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Niamh O’Brien discusses the recent Supreme Court decision in Croydon LBC v Kalonga: Ending ‘Flexible’ Tenancies

In 2012, the Localism Act introduced the concept of the ‘flexible’ secure tenancy. The flexible tenancy regime gave local authorities the power to grant fixed term tenancies with a ‘no fault’ statutory mechanism for recovering possession at the end of the term.  The purpose of the change was to end the presumption that the grant of a secure tenancy amounted to the grant of a ‘tenancy for life’.

What was never entirely clear was the mechanism by which a local authority could recover possession of a dwelling let on a fixed term secure tenancy, in the event of a breach by the tenant during the fixed term.  Could the local authority rely on the ‘traditional’ method (i.e. service of a notice seeking possession)?  Or was the local authority obliged to bring the contractual tenancy to an end first – either by forfeiture (strictly speaking, by obtaining a termination order under s82(3) Housing Act 1985, in lieu of forfeiture), or by triggering a break clause?

In other words, does the secure tenancy regime add to the tenant’s common law contractual and proprietary rights, or does it replace them?

Background to the Decision

In 2015, Croydon granted a 5-year fixed term secure tenancy to Ms Kalonga.  In 2017, Croydon served a notice seeking possession, relying on rent arrears and ASB grounds.  Ms Kalonga defended the claim on two grounds: firstly, her contractual tenancy had not been terminated; and secondly, her tenancy agreement did not provide any express mechanism for early termination.

The possession claim was transferred to the High Court, which decided that the landlord could use the ‘traditional’ method of seeking possession, but only if the tenancy contained a forfeiture clause or early termination clause.

On appeal, the Court of Appeal held that in order to recover possession, the landlord would first have to take the necessary steps to terminate the contractual tenancy (service of a s146 notice etc.), and then seek possession using the ‘traditional’ method (in other words, that the statutory regime supplemented rather than replaced the common law forfeiture regime).

Furthermore, the Court of Appeal concluded that if there was no express forfeiture clause or break clause in the tenancy agreement, the tenancy could not be terminated early at all, irrespective of breach. Croydon appealed to the Supreme Court.

What did the Supreme Court decide?

The Supreme Court has concluded that the statutory regime of security of tenure was intended to enhance, and not replace, the tenant’s contractual and proprietary rights.

Consequently, if a landlord wishes to terminate a fixed term secure tenancy before its term had ended, it can only do so if the tenancy contains a clause permitting early termination, such as a break  or forfeiture clause. Whether a clause amounts to a forfeiture clause is a matter of substance, rather than form: a clause giving the landlord the right to recover possession in specific circumstances (such as breach of a term of the tenancy) could amount to a forfeiture clause.

In this case, Ms Kalonga’s tenancy agreement contained numerous clauses granting her landlord the right to bring her tenancy to an early end. But Croydon had not followed the correct steps to terminate Ms Kalonga’s contractual tenancy, either before or at the time of seeking a possession order in ‘traditional’ possession proceedings.  They were not entitled to a possession order.

Comment

Most local authorities do not seek possession of dwellings let on fixed term tenancies simply by reason of the “no fault” expiry of the fixed term.

What does this mean in practice?

It means that fixed term secure tenancies will be more difficult to terminate than periodic secure tenancies: not least because tricky questions such as waiver of the right to forfeit (most commonly, by acceptance of rent) will come into play.

Fasten your seatbelts: it’s going to be a very bumpy night. 

View Niamh's profile here.


16.03.2022