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Articles | Mon 26th Sep, 2016
On 26th July 2016, Mr Justice Edis handed down judgment in Leeds City Council v Broadley  EWHC 1839 (Admin), which considered whether a tenancy agreement could create a single tenancy with an initial fixed period which later becomes a periodic lease, and the consequences of the same on council tax liability.
The case has implications for the interpretation of certain standard form tenancy agreements.
Relevant terms of the tenancy
The lease provided:
… the landlord agrees to let the premises … for a term of [6 or 12] months and thereafter continuing on a monthly basis unless terminated by either party under the provisions of Clause 3
Paying therefor the rent [which was set out]
There was also a term that the tenant was to pay council tax “charged in respect of the property during the tenancy”.
The question and the rival interpretations
The question was whether the tenancy agreement created a leasehold interest for six months or longer, which is the period required (by section 6(5) and (6) of the Local Government Finance Act 1992) for a person to be an “owner” of a dwelling and thus liable to pay council tax. In particular, it was suggested (at paragraph 22) that Leeds City Council was arguing that there was no such interest because if a new tenancy had been created after the initial six months then the landlord, from whom it would be easier to collect council tax, would have become liable.
The Respondent, who appeared in person and was commended by the judge for making submissions “succinctly and in an entirely reasonable and professional way”, argued that there was one tenancy which had an initial six month period and which then continued on a monthly basis. The Appellant argued that a single tenancy could not be both a fixed term tenancy and a periodic tenancy; thus it was void for uncertainty or, alternatively, it was a “periodic monthly tenancy with a fetter on the giving of notice to terminate before the expiry of six months”.
The Appellant relied upon sections 1(1) and 205(1)(xxvii) of the Law of Property Act 1925 and Lord Templeman’s speech in Prudential Assurance v. London Residuary Body  2 A.C. 386 in which (at 394F) his Lordship said: “A term must either be certain or uncertain. It cannot be partly certain because the tenant can determine it at any time and partly uncertain because the landlord cannot determine it for an uncertain period. If the landlord does not grant and the tenant does not take a certain term, the grant does not create a lease.” In Mexfield Housing v. Berrisford  UKSC 32, Lord Neuberger M.R. (as he then was) noted that “a periodic tenancy with a fetter on the landlord’s right to determine for three years was valid[;] … the term thereby created was equivalent to a fixed term of three years (subject to a restricted right of determination in the landlord and an unrestricted right of determination by the tenant) followed by a periodic tenancy.” Further, the Appellant relied upon the decision in Superstrike Ltd v. Rodrigues  EWCA Civ 669 which confirmed that a periodic tenancy created after the expiry of a fixed term is a new tenancy.
The Respondent submitted that it was all one tenancy because it was all contained within the same tenancy agreement. He characterised the lease as “a periodic tenancy with a minimum period … not a fixed term ending after six months” and there “was a minimum term of [six] months thereafter terminable by one month[‘]s notice” which could not be given before the initial six-month period. He also commented that he used the form of agreement regularly (which may or may not have been an especially probative point).
Edis J. started with the words of the agreement, which he considered prima facie “purport[ed] to create a single tenancy whose term comprises a fixed period of 6 months followed by a period which operates precisely as if it were a new monthly tenancy, but which is described in the document as a continuation of the term originally granted”. He considered that the issue was whether the agreement was invalid because it fell foul of the uncertainty rule, rather than the other way round.
The judge cited Lord Neuberger’s re-statement of the uncertainty rule in paragraph 33 of Mexfield Housing and noted Lady Hale’s reservations as to the rule itself, which she described as having an “Alice in Wonderland quality” because of the contortions through which the law has gone in order to hold that a periodic tenancy has a certain term (the law having concluded that, whilst the maximum term is uncertain, the actual term will be certain because either party to the lease may give notice as to its termination).
Having considered the term in question and the relevant law, Edis J. held that the tenancy agreement did not offend against the uncertainty rule because each element of it was “sufficiently certain” for the purposes of the rule.
“Alternative constructions would be that (1) the agreement creates a monthly tenancy with a fetter on the giving of notice in the first 6 months, or (2) the agreement creates two tenancies a fixed term followed by a periodic tenancy. If those are not bad for uncertainty I do not see why the formulation used in the agreement should be. All three formulations have the same practical effect and legal consequences so far as the termination of the tenant’s holding is concerned. There is no basis for finding that one is repugnant and the other two not. They are all equally uncertain or, to put it another way, equally certain.”
It is interesting and important to note that the judge’s conclusion was a result of taking the words of the tenancy agreement at face value and considering whether there was any reason for the term to be void (rather than seeking a reason positively to uphold it as drafted). That is consistent with the standard rules of contractual interpretation, which is to give effect to the agreement between the party as expressed and considered objectively.
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