Croydon London Borough Council v Kalonga

The Supreme Court construed the secure tenancy regime in Part IV of the Housing Act 1985, in particular section 82(1)(b) and section 82(3). The court held that a fixed-term secure tenancy is only "subject to termination by the landlord" for the purposes of section 82(1)(b) when the tenancy agreement contains an existing and exercisable contractual right of early termination (for example a landlord's break clause) or when the landlord has an available forfeiture right. Where the only means of early termination is forfeiture, the landlord must seek a termination order in lieu of forfeiture under section 82(3) (with the consequences of section 146 LPA and the tenant's right to seek relief). If a non-forfeiture contractual right (such as a break clause) has become exercisable, the landlord may seek possession under the statutory grounds in Schedule 2. Applying those principles, the court held that the tenancy in this case did contain forfeiture provisions (so Croydon could have sought termination in lieu of forfeiture) but Croydon had not pursued that route and the possession claim therefore failed on the assumed facts.

This appeal concerned the construction of the statutory scheme governing secure tenancies introduced by the Housing Act 1980 and consolidated in the Housing Act 1985. It raised whether a landlord can bring an unexpired fixed-term secure tenancy to an end by bringing possession proceedings under Schedule 2 of the 1985 Act, or whether termination in lieu of forfeiture under section 82(3) is the only means where the termination arises from a landlord's contractual rights.

Background and procedural history:

• Appellant: Croydon London Borough Council; Respondent: Ms Kalonga. The parties disputed whether the local authority could obtain possession of a five-year fixed-term "flexible" secure tenancy before expiry.
• Procedural posture: preliminary issues were tried in the High Court (Tipples J) ([2020] EWHC 1353 (QB)), Croydon appealed to the Court of Appeal ([2021] EWCA Civ 77), and the matter was further appealed to the Supreme Court. By the time judgment was given the fixed term had expired and a periodic follow-on tenancy had arisen under section 86, rendering the point academic between the parties but leaving important principles unresolved for future cases.

Issues framed by the court:

1. Whether the phrase "subject to termination by the landlord" in section 82(1)(b) of the 1985 Act should be read as encompassing every contractual means of early termination (including break clauses) so that a landlord may always seek possession under Schedule 2 during the fixed term; or whether where the only contractual method is forfeiture the landlord must seek termination in lieu of forfeiture under section 82(3).
2. Whether the particular tenancy agreement in this case contained a provision for forfeiture.

Court’s reasoning and conclusions:

• The court rejected constructions at both extremes. It held that Parliament did not intend to eliminate the additional contractual and proprietary security enjoyed under an unexpired fixed-term tenancy unless the tenancy was actually, at that time, subject to termination by the landlord in the sense of an existing and exercisable contractual right.
• Accordingly, a fixed-term tenancy is "subject to termination by the landlord" for the purposes of section 82(1)(b) only when a contractual right of early termination (other than forfeiture) has become exercisable, or when a forfeiture right has arisen and is being exercised in the form required by section 82(3) (with section 146 LPA consequences and the right to seek relief).
• If the only available contractual mechanism is forfeiture, the landlord must apply for termination in lieu of forfeiture under section 82(3) (and comply with section 146 and the tenant's right to seek relief). If a break clause or other non-forfeiture right has become exercisable, the landlord may pursue possession under the statutory grounds.
• On the facts assumed for the preliminary issues the tenancy contained forfeiture provisions triggered by default; Croydon had not pursued termination in lieu of forfeiture, so the possession claim failed. The court allowed the appeal in part to correct certain declarations made below.

Appeal allowed in part. The court held that a fixed-term secure tenancy is only "subject to termination by the landlord" under section 82(1)(b) when the tenancy contains an existing and exercisable contractual right of early termination (including a landlord's break clause when exercisable) or when forfeiture is available and is exercised by seeking a termination order in lieu of forfeiture under section 82(3). Where forfeiture is the only available means, the landlord must follow section 82(3) and the requirements of section 146 of the Law of Property Act 1925; where a non-forfeiture right has become exercisable the landlord may seek possession under the statutory grounds. On the assumed facts the tenancy did include forfeiture provisions, but Croydon did not rely on forfeiture so the possession claim failed.

Judgment on preliminary issues at first instance: High Court (Tipples J) [2020] EWHC 1353 (QB). Appeal dismissed by the Court of Appeal: [2021] EWCA Civ 77. Further appeal to the Supreme Court: [2022] UKSC 7 (this judgment).