If a tenant agrees to use a flat as a private dwelling for himself and his family, and for no other purpose, does that preclude him from subletting the flat to a person who is not a member of his family? The Lands Chamber of the Upper Tribunal ruled that it did in Burchell v Raj Properties Ltd [2013] UKUT 443 (LC), even though there were no other obvious restrictions on alienation in the tenant’s lease.
A similar question arose more recently in Roundlistic Ltd v Jones [2016] UKUT 325 (LC); [2016] PLSCS 210. The First Tier Tribunal followed Burchell and ruled that this prevented the tenant of a lower maisonette from subletting to a third party. The Upper Tribunal noted that the user covenant in this case required the premises to be used as a single private dwelling house “in the occupation of the Lessee and his family”. It considered that this was even clearer, and noted that the expression “the Lessee” had not been defined to include sub-tenants. Consequently, Upper Tribunal judge upheld the decision.
The judge’s conclusion meant that the tenant had breached the covenants in his lease by granting an assured shorthold tenancy to a third party for a period while he was abroad. Was there any way out of this bind? The tenant tried – unsuccessfully – to persuade the judge that there was an estoppel in his favour and then, in a last ditch attempt to side step the problem, argued that the user covenant was an unfair contract term for the purposes of the Unfair Terms in Consumer Contract Regulations 1999 and was, therefore, unenforceable.
The 1999 Regulations have, of course, been superseded by the Consumer Rights Act 2015, but they apply to contracts made on or after 1 October 2015. The judge accepted that the 1999 Regulations were potentially applicable. However, they do not apply to contractual terms that reflect mandatory statutory provisions: regulation 4(2).
It transpired that the tenant’s lease was, in fact, an extension of a previous lease. Furthermore, the landlord had been statutorily obliged to grant the extension in accordance with the Leasehold Reform, Housing and Urban Development Act 1993. Section 57 of that Act provides that any new lease should be on the same terms as the existing lease (subject to certain very limited modifications). The old lease had been granted before the 1999 Regulations were enacted and, since the new lease was granted on the terms imposed by section 57, it was also unaffected by them.
In addition, a contractual term that has not been individually negotiated will be considered unfair if “contrary to the requirement of good faith, it causes a significant imbalance in the party’s rights and obligations arising under the contract, to the detriment of the consumer”. The tenant’s predecessor had chosen to require the grant of a new lease containing the user covenant in question. So, if there was a significant imbalance, it had already existed. Therefore, the term in the new lease was not the “cause” of any such imbalance and had not been imposed “contrary to the requirement of good faith” in the regulations.
Allyson Colby is a property law consultant