EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
OPINION OF THE COURT
delivered by LORD HAMILTON
WISHAW & DISTRICT HOUSING ASSOCIATION LIMITED
Pursuers and Respondents;
MICHAEL NEARY (AP)
Defender and Appellant;
Act: O'Carroll; T. C. Young (Pursuers and Respondents)
Alt: Collins; Anderson Strathern (for Mike Dailly, Solicitors, Glasgow) (Defender and Appellant)
13 January 2004
The background and the issue for decision
The appellant and the respondents are respectively the tenant and the landlords of a dwellinghouse at 11 Station Road, Wishaw. The tenancy is regulated by an agreement in writing dated 14 September 2001. The respondents contend that the tenancy is a "short assured tenancy" as defined by section 32(1) of the Housing (Scotland) Act 1988; the appellant contends that, while the tenancy is an assured tenancy, it is not a "short assured tenancy" as so defined.
The respondents having served notice under section 33 of the Act and the appellant having failed to vacate the dwellinghouse, they raised a summary cause against the appellant in Hamilton Sheriff Court for recovery of possession of it. The appellant defended the action. The sole issue between the parties was whether the tenancy was a "short assured tenancy". The sheriff accepted the respondents' contention that it was and granted warrant for ejection. Against that decision the appellant appealed by stated case to the sheriff principal. He answered the relative question to the effect that the sheriff was entitled to hold that the tenancy was a "short assured tenancy" as defined and refused the appeal. Against that decision the appellant, with the leave of the sheriff principal, brings this further appeal to this court.
Section 32(1) of the 1988 Act provides:-
"A short assured tenancy is an assured tenancy -
(a)which is for a term of not less than six months; and
(b)in respect of which a notice is served as mentioned in subsection (2) below".
It is not disputed that there was served a notice complying with section 32(1)(b), including the requirement (under subsection (2)(d)) that it stated that the assured tenancy to which it related was to be a short assured tenancy. The narrow issue between the parties is whether the assured tenancy entered into between them was "for a term of not less than six months" within the meaning of subsection (1)(a).
Clause 2 (headed "TERM OF TENANCY") of the agreement provided -
"The Association will let and the Tenant take possession of the house under a short assured tenancy commencing 15th day of September on 2001 (the date of entry) until 20th day of March on 2002 and monthly thereafter. This is subject to the terms of the tenancy contained in this agreement."
Clause 13 (headed "ENDING THE TENANCY") provided -
"This Short Assured Tenancy may be ended by:
1.The Tenancy reaching its ish (termination date) and the Association giving due notice to quit terminating the tenancy.
2.By the Tenant giving the Association one month's notice in writing, at any stage of the tenancy;
The remainder of Clause 13 made further provision for the ending of the tenancy.
The submissions of parties
Mr Collins for the appellant submitted that the tenancy was not a short assured tenancy within the meaning of the statute. Clause 2 was expressly made subject to the terms of the tenancy contained in the agreement, including Clause 13.2. The latter provision, which entitled the tenant, on giving one month's notice in writing, to break the lease at any stage of the tenancy, was inconsistent with the tenancy being for a term of not less than six months. The parties were mutually bound only until that option was exercised (or always subject to it not being exercised). The agreement, which was the respondents' document, should be construed against them contra proferentem. The expression "term" in section 32(1)(a) did not mean the period of the lease prior to the ish. That tract of time was in Scotland generally referred to as the "period" or the "duration" of a lease (Rankine on Leases (3rd Edition) p. 1; McAllister - Scottish Law of Leases (3rd Edition) para. 2.19). "Term" was more familiar in English law (see Hill & Redman's Guide to Landlord and Tenant Law paras. 1.01 and 1.05). In this part of the 1988 Act "term" was used in contradistinction to "ish" (used in sections 32(3) and 33(1)). Here it meant the actual length of the lease, to the effect that the existence of any break option which could, if exercised, bring the lease to an end after less than six months had passed, precluded the tenancy from being a "short assured tenancy" as defined. It was clear from the relative Parliamentary debates (see, for example, Hansard - House of Lords, 26 April 1988, columns 142-3) that a precise period was envisaged for a short assured tenancy. Although certain observations in Cummins Engine Co Ltd v Inland Revenue 1981 S.C. 365 might present a difficulty for the appellant, that case was distinguishable, the issue there arising out of a different lease and a different statute (a taxing statue). While it was not intended to make any submission on English law, it was noteworthy that, in respect of "assured shorthold tenancies" under section 20 of the (English) Housing Act 1988, the existence of a landlord's break in the first six months was a disqualifying factor. Reference was made to Bridge - Residential Leases pp. 73-4. In the event of the exercise by either party of a break option, the power vested in the sheriff to make an order for possession would be discretionary (section 18(4) and Schedule 5, paras. 10 and 13). In the case of a short assured tenancy the sheriff was obliged, if satisfied of the matters prescribed in section 33(1), to make an order for possession. The appeal should be allowed.
