Mexfield 8 years on: have Co-ops caught up?

The judgment in Berrisford v Mexfield [2011] UKSC 52 should have shaken up housing co-operatives, but almost eight years on it seems that many are yet to change their tenancy agreements.

The Supreme Court decided in Mexfield, based on the facts in that particular case, that the Co-op’s tenancy agreement took effect in law as a 90-year lease, although this was not what it explicitly said in the agreement and would not have been obvious to a layperson reading the agreement.

The agreement said that the tenancy which could be ended by the tenant giving a month’s notice, or by the landlord if specific circumstances applied, such as the tenant falling behind with rent. There was no other mechanism in the contract for the landlord to end the tenancy. This is an issue for Co-operatives in particular because of their status as fully mutual housing associations. As such they are excluded from being able to create secure, assured or assured shorthold tenancies. When private individuals, other housing associations or local authorities draft tenancy agreements the exact wording they use is less important than it is for Co-ops as the statutory provisions for these tenancy types apply, making the position clear even if the drafting is unclear. Co-ops have bare contractual tenancies with no statutory regime to back them up and fill in any gaps.

It is a long-established principle of English law that a tenancy must be for a specific period of time known to both landlord and tenant. Where that is not the case, such as here, the law will interpret the tenancy as a lease which can only be ended after 90 years or when the tenant dies, whichever is sooner.

The implications of this are substantial for landlord and tenant. If a tenant has a Mexfield 90-year lease, then it can only be brought to an end when one of the specific conditions to end the tenancy arises and only then by forfeiture. For conditions other than rent arrears, in order to bring forfeiture proceedings the tenant will have to either admit that they have breached the agreement or the landlord will have to take the tenant to the First Tier Tribunal (Property Chamber) or the county court to prove that they have breached the agreement as a preliminary first step before then going back to the county court to ask the court to forfeit the lease. Two court cases are therefore needed. The process could easily take over 18 months.

Forfeiture is a remedy usually used against long-leaseholders. Most residential long-leaseholders have paid a substantial premium for their lease and many are still paying a mortgage for that premium. Forfeiture deprives the leaseholder of their asset and so is in this context a harsh remedy, and judges are not keen to award it. There is therefore considerable precedent meaning that it is easy for leaseholders to defeat forfeiture proceedings as long as they take some action to remedy their breach of the lease. In the context of long leaseholders who may be left with a mortgage of hundreds of thousands of pounds and no property if their lease is forfeited this is entirely appropriate. In the context of a tenant of shared accommodation in a small housing Co-op where they have been behaving anti-socially this may be more problematic.

Forfeiture proceedings are problematic for tenants too. If the landlord takes them to the First Tier Tribunal (Property Chamber) for a decision that they have breached their lease then legal aid will not be available to them for representation in the tribunal. The landlord will no doubt have legal representation.

Another problem for tenants arises when it comes to repairs. Tenants for tenancies of less than seven years have rights to have certain repairs done by the landlord automatically read into their tenancy agreements by s11 of the Landlord & Tenant Act 1985. Mexfield tenants have no such rights and have to rely on any repairs clauses in their tenancy agreements. It may be that no repairs clauses are in their agreements as it was assumed pre-Mexfield that s11 of the Landlord & Tenant Act 1985 would apply.

Given the above, it is surprising that Co-ops have not amended their Mexfield tenancies. It may be that they are now relying on Southward Co-operative v Walker [2015] EWHC 1615 (Ch), a later decision in the High Court which found that a tenancy that looked like a Mexfield tenancy was actually a contractual license which could be ended only by one of the situations set out in the agreement.

It is by no means certain that a court would decide that any particular tenancy was a Mexfield 90 year lease or a Southward contractual license.

In contrast to 90 year leases, Southward contractual license can be brought to an end with one case in the county court. Southward licensees do not have repair obligations under s11 of the Landlord & Tenant Act 1985 either, as they are licensees and not tenants.

If Co-ops want to change their tenancy agreements, including existing agreements, they will have to do so according to their rules. This is likely to mean that they need a majority vote from all members. It may be that change has been slow because tenants understandably do not want to deprive themselves of a 90-year lease. The alternative to a 90-year lease or contractual license is likely to be either a tenancy which can be ended at any time by the landlord giving notice and taking the tenant to court (probably preceded by a vote from members according to their rules). This may be preferable for the organisation than the uncertainty Mexfield and Southward have created.

If your housing Co-operative would like advice on its tenancy agreement, or if you have been threatened with possession by your housing co-operative landlord, contact Anthony Gold on 0207 940 4000 or mail@anthonygold.co.uk.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*