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Statutory tenancy - period of notice

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Author Topic: Statutory tenancy - period of notice  (Read 93 times)
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« on: January 12, 2021, 08:26:36 PM »

A tenant, who did not quite pass the financial viability test, was given a 6 month tenancy on the basis that he paid all the rent up front.
A break clause was added to the lease to allow the landlord to terminate the lease after 6 months by giving no less than 2 months notice (this was pre Covid regs). The tenant was given 3 months notice after the end of the 6 month contractual period and when Covid regs allowed 3 months notice. The tenant is claiming that the statutory tenancy provisions of s5 of the 88 Act were not over-ridden by the break clause. Can anyone help with the courts likely approach please? (As and when it can get to court)
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« Reply #1 on: January 12, 2021, 08:55:13 PM »

was given a 6 month tenancy
A break clause was added to the lease to allow the landlord to terminate the lease after 6 months

You have a break clause that can only be used after the tenancy have already ended through time?

If you're in England, did you serve the "break notice" on Form 6A? If you're in Wales, what did the notice say wording wise?
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« Reply #2 on: January 13, 2021, 09:39:18 AM »

The break clause was included as part of the original 6 month contractual tenancy - obviously only to come into effect after the 6 month expired which it did in June. Hence s21 notice served giving 3 months notice (served before the 6 month Covid regs came in) but Tenant is claiming because all the rent was paid up front for the initial 6 months then he is entitled to 6 months notice as per s5. From a practical point of view the chances of getting a court order for possession within 6 months is virtually non existent but the issue is whether it would be better to serve a new s21 giving 6 months notice.
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« Reply #3 on: January 13, 2021, 05:56:20 PM »

Why is that that when clarification questions are asked so that the OP's original questions can be properly answer, do they never answer the clarification questions? It was a simple question, did you serve the notice on Form 6A if you're in England. I'm trying to find out whether you served a notice that could at least potentially be a valid s21 notice.

Quote
The break clause was included as part of the original 6 month contractual tenancy

This still doesn't make any legal sense. A break clause is a term allowing either the landlord and/or the tenant to bring a fixed term to an earlier end than it was otherwise agreed. For example, you agreed a 18 months tenancy, but have a break clause that allows a party at month 6 to serve notice to end it earlier. Whether you had a 6 months fixed term tenancy, or a contractual periodic tenancy with an initial 6 months term with a subsequent (possibly shorter) periodic element, there's nothing to break after six months. After six months, you have either a statuory periodic tenancy which arose at the end of the fixed term tenancy by operation of law or the continuation of a contractual periodic tenancy.

Section 5 of the Housing Act 1988 is what causes a statutory periodic tenancy to arise at the end of a fixed term tenancy if the fixed term was not ended by the action of the tenant. It effectively mean if a fixed term assured tenancy ends, a periodic tenancy is deemed granted by landlord to tenant on substantially the same terms as previously. A valid section 21 notice can be served during the fixed term extending into the subsequent statuory periodic tenancy.

If the "6 months tenancy" was a fixed term, then section 21 notice can end on any date as long as it meet the minimum length requirement. If the tenancy is a contractual periodic tenancy, then in Wales the end date must be the last day of a period of tenancy, and in either England and Wales, it cannot be "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". That earliest date will thus depends on how frequent the periodic element of the CPT is.

If you had merely given a break notice, whatever that means, which is otherwise invalid as a section 21 notice, then the break notice would merely bring an existing fixed term tenancy to an end. As such a fixed term tenancy wasn't bought to an end by action of the tenant, a statutory periodic tenancy would had arisen pursuant to s5 of the Housing Act 1988. You then would still had to serve a valid s21 notice, which as you are aware is currently at least 6 months long.

So back to my question. If you're in England, did you serve the "break notice" on Form 6A? If you're in Wales, what did the notice say wording wise?
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« Reply #4 on: January 13, 2021, 08:02:04 PM »

I apologise for not answering the specific question. Yes the notice served was Form 6a. I agree that the break clause does not make much sense. The tenancy agreement was drawn up by a reputable local estate agent who added the mutual break clause. I accept that without the break clause then s5 of the Housing Act 88 would determine that the notice period would be 6 months (not because of Covid because notice was served when the Covid Regs said the minimum period of notice was 3 months). but because the initial contractual period was 6 months and s 5 would just create a statutory tenancy on the same terms as the original contractual tenancy. However because the break clause was included by a reputable local agent was signed by both parties obviously and the tenant is currently paying rent monthly I wondered if anyone else had come across it. The agent who added the break clause is also being asked to clarify it.
If the s21 notice cant override s5, as I suspect it cant, then the next option is to serve another  s21 which of course this time will have to give 6 months notice anyway.
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« Reply #5 on: January 13, 2021, 08:40:49 PM »

You keep referring it to "contractual tenancy". How is the term (length, start & end date, etc.) of the tenancy actually defined in the tenancy agreement? Basically, is it a fixed term tenancy which has a defined start date, and absent any subsequent mutual agreement or exercise of a valid break clause, a defined end date?

"A six months tenancy from XX/12/2019"
"The tenancy will start from XX/12/2019 and end on XY/06/2020"
"A tenancy for a term of six months starting on XX/12/2019"

Or words to those effect?

Alternatively, is it what's known as a contractual periodic tenancy?

"A term of six months then continuing month by month"

Or words to that effect?

Quote
I accept that without the break clause then s5 of the Housing Act 88 would determine that the notice period would be 6 months

That's not what section 5 of the Housing Act 1988 does. You and your tenant both seems to have a misunderstanding on the wordings and effects of that legislation.

