Tenancy Type. Mary owns a residential property in Putney, London. Five months ago she entered into a written agreement to let the whole of the property to Martin for a period of five years and Martin duly moved in. The agreement specifically stated, inte

This means that once the tenancy comes to an end the Landlord can seek possession under a procedure known as the Accelerated Possession Procedure which I will discuss further.

If however the initial term of the tenancy comes to an end which is known as the contractual tenancy then the Tenant holds over on the same terms under a Statutory Periodic Tenancy under the HA 1988. A notice can still be served but this is under Section 21 (4) which basically provides that the notice must end upon an end of the period of the tenancy. So for example if a tenancy commenced on the 1st of the month and rent is payable monthly then the end would be the 31st of a month. The notice must be a clear two months. There are so many invalid notices encountered in practice.

So what amounts to an invalid notice? The usual way this arises in under the Section 21(4) type of notice and is where the notice does not expire on the correct date and the notice has not be worded in such a way than any leeway is possible. The way this can be achieved is by specifying a date then also uses the following wording or similar, namely, “Or on the next date on which a completed period of your tenancy expires not earlier than two months after the giving of this notice…” See in particular  Fernandez and another v McDonald and another [2003] Essentially the case decided that a  notice that failed to specify a date which was the last day of a period of the tenancy was not a valid notice for the purposes of s 21(4)(a) of the 1988 Act. The case decided that the statute did not require the landlord to specify a date on which he required possession. It was not a notice to quit. The landlord would not get possession without the tenant's consent unless he went to court. For that reason, the statute required the landlord to state that possession was required 'after a date specified in the notice, being the last day of a period of the tenancy'. The subsection was clear and precise. Nor was it difficult for landlords to comply. They knew when the period ended.

On the other side caution has to be used by Landlords in ensuring that they do not issue proceedings prematurely. In Lower Street Properties Ltd v Jones   [1996] A discussion took place in this case about similar issues as above but most important it was held that a notice under section 21(4), which provides that it will expire at the end of the period of the tenancy which will end after the expiry of two months from the service of the notice, is a valid notice without specifying a particular date. Section 21(4) does not require there to be anything in writing as to when the notice is given. However proceedings for possession cannot be commenced before the expiration of the section 21(4) notice. It follows that any proceedings issue prematurely have to be dismissed.

The second type of issue on the notice is whether it cannot be validly served. In recent times it has been many Landlords practice to take a deposit or bond at the commencement of the tenancy. Practice saw that many landlords or their agents were reluctant to return these. As a result the Legislature intervened and provided that from 6th April 2007 all deposits had to be either deposited or protected by a scheme. There are requirements as to the timescale this is to be done and within which the Tenant has to be provided with prescribed information. If the Landlord has failed to do this then there are potential financial consequences which will be discussed in further detail below. However purely from the possession perspective the provisions of Section 215 (1) of the Housing Act 2004 provide that  ...” If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when— (a) the deposit is not being held in accordance with an authorised scheme, or (b) the initial requirements of such a scheme (see section 213(4)) have not been complied with in relation to the deposit. (2) If section 213(6) is not complied with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213(6)(a) is complied with.

So what is the effect? In simple terms from a housing perspective a Landlord would not be entitled to rely upon any Section 21 Notice at all whilst the requirements had not be complied with if he took a deposit as opposed to rent in advance. This of course has a major impact upon Landlords who gave the notice when the tenancy commenced and received such a deposit. The fact is that at the time of the notice the provisions in relation to the deposit could not have been complied with so any Section 21 Notice is invalid. The writer has successfully argued this issue before Courts are first instance. However there are arguments potentially as to whether the payment is a deposit or not. I will discuss the general aspect of this later as it can potentially give rise to a claim against a Landlord.

Well what about when the argument is that the deposit is not one but rent in advance?  I will address this in due course.

However this does not mean the Landlord is left without a remedy. S/he can take steps to comply with the requirement of such a deposit and give the information. Once that is satisfied s/he may then serve a new Section 21 Notice which of course would have to be the two month notice referred to. His/her other option would be to use the section 8 procedure if there are specific grounds for possession.

