“Succession” and pre-May 11 2000 tenancies

Introduction

I recently completed a trial in which I was acting for a private registered provider of social housing in a possession claim brought following the death of the tenant.  The second defendant (eventually) accepted he had no statutory succession rights but wanted to rely on a term of the tenancy agreement which effectively committed the landlord to the grant of a tenancy of that (or some other) property to a family member who had been living at the property with the tenant at the time of the latter’s death and for the 12 months immediately preceding that time.

Lack of Evidence

This blog has talked previously about the issues surrounding lack of evidence in cases where there is not a credible reason for the same.  Here, despite claiming to have moved into the property with his brother and lived there ever since, the second defendant produced no clear documentary of his residence there during the relevant 12-month period, limited documentary evidence of residence there at all since the start of the tenancy and no witnesses save for family members in support of his position.

The trial judge concluded therefore that though she was prepared to accepted there was the necessary familial relationship (half brothers), she made a finding that the second defendant did not reside at the property during the required 12-month period.

Underlying legal problem

That was enough of course to defeat the defence and enable the making of a possession order.

This article does not however focus on the evidential deficiencies referred to above but rather the question of enforceability of the tenancy agreement’s extension of “succession” rights (strictly speaking it was rather a commitment to grant a fresh tenancy in defined circumstances) had the pre-conditions been satisfied.

The real objection to allowing such a grant of a new tenancy were largely factual on the part of the landlord – i.e. it wasn’t entirely clear that the second defendant was sufficiently related to the tenant and, in any event, he had not provided satisfactory evidence to meet the residence requirement – but as a means of protecting its position there was, legally, an even greater obstacle facing the second defendant.

In short, even if he otherwise satisfied the conditions for a grant of a fresh tenancy how could he enforce the term in a contract (i.e. the tenancy agreement) to which he was not a party?

Privity and Enforceability of Tenancy Agreement

Even a student of law more concerned with getting an improvement on his best 9-ball break in snooker than his studies (I was young), and opting for a cursory glance at ‘Nutshells on Contract Law’, would appreciate that the second defendant was lacking one of the essential legal requirements for the enforceability of a contractual term.  The need for “privity of contract”.  He was not a party to it and so, ostensibly, could not enforce it.

That may seem unfair, or at least unfortunate, where a contract or part of it had the express purpose of conferring a benefit on a third party.  That third party however could not without more, at common law at least, sue for breach of contract or press for specific performance of the relevant term.

Contracts (Rights of Third Parties) Act 1999 (“the Act”)

That “without more” is clearly the Act.

Acting upon the recommendations, with some amendments, of the Law Commission in its Report on Privity of Contract: Contracts for the Benefit of Third Parties, Law Com No 242 (1996), the Act was passed and received Royal Assent on 11 November 1999.

To cite from it’s explanatory notes:

“4. The Act sets out the circumstances in which a third party is to have a right to enforce a term of the contract (section 1), the situations in which such a term may be varied or rescinded (section 2) and the defences available to the promisor when the third party seeks to enforce the term (section 3). It makes it clear that section 1 does not affect the promisee’s rights, or any rights that the third party may have which are independent of the Act (sections 4  and 7(1)). The Act does not apply to certain contracts (whether wholly or partially) (section 6).”

This would seem ideal to assist the second defendant in seeking to enforce his brother’s tenancy agreement if required, section 1 being very clear that:

“(1) Subject to the provisions of this Act, a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if—

(a) the contract expressly provides that he may, or

(b) subject to subsection (2), the term purports to confer a benefit on him.

(2) Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.

(3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.

(4) This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.” (emphasis added)

However, the problem for him would have arisen from the provisions of section 10 of the Act:

“(2) This Act comes into force on the day on which it is passed but, subject to subsection (3), does not apply in relation to a contract entered into before the end of the period of six months beginning with that day.” (emphasis added)

Application of the Act

In the case I was dealing with the assured tenancy post-stock transfer had commenced in the summer of 1999, before 11 May 2000 (and indeed before the passing of the Act).  It followed that the term providing for the grant of a fresh tenancy would not have been enforceable, at least under the Act, by the second defendant.

Public Law & estoppel

That is not to say that in the right case and on the right facts there might not be any public law argument available to defeat the possession claim, not least legitimate expectation of course, but that broadly would depend upon there being some sort of clear representation being made to the would-be “successor” as to their rights post-tenant’s death and the treatment of them by the landlord.

There may equally on the facts, which were not present here, be an estoppel argument such as was found in Daejan Properties Ltd v Mahoney (1996) 28 HLR 498 and allowed the defendant to defeat the possession claim and be treated as a successor even though that, in law, was not possible.

Succession

Amendments to the succession provisions of both the Housing Act 1985 (section 86A (England) – secure tenancies) and Housing Act 1988 (section 17 – assured tenancies) brought in by sections 160 and 161 of the Localism Act 2011 respectively could conceivably help such third parties as they allow, in the right circumstances, for clauses in tenancy agreements extending succession rights beyond spouses and civil partners to be treated as a statutory succession.

In fact had the deceased tenant enjoyed a secure tenancy then, given that it was a pre-1 April 2012 tenancy,  his brother would been entitled to a statutory succession if the family and residence requirements had been satisfied.

However, the Localism Act changes only apply to those tenancies granted on or after 1 April 2012: sections 160(6) and 161(7) of the 2011 Act.  There is a provision at section 120 and Schedule 8 to the Housing & Planning Act 2016 to remove that restriction in so far as it concerns secure, introductory and demoted tenancies but this has, to date, not been brought into force.

This is why the second defendant had to accept there could be no statutory succession.

Conclusion

It perhaps goes without saying that it would, to use my words at trial, an “unattractive” argument to rely on a lack of legal enforceability to defeat an otherwise valid claim to specific performance of a tenancy agreement but:

(a) It does give the landlord some added flexibility if, for reasons unconnected with the “succession” provision, it does not wish to allow the third party to remain in the property as a tenant (e.g. under-occupation, behaviour, changed policies since insertion of term, etc).

(b) It may assist a costs argument.

This claim demonstrated not only the importance of evidence, and the importance of relevant arguments as to its unexplained absence, but also the need for a proper understanding of the law in this area in order to hone a party’s statement of case accordingly.

[There were also Ground 7 issues which, I am sure, will form the basis of a later post]

 

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