Notices to quit: Court decision provides useful guidance

The rules regarding the form, service and effect of notices to quit, whether under statutory regimes or under the common law, are complicated and the pitfalls are many. A recent decision by the High Court has provided guidance on three specific aspects of serving notices to quit:

1. Who can serve a notice to quit;
2. The duties of a tenant, holding a tenancy on trust for a partnership; and
3. How a validly-served notice to quit can be undone.

The Case

The case was a further claim in the ongoing Procter v Procter dispute, which in brief, concerns three siblings’ claims to the family inheritance (comprising some 600 acres). Readers may remember that in 2021, the Court of Appeal confirmed that an agricultural tenancy, protected under the Agricultural Holdings Act 1986, had been entered into by conduct between the then freeholders of part of the land (as landlords) and the then members of the Procter family partnership (as tenants) – being the three siblings: A, B and C. ‘Within minutes’ of the Court of Appeal’s judgment, Sibling C – as one of the joint tenants holding the tenancy on trust for the partnership – purportedly served a notice to quit on the landlords (the “NTQ”). The partners by this point were Siblings A and B (Sibling C having ‘retired’ from the partnership in 2010).

Siblings A and B challenged the effectiveness of the NTQ: they asserted that the NTQ wasn’t valid; alternatively, that service of it amounted to a breach of trust or fiduciary duty on the part of Sibling C, and that if the notice was otherwise valid, the Court should either undo its effect or order Sibling C to pay them equitable compensation.

The Decision

Question one: Who can serve a notice to quit

The Court confirmed what is now well-established: unless the terms of the tenancy agreement provide otherwise, a notice to quit given by one joint tenant, even without the concurrence (and despite the objections) of any other joint tenant, is at common law effective to determine a periodic tenancy. This is because a periodic tenancy continues only so long as all joint tenants want it to continue. The same principle applies to joint landlords, because there is a notional renewal of the tenancy at the end of each period which requires the consent of all the parties. In contrast, joint tenants must act unanimously to exercise a break clause, surrender the term, exercise an option to renew or apply for relief from forfeiture.

Question two:  The duties owed by a tenant holding a tenancy on trust

The Court held that because Sibling C was a trustee, holding the tenancy on trust for the partnership, she had a fiduciary duty to act in the best interests of the partnership, for no collateral purpose and to preserve the trust property.

In considering Sibling C’s argument that a trustee cannot be obliged to take on a further tenancy for a year, the Court held that recent cases about co-owners (in law and equity) not owing duties regarding renewals and serving notices to quit did not affect the position of a trustee who was not a co-owner in equity, as was the case here.

In practice, Sibling C’s duty to preserve the trust property meant there was a duty to renew the tenancy, and so service of the NTQ was a breach.

Question three: How the effect of a validly-served notice to quit can be undone

A validly-served notice to quit cannot be withdrawn or waived, and so it was not possible to remedy the breach of trust, simply by preventing Sibling C from relying on the NTQ: the tenancy would automatically come to an end on the expiry of the notice. The Court’s solution was to rescind the NTQ, thereby applying a well-known equitable remedy for breach of trust or fiduciary duty (despite it typically applying to contracts).

The Court held that it could require trustees to carry out their duties, and so Sibling C was obliged to continue the tenancy to protect the trust property and act in the best interests of the partnership.

In light of the order for recission, there was no loss suffered by Siblings A and B and so no order for equitable compensation.

Conclusion   

Notices to quit continue to be a contentious area for both landlords and tenants, no less so where either party is in fact a trustee or group of trustees: it is crucial to ensure that the form and service of any notice to quit is valid.

For more information, please contact Helen Bray.