Croydon Council succeeds in the Supreme Court on the termination of flexible tenancies
A ‘flexible’ tenancy is a secure tenancy for a fixed term of at least two years and typically five. They were introduced by the Localism Act 2011 and have proved to be very popular with local authorities.
In Kalonga v Croydon LBC the issue arose as to how the local authority can end the tenancy before the natural expiry date of the term if one or more of the statutory grounds for possession under Schedule 2 to the Housing Act 1985 arose. Both the High Court and the Court of Appeal gave the same answer: it cannot, unless the tenancy contains a forfeiture clause. The Court of Appeal went further by holding that the local authority must also have forfeiture grounds. Consequently, a local authority with neither was locked into the agreement for its full duration irrespective of the tenant’s conduct or otherwise the authority’s need to recover vacant possession. This conclusion further meant that those non-fault-based statutory grounds were inaccessible to landlords of flexible tenancies even if they did contain a forfeiture clause.
Both courts further rejected Croydon’s argument that its standard flexible tenancy terms contained a forfeiture clause. Amongst others, Croydon had relied on a term that stated that it “may take eviction action at any time if one or more of the [statutory] grounds for possession … apply” (the eviction clause).
The Supreme Court unanimously disagreed with the courts below, on both grounds. Lord Briggs JSC held that as long as the fixed-term tenancy contains some lawful means by which possession can be recovered which has become exercisable it is “subject to termination by the landlord” within the meaning of s.82(1)(b) Housing Act 1996, and as long as the basis on which possession is sought is not the tenant’s alleged default a possession order under s.82(1A)(a) Housing Act 1996 may be sought in the normal way. This applies to important ‘management grounds’ such as redevelopment and under-occupation. Where fault is relied on the landlord needs a forfeiture clause but, in construing any contender, the court will look at substance rather than form. Properly understood, the eviction clause, amongst others, constituted a forfeiture clause.
Landlords under flexible tenancies would accordingly be well-advised to consider whether their agreements contain a forfeiture clause, as now construed, and/or a break clause.