Foundations of landlord and tenant law – part 10
The law relating to tenancies is now governed by the two statutory codes:
- The Rent Act 1977 and the
- Housing Act 1988.
These change the underlying common law. But to fully appreciate this, we need to know what the law was to start with.
So this post is going to have a quick look at some of the underlying common law principles relating to the creation and ending of tenancies.
Creating a tenancy
As a tenancy is a type of land, a tenancy agreement is a document of title. The Law of Property Act provides that all documents of title need to be made by a deed – except:
- Where the term is three years or less
- When the tenancy starts immediately, and
- Where a market rent is charged
Here section 54 (2) of the Law of Property Act specifically says that no deed is necessary. Which is why tenancies can be created without any paperwork at all.
Where a tenancy is not going to be at a market rent or is for a longer term, or if it is signed up before the tenants go into occupation, you should make sure that the tenancy agreement is signed as a deed – if you want the three-year term to be fully effective.
You do this (ie sign as a deed) by having wording to that effect on the document and getting signatures witnessed by an independent witness.
So, as short let’s do not need to be created by deed, we also need to look at that other area of law which governs them – the law of contract. As discussed earlier – under the law of contract, a contract is made when there is
- an offer,
- an acceptance and
- ‘consideration’ (money or money’s worth).
However, practically it is generally considered that notwithstanding anything which may have happened earlier, a tenancy will come into being when the tenant goes into occupation and the landlord starts accepting rent.
From that time onwards, both parties are bound by the rights and obligations which go with tenancies.
Periodic tenancies
Note that if a tenant stays on after the end of a fixed term, and the landlord continues to accept rent, this will create a new ‘periodic tenancy’ which will run from month to month, or from week to week (or occasionally quarterly etc), depending on how the rent is paid.
As the period will inevitably be under three years no paperwork is needed to create the new tenancy. Its terms will almost always be the same as the terms of the preceding fixed term tenancy agreement.
Ending a tenancy
In law, a tenancy/contract can end in one of the following ways:
- By agreement/surrender
- By implied surrender
- By ‘effluxion of time’
- A break cluase
- By forfeiture
- By a notice to quit
- By a court order for possession (or equivalent – eg a notice from the Home Office under the Immigration Act)
- By frustration
Let’s take a closer look
Agreement
This is fairly obvious. If a tenant asks a landlord if she can leave early and he agrees, then that is a termination by agreement.
Technically this is known as surrender – the tenant offers to surrender the tenancy and the landlord accepts it. This leads us to
Implied surrender
This is a rule regarding the termination of a tenancy if the tenant appears to have abandoned it. If the actions of the tenant are inconsistent with a desire to continue with the tenancy, ie removing all their possessions, leaving the keys behind and failing to pay rent, this can be deemed an implied offer to surrender, which the landlord can accept by going in and changing the locks.
Effluxion of time
This is a lovely old phrase. Who but a lawyer would ever use it? It means that the tenancy has come to its natural end. So if the tenant moves out at the end of a six month fixed term he does not have to do anything as the tenancy will end anyway by ‘effluxion of time’. The periodic tenancy mentioned above will only arise if he is still there after the fixed term has ended.
Break Clause
The parties can also agree among themselves a procedure for ending the tenancy early which is then set out in the tenancy agreement – known as a ‘break clause’.
To activate a break clause you need to do what it says. So if it provides for two months notice in writing, you need to give two months notice in writing. If the clause says that this must be after the first four months of the tenancy, then the break clause cannot be used during the first four months of the tenancy.
Note by the way that if the tenant does not move out – a periodic tenancy will then arise. The break clause will only end the fixed term.
Forfeiture
This is a very old procedure. It is the right of the landlord to end a tenancy by ‘re-entering’ if the tenant fails to comply with the tenancy terms and conditions (normally this is by failing to pay rent).
In the old days, ‘re-enter’ meant just that. The landlord would physically evict the tenant and change the locks. This can still be done in certain circumstances in commercial tenancies. However under the Protection from Eviction Act 1977 tenants can now only be evicted under a court order for possession, so ‘re-enter’ now means getting a court order.
If you want to forfeit for anything other than rent, there is also a special notice that needs to be served under s146 of the Law of Property Act 1925.
For some types of tenancy forfeiture is still available, but not all as we shall see. The rules of forfeiture are complex and include the right of the tenant to ‘relief from forfeiture’ for example if he pays the rent due in the case of forfeiture for non-payment of rent
Notice to quit
This is the way, under the common law, you end a periodic tenancy. There is a special form for the notice and it has to contain prescribed wording otherwise it is invalid. Under the common law, once the notice period (generally not less than 28 days, ending at the end of a period of the tenancy) has expired the tenancy will end, and the tenant will not be able to defend a claim for possession.
Note by the way that landlords cannot use old style notices to quit for assured and assured shorthold tenancies – because the Housing Act 1988 says so (section 5). You need to use the forms prescribed under the Housing Act (sections 8 and 21) which work in a different way.
Court order for possession
This is the only way nowadays that a landlord can evict a tenant who is unwilling to leave voluntarily.
