Housing Act 1985, section 79(1), section 118(1) and Schedule 1, para 11 — Right of a secure tenant to buy freehold of dwelling-house — Whether premises ‘let as a separate dwelling’ within section 79(1) — Following the course adopted by the assistant recorder at first instance, the Court of Appeal referred to provisions in the consolidating Housing Act 1985 although the Housing Act 1980 was actually in force at the material times
appellants, who held a lease for 21 years granted on September 17 1965,
challenged the decision of the assistant recorder, sitting as a deputy county
court judge, that the appellants were not secure tenants within section 79(1)
and therefore did not qualify under section 118(1) to acquire the freehold —
The landlord condition and the tenant condition specified in sections 80 and 81
were satisfied — It was also conceded that at the date when the notice was
given claiming the right to buy the business previously carried on, of car body
repairs, had ceased, with the result that the business tenancy obstacle in para
11 of Schedule 1 no longer existed — The only remaining issue was whether at
the date of the grant of the lease, which was September 17 1965, the subject
house was ‘let as a separate dwelling’ within section 79(1) — The assistant
recorder decided that it was not and hence the present appeal
premises were let expressly for mixed residential and business user, there
being a covenant in the lease ‘to use the demised premises only for residential
purposes and for the purposes of trade and business for which they are let
namely as a motor body repairs workshop’ — It was submitted on behalf of the
appellants, on the basis of the statutory history of the Rent Acts and cases such
as R v Brighton and Area Rent Tribunal, ex parte Slaughter, that the phrase
‘let as a separate dwelling’ covered a mixed business and residential tenancy —
The court rejected this submission — Under the earlier statutes there was no
specific protection for business tenancies and a tenancy for mixed residential
and business use did not lose the protection of the Rent Acts by reason of the
business factor — The position now was different, as explained by Lord Denning
MR in Cheryl Investments Ltd v Saldanha and as applied in three recent decisions binding on the
court, Pulleng v Curran, Russell v Booker and Henry Smith’s Trustees Charity v Wagle — The appellants
therefore did not qualify under section 79(1) and could not claim a right to
buy the freehold — Appeal dismissed
The following
cases are referred to in this report.
British
Land Co Ltd v Herbert Silver (Menswear) Ltd [1958]
1 QB 531; [1958] 2 WLR 580; [1958] 1 All ER; [1958] EGD 84; 171 EG 489, CA
Cheryl
Investments Ltd v Saldanha [1978] 1 WLR
1329; [1979] 1 All ER 5; (1978) 37 P&CR 349; 248 EG 591, [1978] 2 EGLR 54,
CA
Epsom
Grand Stand Association Ltd v E J Clarke (1919)
35 TLR 525; [1919] WN 170
Henry
Smith’s Charity Trustees v Wagle [1989] 1
EGLR 124; [1989] 11 EG 75, CA
Levermore
v Jobey [1956] 1 WLR 697; [1956] 2 All ER
362, CA
Pulleng v Curran (1980) 44 P&CR 58, CA
R v Brighton and Area Rent Tribunal, ex parte Slaughter [1954]
1 QB 446; [1954] 2 WLR 289; [1954] 1 All ER 423; (1954) 52 LGR 191; [1954] EGD
358; 163 EG 136, DC
Russell
v Booker [1982] EGD 58; (1982) 263 EG 513,
[1982] 2 EGLR 86
This was an
appeal by William George Webb and Arthur Dempsey Barrett, his son-in-law, from
the decision of Mr Assistant Recorder Pearl, at Willesden County Court,
refusing the appellants a declaration that they were secure tenants of a house
at 166 Granville Road, London NW2, and had a right to buy the freehold of the
house under the provisions of the Housing Act 1985. The respondents were the
London Borough of Barnet, the landlords and owners of the freehold.
John Colyer QC
and D J T Parry (instructed by Philip Hodges & Co) appeared on behalf of
the appellants; Michael Barnes QC and John Furber (instructed by the chief
executive and town clerk of the London Borough of Barnet) represented the
respondents.
