TERMINATION AT END OF TERM
Present law
Where the lease is for a fixed term, the tenant can
unilaterally bring it to an end by written notice served at least
3 months before the contractual term date.[93]
Such a notice cannot be given unless the tenant has been in occupation
for at least one month, nor can it take effect before the expiry
of the fixed term. It has been held by the Court of Appeal that
the tenant can, instead of giving this 3 month notice, bring the
tenancy to an end by quitting the property before the end of the
contractual fixed term.[94]
Where he does so, the lease will terminate on the contractual
term date .
Proposal
The Department propose to make it clear in the Act
that a tenant wishing to end a tenancy at the end of the contractual
term can do so by serving at least 3 months before the end of
the contractual term date or by vacating the property before that
date.[95]
This would confirm on the face of the Act the current position
as interpreted by the Court of Appeal. The tenant's ability to
bring the tenancy to an end by quitting the property before the
end of the contractual term date would, in the Department's view,
remove a potential trap for tenants who were unaware of the need
to give three months' notice.[96]
Re-enactment of a burden
This aspect of the proposal is intended to confirm
on the face of the Act the court's interpretation of the existing
law. As suggested by a number of consultees, the Court of Appeal's
decision means that the existing legislation imposes a burden
on landlords, because it may require them to apply to the court
for a renewal of the tenancy in order to be certain of the tenant's
intentions in respect of the tenancy (see "Proportionality"
below). It may therefore be regarded as the re-enactment of a
burden.
Proportionality
A number of consultees questioned whether the re-enactment
of this burden on the landlord was proportionate to the benefit
to tenants (of being able to vacate the premises without serving
a notice) which would be likely to result.
Under the proposals, landlords would not necessarily
receive any notice of a tenant's intention to quit at the end
of a contractual fixed-term tenancy. A landlord wishing to ascertain
his tenant's intentions before the end of such a tenancy would
be able to do so by serving a section 25 notice and subsequently
applying to the court for the renewal of a tenancy. The Department
argued that a tenant not wishing to renew would want to avoid
the expense and trouble of renewal proceedings, and would make
clear his intentions to avoid the matter going to court.[97]
However, consultees were concerned that the landlord
would thereby be put in an unreasonably difficult position when
trying to decide whether to market the property or not. The landlord
would not be able to ascertain a tenant's intentions at the end
of the lease except by taking out court proceedings. Consultees
argued that a landlord could therefore be faced with the choice
of either wasting money on marketing the property, and then finding
that the tenant wishes to renew anyway, or risking a "rental
void" when the tenant leaves on the last day of the contractual
term. Consultees also pointed out that the Department's argument
in favour of these provisions, that a landlord wishing to ascertain
the tenant's intentions could initiate proceedings for renewal,
rather goes against the main thrust of the proposals, which is
to try to eliminate unnecessary court proceedings.
The Department responded to these criticisms in a
report on a later set of consultation responses.[98]
It said that it had discussed the matter with the Sounding Board,[99]
and "[was] satisfied that its proposals clarify what tenants
need to do at the end of a lease, while giving landlords the opportunity
to ascertain their intentions." It noted that landlords have
no guarantee that even tenants who are apparently keen to renew
their leases will actually do so, as a tenant granted a new lease
may apply to have the tenancy revoked.
However, the Department did not respond to the criticism
that the argument that a landlord wishing to ascertain the tenant's
intentions could initiate proceedings for renewal ran counter
to the intention of eliminating unnecessary court proceedings.
Nor was it clear to us what relevance the ability of a tenant
granted a new lease to apply to have the tenancy revoked had to
the question of whether the tenant should be required to give
notice if leaving before the contractual term date.
We therefore asked the Department:
- how it responded to the criticism that the argument
that a landlord wishing to ascertain the tenant's intentions could
initiate proceedings for renewal ran counter to the intention
of eliminating unnecessary court proceedings
- how the tenant's ability to have an order for
grant of a new tenancy revoked under section 36(2) of the Act
affected the question of whether he should be required to give
notice before giving up the tenancy at the end of the contractual
term,[100]
and
- in the light of the questions above, how the
reenactment of this burden was proportionate to the benefit
expected to result.
The Department's response
The Department responded to our question regarding
the elimination of unnecessary court proceedings by pointing out
that a landlord proposing to apply to court to ascertain the tenant's
intentions would first need to write a "letter before action"
to the tenant. To avoid the expense of unnecessary court proceedings,
the tenant would be most likely to respond saying that he or she
did not wish to apply for a new tenancy, and the landlord could
proceed on that basis. If the tenant did wish to renew
the tenancy, the court proceedings would of course not be unnecessary,
as they would facilitate the renewal process.
The Department's explanation of the relevance of
the tenant's ability to have an order for the grant of a new tenancy
revoked to the question of whether he should be required to give
notice before giving up the tenancy at the end of the contractual
term was as follows:
In deciding whether or not tenants should have
to give notice of the termination of a fixed tenancy, it is relevant
to consider the benefits to the landlord of such a requirement.
Such a requirement would assist the landlord by identifying those
tenants who definitely did not want to continue renting their
property and who by giving notice brought the tenancy to an end
at the end of the fixed term. However, it would not assist the
landlord in identifying tenants who were definitely planning to
continue occupying the property. Tenants who had not given notice
would be under no obligation to take a new tenancy. Even after
the grant of a new tenancy, the tenant would be able to apply
for revocation within two weeks of the court making the order.
