Posts Tagged ‘landlord and tenant’

Relief from forfeiture will ordinarily only be granted once during a lease term

May 27, 2017

In Ramadour Industries Ltd v Bullen ([2017] HKEC 974, CA) L granted T a lease of a house on Lamma Island for a two year term. T fell into arrears with the rent but was granted relief from forfeiture. T quickly fell into arrears again and L brought new proceedings seeking possession. T sought relief from forfeiture a second time but this was refused.

The Court of Appeal (Yuen JA giving the court’s judgment) upheld this refusal. The court’s power to grant relief is now codified in section 21F of the High Court Ordinance. Section 21F(1A) provides that relief will only be granted to a tenant once during the term, ‘unless the Court is satisfied that there is good cause why this section should apply in favour of a lessee’.

The intention is clear: relief pursuant to section 21F will normally only be granted once to a tenant during a lease term. The onus is on the tenant trying to invoke section 21F for a second time during a term to show that there is good cause.

Michael Lower

Landlord’s repairing covenant: tenant must give the landlord notice of a defect in the property in the tenant’s possession

September 14, 2016

In Edwards v Kumarasamy ([2016] UKSC 40) the UK Supreme Court had to consider the landlord’s liability in respect of physical injury caused to his tenant. The lease was of the interior of a flat in a block of flats. The landlord (K) was himself a tenant of the flat and had the benefit of the right to use the entrance hall to the flats, the car park and the paved area between the front door and the car park. K sub-let the flat together with these ancillary rights to E. E injured himself when he tripped over an uneven paving stone in the paved area.

The primary question was whether the paved area was part of the exterior of the building of which the flat formed part. If it was, then K would be liable to T under the covenant imposed on landlords by section 11 of the Landlord and Tenant Act 1985. Lord Neuberger held that the paved area was not part of the exterior of the building. The natural meaning of the words of a statute should be applied unless they produced a nonsensical result or one which was inconsistent with the intention of the legislation. Here the natural meaning of the ‘exterior’ did not extend to the paved area ([17]).

That effectively meant that the case was decided in K’s favour. Lord Neuberger went on, however, to look at another, more general issue. He referred to the rule that, ‘a landlord is not liable under a covenant with his tenant to repair premises which are in the possession of the tenant and not of the landlord unless and until the landlord has notice of the repair’ ([30]). This is an implied term. It does not normally apply where the premises to be repaired are not in the tenant’s possession ([42]). If the landlord had been subject to a covenant to repair the paved area, did the tenant have to serve notice of disrepair on him before the landlord was under any liability to repair?

The distinguishing feature of this case was that the premises to be repaired were in the possession neither of the landlord nor the tenant but was property over which they both had a right of way. The premises were the paved area over which the landlord had been granted a right of way which he had effectively passed on to the tenant. The landlord had effectively disposed of his right to use the paved area to the tenant ([50]). Lord Neuberger held that the rule requiring the tenant to give notice of the disrepair applied to this case (49]).

Michael Lower

 

 

No tenancy where there is no intention to create legal relations or where the landlord is not excluded

November 17, 2014

In Heslop v Burns ([1974] 1 WLR 1241, CA) T allowed a family (Mr and Mrs Burns) to live rent-free in a house he owned for many years. He covered all of the outgoings. This action was inspired by sympathy and affection for them. When T died, his executors argued that they were licensees and sought to evict them. Mr and Mrs Burns argued that they had been tenants at will. If this succeeded, they would be able to rely on the Limitation Act 1939 to resist eviction.

The Court of Appeal found that they were licensees and not tenants. There was no intention to create legal relations; the arrangement was an instance of ‘generosity on a very large scale’ (Roskill LJ at 1249). Roskill LJ observed:

‘a licence will be more readily inferred than a tenancy at will first where the advantage given to the suggested “tenant” is obviously intended to be personal to him, and secondly, following what Denning L.J. subsequently pointed out in Facchini v. Bryson [1952] 1 T.L.R. 1386 , 1389, where there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy.’ (at 1248 – 9)

Further, the evidence showed that T felt entitled to come and go to the property as he pleased; there was no intention that his right to possess should be excluded by the arrangement.

