Archive for the ‘certainty of term’ Category

Fixed term followed by periodic tenancy: a single term?

January 7, 2017

In Leeds City Council v Broadley ([2016] EWCA Civ 1212, CA (Eng)) a landlord granted a lease for an initial fixed term of six months  and thereafter continuing on a monthly basis until either party brought it to an end by one month’s notice to quit. For Council tax purposes, it made a difference whether the agreement gave rise to a single term or gave rise to two separate leases (a fixed term tenancy followed by a periodic tenancy).

The local authority argued that a single hybrid fixed / periodic tenancy was a legal impossibility since it would lack certainty of term.

This argument failed. Authorities going back to the seventeenth century showed that this kind of arrangement has long been regarded by the common law as a valid lease. The Law of Property Act 1925 (ss. 1(1) and 205(1)(xxvii)) took over the common law position (Lord Templeman in Prudential Assurance v London Residuary Body and Lord Neuberger in Mexfield Housing Co-operative v Berrisford).

According to their terms, these arrangements created a single tenancy and authority showed that this was to be regarded as a valid arrangement.

Michael Lower

Leases: certainty of term

March 15, 2013

In Say v Smith ((1563) 1 Plowden 269, 75 E.R. 410) one of the questions was as to the validity of an agreement under which a tenant was to have a right (subject to paying the rent at the end of each ten year term) to a perpetual series of ten year leases. The court decided that this was not valid since there was no certainty of term:

‘[E]very contract sufficient to make a lease for years ought to have certainty in three limitations, viz. in the commencement of the term, in the continuance of it and in the end of it: so that all ought to be known at the commencement of the lease, and words in a lease which don’t make this appear are but babble … And these three are in effect but one matter, shewing the certainty of the time for which the lessee shall have a land, and if any of these fail, it is not a good lease for then there wants certainty.’

The arrangement was invalid since the understanding that the renewals would continue in perpetuity meant that there was no certainty of term.

Certainty of term

June 22, 2012

In Tsuen Wan Trade Association Education Foundation Ltd v Chui Kam Ying ([2012] 2 HKLRD 1163) S agreed to sell P the lease of the ground floor of a four-storey 1930s building. The building was held under the terms of a memorandum of agreement made in 1937. A Crown Lease was deemed to have been granted when the conditions of exchange were complied with (New Territories (Renewable Government Leases) Ordinance, s. 3). The term was extended until the expiry of 30 June 2047 by virtue of section 6 of the New Territories Leases (Extension) Ordinance. In 1939, the lease of the building was held by four individuals as tenants in common. Each of them took a lease of one floor of the building from the co-owners for a term that mirrored that in the Crown lease (at that time no-one could have anticipated the statutory extension until June 2047).

The court had to consider, inter alia, whether there was a valid lease of the ground floor after 1997 (when the contractual term expired). This is a problem since the parties clearly had not given any thought as to what would happen after that date. A finding that the parties held over as, for example, periodic tenants or tenants at sufferance or at will would plainly be unsatisfactory. On the other hand, there was no clear expression of intention at the time of the grant as to what should happen. It is not clear whether the tenants of the individual floors were also the successors-in-title of the shares in the tenancy in common of the building as a whole.

The court found that, on a proper construction of the 1939 lease of the ground floor, the parties must have intended that the right to exclusive possession was to subsist as long as the term of the Government lease of the whole building lasted. This imputed intention does seem to raise a certainty of term problem.

Reasonable notice to quit and certainty of term

January 26, 2012

In Joseph v Nettleton Road Housing Co-operative Ltd ([2010] EWCA Civ 228, CA (Eng)) L granted T a monthly periodic tenancy of a flat. The lease contained a term that allowed L to terminate the lease on 4 weeks’ written notice. Such a notice would only be served if T had been given written notice of a breach of covenant and had failed to remedy the breach within the time specified. L served such a preliminary notice but T took no steps to remedy the breach (keeping a dog in the flat). L therefore served a notice to quit. In his defence, T argued that there were implied terms that the procedure could only be invoked in the case of serious breaches and that the preliminary notice would give a reasonable time to remedy the breach. The English Court of Appeal decided that even if T’s proposed terms were implied, L had complied with the contractual procedure concerning notice to quit. T was ordered to give up possession.

The English Court of Appeal noted that there was a clash between the lease terms and the certainty of term requirement (since there is uncertainty as to when the right to serve a notice to quit might arise and as to the length of any reasonable notice that might have to be given before notice to quit could be served). It preferred not to resolve this question and to deal with the matter purely as a matter of interpretation of the contractual rights and duties of L and T. It was therefore taking the view (implicitly) that even if this agreement were not a lease effect could be given to it as a contract. It should be read in the light of the Supreme Court decision in Mexfield Housing Co-operative Ltd v Berrisford.

‘Permanent’ tenancy: void for uncertainty?

November 17, 2011

Siew Soon Wah v Yong Tong Hong ([1973] 2 W.L.R. 713, PC) was an appeal to the Privy Council from the Federal Court of Malaysia. S granted Y a lease. The agreement provided that ‘the tenancy shall be permanent’. In the context of the agreement, the intention was that the term should last as long as the tenant liked. The question was whether the lease was void for uncertainty. The Privy Council held that it was not because of Malaysian statutory provisions that meant that S could not grant a lease for more than thirty years. These provisions supplied the necessary certainty of term. The Privy Council went on to ask whether specific performance should be granted. Here the Privy Council resorted to estoppel. Y had occupied the property and made payments to S. This gave rise to an equitable estoppel protecting the right of occupation.

