Croydon London Borough Council v Kalonga

A fixed-term secure flexible tenancy is subject to termination by the landlord for section 82(1)(b) of the Housing Act 1985 if the landlord has any lawful contractual means of early termination. That classification does not give the landlord an unrestricted route to possession. Before expiry, the tenancy can be terminated only under section 82(3), through a court termination order founded on an express forfeiture clause; section 146 of the Law of Property Act 1925 applies where relevant. A break clause, rescission, or forfeiture for breach without such a clause cannot bypass that scheme. Clauses providing for a notice seeking possession or an application for a possession order are not, by themselves, forfeiture clauses. A forfeiture clause must permit earlier termination and be exercisable on tenant default.

The respondent occupied a five-year flexible tenancy granted by the appellant local authority. During the fixed term, the authority served notice and brought possession proceedings relying on rent arrears and anti-social behaviour grounds under Schedule 2 to the Housing Act 1985, but did not rely on forfeiture.

Tipples J held that the tenancy agreement contained no forfeiture clause and that the landlord had no right to determine the fixed-term tenancy before expiry: [2020] EWHC 1353 (QB), also reported at [2020] 1 WLR 4809. The authority appealed. The respondent’s notice raised the additional questions whether termination required proceedings under section 82(3) and service of notice under section 146 of the Law of Property Act 1925. The central issue was the lawful method of terminating a fixed-term flexible tenancy before its expiry.

The Court of Appeal dismissed the appeal. Lord Justice Arnold gave the principal judgment, with Lady Justice Asplin and Lady Justice King agreeing.

1. For section 82(1)(b) of the Housing Act 1985, a fixed-term secure tenancy is subject to termination by the landlord where any lawful contractual mechanism permits early termination. The expression is not confined to forfeiture. This construction is supported by the statutory language and by the purpose of section 82, which is to protect security of tenure.
2. The route by which the tenancy may actually be terminated is different. A periodic tenancy may be brought to an end by a possession order under section 82(1A)(a). A fixed-term tenancy may be brought to an end before expiry only by a termination order under section 82(1A)(b) and section 82(3), where the agreement contains a forfeiture clause. Allowing possession proceedings under section 82(1A)(a) would substantially deprive sections 82(3) and 82(4) of effect and would enable landlords to avoid the safeguards relating to forfeiture. Section 86 supports this distinction, and demotion orders do not make section 82A(6) redundant.
3. The respondent’s notice succeeded on the procedural point. Where section 146 of the Law of Property Act 1925 applies, the landlord must serve the requisite notice before seeking a termination order. The landlord may also serve the statutory notice under section 83 and pursue termination of the fixed term together with possession of the periodic tenancy which arises.
4. Applying the test in Clays Lane Housing Co-Operative Ltd v Patrick (1984) 17 HLR 188 at 193, a forfeiture clause must provide for termination before the natural expiry of the term and be exercisable on tenant default. Clauses 3 and 10 of the agreement provided for a notice seeking possession or an application for a possession order. They did not themselves confer a right to determine the tenancy and were not forfeiture clauses. The dictum in Billson v Residential Apartments Ltd [1992] 1 AC 494 at 534 concerned enforcement of an existing forfeiture clause, not the identification of such a clause.

• Court of Appeal (Civil Division). The appeal was dismissed. The court held that the fixed-term flexible tenancy could not be terminated before expiry without an express forfeiture clause and that the respondent’s procedural argument was correct.
• High Court of Justice, Queen’s Bench Division. Tipples J determined the preliminary issue, held that the agreement contained no forfeiture clause and dismissed the landlord’s claim: [2020] EWHC 1353 (QB).
• County Court at Central London. HHJ Bailey directed a trial of the correct method of determining a secure flexible tenancy during its fixed term and stayed the remaining claim and counterclaim.