In this post, Jen Knibbs, an associate at CMS, comments on Croydon LBC v Kalonga  UKSC 7, an important decision on whether a landlord can terminate a flexible tenancy agreement before the expiry of the fixed term if the tenancy agreement does not expressly provide for re-entry or forfeiture.
Ms Chipo Kalonga (“Ms Kalonga”) was the tenant of a property in Croydon under a flexible tenancy for a fixed term of five years from 25 May 2015 to 24 May 2020 (the “Tenancy Agreement“). Croydon London Borough Council was her landlord (“Croydon“).
A flexible tenancy is a type of secure council tenancy which lasts for a fixed period of time, usually at least 5 years.
On 2 August 2017, Croydon served a notice on Ms Kalonga, which relied on grounds 1 and 2 of schedule 2 of the Housing Act 1985, seeking to terminate the Tenancy Agreement due to rent arrears and anti-social behaviour. The notice was in the standard form.
On 29 August 2017, Croydon issued a claim in the County Court at Central London seeking possession of the property. The claim was made on grounds 1 and 2 of schedule 2 of the Housing Act 1985. No claim was made on the ground of forfeiture.
In response, Ms Kalonga served a defence and counterclaim arguing, amongst other things, that the Tenancy Agreement did not include a forfeiture clause; Croydon had failed to serve a valid notice; and the claim was defective as a claim for possession of a flexible tenancy during the fixed term. Ms Kalonga defended the claim on the basis that it was only possible to determine a flexible tenancy, as is the case with fixed term secure tenancy, by terminating it in accordance with the forfeiture-like procedure in section 82(3) Housing Act 1985.
On 9 May 2019, the preliminary issue of “the correct manner in which to determine a secure flexible tenancy during the fixed term (including whether, and if so how, and principles relating to forfeiture apply)” was transferred to the High Court. The remainder of the claim and counterclaim was stayed pending the determination of this preliminary issue.
The High Court determined that the Tenancy Agreement did not contain a forfeiture clause and that without one, Croydon had no right to end the Tenancy Agreement before the end of the fixed term. Croydon appealed.
Court of Appeal
The Court of Appeal dismissed the appeal and agreed with the ruling of the High Court.
The Court of Appeal held that the words “subject to termination by the landlord” did, at first glance, allow a landlord to terminate the tenancy by any lawful means. However, considering the legislative intention behind section 32 of the Housing Act 1980 (the precursor to section 82 of the Housing Act 1985), a fixed term tenancy could only be brought to an end by obtaining an order for termination pursuant to a forfeiture clause, at which point a periodic tenancy would commence. Croydon appealed to the Supreme Court.
There were two issues for the Supreme Court to consider:
Whether the existence of a provision for forfeiture in the Tenancy Agreement and its exercise by obtaining a termination order in lieu of forfeiture under section 82(3) of the Housing Act 1985 is the sole way in which a secure fixed term tenancy can be brought to a premature end; and
Whether the Tenancy Agreement contained a provision for forfeiture, under which Ms Kalonga could terminate the least because of some fault on the part of Croydon.
In consideration of the first issue, it was held that there are only two ways a landlord can recover possession during the fixed term. The first way is where a tenancy agreement contains a break clause; the second where a tenancy agreement contains a forfeiture clause. In short, a landlord is able to seek possession against a tenant with a secure fixed term tenancy where there is an exercisable break or forfeiture clause.
In consideration of the second issue, whether a particular clause amounted to a forfeiture clause was a matter of substance, not form. The Tenancy Agreement allowed Croydon to seek an order for possession from the Court “at any time” if Ms Kalonga breached the terms of the Tenancy Agreement. The Supreme Court held that was to be considered a forfeiture clause if you apply the test established in Clays Lane Housing Co-operative Ltd v Patrick  17 HLR 188, and the lower courts had been wrong to conclude otherwise.
The Supreme Court unanimously concluded that the Tenancy Agreement did contain a forfeiture clause. However, as Croydon had stated that it was not relying on a right of forfeiture, the appeal was allowed in part.
There is thought to be somewhere in the region of 30,000 fixed term secure tenancies in England, therefore this is a significant case setting out the position in terminating a flexible tenancy.
Whilst the outcome only applies to flexible tenancies granted by local authorities, it is important to note that private registered fixed term tenancy agreements do need to contain a provision to determine the tenancy by way of provision for re-entry to ensure compliance with section 7(6)(b) of Housing Act 1988.