Assured tenancy – Tenants falling into arrears of rent – Landlord obtaining possession order under Housing Act 1988 – Tenants paying arrears – Whether tenants entitled to relief from possession by virtue of section 138 of the County Courts Act 1984 – County court holding tenants entitled to relief – Landlord’s appeal allowed
By a written agreement the appellant landlord’s predecessor in title let 42 The Hobbins, Bridgnorth, Shropshire, to the respondent tenants for a fixed term of 10 years from 1 December 1989. The initial rent was £2,700 pa, payable monthly in advance and subject to review by means of an index-linking provision. Clause 4(a)(i) of the agreement contained a proviso for re-entry and determination if the rent were, at any stage, 14 days in arrears. The tenants occupied the property as their only principal home, and, accordingly, the tenancy was an assured tenancy within the provisions of the Housing Act 1988. By 1996 the rent had risen to £131 per month, at which time the tenants were encountering financial difficulties as a result of being made redundant. In April 1998 the arrears of rent amounted to £2,239.92, no payments having been made since December 1997.
On 15 April 1998 the landlord served notice on the tenants, pursuant to the provisions of section 8 of the 1988 Act, of their intention to seek possession on the grounds numbered 8 to 10 in Schedule 2 to the 1988 Act, and proceedings were duly issued. The district judge made an order for immediate possession, together with judgment for the arrears of rent in accordance with county court form N26. On 7 July 1998 the tenants applied for a suspension of that order claiming that they would be able to clear the arrears in full. Within three days the arrears were paid, and, thereafter, the monthly rent was paid on the due date. The tenants sought to invoke the relief provided for by section 138 of the County Courts Act 1984 and applied for the possession order to be set aside. The county court held that the tenants were entitled to relief from the possession order.
The landlord appealed contending that section 138 of the Act did not apply because it was not proceeding to enforce a right of re-entry or forfeiture in respect of the premises for non-payment of rent, which was the prerequisite of the operation of section 138(1). The tenants contended that, in order to bring the lease to an end under its contractual terms, it was incumbent on the landlord to invoke the forfeiture provisions under clause 4(a)(i) of the agreement. They said that the lease would otherwise continue in being, with mutual contractual obligation continuing in force, even though an order for possession had been made pursuant to the 1988 Act, and, accordingly, the tenants were entitled to invoke the relief provided for by section 138 of the 1984 Act.
Held The appeal was allowed.
1. The express words of section 5(1) of the 1988 Act made it clear that the order for possession ipso facto brought the assured tenancy to an end. It removed the main foundation of the tenants’ contention that a parallel claim for forfeiture was necessary in order to avoid the contractual tenancy continuing after the order for possession was granted under the Act.
2. The terms of the 1988 Act expressly ruled out a claim for forfeiture: first, by virtue of section 5(1) itself, which provided the only route for bringing an assured tenancy to any end; and, second, by virtue of section 45(4), which made an express declaration to that effect for the avoidance of doubt. Furthermore, section 7(3) of the 1988 Act was explicit, obliging the court to make an order for possession if it were satisfied that any of the grounds in Schedule 2 Part 1 were established, subject, inter alia, to section 6.
3. Section 7(6) of the 1988 Act provided two stepping stones that a landlord must traverse in order to achieve an order for possession, with section 7(6)(b) of the Act requiring no more than a provision in the terms of the tenancy itself for it to be brought to an end on the ground in question. Therefore, as a matter of principle, it could be concluded that there was no room for applying section 138 of the 1984 Act, since the requirements of section 138(1) were not met.
Edward Deneham (instructed by Finers) appeared for the appellant; Jan Luba (instructed by R Gwyne & Sons, of Shrewsbury) appeared for the respondents.
Thomas Elliott, barrister
