Landlord and tenant–Point of law of general interest following grant of new lease of business premises to existing lessee in pursuance of consent order in proceedings under Part II of Landlord and Tenant Act 1954–Covenant in new lease to pay rent at a higher rate from a date anterior to date of execution–Whether lessee liable to pay higher rent from that anterior date or only from date of execution–Period in dispute covered continuation of old tenancy under 1954 Act and interval between termination of old tenancy and execution of new lease–Nearly four years involved–Natural construction that higher rent was payable from anterior date correct–Lease cannot retrospectively vest an estate in a lessee or make him retrospectively liable for a breach of covenant, but there is nothing to stultify agreement to make payments for periods anterior to grant–Vice-Chancellor’s important summary of the law where a term is granted to run from a date anterior to the execution of the lease
In this action
the landlords, John Richard Bradshaw and Norman Frederick Bradshaw, claimed
from the tenant, Alexander Christopher Pawley, payments of rent at the rate
mentioned in a lease executed on March 10 1978 for a period commencing almost
four years earlier, namely, from March 24 1974, when the previous lease, which
was the subject of proceedings under Part II of the Landlord and Tenant Act
1954, expired.
D R G Hands
(instructed by Kingsley, Napley & Co) appeared for the landlords; R W Moxon
Browne (instructed by C A Maddin & Co, of Surbiton) for the tenant.
Giving
judgment, MEGARRY V-C said: This case raises a short point of principle on the
law of landlord and tenant. The basic question is whether on the grant of a new
lease to an existing lessee a covenant to pay rent at a certain rate from a
date anterior to the date when the lease was executed can make
the date when the lease was executed. The question arises in an action brought
by the landlords against the tenant claiming rent at the agreed rate from the
anterior date; and a striking feature is that the two dates are nearly four
years apart.
The relevant
facts may be briefly stated. The premises in question are business premises
which the tenant formerly held under a lease for 21 years less a day from March
25 1953. The natural expiration of the term was thus on March 24 1974, but of
course the Landlord and Tenant Act 1954, Part II, applied to the tenancy. The
landlords accordingly gave a statutory notice on February 13 1974 to determine
the tenancy on August 14 1974; and on June 12 1974 the tenant applied to the
county court for the grant of a new tenancy under the Act.
Prolonged
negotiations then took place between those advising the parties. From early on
these were on the basis of a new term for 10 years, and after a while this
emerged as being 10 years from March 25 1974. Finally, on January 11 1977, a
consent order was made in the county court for the grant of a new lease of most
of the premises for a term of ‘Ten Years from the 25th March 1974 at a rent of
£1,750’ a year, with provision for ‘upward reviews’ during the term. The rent
payable under the previous lease, I may say, was £312 a year, with no provision
for rent revision. In each case there was in addition an insurance rent which
does not affect what I have to decide. It is regrettable that the order does
not state on the face of it that it was a consent order, as every consent order
ought to do; but it is common ground that in fact it was a consent order. The
order also provided that the parties should jointly apply to the court under
section 38(4) of the Act for an order authorising an agreement to exclude
sections 24 to 28 of the Act in respect of the new lease; and it was agreed
that this agreement should be included in the lease. This, of course, would
prevent the new lease from conferring any right to a new tenancy under the Act
when it expired. On May 16 1977 the court made the requisite order to this
effect.
A week later,
on May 23 1977, the tenancy flowing from the combined effect of the old lease
and the Act came to an end. Section 24(1), when read with section 64, had
prolonged the tenancy until the expiration of three months after the end of the
period of six weeks allowed for an appeal from the order of January 11 1977.
The Judicature Act 1925, section 31(1)(h), does not prohibit appeals from
consent orders, though it does require leave for such an appeal. The new lease,
however, still had not been executed, for dissension arose on the point now
before me for decision. Finally, on March 10 1978, the lease was duly executed;
and on June 29 1978 the writ was issued.
It will be
seen that there are thus four main periods with which I am concerned.
(1) Until March 24 1974 the old lease was running
at a rent of £312 a year; and this period is not in issue.
(2) From March 24 1974 until May 23 1977 the
tenancy created by the old lease was being continued by force of the Act. This
second period is very much in issue. The tenant contends that his liability for
this period is at the rate of £312 a year, whereas the landlords contend that
it is at the rate of £1,750.
