Requiring NTQ to end fixed term tenancy: unfair and unenforceable?

There are different methods a private tenancy can be brought to an end by the landlord or the tenant; these include

• expiry of the term,
• issuing of a notice to quit,
• surrender or forfeiture of tenancy and
• ejectment.

It’s common for questions to arise about the obligations of tenants when a fixed term tenancy comes to an end and whether it is required of them to serve a notice to quit on the landlord.

Ending a fixed term tenancy

In an instance where a landlord and tenant have agreed a fixed term tenancy, for a 12 month period for example, the general rule is that no notice is required to determine a fixed term tenancy.

The tenancy will be determined by natural expiry at the end of the relevant term. There is no legal requirement to serve a notice to quit at the end of term in these circumstances. This rule has been established by the courts in the cases of Wright v Tracey (1874) IR 8 CL 478 and McGrath v Travers (1948)  IR 122.

This general rule deals with circumstances in which the tenancy has come to its natural end and there has been no express agreement by the parties to the contrary.

As such, the important question remains; is the tenant required to provide a notice to quit in a fixed term tenancy if a contractual term has been included in the tenancy agreement requiring such notice?

Can a landlord use contract terms to insist that tenant serves NTQ to end fixed term?

Importantly there is nothing in law to prevent the parties inserting express provisions in respect of the requirement of notice within a tenancy agreement. Indeed it is not uncommon for agreements for a fixed term to contain a provision for a “break” clause. Within such a clause, either party, most often the tenant, can determine the tenancy early by giving a specified notice or complying with certain conditions.

However, a ‘break’ clause is clearly distinguishable from a clause requiring notice at the end of a fixed term agreement.  Although it is indeed permissible for the common law position to be varied by the terms of a tenancy agreement, such variances remain subject to consumer protection legislation which requires that contracts are fair to the consumer. Contracts entered into from October 2015 are governed by the Consumer Rights Act 2015, rather than by these unfair terms regulations.  

Part 1 of Schedule 2 of The Consumer Rights Act states that any term is potentially unfair if it has the object or effect of automatically extending a contract of fixed duration where the consumer does not indicate otherwise, when the deadline fixed for the consumer to express a desire not to extend the contract is unreasonably early. Further guidance on the fairness of such terms can be found in section 5.19 of the Competition and Markets Authority guidance on unfair terms.

Requirement to serve notice at end of fixed term is unfair and unenforceable

The Office of Fair Trading (OFT) had examined the requirement to provide notice in a fixed term tenancy, and was quite unequivocal in the view that this is a requirement that should not be placed on tenants. In their now retracted 2005 guidance on Unfair Terms in Tenancy Agreements the OFT stated;

“A tenant is not required to give notice to bring the tenancy to an end at the end of the fixed term… We appreciate that landlords will want to ensure that their properties are not left empty between tenancies, but object to terms that impose a contractual obligation on the tenant to give notice in order for the tenancy to be terminated at the end of the fixed term.”

This guidance has now been archived as the Office of Fair Trading has been replaced by the Competition and Markets Authority, and the OFT guidance does not necessarily reflect the CMA's current thinking. However, the CMA has published its own guidance on terms requiring that a consumer give excessive notice if they wish to cancel a contract at the end of its fixed term in Section 5.19 of its guidance on unfair terms. 

The courts are not legally bound by direction from the Competition and Markets Authority, but are likely to find it highly persuasive.  It is likely that a court would consider to what extent the term complies with CMA guidance on the issue if its interpretation of such a contractual requirement was sought.

It is, however, good practice for a tenant to convey their intentions to a landlord at the earliest opportunity and, similarly for landlords to talk to tenants to establish their intentions to remain in or vacate the property in the weeks before the expiry of the contract.

What does it say in the contract?

Staying in the property beyond the final day of the contract

Importantly, tenants should remain aware that if they stay just one day following the expiry of the fixed term agreement, then their tenancy will become periodic.

Periodic tenants must provide written notice in line with the requirements of the Private Tenancies Order (2006) NI, as amended.

Landlord's rights to pursue tenant for rent due if tenancy ends early

Next month, Chris will examine caselaw dealing with a landlord's entitlement to unpaid rent when a tenancy ends before the fixed term expires.  Sign up to our mailing list to make sure you don't miss out on this and other housing law articles.