Unless the landlord is bringing a claim to forfeit based on rent arrears, the proper form of notice will need to be served first. It is fairly easy for a landlord to get an order for possession under the common law, which is one reason why the statutory codes were introduced.
Frustration
This is a contractual rule which says a contract will end by frustration if it becomes impossible to perform.
Tenants would like to be able to invoke this if they are unable to live at the property because their job requires them to live somewhere else, but in reality, this rule will very rarely apply to a tenancy.
The only circumstances really where it can be used are if it becomes physically impossible to live in the property, for example, if it has burned to the ground or if it was on a cliff top and has fallen into the sea.
Timings
Finally, just a couple of rules you need to know.
- Rent is payable in arrears unless the tenancy agreement specifically says it should be paid in advance and is in arrears if it is not paid by midnight on the due date. So for a weekly tenancy where there is no tenancy agreement providing for rent to be paid in advance – if the tenant goes in on Tuesday the rent will be in arrears if it is not paid by midnight on the following Monday.
- A fixed term or periodic term will end at midnight on the last day of the term or period
Next time I am going to be looking at the first statutory code we need to consider, that set up by the Rent Act 1977.
Isn’t the Protection from Evictions Act 1977 also relevan?. Like the Rent Act 1977 it changed little mostly simplifying and restating the existing la, e.g. I believe the requirement to get a possession order goes back to the 1920s.
This is a really interesting series of articles, and this one is particularly useful in seeing how the evolution of tenancy law slots together. After reading the section titled Creating a Tenancy, I have a couple of questions;
1) If a tenant signs a tenancy to commence in say, one month’s time, does that tenancy agreement then have to be signed as a deed for it to be enforceable?
2) If, as in the scenario in Q1, a tenant signed an AST to commence at some date in the future, but didn’t pay the rent or deposit as stipulated in the AST by the commencement date, would the agreement then fail to be contractually enforceable by the tenant as no consideration was received by the landlord, or would the wording of the AST requiring consideration in the form of rent be sufficient to satisfy that requirement of a contract?
So from a practical perspective, would a landlord be required to provide a tenant with keys and allow them to move into a property where an AST had be signed in advance, but the tenant had then failed to pay the required rent and was already therefore in breach of contract?
1 No matter what, when a tenant actually moves in and starts paying rent, a tenancy will be created automatically under the Law of Property Act 1925 s54(2).
2. If the tenant has failed to pay the rent, the landlord could claim to be entitled to cancel the tenancy for breach of contract. It would depend on the circumstances though.
For example, the tenancy agreement could maybe make the tenancy conditional upon the rent and deposit being payable in advance and give a deadline.
That doesn’t quite answer question 1, which I understand to be “If a tenancy agreement is signed before the day on which the tenancy is to start (or the day on which possession is given to the tenant), are the terms in that agreement enforceable if it is not signed as a deed?”
It’s dangerous to generalise too much, and when considering actual cases much will depend on their own facts.
However, the enforceability of the terms of a tenancy (whenever signed) does not depend solely on whether it is signed as a deed or not.
I’m really asking whether if a tenant signed a tenancy to start in a not ridiculously distant future date, say one month, and then changed their minds prior to taking up occupation, would that tenancy agreement be a legally enforceable contract whereby the tenant would be obliged to pay rent for the minimum term, or until an agreeable replacement tenant where found? To be enforceable, would it be necessary for it to be signed as a deed? Or are you saying that regardless of the type of signing it may not be enforceable at all if the tenant has not taken up occupation?
I think it would be enforceable as a contract anyway, but an actual tenancy (ie the legal interest in the land) would not be created unless it was signed as a deed,.
The problem is of course that enforcing it through the courts would be more expensive than it is worth.
Because of this, we tend to be a bit more flexible in short lets as enforcing your strict legal rights are often not really an option as the legal costs would be prohibitive.
It is interesting that exercising a break clause and the tenant then not leaving creates a periodic tenancy, not “holding over” as in the Distress For Rent Act.
1. If the contract is worded to create a contractual periodic tenancy, then is the periodic tenancy after exercise of the break clause a continuation of the tenancy, rather than a new tenancy?
2. If the contract does not provide for the tenancy to continue periodically, then is the new tenancy a statutory periodic tenancy?
3. does the periodic tenancy arise regardless of who (tenant/landlord) exercised the break clause?
4. Does this mean that when a break clause is exercised, the landlord should immediately issue a S21 notice (for modern tenancies) if he wants possession?
5. Can you provide the authority for the effect of exercising a break cause?
1. Probably, although it may depend on how the contract is worded
2. Probably
3. I would have thought so
4. Yes. There are only two ways a landlord can legally recover possession – (1) the tenant leaving voluntarily and (2) bailiffs under the authority of a court order.
5. I am not aware of any case law specifically on this point. But the s18 of Distress for Rent Act applies specifically where a tenant has served a tenants notice to quit.
With my pedant hat on, I would observe that a day has either no midnight (midnight being the moment between 2 days) or 2 midnights (one at the start and one at the end).
I imagine that you are referring to “midnight at the end of the day”.