The World of Section 21 has been turned on its head by a surprising court decision. Richard Jones, Policy Director and RLA solicitor explains changes and the importance of Spencer v Taylor.
From time to time, a court decision turns what is the common understanding of the law on its head. This has happened with Spencer v Taylor.
As landlords know, the common way to gain possession from a shorthold tenant is to use the ‘no fault’ Section 21 procedure. It requires landlords to give a valid written S21 notice to their tenant and at least two months’ notice before court proceedings.
Section 21(1) Notices
There are two types of S21 notice. What has changed as a result of Spencer v Taylor is that there is a new understanding as to which now applies.
Up to now, a S21(1) notice was given only during a fixed term tenancy. A S21(1) notice given during the fixed term of a tenancy is still effective even if a periodic shorthold tenancy (eg a monthly tenancy) is running, including a statutory periodic tenancy.
This is a tenancy which comes into existence automatically where the shorthold tenant stays on after the fixed term tenancy runs out (assuming there is nothing in the agreement providing for a continuation).
Section 21(4) Notices
A S21(4) notice is given when there is a periodic assured shorthold tenancy in existence. This can occur, for example, where the tenancy started life as a fixed term tenancy (eg for six months).
Prior to Spencer v Taylor it was generally thought that only a S21(4) notice could be used where the notice was given after the fixed term had ended. It was thought a S21(1) notice could not be given. A S21(4) notice can also be given if the tenancy was periodic from the outset. In this latter case the legislation is clear that only a S21(4) notice can be used and this is not altered by Spencer v Taylor.
There are four differences between S21(1) and S21(4) notices:
- A S21(4) notice must refer to S21 of the Housing Act 1988.
- It has to specify a date ‘after’ which possession is required (unlike a S21(1) which need not specify a date).
- Significantly, a S21(4) notice must run out on the last day of a period of the tenancy (a S21(1) notice can run out on any date).
- A S21(1) notice can end ‘on’ a date (but a S21(4) notice runs out ‘after’ the date given in the notice).
A trap for the landlord
Where a S21(4) notice has been given, unfortunately many a landlord has fallen into the trap of getting the expiry date for the notice wrong. It must end on the last date of a period of the tenancy to be valid.
To avoid the possibility of getting the expiry date wrong under a S21(4) notice, those supplying forms have included a ‘fallback’ formula.
This is along the lines that the expiry date is ‘after the date which is the end of the period of your tenancy which will end next after the expiration of two months after the service of this notice on you’.
Usually there is an note explaining how the legislation operates.
Simply using this formula, without stating an actual expiry date, suffices.
What Spencer v Taylor also does is address the common situation where the notices give both an actual date and also uses the fall-back formula as an alternative where it is not clear which prevails.
This is not a problem with the RLA’s form as this states that the alternative fallback date only applies if the stated date is non-compliant.
Spencer v Taylor itself
What happened here is that a six-month fixed term tenancy had run out when the S21 notice was served, and a weekly statutory periodic tenancy was running from Saturday to the following Sunday.
Any S21(4) notice should therefore have expired on a Sunday.
In fact the landlord gave notice on October 18, 2011, which expired on January 1, 2012. This was a Sunday, resulting in the notice being apparently ineffective.
However, the notice added the fall-back formula as an alternative with an explanatory note setting out the rules under S21(4). This led to an alternative valid date of December 23, 2011. Proceedings were started the following April.
The County Court judge upheld the notice because of the use of the alternative formula. The tenant then went to the Court of Appeal, which took the case a stage further by ruling the notice was also valid under S21(1) even though it was given after the fixed term had ended. Crucial to the decision was the Appeal Court’s reading of S21(2), which reads: “A [S21(1)] notice… may be given before or on the last day on which a tenancy came to an end.”
On the face of it, this is the window during which the landlord may give a valid S21(1) notice as nothing is said about such a notice being given after the last day of the fixed term.
The tenant’s argument was that this prohibited the landlord from serving notice under S21(1) once the fixed term had ended; in other words, saying that the landlord may only serve a S21(1) notice by the last day of the fixed term.
The Appeal Court disagreed and said “that is not what the sub-section says”.
