Alexander-David v London Borough of Hammersmith & Fulham

Introduction

Factual Background

Clause 2 provided that:

“2.

Either party may determine the tenancy on a Monday by giving the other party at least 4 weeks previous notice in writing to that effect. And for the purposes of this agreement, Notice to Quit is deemed to have been given:-

if it has been placed through the letterbox of the dwelling referred to in the said Notice by an Officer of the Council;

if given to you or a member of your household aged 16 years or over by an Officer of the Council;

- 48 hours after posting by recorded delivery to the address referred to in the said Notice.”

Clauses 3 and 4 dealt with the rent payable under the lease. Clause 5 stated that:

“5. The rooms at the above address will be used to accommodate the following persons only:

Forename	Surname	M/F	DoB	Relation
ELYARNA	ALEXANDER-DAVID	F	30/12/1989
UNKNOWN	ALEXANDER-DAVID	U	21/07/2006	CHILD”

Clause 6 set out eighteen “terms and conditions” which the tenant had to observe. They included requirements to pay the rent regularly, not to cause disturbance or annoyance to the occupants of neighbouring premises, to treat the common parts with care and to keep to the landlord’s regulations relating to the use of common parts, refuse areas etc., and not to keep pets without the landlord’s prior consent.

Clause 7 contained the following declaration:

“7.

I/We understand that the tenancy hereby created is not a secure tenancy and I/we further understand the conditions of the tenancy. I/we agree to honour all terms and conditions contained within this agreement.”

The agreement was signed by the Appellant, as tenant and by the Respondent’s Director of Housing on behalf of the landlord.

The Appellant moved into the premises. In July 2007 one of the Respondent’s Housing Officers wrote to the Appellant about various complaints that had been received from other residents about nuisance and rubbish being left in the communal area. The Appellant did not attend an interview. More complaints were made about nuisance and rubbish and about the Appellant’s dog, for which she did not have permission from the Respondent. Further letters from the Housing Officer and an interview in August 2007 failed to resolve these complaints and the Respondent decided to terminate the agreement and recover possession. There was also concern about the state of the Appellant’s rent account.

On 14^th September 2007 the Respondent served a Notice to Quit addressed to the Appellant by placing the notice through the letterbox at the premises in accordance with clause 2 of the agreement (paragraph 3 above). The notice was expressed to expire on 15^th October 2007,

Possession proceedings were commenced by the Respondent on 21^st December 2007. By the time a formal Defence was served by the Appellant’s previous solicitors on 8^th February 2008 the Appellant had ceased to be a minor. The Defence erroneously alleged that the tenancy was a secure tenancy.

On 11^th February 2008 the District Judge struck out the Defence and ordered the Appellant to give up possession of the premises by 25^th February 2008. The Appellant then instructed her present Solicitors who, on 3^rd March 2008, filed an appeal against the District Judge’s decision. Their grounds of appeal raised a new argument that had not been advanced before the District Judge. Before summarising the Appellant’s submissions it is convenient to set out the relevant statutory framework.

Statutory Framework

Moving from housing law to property law, section 1(6) of the 1925 Act states that “A legal estate is not capable….of being held by an infant”. As from 1^st January 1997 TOLATA abolished the power to make “strict settlements” under the Settled Land Act 1925: section 2(1). Schedule 1 to TOLATA contained consequential provisions “including provision to impose a trust in circumstances in which, apart from this section, there would be a settlement for the purposes of the Settled Land Act 1925 (and there would not otherwise be a trust)”: section 2(6). Paragraph 1(1) of Schedule 1 is material for present purposes:

“(1)

Where after the commencement of this Act a person purports to convey a legal estate in land to a minor, or two or more minors, alone, the conveyance –

(a) is not effective to pass the legal estate, but

(b) operates as a declaration that the land is held in trust for the minor or minors (or if he purports to convey it to the minor or minors in trust for any persons, for those persons).”

Paragraph 1(2) deals with those cases where there is a purported conveyance of a legal estate to a minor, or minors, and another person who is of full age. The interrelationship between these two statutory schemes – the duty to provide 16 and 17 year olds with accommodation and their inability to hold a legal estate in that accommodation – places local housing authorities in a dilemma. Under the 1996 Act they are obliged to have regard to guidance issued by the Secretary of State: s.182. Unfortunately, the Secretary of State’s guidance in this respect in the Homelessness Code of Guidance for Local Authorities – July 2006 is not particularly informative. Under the sub-heading “Tenancies for Minors” paragraph 16.31 of the guidance says:

“16.31

There are legal complications associated with the grant of a tenancy to a minor because a minor cannot hold a legal estate in land. However, if a tenancy is granted it is likely to be enforceable as a contract for necessaries (i.e. the basic necessities of life) under common law. In some circumstances, social services authorities may consider it appropriate to underwrite a tenancy agreement for a homeless applicant who is under 18.”