How Are Possession dealt with?

1. Accelerated Possession Proceedings

If the possession proceedings are being brought based on a section 21 notice these will normally be dealt with under a procedure known as the Accelerated Possession Procedure. This is governed by Part 55 of the Civil Procedure Rules and if the case cannot satisfy these requirements it cannot be dealt with as an accelerated case.  

In essence the requirements are that the claim is brought under Section 21, this must commence in the Court where the premises are located, and the only purpose of the claim is to recover possession of the premises. In addition the tenancy must be a written tenancy and no other claim is made (apart from costs). There are certain procedural aspects in that the claim form must have exhibited to it the Tenancy Agreement, The Notice, details of the Tenancy Deposit scheme used and details of any registration of the premises with a local Authority. Essentially this latter part refers to whether it is a HMO and is required to be licensed under the Housing Act 2004 or under Part 3 of the said Act.

The effects of this means that if for example the original tenancy agreement cannot be produced such as due to its loss over time then this procedure cannot be used.

Under the Accelerated procedure most cases are considered on the basis of the papers placed before the District Judge. S/he has to consider whether the tenancy is an AST (and as I have stated the present position is that all are by default unless specified) and whether the notice is valid and where a deposit is paid whether that is protected.. If s/he is so satisfied then the Court must make a possession order which is normally in 14 days. The Court can extend this to a maximum of 42 days under the Housing Act 1980 if exceptional hardship can be shown. However if the Tenant serves and files a defence then the case will have to be listed for hearing and if there appears substance in it then it will have to be adjourned for a further hearing with it being case managed by the Court.

2. General Possession Proceedings

If the proceedings cannot be dealt with under the accelerated procedure they must be deal with under the normal possession procedure. Indeed all proceedings where a notice has been served under Section 8 have to be considered under this procedure which in essence means that a date is fixed for a hearing of the possession case.

 However if this case is based on Section 8 and a discretionary ground is used then not only must it be shown that the ground can be made out but that it is reasonable in all the circumstances to make an order for possession. Further the court can suspend such an order on terms.

One such discretionary ground is breach of the terms of the tenancy other than relating to the payment of rent which is directly relevant to matters under discussion.

 There can be situations where the Tenant will bring a counterclaimagainst a Landlord this particularly applies to cases based on rent arrears. Often the premises have been in disrepair and the landlord has done nothing or very little. The tenant then brings a claim based on the failure to repair and seeks damages together with a claim for personal injury. Personal injury can be very wide and can extent for example to the mental stress from living in such conditions. Further another example would be where a deposit was paid and the Tenancy Deposit Requirements have not been complied with. If the amount of the Tenants claim exceeds the rent arrears then there is no rent lawfully due and the Court would have to dismiss the claim and order payment of damages together normally with an order of specific performance or an order for these types of proceedings.

Tenancy Deposit Scheme

I have of course discussed this issue above in terms of the inability to serve a Section 21 Notice but the Act provides for certain remedies. This could lead to a Part 20 counterclaim in proceedings against a Landlord or to free standing proceedings brought by a Tenant against a Landlord. There are no binding judgments on this issue so the law is conflicting.

This aspect is set out in Section 214 of the Housing Act 2004 and in essence says that where such a deposit has been paid in relation to an AST and that the Landlord fails to either protect the deposit by one of the authorised schemes or/and fails to provide the prescribed information within 14 days of the payment of the deposit to the Landlord then the Court must order the repayment of the deposit to the tenant or orders it be paid into an authorised scheme within 14 days. Further that the Court must also order the landlord to pay to the tenant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

On the face of it that appears straightforward but the interpretations has differed. For example the judiciary at one Court take the view that this right can only arise where an invalid section 21 notice has been served. I respectfully disagree with that. It could not possible be Parliament’s intention for a free standing section to be considered in this way.

