‘Hybrid’ assured shorthold tenancies

Posted: 14th December 2016

FlatsIn a decision that will be required reading for property landlords, the Court of Appeal has confirmed the validity of a form of assured shorthold tenancy that has been in common use for many years. At the same time, the Court defined the concept of ‘ownership’ in the context of Council Tax liabilities.

The case concerned a property investor who rented out residential premises to tenants on the basis of standard form leases that are ubiquitous in the private rental sector. Each lease was for a term of six or 12 months and thereafter continued on a month-by-month basis. The obligation to pay Council Tax rested on the tenant.

Putting forward a novel argument, a local authority submitted that leases must either be for a fixed or a periodic term and that ‘hybrid’ leases are invalid. It was submitted that the lease concerned in the case had to be viewed either as for a fixed term, followed by a periodic tenancy, or as a monthly periodic tenancy that could not be terminated in its first six or 12 months.

On that basis, the council argued that the lease had not been granted for a period of six months or more and that relevant tenants could thus not be viewed as ‘owners’ within the meaning of Section 6 of the Local Government Finance Act 1992. That, it was submitted, meant that when a fixed or a periodic term and that ‘hybrid’ leases are invalid, the liability to pay Council Tax reverted to the landlord.

In rejecting those arguments and dismissing the council’s appeal against an earlier decision to like effect, the Court found that the form of lease in question was valid. Such leases reflected an obvious commercial reality and provided a benefit to both landlord and tenant in offering a degree of initial certainty with a degree of flexibility thereafter.