How can you tell a monthly tenancy from a 90-year lease? It is harder than you might think — a recent case went all the way to the Supreme Court to find the answer.
It is a rule of law that the term of a tenancy must be certain or capable of being rendered certain at the outset. In a periodic tenancy this rule is satisfied by each party having the right to terminate at the end of any period. If the rule is not satisfied then the arrangement cannot be a tenancy but can only be a contractual licence, so that the tenant has no right to remain if the landlord sells the property. A case which came before the Supreme Court in November highlights the difficulties the rule can cause and led to the court calling for Parliament to abolish the rule.
The case concerned an arrangement by a housing association described as an occupancy agreement "from month to month until determined as provided in this agreement". The agreement provided for termination by the tenant on one month's notice but there was no right for the association to terminate unless the tenant was in breach of the terms of the agreement or ceased to be a member of the association. The drafting appeared to fall into the trap of having created an uncertain term, which could not be a valid tenancy.
The Court of Appeal decided that, despite the wording of the agreement, the conduct of the parties implied that there was a monthly periodic tenancy. That meant that there was a valid tenancy but the landlord could end it at any time on one month's notice, which was an unsatisfactory result for the tenant.
The Supreme Court came up with a different solution that gave the tenant the security she needed. It held that the termination provisions in the agreement were not consistent with an intention to create a monthly periodic tenancy. It was in effect a tenancy for life. But section 149(6) of the Law of Property Act 1925 automatically converts a life tenancy granted at a rent or a premium into a tenancy for a term of 90 years, which can be terminated by the landlord on one month's notice but only following the tenant's death. Therefore, during the tenant's life it could only be terminated as provided by the agreement by the tenant on one month's notice or by the landlord if the tenant was in breach of the agreement or had ceased to be a member of the association.
That solution was only possible because the tenant was an individual. If the tenant is a company, then it is not possible to grant a lease for life and section 149(6) cannot come into play. The company could only have a contractual licence which it could enforce against the original landlord but not any future owner.
Another situation in which section 149(6) cannot be used is where the tenancy is not in writing. In another case, also heard in November, a couple occupied a farm paying a monthly rent and claimed that they had an oral agreement that they could live there as long as they wanted. They obtained a court order that they had a tenancy for life which was converted by section 149(6) into a 90 year tenancy. However the Court of Appeal reversed the decision because section 53 of the Law of Property Act 1925 requires a tenancy for more than three years to be in writing. So an oral arrangement cannot be a lease for life and section 149(6) cannot apply.
Source: Berrisford v Mexfield Housing Co-Operative Ltd [2011] UKSC 32; Hardy v Haselden [2011] EWCA Civ 1387.
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