What's the wordings of the break clause?
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« Reply #6 on: January 14, 2021, 11:09:44 AM »

The term of the tenancy is 'it is from and including 14.12.19 to 13.06.20 and thereafter month to month until terminated by either party serving notice in accordance with the agreement'
The total upfront rent for 6 months in the sum of xxxx is payable in advance.
The rent was paid up front for the first 6 months and now he is paying monthly.

The break clause is worded as
'The tenant agrees that the landlord has the right to terminate the term after the first 6 months by giving the tenant not less than 2 months notice in writing at the end of the agreement. When the notice period expires the terms of this agreement shall cease.

So to recap the 6 months expired, the tenant started paying monthly, notice via form 6A was served and now the tenants solicitor is saying as part of the defence against the action that under s5 of the Housing Act 88 6 months notice should have been given because the new tenancy should have the same terms as the original tenancy. BTW the property is in England
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« Reply #7 on: January 14, 2021, 11:37:37 AM »

Okay, that's a contractual periodic tenancy with a six months initial term and then the period is monthly.

That is not a break clause. Stop calling it a break clause. Do not refer to it as a break clause when communicating with your tenant or their representative. A break clause exist to allow the termination of a fixed term tenancy earlier than it would otherwise. This is just a clause setting out how this periodic tenancy can be ended.

I can see maybe they are trying to say, yes there was a break notice, it was used to end the original tenancy. Because the original tenancy was ended by the landlord and not the tenant, and the tenancy was assured when it ended, a new periodic tenancy was deemed granted pursuant to s5(2). This new tenancy has the same periods as the previous tenancy, so the initial period is six months. And that's where they're going from. However, a statutory periodic tenancy under s5(2) requires as a pre-condition a fixed term tenancy originally, which this isn't, so I don't see how that section come into play at all.

So your position should probably be along the following line: this "break clause" that's not really a break clause set out how the tenancy can be determined absent any legislative intervention. However, as the tenancy is currently assured shorthold, the clause only has effect as to date calculation under s21(4) of the earliest date when a notice under that section can expire. You served a notice under s21(4) of the 1988 Act, a minimum of 3 months as required under Coronvirus Act at the time of service. Section 21(4)(b) requires the notice not to expire "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". That earliest day is 2 months from service per your "break clause". Your 3 months notice satisfy that requirement. Ergo, (assuming things like deposit protection compliance and others), the notice was a valid notice under s21(4). You have 7 months from the date of service of the notice to apply to court for an order for possession. (Works out to around 4 months after notice expiry.)
« Last Edit: January 14, 2021, 11:42:06 AM by KTC »
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« Reply #8 on: January 14, 2021, 02:53:33 PM »

Thankyou for your reply. As I said I agree that the term break clause is not appropriate but was called that in the tenancy agreement that was drawn up by a reputable firm of estate agents who are currently ‘defending’ their position - but without so far giving any authority. The expression break clause is in the tenancy agreement but not mentioned elsewhere. I was using it as a shorthand.
The issue is on the interpretation of the initial term of the tenancy. The tenants solicitor has opted to interpret it as a fixed term of 6 months. I have seen, on another forum, a suggestion that  where, for what ever reason, there is an issue of paying a number of months up front the agreement should say pay 5 months initially and then pay the last month separately. This rather implies that the benefit would be to create a monthly statutory tenancy after the initial period and therefore that a lump sum payment of the 6 months may create a fixed term of 6 months requiring a 6 month period of notice. The issue is confused in my example by the ‘break clause’ and the statement that the tenancy will continue on a month by month basis. Obviously the tenants solicitor has opted for the interpretation that it is a 6 month term initially. I would be more confident of this argument losing if there are authorities that have looked at this situation before and if the courts were not generally in favour of protecting the tenants.
In the meantime the claim for possession has been lodged.
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« Reply #9 on: January 14, 2021, 03:35:38 PM »

Quote
should say pay 5 months initially and then pay the last month separately

That only matters if the tenancy is fixed term. The intent there is when that fixed term ends and a statutory periodic tenancy arise, the most recent payment period immediately before the tenancy ended was for a month, causing the SPT to be monthly.

"from and including 14.12.19 to 13.06.20 and thereafter month to month" is clearly a contractual periodic tenancy, and not a fixed term tenancy (of six months).

Authorities are likely to be light on the ground because it's such a settled way of describing a term for CPT, but Leeds City Council v Broadley [2016] EWCA Civ 1213 is probably what you're looking for.
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« Reply #10 on: January 14, 2021, 03:41:21 PM »

Obviously the tenants solicitor has opted for the interpretation that it is a 6 month term initially.

That wouldn't be enough to help their client the tenant. If the original tenancy was a six months fixed term only, then while the SPT that arise from it is six-monthly, Taylor v Spencer [2013] EWCA Civ 1600 mean the landlord can serve a notice under s21(1) of the Housing Act 1988. Such notice would only require it be of at least 2/3/6 months as the case may be due to COVID-19, and it can be served during the SPT that has arisen. They would need it to be a CPT to start with forcing notices to be under s21(4), but in that case, a SPT wouldn't arise pursuant to s5 as that could only happen from a fixed term tenancy.
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« Reply #11 on: January 14, 2021, 10:31:20 PM »

Thankyou for your help however I’m still questioning whether the payment of the 6 months rent ‘up front’ does not differentiate it from the Leeds case.
« Last Edit: January 15, 2021, 09:09:30 AM by JanRuss »
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