Periodic tenancies and freedom of contract

Re Threlfall ((1880) 16 Ch D 274, CA (Eng)) concerned a lease at a yearly rent of GBP 800 payable in equal quarterly installments.  The landlord had the right to enter at any time after three months from the date of the lease without giving notice. The lease was contained in a mortgage deed (the mortgagee granted the lease to the mortgagor and the re-entry provision reflected this context). The question was whether this was a periodic tenancy or a tenancy at will. The English Court of Appeal held that there was a periodic tenancy despite the re-entry provisions.

Cotton LJ said:

‘But I know of no law or principle to prevent two persons agreeing that a yearly tenancy may be determined on whatever notice they like. There is freedom of contract in this respect. ‘ (at 281 – 2).

Michael Lower

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Periodic tenancy: service of notice to quit on the tenant’s solicitor

In Hau Gay Yau v Wong Muk Din ([2014] HKEC 1456, CA) a landlord served notice to quit to determine a periodic tenancy on the solicitor acting for the tenant. The Court of Appeal, overturning the first instance decision, held that the notice had been validly served. Sections 62(2) – (4) of the Conveyancing and Property Ordinance do not exclude other modes of service than those that they specify ([22]). It was clear that the solicitors on whom the notice had been served had been instructed by the tenant in relation to this matter ([23]). The tenant’s actions showed that he regarded his solicitors as having had authority to receive the notice ([23]).

Michael Lower

Notice to quit: validity of notice giving a specified date and then using a fall-back formula which might give a different date

In Leung Chung Ting (No 2) v Tin Yat Co ([1963] HKLR 304) T held under a monthly periodic tenancy. L gave T notice ‘to quit and deliver up possession by 19 November, 1961, or on the last day of your tenancy which shall expire next after one calendar month from the date of service of the said notice to quit.’ T argued that the notice have two date and was therefore invalid on account of its ambiguity. This argument failed.

Several authorities, commentaries and published precedents used this formula (the formula was applied in a slightly garbled way in this case and should have referred to ‘the month of your tenancy’). In this case, the general wording referred to the same date as that specified but even if the effect of the formula were to identify two different dates the notice would be valid. If the first date was valid, the rest of the formula could be treated as surplusage ((310, Hogan C.J.).

Huggins J. said:

‘It is, therefore, clearly permissible to add such general words even though the result be (as it will be if the date expressed is wrong) to name two different dates for the giving up of possession. One knows that in practice practitioners almost invariably do include such general words and, speaking for myself, I would think that at the present day they would be lacking in prudence if they did not. The basis upon which the alternative date is allowed to be stated is no doubt to mitigate the strictness of the old law. No prejudice results to the tenant, because the form of the general words makes it abundantly clear to him that the landlord is merely guarding himself against the consequence of a mistake as to the date upon which the periodic tenancy commenced and that the date expressed is to be the operative date only if the tenancy may lawfully be determined on, that day.’ (315)

Michael Lower

‘Waiver’ of notice to quit? New tenancy and estoppel

In Kam Wing Property Investments Ltd v Koncord Ltd ([2005] HKEC 213, CA) T had the benefit of a periodic tenancy. L served notice to quit. T refused to leave and so L applied to the court for possession using the summary judgment procedure. T argued that L had ‘waived’ the notice to quit. This failed.

First, Deputy Judge A To pointed out that a notice to quit, once served cannot be withdrawn. The parties can agree to a new lease but there was no evidence of such an agreement here:

‘Technically, a notice to quit, once given, cannot be waived unilaterally by the party giving it. Even according to the evidence of the Defendant, the Plaintiff never expressly waived the notice to quit in the sense that it withdrew the notice. Instead, the documentary evidence consistently shows that the Plaintiff insisted on the notice. To the extent that “waiver” is used as a convenient misnomer, it requires the consensual agreement of the parties that the tenant remains in possession. As with any agreement in respect of disposition of interest in land, four certainties apply, namely certainty of parties, property, term and price. Even on the evidence of the Defendant there was no agreement as to the term of the new tenancy and the rental. The so called defence of “waiver” does not even get off the ground.’ ([13])

The possibility that the landlord might be estopped from relying on the notice was considered but there was no credible evidence of a representation that the notice would not be relied upon. L sought summary judgment but before a court would be persuaded that a full trial was necessary, T would need to ‘show that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his evidence is reasonably capable of belief.’ ([16])

T had not succeeded in this.

Michael Lower

Periodic tenancy: Government’s right to resume possession for a public purpose

In Attorney-General v Sun Lee Godown Co Ltd ([1968] HKLR 116) the Crown had granted a monthly tenancy. The agreement allowed the Crown to resume possession if it needed the land, or any part of it, for a public purpose. The question was whether the Crown retained the normal implied right to give a month’s notice to quit or whether this was displaced by the limited express right to recover possession. It was held, as a matter of construction of the agreement, that the express right was additional to, and did not displace the usual right to terminate by giving notice to quit.

