry or forfeiture, obtaining an order for the termination of the fixed-term tenancy and its replacement with a periodic tenancy.
Kalonga countered that, in the event of default, a flexible tenancy could only be determined during the fixed-term period if the tenancy agreement contained a proviso for re-entry. If there was no such provision, a landlord was unable to determine the tenancy agreement and obtain an order for possession before the expiry of the fixed-term period.
The conundrum
The High Court ([2020] EWHC 1353 (QB); [2020] PLSCS 107) found that any fixed-term tenancy was capable of falling within the scope of section 82(1)(b) provided it was “subject to termination by the landlord”. Ordinarily a tenancy granted for a fixed term could be terminated within the fixed-term period either by forfeiture or by the operation of a break clause. If, however, the landlord did not have a right to forfeit the lease or to serve a break notice, then the tenancy would only end when the fixed term expired and the conditions in section 107D were met. Reliance could not be placed on section 82(1A) to effect termination because the fixed-term tenancy would not fall within the ambit of section 82(1)(b).
The High Court also found, albeit obiter, that if a flexible tenancy contained a forfeiture clause, the landlord could bring the tenancy to an end by relying on any of the avenues permitted under section 82(1A).
On appeal ([2021] EWCA Civ 77; [2021] PLSCS 21), the Court of Appeal upheld the High Court’s finding that Kalonga’s tenancy agreement did not contain an express forfeiture clause. It, however, went further and found that, if a flexible tenancy agreement did contain a forfeiture clause, the landlord could only terminate the tenancy agreement during the fixed-term period by first serving a notice under section 146 of the Law of Property Act 1925 and then commencing possession proceedings in accordance with section 82(3) of the 1985 Act. The council appealed.
Relief
Having regard to section 82(1) and 82(3) of the 1985 Act, the Supreme Court accepted that a fixed-term tenancy could only be determined during the fixed-term period if the tenancy agreement contained a forfeiture proviso or a break clause and the requisite notices had been served.
The Supreme Court found that Kalonga’s tenancy agreement contained numerous provisions allowing the council to bring her tenancy to an early end by reason of her conduct. Relying on Clays Lane Housing Co-operative Ltd v Patrick [1985] 17 HLR 188, it was held that those provisions amounted to forfeiture provisions enabling the council to terminate her tenancy. In such circumstances, Kalonga could apply for relief if the breaches were capable of remedy.
The takeaway
Due to the prevalence of flexible tenancies, this decision provides clarity to both landlords and tenants. Yet it also serves as a useful reminder to local authorities to review the terms of their flexible tenancies to ensure that they contain the necessary forfeiture and/or break clauses.
Elizabeth Dwomoh is a barrister at Lamb Chambers
