Uncertainty of term: an agreement with the tenant of a mutual housing association expressed to be from month to month but terminable by the landlord only in specified circumstances has been found to be a lease for life which, by s149(6) of the Law of Property Act 1925, takes effect as the grant of a lease for 90 years.

Berrisford v Mexfield Housing Cooperative Limited [2011] UKSC 52
(Lord Hope (Deputy President), Lord Walker JSC, Lady Hale JSC, Lord Mance JSC, Lord Neuberger JSC, Lord Clarke JSC, Lord Dyson JSC)
Date of Judgment 9/11/2011

The Appellant tenant appealed against a decision of the Court of Appeal that a possession order obtained by the Respondent landlord was valid.

The landlord was a fully mutual housing co-operative association, which was founded by a bank with a view to buying mortgaged properties from individual borrowers who were in difficulty and then letting the properties back to them. The tenant was a former owner-mortgagor.

The parties had entered into an agreement described as an “occupancy agreement”. Clause 1 of the agreement stated that the tenant took a property owned by the landlord “from 13th December 1993 and thereafter from month to month until determined as provided in this Agreement”. Clause 5 of the agreement allowed the tenant to determine the agreement by giving the landlord one month’s notice in writing and clause 6 provided that the landlord was only entitled to end the agreement in four specified circumstances which did not include the giving of notice to quit. As the landlord was a mutual housing association, the only statutory protection which benefited the tenant was a right not to be evicted without a court order and at least four weeks’ notice to quit.

The landlord served the tenant with a month’s notice to quit. None of the termination provisions set out in clause 6 applied and the landlord argued that the occupancy agreement could not create a valid express tenancy because it was of uncertain duration and that a periodic tenancy had arisen. The landlord, in particular, relied upon the fact that clause 1 described the tenancy as being “from month to month” and argued that this carried with it a right on the part of the landlord to determine the agreement on one month’s notice.

The tenant accepted that the arrangement was not capable, as a matter of law, of being a tenancy in accordance with its terms. The court considered (a) the possibility that the purported tenancy created by the agreement was simply for an indeterminate term; and (b) the possibility that it was a periodic tenancy with an invalid fetter on the landlord’s right to determine; and concluded that the outcome would be the same in both cases.

The Supreme Court unanimously allowed the appeal and found that:

1. For the purposes of interpreting the occupancy agreement, the surrounding circumstances were that the landlord was a co-operative housing association and the purpose of the agreement was to provide the tenant with a home; these 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. As a matter of construction, the arrangement contained in the agreement could only be determined in accordance with clauses 5 and 6 (or consensually).
2. Such an arrangement cannot take effect as a tenancy in law in accordance with its terms as it is for uncertain duration.
3. On a true construction of the agreement, it was intended that the tenant should enjoy the premises for life, subject to clauses 5 and 6.
4. By 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 the tenant had not served a notice under clause 5 and the landlord was not relying upon clause 6, the 90 year tenancy created by the agreement subsisted and the landlord was not entitled to possession.

It was unnecessary for the court to consider the tenant’s alternative argument that, even if the agreement did not create a tenancy, it remained a binding contract which was capable of being enforced against the landlord. However, Lord Neuberger expressed support for the view that, if the tenant had failed to establish that she had a subsisting tenancy of the premises, she would nonetheless have defeated the claim for possession on the ground that she was entitled to enforce her contractual rights as between the parties.

The merits of dispensing with the certainty of term requirement were considered. Lady Hale was of the view that the rules relating to periodic tenancies and certainty of term have an Alice in Wonderland quality. In the present case, it was not difficult to conclude that the parties did in fact intend a lease for life. However, it was not difficult to imagine circumstances in which the same analysis would apply but would be very far from the intention of the parties. In addition, the analysis is not available where the tenant is a company or a corporation so in those circumstances the court is unable to give effect to the undoubted intentions of the parties. The Supreme Court considered that there was much to be said for changing the law and overruling the certainty requirement. However, it was not necessary to do so in this case.

01.09.2012