Mr O'Carroll for the respondents submitted that it was clear, especially from section 32(3), that the legislature was making use of expressions familiar in the Scots law of landlord and tenant. That subsection also made it plain that, once a short assured tenancy was in place (which in principle guaranteed the tenant a minimum of six months' occupancy), any tenancy thereafter retained the character of a short assured tenancy, whatever the mechanism by which the relationship of landlord and tenant persisted. The landlord's right of recovery of possession under section 33 was without prejudice to his right to seek recovery under the earlier provisions of the Act (which could be invoked at any time). A landlord under a short assured tenancy had a guarantee of recovery without being required to undergo the longer and more difficult procedure provided by these earlier provisions. One of the conditions of the right to recovery under section 32 was that the tenancy had reached its ish. Sections 32 and 33 were intimately inter-related. The existence of a break clause (and any operation of it) did not affect the term of the tenancy or its ish. Any recovery of possession based on the exercise, within the first six months, of any landlord's break could not be secured under section 33 as the ish had, in such a situation, not been reached. Thus, though in the circumstances of this case it was unnecessary to rely on such a submission, the existence of a break in favour of a landlord was not inconsistent with a tenancy being a short assured tenancy. The respondents were a non profit making housing association with certain social responsibilities. That might explain why a break clause in favour only of the tenant had been introduced. The meaning of "term" in section 32(1)(a) was clear. It was consistent with that expression as interpreted and applied in Cummins. The nature of breaks in a lease was explained in Rankine on Leases (3rd Edition), especially at p. 527. It was a mode of termination of a lease during its currency (p. 522). Reference was also made to Paton and Cameron - Landlord and Tenant at pp. 242-3. There was nothing in the 1988 Act to suggest that a tenant under a short assured tenancy was obliged to remain for at least six months. The appeal should be refused.
Discussion and result
Sections 32-35 of the 1988 Act make, in respect of Scotland, provision for "short assured tenancies", a sub-set of assured tenancies, for which special arrangements are made. One of these arrangements relates to recovery of possession on termination of a short assured tenancy (section 33). Without prejudice to the landlord's right to recover possession in accordance with the more generally applicable provisions of the Act, the sheriff is obliged, on an application to him, to make an order for recovery of possession if he is satisfied that the conditions specified in section 33(1)(a)-(d) are met. No question of any discretionary power in such circumstances arises. These special provisions apply only to a short assured tenancy as defined by section 32(1), a condition of which is that the tenancy "is for a term of not less than six months".
It is plain from sections 32 and 33 that Parliament, in making these provisions, has adopted words and concepts familiar in the Scots common law of landlord and tenant; expressions such as "ish" and "tacit relocation" appear. The expression "term" is perhaps less common in that law to import the tract of time between the date of entry and the ish, the expressions "duration" and "period" being more commonly used. But the expression "term" in the sense indicated is not unknown and is readily intelligible.
