The significance of Mexfield Housing Co-operative Ltd v Berrisford [2011] 3 WLR 1091

An important task in land law is to be able to identify precisely the status of a person occupying land and the interest or rights they hold. This will be obtained by a combination of examining and construing the agreement between the parties concerned and applying the relevant principles of law. The surprising, and at least in modern times, novel result in the Supreme Court’s decision in Mexfield Housing Co-Operative v Berrisford, which allowed an appeal against the decision of the Court of Appeal [2011] Ch 244, has very important and potentially wide ranging ramifications in this area. The ramifications may even be as great as those in the celebrated case of Street v Mountford [1985] AC 809, a case which went a considerable way to resolving the problem of the lease/licence distinction on the presence or absence of exclusive possession.

,p>The issue in Mexfield concerned the certainty rule in leases and the consequence of an agreement between putative landlord and tenant failing the rule. In Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 the House of Lords had upheld the certainty requirement for all leases, although the case concerned a purported fixed term lease. The salvation of the periodic tenancy from a breach of the certainty rule was the ability of either landlord or tenant to serve notice to quit bringing the tenancy to an end. Any expressed restraint for an uncertain period on either party in this regard would make the purported lease void for repugnancy. The position reached in relation to certainty by Prudential Assurance was approved with great reluctance and unhappiness by the Supreme Court in Mexfield. Lord Neuberger MR stated that the “law appeared clear in its effect, intellectually coherent in its analysis, and, in part, unsatisfactory in its practical consequences.”

toletThe first and most obvious development in Mexfield is in relation to the consequences of voidness for uncertainty. Previously the courts replaced the failed lease with an implied periodic tenancy where the tenant had been in possession, paying a regular sum of money to the landlord, on terms which were not inconsistent with the express terms of the now void agreement. This was the finding of the Court of Appeal in Mexfield.

Here the claimant was a fully mutual housing association which had been formed to provide a solution for mortgagors who found themselves in financial difficulty. The claimant acquired the freehold from the mortgagors and the latter then become tenants in the property, replacing their mortgage instalments with the obligation to pay rent. The lease provided that the tenant held the property “from month to month until determined as provided in this agreement”. Although the tenant could terminate the lease by giving one month’s notice, the claimant landlord, under clause 6, could only terminate the lease in a limited number of circumstances, if the tenant ceased to be a member of the association or allowed the rent to be 21 days in arrears. Notwithstanding this position, the claimant sought to terminate the lease outside clause 6, arguing that since the lease was void for uncertainty it would be replaced by an implied periodic tenancy which could be brought to an end by the service of one month’s notice to quit.

The Supreme Court held that the agreement did indeed fail to create a periodic lease but, instead of an implied periodic tenancy which would allow the claimant to terminate by notice, the Supreme Court held that this was a 90 year term subject to determination by the death of the tenant or earlier according to the terms of the agreement. The route to this conclusion was first, to examine the pre-1925 authorities (in particular Doe v Browne 8 East 165) which appeared to show that where a tenancy failed for uncertainty it was deemed to be a tenancy for life. Post-1925 authorities appear not to have discussed this principle or had the relevant authorities cited to the court, but Lord Neuberger MR was prepared to state that this was “a well established common law rule.” The imposition of a tenancy for life occurred automatically without reference to the intention of the parties, although the Supreme Court Justices held that the result was consistent with the original intention of the parties in this case. Secondly, although a tenancy for life could have been a legal estate before the 1925 Act this was not so afterwards as a result of s.1. But s. 149(6) converted leases for life into 90 year terms subject to earlier determination by the death of the tenant or according to the terms in the agreement. This was a way of providing the tenant here with the security that she obviously expected, but as Lord Dyson JSC stated:

“[t]his is a just result which plainly accords with the intention of the parties. But it may legitimately be said that it is not satisfactory in the 21st century to have to adopt this chain of reasoning in order to arrive at such a result. It is highly technical.” [para.119]

But there are formality requirements for the successful use of this reasoning. In Hardy v Haselden [2011] EWCA Civ 1387 an oral offer was orally accepted by the respondent to the effect that he could occupy a mobile home on a farm for so long as he wished in return for the payment of £200 to the appellant owners. There were various other arrangements so that the occupant was allowed to keep livestock on the premises and he would renovate the farmhouse. The advantage to the owners in this arrangement seems to have been that the property would be secured from trespassers. The judgment given at first instance following Mexfield assumed that the occupant was entitled to a tenancy for life given the fact that there was no certain term and the occupant could remain as long as he wanted. This conclusion was rejected on appeal. The terms on which the property was occupied might have given rise to such a tenancy but here there were no formalities. As a tenancy for life is now necessarily an equitable interest, its creation would have to comply with the formalities of s.53 of the Law of Property Act 1925 or there would have to be a written contract for its creation complying with s.2 of the Law of Property (Miscellaneous Provisions) Act 1989. Nothing of this sort was present in this case.

An alternative argument for the claimant in Mexfield would also have succeeded had it been necessary to rely on it. This involved the Supreme Court taking a different approach to the one taken in previous cases to the effect and validity of the contract itself. In Lace v Chantler [1944] KB 368 Lord Greene MR had held that where an agreement attempted to create a lease but failed, it was impossible to give the agreement validity as a contractual licence between the parties themselves because this is not what they intended, they had intended to create a lease. Lord Neuberger MR disagreed stating that:

“[i]f the agreement is incapable of giving rise to a tenancy for some old and technical rule of property law, I do not see why, as a matter of principle, that should render the agreement invalid as a matter of contract.” [para. 60]

This would mean that, of course, the licence so created would have no proprietary effect binding third parties but importantly, as confirmed by Lord Clarke JSC, the contract would be irrevocable, enforceable according to its terms and the licensee would be able to obtain a timely injunction to prevent any threatened breach. The significance of this approach is important for corporate occupiers for whom the tenancy for life outcome is not going to be available. This unfortunate disparity between natural and corporate persons, which was recognised in the judgments of Mexfield, adds to the case for reform in this area.

Leave a Reply