 Helen Mitchell and James Fieldsend explore a recent decision
clarifying how the periods of a statutory periodic tenancy
should be determined for the purposes of s5 of the 1988 Act
Section 5 of the Housing Act 1988
provides that following the expiry
of a fixed-term assured tenancy
the tenant is entitled to remain in possession
of the property pursuant to a
statutory periodic tenancy. But what are
the periods of that tenancy? Is it weekly,
monthly, quarterly or annual? This is the
question the Court of Appeal was asked
to rule upon in the recent case of Church
Commissioners for England v Gisele Meya [2006]. The answer to this question is
of importance because it dictates,
amongst other matters, the duration of
any notice served pursuant to s21(4)
Housing Act (HA) 1988 (in the case of
periodic assured shorthold tenancies);
the period of any tenant’s notice to quit;
and in certain circumstances the period
of notice to be given in a notice served
pursuant to s8 HA 1988 (for example
where grounds 1, 2, 5-7, 9 and 16 of
Schedule 2 are relied upon).
Section 5(3)(d) HA 1988 provides that
the periods of the statutory periodic tenancy
are the same as those for which rent
was last payable under the fixed-term
tenancy. The common approach adopted
in the county courts was that if the
rent under the fixed-term tenancy was
payable weekly, the statutory periodic
tenancy arising at the end of the fixed
term would be a weekly tenancy, but if
the rent was paid monthly the periods
would be monthly, and so on. In Meya,
however, the tenant challenged the landlord’s
contention that, as rent paid under
the fixed term was quarterly, the statutory
periodic tenancy was a quarterly
tenancy. The tenant argued that, because
the rent in the fixed-term agreement was
expressed as an annual amount under
the common law, and applying the
judgment of Kennedy LJ in Laine v
Cadwallader [2001], the arising statutory
periodic tenancy must be annual.
The facts
In Meya the tenant occupied the property
pursuant to an assured shorthold
tenancy. Following the first agreement
entered into by the parties (which was
for a fixed term of two years) there was a
succession of further tenancy agreements,
the most recent of which was
dated 25 February 2004 for a term of one
year less one day from 1 January 2004
to 30 December 2004, at an annual
rent expressed to be £17,680, payable in
equal quarterly instalments on the usual
quarter days.
Case history
On 7 March 2005 the landlord served
the tenant with a notice requiring possession
pursuant to s21(4)(a) HA 1988.
The end date specified in this notice
was:
...30th May 2005 or the end of that period
of your tenancy which will end after the
expiry of 2 months from the giving of this
notice, whichever is the later.
Notwithstanding service of this notice,
the tenant failed by the June 2005 quarter
day to vacate the premises and
accordingly the landlord issued proceedings
claiming possession in July
2005. Those proceedings were issued
under the accelerated procedure under
Part II of CPR 55.
The tenant filed a defence arguing that
she occupied the premises under a yearly
periodic tenancy, that the date given in
the s21 notice (under the ‘saving provision’)
had not passed and the
proceedings therefore had been commenced
prematurely. The matter came
before Lawrence DDJ for hearing on 25
October 2005.
At this hearing the judge agreed with
the parties that, in simple terms, he needed to rule on whether the periods
of the tenant’s tenancy were quarterly
or yearly.
He was inclined to agree with the
view of the authors of Woodfall (para
24.038, footnote 3) and adopt the landlord’s
interpretation that, as the rent
under the fixed term was payable quarterly,
therefore it was a quarterly
periodic tenancy. The tenant, however,
successfully persuaded the judge to
follow the judgment of the Court of
Appeal in Laine v Cadwallader where, in
a different context, Kennedy LJ interpreted
the wording of s5(3)(d) HA 1988
in such a way that when his reasoning
was applied to the Meya case it produced
the result that the periods of the
statutory periodic tenancy were yearly.
The judge ‘reluctantly’ could find no
way of distinguishing the reasoning of
Kennedy LJ and therefore he determined
that the periods of the tenancy
were in fact yearly. Accordingly, the
proceedings had been issued prematurely
and therefore the claim had to be
dismissed. The judge did, however,
grant the landlord permission to appeal
directly to the Court of Appeal, his view
being that, given the importance of the
matter, only the Court of Appeal could
confirm its own interpretation of
s5(3)(d) and seek to distinguish if necessary
the decision in Laine v Cadwallader.
Court of Appeal
The Court of Appeal held that, if the
common law applied (Adler v Blackman
[1953] considered), then where a rent is
expressed to be an annual rent, albeit
payable by equal quarterly instalments,
an annual and not a quarterly tenancy
would arise by virtue of holding over.
However, the Court of Appeal held that
it would be ‘slipping into error’ if it
decided the matter by reference to the
common law rather than applying the
actual wording of the HA 1988 and
asking what was the period for which
rent was last payable.
Section 5 of the Housing Act 1988: security of tenure
(1) An assured tenancy cannot be brought to an end by the
landlord except by obtaining an order of the court in
accordance with the following provisions of this Chapter or
Chapter II below or, in the case of a fixed-term tenancy
which contains power for the landlord to determine the
tenancy in certain circumstances, by the exercise of that
power and, accordingly, the service by the landlord of a
notice to quit shall be of no effect in relation to a periodic
assured tenancy.
