Generations of lawyers have been taught that, to be valid, a lease must be for a term that is certain or ascertainable at the time it comes into effect. See, for example, Lace v Chantler [1944] 1 All ER 305, which concerned a lease that was granted for “the duration of the war”. Periodic tenancies escape the rigours of this rule because either party can serve a notice to quit terminating the tenancy at the end of the relevant period – be it weekly, monthly, quarterly or annually.
What is the position, however, if a clause in a periodic tenancy agreement prevents the landlord from terminating the tenancy unless the tenant is in default? The effect of the House of Lords decision in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 EGLR 56; [1992] 36 EG 129 is that because the maximum term of the tenancy is uncertain, the parties have not created a lease. However, where possible, the court will instead imply the existence of a periodic tenancy. Consequently, the landlord will be entitled to determine the periodic tenancy by serving the requisite notice to quit, even though the tenant is not in default, despite the prohibition in the “lease”.
In Mexfield Housing Co-operative Ltd v Berrisford [2010] EWCA Civ 811; [2010] PLSCS 196, the landlord asked the Court of Appeal to confirm the legal position (although it was not seeking possession from the tenant). The tenant asked the court to distinguish Prudential. It argued that any lease or tenancy agreement serves a dual purpose: it records a contract between the original parties and creates an interest in land for the tenant that (subject to any valid contractual or statutory restrictions) can be transferred to successors in title.
The tenant suggested that the contract between the parties could survive independently of the failed lease and that equity could intervene, as between the original contracting parties, to enforce the terms of their agreement, even though they had failed to create a lease because of lack of certainty regarding when the lease might end.
The Court of Appeal disagreed. It ruled by a majority that although equity was able to intervene on the ground, for example, of an equitable or proprietary estoppel, it was unable to validate an agreement that was incapable of creating a valid lease at common law or to intervene to make the parties’ agreement enforceable by specific performance or injunction.
The court also dismissed the tenant’s argument that the agreement could be construed as a licence. The parties had intended to create a tenancy and the court could not rewrite their agreement to turn it into a licence containing a prohibition against termination except in the event of a default.
Their lordships reached their conclusion without enthusiasm. They did not believe that it was desirable or just to allow the landlord to disregard its deal with its tenant and called on parliament to re-examine the requirement that, to be valid, a lease of land must be for a term that is certain (or that is capable of being made certain).
Allyson Colby is a property law consultant
