Landlord and tenant – Tenancy – Certainty of term – Appellant occupying residential premises under agreement with respondent housing association – Agreement expressed to take effect from month to month and to be terminable by association only on occurrence of specified events – Whether respondent entitled to possession on service of notice to quit – Occupancy agreement held to create periodic tenancy terminable by four weeks’ notice regardless of whether specified events occurring – Whether creating life tenancy terminable on specified events – Appeal allowed
The respondent was a fully mutual housing association that purchased mortgaged properties from borrowers who were in difficulty and then let the properties back to them. In 1993, it purchased a residential property from the appellant and then entered into an “occupancy agreement” with her under which it purported to let the property to her from month to month, at a weekly rent, until determined as provided in the agreement. Clause 5 entitled the appellant to determine the agreement by giving one month’s notice. By clause 6, the respondent’s right to determine by notice arose only on the occurrence of specified events, including the accrual of rent arrears or some other breach of the agreement.
In 2008, the respondent gave the appellant one month’s notice to quit the property. It later brought possession proceedings against her. It contended that since its status as a fully mutual housing association precluded the creation of an assured or secure tenancy, the appellant held only a common law periodic tenancy, which could be terminated by the service of four weeks’ notice to quit notwithstanding the restrictions in clause 6. It contended that those restrictions had no effect since they contravened the rule against the creation of a tenancy for an uncertain maximum term. That argument was rejected in the county court but accepted on appeal to the High Court, which accordingly granted a possession order: see [2009] EWHC 2392 (Ch); [2009] 41 EG 115 (CS).
The Court of Appeal upheld the High Court’s decision on appeal: see [2010] EWCA Civ 811; [2010] 2 EGLR 137. The majority held that, since the intention had been to create a tenancy, the contractual restriction on the respondent’s right to determine the agreement was not separately enforceable.
On a further appeal to the Supreme Court, the appellant argued that the arrangement under the agreement would, prior to 1926, have been a term for the life of the tenant subject to the specified right to determine, such that it now took effect as a tenancy for 90 years subject to that right, pursuant to section 146(6) of the Law of Property Act 1925.
Held: The appeal was allowed.
An agreement could not give rise to a tenancy for a term whose maximum duration was uncertain at its inception. Although the parties could validly create a periodic tenancy determinable by either party, any fetter on the right to serve notice determining a periodic arrangement would be effective only if the fetter was for a specified period. A fetter that was to endure for an uncertain period was ineffective: Prudential Assurance Co Ltd v London Residuary Body [1992] 36 EG 129 applied. In the instant case, the parties had intended that the arrangement should be determinable only pursuant to clauses 5 or 6, by the service of one month’s notice by the tenant or by the landlord invoking a right of determination on one or more of the clause 6 grounds. Such an arrangement was not, as a matter of law, capable of being a tenancy in accordance with its terms.
However, the arrangement took effect as a tenancy under section 149(6) of the 1925 Act. Had the agreement been entered into before the 1925 Act came into force, the courts would have treated the arrangement as the grant of a tenancy to the appellant for her life, subject to the rights to determine contained in clauses 5 and 6: Warner v Browne (1807) 8 East 165 and Zimbler v Abrahams [1903] 1 KB 577 considered. Section 249(6) did not only preserve life interests that existed before the 1925 Act came into force but expressly applied also to life interests granted thereafter. It was not limited to leases for life but also applied to contracts that would have been treated by established case law as such leases. There was no reason in principle to exclude from its ambit arrangements that were determinable in circumstances other than the tenant’s death. Moreover, it applied regardless of whether the purported tenancy created by the parties’ agreement was simply for an indeterminate term or was a periodic monthly tenancy with an invalid fetter on the landlord’s right to determine, since the latter arrangement would also have been treated under the old law as a life estate with a right to determine in accordance with the terms of the fetter.
Accordingly, by virtue of well-established common law rules and section 149(6), the arrangement between the appellant and the respondent was a tenancy for a term of 90 years, determinable on the tenant’s death by one month’s notice from the landlord, or in accordance with its terms under clause 5 or 6. Since the appellant was still alive, had not served notice under clause 5 and the respondent was not relying on clause 6, the appellant retained her tenancy and the respondent was not entitled to possession.
Per curiam: Had the appellant failed to establish that she had a subsisting tenancy of the property, there was a strong argument that she could none the less defeat the possession claim on the ground that she was entitled to enforce her contractual rights. If, for technical reasons, the agreement failed to create a tenancy, it was hard to see why it should not be capable of taking effect as a contract enforceable between the parties personally, albeit not capable of binding their respective successors.
Mark Wonnacott (instructed by Mary Ward Legal Centre) appeared for the appellant; Jonathan Gaunt QC, Kerry Bretherton and Laura Tweedy (instructed by Rickerbys LLP, of Cheltenham) appeared for the respondent.
Sally Dobson, barrister
