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New Tenancies Under Section 34

InTruro Diocesan Board of Finance Ltd v Foley [2008] EWCA Civ 1162 the Court of Appeal considered the effect of section 34(1)(b) of the Housing Act 1988.

In this case Mr Foley had compromised a prior dispute with the Diocesan Board by a consent order under which he surrendered his tenancy under the Rent Act 1977 and gave up possession for approximately 24 hours before being granted a new assured shorthold tenancy for 5 years under the Housing Act 1988.  In due course he was served with a section 21 notice and contested this on the basis that he could not have the protection of the Rent Act removed in the manner in which the consent order sought to do.

Section 34 sought to prevent the granting of any further protected tenancies under the Rent Act 1977 but intentionally kept open the possibility that certain tenants would be able to gain such tenancies primarily in order to prevent unscrupulous landlords inducing protected tenants to sign new assured shorthold tenancies thereby losing their protection.  Section 34(1)(b) requires that a tenancy “granted to a person … who … was a prtoected or statutory tenant and is so granted by the person who at that time was the landlord” will remain a protected tenancy.  In section 45(1) it is stated that  “except where the context otherwise requires [a] tenancy includes … an agreement for a tenancy”.

Mr Foley’s argument was simple.  The consent order was an agreement for a tenancy between a landlord and tenant who had previously been related by a protected tenancy.  Therefore any tenancy flowing from the agreement should also be a protected tenancy.

The Diocesan Board’s argument was equally simple.  They suggested that section 34(1)(b) was clearly one of those areas where “the context otherwise requires”.

Perhaps unsurprisingly, the Court of Appeal was not entirely keen to allow an agreed consent order to be set aside in this manner and unanimously followed the argument advanced by the Diocesan Board.

However, that was not quite the end of the matter as Mr Foley advanced a second argument.  This was the, rather clever, postion that the consent order was a signed agreement which set out all the termns of a tenancy and should therefore take effect as the grant of a tenancy under the principle established in Walsh v Lonsdale.  This would have the effect of making s45(1) irrelevant and allow s34(1)(b) to be engaged directly.  This argument was leant weight by the fact that the consent order was executed as a deed in order to comply with the provisions of s52(1) of the Law of Property Act 1925 and that no further tenancy agreement between the parties was in fact ever entered into.

Perhaps surprisingly, the Court of Appeal divided itself over this issue.  The majority (Sir John Chadwick dissenting) distinguished Walsh on the basis that the intention of the parties in that case was clearly different from the intention here.

TYhe upshot of this decision is that practitioners can feel confident when drawing up consent orders, and potentially any agrement, by which a prtoected tenant surrenders their tenancy for the grant of a new Housing Act 1988 tenancy.

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