One of two joint tenants in residence on expiry of a residential lease to which Part I of the Landlord and Tenant Act 1954 applied – Tenant becoming bankrupt shortly after expiry of contractual term – Disclaimer by trustee in bankruptcy – Whether tenancy continuing after expiry – Whether, if continuing, it vested in trustee as part of bankrupt’s estate
On 6 January 1982 the defendants (H and W) took an assignment as joint tenants of the 14-year residue of a long lease of a mews residence in Kensington, London. The lease, being at a low rent, was one to which Part I of the Landlord and Tenant Act 1954 applied. W left the property in 1983 and a decree of divorce was made in the following year. H continued to reside in the premises. Some three weeks after the expiry of the lease on 25 December 1996, H was declared bankrupt. On 22 May 1997 the Official Receiver purported to disclaim the lease. The landlord sought possession on the grounds: (i) that the protection otherwise afforded by Part I could not be claimed by a joint tenant unless all the joint tenants were in residence on the contractual expiry date (the joint tenancy issue); and, alternatively, (ii) that, contrary to H’s assertion, such post-expiry interest as H may have acquired under the Act did form part of his “estate” for the purpose of section 283(1) of the Insolvency Act 1986 and was, accordingly, effectively disclaimed by his trustee in bankruptcy (the property issue). The trial judge ruled in favour of H on both issues. The landlord appealed.
Held: The appeal was allowed on the property issue.
1. Whether residence by H alone on the expiry date qualified him for protection under Part I, depended on whether the concepts underlying that part were modelled upon the business code to be found in Part II of the 1954 Act or upon those to be found in the Rent Acts (now the Rent Act 1977). In the former case, continuing occupation by one only of two or more joint tenants did not suffice: see Jacobs v Chaudhuri [1968] 2 QB 470. The contrary applied under the Rent Act regime: see Lloyd v Sadler [1978] 1 EGLR 76. On the joint tenancy issue the judge had correctly ruled that, notwithstanding linguistic similarities between Parts I and II of the 1954 Act, the Lloyd v Sadler approach was to be preferred, above all because the purpose of Part I, with its many references to the Rent Act, was to extend the protection of that Act to tenants of the relevant types of long leases: see St Ermins Property Co Ltd v Patel [1997] 2 EGLR 61. Moreover, the respective provisions dealing with part occupation demonstrated that the continuation tenancy under Part I was not, unlike under Part II, in truth a continuation of the same tenancy.
2. However, on the property issue, the judge had wrongly concluded that H’s continuing interest was not “property” within the meaning of the Insolvency Act 1986. The continuation tenancy had clear incidents of a property nature, in particular its retention from the contractual tenancy and the character of assignability: see section 3 of the 1954 Act. That consideration was reinforced by section 283(3A) of the 1986 Act, which significantly omitted a continuation tenancy of the kind under consideration from the list of statutorily protected tenancies expressly declared not to form part of the bankrupt’s estate: Sutton v Dorf [1932] 2 KB 304 and City of London Corporation v Bown [1990] 60 P&CR 42 considered.
3. In the light of the ruling on the joint tenancy issue, it was not open to H to contend that the tenancy remained subject to a (co-ownership) trust for sale under the Law of Property Act 1925. It was accordingly unnecessary to decide whether, by reason of such a trust, the vesting of the tenancy in the trustee in bankruptcy would have been precluded by section 283(b) of the 1986 Act.
Edwin Johnson (instructed by Radcliffes) appeared for the appellant landlord; Jacqueline Baker (instructed by Wedlake Bell) appeared for the respondent tenants.
Alan Cooklin, barrister
