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Hope on the horizon to simplify assured shorthold tenancy termination notices

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06/06/2014

Section 21 of the Housing Act 1988 (the Act) provides that a landlord can regain possession of the property without the need to prove any fault on the part of the tenant. In order to commence possession proceedings, a landlord must comply with the requirements of section 21 by giving the tenant at least two month’s notice of their intention to seek possession. If the tenant is still within the fixed term of the Assured Shorthold Tenancy (AST), this is the only requirement and a notice may be served under section 21(1).

However, where the fixed term has expired, it was generally held to be the case amongst practitioners that the additional requirements of section 21(4)(a) must be complied with. Consequently, the notice must specify that possession is required “after” a particular date and such date must be the last day of a period of the tenancy. The courts have consistently taken a strict approach in the interpretation of the Act, requiring landlords to comply with the stringent requirements in section 21(4)(a).

The recent Court of Appeal case of Spencer v Taylor [1] held that the simpler requirements of section 21(1) apply to all ASTs which were initially granted for a fixed term. The departure from the courts’ earlier strict interpretation of section 21 is likely to be welcomed by landlords for clarifying and simplifying the law in this area.

Case summary

The landlord granted a tenant a six month AST beginning on a Monday. The rent was payable weekly and on the expiry of the fixed term the tenancy, by operation of law became a statutory periodic tenancy, pursuant to section 5(2) of the Act. In accordance with the Act, the statutory periodic tenancy was granted on the same terms as the fixed term tenancy. Accordingly, the interim periods were weekly, with each period ending on a Sunday.

The landlord served a notice on the tenant requiring possession of the property:

“(a) after 1 January 2012 or (b) at the end of your period of tenancy which will end next after the expiration of two months from the service upon you of this notice”.

The tenant contested the validity of the notice because 1 January 2012 was a Saturday and was not therefore the last day of a period of the tenancy and the saving provision gave a second date which invalidated the first. The High Court and the Court of Appeal held that the notice was valid.

Decision

The Court of Appeal dealt with two separate points: the applicability of section 21(1) to periodic tenancies and whether or not the inclusion of two dates, one of which was incorrect, invalidated the notice.

With regard to the first point, Lord Justice Lewison considered section 21(2) to be worded in a permissive way. So, where a statutory periodic tenancy follows immediately after expiry of the fixed term of an AST, a two month notice under section 21(1) could be served to terminate the tenancy.

Lewison LJ could have ended his judgment at this juncture, dismissing the appeal in the process. However, he went on to look at whether the inclusion of two separate dates in the notice, one of which was calculated incorrectly, would invalidate the notice. In this case, there was an incorrect date in part (a) of the notice and the saving formula in part (b) which included the correct wording.

In this part of the judgment, Lewison LJ relied on the reasoning in Mannai Investment v Eagle Star to suggest that, if the reasonable recipient of a notice would be aware of the mistake, the court will accept that the correct date, in this case the saving formula, could stand. He felt that, in this instance, the reasonable recipient would look at the back of the form which contained the explanatory notes to the notice and ascertain for themselves that the 1 January date was incorrect. As such, to invalidate the notice on these grounds would go against the court’s intention to try and give effect to a notice where possible. Therefore, provided that one of the dates is valid, the notice ought to stand.

Whilst this point is arguably less important, in the rarer situation where an AST is granted on a periodic basis, the complex calculations required to end a periodic tenancy will not be as crucial, on the proviso that the saving formula as detailed in part (b) is included. The judgment may therefore have far-reaching consequences for the serving of notices, even if there has never been a fixed term.

The tenant in the Spencer v Taylor case has appealed to the Supreme Court. Agents and landlords should therefore continue to use the old-style section 21(4) notices until such time as the Supreme Court confirms the simplification advocated by the Court of Appeal. We will keep you updated on the progress of the appeal. Should the judgment stand, the process to end an AST should become less arduous and thus widely welcomed by landlords and their agents.

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[1] [2013] EWCA Civ 1600