Giving the
first judgment at the invitation of Sir Stephen Brown P. TAYLOR LJ said: This
is a tenant’s appeal from a decision of Mr Assistant Recorder Pearl sitting as
a deputy county court judge at Willesden County Court on November 27 1987. The
order refused a declaration sought by the applicants that they are secure
tenants of 166 Granville Road, London NW2, and have a right to buy under the
terms of the Housing Act 1985.
The first
appellant, Mr Webb, owned the freehold of a house in Granville Road and carried
on there the business of car body repairs. In 1965 that house was compulsorily
acquired by the respondent (Barnet). However, Barnet granted Mr Webb a lease of
166 Granville Road on September 17 1965. The term was 21 years and the rent £5
per annum. By clause 1 of the lease the demise was said to comprise ‘all that
piece or parcel of land together with the messuage or tenement outbuildings and
appurtenances thereto belonging and known as 166 Granville Road, NW2’. By
clause 2(j)(i) Mr Webb covenanted:
to use the
demised premises only for residential purposes and for the purposes of trade or
business for which they are let namely as a motor body repairs workshop.
Accordingly,
Mr Webb moved his home and his business into the demised premises. The layout there
is shown on a plan. The living accommodation consisted on the ground floor of a
dining-room, living-room, kitchen and hall; upstairs there were four bedrooms
and a bathroom. Running along the side of the house was a passageway leading to
a garage/workshop with access from both front and back streets. The Webb family
resided in the living accommodation and Mr Webb carried on his motor body
repair business in the garage/workshop, assisted by his son as time went on. On
June 21 1976 he indicated by letter to Barnet that he would like to purchase
the freehold of the house and asked for details of procedure. Barnet replied
that it was not their policy to sell the freehold of any of their properties.
By the end of 1979, Mr Webb had become elderly (he is now 83) and his son David
was ill. Accordingly, he decided to give up his business. The learned deputy
judge found that this cessation occurred in late 1979 or early 1980. David died
in May 1987, but Mr Webb has continued to live in the house with his daughter and
son-in-law, Mr Barrett, who is the second appellant.
Following the
enactment of the Housing Act 1980, Barnet sent a circular to their tenants
informing them of the ‘right to buy’ provisions and inviting them to complete
form RTB1 claiming the right to buy. Mr Webb filled in such a form and it was
received by Barnet on February 20 1981. Some time after March 1981 Barnet sent
to Mr Webb a form RTB2 by which they admitted in relation to Mr Webb and his
family that they had the right to buy the house. Mr Webb did nothing further
for a while but was clearly content in the understandable belief that he was
going to obtain the freehold of his house. However, on July 5 1983 Barnet’s
housing manager sent Mr Webb a bombshell letter in the following terms:
re: Right
to Buy Application
You may be
aware that following your application to buy your home and my acknowledging
RTB2 of 20th February, 1981, some doubt arose as to whether in fact the Right
to Buy could be granted.
The Right to
Buy provisions of the 1980 Housing Act only cover secure tenancies. Further
investigation has shown that your tenancy is not secure because it comes under
the Landlord and Tenant Act, 1954 Part 11. Accordingly the Right to Buy cannot
arise.
I apologise
for any inconvenience caused by the delay in forwarding this information to
you, and advise you to contact the Sales Team if you have any queries.
The Webb
family protested and eventually consulted a solicitor. Barnet remained adamant,
so the appellants commenced these proceedings.
The relevant
statutory provisions were first enacted in the Housing Act 1980. However, they
are now to be found unchanged in the Housing Act 1985, a consolidating Act, and
since the learned deputy judge referred to them in the more recent Act, that
course has been adopted on the hearing of this appeal.
It is
necessary to look at Parts IV and V of the 1985 Act. Part IV is headed ‘Secure
tenancies and rights of secure tenants’. Section 79(1) provides:
A tenancy
under which a dwelling-house is let as a separate dwelling is a secure tenancy
at any time when the conditions described in sections 80 and 81 as the landlord
condition and the tenant condition are satisfied.
The landlord
condition under section 80(1) is that the interest of the landlord belongs to a
local authority (inter alia). The tenant condition under section 81 is
that the tenant is an individual and occupies the dwelling-house as his only or
principal home. Section 79(2) provides:
Subsection (1)
has effect subject to —
(a) the exceptions in Schedule 1 (tenancies which
are not secure tenancies) . . .