Michael Lower

Holding over with landlord’s consent: tenancy at will or periodic tenancy?

April 22, 2014

In Erismus Housing Ltd v Barclays Wealth Trustees (Jersey) Ltd ([2014] EWCA Civ 303, CA (Eng)) EHL were tenants of Barclays under the terms of a five year lease that expired on 31 October 2009. They held over at the end of the lease and continued to pay the rent payable under the expired lease while they negotiated the terms of a new lease. The negotiations progressed slowly and by fits and starts but were never abandoned. The tenants then decided to move to new premises. They gave notice to terminate their possession on 31st August 2012. Barclays contended that EHL had been periodic tenants during the holding over; it was agreed between the parties that, if this were so, EHL could not give a notice to quit that would expire before 31st October 2013. Thus, this is a case about the factors to be borne in mind when considering whether or not an implied periodic tenancy has arisen during a holding over. The Court of Appeal turned to the judgment of Nicholls LJ in Javad v Aqil for the relevant principles.

Patten LJ, giving the leading judgment, then said:

‘When a party holds over after the end of the term of a lease he does so, without more, as a tenant on sufferance until his possession is consented to by the landlord.  With such consent he becomes at the very least a tenant at will and his continued payment of the rent is not inconsistent with his remaining a tenant at will even though the rent reserved by the former lease was an annual rent.  The payment of rent gives rise to no presumption of a periodic tenancy.  Rather, the parties’ contractual intentions fall to be determined by looking objectively at all relevant circumstances.  The most obvious and most significant circumstance in the present case, as in Javad v Aqil, was the fact that the parties were in negotiation for the grant of a new formal lease.  In these circumstances, as in any other subject to contract negotiations, the obvious and almost overwhelming inference will be that the parties did not intend to enter into any intermediate contractual arrangement inconsistent with remaining parties to ongoing negotiations.  In the landlord and tenant context that will in most cases lead to the conclusion that the occupier remained a tenant at will pending the execution of the new lease.  The inference is likely to be even stronger when any periodic tenancy would carry with it statutory protection under the 1954 Act which could be terminated by the tenant agreeing to surrender or terminating the tenancy by notice to quit: see Cardiothoracic Institute v Shrewdcrest Ltd [1986] 1 WLR 368.’ ([23])

EHL held over as tenants at will and not as periodic tenants.

Michael Lower

Implied periodic tenancy on holding over? Open question in each case.

May 8, 2013

In Longrigg, Burrough and Trounson v Smith ([1979] 2 EGLR 42, CA (Eng) T refused to give up possession at the end of a fixed term. L tried to persuade T to leave and, when this failed, brought possession proceedings. In the meantime, L accepted several rent payments after the end of the fixed term. The question was whether the payment and acceptance of rent gave rise to an implied periodic tenancy.

The English Court of Appeal held that there was no presumption of an implied periodic tenancy from the fact that rent had been paid and accepted. It was an open question whether this was the right inference to be drawn from the facts of each particular case. Here there was no implied agreement that a new periodic tenancy was to arise.

Ormrod L.J. said:

‘The old common law presumption of a tenancy from the payment and acceptance of a sum in the nature of rent dies very hard. But I think the authorities make it quite clear that in these days of statutory controls over the landlord’s rights of possession, this presumption is unsound and no longer holds. The question now is a purely open question; it is simply: is it right and proper to infer from all the circumstances of the case, including the payments, that the parties had reached an agreement for a tenancy? I think it does not now go any further than that.’

Michael Lower

Service occupier: what if the relevant work began after the employment contract commenced?

April 5, 2013

In Norris v Checksfield ([1991] 1 W.L.R. 1241, CA (Eng)) N employed C as a semi-skilled mechanic. A little later N asked C whether he would like to live in N’s bungalow. The conditions were that he would drive coaches for N. He would live in the bungalow so as to be available for this work at short notice. N dismissed C and sought possession of the bungalow. One of the questions was whether C was a licensee or a tenant. In particular, the English Court of Appeal had to consider whether it made any difference that the arrangement concerning the bungalow and the driving duties arose after the commencement of the employment. The Court of Appeal held that this made no difference and that C was a licensee and not a tenant.

