The law of landlord and tenant is highly technical, not least because it is derived from rules of ancient origin. One such rule is that an agreement for an uncertain term cannot be a tenancy. Therefore, to be valid, a lease must be for a term that is certain or ascertainable at the time when it comes into effect.
The law recognises periodic tenancies on the ground that either party can serve a notice terminating the tenancy at the end of the relevant period. But woe betide a periodic tenancy if one of the parties is prohibited from serving a notice to quit except in circumstances that may never arise. In such cases, it will be impossible to predict with any certainty how long the term may last and, because the maximum term is uncertain, the parties have not created a lease: Prudential Assurance Company Ltd v London Residuary Body [1992] 2 AC 386.
The rules have been described as “arbitrary and crude” and, most recently by Lady Hale in Mexfield Housing Co-operative Ltd v Berrisford [2011] UKSC 52; [2011] PLSCS 265, as having “an
The court agreed that the law is unsatisfactory and was in favour of jettisoning the rule that leases must be for a term certain. However, it felt that it was up to Parliament to make such a fundamental change after full consultation with interested parties.
None the less, it held that, where a landlord grants a periodic tenancy containing an objectionable fetter on termination to an individual (as opposed to a company or corporation), the arrangement creates a tenancy for life at common law.
Tenancies for life are governed by section 149(6) of the Law of Property Act 1925. The statutory provision converts a tenancy for life into a lease for 90 years determinable by at least one month’s notice in writing after the death of the tenant. In this case, the tenancy was terminable before the death of the tenant, in the circumstances specified in the parties’ agreement, as well.
The court accepted that there may be other circumstances in which the analysis in this case will apply, although the outcome will not reflect the parties’ intentions. It also acknowledged the anomaly that arises where the occupier is a company or corporation.
Would the court uphold a similar arrangement with a company on the basis that it constitutes a binding personal contract between the parties? The court did not need to decide the point. Although there was some sympathy with the suggestion that the agreement might be enforceable as between the parties personally, the danger is that the arrangement would not be enforceable as between their respective successors in title, because it does not create an interest in land. A better alternative would be to enter into a long lease containing a break clause that is exercisable on the happening of the uncertain event, because the law has no policy objection to such an arrangement.
Allyson Colby is a property law consultant