Para 11 of
Schedule 1 provides:
1954 Act
tenancies
11. A tenancy
is not a secure tenancy if it is one to which Part II of the Landlord and
Tenant Act 1954 applies (tenancies of premises occupied for business purposes).
Part V of the
Act is headed ‘The Right to Buy’. Section 118(1) provides as follows, so
far as is relevant:
A secure
tenant has the right to buy, that is to say, the right, in the circumstances
and subject to the conditions and exceptions stated in the following provisions
of this Part —
(a) if the dwelling-house is a house and the
landlord owns the freehold, to acquire the freehold of the dwelling-house; . .
.
Section 122(1)
provides:
A secure
tenant claims to exercise the right to buy by written notice to that effect
served on the landlord.
Section 124(1)
provides, so far as is relevant:
Where a notice
under section 122 (notice claiming to exercise right to buy) has been served by
the tenant, the landlord shall . . . serve on the tenant . . . a written notice
either —
(a) admitting his right, or
(b) denying it and stating the reasons why, in
the opinion of the landlord, the tenant does not have the right to buy.
Mr Webb’s
notice under section 122(1) was given in February 1981. That is the relevant
time in considering whether he was a secure tenant and thus had the right to
buy. It is common ground that during the period in which Mr Webb was carrying
on the business of car body repairs, Part II of the Landlord and Tenant Act
1954 would have applied to his lease. However, it is conceded that from the
date he ceased the business in late 1979 or early 1980, Part II of the 1954 Act
ceased to apply to the tenancy. Accordingly, in February 1981 para 11 of
Schedule I did not apply to defeat Mr Webb’s application. So, if he can bring
himself within section 79(1), he would have the right to buy. It is
unchallenged that the landlord condition and the tenant condition were
satisfied. The remaining issue, therefore, is whether the house ‘is let as a
separate dwelling’. It is common ground that on that issue the relevant time is
the time of the letting. So, the crucial question is whether in 1965 this house
was ‘let as a separate dwelling’.
Counsel on
both sides have taken us exhaustively through the history of legislation and
case law concerning the phrase ‘let as a separate dwelling’. It was first used
by Parliament in section 2(2) of the Increase of Rent and Mortgage Interest
(War Restrictions) Act 1915. In Epsom Grand Stand Association Ltd v Clarke
(1919) 35 TLR 525 this court held that the phrase applied where premises
were let and occupied as a dwelling notwithstanding that there was also a
business purpose to the letting. That holding was given statutory force in
section 12(2) of the Increase of Rent and Mortgage Interest (Restrictions) Act
1920, which provided so far as is relevant:
This Act shall
apply to a house or a part of a house let as a separate dwelling . . .
Provided that
— . . . (ii) the application of this Act to any house or part of a house shall
not be excluded by reason only that part of the premises is used as a shop or
office or for business, trade, or professional purposes; . . .
Over the next
three decades, further Rent Acts varied the provisions as to control. The Act
of 1939 introduced ‘new control’ and lettings under the Acts of 1920 to 1938
were still subject to ‘old control’. But the same provision as to a mixed
letting continued in the statutory scheme. Thus, section 3(3) of the Rent and
Mortgage Interest Restrictions Act 1939 provided (so far as is relevant):
. . . the
application of the principal Acts, by virtue of this section, to any
dwelling-house shall not be excluded by reason only that part of the premises
is used as a shop or office or for business, trade or professional purposes . .
.
A series of
cases applied this provision: see, for example, R v Brighton and Area
Rent Tribunal, ex parte Slaughter [1954] 1 QB 446; Levermore v Jobey
[1956] 1 WLR 697; British Land Co Ltd v Herbert Silver (Menswear)
Ltd [1958] 1 QB 530. Mr Colyer relies strongly on these cases and on the
statutory provisions already mentioned. He submits that the phrase ‘let as a
separate dwelling’, having acquired by statute and case law an established
meaning as a term of art, must continue to hold that meaning in subsequent
legislation unless the contrary is clearly shown. It therefore holds that
meaning in section 1 of the Rent Act 1977 and in the Housing Acts of 1980
(section 28) and 1985 (section 79(1)).
