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Security of Tenure

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Landlord and Tenant – tenancy of uncertain duration.

A somewhat unusual and perhaps far-reaching case came before the Supreme Court recently and judgment was handed down on 9th November 2011.

Mexfield Housing Co-operative Limited v Berrisford concerned a housing association funded by a bank as part of a mortgage rescue scheme which bought mortgaged properties from borrowers in difficulties and then let them back to the borrower. They acquired Ms Berrisford’s property under the scheme and she continued in occupation under an ‘occupancy agreement’ on payment of a weekly rent. The agreement could only be terminated by Ms Berrisford on giving one month’s notice in writing and by Mexfield under certain limited circumstances eg breach of covenant. Ms Berrisford fell in to arrears but subsequently paid them off. Mexfield still sought to end her occupancy by serving a notice to quit.

Mexfield succeeded in the Court of Appeal but Miss Berrisford appealed to the Supreme Court. In its judgment the Supreme Court interpreted the occupancy agreement by considering the surrounding circumstances namely that it was to provide Ms Berrisford with a home because of the mortgage rescue background and her right of occupation was not intended to be ‘precarious’. Following on from that, both parties intended that the arrangement should only be ended in certain limited circumstances and could not in law take effect as a tenancy because it was for an uncertain duration – a rule that has been established for many centuries. Before 1925, the common law treated such an agreement for an uncertain term as a ‘tenancy for life’. Under the perhaps lesser known provisions of Section 149 (6) of the Law of Property Act 1925 such a tenancy for life is treated as a term 90 years determinable on the death of the tenant.

Applying this rationale, the Court allowed Ms Berrisford’s appeal and held that her ‘occupancy agreement’ should be treated as a tenancy for a term of 90 years and Mexfield was not entitled to possession. It should be noted however that Mexfield could still terminate in the event of a breach of the terms of the agreement e.g. rent arrears.

Finally this rule of ‘uncertainty of term’ came about as a result of a case some years ago involving a commercial lease and therefore it would seem that this recent judgement of the Supreme Court applies equally to commercial leases as well as residential tenancies.

(See also Property Litigation.)