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On appeal from [2021] EWCA Civ 77

The Appellant, a local housing authority, granted the Respondent a fixed-term secure tenancy of five years. During the tenancy, the Appellant served the Respondent with notice that they intended to seek possession of the Property on the grounds of rent arrears and anti-social behaviour.

There are two issues in the appeal. The first is whether the Appellant was able to seek possession in those circumstances or whether they were prevented from doing so in light of the statutory protections for secure tenancies under the Housing Act 1985 (as they apply to fixed-term tenancies granted by public sector landlords). That issue turned on the proper construction of the statutory regime governing secure tenancies, now to be found in Part IV (sections 79 and following) of the 1985 Act. The second issue is whether the tenancy agreement contained a forfeiture clause, under which the Appellant could terminate the lease because of some fault on the part of the Respondent.

Both the High Court and the Court of Appeal found in favour of the Respondent. The Court of Appeal held that the only way to bring a secure fixed–term tenancy to an end under the 1985 Act during the period of the fixed–term was by the exercise of a forfeiture clause to obtain a termination order in lieu of forfeiture pursuant to section 82(3) of the 1985 Act. The Appellant had not purported to rely upon forfeiture in seeking to terminate the fixed–term tenancy and the Court of Appeal held that her tenancy agreement did not, in any event, contain a forfeiture clause. As a result, the Appellant could not terminate the fixed–term tenancy prior to the end of the five years. The decision was then appealed to the Supreme Court.

 

Held – Appeal unanimously allowed in part.

 

The construction of the relevant provisions of the 1985 Act advanced by the parties and by the courts below all gave rise to significant difficulties. The provisions had to be interpreted so as to accommodate all situations. Both party’s interpretations of the Act would give rise to unsatisfactory results in certain circumstances.

A different solution was therefore required. In order to reach this solution, the critical question was whether Parliament intended via the security of tenure provisions of the 1985 Act to grant greater protections to social housing tenants compared with the contractual and proprietary rights under their tenancy agreements or to replace and to some extent reduce or remove them.

A fixed–term tenancy confers substantial security of tenure. Legislation to improve tenants’ rights should not be construed lightly as taking that away. The 1985 Act did not demonstrate that Parliament intended the possession regime to apply to all fixed–term secure tenancies. Those without provisions for early termination were immune until the end of the fixed–term. Parliament could not be taken as intending to expose a tenant to a loss of contractual security of tenure earlier than the landlord could have obtained possession under the terms of the tenancy.

The key to reaching this conclusion was attention to the words of section 82(1) and, in particular, reading “subject to termination by the landlord” with “cannot be brought to an end by the landlord except…” in section 82(1) of the 1985 Act. The latter phrase assumed that a fixed–term tenancy could be brought to an end by the landlord in accordance with the terms of the tenancy agreement. Without a provision for earlier termination however, an unexpired fixed–term created a bar to termination. A fixed-term tenancy without a forfeiture or break clause could not be terminated until the fixed–term expired by effluxion of time. A fixed–term tenancy with a forfeiture clause however could not be terminated otherwise than by termination in lieu of forfeiture under section 82(3) of the 1985 Act. In short, a landlord is able to seek possession against a tenant with a secure fixed–term tenancy where there is a presently exercisable break or forfeiture clause. That approach prevents the tenant being deprived of their contractual and proprietary rights but also means that the landlord may rely upon a contractual right to terminate or forfeit where it has been granted one under the tenancy agreement where such a right has actually become exercisable.

The Court’s conclusion in relation to issue one was fatal to the Appellant’s case because, regardless of whether the tenancy agreement contained a forfeiture clause, they had not sought to rely upon it. Lord Briggs nevertheless went on to decide the second issue. Whether a particular clause amounted to a forfeiture clause was a matter of substance, not form, and a landlord would not be permitted to dress up a forfeiture clause as something else to avoid relief from forfeiture being available to the tenant. The tenancy agreement permitted the landlord to seek an order for possession from the Court “at any time” if the tenant breached the terms of the agreement. That was a forfeiture clause applying the established test derived from Clays Lane Housing Co-operative Ltd v Patrick [1985] 17 HLR 188 and the Courts below had been wrong to conclude otherwise.

The cumulative result was that the Respondent’s tenancy agreement contained numerous provisions granting the Appellant the right to bring the secure fixed–term tenancy to an early end. Some of those were forfeiture provisions and some merely break clauses. The Judge was therefore right to dismiss the claim in circumstances where the Appellant had not sought termination in lieu of forfeiture but her declarations were only partially correct because the tenancy agreement did contain a forfeiture clause. That meant that the appeal succeeded in part.

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12 Jan 2022 Morning session Afternoon session