However, the
learned deputy judge relied on two cases as showing that the phrase does not
now apply to a mixed business and residential tenancy. The first was Cheryl
Investments Ltd v Saldanha [1978] 1 WLR 1329. At p 1331H Lord
Denning MR set out the legislative history in an illuminating passage:
The statutes
on this subject cannot properly be understood except in the light of their
history. I will, therefore, sketch it in broad outline, taking by way of
illustration a situation which used to be very common. It is where a shopkeeper
lives over the shop, or a doctor has his consulting room in his house. For over
35 years from 1920 onwards such a person was protected by the Rent Acts, not
only in respect of the amount of rent, but also from eviction. The Acts
distinctly declared that the application of them ‘to any house or part of a
house shall not be excluded by reason only that part of the premises is used as
a shop or office or for business, trade or professional purposes’: see section 12(2)
(c) (ii) of the Increase of Rent and Mortgage Interest (Restrictions)
Act 1920. This protection was carried so far that when a lady ran a guest house
as a business and had her own bedroom and sitting room there — entirely
ancillary to the business — she was protected by the Rent Acts: see Vickery v
Martin [1944] KB 679.
This
protection was continued until 1957. There was no break in 1954: for although
the Landlord and Tenant Act 1954 (which I will call the ‘Business Tenancy Act’)
gave rights to tenants of business premises, it did not apply to tenancies
which were protected by the Rent Acts: see section 43(1)(c) of the Act
of 1954.
But in 1957
there was a fundamental change. By the Rent Act 1957 most houses were
de-controlled. Thenceforward the shopkeeper who lived over the shop, and the
doctor who had his consulting room in his house, were no longer protected by
the Rent Acts. They were only protected by the Business Tenancy Act 1954: see
section 11(7) of, and paragraph 11 of Schedule 4 to, the Act of 1957. In 1965
there was another fundamental change. By the Rent Act 1965 Parliament restored
protection for the tenants of dwelling houses who lived at home away from the
business. But this time Parliament did not give this protection to the
shopkeeper or the doctor who lived over the shop or the consulting room.
Parliament left them to the protection of the Business Tenancy Act 1954. From
1965 onwards Parliament divided tenancies into two separate and distinct
categories: ‘regulated tenancies’ and ‘business tenancies’. Every tenancy had
to be placed into one category or the other. ‘Regulated tenancies’ were
dwelling houses protected by the Rent Acts.
This dichotomy was made by paragraphs 1 and 3 of Schedule 1 to the Rent Act
1965, and has been continued by the Rent Acts of 1968 and 1977: see section
9(5) of the Act of 1968 and section 24(3) of the Act of 1977.
The result is
this. If a house is let as a separate dwelling (without being occupied in whole
or in part for business purposes) it is a ‘regulated tenancy’. But, if it is
occupied by the tenant ‘for the purposes of a business carried on by him or for
those and other purposes’ it is a ‘business tenancy’: see section 23(1) of the
Act of 1954. It cannot be both.
It is of the
first importance now to be able to place a tenancy into the correct category,
because the two categories are very different animals.
Thus under the
earlier statutes there was no specific protection for business tenancies. In
that period, a tenancy for mixed residential and business use did not lose the
protection of the Rent Acts by reason of the business factor. As already shown,
that was recognised by both statute and case law. However, the Rent Act of 1965
introduced the dichotomy to which Lord Denning referred. Paras 1 and 3 of
Schedule 1 to the Rent Act 1965 provided as follows:
SCHEDULE 1
AMENDMENT OF
THE RENT ACTS IN RELATION TO REGULATED TENANCIES
PART I
AMENDMENTS FOR
DETERMINING WHETHER TENANCY IS REGULATED TENANCY
THE INCREASE
OF RENT AND MORTGAGE INTEREST (RESTRICTIONS) ACT 1920
1.–(1)
Subsection (2) of section 12 shall apply as if in the proviso para (ii) were
omitted . . .
THE RENT AND
MORTGAGE INTEREST RESTRICTIONS ACT 1939
3. In section
3(3) the words preceding ‘for the purposes’ shall be omitted.
The words
omitted from section 3(3) are those quoted earlier in this judgment.