In  Harvey v Bamforth 2008    Ms Harvey contended that the power to order the return of a deposit and damages pursuant to section 214(3) and (4) only arose if the court was satisfied that section 213(6)(a) had not been satisfied and that compliance with section 213(6)(b) was irrelevant for these purposes. So - the power to order the return of the deposit and damages only arises if the landlord has failed to provide the prescribed information in the prescribed form (or one in similar effect). It is irrelevant, for the purposes of section 214(3) and (4) when that information is provided.

HHJ Bullimore accepted this argument. In his judgment:

“The failure on the landlord’s part was not that ‘the prescribed information was not given’ but that it was not given within the fourteen days. The district judge… took the view that [Section 213(6) (a) and Section 213(6) (b)] were so closely connected that they only made sense if they were read together but I think that was an error. I think that the draftsman in dealing with proceedings relating to tenancy deposits in Section 214 was very clear in differentiating between the requirements of giving information and giving the information after a specified period.  There were, to his mind, sound policy arguments for this conclusion

… they are very serious powers to be exercised against a landlord… one can well see that in the minds of the legislators, it was one thing to deal with a landlord who had not provided the prescribed information at all and to deal with it in that way with a landlord who had provided the prescribed information but had not done it within that short period laid down by the Act. Accordingly, as the information had been given before the tenant made his application, the application should have failed. The appeal was allowed and the order for the return of the deposit and the damages was overturned.

In Ferguson v Jones 2008, the Court was concerned with an assured shorthold tenancy. Ms Jones had paid a deposit of £500, which was not put into a scheme within the initial 14 days. In fact it was not put into a scheme by the landlord until after the landlord had brought a possession claim (presumably not on a Section 21 notice) and Ms Jones had counterclaimed for disrepair and for the three time the value of the deposit under Section 214(2) and (3) HA 2004.

DJ Sheldrake held that the court had no discretion under Section 214(4) and had to order the payment. The provision requiring the deposit to be protected within 14 days of receipt would be otiose if the landlord could escape the penalty by later compliance. That they should not was clearly Parliament’s intention.

In Stankova v Glassonbury 2008, , the landlord failed to protect deposit and notify the tenant within 14 days, although he did pay the deposit into an authorised scheme before the court hearing . The court awarded the mandatory 3 X deposit award, although the district judge said that to do so “went against the grain”.

Shelter has recently been asked by the Housing Committee of the Civil Justice Council to make suggested legislative changes given the way these issues are being dealt with by the Judiciary.

Deposit or Rent in Advance

Its concept is somewhat interesting as to whether in fact the payment of rent in advance is in effect a sham for a bond in disguise. This issue was in fact considered in Piggott v Slaven [2009]

The issue was whether there was deposit at all, or just an advance payment of rent. Whilst there are some side issues it is the aspect in relation to this aspect that is important. Essentially the facts were that Ms Slaven had signed a six months AST on 14 Feb 08 at a weekly rent of £105 to be paid weekly in advance. On 24 June 08 the Landlord, Mr Piggott served notice under Section 21 with possession required on 27 August. An accelerated possession claim was issued on 9 September.

However before taking this tenancy, Ms Slaven was the tenant of another property at which her Landlord was also Mr Piggott. A deposit of £600 was paid by Ms Slaven to Mr Piggott for that tenancy in April 2005. Ms Slaven defended on the basis that this £600 had been retained by Mr Piggott as deposit for the tenancy of the new property (there being no interruption between the tenancies) and that this deposit has not been put in a scheme, therefore the Section 21 notice was invalid, or of no effect. Ms Slaven claimed the 3 x deposit.

At the hearing, there was dispute over the amount of money and whether or not it was a deposit. The learned District Judge found that there had been an amount of £525 taken by Mr Piggott, which had been described as advance rent.

On the deposit issue, the DJ noted that s.212(8) HA 2004 describes a deposit as meaning:

Any money intended to be held (by the landlord or otherwise) as security for (a) the performance of any obligations of the tenant, or
(b) the discharge of any liability of his arising under or in connection with the tenancy.