(2) If an assured tenancy which is a fixed-term tenancy comes to
an end otherwise than by virtue of:
(a) an order of the court, or
(b) a surrender or other action on the part of the tenant,
then, subject to s7 and Chapter II below, the tenant shall be
entitled to remain in possession of the dwelling-house let
under that tenancy and, subject to subsection (4) below, his
right to possession shall depend upon a periodic tenancy
arising by virtue of this section.
(3) The periodic tenancy referred to in subsection (2) above is
one:
(a) taking effect in possession immediately on the coming to
an end of the fixed-term tenancy;
(b) deemed to have been granted by the person who was the
landlord under the fixed-term tenancy immediately
before it came to an end to the person who was then the
tenant under that tenancy;
(c) under which the premises which are let are the same
dwelling-house as was let under the fixed-term tenancy;
(d) under which the periods of the tenancy are the same as
those for which rent was last payable under the fixedterm
tenancy; and
(e) under which, subject to the following provisions of this
Part of this Act, the other terms are the same as those of
the fixed-term tenancy immediately before it came to an
end, except that any term which makes provision for
determination by the landlord or the tenant shall not
have effect while the tenancy remains an assured tenancy.
(4) The periodic tenancy referred to in subsection (2) above
shall not arise if, on the coming to an end of the fixed-term
tenancy, the tenant is entitled, by virtue of the grant of
another tenancy, to possession of the same or substantially
the same dwelling-house as was let to him under the fixedterm
tenancy.
(5) If, on or before the date on which a tenancy is entered into
or is deemed to have been granted as mentioned in
subsection (3)(b) above, the person who is to be the tenant
under that tenancy:
(a) enters into an obligation to do any act which (apart from
this subsection) will cause the tenancy to come to an end
at a time when it is an assured tenancy, or
(b) executes, signs or gives any surrender, notice to quit or
other document which (apart from this subsection) has
the effect of bringing the tenancy to an end at a time
when it is an assured tenancy,
the obligation referred to in paragraph (a) above shall not be
enforceable or, as the case may be, the surrender, notice to
quit or other document referred to in paragraph (b) above
shall be of no effect.
(6) If, by virtue of any provision of this Part of this Act, Part I of
Schedule 1 to this Act has effect in relation to a fixed-term
tenancy as if it consisted only of paragraphs 11 and 12, that
Part shall have the like effect in relation to any periodic
tenancy which arises by virtue of this section on the coming
to an end of the fixed-term tenancy.
(7) Any reference in this Part of this Act to a statutory periodic
tenancy is a reference to a periodic tenancy arising by virtue
of this section.
The Court of Appeal emphatically
stated that meaning had to be given
to the word ‘last’ in s5(3)(d). The agreement
provided for the rent to be paid by quarterly instalments. The last instalment
became payable on one of the
usual quarter days and was payable
in respect of a period of one quarter.
The statutory periodic tenancy that
arose after expiry of the fixed term
under the HA 1988 is a creature of
statute and not of common law. It is the
provisions of the statute that determine
the periods of the statutory periodic
tenancy, not the common law. The
Court of Appeal held that the reasoning
of Kennedy LJ in Laine v Cadwallader, so
far as it related to s5(3)(d), was obiter, as
the issue in that case did not turn on the
interpretation to be given to that statutory
provision.
Section 21(4) of the
Housing Act 1988
Without prejudice to any such right as
is referred to in subsection (1) above, a
court shall make an order for
possession of a dwelling-house let on an
assured shorthold tenancy which is a
periodic tenancy if the court is satisfied:
(a) that the landlord or, in the case of
joint landlords, at least one of them
has given to the tenant a notice
stating that, after a date specified in
the notice, being the last day of a
period of the tenancy and not earlier
than two months after the date the
notice was given, possession of the
dwelling-house is required by virtue
of this section; and
(b) that the date specified in the notice
under paragraph (a) above is not
earlier than the earliest day on
which, apart from section 5(1)
above, the tenancy could be
brought to an end by a notice to
quit given by the landlord on the
same date as the notice under
paragraph (a) above.
Asking then for what period the last
payment of rent under the fixed term
was payable provides the answer that it
was for a quarterly period. In other
words, what was the last payment of
rent the tenant was obliged to make and
what period was covered by that last
payment? Here the rent was an annual
rent, but it was expressly payable quarterly
in advance on the usual quarter
days and therefore the periods were
quarterly and the proceedings had not
been issued prematurely.
Impact on existing tenancies
and drafting of future assured
shorthold tenancy agreements
The Court of Appeal, thankfully, has
taken a common-sense approach. It clarifies
how the periods of a statutory
periodic tenancy should be determined,
simplifying the position for both parties
when it comes to the serving of a section
21 notice, a notice to quit and, in certain
circumstances, a notice seeking possession.
It is far easier now to calculate the
‘end of a period of the tenancy’, the calculation
of which has given rise to many
mistakes by landlords and tenants alike
and many ‘void’ notices!
Nevertheless it would be wise, to
avoid doubt when drafting a fixed-term
tenancy, not to express the rent as an
annual amount, particularly where the
intention is for the rent to be paid in periodic
instalments. If, during the fixed
term, a landlord wishes to receive rent
weekly, monthly or quarterly, simply
express the rent to be a weekly, monthly
or quarterly amount in the written agreement.
This should avoid confusion as to
what the periods of the statutory periodic
tenancy are that will take effect at the end
of the fixed term. © Property
Law Journal
|