The Appellant’s Submissions

The Respondent’s Submissions

Discussion and Conclusions

Under section 21 of the 1985 Act:

“The general management, regulation and control of a local housing authority’s houses is vested in and shall be exercised by the authority….”

If, as the Appellant contends (see paragraph 14 above), it would be inconsistent with a trustee’s duties to serve a notice to quit on the beneficiary of a trust, would not the Respondent, in entering into an agreement whereby it effectively disabled itself from exercising one of the most effective instruments of management, regulation and control available to a landlord – service of a notice to quit upon a tenant in breach of the terms of his or her tenancy – be unlawfully fettering its discretion? It could be said that insofar as a local housing authority holds its property on trust at all, it must hold it on trust for the Council Taxpayers generally, and must be free to manage it in their best interests, and not allow itself to be constrained to manage it only in the interest of a particular beneficiary.

A declaration by a local housing authority that it holds its property in trust for a third party would, at least arguably, be a disposal of that property for the purposes of section 32 of the 1985 Act which provides that disposal may be made “in any manner”, but, save in the case of disposals under sub-section 32(3) (the grant of secure tenancies or tenancies that would be secure tenancies if they were not excluded by Schedule 1), not without the consent of the Secretary of State. No consent has been granted for the disposal of the Respondent’s housing by way of a declaration that it is held by the authority on trust for a third party.

Miss Bretherton accepted that a “voluntary” declaration of trust by a local housing authority probably would amount to a disposal for the purposes of section 32, but she submitted that the agreement was a lawful disposal, by way of the grant of a tenancy, for which consent was granted under section 32(2), and the declaration of trust arose by operation of law pursuant to TOLATA. Although Mr Rutledge submitted that these statutory provisions in the 1985 Act were relevant by way of background, he did not submit that they were grounds for concluding that the Respondent could not lawfully have entered into an agreement whereby the Appellant was granted a legal tenancy. His submission was simply that, construing the agreement in context, the Respondent had granted, not a legal, but an “equitable tenancy”.

Notwithstanding my doubts, I am prepared in these circumstances to proceed on the basis that entering into an agreement which would have the legal consequences set out in paragraph 1(1) of Schedule 1 to TOLATA was not an unlawful fetter upon the Respondent’s powers of management under section 21 and/or an unlawful disposal under 32 of the 1985 Act. My concerns in this respect are allayed to some extent by the fact that there has been no public law challenge to the validity of the agreement if it is to be construed as contended for by the Appellant and such a challenge would now be well out of time. Moreover, section 44 of the 1985 Act provides that a disposal without consent by a local authority of a single house to an individual will not be void.

I turn, therefore to consider Mr Rutledge’s submission that the agreement granted the Appellant a tenancy in equity. I accept his submission that local housing authorities may, in principle, grant tenancies to minors that are effective in equity: see Kingston upon Thames Royal Borough Council v Prince (1993) 31 HLR 794 in which it was held that a minor could succeed to a secure tenancy under the 1985 Act. In a judgment with which Roch L.J. agreed, Hale J. (as she then was) said:

“A minor can hold an equitable tenancy of any property, including a council house.”

She referred to the Law Commission’s Report on Minors’ Contracts (Law Commission No. 124, 1984) in which the Commission had said of the statutory position under the 1925 Act and the Settled Land Act 1925 prior to the enactment of TOLATA:

“Moreover the statutory provisions do not restrict a minor’s ability to acquire an equitable interest in land: there is nothing to prevent a would-be lessor granting an equitable tenancy to a minor. The desired result can be achieved by the lessor’s entering into a contract with the minor to grant him a lease on the agreed terms, followed by the minor’s entry into possession of the property let. ”

Mr Rutledge also referred to R v Tower Hamlets London Borough Council ex.p. Von Goetz (1999) 31 HLR 669 as authority for the proposition that there can be an equitable term of years absolute, and to section 621 of the 1985 Act which defines a lease or tenancy as including an agreement for a lease or tenancy.