On ‘intended’ there is no indication in HA 2004 whether this is an objective or subjective test. However in view of the policy aim of protecting the tenant, it was surely not intended that the Landlord could avoid the scheme simply by saying that he did not intend to hold the money as security.

In this case the Judge found that, any money over the first week’s rent was clearly being held as security against any potential future breach of rent liability, or other condition, by Mr Piggott, as it was not set off against the first five weeks rent liability. It was therefore, objectively, intended to be a security and was a deposit.

The deposit had not been put in a scheme as required under Section 213(1) and (6) and, by Section 215(1) the Section .21 Notice was not valid. And thus three times the deposit payment ordered and the return or protection of the deposit.

Arguably, then, any money from the tenant held by the landlord over and above the immediate payments of rent due is construable as a deposit, where the landlord has not clearly indicated that it will not be used in relation to any breach of tenancy condition or tenant liability.

However again this is a County Court decision which is not binding but of persuasive authority.

General

Finally in terms of these issues one thing to note is that a lease for a fixed term of over 3 years must be executed under Deed. The requirements of this are set out at Section 54(2) LPA 1925. If this requirement is not satisfied there is no legal lease but of course in a situation equity assists and provides such a lease to be equitable. However the equitable rules do prevail where there is a conflict with common law although the usual maxim in relation to equity such as “he who seeks equity must do equity” and “he who seeks equity must come with clean hands” do apply and must be borne in mind.

Fairness in Tenancies

Frequently this is an issue that tends not to be looked at or addressed. However the issue is quite topical in the context of the bank charges case. Essentially The Unfair Terms in Consumer Contracts Regulations 1999 state that a person should not have unfair terms in a contract.

In a fairly balanced contract, the rights of all the parties must be secure and enforceable, and not at risk of being lost without good reason. Under the general law, contracts normally remain binding on both parties unless a breach by one of them threatens the whole value of it for the other.

The Office of Fair Trading (“OFT”)  has considered the issue of fairness in relation to tenancy agreements and many terms that are in standard use are considered by the OFT to be unfair including for example the typical forfeiture clause.

However in the context of this assignment could the clause that the premises are used for residential purposes only be unfair? To consider this the issue has to be approached from another perspective namely is the inverse of such a clause unreasonable which in effect would be not to allow the premises to be used for business purposes whatsoever.

Cleary if a Tenant in this situation set up business repairing cars from home in the curtilage of the property and undertook such work until the early hours of the morning then arguably that would be unreasonable.

However in contrast if a Tenant having been made redundant established a business whereby he undertook answering telephone calls and mailing items would it  be reasonable for such a clause to in effect restrain a Tenant from operating such a business.

A proportional approach has to be taken but I respectfully submit that a clause which in effect restricts any type of business by the requirement for the premises to be used for residential purposes only is potentially unreasonable and thus if this is standard type of agreement such a clause does not satisfy the test of reasonability set out in the regulations.

Unlawful Eviction

It is quite astounding how many Landlords do not understand the principle that a possession order is required in order to obtain possession from a tenant. Indeed in every tenancy agreement there is a covenant of quiet enjoyment which allows the tenant to peacefully occupy the premises. Further the law provides that no eviction can take place without due process of law and this extends to a Landlord using ‘self-help’ to evict a tenant after the date for possession has passed in terms of the possession order. Further it is a criminal offence to harass or evict a residential occupier It is not necessary to consider this aspect in depth suffice to say that there would be an unlawful eviction if the Landlord ether forcibly evicts, changes the locks or makes access to the premises impossible. It is possible for a tenant to obtain an injunction order and to see potentially significant damages dependent on the nature of the tenancy.

Legal position on Sale

This again needs brief consideration but in essence if the Fee Simple owner transfers or conveys the property to a third party then on the sale all rights and liabilities that attach to the land are so transferred. A tenancy is a leasehold estate as it create a terms of years absolute and therefore is an estate in the Land. As a result if a property is sold whilst it is tenanted then the new owner takes subject to that tenancy as indeed does any new Lender as the tenancy creates in any event an overriding interest based on actual occupation which the purchaser and  Mortgagee is bound by even if they did not know of its existence.