We acknowledge that the tenant's ability to apply
for revocation of a grant of a new tenancy does not affect the
issue of whether tenants should have to give notice of termination
of a fixed term tenancy, to the extent that landlords should be
able to identify tenants who are definitely not proposing to renew
their leases. But it is relevant to the issue of whether such
a requirement would identify with any degree of certainty those
tenants who are definitely planning to remain in occupation.[101]
Finally, the Department justified the re-enactment
of the burden on the landlord of the confirmation of the Court
of Appeal's interpretation resulting from the existing law in
the following terms:
Our approach has been to opt for what we consider
the lesser burden. A tenant who failed to meet a requirement
to serve three months notice would have continuing obligations
under a continuation tenancy extending beyond the fixed term.
The tenant might only appreciate this after the end of the fixed
term, at which point he or she would have to serve three months
notice under section 27(2). The tenant could therefore face a
continuing rental liability for some months beyond the time he
or she had presumed, because it was in the contract, that the
tenancy would come to an end. By comparison, the burden on the
landlord of not receiving such a notice would mean that that in
some cases he or she would not know that the tenant had decided
not to renew the tenancy. If there were no means of ascertaining
this, the landlord would not be able to seek a new tenant until
the existing tenant had left the property at the end of the fixed
term, and so could face a loss of rental income for a certain
period. However, as noted above, the landlord would, under the
Department's proposals, have a means of ascertaining the tenant's
intentions, by applying to court for a new tenancy.[102]
Our conclusion
We are not persuaded by the Department's arguments
as to the relevance of the tenant's ability to apply for revocation
of a grant of a new tenancy. As already indicated, the Department
concedes that the tenant's ability to apply for revocation does
not affect the issue of whether tenants should have to give notice
to terminate a fixed term tenancy, to the extent that landlords
should be able to identify those tenants who are definitely not
proposing to renew their leases. It contends, however, that it
is relevant to the issue of whether such a requirement would identify
with any degree of certainty those tenants who are definitely
planning to remain in occupation. The landlord cannot be sure
that a tenant who has not given notice would take a new tenancy
and, even if he does so, he can apply to court for the order to
be revoked. It is not, however, clear to us how this consideration
is relevant, given that the purpose of the notice requirement
is to give advance warning to the landlord of the tenant's intention
to quit the premises at the end of the contractual term date,
rather than to have the effect of identifying those tenants who
definitely wanted to remain in occupation.
However, we see greater force in the Department's
response to our other two questions. The landlord will be able
to ascertain in advance his tenant's intentions, and thus decide
whether or not to market the property, by applying to the court
for renewal of the tenancy. We accept that unnecessary court
proceedings are unlikely to result, since tenants not wishing
to renew would wish to avoid the expense of going to court. We
are persuaded by the Department's arguments (at paragraph 163
above) that, on the whole, the burden on the landlord is proportionate
to the benefit to the tenant of being able to vacate the premises
without giving notice. We are therefore satisfied that the
re-enactment of this burden is proportionate to the benefit which
is expected to result.
TERMINATION OF CONTINUING TENANCY
Present law and problem
A separate procedure is provided by the Act to bring
to an end a fixed term tenancy which has been automatically extended
by the Act.[103]
A tenant who wants to quit a continued tenancy has to give at
least 3 months' notice ending on a quarter day: ie, 25 March [Lady
day], 24 June [mid-summer], 29 September [Michaelmas], or 25 December
[Christmas]. The result is that the periods of notice differ considerably,
depending on when notice is given. For example, a notice given
on 24 September can expire on 25 December (92 days), but if it
is given on 30 September it cannot expire until 25 March (176
days).
Proposal
To make the working of the Act less capricious in
this respect, the Department (in accordance with the Law Commission's
recommendation) propose the following. A tenant who wishes to
terminate a fixed term tenancy which is continuing beyond its
term date by virtue of the Act's provisions will (as now) have
to give at least 3 months notice to the landlord. However, this
notice will be able to take effect on any day, rather than at
the end of a period ending on a quarter day.[104]
Removal or reduction of a burden/removal of inconsistency
or anomaly
This proposal clearly reduces a burden on the tenant,
who would no longer face the continuation of the tenancy beyond
the three months' notice period merely because the expiry of the
notice did not occur on a Quarter Day. The Department argues that
it also removes an inconsistency or anomaly, given that the Act
as currently drafted operates capriciously.
Necessary protection
No necessary protection would be removed by this
aspect of the proposal. The existing provision makes the payment
of rent slightly easier in that rent is often payable on a quarter
day. However, the proposal provides for the apportionment of rent
if the tenancy does not end on a quarter day.
93 S 27(1) Back
94
Esselte v Pearl Assurance plc [1997] 2 All ER 41 . The Court of
Appeal decided that another decision of the Court of Appeal (Long
Acre Securities Ltd v Electro Acoustic Industries Ltd (1989) 61
P & CR 177) to the contrary effect should not be followed
because the latter decision was inconsistent with an earlier
decision of the Court of Appeal (Morrison Holdings Ltd v Manders
Property (Wolverhampton) Ltd [1976] 2 ALL ER 205), which was more
consistent with the wording of the legislation and accorded with
persuasive dicta in other cases. Back
95
Proposed order, article 25 (new section 27(1A)). Back
96
Explanatory statement, p 49. Back
97
Explanatory statement, page 49. Back
98
Appendix C. Back
99
See "Consultation" at paras 179 to 184 below. Back
100
We accepted that the tenant's ability to revoke was relevant to
the argument for abolishing the tenant's counternotice. A tenant
who indicates in his counternotice that he is unwilling to give
up possession and is subsequently granted a new tenancy by the
court can apply for the order granting the tenancy to be revoked.
So, the tenant's counternotice affords no real indication of
the tenant's intentions. But we pointed out that this was different
from the case under consideration, where the tenant wishes to
give up his tenancy at the end of the contractual term. (Appendix
A, para 15.) Back
101
Appendix B, paras 22 and 23. Back
102
Appendix B, para 25. Back
103
S 27(2) Back
104
Proposed order, article 25(2)(b). Back
