Southward Housing Co-Operative Ltd v Walker & Anor

A tenancy granted by a fully mutual housing co-operative may contain contractual restrictions on termination which prevent it operating as an ordinary periodic tenancy. Where the restriction applies to service of a notice to quit, the agreement is for an uncertain term. The rule against uncertainty of term applies, but the agreement may instead take effect between the parties as a contractual licence where converting it into a 90-year lease would defeat its fundamental terms and the parties’ evident intention. The statutory exclusion of fully mutual co-operative tenancies from secure and assured tenancy regimes is not discriminatory on the facts. A private co-operative landlord’s possession claim is not subject to an Article 8 proportionality defence.

The claimant, a fully mutual housing co-operative, granted the defendants a weekly tenancy of their home. The agreement restricted termination and possession proceedings to specified grounds, including rent arrears. After substantial arrears accumulated, the claimant served a notice to quit and brought possession proceedings.

The defendants argued that the agreement was analogous to Mexfield Housing Co-operative Ltd v Berrisford [2012] 1 AC 955, and therefore operated as a 90-year lease under section 149(6) of the Law of Property Act 1925. They also relied on Articles 8 and 14 ECHR, Article 1 of the First Protocol, public-law principles and a proposed declaration of incompatibility. The central issues were the legal character of the tenancy, the effectiveness of the notice to quit, and the compatibility of the statutory exclusions with Convention rights.

1. Nature of the agreement. On its true construction, the restrictions in the agreement applied to the service of a notice to quit as well as to possession proceedings. The agreement therefore could not operate as an ordinary weekly periodic tenancy and was for an uncertain duration.
2. Effect of uncertainty. The rule against uncertainty of term applied at first instance. However, the Supreme Court in Mexfield Housing Co-operative Ltd v Berrisford [2012] 1 AC 955 had left open whether the consequential conversion into a lease for life, and thereafter a 90-year lease under section 149(6) of the Law of Property Act 1925, could be disapplied where it would contradict the parties’ fundamental bargain. In this case the agreement repeatedly described itself as a weekly tenancy, provided for notice to quit and contained no forfeiture provision. It was not intended to confer a right to occupy for life.
3. The appropriate solution was to treat the agreement as a contractual licence taking effect according to its terms. The notice to quit complied with those terms and determined the contractual relationship. The claimant was consequently entitled to possession.
4. Alternatively, if a 90-year lease had arisen, clause 7 would have to be treated as an innominate termination process amounting to forfeiture. The claimant had established that there was insufficient distress on the premises, no section 166 notice under the Commonhold and Leasehold Reform Act 2002 was required, and subsequent demands did not waive the right to forfeit. Relief from forfeiture would in any event have been refused on the evidence then available.
5. The exclusion of fully mutual housing co-operatives from the secure and assured tenancy regimes was not shown to discriminate on an Article 14 ground. The defendants’ contractual protections, mutual membership and participation in the co-operative also meant that the overall position was not established to be less favourable. Any difference was justified within Parliament’s wide margin of appreciation in social-housing policy.
6. Section 3 of the Human Rights Act 1998 could not be used to read the relevant housing legislation so as to reverse the statutory exclusion. The claimant was not exercising functions of a public nature for section 6 purposes, and its possession claim was private. The court therefore could not entertain an Article 8 proportionality defence. A declaration of incompatibility under section 4 was neither justified nor material to the outcome.
7. The defence and counterclaim were dismissed. An order for possession, arrears or use-and-occupation charges, and costs was to be made, with consequential matters to be addressed after judgment.