The fall-back formula
Independently of its decision that the notice was valid under S21(1) so that the wrong date did not matter, the Appeal Court went on to look at the alternative fall-back wording which the County Court had relied on solely when finding that the notice was still valid under S21(4).
The fixed date specified and the formula resulted in different dates as indicated.
The Appeal Court decided, in line with previous cases, that if a reasonable recipient of the notice would have recognised that one date (ie January 1, 2012) was the primary date and the other was a fall-back, the notice would not be invalid. The reasonable recipient would be able to see from the notes on the back of the form that, as January 1, 2012, was a Sunday, it was ineffective, and should then be able to work out the correct date.
The outcome of Spencer v Taylor
The outcome meant that the notice was effective both for the purposes of S21(1) and S21(4). The Court did not say which of the two dates was effective under S21(1); only that as both dates had gone by when proceedings were started, this was enough.
It also said that S21(1) prevails over S21(4), and that a S21(1) notice may still be served even after the fixed term of the tenancy has run out and can be relied on as well as S21(4). This only applies if the tenancy starts life as a fixed term tenancy.
In future, instead of looking at the date when the notice is given to decide whether it should be served as a S21(1) or a S21(4) notice, it is a question whether or not the tenancy started out as a fixed term tenancy.
Only if it begins as a periodic tenancy does there have to be compliance with the stricter S21(4) notice procedures.
Another issue raised in Spencer v Taylor was that if you used the fall-back formula for the purpose of S21(4) as well as specifying a fixed date, what would happen if both of the dates were valid.
The court declined to decide this point but hinted that in that situation the notice would be invalid altogether (presumably unless spelt out which date prevailed). As we shall see, this puts judges in an illogical position when it comes to applying S21 where alternative dates are given.
Notices stated as given under Section 21(4)
What if the notice refers solely to S21(4)?
Can the landlord who has got the date wrong still rely on S21(1) if the tenancy started as a fixed term tenancy? In the judgement of Spencer v Taylor there is a strong suggestion this would make no difference
This is not the end of the story. Rarely has a decision in this field raised such surprise. An Appeal Court decision brooks no argument, unless and until it is overturned by the Supreme Court or by another Court of Appeal (which happens infrequently).
The Court’s reading of S21(2) is emphatic. Under our binding system of precedent, any lower court judge is bound to read it in this way.
Until now we had all assumed that once the fixed term had run out, S21(4) requirements applied. Now we can rely on S21(1) if the tenancy begins as a fixed term tenancy. The RLA has long campaigned for an amendment to S21(4) to avoid landlords being tripped up. Spencer v Taylor goes a long way to bringing this about.
Are there limits to the decision?
There are still various issues. The Court of Appeal’s view that S21(1) overrides S21(4) is perhaps questionable. The opening words of S21(1) say that it operates without prejudice to the S8 procedure for obtaining possession, eg due to rent arrears. S21(4) opens with the words “Without prejudice to any such right as is referred to in [S21(1)]”.
The Appeal Court reads this as including the provisions for making possession orders in S21(1) itself, but it could equally be read as just repeating the reference to the S8 rights alone.
It could be argued that the decision should be limited to cases where there is a statutory periodic run-on. What happens, therefore, if following the end of a fixed term a new periodic tenancy comes into existence, which is not a statutory periodic tenancy?
According to S21(1), once the fixed term tenancy has expired, there can only be an assured shorthold periodic tenancy in existence. This need not be a statutory periodic tenancy. It can be a contractual periodic tenancy.
For many years, the RLA’s standard form of tenancy provided for such a continuation, although this is no longer the case.
Alternatively, the parties could expressly agree on a new periodic tenancy following the expiry of the fixed term. According to the Court of Appeal’s reading, an effective S21(1) notice could still be given even after the fixed term had run out and, on the face of it, S21(1) is clear as it says that in this situation the Court “shall make an order for possession”.
Nevertheless, there is a potential problem because S21(3) says that, if an order for possession is made under S21(1), “any statutory periodic tenancy shall end without further notice”. It says nothing about what happens if there is a contractual periodic tenancy. There is an apparent conflict between the mandatory wording of S21(1) and S21(3) itself which only refers to the statutory periodic tenancy being brought to an end. This must be contrasted with a possession order made under S21(4), since S21(4A) clearly states that where you rely on S21(4), any shorthold tenancy ends; not just one which is a statutory periodic tenancy.
