Social Housing Speed Read – Is exercise of a forfeiture clause the only way in which public sector landlords of fixed term tenancies can bring a tenancy to an end?
22nd April, 2022
A case which considered whether a landlord can terminate a flexible tenancy agreement before the fixed term has expired when there was no specific provision for re-entry or forfeiture has reached the Supreme court.
We have previously written an article on this case Croydon LBC v Kalonga. (Click here to read)
Croydon LBC (the Appellant) granted Ms Kalonga (the Respondent) a fixed-term secure tenancy of 5 years from 25 May 2015 until 24 May 2020. The Appellant served a notice on the Respondent on 2 August 2017, which sought to terminate the tenancy agreement and repossess the property on the grounds of rent arrears and anti-social behaviour. The Appellant’s case was dismissed by both the High Court and the Court of Appeal, determining that the tenancy agreement did not contain a forfeiture clause, and that without one the Appellant had no right to end it before the end of the fixed term. In any event, the Appellant did not seek to rely on forfeiture in seeking to terminate the Respondent’s fixed-term tenancy.
The Supreme Court considered firstly whether the existence of a provision for forfeiture in the tenancy agreement and its exercise by obtaining a termination order in lieu of forfeiture is the only way in which a secure fixed term tenancy can be brought to a premature end. Secondly whether the tenancy agreement between the Appellant and the Respondent actually contained a provision for forfeiture, under which the Appellant could terminate it because of some fault on the part of the Respondent.
Supreme Court Judgment
The Supreme Court held that obtaining a termination order in lieu of forfeiture is not the only way that a landlord can bring about the termination of a fixed-term secure tenancy. Where there is a means of early termination such as a true break clause, which has become exercisable, the landlord may seek possession under any available statutory ground so long as any requisite steps have been taken. However, if the only terms of the tenancy agreement which would enable the landlord to obtain early termination are forfeiture provisions, then the landlord must forfeit or obtain a termination order in lieu of forfeiture.
After concluding that the issue of whether a particular clause is or is not a forfeiture clause is a question of substance, not form, the Supreme Court held that the tenancy agreement contained numerous provisions granting the Appellant the right to bring the Respondent’s secure fixed-term tenancy to an early end. Some of these were forfeiture provisions and some simply break clauses. Despite this, as the Appellant had not sought termination in lieu of forfeiture, the Supreme Court held that claim for possession failed. Therefore the appeal succeeded in part only. You can read the full Judgment here: Judgment – Croydon LBC v Kalonga.
With many similar tenancy agreements in place throughout the sector, it is now clear that to obtain a possession order of any secure tenancy during a fixed term, there must be a provision in the tenancy agreement that enables the term to be ended early. This is not limited to just the exercise of a forfeiture clause, and in non-default grounds, this could be a break clause. Whether or not a particular agreement includes a forfeiture clause or a break clause remains to be considered on the facts of each case, and each tenancy agreement would need careful scrutiny to establish this.
Whilst this decision concerned fixed term secure or flexible tenancies, which are only relevant to local authorities, it does give an indication of how it would be applicable to new tenancies. Private registered providers with fixed term assured short hold tenancy agreements should take note that their tenancy agreements should contain a provision to determine the tenancy, and therefore should include a provision for re-entry to ensure compliance.
If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact Melanie Dirom, or a member of our expert Social Housing Team
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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