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When is a landlord not a landlord?

To Let sign on terrace houses Print publication

19/12/2018

When is a landlord not a landlord? It might sound like the beginning of a bad joke, but the Court of Appeal had to consider that question in the case of Barrow v Kazim [1].  In so doing, it highlighted a serious point for landlords and receivers to note when they are seeking possession of sublet residential premises.  Housing Management & Litigation specialists Karl Anders explains.

What happened in the case?

Kazim owned a building containing residential flats. Kazim had let the building to an agency, who had then sub-let the individual flats to residential occupiers on assured shorthold tenancies (ASTs) under the Housing Act 1988 (the Act) [2].

Kazim, as head landlord, wished to recover possession and served a notice on both the intermediate tenant (i.e. the agency) and the sub-tenants (Barrow and another). The notice was intended to terminate the intermediate tenancy and also to constitute a notice to terminate the ASTs under section 21 (1) (b) of the Act.

The sub-tenants contested the validity of Kazim’s notice, asserting that Kazim was not their landlord for the purposes of giving notice, and therefore no effective notice had been served on them.

The view of the Court of Appeal

The Court of Appeal agreed with the sub-tenants and confirmed what has, to date, generally been believed to be the position. It stated that a notice under section 21 of the Act must be served by the person who is the landlord at the date the notice is given, not the person who will be the landlord at the termination date specified in the notice given to end the intermediate tenancy.  Importantly, the fact that an intermediate tenancy will come to an end by the date specified in the notice does not convert the head landlord into the ‘landlord’ for the purposes of enabling it to also serve a valid section 21 notice on the sub-tenant. Instead, the intermediate tenant will remain the sub-tenant’s landlord until such time as the intermediate tenancy ends.  Kazim’s notice was therefore ineffective to terminate the ASTs.

What are the key takeaways for landlords and receivers?

The facts of this case are not uncommon. They will also be encountered by receivers upon investigating the occupational status of securities over which they have been appointed. The following key points are worth noting:

  • While the common law may provide that any sublease falls away upon termination of a head lease, that is not the case where the sublease is an AST. The Housing Act 1988 intervenes in those circumstances and preserves to existence of the AST.
  • Receivers and head landlords can take steps to recover possession from sub-tenants occupying residential premises under ASTs only after they have become the direct landlord of the sub-tenants. The route to possession is therefore sequential, and not concurrent.

In this case Kazim argued that it was unsatisfactory that head landlords should have to wait for an intermediate tenancy to determine and only then be in a position to serve a notice to determine an AST. That practical argument was however given short shrift by the Court of Appeal, from whom a strict legal analysis was inevitable.

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[1] [2018] EWCA Civ 2414
[2] Section 21 (1) (b) of the Act allows a landlord who has served at least two months’ notice on a tenant to recover possession without having to rely on statutory grounds for possession

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