- A lease has to be for a period which is certain
- A periodic tenancy meets this requirement as it is analysed as a series of individual tenancies
- Under a periodic tenancy, both the landlord and the tenant must be able to give a notice to quit
- If there are restrictions on the landlord's ability to give a notice to quit, a periodic tenancy will not have been created
A number of formalities are required for the creation of a valid lease. Unfortunately, sometimes technical legal rules can prevent an arrangement from taking effect as the parties intended.
In Mexfield Housing Co-Operative v Berrisford, a tenancy agreement between a housing co-operative and one of its tenants provided that a property was let from 13 December 1993 and thereafter from month to month until determined as provided in the agreement.
The agreement was determinable by the tenant giving one month's notice. It also contained a clause which allowed the landlord to bring it to an end, but only where the rent was unpaid or there was another breach of the agreement by the tenant.
The question for the court was whether, despite the express provision in the lease, the landlord could bring the tenancy to an end by service of a month's notice to quit - regardless of whether there had been any breach of the agreement by the tenant.
The Court of Appeal, by a majority of 2:1, ruled that the housing association could serve a notice to quit, even where the tenant was not in default.
The explanation for what may, at first, appear to be a surprising decision can be found in the essential requirements for the creation of a lease.
A lease has to be for a period which is certain. Although most leases are granted for a fixed term, a fixed term is not necessary to satisfy this requirement. The important thing is that the term of the lease has to be capable of being ascertained with certainty. It is for this reason that a periodic tenancy satisfies the requirement – it is really analysed as a series of individual tenancies, each for the relevant period.
Crucially however, under a periodic tenancy, both the landlord and the tenant must be able to give a notice to quit. If there are restrictions on the landlord's ability to give a notice to quit, a periodic tenancy will not have been created.
The lease purportedly created by the occupancy agreement had no end date, and so was not for a fixed term. Since the landlord could not serve notice to bring the tenancy to an end save in certain circumstances, neither was the agreement capable of creating a periodic tenancy.
The court therefore held that the lease purportedly created by the occupancy agreement was void. However, in its place there was to be implied a monthly periodic tenancy, by reason of the tenant's occupation coupled with regular monthly payments of rent.
In other words, the parties had created a lease, but not the one they had bargained for.
Enforceable as a contract?
The tenant had argued that, even if the occupancy agreement may not have been effective to create an interest in land, it still existed as a valid contract between the housing association and the tenant. It contended that this contract could be enforced in equity as if it created an interest in land.
The court rejected this argument. It acknowledged that a lease serves a dual purpose: it records a contract between the original parties who are the landlord and the tenant; and it creates an interest in land. However, the contract could not survive independently of the failed lease. If a claimed interest in land does not satisfy the basic legal requirements for its existence, then generally speaking the interest cannot exist either at law or in equity.
The tenant then argued in the alternative that the occupancy agreement created a contractual licence, rather than a lease.
The court found that the parties intended to create a tenancy. It noted that there was exclusive possession coupled with the payment of rent. In addition, the constitution of the housing association required all its members to be tenants. The court held that it would not be justified in treating the document as something different from what the parties intended, and regarding it merely as a licence.
Things to consider
The court's reasoning for rejecting the licence proposition was that it would be setting up a new bargain which neither of the parties had ever intended to enter into. However, this could also be said of the implied periodic tenancy (terminable on one month's notice on either side) which the court ruled had been created in its place. For that reason, the court said that it did not reach its conclusion "with enthusiasm", and even went so far as to recommend that the rule that a lease must be for a certain term should be reviewed by Parliament.
Ordinarily, the finding that there was a lease (rather than a licence) could mean that the agreement would then carry with it some form of security of tenure. However, the landlord was a fully mutual housing association. It could not grant assured tenancies, nor create any other form of secure tenancy. Ironically therefore, in this instance, the tenant would have been better off had the court found that the document only created a licence, rather than a lease.