Service occupancy: tenancy or not?

March 28, 2013

In Fox v Dalby ((1874 – 75) L.R. 10 C.P. 285) D was a sergeant in the army. He was required by army rules to live in a house near stores where ammunition and equipment were kept if his commanding officer so required. This was so that he could look after the stores. Not everyone with his job was required to live near the stores and those who did not could still properly perform their duties. The question was whether he was a tenant or whether he was in possession on behalf of his employer. It was held that he was not a tenant since (i) he was required to live in the house, and (ii) this was for the better performance of his duties.

Lord Coleridge C.J. said:

‘[I]f either ingredient exists, – if the occupation be necessary for the better performance of the duties required to be performed by the party, or if, though it be not necessary for their performance, he is required by the authority by which he is appointed to reside there in order to perform them, the occupation is not an occupation as tenant.’ (294)

Brett J. said:

‘[W]here a person situate like the respondent is permitted (allowed if so minded) to occupy premises by way of reward for his service, or as part payment, his occupation is that of tenant; but … , where he is required to occupy them for the better performance of his duties, though not specifically required, his occupation is not that of tenant.’ (295)

Street v Mountford

March 21, 2013

Introduction

Lord Templeman’s judgment in Street v Mountford ([1985] A.C. 809) was an authoritative restatement of the defining characteristics of a lease. It provided clarity as to the factors that distinguish the lease from the contractual licence. In Street itself, this mattered because of the protection afforded to tenants (but not to licensees) by the Rent Acts. That such a restatement was necessary was due to the fact that certain Court of Appeal decisions (for example, Marchant v Charters [1977] 1 W.L.R. 1181, 1185 (per Lord Denning M.R.)) had muddied the waters by denying that the presence or absence of exclusive possession was the central issue.

Street v Mountford

Mr. Street entered into an agreement under which Mrs. Mountford would, as Mr. Street conceded, have exclusive possession of two rooms in a property owned by Mr. Street. The agreement described itself as a licence. It ended with a clause declaring that the parties did not intend to create a lease. Mrs. Mountford applied for the registration of a fair rent under the Rent Acts. Mr. Street sought a declaration that Mrs. Mountford was a licensee. The House of Lords (Lord Templeman giving the main judgment) held that Mrs. Mountford was a tenant since the agreement provided for her to have exclusive possession for a term and at a rent.

The essential elements of a lease

Lord Templeman explained the essential elements of a lease:

‘To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments.’ (Street v Mountford [1985] A.C. 809, 818).

Lord Templeman also said that ‘the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent.’ (Street v Mountford [1985] A.C. 809, 826). The Court of Appeal later explained that Lord Templeman had not intended to suggest that the payment of a rent was an essential characteristic of a lease (Ashburn Anstalt v Arnold [1989] Ch.1, 9 -10, Fox L.J.). Thus, one is left with the statement that the essential elements of a lease are exclusive possession and certainty of term. This is consistent with nearly all previous authority in England and in other jurisdictions (see, for example, Radaich v Smith (101) CLR 209).

Exclusive possession

To say that occupation by a tenant is exclusive possession, while that of a licensee is not, is to invite the accusation of circular reasoning or of simply replacing one term with another without explaining either. The court has ‘to ascertain the nature and quality of the occupancy’ (Street v Mountford [1985] A.C. 809, 825). Thus, Lord Templeman went further and sought to offer guidance as to how exclusive possession differs from the right to occupy enjoyed by a licensee:

‘The tenant possessing exclusive possession is able to exercise the rights of an owner of land, which is in the real sense his land albeit temporarily and subject to certain restrictions. A tenant armed with exclusive possession can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.’ (Street v Mountford [1985] A.C. 809, 816).

The guidance offered here is that a tenant is one who (under the terms of the lease) has the control rights associated with ownership. In particular, the tenant has the right to exclude others (including the landlord).