In Cummins Engine Co Ltd v Inland Revenue the First Division required to construe a Scottish lease and apply to it the provisions of the Stamp Act 1891. Clause First of the lease discussed in that case provided -
"The lease shall, subject as aftermentioned and notwithstanding the dates hereof, endure for a period of Ninety-nine years that is from the date of entry to the premises (being the Term of Martinmas Nineteen hundred and seventy-eight) to the Term of Martinmas Two thousand and seventy-seven, provided that the tenants will be entitled to terminate the lease at any of the terms of Martinmas, Nineteen hundred and ninety-eight, Martinmas, Two thousand and eight, Martinmas, Two thousand and eighteen, Martinmas, Two thousand and twenty-eight, Martinmas, Two thousand and thirty-eight, Martinmas, Two thousand and forty-eight, Martinmas, Two thousand and fifty-eight and Martinmas, Two thousand and sixty-eight by giving the landlords formal notice thereof not later than the term at which they intend to exercise their entitlement ...".
The issue for decision in that case was whether the lease was "for a definite term exceeding 35 and not 100 years" within the meaning of that heading in the First Schedule to the Stamp Act 1891 (as amended). Lord President Emslie, delivering the Opinion of the Court, said at p. 369 -
"From the lease the term is to be ascertained. Now the term specified is 99 years and this is the term to be taken for stamp duty purposes notwithstanding that contingencies are provided for which may lead to its termination before the expiry of 99 years. The lease may be terminated prematurely by the landlords who have the option to irritate the lease if the tenant should be in material breach of contract. It may also be terminated prematurely if the tenants choose to exercise their option to bring it to an end at any of the prescribed terms, all of which are within the period of the lease which confers the option. Under the lease the landlords (leaving possible irritancy out of account) are bound for 99 years. If neither party takes any action to bring the lease to an end before the expiry of 99 years the lease will endure for 99 years. The only proper conclusion to be drawn from this lease is that it must be regarded as a lease for 99 years which may, if the tenants take the appropriate action at a defined break, be terminated prematurely."
Thus, notwithstanding the option of the tenants to terminate the lease at certain specified earlier dates, the court had no difficulty in holding that the "term" of the lease ran from the date of entry to its conventional ish 99 years later. Although the court was there concerned with the expression "term" in a different lease and with the application to it of a different statute (and one applicable throughout the United Kingdom), we are not persuaded that a different construction of the expression is appropriate in the purely Scottish context of the 1988 Act. That decision is also illuminating in its recognition that the existence of a break clause (at least in favour of the tenant) does not have the result that the duration or term of the lease is restricted to the period ending with the date (or earliest date) at which, if the clause is operated, the relationship of landlord and tenant is brought to an end. A break clause confers an option, on the party or parties in whose favour it is drawn, to bring the lease to an end during its conventional currency, i.e. prior to its conventional ish (Rankine on Leases (3rd Edition) pp. 522 and 527).
In the present case the term (or duration) of the lease is from 15 September 2001 to 20 March 2002 (a period of six months and a few days) and monthly thereafter (Clause 2). That clause is expressly made subject to the remaining terms of the tenancy agreement, which includes (Clause 13.2) an option, in favour of the tenant only and unrestricted as to time, to bring the lease to an end by giving to the landlord one month's notice in writing. But the existence of that break clause does not, any more than in Cummins Engine Co Ltd v Inland Revenue, have the effect, in our view, of rendering the "term" of the tenancy less than six months. As there is, in our view, no ambiguity, no question of construing the lease contra proferentem arises.
This tenancy agreement contains no break clause in favour of the landlord. Express provision is made in the parallel but differently worded English legislation (section 20(1) of the Housing Act 1988) in relation to that matter. There is much force in Mr O'Carroll's submission that the language of sections 32 and 33 of the Scottish Act makes such expression unnecessary. But it is unnecessary for the purposes of this case to express any concluded view as to the possible effect in a Scottish assured tenancy of a break clause in favour of the landlord which, if exercised, could bring the tenancy to an end earlier than six months from its commencement. We reserve our opinion on that matter.
However, for the reasons given, we shall affirm the decision of the sheriff principal and refuse the appeal.