Spencer v Taylor update – Supreme Court refuse leave to appeal

Well this is just a short note, and the title says it all. On 24th July the Supreme Court refused the tenant leave to appeal against the CA decision which accordingly stands. This is all about ending Assured Shorthold Tenancies, and is in fact good news for both landlords (as you’d expect) and tenants as well, as it clarifies the law no end, so everybody knows where they are.

I wrote about this at the time, but in summary the CA had put an end to all those irritating problems caused by the complicated provisions of s21 Housing Act 1988. This provides for two forms of notice – one in s21(1)  for use with a fixed term tenancy which just needs to be 2 months expiring after the tenancy has come to an end, and one in s21(4) that is for use in periodic tenancies and needs a date after which possession is to be given that is on the last day of a period of the periodic tenancy, and at least 2 months ahead. There is lots of scope for getting this wrong, as the period of the tenancy may be different to the date when rent is paid, and many landlords forget that a tenancy starting on 5th May ends on 4th June, not 5th June.

Lewison LJ pointed out that s21(1) notices can be given in all cases

on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy

so as virtually all periodic ASTs start as a fixed term, and then run on, a s21(1) notice can be used for them as well. And the cleverest bit is that he pointed out that a s21(4) notice, is a perfectly valid s21(1) notice, just one with added bells & whistles.

So landlords can throw away their s21(4) notices and use the simple s21(1) version in every case apart from the rare ones when the AST was always a periodic tenancy, or where the conversion to the periodic tenancy is contractual rather than the normal statutory one.

Of course you still have to make sure the notices etc about the deposit have been reserved following Superstrike (my piece here) but not for long, as remedial legislation is on its way – here’s the current position as at 22nd July. More of that when it arrives.

No doubt there will be more detail and analysis from the usual sources – Nearly Legal has promised an extended piece shortly. But good news all round.

 

PS – Nearly Legal’s extended piece is here.

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Spencer v Taylor – Good News for Landlords

Spencer v Taylor [2013]EWCA Civ 1600

This piece is a bit late, as the judgement was given before Christmas. But I’ve been busy, and there has been a lot of Mitchell-related nonsense going on.

We need to go back a bit. In the old days, before the new legislation there was very little private rented accommodation about, because the rents were controlled and it was virtually impossible to get tenants out even if they weren’t paying the rent. Then the new assured tenancies arrived and rent controls were relaxed, and it became possible to recover possession if there was a good reason, especially if the rent got seriously into arrears.

But landlords were still reluctant to commit themselves to possibly a lifetime of commitment, if their idea of a good reason differed from the judge’s. The mandatory orders under Ground 8 for tenants who were 2 months in arrears of rent were a start. However, what they wanted was the certainty of getting the property back if they wanted to. And this was where s 21 Housing Act 1988 came in. Because if a landlord served a s 21 notice and got the procedure right the Judge would have to make an order for possession in 14 days (or no later than 6  weeks if there would otherwise be serious hardship). There was no discretion.

And there was no fancy form of notice – they just had to give 2 months’ notice in writing.

Well, as you might imagine, landlords liked this, and the supply of properties to let increased rapidly. Perhaps I ought to say before you complain, that I realise that there were no doubt other reasons for this as well – the difficulties in getting a mortgage and the reductions in benefits and the economy generally for a start.

However, things are never simple. s 21 was drafted when ASTs were in their infancy and the draughtsmen didn’t realise that virtually all ASTs would run for 6 months as a fixed term, and then run on as periodic normally monthly tenancies thereafter. It would appear that they expected them to be either entirely fixed term, being brought to a prompt end at the end of the term, or to be periodic from the outset. And in the neat way that draughtsmen have they gave two forms of notice that had to be given – one for fixed terms and one for periodic terms.

The fixed term notice has given no difficulty. What is needed under s 21(1) is

  • a notice in writing signed by the landlord (or at least one of joint landlords)
  • requiring possession in not less than 2 months
  • expiring after the end of the fixed term

Hard to go wrong here, provided you can prove that the notice was actually given. The periodic notice however was much more complicated in practice. Under s 21(4) you needed

  • a notice in writing signed by the landlord (or at least one of joint landlords)
  • stating that after a date given possession is required under this section
  • the date must be at least 2 months after service
  • and must be the last day of a period of the tenancy
  • and must be no earlier than the earliest that the tenancy could have been brought to an end by a Notice to Quit if these were not invalidated by s 5(1). [in practice this wasn’t a problem as this was almost always less then 2 months].

The problem was getting the day right. A monthly tenancy starting on the 5th ends on the 4th of the next month and it’s the 4th that you have to give, or it’s invalid. Lots of scope for getting it wrong, and having to start again, even, sometimes,  if you had a saving clause. And as almost every AST was terminated when it was a periodic tenancy the established wisdom was that you had to use this form. So it mattered.

But no more. Lewison LJ in the Court of Appeal (who was an eminent landlord and tenant counsel in his day) decided to cut through the wreckage and simplify things. He noticed that s 21(1) applied

on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy

Now this tenancy had been a fixed term tenancy at the outset, in 2006, but had been periodic ever since the initial 6 months expired. The notice that had been served in 2011 was the s21(4) periodic one and it was arguable that the date selected was incorrect (the saving clause was not as clear as it should be). So the parties went to the CA presumably expecting to argue about the saving clause. And Lewison LJ decided that even if it was an invalid s 21 (4) notice it was a perfectly valid s 21(1) notice. It ticked all the boxes – it was signed, required possession in not less than 2 months, and it expired after the end of the fixed term. So all the arguments about s 21(4) just didn’t matter. And the famous 2003 CA decision of Fernandez v McDonald , which said that the correct date was vital, was strictly speaking irrelevant as the court only dealt with a s 21(4) notice.

For completeness I ought to say that Lewison LJ went on to find that the notice would have been valid under s 21(4) as well, but that is beside the point. Because NOBODY IS GOING TO USE s 21(4) NOTICES AGAIN.

You don’t need to. Unless your AST has NEVER been a fixed one, which is extremely unusual, and indeed this is another reason to avoid that arrangement, s 21(1) notices may be used in every case. Because the CA have said so in Spencer v Taylor. They are just so much easier. And although I will for one be unhappy to see s 21(4) go as it has been good to me in producing reasons to be given work by landlords, opportunities of earning fees in sorting out messes that landlords (and some non-specialist lawyers) have got into, and unexpected get-out-of-jail-free cards for my tenant clients, it must be for the best.

However, if you are a landlord, or acting for a landlord, do remember that before serving any sort of s 21 notice you have to be sure that any deposit has been properly protected, the appropriate notices etc served, and re-served as required by Superstrike v Rodrigues   (& see my further comments here) after the fixed period has expired. Or any s 21 notice is invalid and you’re in trouble.

IMPORTANT NOTE

I have just heard that the tenant has applied for permission to appeal to the Supreme Court, so things are still in the air. Anthony Gold are representing the landlord and have more info here. So until this is finally decided it is best to continue using the s 21(4) notice if the notice is served after the fixed term has expired (the “established wisdom” referred to above) just in case the SC don’t agree with Lewison LJ. Which will be a pity.

PS – Leave to appeal refused 24th July 2014. See my note. So the useful decision stands.