Severance of the reversion–No apportionment of rent agreed by tenants–Still only one contract of tenancy and one holding–Separate notices by reversioners demanding arbitration as to rents of parts not valid
This was a
case stated by an arbitrator, J E Pallett FRICS, for an opinion on a question
of law concerning an arbitration under section 8 of the Agricultural Holdings
Act 1948 between R A G B Stiles, J M R Stiles, J B Stiles and F J B Stiles, the
landlords of Manor Farm, Wellow, near Yarmouth, Isle of Wight, and J W Farrow
and C G Farrow, the tenants. The case was heard by His Honour Judge R Stock in
Newport, Isle of Wight, County Court on December 10 1976.
Hubert Dunn
(instructed by Day, Whately & Gilbert White, of Godalming) appeared for the
landlords. H A C Densham, of Burges, Salmon & Co, of Bristol, represented
the tenants.
The facts were
that Manor Farm, an agricultural holding of some 860 acres, was let to the
tenants under an agreement dated October 29 1962 entered into with the then
landlords, Magdalen College, Oxford. In August 1972 Magdalen College sold part
of the holding, comprising 364 acres, to Mr and Mrs R A G B Stiles and the
remaining part, of 496 acres, to Mr and Mrs J B Stiles, and notice of the
change in identity of the landlords was given to the tenants by the college’s
solicitors. Notice of severance of the freehold reversion was given by the new
landlords’ agents in September 1972, and on completion of the severance, the
tenants were informed of the apportionment of the rent, at that time £3,550 per
annum, agreed between themselves by the new owners, but the tenants never
agreed to nor disagreed with that apportionment. The rent was paid half-yearly
in a single sum. In July 1973 the terms and conditions of the tenancy were
varied by a supplemental agreement and the rent was increased to £8,550 as a
single unapportioned sum.
In 1975 two
notices dated September 25 were given to the tenants by the landlords’ agent, D
A W Brown FRICS, demanding arbitration as to rent under section 8 of the
Agricultural Holdings Act 1948. One notice was in respect of ‘the rent to be
paid for the holding which you hold as tenants of’ Mr and Mrs J B Stiles ‘being
part of the property known as Manor Farm. . . .’ and stated that the other part
was vested in Mr and Mrs R A G B Stiles. The second was given of behalf of Mr
and Mrs R A G B Stiles in respect of their part of the holding and was mutatis
mutandis in similar terms, referring to the other part being owned by Mr
and Mrs J B Stiles. No notice under section 8 in respect of the whole holding
was served either by the landlords or by the tenants.
The questions
of law submitted by the arbitrator for the opinion of the court were whether
the two notices dated September 25 1975 were valid and effective notices to
implement the provisions of section 8; whether the arbitrator had jurisdiction
to determine the rent either (i) for the whole holding, or (ii) for the severed
parts thereof; and, if the answer to (ii) was in the affirmative, whether the
arbitrator should make separate awards in respect of each of the severed parts.
Giving judgment,
JUDGE STOCK said that Mr Dunn for the landlords had agreed, indeed could hardly
have contended otherwise, that the whole property was comprised in one tenancy
and constituted one agricultural holding. It was clear from the judgment of
Stamp LJ in Jelley v Buckman [1974] QB 488 that severance of the
freeholder’s reversionary interest did not create a new tenancy, and bearing in
mind that provision and looking at the agreement between the parties dated July
2 1973 it was quite clear that the whole farm, comprising over 800 acres,
constituted one holding and was comprised in one contract of tenancy.
Mr Dunn had
submitted that the two notices given under section 8 should be read together;
but in his (Judge Stock’s) view that was not possible. One only had to look at
each of the demands for reference to arbitration. Both specifically included
part of the holding and specifically excluded the remaining part. It was not
possible to read the two notices together. It had then been argued on behalf of
the landlords that the combined effect of section 140 and section 141 (2) of
the Law of Property Act 1925 was that to each of the severed parts of the
freehold interest in the land there was attached the right to give notice
pursuant to section 8 of the 1948 Act in respect of that part. The obligations
of the tenant in the original tenancy agreement included an obligation ‘To pay
the said rent hereinafter reserved or any rent substituted therefor by
agreement or by arbitration under the provisions of section 8 of the
Agricultural Holdings Act 1948. . . .’
