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Terminating Fixed Term Tenancies
In the recent case of LiveWest Homes Ltd v Bamber the issue of terminating fixed term AST tenancies came before the Court.
This is a High Court judgment, so binding on County Courts.
The issue turned on whether ss21(1A) and (1B) Housing Act 1988 applied to the tenancy and whether the service of a s21 Notice without a 6-month ‘minded to’ notice allowed for the termination of the tenancy during the ‘starter’ period of the tenancy.
- The parties agreed that the tenancy was one for a term certain of more than 2 years
- The tenancy granted purported to be a fixed term tenancy for 7 years which included a starter period
- The tenancy had break clauses in it. One of these was that during the starter period of 12 months, or an extension of that period, it could be terminated by way of 2 months’ written notice
- A break clause in a fixed term tenancy enables the landlord to terminate the tenancy during the fixed term of the tenancy.
The tenancy was entered into on 27 February 2017, following proceedings on another fixed term tenancy that were being contested and approaching a hearing at the Court of Appeal.
On 9 August 2017 a s.21 notice purporting to exercise the break clause and bring about the end of the tenancy was sent.
A review of the decision to issue the notice was requested by Ms Bamber. This review request was turned down and proceedings were issued.
As a preliminary issue the case was placed before a Circuit Judge to determine whether ss21(1A) and (1B) applied and therefore whether the notice served was lawful.
Ss21(1A) and (1B) concern fixed term social housing tenancies which are for more than 2 years in duration. S21(1B) provides that the landlord should serve a “minded to” (end the tenancy) notice no less than 6 months before the end of the fixed term to be able to evict using s21.
Whilst it was agreed that it was a fixed term tenancy of over 2 years, the break clause meant that it was not in operation for this period and the effect of serving the Notice was that it converted to a periodic assured shorthold tenancy.
Therefore, in this instance the 6-month’s ‘minded to’ notice was not required.
Where does that leave us
The judgement confirms that where there is a break clause for a starter period within a fixed term tenancy that tenancy can be terminated by way of a s21 Notice.
In respect of other break clauses, it is clear from s5(2) Housing Act 1988 that where a break clause is exercised the fixed term becomes a periodic tenancy. At this point the tenancy then would fall outside of s21 (1a) and (1B) and a section 21 notice could be served as soon as the break provisions have been fully complied with.
Notes of best practice
Where you are using fixed term tenancies, the Tenancy Standard, at paragraph 2.2.2, states that any starter period is in addition to a fixed term of the tenancy. Some landlords have been including a starter period within a fixed term and using break clauses. Others have it in addition to by:
- Granting a periodic AST starter tenancy that has provisions for converting into a fixed term AST for a period of years (at least 5 years)
- Granting a periodic AST starter tenancy and then enter into a new fixed term AST at the conclusion of this.
Both of these options should be familiar to Registered Providers as they are how RPs used to grant an assured tenancy.
By having a clear starter period there can be no dispute as to whether the tenancy is a fixed term or not.
We also recommend that Registered Providers ensure that they have clear terms in their agreements that:
- State what the starter period is, and
- Enable them to bring the tenancy to an end by either a s21 notice or a Notice of Seeking Possession. A provision enabling termination via a NoSP is important because a s21 notice cannot take effect for the first 6 months of any assured shorthold tenancy. In addition, there may be reasons for taking advantage of the (shorter) time scales for a NoSP rather than waiting 2 months for s21 to expire.
Please contact our housing specialists at Broadwalk House, Southernhay West, Exeter EX1 1UA
Call: 01392 204515 or email: firstname.lastname@example.org