This in summary form is the legal position and I now turn to advising Martin.

As there is a tenancy I assume for present purposes that this is for valuable consideration that is to say for the payment of a rent

As the agreement is for a five year period then not only must the agreement be in wring but is must have been executed as a Deed and all formalities complied with.  However if this is not the case then clearly an equitable interest would arise and no party could deny the existence of the same given presumably by performance of all the terms. I therefore advise that not a lot turns on this point.

The tenancy commenced in 2008 on the basis of it being 5 months ago from the date when this task was settled that is commenced on 3rd October 2008. There is no indication that any written notice was provided at the commencement of tenancy and on that basis I advise Martin that he has an Assured Shorthold Tenancy Agreement. He essentially has the right to remain in occupation for the whole period of the agreement whether the Landlords title changes or not. However if he breaches the agreement or there are grounds for possession on any of the requisite grounds then the Landlord may take steps to acquire possession.

The Landlord would do this by serving a Section 8 notice and issue proceedings for possession. However as matters stand I advise that I see no basis for a Court to award possession. This is because as far as I see it none of the matter set out in the grounds for possession can be satisfied.

However if the position changes in that Martin does commence using the premises for business purposes then the situation could change. In this event it may well be that Mary would see this as a breach of the tenancy. She would then normally have to serve a notice of 14 day intention to seek possession based on Ground 12 namely any obligation of the tenancy (other than one related to the payment of rent) has been broken or not performed.

Once that notice had expired Mary would have to issue possession proceedings. If Martin is running a business from his home then prima facie he is in breach of the clause and a ground for possession can be made out.

However under Section 7(4) the Court can only make such an order if it considers it reasonable to do so. This in turn would depend on the type of business proposed to be run. Another aspect to be considered  is that if the agreement is a standard form of agreement whether this unfair in relation to this specific clause as it is in effect an affirmative clause which cause the negative side not to be defined and to in effect by excluding any type of business does not meet the standard of reasonableness under the regulations.

If the business was low key in that all it required was for example running a business mainly via the internet and some phone calls and mail then in such circumstances I advise Martin that a court would be unlikely to consider it was reasonable to make such an order. If on the other hand the business involved running a scarp mental business or a car repair service with cars stored within the curtilage of the property which is an eyesore then a court exercising its judicial discretion would be less likely to exercise its discretion in Martin’s favour. Accordingly Martin should think hard and long as the type of business if any he proposes to run.

Finally there is the issue of Mary selling the house. I advise Martin that any sale made would have to be made subject to the tenancy and the new Landlord would be bound by it. However Mary could offer to buy out Martin so that she could sell with vacant possession. As there is 4 years 7 months to run I advise Martin that he is in a strong bargaining position and that any proposed by him should be based upon the formula set out in Section 28 of the Housing Act 1988 that is to say the value of the property subject to the tenancy and taking the value with vacant possession and the difference is the level from a negotiating perspective that should be paid.

It may well be that Mary does not want to do this but clearly Martin’s tenancy would reduce the open market sale value. However I advise Martin that if there was any attempts by Mary or if she does sell the property by the new purchaser to evict him he should firstly complain to the Local Authority who have jurisdiction in terms of prosecution under Section 1 PFA 1977 and Martin himself should also seek an injunction to restrain such attempts or to order him to be reinstated

In addition not only will the new Landlord be bound by the tenancy but any mortgagee will be also.This is by virtue of the fact that Martin as a person in occupation has an overriding interest.

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However if the position had been intolerable by virtue of Mary’s or the new Landlord’s behaviour he could consider not moving back there and take legal steps to protect his belongings by making an application if necessary for their return under the Torts (Interference with Goods) Act 1977 and seek damages on the basis that the Landlord is a Landlord in default within the meaning of Section 27.

I advise Martin accordingly.

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