It could therefore be open to a lower court judge to say that Spencer v Taylor only applies if a fixed term is followed by a statutory periodic tenancy as happened there.
As S21(3) refers only to ending the statutory periodic tenancy without further notice, there is the suggestion that you need to rely on a S21(4) notice to end any other kind of shorthold periodic tenancy.
The effective date under Section 21(1)
This is where the Appeal Court’s reasoning is questionable.
Under S21(1) no date needs to be fixed for when possession is required so long as a minimum of two months’ notice is given. It is normal, however, to specify the actual date, and the inference from Spencer v Taylor is that if the landlord does so he/she cannot go back on the date for S21(1) purposes. The landlord has to wait until any such date has gone by before beginning court proceedings.
What happens if more than one date is given? This arose in Spencer v Taylor where S21(1) was involved even though the formula may have been intended purely to operate for S21(4) purposes. Relying on S21(1), you will invariably end up with two conflicting valid dates due to its less rigid requirements. If the notice makes it clear which date prevails, there should be no problem.
In Spencer v Taylor there were two conflicting valid dates for S21(1) purposes (even if one of them was not effective for S21(4) purposes). The Appeal Court simply said, in effect, that as both dates had gone by when court proceedings were commenced, the notice was valid for S21 purposes.
This is inconsistent, however, with the court’s own views in relation to S21(4) where it strongly suggested that if two valid inconsistent dates are given for S21(4) purposes the notice is invalid altogether (unless it is stated which prevails).
Notwithstanding, there is a clear binding decision by the court that the notice was valid.
What would have happened, however, if in that case the landlord had started court action for possession after December 23, 2011, but before January 1, 2012?
The court makes no pronouncement, so the answer has to be that you have to wait until all possible valid dates have gone by before initiating the claim for possession.
Where are we now?
Instead of looking at the date when the S21 notice is given, we now have to see whether the tenancy started out as a fixed term tenancy.
If it did, the landlord can now rely on S21(1) with its relaxed requirements whenever the notice is given and even if it is given after the end of the fixed term. This is certainly so if the tenancy runs on as a statutory periodic tenancy.
It also assumes that all dates given in the notice have gone by before court proceedings are started. For any lower court judge to decide to the contrary in this situation would be to defy a binding Court of Appeal decision.
On the other hand, if the tenancy started as a periodic assured shorthold tenancy, the requirements of S21(4) must still be observed. As Spencer v Taylor could be limited to statutory periodic tenancies, it would still be sensible to comply with S21(4). This is because of the apparent conflict between S21(1) and S21(3) explained above.
Old habits die hard, and in view of the risks of Spencer v Taylor being overturned or questioned, a belt or braces approach may be preferred. There should be a note explaining accurately how S21 works. Delays in obtaining possession due to technical issues being raised by tenants are always of concern to landlords.
If the notice is given after the end of the fixed term, it is still better to ensure that the notice complies with S21(4). Due to the possibility of their otherwise being two conflicting compliant dates invalidating the notice, it would be better to correctly state the actual date when possession is required without using the fall-back formula.
If you do use the formula, then to avoid any possibility of two different valid dates being given, it needs to be made clear in the notice itself which of the two prevails. If the notice does not make this clear, you need to wait until all the dates set out in the notice have gone by before starting possession proceedings.
On the other hand, it could be important to ensure that if the notice is given after the end of the fixed term where the periodic continuation tenancy is not a statutory periodic tenancy, that you comply with the stricter S21(4) requirements rather than simply relying on Spencer v Taylor and S21(1) alone.
If there are then alternative dates, one either needs to be invalid for S21(4) purposes, or if both are valid, the notice needs to make it clear which prevails as the effective date after which possession is required.
What should be clear is that, if the landlord gives notice after the end of the fixed term where the tenancy continues under a statutory periodic tenancy, should there be a failure to comply with S21(4), especially where the wrong date is specified, you can rely instead on S21(1) so long as at least two months’ written notice is given.