(3) From May 24 1977 until March 10 1978 the old
lease had come to an end and the new lease had yet to be granted. This third
period is also in issue. There is the same dispute about the amount of the
rent, and Mr Moxon Browne, who appeared for the tenant, was forced to contend
that either the tenant was holding over during that period, without any lease
or tenancy, or else he was there by virtue of the agreement for a lease
evidenced by the consent order, on the terms of that order.
(4) From March 10 1978 onwards the new lease was
in force, and there is no dispute that thereafter the tenant was liable for
rent at the rate of £1,750 a year. Accordingly, what I have to decide is the
liability of the tenant during the second and third periods.
With that, I
turn to the provisions of the new lease, which is expressed in terms of ‘the
Lessor’ and ‘the Lessee.’ By the
habendum, the premises are demised to the lessee to hold the same unto the
lessee ‘from the 25th day of March 1974 for the term of ten years but
determinable as hereinafter provided YIELDING AND PAYING THEREFOR during the
said term yearly and proportionately for any fraction of a year the rents
hereunder set out.’ There are then
specified ‘for the first four-and-three-quarter years of the said term’ the
rent of £1,750 a year, and ‘for the next three years of the said term’ a rent
determined in accordance with clause 3, which contains provisions for rent
review. There is then a similar provision ‘for the remainder of the said term’;
and all the rents are to be paid quarterly in advance on the usual quarter
days. The lessee’s covenants are made ‘to the intent that the obligations may continue
throughout the said term’; and the first of these is ‘to pay during the said
term the said reserved rents at the times and in manner aforesaid,’ and so on.
In considering
the rival contentions, I think that the starting point is to construe the lease
in the ordinary way, before considering whether there is anything in the law to
modify that construction or to prevent its being effectuated. It seems
perfectly clear that the obligation to pay a rent of £1,750 a year is an
obligation to pay that rent for the period of 10 years from March 25 1974. The
reddendum is in terms of paying rent at that rate ‘during the said term,’ and
so is the covenant to pay rent: and there is no term in the document that can
be called the ‘said’ term except the ‘term of 10 years’ running ‘from the 25th
day of March, 1974.’
That
construction seems to me to be supported (if support be needed) by the
consequences of an answer which Mr Moxon Browne gave to a question from the
Bench. He was constrained to accept that the time-table for increases of rent
for the specified periods ‘of the said term’ was to operate during the 10 years
from March 25 1974 and not the six years and a few days running from the
execution of the lease on March 10 1978. Accordingly, the revised rent was to run
from the expiration of ‘the first four-and-threequarter years of the said
term,’ and so would commence at Christmas 1978, and so on. Mr Hands, who
appeared for the landlords, said that on this footing it was impossible to see
how it could be said that ‘the said term’ meant one thing for the purpose of
laying down a rent of £1,750 a year and another for the purpose of the
time-table of rent increases, especially when the first four-and-threequarter
years of that time-table provides for the rent to be £1,750 a year. The ‘said
term’ must mean the same term, whether the phrase is ‘during the said term’ or
‘of the said term.’
That
contention seems to me to be unanswerable. Mr Moxon Browne’s contentions
reduced him to contending that the obligation to pay £1,750 a year ‘during the
said term’ really meant not ‘during the said term of 10 years from March 25
1974,’ but ‘during so much of the said term of 10 years from March 25 1974 as
subsists while the parties are in the relationship of landlord and tenant under
this demise,’ and so when the lease was executed meant during the next six
years and a few days. Similarly, the provision in the consent order for the
grant of a new lease ‘for a term of ten years from the 25th March 1974, at a
rent of £1,750’ was really an agreement to pay a rent of £1,750 not for 10
years but for so much of the then unexpired period of approximately seven years
and two months out of that 10 years as still remained unexpired when the lease
was finally executed. As the difference between the two rents is nearly £4 a
day, each day’s delay in executing the lease would save the tenant some £4. As
a matter of construction I cannot accept these contentions. I feel no doubt
that on ordinary principles of construction the true meaning of the consent
order and the lease is that a rent of £1,750 a year was to be paid throughout
the period of 10 years from March 25 1974 irrespective of the date on which the
lease was actually executed.
