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Section 21 notices

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8th January 2014

An End to the quest for “the last day of a period of the tenancy”.

Terminating an assured shorthold tenancy with a section 21 notice has always been tricky. The simple answer to the question “how much notice do I have to give to terminate an assured shorthold tenancy after the fixed term has expired?” is 2 months. But as many a landlord has discovered to his cost, it’s not nearly as simple as that. At least it wasn’t until now. Following the Court of Appeal’s recent decision in Spencer v Taylor [2013] EWCA Civ 1600, all that convoluted wording we previously had to resort to specify the date on which the tenancy would end can be abandoned in the majority of cases.

Section 21 of the Housing Act 1988 provides that the court may not make an order for possession where the contractual term of an assured shorthold tenancy has come to an end unless and until the landlord has given the tenant notice in accordance with s. 21 (1) or s. 21 (4) of the Act.

Section 21 says:

“(1) Without prejudice to any right of the landlord under an assured shorthold tenancy to recover possession of the dwelling-house let on the tenancy in accordance with Chapter I above, on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy, a court shall make an order for possession of the dwelling- house if it is satisfied:

(a) that the assured shorthold tenancy has come to an end and no further assured tenancy (whether shorthold or not) is for the time being in existence, other than an assured shorthold periodic tenancy (whether statutory or not); and

(b) the landlord or, in the case of joint landlords, at least one of them has given to the tenant not less than two months’ notice in writing stating that he requires possession of the dwelling house…

(2) A notice under paragraph (b) of subsection (1) above may be given before or on the day on which the tenancy comes to an end; and that subsection shall have effect notwithstanding that on the coming to an end of the fixed term tenancy a statutory periodic tenancy arises…

(4) Without prejudice to any such right as is referred to in subsection (1) above, a court shall make an order for possession of a dwelling- house let on an assured shorthold tenancy which is a periodic tenancy if the court is satisfied—

(a) that the landlord or, in the case of joint landlords, at least one of them has given to the tenant a notice in writing stating that, after a date specified in the notice, being the last day of a period of the tenancy and not earlier than two months after the date the notice was given, possession of the dwelling-house is required by virtue of this section; and

(b) that the date specified in the notice under paragraph (a) above is not earlier than the earliest day on which, apart from section 5(1) above, the tenancy could be brought to an end by a notice to quit given by the landlord on the same date as the notice under paragraph (a) above.”

The conventional wisdom has been that s. 21 (1) applies when the notice is served before the contractual term has come to an end and s. 21 (4) comes into play when notice is served after the contractual term has expired. The thinking being that after a contractual fixed term has expired, a periodic tenancy will arise by virtue of section 5 of the Act, and that s. 21 (2) allows notice to be served under s. 21 (1)(b) only during the fixed term.

In practice complying with s. 21 (4) is easier said than done. The date to be specified as the date on which the tenant is to give up possession must fulfil two requirements. First it must be at least two months after the notice is given and second it must be the last day of a period of the tenancy. After the expiry of the fixed term, the “period” of the tenancy which will arise under s. 5 will be the same as those for which rent was last payable under the fixed term tenancy – s. 5(3)(d). So if rent was payable weekly, a weekly periodic tenancy will commence immediately on the coming to an end of the fixed term. If the fixed term ended on a Sunday, the periodic tenancy begins on a Monday and the last day of a period of the tenancy will be a Sunday. If the date specified in the notice is two months after the notice is given but it is a Monday or a Tuesday, it will be invalid under s. 21(4).

It is not unusual for either the landlord or the tenant to have no recollection of what day of the week the periodic tenancy commenced. If the tenancy is in writing, it should be possible to work it out but if the tenancy is oral it may be impossible. One way round this problem was to dodge the inclusion of an actual date at all and use a formula of words which would comply with the Act. In Lower Street Properties Ltd v Jones [1996] 2 EGLR 67, the Court of Appeal said that a notice which provided that it would expire “at the end of the period of your tenancy which will end after the expiry of 2 months from the service upon you of this notice” was valid.

