Paul Alexander Constantine v Aaron Spencer Bird

A contractual option to renew a tenancy will create a perpetually renewable tenancy only where the wording is unequivocal. Courts lean against perpetual renewals. An option expressed to continue on the same terms, including the option itself, may be perpetual, but ambiguity prevents that construction. Where the option permits only one renewal, a statutory periodic tenancy arises when the renewed term ends. The landlord’s acceptance of rent or willingness to allow continued occupation does not, without more, establish a perpetual right of renewal under section 5(4) of the Housing Act 1988.

The appellant held a 12-month assured tenancy. Clause 3.23 gave him an option to renew for a further 12 months at the same rent, provided specified conditions were met. He exercised the option annually and contended that the clause created a perpetually renewable tenancy, preventing the arising of a statutory periodic tenancy under section 5(4) of the Housing Act 1988.

The respondent contended that the option permitted only one renewal. After serving a notice proposing a new rent under section 13, he obtained a market-rent determination from the First-tier Tribunal. The FTT concluded that the option was exercisable only once, but gave inadequate reasons. The central issue on appeal was whether the tenancy was perpetually renewable and therefore outside the FTT’s rent-determination jurisdiction.

1. The appeal was dismissed. The First-tier Tribunal’s determination of the market rent took effect.
2. Courts lean against perpetual rights of renewal. Such a right will arise only from unequivocal wording. A clause providing for renewal on the same terms, including the renewal option, is sufficiently clear to create perpetual renewals, as illustrated by Parkus v Greenwood [1950] Ch 644 and Caerphilly Concrete Products v Owen [1971] EWCA Civ 1.
3. Clause 3.23 did not state whether the option was included in or excluded from the renewed tenancy. That ambiguity meant that it could not create a perpetual right of renewal.
4. The appellant therefore had a right to renew once, for a single further 12-month term. When that term ended, a statutory periodic tenancy arose under section 5(2) and (4) of the Housing Act 1988. The landlord could consequently use section 13 and the FTT had jurisdiction under section 14 to determine the market rent.
5. The reasoning of the FTT was insufficient, but its conclusion was correct. There was no point in setting aside and remaking the decision because the Upper Tribunal supplied the necessary explanation.
6. The landlord’s willingness to permit continued occupation and acceptance of annual rent did not demonstrate acceptance of a perpetually renewable tenancy.

• Upper Tribunal (Lands Chamber): The appeal from the First-tier Tribunal was dismissed. The FTT’s market-rent determination took effect.