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In this test case – the parties having settled the substantive possession claim prior to the Court of Appeal hearing ([2010] EWCA Civ 811) – the issue for their Lordships was whether Mexfield Housing Co-operative Ltd had granted Ms Berrisford a legal tenancy which was terminable only in accordance with its terms or whether the tenancy was void for uncertainty of term and therefore took effect as a tenancy from month to month, terminable by notice to quit.

Facts

The facts of the case are summarised in the Case Preview.  In short, a tenancy granted by a fully mutual housing association no longer attracts security of tenure under either the Housing Act 1985 or the Housing Act 1988 and, thus, is ordinarily terminable by notice to quit.

Mexfield’s standard form occupancy agreement purported to grant a tenancy from month to month which was terminable by Ms Berrisford giving one month’s notice to quit (clause 5), and was terminable by Mexfield only in the following circumstances (clause 6):

“a) If the rent reserved . . . shall at any time be in arrear and unpaid for 21 days after the same shall have become due . . .

b) If the member shall at any time fail or neglect to perform or observe any of the stipulations conditions or provisions contained in this Agreement which are to be performed and observed by the Member

c) If the Member shall cease to be a member of the Association

d) If a resolution is passed under . . . the Association’s Rules regarding a proposal to dissolve the Association.”

On February 11, 2008, the Respondent served a notice to quit on the Appellant owing to rent arrears (which were subsequently paid) and, upon its expiry, commenced possession proceedings. It relied on the decision in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 as authority for the proposition that a term of uncertain duration cannot create a lease and that consequently, the entire occupancy agreement was void (including cl.6).  In the absence of the agreement, the Appellant enjoyed exclusive occupation of the property from month to month.  By implication, this amounted to a monthly periodic tenancy in accordance with the decision in Street v Mountford [1985] AC 809.  Such a tenancy was terminable by notice to quit.

Ms Berrisford had argued (up to and including the Court of Appeal) that although at law the occupancy agreement was incapable of creating a tenancy, in equity she was entitled to rely on the terms of the agreement against Mexfield. Accordingly, she could seek to enforce clause 6 by way of specific performance or an injunction; or alternatively, the occupancy agreement granted her a licence to occupy the flat, which licence could only be terminated in accordance with cl.6.

The Court of Appeal reluctantly dismissed Ms Berrisford’s appeal and she appealed to the Supreme Court.

Issues

Ms Berrisford’s argument was developed on appeal to the Supreme Court and gave rise to the following points:

(1) the occupancy agreement purported to be the grant to Ms Berrisford of a tenancy for a term determinable by her on one month’s notice under clause 5, or by Mexfield through exercising its rights under clause 6, and in no other way;

(2) subject to the points in (3) and (4) below, such an arrangement could not constitute a valid tenancy in law;

(3) before 1926, the arrangement would have been a term for the life of the tenant, subject to the determination rights under clauses 5 and 6 before her death;

(4) by virtue of section 149(6) of the Law of Property Act 1925, such a term is now a tenancy for 90 years, subject to the landlord’s right to determine on the tenant’s death, and to the rights under clauses 5 and 6;

(5) as Ms Berrisford had not served notice under clause 5, and Mexfield was not relying on clause 6, Mexfield was not entitled to possession, as the 90-year tenancy created by the occupancy agreement subsisted.

Judgment

Their Lordships unanimously held that Ms Berrisford’s appeal should be allowed.

First, as to whether the occupancy agreement purported to be terminable only in accordance with clauses 5 and 6, Mexfield sought to argue that, as the tenancy was expressed to be “from month to month”, it took effect in law as a monthly periodic tenancy terminable by one month’s notice to quit.  Mexfield invited their Lordships to construe the agreement as such.  Their Lordships rejected this approach as flawed in a number of respects including the fact that such a construction did not fall within the scope of the natural meaning of the specifically restrictive words in clause 6.  Their Lordships held that the agreement was terminable by Mexfield only in accordance with clause 6.