This right to exclude others is compatible with (and may even be reinforced by) the fact that there are limited exceptions (such as the reservation of easements or a landlord’s right to enter for certain limited purposes) (Street v Mountford [1985] A.C. 809, 818). If, however, the landlord’s obligations require unrestricted access on his part then there is no exclusive possession and the agreement is a contractual licence (Westminster City Council v Clarke [1992] 2 A.C. 288). The result is that the licensee (a lodger perhaps), ‘is entitled to live in the premises but cannot call the place his own.’ (Street v Mountford [1985] A.C. 809 818).

Importance of a proper understanding of the agreement: labels and shams

The agreement in Street described itself as a licence. At the foot of the agreement was the following declaration made by Mrs. Mountford:

‘I understand and accept that a licence in the above form does not and is not intended to give me a tenancy protected under the Rent Acts.’

Lord Templeman had to consider whether these facts should carry any weight in the analysis. He leaves no room for misunderstanding on this point: it is entirely a question of whether, properly construed, the agreement offered exclusive possession for a certain term (Street v Mountford [1985] A.C. 809, 823 and 826). The parties ‘cannot turn a tenancy into a licence merely by calling it one.’ (Street v Mountford [1985] A.C. 809, 821). The court should, ‘be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy.’ (Street v Mountford [1985] A.C. 809, 825. See also A.G. Securities v Vaughan and Antoniades v Villiers [1990] 1 A.C. 417). There is a slightly troubling statement in National Car Parks Ltd v Trinity Development Co (Banbury) Ltd ([2001] EWCA Civ. 1686) to the effect that, when making the lease / licence distinction, some weight might be given to the label employed by two professionally advised parties with equal bargaining power.

The lease as an estate in land

Lord Templeman takes it for granted that a lease is always an estate in land. At the very beginning of his judgment he explains that if the agreement created a tenancy then Mrs. Mountford had acquired a legal estate in land (Street v Mountford [1985] A.C. 809, 814).When the court ascertains the nature and quality of the occupancy with a view to seeing whether or not exclusive possession has been granted, the ultimate question is ‘to see whether the occupier has or has not a stake in the room’ (Street v Mountford [1985] A.C. 809, 823). Is the degree of control that the occupier can exercise in accordance with the terms of the agreement so extensive as to amount to ownership for the time being? Is the land ‘his land albeit temporarily and subject to certain restrictions’? Or, by contrast, is the occupier a mere licensee with the result that he ‘cannot be said to own any estate in the land’? (Street v Mountford [1985] A.C. 809, 816).

Lord Templeman’s express understanding, then, is that the lease is always an estate in land. In Bruton v London & Quadrant Housing Trust ([2000] 1 A.C. 406), however, the House of Lords decided that the lease need not be an estate in land. Once there is an agreement that offers exclusive possession for a term then a lease has been created. This is true even though the ‘landlord’ has no estate in land (is himself a licensee for example). Paradoxically, a literal reading of Street has resulted, in the eyes of some commentators at least,  in a blurring of the distinction between the lease and the contractual licence. The paradox is that Lord Templeman had insisted that the grant of exclusive possession for a term would be what distinguished the lease (an estate in land) from the contractual licence (a non-proprietary arrangement).

Exceptional cases

Lord Templeman states that while exclusive possession is an essential element of a lease, an occupier with exclusive possession is not necessarily a tenant (Street v Mountford [1985] A.C. 809, 818). In discussing these special cases, Lord Templeman draws a distinction between ‘conduct which negatives an intention to create legal relations’ and ‘special circumstances which prevent exclusive possession from creating a tenancy’ (Street v Mountford [1985] A.C. 809, 822). The former category catches informal arrangements where a landowner allows someone else (perhaps a family member or friend) to occupy property but where there is no contractual intent (as in Marcroft Wagons Ltd v Smith [1952] 2 K.B. 496).

