Lease - Duration - Certainty

Mexfield Housing Co-operative Ltd v Berrisford: Supreme Court (Lords Hope DP, Walker, Mance, Neuberger, Clarke and Dyson, Lady Hale): 9 November 2011

The landlord was a fully mutual housing co-operative association founded by a bank as part of a mortgage rescue scheme with a view to buying mortgaged properties from borrowers in difficulty and letting the properties back to them. The borrowers were required by the landlord’s rules to become members of the association.

The tenant purchased one of those properties (the premises) from the landlord and let it back to her under an occupancy agreement (the agreement). The agreement provided that rent was to be payable weekly in advance at £89 per week subject to annual increases. The only express provisions of the occupancy agreement that dealt with its termination provided that it could be determined, under clause 5, by the tenant giving the landlord one months' notice in writing and, under clause 6, by the landlord ‘by the exercise of the right of re-entry specified in this clause but only in [certain specified] circumstances’ which did not include the giving of notice to quit.

Because the landlord was a mutual housing association the only statutory protection from which the tenant benefited was a right to (a) not be evicted without a court order and (b) at least four weeks’ notice to quit. The tenant remained in occupation and complied with her obligations under the agreement until she fell into arrears with her rent, which she soon paid off. Rather than invoke any of the provisions of clause 6 of the agreement, the landlord sought to end the tenant’s occupancy by serving a notice to quit.

The landlord applied for summary judgment on the basis that the agreement could not be a valid express tenancy because it was of uncertain duration. However, it said, an implied periodic tenancy arose by virtue of the payment and acceptance of rent since 1993, and, pursuant to well established principles, the landlord was therefore entitled to determine such a tenancy by notice to quit. At first instance, the judge refused the landlord's application for summary judgment. The Chancery Division of the Court of Appeal accepted the landlord's argument and made an order for possession. The tenant appealed.

The tenant contended that: (i) the agreement purported to be the grant to her of a tenancy for a term determinable by her on one months' notice under cl 5, or by the landlord through exercising its rights under clause 6 and in no other way; (ii) subject to the points in (iii) and (iv) below, such arrangement could not constitute a valid tenancy in law; (iii) 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; (iv) by virtue of the Law of Property Act 1925 (the 1925 act), such a term constituted 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; (v) as she had not served notice under clause 5, and the landlord was not relying on clause 6, the landlord had not been entitled to possession, as the 90-year tenancy created by the agreement remained in subsistence. The appeal would be allowed.

In light of established authority: first, an agreement for a term, whose maximum duration could be identified from the inception could give rise to a valid tenancy. Secondly, an agreement which gave rise to a periodic arrangement determinable by either party could also give rise to a valid tenancy. Thirdly, an agreement could not give rise to a valid tenancy as a matter of law if it was for a term whose maximum duration was uncertain at the inception. Fourthly, (a) a fetter on a right to serve notice to determine a periodic tenancy was ineffective if the fetter was to endure for an uncertain period, but (b) a fetter for a specified period could be void (see [33] of the judgment).

It was necessary to determine whether the landlord was entitled to terminate the agreement on one month's notice. For the purposes of interpreting the agreement, the surrounding circumstances were that the landlord was a co-operative housing association, of which the tenant was a member, and that the purpose of the agreement was to provide the tenant with a home. Those factors together with the mortgage rescue background tended to support the notion that the tenant's right of occupation was not intended to be precarious.

Despite the fact that the agreement was expressed as a tenancy 'from month to month', as a matter of contractual interpretation, it seemed clear from the language of the agreement that the tenancy could only be determined by the tenant pursuant to clause 5 or by the landlord pursuant to clause 6, and in no other way. In light of established authority, such an agreement could not take effect as a tenancy as it was for a term of uncertain duration. Before the 1925 act came into force, an agreement for an uncertain term was treated as a tenancy for the life of the tenant, determinable before the tenant's death according to its terms.

On that basis, it seemed clear that, at least if the agreement had been entered into before 1 January 1926, when the 1925 act came into force, it would have been treated by the court as being the grant of a tenancy to the tenant for her life, subject to her right to determine pursuant to clause 5 and the landlord's right to determine pursuant to clause 6 of the agreement. On a true construction of the agreement, it was intended that the tenant enjoy the premises for life subject to determination pursuant to clauses 5 and 6 of the agreement.

The effect of section 149(6) of the 1925 act was that the agreement was to be treated as a tenancy for a term of 90 years determinable on the death of the tenant, subject to the rights of determination in clauses 5 and 6. The tenant was still alive, and it was common ground that she had not served a notice under clause 5 and that the landlord was not relying on clause 6. In those circumstances, it followed that the tenant retained her tenancy of the premises and that the landlord was not entitled to possession (see [13], [15], [18], [20], [22]-[23], [34]-[35], [39], [46], [49], [54], [56], [57] of the judgment).

Prudential Assurance Co Ltd v London Residuary Body [1992] 3 All ER 504 criticised; Doe d Warner v Browne 8 East 165 considered; Zimbler v Abrahams [1903] 1 KB 577 considered; Lace v Chantler (or Chandler) [1944] 1 All ER 305 considered; Breams Property Investment Co Ltd v Stroulger[1948] 1 All ER 758 considered; Midland Rly Co's Agreement, Re, Charles Clay & Sons Ltd v British Railways Board [1971] 2 WLR 625 considered; Street v Mountford [1985] 2 All ER 289 considered; Bass Holdings Ltd v Lewis [1986] 2 EGLR 40 considered.

Per curiam: There was... much to be said for changing the law, and overruling what may be called the certainty requirement... on the ground that, in so far as it had any practical justification, that justification has long since gone, and, in so far as it is based on principle, the principle is not fundamental enough for the Supreme Court to be bound by it... however, I would not support jettisoning the certainty requirement, at any rate in this case (see [34]-[35] of the judgment).

Decision of Court of Appeal [2011] 2 All ER 273 reversed.

Jonathan Gaunt QC, Kerry Bretherton and Laura Tweedy (instructed by Rickerbys LLP) for the claimant; Mark Wonnacott (instructed by Mary Ward Legal Centre) for the defendant.