The difficulty with these submissions is, as Miss Bretherton pointed out, that whatever the Respondent was entitled to do as a matter of law, what it in fact did was to enter into one of its standard form tenancy agreements with the Appellant which would, in the absence of any indications to the contrary, normally be construed as the grant of a legal estate in the premises. As the Law Commission recognised in its report (paragraph 22 above) a “normal letting (even a weekly tenancy created orally)” constitutes a legal estate. What is it about this tenancy agreement that makes it a grant of “an equitable tenancy” and not a purported grant of the Respondent’s standard form legal tenancy? Mr Rutledge relied on four indicia which, he submitted, pointed to the conclusion that this was the grant of an equitable tenancy: (i) the absence of any reference in the agreement to a trustee; (ii) the statutory context, that this was non secure temporary accommodation for homeless persons, (iii) the terms of clause 2, which would be redundant or inappropriate if notice to quit had to be served on a trustee in addition to, or instead of, the tenant; (iv) clause 5, which in giving the tenant’s age clearly indicated that this was the grant of a tenancy to a minor.

In my judgment, none of these factors, whether considered individually or collectively, is sufficient to displace the obvious inference to be drawn from the fact that the agreement is in the Respondent’s standard form for creating legal tenancies with its adult tenants.

The lack of any reference in the agreement to a trustee is of no assistance in deciding whether, what is on the face of it, a “normal” grant of a legal estate is a purported grant of such an estate for the purposes of paragraph 1(1) of schedule 1 to TOLATA. If the agreement had referred to a trustee, that would have been a clear indication that the Respondent was not purporting to convey a legal estate. There would be no need for TOLATA to declare that the agreement was to “operate as a declaration that the land is held in trust” because the agreement in referring to a trustee would itself have included such a declaration. Similar observations apply in respect of the omission of any reference to a trustee in clause 2. The agreement included the Respondent’s standard form termination clause for its legal tenancies. If it was not purporting to grant a legal tenancy to the Appellant clause 2 would no doubt have been differently drafted.

Since the same form of tenancy agreement is used by the Respondent when it secures that accommodation is available for homeless adults who have a priority need for accommodation the references in the recital to the agreement to the purpose for which the premises were being let, and the acknowledgement in the recital and clause 7 that the tenancy was not a secure tenancy do not support the Respondent’s contention that it was not purporting to grant a legal tenancy.

Nor does clause 5, which is concerned not with the ages of the occupants of the premises, but with who will be accommodated at the premises. The Appellant’s date of birth and that of her daughter are added for the purposes of identifying them. Since the Appellant’s age is mentioned in the agreement it is clear on the face of the agreement that the Respondent was granting a tenancy to a minor, but that does not mean that the agreement was anything other than a purported grant of a legal tenancy to a minor.

There is a further difficulty with Mr Rutledge’s submission that the Respondent granted “an equitable tenancy” of the premises. “Equitable tenancy” is a convenient shorthand for a tenancy that is treated as being effective in equity even though it is, for some reason, not effective as a legal estate: e.g. because a trustee is holding the legal estate on trust for a minor, as in Prince (above), or because there is only an agreement for a lease: see the example given in the Law Commission’s Report cited in Prince, paragraph 22 above.

I am not persuaded that a landlord who has full capacity to grant a legal tenancy, and who grants a tenancy without any express qualification to the effect that something less than a legal tenancy is being granted can subsequently say that what he granted was not a legal tenancy, but an “equitable tenancy”. As Miss Bretherton put it in her submissions: a landlord does not elect to grant an equitable tenancy; such a tenancy arises in certain specified circumstances, recognised by equity. For these reasons I accept the Appellant’s submission that paragraph 1(1) of Schedule 1 to TOLATA applied to the tenancy granted to the Appellant.

Was the Notice to Quit effective to terminate the Appellant’s tenancy? Mr Rutledge submitted that the notice had been served in accordance with the terms of clause 2 (that was not in dispute) and there was no breach of trust because service of a notice to quit was not an “act” bringing the tenancy to an end, but rather an indication by the Respondent that it did not wish the tenancy to continue: see Fulham London Borough Council v Monk (1992) 1 AC 478, per Lord Bridge at p.490H–491A and Lord Browne-Wilkinson at p.492 A-B. Whether serving the notice to quit was a “positive” act by the Respondent, or a failure by the Respondent to signify its positive assent to the continuation of the tenancy seems to me to be a distinction without a difference when the Respondent’s duties as a trustee towards the Appellant as the beneficiary of the trust property are in issue. I accept Miss Bretherton’s submission that, for so long as the Respondent held the premises in trust for the Appellant, it could not lawfully destroy the subject matter of the trust by serving notice to quit on the Appellant.

