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Croydon LBC v Kalonga [2020] EWHC 1353 (QB)

11th August 2020

By Sam Madge-Wyld

Background

The “flexible tenancy” was the latest, and mercifully the last, in a long line of new “tenancies” created by Parliament to address perceived deficiencies within social housing. The flexible tenancy is a fixed term secure tenancy that is capable of determination at the end of its term by not becoming a secure periodic tenancy. Its purpose was to enable a greater churn of social housing and to ensure that such housing went to those tenants in greatest housing need. The flexible tenancy did not prove popular—there are said to be only 30,000 flexible tenancies in existence—and Parliament’s proposal to make such tenancies mandatory (under the Housing and Planning Act 2016) has never been brought into force.

For those local authorities that did grant such tenancies, there had existed a debate about the steps that were necessary to determine the tenancy during the fixed term where the tenant had arrears of rent or had committed acts of nuisance (see, for example, A. Dymond, “Flexible Tenancies and Forfeiture” (2014) J.H.L. 4 and J. Holbrook, “In A Fix” (2012) 162 N.L.J. 868). The point has recently been decided in Croydon LBC v Kalonga [2020] EWHC 1353 (QB), where Tipples J. held that it was unnecessary to determine the fixed term before a court could order possession. That said, the court lacked jurisdiction to make an order for possession if the tenancy agreement did not provide the landlord with a right of re-entry and Croydon’s tenancy agreement did not. Accordingly, Croydon’s claim for possession (based on rent arrears and anti-social behaviour) was dismissed and it was unable to recover possession until the end of the fixed term. Both strands of the decision raise interesting points of principle which are very difficult to reconcile with authority.

Forfeiture clause

The tenancy did not contain the usual form of forfeiture clause which gave the landlord an express right of “re-entry” or the right to “forfeit” the lease. However, it is well established that there is no *L. & T. Review 157 requirement that a forfeiture clause contain the words “re-entry” or “forfeiture”. In Clays Lane Housing Co-operative Ltd v Patrick (1985) 49 P. & C.R. 72, Fox LJ held that “a right to determine a lease by a landlord is a right of forfeiture if (a) when exercised, it operates to bring the lease to an end earlier than it would ‘naturally’ terminate; and (b) it is exercisable in the event of some default by the tenant”. Moreover, it is now generally thought to be unnecessary that there is some default by the tenant.

In Kolanga, the tenancy agreement provided that the landlord could “end a secure tenancy by first serving a notice of seeking possession and applying to the court for a possession order”. A subsequent clause provided that the landlord was entitled to seek possession if the tenant breached “any of the clauses in this agreement, or if any of the grounds in Sch.2 of the Housing Act 1985 as amended by the Housing Act 1996, or for any other ground that is made law and applies in the future, are breached”. Fairly construed, it is hard to see how this is not a forfeiture clause: (1) it reserves the landlord a right to determine the tenancy before its natural end; and (2) sets out the circumstances in which it is exercisable, most of which will have arisen from a defaulting tenant.

Surprisingly, Tipples J held otherwise. Her Ladyship’s reason for doing so was that “the service of a notice seeking possession or the application to the court for a possession order is not the same thing as the exercise by a landlord of its right to determine the tenancy agreement before the end of the fixed term in the event of default by the tenant” (at [22]). She cited no authority for this proposition, which is unsurprising given that it is hard, if not impossible, to square with well-established authority. A landlord can forfeit a tenancy by serving an issued claim for possession on the tenant (Billson v Residential Apartments [1992] 1 A.C. 494). Issuing and serving a claim for possession is, therefore, as clear an example of the landlord exercising a right of re-entry as one could hope for.

Section 82 of the Housing Act 1985

Fixed-term secure tenancies were not popular, and few are likely to have been granted before the flexible tenancy was created by the Localism Act 2011. As such, before Kalonga, there had been no reported case on what steps needed to be taken before a court could make an order for possession. In Kolonga, Tipples J held that it was not necessary for the landlord to have terminated the fixed term before the court could make an order for possession. This was because ss.82(1)(1A) provided that both a periodic and a fixed term tenancy could be ended by the making and execution of a possession order. The ability to terminate the fixed term by forfeiture (under s.82(3)) was expressed to be an alternative and not a prerequisite.

On an initial reading of s.82. it is hard to fault this conclusion. The construction accords with the ordinary meaning of the words used. However, it flatly contradicts the information for tenants contained in the notice prescribed by the Secure Tenancies (Notices) Regulations 1987 and belies a misunderstanding as to the way in which secure tenancies were integrated into the common law of landlord and tenant. As Lord Hoffman explained in Walker v Birmingham CC [2007] UKHL 22; [2007] 2 A.C. 262, the purpose of the secure tenancy was to confer additional benefits to public sector tenants, but in a way, unlike the Rent Acts, that preserved the contractual tenancy. “It merely added statutory incidents to that tenancy which overrode some of the contractual terms” (at [3]) and was otherwise “an orthodox estate in land” (at [7]). In Sheffield City Council v Wall [2010] EWCA Civ 922; [2011] 1 W.L.R.1342, Ward LJ explained, at [47] that “a secure tenancy is … a contractual tenancy ‘cloaked’ with statutory protection”. When s.82 is considered against this backdrop, it becomes readily apparent that, although a secure tenancy must be ultimately terminated by execution of a court order, this does not mean that a court *L. & T. Review 158 could make such an order without the fixed term having been determined by s.82(3) first. Every student of real property would understand that the landlord of a fixed term tenancy does not have a right of possession against its tenant until the term has ended.

The construction favoured in Kolonga, therefore, only works if it is possible to argue that ss.82 to 84 (which govern the circumstances in which a secure tenancy is terminated) operate as a complete code to the exclusion of all the ordinary common law rules of landlord and tenant both to the benefit and disadvantage of the tenant. Such an argument is unlikely to succeed for the reasons set out above and for three additional reasons. First, the Supreme Court rejected this approach to the construction of the succession provisions in ss.87 to 89 in Hickin v Solihull MBC [2012] UKSC 39; [2012] 1 W.L.R. 2295; [2013] L. & T.R. 9. Secondly, the provision for the termination of the fixed term in s.82(3) is also rendered pointless by this construction. Why go to the hassle of terminating the fixed term, which does not even confer an immediate right of possession, if you can simply rely on the service of a notice and a ground of possession? Finally, Parliament understood this to be the correct interpretation because it legislated in the Housing and Planning Act 2016 to avoid this outcome by permitting the court to make an order for possession notwithstanding the existence of a fixed term (albeit such provisions have never been brought into force).

Conclusion

It was unclear in Kalonga if the right to forfeit had been waived. If it had not, Croydon ought to have been permitted to proceed with its possession claim. The fixed term had, upon service of the claim form on the tenant, been terminated by reason of non-payment of rent and the court, therefore, had jurisdiction to determine what possession order, if any, it was reasonable to make. However, had there been no rent arrears, the fixed term could not have determined without there being first a determination under s.168 of the Commonhold and Leasehold Reform Act 2002 and service of a s.146 notice under the Law of Property Act 1925.

This article first appeared in Landlord and Tenant Review 2020, 24(4), 156-158.

 

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