Tenancy – Termination – Fully mutual housing co-operative association – Possession proceedings – Respondent landlord claiming entitlement to possession by virtue of notice to quit served on appellant tenant – Whether occupancy agreement creating interest in land terminable by notice regardless of whether tenant in breach – Whether occupancy agreement creating contractual licence – Appeal dismissed
From 1993, the appellant occupied residential premises owned by the respondent pursuant to an occupancy agreement. The agreement stated that the respondent “let” the property to the appellant at a monthly “rent”. By clause 6, the respondent could terminate the agreement by giving one month’s notice but only if, inter alia, the rent remained unpaid for 21 days after it fell due. By 2008, the appellant had accrued rent arrears of approximately £1,000 because her housing benefit was paid monthly in arrears, whereas the rent was payable weekly in advance. The respondent served notice to quit on the appellant, purporting to terminate the tenancy in March 2008. It subsequently brought possession proceedings on the grounds that the tenancy was a tenancy from month to month that had been terminated by notice and, in addition, had been forfeited for rent arrears. The appellant claimed that she had an assured tenancy protected under the Housing Act 1988.
The respondent applied to strike out the defence and sought summary judgment on its possession claim. It contended that: (i) because it was registered under the Industrial and Provident Societies Act 1965 and was a fully mutual housing co-operative association within the terms of the Housing Associations Act 1985, the tenancy fell within the exception in para 12(1)(h) of Schedule 1 to the 1988 Act such that it fell outside that Act; and (ii) the appellant held only a periodic tenancy at common law, which could be terminated according to its terms by the service of a four–week notice to quit.
The county court refused summary judgment but the High Court granted it on appeal. The judge held that since the appellant’s tenancy was a common law tenancy with no overriding statutory procedure to protect it, it could be terminated by an appropriate contractual notice, which the respondent had served: see [2009] EWHC 2392 (Ch); [2009] 41 EG 115 (CS).
The appellant appealed. The issues for the court were whether the occupancy agreement created a tenancy or merely a contractual licence and, if the latter, whether the appellant could enforce the contract as though it created an interest in land.
Held: The appeal was dismissed (Wilson LJ dissenting).
(1) The terms of the occupancy agreement purported to grant a lease to the appellant, giving her exclusive possession of a defined property for a rent payable from time to time. However, the term of the tenancy agreement created by the occupancy agreement was void because it was for an uncertain period: Prudential Assurance Co Ltd v London Residuary Body [1992] 2 EGLR 56; [1992] 36 EG 129 applied.
If the occupancy agreement could not create a valid lease at common law because it did not satisfy the legal requirement of certainty of term, equity could not validate it or otherwise intervene to make it enforceable by specific performance or injunction. The appellant had relied on the personal obligations created by the contractual provisions for determination contained in clause 6 of the occupancy agreement. However, that clause was inconsistent with the existence of a lease. By fettering the right to serve a notice to quit before the occurrence of an event the time of which was uncertain, clause 6 precluded the existence of a certain limit to the maximum duration of the term. It contravened the rule that a lease could not be created for an uncertain maximum term. The duration of the lease had to be for a term, and that meant that the end of the term had to be certain from the start. Otherwise, the lease was invalid.
The certainty requirement might be satisfied even though the lease could be validly terminated prior to the expiry of the maximum term. It was satisfied in the case of a periodic tenancy, such as a monthly tenancy terminable by notice, which was analysed as a series of individual leases for the fixed maximum duration of each period in question, subject to termination. However, it was not satisfied in the instant case because of the effect of the restriction on the power to serve a notice to quit to specified events that might not occur, thus making the term indefinite and uncertain and the lease void.
(2) Furthermore, the lease could not be construed as an agreement to grant a licence. The intention was to create a tenancy. The law stated that it was bad as a tenancy, but the court was not justified in treating the contract as something different from what the parties had intended it to be and regarding it merely as a contract for the grant of a licence with the benefit of clause 6 of the occupancy agreement. The natural implication from the circumstances of exclusive possession and the payment of rent was that of a periodic common law tenancy terminable by notice to quit and without the clause 6 restriction to specified grounds for repossession: Lace v Chantler [1944] KB 368 applied.
Mark Wonnacott (instructed by the Mary Ward Legal Centre) appeared for the appellant; Kerry Bretherton and Laura Tweedy (instructed by Rickerbys LLP, of Cheltenham) appeared for the respondent.
Eileen O’Grady, barrister
