Paul Alexander Constantine v Aaron Spencer Bird

This is an appeal from a determination by the First-tier Tribunal of the market rent for the appellant’s tenancy under section 14 of the Housing Act 1988. The issue in the appeal is whether the tenancy was a perpetually renewable one, with the effect that the FTT had no jurisdiction to determine the rent. The appeal has been determined under the Tribunal’s written representations procedure; neither party has been legally represented..

The relevant statutory provisions are contained in the Housing Act 1988, of which section 5(2) has the effect that when a fixed-term assured tenancy (such as Mr Constantine’s which was granted for a term of 12 months) comes to an end because it has reached the end of its term, then the tenant is entitled to remain in possession on a statutory periodic tenancy. Section 5(3) provides that that is a tenancy:

“(a)

taking effect in possession immediately on the coming to an end of the fixed term tenancy;

(b)

deemed to have been granted by the person who was the landlord under the fixed term tenancy immediately before it came to an end to the person who was then the tenant under that tenancy;

(c)

under which the premises which are let are the same dwelling-house as was let under the fixed term tenancy;

(d)

under which the periods of the tenancy are the same as those for which rent was last payable under the fixed term tenancy; and

(e)

under which, subject to the following provisions of this Part of this Act, the other terms are the same as those of the fixed term tenancy immediately before it came to an end, except that any term which makes provision for determination by the landlord or the tenant shall not have effect while the tenancy remains an assured tenancy.”

Where a statutory tenancy has arisen, section 13 provides that the landlord can serve a statutory notice proposing a new rent. If the tenant does not accept that new rent, the tenant may apply to the FTT which will determine a market rent for the tenancy, and that will be the rent that takes effect (whether lower or higher than the rent proposed by the landlord.

In London District Properties Management Limited v Goolamy [2009] EWHC 1367 (Admin) Burnett J held that any provisions about rent in the original assured tenancy, which are expressed to govern the rent after the statutory periodic tenancy takes effect, are of no effect; once the statutory periodic tenancy takes effect the landlord can serve a section 13 notice (subject to the timing provisions in that section) and the FTT has jurisdiction to determine a market rent under section 14.

However, the tenant says that that is not what has happened here and relies on section 5(4) of the 1988 Act which says:

“(4)

The periodic tenancy referred to in subsection (2) above shall not arise if, on the coming to an end of the fixed term tenancy, the tenant is entitled, by virtue of the grant of another tenancy, to possession of the same or substantially the same dwelling-house as was let to him under the fixed term tenancy.”

In order to explain that we have to look at the terms of the tenancy.

Mr Constantine’s tenancy was granted in March 2017 for a term of 12 months. The agreement stated that the rent was £1,256.25, “payable monthly”; the agreement recorded that “on this occasion” the parties had agreed that it should paid as a single sum in advance; therefore “the total rent payable in this instance is £15,075.00”.

It contains the following clause 3.23:

“Tenant option to renew for further 12 months at the same rent, provided no breaches of the terms of the lease and notice of exercise option to be given no later than 3 months before the end of the term.”

Mr Constantine says that the effect of that clause is to make his tenancy perpetually renewable, so that he can renew it every year at the same rent. He is, he says, in the words of section 5(4) of the 1988 Act, “entitled, by virtue of the grant of another tenancy, to possession of the same dwelling-house”, so that no statutory tenancy arises and he remains liable only for the annual rent of £15,075.

His landlord, Mr Bird, says that the clause gives him the right to renew the tenancy only once. After that a statutory periodic tenancy arises, he can serve a notice under section 13 of the 1988 Act and the First-tier Tribunal has jurisdiction under section 14 to determine a market rent for the property.

The dispute about the effect of the term is a long-running one. On 21 March 2024 Mr Bird served a notice under section 13 of the 1988 Act proposed a new rent of £1,450 per month, and Mr Constantine responded by referring the matter to the FTT under section 13(4). His argument in the FTT against the new rent was that no statutory tenancy had come into eing because the tenancy was perpetually renewable; he remained in possession pursuant to the annual renewal provided for in the tenancy agreement at clause 3.23. Mr Constantine says in his grounds of appeal that he has given notice every year in accordance with the provisions of that clause, and it does not seem to be in dispute that he has done so.

The FTT recorded the parties’ arguments, reminded itself that the construction of the agreement must follow the guidelines set out in Arnold v Britton [2015] UKSC 36, and said:

“9.

On the balance of the evidence before it, the Tribunal is of the opinion the option granted by clause 3.23 of the 2017 tenancy agreement was a right to renew the tenancy only for one further year period of 12 months from 29 March 2028 to 28 March 2019 with no further option to renew after that. The contention that there has been an informal agreement to vary the agreement based to the email exchanges is subjective evidence that is insufficient to rebut the primary document, the agreement.”

Accordingly the FTT found that a statutory periodic tenancy had arisen, and proceeded to determine the market rent. This Tribunal granted Mr Constantine permission to appeal that decision on the basis that it might well be correct but was not properly explained.

Accordingly I have to determine whether the FTT was right to conclude that the tenancy was not perpetually renewable.

It is well-established that the courts lean against perpetual renewals. It is generally unlikely to have been what the parties intended and only unequivocal words will give rise to a right of perpetual renewal: Woodfall, Landlord and Tenant 18.014 to 18.015.

A clause that confers an option to renew “on the same terms including this option”, or similar, obviously gives rise to a perpetually renewable tenancy: Parkus v Greenwood [1950] Ch 644, Caerphilly Concrete Products v Owen [1971] EWCA Civ 1. Equally, a tenancy which confers a right of renewal “excluding this option” is clearly not perpetually renewable. Mr Constantine’s lease did not say that the option to renew was to be included or excluded in the renewed tenancy and to that extent it was ambiguous – hence the dispute between the parties.

However, because of the ambiguity I find that the tenancy was not perpetually renewable, because only unequivocal wording will have that effect. As Woodfall puts it, “equivocal expressions will not be construed as conferring a perpetual right of renewal where they are fairly capable of being otherwise interpreted”; for example, in Marjorie Burnett v Barclay [1980] EWHC Ch 1 the lease gave the tenant the right to take a new lease on its expiry:

“such lease shall also contain a like covenant for renewal for a further term of seven years on the expiration of the term thereby granted.”

It was held that those words did not create a right of perpetual renewal.

I find that Mr Constantine had the right to renew his tenancy once only, for a single term from March 2018 to 2019. Thereafter a statutory periodic tenancy arose. The FTT was correct so to find; its decision was not properly explained, but I hope that the above amounts to a sufficient explanation and on that basis there is no point in setting aside and remaking the FTT’s decision.

The landlord has indicated in correspondence that he is content for Mr Constantine to stay in the property so long as he agrees to abide by the FTT’s decision as to rent. In the meantime the landlord has accepted Mr Constantine’s annual payment of rent. In my judgment neither the landlord’s willingness to let Mr Constantine stay, nor his acceptance of rent on an annual basis, indicate his acceptance that this is a perpetually renewable tenancy.

Accordingly the appeal fails and the FTT’s determination of the market rent takes effect.