Secondly, as to whether the agreement was capable of being a tenancy as a matter of law if it was terminable only in accordance with clauses 5 and 6, it was accepted by Ms Berrisford that the agreement (insofar as it purported to be a tenancy) was void for uncertainty of term.  Lord Neuberger summarised the common law which supported conclusively the proposition that an agreement for an uncertain term cannot be a tenancy in the sense of being a term of years.  He disapproved of the practical effects of the rule but refrained from “jettisoning the certainty requirement” for six reasons:

a) for centuries, the principal of certainty of term has been fundamental to the concept of a term of years;

b) the 1925 Act defines a term of years as meaning “a term of years . . . either certain or liable to determination by notice or re-entry”: s 205(1) and the effect of s 149(6) is to convert a tenancy for life (which is of uncertain duration and was a species of freehold estate prior to 1926) into a determinable term of 90 years; and

c) the House of Lords confirmed the certainty requirement only 20 years ago in the Prudential case;

d) a change in the law might upset long established titles;

e) where the grant is to an individual, for the reasons given at (4), below, the agreement does take effect as a tenancy; and

f) the parties accepted that the agreement is incapable of being a valid tenancy according to its terms.

Thirdly, as to whether the agreement would have been treated as a tenancy for life before 1926, Mexfield argued that there was authority to support the proposition that on a fair reading of the agreement, the parties must have intended the agreement to create a tenancy for life which was not the case here. Their Lordships reviewed the authorities and concluded that those relied on by Mexfield were wrong insofar as they conflicted with the higher authority in support of Ms Berrisford’s position but, in any event, on a true construction of the agreement, it was intended that Ms Berrisford enjoy the premises for life subject to determination in accordance with clauses 5 and 6.  Consequently, the agreement would have been a tenancy for life prior to 1926.

Fourthly, in light of the above conclusion and the fact that s.149(6) provides that “[a]ny lease . . . at a rent . . . for life . . . or any contract therefor, made before or after the commencement of this Act, … shall take effect as a lease… or contract therefor, for a term of 90 years determinable after the death . . . of the original lessee . . . .”, their Lordships concluded that the agreement took effect as a term of 90 years.  Mexfield sought to argue that s.149(6) applied only to agreements which provided that the tenancy automatically determined on the tenant’s death rather than that the tenancy became determinable on the tenant’s death by notice to quit. Lord Neuberger roundly rejected this argument on the basis that the agreement was a tenancy for life as a direct result of the common law rule and that therefore its terms were inapplicable in this context.

Fifthly, their Lordships held that, as a result of the above reasoning, Ms Berrisford was entitled to retain possession of her property because a legal tenancy subsisted, terminable only in accordance with its terms (or by surrender) and Mexfield had not determined the tenancy in accordance with clause 6.

Despite Ms Berrisford’s success on the first point, Lord Neuberger went on to consider her alternative case in contract (the licence argument pursued before the Court of Appeal) and stated he “incline[d] fairly strongly to the view” that such an argument would have been successful insofar as it applied to the original contracting parties.

Finally, if all of the above arguments had been unsuccessful, on the question of whether the terms of the occupancy agreement would have been inferred into the monthly periodic tenancy which subsisted in default, their Lordships confirmed that those terms would have been so inferred, as between the original contracting parties.

Comment

My case preview prediction was realised.  It is somewhat unfortunate that, because of their findings on the “tenancy for life” issue, their Lordships precluded themselves from going the extra mile and actively considering “jettisoning” the certainty rule in the context of this case.  It leaves a door wide open for what practitioners may consider the appropriate case to run this argument (concerning, in all likelihood, a commercial lessee).

Furthermore, the implications of this decision for housing co-operatives who have similar agreements (and their tenants) are immense.  The 90-year term will have to be registered; the agreement may require stamping for use in evidence; repairing covenants are not implied under the Landlord and Tenant Act 1985, s 11 and termination of the agreement prior to the tenant’s death will require express provision for forfeiture in specified circumstances.