This may be a satisfactory solution to lawyers but the “formula” does not really make it clear to the departing tenant exactly what day he has to tie up his knapsack and start on his journey to pastures new.

To deal with this problem, many practitioners inserted a date in the notice as well as “the formula” as a back up in case the date cited was wrong. It was argued in Spencer that such an approach results in two dates being “specified” rather than “a date” and that this invalidated the notice. A further problem can arise if the words “whichever is the later” are added, as the notice risks being invalid because the later date is the wrong one.

In Spencer, Lewison LJ accepted that the inclusion of two dates could be a problem – it would depend on the way in which the two dates are expressed to operate. If the reasonable reader of the notice would understand that one date is the primary date and the other date is a fall back date, he could see no reason to invalidate the notice on that account. However, if both dates satisfied the requirements of s. 21 (4) and there was no way of knowing which date was to take priority, there may be a problem. It seems, therefore, that if two dates are included it would be best to get the fixed date wrong!

The next problem faced by landlords is that minor errors in the date for possession cannot be saved by the “reasonable recipient” test laid down in Mannai Investment Co. Ltd v Eagle Star Assurance Co. Ltd [1997] AC 749. In Fernandez v McDonald [2003] EWCA Civ 1219, the section 21 notice specified 4^th January 2003 whereas the last day of a period of the tenancy was, in fact, 3^rd January 2003. The case proceeded on the basis that the notice had to comply with section 21 (4) and the landlord argued that the tenant would have understood that 4^th January was a mistake for 3^rd January. The Court of Appeal rejected that argument finding that, even if the court could be satisfied that a reasonable recipient would have understood the notice, the statutory requirements of s. 21 (4) had not been complied with. The court was unable to correct the error.

In Spencer v Taylor a similar problem arose. The fixed term tenancy was for a term of 6 months beginning on 6^th February 2006. On the expiry of the fixed term a weekly periodic tenancy arose. The last day of the tenancy was a Saturday. Unfortunately, the date stated in the notice after which possession would be required was a Sunday.

However, the Court of Appeal looked at the wording of section 21 afresh and found that “the conventional wisdom” was wrong all along. There is no need to comply with section 21 (4) at all because compliance with s. 21 (1) will suffice. Lewison LJ said:

“9. Under section 21 (1) (a), the court must be satisfied first that the assured shorthold tenancy has come to an end. As applied in our case, this means the fixed term shorthold tenancy referred to in the opening part of section 21 (1). In our case, that tenancy came to an end on its expiry date.

10. Next, the court must be satisfied that no further shorthold tenancy has come in an [sic] existence apart from the an [sic] assured shorthold periodic periodic tenancy. In our case, on the coming to an end of the fixed term assured shorthold tenancy an assured shorthold periodic tenancy came into existence by virtue of section 5 of the Housing Act 1988. No other tenancy came into existence so that condition is also satisfied.

11. The third condition that must be satisfied is that the landlord has given two months’ notice. Sub-section 21 (1)(b) does not require the notice to expire on any particular date nor does it require a date to be specified in the notice. In our case, Mr Spencer gave notice on 18 October for the following 24 December or 1 January. That was more than two months’ notice.”

Counsel for the tenant argued that s. 21(2) means that the landlord may only serve notice under s. 21 (1) before or on the day the fixed term expires. The Court of Appeal rejected this argument and found that the language of s. 21 (2) is permissive. In other words, where there was originally a fixed term tenancy which has now expired, there is no need to comply with s. 21 (4) at all – two months’ notice under s. 21 (1) can be served.

This is a surprising decision given the number of cases which have preceded it and assumed that s. 21 (4) will apply where the fixed term has expired. However, it is great news for landlords who no longer have to embroil themselves in all that “last day of a period of the tenancy” business. Section 21 (4) will still be relevant to tenancies which started life as periodic tenancies but where there was originally a fixed term, two months’ notice will now suffice.

Published in the Landlord and Tenant Review.

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