So the
statutory extension of ‘let as a separate dwelling’ in the 1920 Act and in the
1939 Act, to cover a mixed letting, was expressly excised in regard to
regulated tenancies. Although it continued in relation to controlled tenancies,
it ceased finally to apply at all when controlled tenancies were abolished by
section 64(1) of the Housing Act 1980. The tenancy in the present case could
not, however, have been a controlled tenancy, as it was granted after July 5
1957.
It is arguable
that the effect of paras 1 and 3 of Schedule 1 to the 1965 Act was merely to
bring the old statutes into line with section 1(3) of the 1965 Act in providing
that, where ‘part of the premises is used‘ for business purposes, the
1954 Act applies and there cannot at that time be a regulated tenancy
under the Rent Acts. On that argument the amendments would not change the
established meaning of ‘let as a separate dwelling’. Should the business user
cease, the demise would then become a regulated tenancy and by the same token
the tenant would, under the 1980 and 1985 Housing Acts, become a secure tenant.
However,
recent decisions of this court have been to the contrary effect. In Cheryl
Investments Ltd v Saldanha Lord Denning MR gave four practical
illustrations. Numbers two and four are in point. At p 1333 he said:
Second, take the case where a professional man takes a tenancy of one
house for the very purpose of carrying on his profession in one room and of
residing in the rest of the house with his family, like the doctor who has a
consulting room in his house. He has not then a ‘regulated tenancy’ at all. His
tenancy is a ‘business tenancy’ and nothing else. He is clearly occupying part
of the house ‘for the purpose of’ his profession, as one purpose; and
the other part for the purpose of his dwelling as another purpose. Each
purpose is significant. Neither is merely incidental to the other.
. . .
Fourth, suppose now that the second man decides to give up his office at
home and to take a tenancy of an office elsewhere so as to carry on his profession
elsewhere. He then has a ‘business tenancy’ of his new premises. But he does
not get a ‘regulated tenancy’ of his original home, even though he occupies it
now only as his home, because it was never let to him as a separate dwelling:
unless the landlord agrees to the change.
Mr Colyer says
that the last sentence of the fourth illustration is wrong. It was in fact obiter
in Cheryl Investments Ltd v Saldanha, but it was adopted and
approved in Pulleng v Curran (1980) 44 P&CR 58. In that case
there was a lease of premises consisting of a grocer’s and dairyman’s shop with
residential accommodation above for a period of seven years. There was a
covenant prohibiting the tenant without the landlord’s consent carrying on any
trade or business other than that of grocery and dairy. In February 1968 the
landlord gave notice to terminate the tenancy under the 1954 Act. The tenant
applied to the county court for a new lease on the same terms and this was
granted for seven years from September 1968. In November 1977 the landlord gave
notice to terminate the continuing year-to-year tenancy and the business
tenancy. Thereupon the tenant indicated that he had ceased the business in 1965
and had thereafter occupied the premises only as his residence. He sought to
argue that, as the business user had ceased, the premises were within the Rent
Acts. The judge found against him on two grounds. First, he held that the
business user had not in fact ceased. Second, in the alternative, he held that
the premises would not by mere cessation of the business user fall into the
Rent Acts. On appeal, all three members of this court upheld the learned
judge’s first ground of decision, out each went on to deal with the second as
an alternative ground and upheld that also. Sir George Baker, giving the first
judgment, said at p 68:
The
propositions, as put very clearly by Mr Allen, for the tenant, come to this. A
tenancy of combined business and residential property cannot be a residential
tenancy so long as some business use continues, but if the tenancy ceases to be
one to which the Act of 1954 applies — for example, because the business use
ceases — it will become a regulated tenancy. Mr Allen further submits that,
when the tenant gave up his business, his tenancy was changed into a residential
tenancy to which the Rent Act [1977] then applied and that on determination of
the tenancy from year to year by notice to quit it became statutory.
I think that
this is based on a fallacy . . .
Having read
through all the relevant sections and taken the whole of the Act, I have come
to the conclusion that there is no provision that enables the tenant to say: ‘I
have stopped the business use; therefore this becomes a residential tenancy.’