As for the latter category, Lord Templeman says:

 ‘Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the right of exclusive possession might be referable and which would or might negative the grant of an estate include occupancy under a contract for the sale of land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office.’ (Street v Mountford [1985] A.C. 809, 826 – 7)

It would have been better to say that while the occupier in such cases might appear to have exclusive possession, the reality is that he does not. One reason for saying so is that it would have avoided any blunting of the message that a person enjoying exclusive possession as a result of an agreement with a landowner is a tenant. Another reason is that the occupiers in these exceptional cases do not have exclusive possession at all. One who occupies property between contract and completion will do so either as licensee or as tenant; either is possible and whether a lease or licence has been created will depend on the terms agreed between the parties. In the other two cases mentioned, it would be appropriate to say that the occupier is there on behalf of the employer or the organisation in which he holds an office. It is the employer or organisation which is in exclusive possession through its employee or office-holder.  In fact, this is the explanation given by Lord Templeman himself earlier in the judgment (Street v Mountford [1985] A.C. 809, 818).

Terms of agreement meant that there was no exclusive possession

March 20, 2013

In Westminster City Council v Clarke ([1992] 2 A.C. 288, HL) the council and C entered into an agreement that gave C the right to occupy a room in a hostel for homeless, single men. Some of the occupants had personality disorders or physical disabilities. The agreement provided that C did not have exclusive possession. The council could change the accommodation or require C to share his room. C had to be back in his room by 11 pm and any visitors had to leave by then. C had to comply with the directions of the warden or his staff. The question was whether C had exclusive possession of his room (and, therefore, a tenancy).

The House of Lords held that he did not have exclusive possession. It looked at the purposes underlying the agreement: these could not be achieved if C had exclusive possession. The restrictions imposed on C were incompatible with exclusive possession.

Lord Templeman said:

‘From the point of view of the council the grant of exclusive possession would be inconsistent with the purposes for which the council provided the accommodation at Cambridge Street.’ (300 – 01)

and later:

“The conditions of occupancy support the view that Mr. Clarke was not in exclusive occupation of room E. He was expressly limited in his enjoyment of any accommodation provided for him … These limitations confirmed that the council retained possession of all the rooms of the hostel in order to supervise and control the activities of the occupiers, including Mr. Clarke. Although Mr. Clarke physically occupied room E he did not enjoy possession exclusively of the council.’ (301 – 02)

Estoppel and lease renewal negotiations

December 13, 2011

Derby & Co Ltd v ITC Pension Trust Ltd ([1977] 2 All ER 890) concerned lease renewal negotiations. The tenants had the right to a new lease under the terms of Part II of England’s Landlord and Tenant Act 1954. The Landlords were prepared to grant a new lease to the tenants. The ’54 Act provides that the new lease is to be agreed between the parties or, failing agreement, to be on such terms as appear reasonable to the court. The parties entered into negotiations on a subject to contract basis and without prejudice to the tenant’s rights under the ’54 Act. A form of lease had been agreed and was ready for execution. Then the tenants backed out. The landlords sought an order that the tenant was bound to enter into the lease on the terms and in the form that had been ‘agreed’. The landlords argued that there was now an agreement for the purposes of the ’54 Act and the court had a duty to impose that agreement on the parties. This failed because the ‘agreement’ was subject to contract and had expressly reserved the the tenant’s right to ask the court to settle the terms. The landlords sought to rely on estoppel. The basis of the estoppel is not entirely clear from the judgment. In essence, the landlord argued that it had not invoked its right to apply for an increased (‘interim’) rent during the negotiation period and, thus, the tenants were estopped from backing out of the ‘agreement’. Again, this failed because the negotiations were subject to contract:

‘It seems to me, again, that where parties negotiate on a basis ‘subject to contract’ everybody knows that there is a risk that, at the end of the day, either side may back out of the negotiations, up to the point where leases are exchanged. I do not think that a party who relies on the other side not to back out can be said to have estopped that party from backing out simply because he has not done something which he might have done in the intervening period.’ (per Oliver J. at 896)

There was no evidence that the tenants had induced the landlords not to apply for an interim rent; there was no evidence that this failure to apply was caused by any reliance on the tenants.