Posts Tagged ‘licences’

Developer’s informal allocation of private parking space in the common area

May 20, 2017

In Faraday House (IO) v Shine Wheel Ltd ([2017] HKEC 957, LT) P was the purchaser of a flat in Faraday House in 1992. The estate was then a new development and she bought from the developer. She wanted three car parking spaces. Two of the spaces she was offered were allocated as private car parking spaces. The third space (‘the Adjacent Space’) was next to these spaces but was in the common area of the development.

The selling agent assured P that he would arrange for the developer to expressly acknowledge her right to use the Adjacent Space as a private car parking space (‘the Assurance’). P paid HK$250,000 for the two ‘official’ spaces and HK$50,000 for the Adjacent Space.

The Adjacent Space was never re-designated as an area for P’s exclusive use but P was issued with a Permission Letter allowing her to use the space. She was given three car parking permits. The owners incorporated in 1996 and a new manager was appointed at that time.

P used the three spaces for sixteen years until 2014. The owners’ corporation then demanded that she cease using the Adjacent Space. When P refused to comply, the corporation brought proceedings seeking an injunction preventing P from parking in the Adjacent Space. Parking in the common areas was a breach of the DMC.

The Lands Tribunal (Judge Kot) started from the proposition that the Permission Letter to use the Adjacent Space was a licence. The developer could not have granted a licence over the Adjacent Space since it had already been designated as a common area; the licence was invalid. Even if it were valid, it would be revocable; there were no equitable grounds for restraining this revocation. Even if it were irrevocable, it would not bind the IO which took over control of the common parts in 1996.

Promissory estoppel, the principles of which were most recently articulated in Hong Kong in Luo Xing Juan v Estate of Hui Shui See ((2009) 12 HKCFAR 1) could not help. The IO were not bound by an assurance given by the developer. The act of allowing P to park in the Adjacent Space for many years could be seen as an assurance. P had not, however, incurred any detriment in reliance on this (the HK$50,000 having already been paid).

Acquiescence was a possible defence given the nature of the covenants that had been broken. There had been an assurance or lying by on the part of the owners. It was not, however, unjust in all the circumstances to grant the injunction sought. P had had the benefit of the Adjacent Space over many years and would not be caused any hardship.

Michael Lower

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A lease for an uncertain term granted to an individual is a lease for life

November 15, 2011

A lease for an uncertain term (or a periodic tenancy where the right to serve notice to quit is subject to an indeterminate, invalid fetter) created a lease for life at common law. This was so whether or not the parties intended a lease for life. In England, a lease for life takes effect as a lease for 90 years (Law of Property Act 1925, s. 149(6)). Contractual effect (binding only on the parties) is to be given to a licence agreement that cannot take effect as a lease (because of uncertainty of term). This is so even if the parties thought that they were creating a lease. Similarly, contractual effect (binding only on the parties) can be given to an invalid, indeterminate fetter on the right to serve a notice to determine a periodic tenancy.

In Mexfield Housing Co-operative Ltd v Berrisford ([2011] UKSC 52) M entered into an occupancy agreement with B. B could determine it by serving a month’s notice. M could only terminate it in the event of B’s default or in the event of her ceasing to be a member of M. M purported to terminate it by serving one month’s notice. It argued that the agreement was an ineffective attempt to create a lease. It was ineffective, it was argued, because of the lack of certainty attached to the landlord’s right to determine the agreement. M argued that the result was that B occupied under a periodic tenancy that could be brought to an end by notice to quit.

The Supreme Court reluctantly accepted (and B conceded) that this was a lease for an uncertain term. When granted to an individual, however, common law deemed this to be a lease for life. This seems to have accorded with the parties’ intentions in this case but the result would be the same even if this were not the case. The Law of Property Act 1925, s.149(6) converted a lease for life into a lease for a term of ninety years subject to the parties’ rights to bring it to an end in certain events by notice to quit.

Even if this had not been the case, the agreement could have taken effect as a contractual licence even if the parties had intended to create a lease. Lord Neuberger left open the question as to whether it could have taken effect as a periodic tenancy (had this accorded with the parties’ intentions) with contractual effect being given (as between the contracting parties) to the restrictions on the right to serve a notice to quit found in the agreement between M and B ([69]).

The Supreme Court was highly critical of the certainty of term principle but did not overrule earlier authorities that laid it down as an essential element of a lease.

Michael Lower