Mills-Owen J. said:

‘I see no reason to infer a bargain whereby the Crown relinquished the right to give notice to quit in exchange for clause 3(f). Further, if I had been of the opinion that clause 3(f) operated, whether by way of inferred bargain or otherwise, to deprive the Crown of the right to give the usual month’s notice to determine the monthly tenancy, I would have held it to be void as repugnant to the nature of the tenancy expressly created. It would be clearly so repugnant, in my view, as amounting to complete in consistency with the incidents of a monthly tenancy. It would be not a mere added condition, or a mere regulation of the conditions on which notice to quit might be given by the landlord. On the contrary, in my view it would have been a provision depriving the landlord of the right to determine the tenancy by a means inherently incident to the nature of the tenancy expressly created, namely by notice to quit. It would have amounted to an attempt to change the nature of the monthly tenancy, by destroying an essential incident of such a tenancy, not merely to regulate the length of notice or the terms on which it might be given. It would not be a question of regulation to a degree but of complete abrogation of the right to give notice. That in my view would necessarily be repugnant to the nature of the tenancy.’

Michael Lower

Fetter on landlord’s right to give notice to quit

Doe d Warner v Browne ((1807) 8 East 165, 103 E.R. 305) concerned a yearly tenancy. The agreement provided that the lessor could not bring the lease to an end so long as the lessee paid the rent and did not sell any article injurious to the lessor’s business. It was held that it was entirely repugnant to the nature of a tenancy from year to year that the option of determining it should rest solely with the tenant (167, Lord Ellenborough C.J.)

Michael Lower

Both parties must be able to bring a periodic tenancy to an end

In Centaploy Ltd v Matlodge Ltd ([1974] Ch. 1) the question was whether an agreement to grant a weekly tenancy ‘to continue until determined by the lessee’ was valid. It was held that it was not since the fact that the landlord had no right to give a notice to quit was repugnant to a periodic tenancy: both parties must have a right to bring the arrangement to an end (Whitford J. at 15)

Michael Lower

Quarterly tenancy determinable ‘at any time’. Did the notice have to expire at the end of a quarter?

In Lai Mai-yu v The Attorney-General ([1977] HKLR 382, SC) the Crown granted T a lease for a fixed term of one year and thereafter to be a quarterly tenancy. The lease provided that ‘the term hereby created may be determined at any time by either party giving to the other not less than three calendar months’ notice in writing to that effect.’ The Crown gave three months’ notice in accordance with the lease. The notice did not expire at the end of a quarter. The Crown, by mistake, demanded and accepted rent for a period after the expiry of the notice to quit.

Trainor J. held that when T remained in possession at the end of the fixed term, it did so in accordance with the express terms of the agreement; this was not a case of an implied periodic tenancy as a result of a holding over. Thus, the notice was valid. He went on to say that even if this had been an implied periodic tenancy, it would have been impressed with the provision as to notice and that the words ‘at any time’ in that clause were enough to give validity to a notice to quit that did not expire at the end of a quarter.

Once notice to quit had been given, the lease was at an end. It could not be withdrawn. At most, the demand and acceptance of rent could have been evidence of an intention to create a new lease but the evidence did not point to this as being the intention of the parties.

Trainor J. provides a useful summary of the possible relationships that can arise when a tenant holds over:

‘Holding over simply means that on the expiration of a term the tenant remains in occupation of the demised premises. If he does so without either the consent or disapproval of the owner he is a tenant at sufferance; if it is with the approval of the owner then there is a tenancy at will. If the occupant remains with the consent of the owner and pays him rent there arises between them by a presumption of law a relationship of landlord and tenant. When the rent paid is expressed to be at an annual rate, even though payable by instalments, then the nature of the relationship is presumed to be that of a tenant from year to year and such of the terms of the expired lease as are applicable to a yearly tenancy will apply. It is a presumption, however, that is rebuttable by the circumstances. It is when rent is paid and received that the relationship of landlord and tenant is established and the nature of the relationship can be ascertained, e.g. is the occupant a yearly tenant.’

 

Michael Lower

Weekly tenancy: notice to quit

Lemon v Lardeur ([1946] K.B. 613, CA (Eng)) concerned a four weekly tenancy of a house. Notice to quit, signed by L’s husband (H), was served on T. The English Court of Appeal found that the notice was invalid for two reasons. First, L had not shown when the tenancy began and so it was not possible to say what date should appear in the notice to quit. Second, H only had a limited authority to act for L and so the notice had to state expressly that it was served on behalf of L.

Head landlord’s failure to end periodic tenancy: invalidity of dealings with sub-tenants

In Lew See-Chun v Yu Kin-Keung ([1995] HKDCLR 65, LT) L granted a yearly periodic tenancy to T who granted two sub-leases to ST1 and ST2 respectively. L did not bring the periodic tenancy to an end but invited ST1 and ST2 to enter into new sub-leases with L.T did not acquiesce in this arrangement. L may well have been right in his assertion that T did not have a sufficient title out of which to create the sub-leases. Nevertheless, as L had not given notice to quit, T’s lease remained in existence and so did the sub-leases granted by T.

The judgment is interesting as a Hong Kong authority setting out some fundamental propositions:

‘At common law a periodic tenancy is of indefinite duration determinable by notice to quit.’ (68, HH Judge Cruden).

‘In the absence of express provision to the contrary, yearly tenancies arise where rent measured with reference to a year, is paid and accepted.’ (68, HH Judge Cruden)

‘At common law a yearly tenancy, in the absence of agreement, may be unilaterally terminated upon either party giving to the other one half-year’s notice.’ (68, HH Judge Cruden)

There may even be a hint here of an acceptance of the contractual (non-proprietary) lease later recognised by the House of Lords in Bruton.