Landlords will welcome a new slant on the rules that apply to notices terminating assured shorthold tenancies

Most residential tenancies granted in the private sector today are assured shorthold tenancies and are usually granted for an initial fixed term. When the tenancy ends, the parties may choose to end the arrangement, to renew the tenancy for a further fixed term, or to allow the tenancy to continue as a statutory periodic tenancy – in which case, the length of each subsequent period of the tenancy will be determined by when rent was paid under the original fixed term agreement. For example, if the rent was payable monthly on the first day of each calendar month, the statutory tenancy will be a monthly periodic tenancy in which each new period commences on the first day of every month. Where a tenant does not wish to quit at the end of a fixed or periodic term, a valid notice is essential. The rules that apply in such cases are set out in section 21 of the Housing Act 1988. The section provides that assured shorthold tenancies can be brought to an end by at least two months’ notice. However, it has always been thought that section 21(1)(b) notices, which do not need to specify an end date, are for use by landlords wishing to terminate fixed term assured shorthold tenancies when they expire. By contrast, it was believed that notices to terminate contractual or statutory periodic tenancies must comply with section 21(4). This subsection requires landlords to specify an end date that coincides with the last day of a tenancy period (which reflects the common law rules that apply to notices to quit). Spencer v Taylor [2013] EWCA Civ 1600 has shown us that the effect of section 21 has been widely misunderstood. The landlord granted the tenant a six-month fixed term tenancy, which subsequently became a statutory periodic tenancy. In due course, he served more than two months’ notice on the tenant terminating the statutory periodic tenancy. However, the date specified in the notice as being the date on which the tenancy was to terminate was not the last day of a period of the tenancy. The court could easily have rescued the notice because it specified an alternative end date, which was to be calculated by applying the following formula: “or… at the end of your period of tenancy which will end next after the expiration of two months from the service upon you of this notice”. This form of wording was designed to safeguard landlords because it enables tenants to work out when their periodic tenancies end and, in this case, because the date specified by the landlord was clearly ineffective, this alternative date prevailed. However, the Court of Appeal ruled that the landlord’s notice was valid in any event. It ruled that it was a mistake to see sections 21(1) and (4) as in some way mutually exclusive in cases where an assured shorthold tenancy agreement begins life as a fixed term tenancy and subsequently becomes a statutory periodic tenancy. Consequently, there was nothing to stop the landlord from relying on section 21(1)(b) and, because it had given the tenant more than two months’ notice, the notice was valid. The decision appears to restrict the application of section 21(4) to assured shorthold tenancies that are periodic from the outset. It stands the rules, as practitioners understood them, on their head and contradicts the DCLG’s advice on the termination of assured shorthold tenancies). However, it simplifies the law and landlords will welcome the judgment with open arms.   Allyson Colby is a property law consultant