Mr Dunn argued that there was thus an obligation in the tenancy
agreement whereby the tenant was under a contractual duty to pay the rent as
fixed by arbitration or agreed; therefore section 141 (2) of the Law of Property
Act 1925 operated as there was a covenant or provision which the owner of a
severed part was entitled to enforce by taking proceedings in respect of his
part of the reversion. On the other hand, Mr Densham, for the tenants,
submitted that sections 140 and 141 related only to contractual rights and had
no bearing on statutory rights, and that seemed to him (his Honour) to be
correct. The right to appoint an arbitrator and to proceed under the 1948 Act
was a statutory right; all the lease did was to impose an obligation to pay
rent as fixed following the exercise of the statutory right. It was implicit
that the landlord could recover the increased rent even without the express
contractual provision. That would exist in any event. It did not affect the particular
manner in which the statutory right was to be exercised. That was contained in
the statutory provisions and in particular the statutory provision which stated
that ‘the landlord may give notice. . . .’
Finally it was
said on behalf of the landlord that one should look at the statute as a whole,
and in particular sections 60 and 61 and the compensation provisions contained
in sections 32 to 59, and that it was clear from those provisions that the term
‘holding’ was used so as to include ‘part of a holding.’ It seemed to him (Judge Stock) clear from
those provisions, without looking at them in detail, that when the Act intended
the provisions to apply to part of a holding it said so. So where, as in
section 8, there was no provision for notice to be given in respect of part of
a holding, one could read into that section such a provision on the basis that
that fell within the general scheme of the Act. It followed, therefore, that
the answer to the first question posed in the statement of special case was in
the negative; the two notices were not valid and effective notices because they
should have been given by the landlord (the singular including the plural) and
in respect of the holding and not by the landlords of the severed parts in
respect of the portions of the holding which they respectively owned.
When one
looked at the other questions one saw the great difficulties that would be
presented if any other answer were given. If, for example, the arbitration had
been pursued in respect of one part only, what would be the rent payable for
the other part and what would happen to it?
It had not been apportioned, but supposing the arbitrator were entitled
to, and did in fact, assess the rent payable for the part in respect of which
the arbitration had been pursued at, say, £6,000 per annum, what would be the
rent for the other part? There would be
no guide at all if the owner of one part were to apply for arbitration and the
owner of the other part were not. There was considerable force in the argument that
when there was only one holding the rent could only be revised in respect of
that whole holding. It was true, as Mr Densham said, that the sum of the parts
(in rental terms) did not necessarily equal the whole. It could readily be
seen, as he submitted, that if the freehold interest in the holding were
severed so that one part comprised all the buildings and not much land and the
other part comprised most of the land but no buildings an anomalous situation
would arise. So far as the land with the buildings were concerned, in view of
perhaps onerous repairing obligations on the tenant those buildings would in
large part prove to be a liability, since the excess buildings would be useless
for the small acreage. Then, if one looked at the larger acreage without the
buildings, the rent would be depressed in respect of that part because of the
large acreage not provided with any buildings. It was clear from section 2 of
the Agriculture Act 1958, which amended the valuation provisions contained in
section 8 (1) of the 1948 Act, that the arbitrator must look at the rent of the
holding referred to him and it was not possible for him to take into account
other property. There was also force in another illustration given by Mr
Densham where the ownership of a small piece of land with very high amenity
value because of the demands, for example, for the use of the land as grazing
for ponies, might be severed from the remainder of the holding though remaining
subject to the tenancy, and then the reversionary owner of that small part
might go to arbitration and obtain a rental wholly disproportionate for that
part when viewed as part of a whole holding. The whole scheme of the 1948 Act
said that the landlord of the holding might demand arbitration and therefore
where there was only one holding, only one valid notice could be given and that
should be given by the landlord(s), ie all the four members of the Stiles
family.
The landlords
were ordered to pay the costs of the case stated, to be taxed on scale 4.
