Landlord and tenant – Agricultural holding – Statutory protection – Freehold owners of land purporting to grant tenancy to partnership comprising themselves and siblings – Judge dismissing claim to protected tenancy – Appellants appealing – Whether tenancy to be inferred from conduct at common law – Whether possible to infer exclusive possession where partial overlap between parties – Whether parties entitled to tenancy protected by Agricultural Holdings Act 1986 – Appeal allowed
The appellants and the respondent were siblings who inherited an estate following the death of their parents in 2013 and 2014. The appellants lived on the estate but the respondent did not. The estate was a family farm in Yorkshire consisting of about 600 acres of arable land, four farmhouses, various agricultural buildings and a golf course.
The estate was owned and managed through a series of complex family trust and partnership structures. It was alleged that in 1994, a tenancy had been created between the freeholders (the parents and the first appellant) and partnership which farmed the land (the partners plus the three siblings). There was thus a partial overlap between the identity of the freeholders and the identity of the partners. There was no written tenancy agreement but the appellants claimed that the tenancy attracted the protection of section 2 of the Agricultural Holdings Act 1986.
The judge held that, ordinarily, the partnership would have been entitled to a tenancy created by conduct because: there was an intention to create legal relations; rent was treated as paid by accounting adjustments; and the partnership was in exclusive possession of the land. However, the claim to a tenancy protected by the 1986 Act failed because: at common law, it was not possible to create a tenancy where there was an overlap between putative landlords and tenants; there was no lease in writing, so the grant was not validated by section 72 of the Law of Property Act 1925; and if there had been a tenancy, it would have taken effect as a tenancy at will: [2019] EWHC 1199 (Ch). The appellants appealed.
Held: The appeal was allowed.
(1) There was no insuperable bar, at common law, to the creation of a tenancy where there was a partial overlap between landlords and tenants (though not complete coincidence). Accordingly, although the common law set its face against the grant of a tenancy by A and B to A and B, there was no absolute rule that prohibited the grant of a tenancy by A to A and B; or by A and B to A, B and C: obiter dicta in Rye v Rye [1962] AC 496 disapproved.
Subject to section 82 of the Law of Property Act 1925, the “two-party rule” (that there had to be at least two parties to a contract) was well established. So far as the contractual aspect of a tenancy was concerned, the common law regarded it as impossible for A to contract with himself and others. In that respect, the common law had been altered by section 82 of the 1925 Act which provided that any agreement entered into by a person with himself and one or more other persons was capable of being enforced as if the agreement had been entered into with the other person or persons alone. It was not suggested that the section applied only to written agreements. Accordingly, in terms of contract, an agreement by A and B to let property to A, B and C would appear to be enforceable (at least): By A and B against C and by C against A and B. Common to those permutations was that C had fully enforceable contractual rights and obligations. A tenancy from A and B, as landlord to A, B and C jointly as tenants, could be inferred from conduct at common law, or created orally.
(2) It was one of the essentials of a tenancy that the tenants had exclusive possession. There was no conceptual problem in the express grant of a tenancy by A and B to A, B and C, even if the grant was not in writing. In such a case the grant would necessarily entail that A, B and C had exclusive possession as against A and B. That could not be a legal impossibility, not least because section 72(1) of the 1925 Act allowed property to be “conveyed by a person to himself jointly with another person”.
As against A and B, A, B and C were in the position of a single owner. Following the grant of the tenancy, A and B were entitled to possession in two capacities. As joint landlords they were entitled to possession in the sense of receipt of rents and profits, as contemplated by section 205 of the 1925 Act; and as joint tenants they were entitled, together with C, to physical possession of the land. They had exchanged their right to physical possession of the land for symbolic possession in the shape of receipt of rents and profits. The judge was wrong to hold that the alleged tenancy was incapable of being created.
It was possible to have exclusive possession in circumstances where there was an overlap between the individuals comprising the landlord and the individuals comprising the tenant. Furthermore, it was possible to infer the grant of exclusive possession where there was a partial overlap between the individuals constituting the landowner and the persons claiming to be in possession of the land.
(3) On the judge’s findings this was a case of a true transaction between landlords and tenants, albeit one that was inferred from conduct and a tenancy at will. Although such a tenancy was terminable at will, it was in all respects a tenancy properly so called, carrying with it possession of the land whilst it subsisted. A tenancy at will was a letting of land for an interest less than a tenancy from year to year and thus converted to a yearly periodic tenancy under section 2 of the Agricultural Holdings Act 1986. Further, a tenancy with mixed agricultural and non-agricultural user could be protected by the 1986 Act. In the present case, where around 27% of the holding was a golf course, and various properties on the holding were let under assured shorthold tenancies, the judge had been entitled to hold that the character of the holding was still agricultural.
Edward Peters (instructed by Ebery Williams Ltd) appeared for the appellants; Bruce Walker (instructed by Grays Solicitors LLP) appeared for the first respondent; the second and third respondents did not appear and were not represented.
Eileen O’Grady, barrister
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