Spencer v. Taylor is now section 21 law. But what does that mean?

As some of you will be aware, last year, in the case of Spencer v. Taylor the Court of Appeal decided to use a new interpretation of section 21 of the Housing Act 1988.

As reported by Anthony Gold, the solicitors in the case, this interpretation has now been upheld by the Supreme Court.

Section 21 notice – What is the new interpretation?

It is that the easier section 21(1) notices (the ones that just have to give two months notice) can now also be used during a statutory periodic tenancy.

Previously the accepted wisdom was that the more problematic section 21(4) notices needed to be served if the tenancy was periodic. These notices are the ones that have to give a date which is “the last day of a period of the tenancy and not earlier than two months after the date the notice was given“.

This caused a lot of problems (when the section 21 notice was being served during a periodic tenancy) as landlords would just give a straight two months notice, not realising that it had to end on a particular day. Usually they then lost their claim for possession.

However in Spencer v. Taylor, the Court of Appeal pointed out that s21(2), the section which says when that notice should be served, uses the word ‘may’. Which means (the Court of Appeal say) that this notice is not tied to JUST being served during the fixed term. It can be served during a periodic tenancy too.

This is what the Judge, Lord Justice Lewison, says in the case about the interaction between s21(1) and s21(4) (I have put it in bullets to make it easier to read):

• First, section 21(1) also encompasses cases in which a fixed term assured tenancy is followed by a periodic tenancy. That is because it says it does.
• Second, that periodic tenancy may or may not be a statutory periodic tenancy. It does not matter, because section 21(1) says that it does not.
• Thus, third it is a mistake to see section 21(4) and section 21(1) as in some way mutually exclusive.
• Fourth, section 21(4) is expressly stated to be without prejudice to any such right as is referred to in sub-section (1). So if there is any conflict between the two sub-sections, section 21(1) prevails

So that makes things a lot easier. Or does it?

It now looks as if s21(4) notices only need to be served when there has never been a fixed term at all. So for example if the tenant goes in on a handshake and has a periodic tenancy from the start.

But what if the periodic tenancy is not a statutory one but a contractual one? This is what section 21(2) actually says:

A notice under paragraph (b) of subsection (1) above may be given before or on the day on which the tenancy comes to an end; and that subsection shall have effect notwithstanding that on the coming to an end of the fixed term tenancy a statutory periodic tenancy arises.

The word ‘may’ is the word used by the Court of Appeal to justify the use of the 21(1) notice for periodic tenancies. BUT s21(2) just refers to statutory periodic tenancies. Does this mean that the word ‘may’ only applies if the tenancy is a fixed term one or a statutory periodic?

What about contractual periodic tenancies?

We need to know about the correct notice to serve during a contractual perioidic tenancy:

1. Many tenancy agreements, including the Landlord Law tenancy agreements provide for a contractual periodic tenancy.
This is so that landlords taking six months rent in advance, will not find themselves stuck with a six month periodic tenancy (as they would do under s5 of the Housing Act, the section which creates the statutory periodic tenancy and says how it works). If the periodic tenancy had been created under s5 it would in most cases have created a six month periodic tenancy, meaning the landlord would have to have given a six month notice period in their s21 notice.

Also a contractual periodic gives some protection against the rule in the Superstrike case (which said that the prescribed information needed to be re-served when a new statutory periodic tenancy is created). This problem will end though when the new amendments in the Deregulation Bill come into force though, hopefully in October of this year.

2. The Landlord Law section 21 notice saving clause (which is also used in other section 21 notice forms) is based on the traditional interpretation of section 21
So if you use it during a periodic tenancy it will automatically make the expiry date of your notice the expiry date needed to comply with s21(4). Whereas if you did not need to use s21(4) an earlier expiry date would have been OK.

Amending the Landlord Law section 21 notice saving clause – or not?

When I first read that Spencer v. Taylor was now good law, my first thought was that I should amend the saving clause on my section 21 notices. However now I am not so sure.

That format will still be needed for tenancies which never had a periodic tenancy and (perhaps) for tenancies where the periodic tenancy is contractual (ie is there because the tenancy agreement says so rather than because of s5 of the Housing Act 1988).

I am concerned therefore about changing a format that has worked in the past. Because a s21(4) notice will always be right. But a s21(1) notice can sometimes be wrong.

Incidentially I still think a saving clause is a good idea, as it will protect landlords who mistakenly give a date which is earlier than the end of the fixed term, or who fail to serve a notice provided by their legal advisers in good time meaning that the date on the notice will be less than two months from the date of service (I have known this happen).

What do you think?