The question,
then, is whether there is anything in the law to
to the natural construction of its language. When asked, Mr Moxon Browne agreed
that on this he relied not on any provisions of the Act but on the general
principles of the law. The only qualification to this was that he relied to
some extent on the provisions of the Act which prevented the old tenancy from
determining when the old lease expired; and he also contended that section 24A,
when read with section 64, would be pointless if the landlords were right. This
latter point, however, did not withstand investigation, and I need not pursue
it further. In the main, Mr Moxon Browne relied on authorities which for the
most part are conveniently collected in Roberts v Church Commissioners
for England [1972] 1 QB 278. As he contended, there are indeed some
limitations on the effect that can be given to a term expressed to run from a
date prior to the execution of the lease, and I must consider these.
First, it is
well settled that a lease cannot retrospectively vest an estate in the lessee.
If today a lease is granted for seven years from this day a year ago, no term
of seven years is brought into being, but only a term of six years from today.
A lease, of course, is more than a mere contract, for it operates by way of
grant to create an estate or interest in the land; and you cannot grant today
that X shall have had a term of years vested in him a year ago. Whatever
contractual obligations there may be between the parties, no actual term of
years can be created until the lease has been executed and so the grant has
been made. Thus where the question is what term has actually been created, as
where statute refers to terms of a particular length, the commencement of the
term cannot be earlier than the date of the grant of the lease. There is, of
course, no objection to a lease defining the term by reference to some past
date, as in the grant of a term of seven years from this day a year ago; but
this merely creates a term of six years from today.
Second, a
lease for a term from some past date will not, at any rate normally, make into
a breach of covenant that which was not a breach when it was committed. An act
or omission by a prospective lessee which would be a contravention of the
proposed lease is not turned into a breach of covenant by him merely because he
subsequently accepts the grant of the lease for a term which is expressed to
run from some date anterior to the act or omission. That, I think, follows from
Shaw v Kay (1847) 1 Exch 412. There, the landlord sued on a
repairing covenant in respect of acts done by the tenant before the lease was
executed, basing the claim on the lease having been expressed to run from an
earlier date. The claim failed, though no reasoned judgments were delivered.
It may be
tempting to infer from these two propositions that when a term is expressed to
run from some date prior to the actual grant of the lease, that prior date can
have no function save as a unit of calculation in ascertaining the date on
which the term will expire; and in Shaw v Kay at p 413 there is a
dictum of Parke B which can be read as indicating this. Whatever the
temptation, I think that it would be wrong to draw any such inference. The
dictum on which Parke B relied, uttered by Eyre CB in Wyburd v Tuck
(1799) 1 B & P 458 at p 464, must be understood in relation to the facts of
the case: and what the court was concerned with there was a lease of tithes as
giving the plaintiff a title to sue for the tithes. As the lease did not vest
the term in the tenant before it was executed, he could not sue for tithes due
before the date of execution. However, when what is in issue is not title but
obligation or liability, I do not see why the parties should not, if they so
choose, make the obligation or liability enforceable in respect of such
anterior date as they wish. Thus if a lease is granted for a term of 21 years
from a date two years prior to the grant of the lease, with a provision for
determination at the end of the seventh or fourteenth years of the term, then
in the words of Clauson J ‘it is perfectly easy as a matter of construction of
such a document to say that the seven years according to the obvious intention
of the parties is not to run as from the date of the execution of the lease but
from the moment spoken of, though inaccurately, as the beginning of the term in
the document’: Earl Cadogan v Guinness [1936] Ch 515 at p 518. Bird
v Baker (1858) 1 E&E 12 provides an example of this. There, the
lease was granted in July 1851 for 14 years from Christmas 1849, with power to
break ‘at the expiration of the first seven years thereof’: and the Court of
Queen’s Bench held that the break came at Christmas 1856 and not in July 1858.
I cannot see
what there is to stultify an agreement in a lease to make payments in respect
of past periods, or to require the court to construe a lease so as to prevent
any agreement from relating to past periods unless compelled to it. It is by no
means unknown for a lease not to be executed until after the prospective lessee
has entered (usually with safeguards for the lessor) and for the lessee then to
pay rent and observe the terms of the lease as from a date prior to the
execution of the lease. If as a matter of construction the obligation is to pay
rent at a specified rate from some date earlier than that of the execution of
the lease, why should that not be enforceable?
I think that
some support for this view is provided by a dictum of Pollock CB in Shaw
v Kay. The report in (1847) 1 Exch 412 that was cited to me omits this,
but it is to be found in the report of the case in (1847) 17 LJEx 17 at p 18.
The Chief Baron said: ‘A party may covenant to indemnify another from what has
passed. I may demise premises today, and covenant to save my tenant harmless
from what has happened six months before.’
