Switaj v McClenaghan

Landlord and tenant – Assured shorthold tenancy – Tenant Fees Act 2019 – Appellant holding assured shorthold tenancy of flat owned by respondent – Respondent serving section 21 notice on appellant to terminate tenancy – County court making order for possession – Appellant appealing – Whether payments required by landlord and paid before 2019 Act came into force precluding service of section 21 notice – Appeal dismissed In April 2018, the appellant entered into an assured shorthold tenancy of a flat in Holloway owned by the respondent. The original AST was for a fixed term of 12 months at a rent of £1,400 per month. The tenancy required the tenant to pay the landlord a security deposit to be held under an approved tenancy deposit scheme, an administration fee and a check-out fee. The statement of account showed that the appellant made payments, all before 18 July 2018, relating to the deposit, the administration fee, the check-out fee and two instalments of rent. New tenancies were granted in subsequent years. The terms of the original AST were substantially changed as there was no longer any provision for administration or check-out fees. On 22 June 2023, the respondent served the appellant with a notice to terminate the tenancy under section 21 of the Housing Act 1988. The Tenant Fees Act 2019 came into force on 1 June 2019. Among other things, it precluded a landlord from serving a section 21 notice where they were in breach of section 1(1) of the 2019 Act. The appellant said the respondent was in breach of section 1(1) because of the payments made in 2018. The district judge rejected that defence and made an order for possession. The appellant appealed. The issue was whether payments required by the landlord and paid before the 2019 Act came into force precluded the service of a section 21 notice. Held: The appeal was dismissed. (1) The prohibitions in section 1 of the 2019 Act could apply even where the prohibited payments were not paid pursuant to a provision of the tenancy agreement: section 1(6)(a). But the landlord still had to “require” the payment and, if the requirement was not contained in a provision of the tenancy agreement, had to do so “in consideration of” the grant, etc, of a tenancy. The ordinary meaning of “require” was to ask or request a person to do something. That entailed some overt act or utterance. Mere silence could not amount to a requirement. The force of the word “require” was reinforced by section 30 which disapplied section 1 in relation to “a requirement imposed” before the section came into force; and by section 1(7) which also spoke of a requirement “imposed” by the landlord. The word “required”, taken in context, imported a compulsory quality to the requirement. Moreover, if the requirement was not contained in a provision of the tenancy, it had to be made in consideration of the grant of a tenancy. The check-out fee here was part of the consideration of the grant of the original tenancy. It formed no part of the consideration of the grant of the current tenancy which was the subject of the section 21 notice: Superstrike Ltd v Rodrigues [2013] 2 EGLR 91; [2013] EGILR 18 distinguished. (2) The starting point in the present case was that the money described as the check-out fee was paid by the appellant as part of the consideration for the grant of the original AST. It was debited to her account before that tenancy came to an end. There was nothing in the original AST to support an inference that it was a conditional payment. It was simply part of the overall consideration for the original grant. It was required and paid long before the 2019 Act came into force. Retention of the monies did not amount to a requirement in consideration of the grant of the current AST, particularly where, as here, the appellant did not ask the respondent to repay them. The check-out fee was paid in consideration of the grant of the original AST. The retention of the monies was entirely independent of the grant of the current tenancy. Nor could the passive retention of the monies amount to a requirement. (3) Moreover, the language of section 1(6) was deliberately phrased in contractual terms. In most cases, the requirement had to be made pursuant to a provision of the tenancy agreement (ie, a contractual term). But where it need not be, as in section 1(6)(a), the use of the phrase “in consideration of” had to take its meaning from the contractual context in which it was used. Therefore, in the context of the grant of a tenancy it had its usual meaning in the law of contract, namely, a payment in exchange for the grant. The grant in exchange for which the payment was actually made was of the original AST. Section 1(6)(d) applied where a person entered into a tenancy agreement which required or purported to require the making of a prohibited payment. To fall within the scope of that paragraph, it was necessary for a tenancy agreement (contract) to contain a requirement or purported requirement to make a prohibited payment. All the sub-paragraphs of section 1(6) were prefaced by the statement that the landlord made a requirement “if and only if” one or more of those paragraphs was satisfied. The words “only if” were a statutory instruction not to expand the natural meaning of the words. It was still necessary to establish that the landlord required the payment to be made in consideration of the grant, etc, of a tenancy. Even if it was possible to give consideration without being aware that one was doing so, it was impossible to find a requirement in mere silence. (4) Long before the 2019 Act came into force, the appellant was required to pay, and did pay, a sum of money intended for use as a check-out fee. She had never been required to pay that sum again. If and when a check-out took place, the landlord would bear the costs. The fact that the landlord had funds set aside for that purpose amounted neither to a requirement nor to a payment in consideration of the grant of a tenancy after the coming into force of the 2019 Act. Because the 2019 Act was not retrospective, the payments that the respondent required were not prohibited; and any requirement made before the Act came into force was not caught by section 1: see section 30. Martin Westgate KC and Miranda Grell (instructed by Hackney Community Law Centre) appeared for the appellant; Luke Decker (instructed by Regency Solicitors) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Switaj v McClenaghan