16 January 2019

Section 21: Head Landlords better take notice…

Summary: Barrow and other v Kazim and others [2018] EWCA Civ 2414

The Court of Appeal has recently held that the meaning of 'landlord' for the purposes of the residential notice to quit procedure under section 21 Housing Act ("HA") 1988 does not include a head landlord. As a result, the intermediate landlord must serve any such notice on a sub-tenant who enjoys an assured shorthold tenancy ("AST") in order for it to be effective. This is the case even when the head landlord has already served a notice to quit on the intermediate landlord.

The Facts

The respondent landlords were the owners of the freehold interest in a building containing residential flats, which had been leased to Anthea Investments Limited (the "Agency"). This lease permitted the Agency to sub-let the flats as residential accommodation and, consequently, two of the flats were sub-let to the appellant tenants on ASTs.

Wishing to recover possession of the property, the respondents served the Agency with a notice to quit on 12 January 2016, citing a termination date of 19 March 2016. The notice expressly stated that, in addition to terminating the Agency's lease of the premises, it was intended to also constitute a notice on the appellants under section 21 HA 1988.

Following the termination of the Agency's lease on 19 March 2016, the respondents sought possession of both of the residential flats on the basis that the section 21 notice had been effectively served in January 2016. At both first instance and on appeal to the High Court, the Court sided with the landlord and granted possession. The appeal was finally heard on 17 October 2018.

The Applicable Law

The procedure for determining an AST without the need to rely on the grounds for possession set out in Schedule 2 HA 1988 is contained in section 21. In summary, provided that the contractual term of any tenancy has expired, the landlord has complied with its obligations concerning gas safety and registering any deposit, and the landlord has given the tenant not less than two months' written notice, then the court shall order possession. The term 'landlord' in this context is defined at section 45 HA 1988 as "any person from time to time deriving title under the original landlord and also includes, in relation to a dwelling-house, any person other than the tenant who is, or but for the existence of the assured tenancy would be, entitled to possession of the dwelling-house".

Section 18 HA 1988, states that where the sub-lease is an AST, as was the case for the appellants, the termination of the head-lease will not act to also determine the sub-lease and instead the head-landlord will step in as the sub-tenant's direct landlord.

Arguments before the Court

The tenant's based their arguments on the notion that the identity of the landlord should be determined at the date the notice is given, and therefore, as the Agency was still its landlord on this date, the section 21 notice was invalid.

In contrast, the landlord relied on the above definition of 'landlord' in section 45 HA 1988 and, in particular, stated that the wording of this section was wide enough to encompass a head landlord. The landlord also submitted that, in any event, the Agency could not be considered the 'landlord' for the purposes of section 21 as it was unable to give the requisite 2 month notice period.

The Decision

The Court allowed the appeal and agreed with the Tenants' submissions that a section 21 notice must be served by the entity that is the 'landlord' at the date that the notice was given. As the Agency's tenancy was not due to terminate until 19 March 2016, section 18 HA 1988 did not apply and it continued to have a direct landlord-tenant relationship until this date. Therefore, it was the only 'landlord' able to serve a section 21 notice on the appellants.

The Court also rejected the landlord's argument that the Agency would nevertheless be unable to provide the necessary two months' notice before the expiry of its own tenancy. Not only could the Agency have given more than two months' notice for some days after receiving its own notice to quit, but there was also nothing in the Housing Act 1988 to suggest that it could not give notice for a date later than the determination of its own tenancy.

Our Comment

The facts of this case are not uncommon and the judgment has highlighted the importance of forward planning for head landlords seeking to recover possession of similarly sub-let properties. In particular, care must be taken to factor in a potential two month delay in light of the need to wait until the intermediate tenancy has been terminated before serving a section 21 notice. Whilst an additional two month delay may not be cause for concern for some landlords, for those who wish to expedite possession it could be an inconvenience. In such circumstances, the Court's suggestion that head landlords include a term in the head-lease requiring the swift service of a section 21 notice once the intermediate landlord has itself received a notice to quit may prove useful.

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