Can a landlord grant a lease to himself and another party? In other words, can A grant a lease to A and B? Or can A and B grant a lease to A, B and C? Lord Justice Lewison’s judgment in Procter v Procter [2021] EWCA Civ 167; [2021] PLSCS 33, delivered remarkably quickly after the case was heard, explains why there is no legal impediment to such lettings.
The case concerned a family farm in Yorkshire. The land was held by trustees and was farmed by a partnership that included the trustees and other family members. Sadly, the family fell out and, in the absence of a written tenancy agreement, the partnership claimed that it had an oral tenancy, which was protected by the Agricultural Holdings Act 1986. But the partially overlapping identities of the partners and trustees presented a problem.
Legal background
The Law of Property Act 1925 contains two provisions that are useful in such cases. Section 72 validates conveyances, leases and other assurances of property by a person to himself, or to himself and another party. But it applies only to written instruments thanks to the House of Lords’ decision in Rye v Rye [1961] 181 EG 69.
In addition, section 82 of the 1925 Act enables a person to contract with himself and others. So A can contract with A and B. Or A and B can contract with A, B and C. But A cannot contract with himself alone. So a freeholder cannot grant a lease of land to himself because, as Lord Denning explained in Rye: “Every tenancy is based upon an agreement between two persons and contains covenants expressed or implied by the one person with the other. Now, if a man cannot agree with himself and cannot covenant with himself, I do not see how he can grant a tenancy to himself.”
Key point
- A landowner cannot grant a lease to himself – but a partial overlap in the identities of landlords and tenants is permissible, at common law as well as pursuant to provisions in the Law of Property Act 1925
However, in Rye, both Lords Radcliffe and Denning suggested that it might be possible for landowners acting in one capacity to grant a lease to themselves in a different capacity, or to grant leases where there are partially overlapping identities. But Lord MacDermott disagreed; he did not think that A could grant a lease to A and B at common law.
Judicial engineering
The trial judge decided that English common law makes it impossible to create a tenancy if the identities of the landlord and tenant overlap. Had there been a written tenancy agreement, section 72 of the 1925 Act would have come to the rescue. But the statutory rule did not apply. So the judge dismissed the partnership’s claim.
Fortunately, the Court of Appeal preferred “to oil the wheels of commerce, rather than to throw grit into the engine”. Consequently, it had to explain why lettings to two or more tenants, where the landlord is one of those tenants, are valid at common law, as well as under the Law of Property Act 1925.
One of the objections to the grant of a lease by a landlord to himself is that such a letting would be pointless. But a lease from A and B to A, B and C is not pointless. C will not have had any rights over the land beforehand. However, after the lease is granted, A, B and C will jointly enjoy exclusive possession of the land – which is one of the essential requirements of a tenancy. And they will do so in their capacity as tenants entitled to physical possession of the land as against A and B, who will hold the reversion in a different capacity, as landlords entitled to receive the rents.
A lease vested in A, B and C will not merge, either at law or in equity, with a freehold held by A and B alone. Furthermore, although it was impossible for a person to contract with himself and others at common law, section 82 of the 1925 Act had changed that and its operation is not limited to written agreements.
Lewison LJ accepted that landlords cannot, or would not, distrain on their own goods. But there was no reason why landlords should not distrain on goods that they own jointly with others. His Lordship dealt equally swiftly with concerns about the service of notices to quit, deploying Lord Bridge’s comments in Hammersmith LBC v Monk [1992] AC 478; where a landlord’s or a tenant’s interest in a periodic tenancy is jointly held by two or more parties, all joint parties must agree to the continuation of the interest.
Outcome
Lewison LJ made no mention of Harrison-Broadley v Smith [1964] 1 WLR 456, a decision about an oral licence, in which the Court of Appeal had ruled that a person cannot grant a licence to himself jointly with others. His Lordship simply confirmed – and Lord Justices Arnold and Nugee agreed – that English common law does not prevent lettings to two or more tenants, where the landlord is one of those tenants.
On the facts of this particular case, the partnership had a tenancy at will under section 54(1) of the 1925 Act, which was protected by the Agricultural Holdings Act 1986. Their Lordships accepted that their decision would convert a precarious form of tenure into one of the most secure. But that was the result of the way in which the 1986 Act operates to protect farmers and husbandry for the benefit of the nation.
Allyson Colby is a property law consultant