On the same footing I do not see why, by suitable wording, a lease
should not impose on one of the parties some liability for things past.
Mr Moxon
Browne stressed that rent was something that had to be paid periodically, and
so an obligation to pay nearly four years’ rent at a blow indicated that what
was being paid could not truly be called rent. However, I do not think that
rent becomes denatured when a sufficiency of gales remain unpaid. Nor do I see
why an obligation to pay rent in respect of periods of occupation by the tenant
prior to the grant of the lease should not be regarded as rent. What must
matter, surely, is what the payments are due for, rather than how and when the
payments are in fact made. I would follow Foa’s Landlord and Tenant (8th
ed 1957) p 101 in regarding rent as being prima facie ‘the monetary
compensation payable by the tenant in consideration for the grant, however it
be described or allocated,’ though I think that I would insert the word
‘periodical’ before the word ‘monetary.’
I would also pay more attention to modern than medieval concepts in
considering the nature of rent. If the parties to a lease choose to agree that
the lessee shall pay rent to the lessor in respect of a period prior to the
grant of the lease, I do not see why this should not be valid and enforceable.
So far as it goes, I think that M’Leish v Tate (1778) 2 Cowp 781
at p 784 supports the view that rent may still be rent even though it is
reserved in respect of the occupation by a tenant at some time prior to the
execution of the instrument which reserves the rent. Even if this is wrong, and
the payments in dispute, though described as ‘rent,’ are not in law ‘rent,’
strictly so called, I cannot see why the lessors should not enforce payment.
There is nothing to stop a man from being liable on a covenant to pay a sum of
money in respect of some past period.
Mr Moxon
Browne relied to some extent on the tenant holding on the terms of the old lease,
as extended by the Act, from March 24 1974 until May 23 1977: this is the
second period that I mentioned earlier. As during this period the tenant held
at a rent of £312 a year, why should he now pay more? The answer, I think, is that he would be under
no obligation to pay more unless he had bound himself to do so: and on the true
construction of the new lease that is just what he has done. The fact that he
need not have paid more if he had not entered into a new lease, or if instead
he had entered into a differently worded lease, cannot alter the consequences
of what he did do. I know of nothing at common law to prevent a tenant under an
existing tenancy from agreeing to pay
of his existing tenancy. Nor can I see any magic in the Act which would make
the terms of the extended tenancy prevail over those of the new lease. The
position of the tenant during the third period is a fortiori; for his
old tenancy had ended and until the new lease was executed the tenant’s only
right of occupation was by virtue of the agreement evidenced by the consent
order of January 11 1977. That agreement, of course, was for the same rent as
the rent under the new lease, namely, £1,750 a year, and so, whatever the road,
the terminus is £1,750 a year.
I do not think
that any difficulty arises from the payment and acceptance of rent at the rate
of £312 a year after March 25 1974; and, indeed, no difficulty has been
suggested. Obviously credit must be given for the payments made against the
payments due at the rate of £1,750 a year, and the landlord’s claim is, of
course, properly made on that basis. Nor, I think, is there any difficulty in
the fact that the payments at the higher rate have not been made punctually
each quarter day since March 25 1974. No obligation under the new lease to make
these payments could arise until the lease had been executed, and so the
omission to make those payments at any earlier date could not constitute a
breach of covenant.
In the result,
I think that where a lease creates a term of years which is expressed to run
from some date earlier than that of the execution of the lease, the relevant
law may be summarised as follows.
(1) The term created will be a term which commences
on the date when the lease is executed, and not the earlier date.
(2) No act or omission prior to the date on which
the lease is executed will normally constitute a breach of the obligations of
the lease.
(3) These principles do not prevent the parties
from defining the expiration of the term by reference to a date prior to that
of the execution of the lease, or from making contractual provisions which take
effect by reference to such a date, as by defining the period for the operation
of a break clause or an increase of rent.
(4) There is nothing in these principles to
prevent the lease from creating obligations in respect of any period prior to
the execution of the lease.
(5) Whether in fact any such obligations have
been created depends on the construction of the lease; and there is nothing
which requires the lease to be construed in such a way as to avoid, if
possible, the creation of such obligations.
On the facts
of the case before me, these principles and the other matters that I have
discussed point to only one conclusion, namely, that the landlords’ claim
succeeds. The precise terms of the order are for discussion.