Stephenson LJ
also rejected Mr Allen’s argument. He said at p 74:
. . . I am
clearly of opinion that, on its true construction, the lease of this ‘messuage
or tenement shop and premises’ contemplated the occupation of part of the
premises as a shop for the purposes of carrying on a grocery and dairy business
and (not ‘or’) part as a dwelling-house for the purposes of a residence. It was
not a letting of the property as a residential dwelling, but it included a
business tenancy to which Part II of the Act of 1954 applied and which could
not be turned into a regulated tenancy by the tenant ceasing to occupy the shop
part for the purposes of carrying on that or any other business unless the
landlord agreed.
Stephenson LJ
then referred with approval to what Lord Denning said in Cheryl Investments
Ltd v Saldanha. Cumming-Bruce LJ also held that this alternative
ground of decision of the learned trial judge was correct.
Russell v Booker (1982) 263 EG 513, [1982] 2 EGLR 86 concerned an
agricultural holding which included a dwelling-house. The agricultural use
deteriorated and was abandoned. The question arose as to whether the demise
which had ceased to be an agricultural tenancy came under the Rent Acts when
the tenant continued to reside in the dwelling-house. The judgment of the court
was given by Slade LJ. At p 516 the learned lord justice set out a number of
propositions of which numbers (3) and (4) are relevant. He said:
(3) If a tenant changes the user of the premises
and the fact of the change is fully known to, and accepted by, the landlord, it
may be possible for the court to infer a subsequent contract to let them ‘as a
separate dwelling-house’, although this would be a contract different in
essentials from the original tenancy agreement.
(4) However, unless a contract of the
last-mentioned nature can be spelt out, a mere unilateral change of user will
not enable a tenant to claim the protection of the Rent Acts in a case where
the terms of the tenancy agreement itself provide for and contemplate the use
of the premises for some particular purpose which does not attract the
protection of those Acts — for example as a shop or agricultural holding.
Later, on p
517, Slade LJ:
On the
authority of Wetherall v Smith we accept that unilateral
abandonment by the tenant of agricultural user of land may cause it to cease to
be an ‘agricultural holding’. However, on the authority of Wolfe v Hogan
and Whittly v Scott-Russell, we cannot accept that a mere
unilateral change or abandonment of user by a tenant, which is not embodied in
a new contract between landlord and tenant, express or implied, can operate to
take a tenancy which did not begin by being protected by the Rent Acts into the
protection of those Acts.
It is clear
that the passages quoted from Russell v Booker were the ratio
decidendi of the case. They are therefore binding upon this court. Some
argument was raised as to whether the observations of this court cited above
from Pulleng v Curran were ratio or obiter. In our
judgment, they were ratio in that there were two grounds for the
decision of the court each of which was part of the ratio in the case.
That view was confirmed by a very recent decision of this court given between
the conclusion of argument and judgment in the present case, Henry Smith’s
Charity Trustees v Wagle (unreported,* judgment given on November 23
1988). In that case the leading judgment was given by Dillon LJ and this court
held that Pulleng v
the proposition that, where there is a tenancy for mixed business and
residential purposes, the cessation of the business, although it does take the
tenancy out of the 1954 Act, does not render it a regulated tenancy. There are,
therefore, three decisions of this court now binding upon us to that effect
and, in our judgment, it follows that the argument on behalf of Mr Webb in this
case must be rejected. We reach that conclusion with reluctance, the more so
because (a) Mr Webb lost his first home by compulsory purchase and was then
granted the present tenancy by Barnet and (b) Barnet then led him to believe
that he would be able to buy his home only to disappoint him in the event.
*Editor’s
note: Reported at p 124 post.
As to (b),
there was an alternative ground in the notice of appeal based upon estoppel
arising from Barnet’s acceptance of Mr Webb’s application to buy his house.
However, Mr Colyer has frankly conceded that he is prevented by authority from
advancing that argument in this court. We mention it only as he wished to
reserve the point should the case go further.
We therefore
uphold the careful and lucid judgment of the learned deputy judge and dismiss
this appeal. We merely add as a postscript that, in view of the very
unfortunate history of this matter, we hope Barnet, so far as it is in their
power to do so, will treat Mr Webb sympathetically.
SIR STEPHEN
BROWN P and CROOM-JOHNSON LJ agreed and did not add anything.
The appeal
was dismissed. No order for costs was made save legal aid taxation of the
appellant’s costs. Leave to appeal to the House of Lords was refused.