A lease for an uncertain term granted to an individual is a lease for life

November 15, 2011

A lease for an uncertain term (or a periodic tenancy where the right to serve notice to quit is subject to an indeterminate, invalid fetter) created a lease for life at common law. This was so whether or not the parties intended a lease for life. In England, a lease for life takes effect as a lease for 90 years (Law of Property Act 1925, s. 149(6)). Contractual effect (binding only on the parties) is to be given to a licence agreement that cannot take effect as a lease (because of uncertainty of term). This is so even if the parties thought that they were creating a lease. Similarly, contractual effect (binding only on the parties) can be given to an invalid, indeterminate fetter on the right to serve a notice to determine a periodic tenancy.

In Mexfield Housing Co-operative Ltd v Berrisford ([2011] UKSC 52) M entered into an occupancy agreement with B. B could determine it by serving a month’s notice. M could only terminate it in the event of B’s default or in the event of her ceasing to be a member of M. M purported to terminate it by serving one month’s notice. It argued that the agreement was an ineffective attempt to create a lease. It was ineffective, it was argued, because of the lack of certainty attached to the landlord’s right to determine the agreement. M argued that the result was that B occupied under a periodic tenancy that could be brought to an end by notice to quit.

The Supreme Court reluctantly accepted (and B conceded) that this was a lease for an uncertain term. When granted to an individual, however, common law deemed this to be a lease for life. This seems to have accorded with the parties’ intentions in this case but the result would be the same even if this were not the case. The Law of Property Act 1925, s.149(6) converted a lease for life into a lease for a term of ninety years subject to the parties’ rights to bring it to an end in certain events by notice to quit.

Even if this had not been the case, the agreement could have taken effect as a contractual licence even if the parties had intended to create a lease. Lord Neuberger left open the question as to whether it could have taken effect as a periodic tenancy (had this accorded with the parties’ intentions) with contractual effect being given (as between the contracting parties) to the restrictions on the right to serve a notice to quit found in the agreement between M and B ([69]).

The Supreme Court was highly critical of the certainty of term principle but did not overrule earlier authorities that laid it down as an essential element of a lease.

Michael Lower

A periodic tenancy with an (uncertain) restriction on serving a notice to quit.

September 29, 2011

A restriction on the landlord’s right to serve a notice to quit in respect of a periodic tenancy is unenforceable (even between the original parties) if it offends the requirement for certainty of term. It may be different if the facts are such as to make it unconscionable to ignore the restriction.

In Mexfield Housing Co-operative v Berrisford ([2010] EWCA Civ. 811, CA (Eng)) M granted B a monthly periodic tenancy. Clause 6 of the agreement provided that M would not determine the tenancy unless B fell into arrears with the rent or ceased to be a member of the co-operative. Clause 6 could not be construed as defining the term of the lease at common law since then the lease would be void for uncertainty. B’s counsel accepted this but argued that the restriction, unenforceable at common law, would be enforced by equity. The majority of the English Court of Appeal in this case rejected the argument. Where the parties had granted a lease they could not contractually re-write the common law requirement for certainty of term. As Mummery LJ pointed out, equity follows the law. It could be different if the circumstances were such as to make it unconscionable for the landlord to ignore the agreement; here an estoppel could arise. In effect, the decision explores the interaction between the lease as contract and the lease as estate in land.

M had agreed to grant B a new lease in any case so as between these parties the appeal was academic. The court agreed to hear it because it was a test case: a great many tenancies had been granted using the arrangements in this case.

Certainty of term

December 28, 2010

A purported lease ‘for the duration of the war’ is invalid because of the uncertainty of the term of the lease. The commencement date and duration of the lease must be certain before the start of the lease.

In Lace v Chantler ([1944] KB 368, CA (Eng)) the landlord and tenant had agreed that the lease was to be ‘for the duration of the war”. The question was whether a lease for the duration of the war was valid. It was held that it was not because this arrangement lacked the necessary certainty as to the duration of the lease. The lease term had to be fixed or ascertained before the lease commenced.

Certainty of term

September 18, 2010

The requirements of certainty of term had to be considered in Ashburn-Anstalt v Arnold ([1989] Ch 1.

This concerned an agreement under which Arnold was to have the right to use some land for a fixed term. When the term ended Arnold could remain in occupation until the owner of the land served one quarter’s notice requiring Arnold to give up possession. The question was whether this arrangement satified the certainty of term requirement. One objection was that it did not since Arnold did not know in advance when the owner would serve the notice. The English Court of Appeal decided that although Arnold had no express right to determine the agreement, it did in fact have an ability to do so simply by moving out.

The Court of Appeal thought that there was no certainty problem:

‘The result, in our opinion, is that the arrangement could be brought to an end by both parties in circumstances which are free from uncertainty in the sense that there would be no doubt whether the determining event had occurred. The vice of uncertainty in relation to the duration of a term is that the parties do not know where they stand. Put another way, the court does not know what to enforce. That is not the problem here.’

Later, however, Lord Templeman in PrudentialAssurance Co Ltd v London Residuary Body ([1992] 2 AC 386 at 395 – 6declared that, in this respect, Ashburn-Anstalt had been wrongly decided.