Mr Rutledge submitted that there would be no breach of trust, relying on the cases of Hammersmith and Fulham London Borough Council v Monk (1992) AC 478 and Crawley Borough Council v Ure (1996) IQB 13. But those cases were concerned with the position where only one of two joint tenants had served a notice to quit. The properties in question were held on trust for sale in circumstances where the joint tenants were both trustees and beneficiaries: see per Glidewell L.J. at p.23 of the Ure case (above). The service of a notice to quit by a trustee who is also a beneficiary under a trust, and who conceives it to be in his or her own best interests to serve the notice, is not to be equated with the service of a notice to quit by a trustee who holds the property on trust for another person.

This difficulty was recognised in an article in the New Law Journal on 14^th October 2005 “Child tenants – a minor problem”. Having referred to Schedule 1 to TOLATA the author said:

“Where there is a trust, there must be a clearly identified trustee and beneficiary. Clearly, the child is the beneficiary and has a right to reside in the property – residency being the purpose of the trust. Ordinarily, given that there would usually not be a trust instrument, the trustee would be the local authority as grantor of the tenancy thus creating a resulting trust. However, in some circumstances, it may be that the parent or guardian of the child is the trustee. This would be determined on a case-by-case basis.

Assuming the local authority is the trustee, it has a duty to act in the best interests of the child beneficiary and protect the trust property by preserving the tenancy. However, as a local authority it also has a duty to act in the best interests of the public purse and protect the assets of the local authority which may require taking possession of the property. This creates a clear conflict of interest.

In order to resolve this conflict the local authority needs to divest itself of one of the duties. Given that, by its nature, a local authority cannot cease to act in the public interest, it can only seek to absolve itself of responsibility as trustee. This is done by way of application to the county court.

………

Once a new trustee is appointed, there is no longer a conflict of interest for the local authority and action can then be taken to terminate the tenancy and obtain possession of the property.”

Under the heading “Terminating the tenancy” the article advises local authorities that in the case of non-secure tenancies “to avoid potential difficulties it is advisable to serve the trustee as well as the child.”

The Respondent relied on Lord Browne-Wilkinson’s speech in the Monk case in which he said at page 493 that service of a notice to quit by one of the two joint trustees in breach of trust did not mean that the notice to quit was a nullity.

“The fact that a trustee acts in breach of trust does not mean that he has no capacity to do the act he wrongly did.”

However, Lord Browne-Wilkinson continued:

“The breach of trust as between [one joint tenant] and [the other joint tenant] could not affect the lessors unless some case could be mounted that the lessors were parties to the breach….”

In the present case, the Respondent is, in the absence of any other trustee, in the uncomfortable position of being both lessor and trustee, and in the former capacity of being not merely a party to the breach of trust, but the instigator of the breach. In these particular circumstances I conclude that service of notice to quit only on the minor beneficiary of the trust was not sufficient to terminate the tenancy that was being held by the Respondent as trustee on her behalf. It follows that I would allow the appeal and quash the possession order granted by District Judge Steel.

The Judge was understandably concerned with the practical consequences for local housing authorities that he feared would be the result of allowing the appeal. It may well be the case that all the ramifications for local housing authorities of making the Order were not thought through before it was brought into force in 2002. But as the article in the New Law Journal explains, the problem posed by the interaction of housing law and property law in relation to homeless 16-17 year olds is not insoluble. In Prince Hale J. pointed out that a licence is not a legal estate, and that section 79(3) of the 1985 Act gives the same security to a licence to occupy a dwelling house as is given to a tenancy.

Describing an agreement as an agreement to grant a licence will not suffice to avoid the creation of a tenancy if the Respondent allows an applicant to have exclusive possession of residential premises for a term, and does not provide any attention or services: Street v Mountford [1985] AC 809. However, the applicants in question are 16-17 years old. They may well require support and assistance going beyond the mere provision of accommodation. It should not be too difficult for the Respondent, in discharging both its local housing authority and social services functions to co-ordinate matters so that, whether by making provision in the agreement for some attention or services, or by permitting inspection of the premises by those charged with the child’s welfare, and thereby preventing the grant of exclusive possession, any agreement with a 16-17 year old is not merely expressed to be, but is the grant of a licence rather than a tenancy.

It is not for this Court to advise the Respondent as to how to deal with future 16-17 year old homeless applicants, but an agreement to grant a lease for the period until the applicant turns 18 rather than the grant of a lease may also be an option. Whatever course is adopted, it is important that the inability of a minor to hold a legal estate is expressly recognised, and that any agreement with a 16 or 17 year old expressly states that because the applicant is a minor the Respondent is not granting a legal estate but is instead securing that accommodation is available by granting something other than such an estate.

The problem has arisen in this case because the Respondent’s standard form tenancy agreement does not expressly address the Appellant’s inability to hold a legal estate, and in consequence does not purport to do anything other than grant her such an estate.

I would therefore allow the appeal.

I agree.

I also agree.