There is obvious benefit to both parties where a lease is granted for an initial fixed term followed by a periodic tenancy, which is terminable on notice. Both parties will know that the lease has a minimum term and will enjoy a degree of flexibility thereafter.
The question that arose in Leeds City Council v Broadley [2016] EWCA Civ 1213; [2016] PLSCS 338 was whether a freeholder or his tenants were “the owners” of dwellings, while they had no residents, for the purposes of section 6 of the Local Government Finance Act 1992 (which deals with council tax).
The terms granted by the assured shorthold tenancy agreements between the landlord and his tenants were for six or 12 months certain. The tenancy agreements stated that the tenancies would then continue from month to month, until determined by notice and, in the cases before the court, the tenants had simply abandoned the properties during their contractual periodic tenancies without serving the notices required to end them.
The council hoped to show that council tax was due from the freeholder, from whom it would be easier to collect. But, if the tenants had leasehold interests that were “granted for a term of six months or more”, they constituted “owners” for the purposes of the 1992 Act and remained liable for council tax, even though they had moved out.
The council lost its argument at first instance that an initial fixed term, followed by a contractual periodic tenancy, offended against the rule that requires tenancies to be of sufficiently certain duration. When the case was heard by the Court of Appeal, the council offered an alternative. It argued that, if the agreements were valid, they had created two distinct tenancies: fixed term tenancies of six/12 months and separate periodic tenancies arising at the end of the fixed terms. On that basis the contractual periodic elements of the tenancies, were not interests “granted for a term of six months or more” and liability for council tax rested with the freeholder.
The Court of Appeal had no doubts about its answer. After considering authorities dating back to 1605, it ruled that they all pointed to the conclusion that grants in the form made by the landlord, ie grants for a fixed term followed by a periodic tenancy, are single grants, which are valid at common law.
So the tenants held the properties pursuant to the same grants throughout their tenancies, whether during the fixed terms or thereafter. And, since the landlord had granted terms “of six months or more”, this satisfied the requirements of the 1992 Act – and the tenants’ liabilities continued while their tenancies subsisted as periodic tenancies, even though they had gone out of occupation.
It is worth noting that the position will be different where the contractual term of a lease has ended, ie where landlords grant tenancies for fixed terms only, which then continue after they have expired by virtue either of the common law (because the tenant has held over and continued to pay rent) or the operation of statute.
Allyson Colby is a property law consultant
