Leasehold Reform Act 1967–Claim by joint tenants under long tenancy to acquire freehold–Whether residence condition satisfied–Lengthy absences by tenants for the purpose of sailing their yacht and taking part in races–Analysis of the expression ‘occupying as his residence’ for the last five years or for periods amounting to five years in the last 10 years–Difference in meaning of ‘occupation’ between Rent Acts and Leasehold Reform Act–Here the leaseholders had given instructions that the house should be sublet in their absence and there was a period when their mortgagee was in possession–Physical absence together with a lack of intention to exercise their rights as tenants to occupy the house as their residence meant that the residence qualification for enfranchisement was not fulfilled–County court judge’s decision in favour of tenants reversed
This was an
appeal from a decision of Judge Parker at West London County Court that the
applicants, the present respondents, were entitled under the Leasehold Reform
Act 1967 to acquire the freehold of 3 Cheyne Gardens, London SW3, of which they
became by assignment in 1973 the leaseholders under a long lease at a low rent.
The appellants in the present appeal were Earl Cadogan and another in whom the
freehold of the premises at 3 Cheyne Gardens was vested. The appeal turned
entirely on the question whether the residence qualification for
enfranchisement in section 1(1) of the 1967 Act was satisfied by the
respondents, Commander Trevor Peter Gordon Poland and his wife, who were the
joint leaseholders.
William
Poulton (instructed by Lee & Pembertons) appeared on behalf of the
appellants; A G Steinfeld (instructed by Reynolds, Porter, Chamberlain &
Co) represented the respondents.
Giving the
first judgment at the invitation of Megaw LJ, WALLER LJ said: This is an appeal
from the decision of Judge Parker sitting at West London County Court when he
declared that the applicants, Commander and Mrs Poland, were entitled to acquire
the freehold of a house and premises known as 3 Cheyne Gardens, London SW3. By
a lease dated June 1 1960, 3 Cheyne Gardens was demised to Mr and Mrs Haire for
21 1/2 years from March 25 1960 to September 29 1971 at a rent of £150 per
annum. This was a long lease at a low rent. The lease was assigned to Commander
and Mrs Poland on December 13 1973 who, on the same date, charged the property
to First National Securities Ltd for £17,500. The notice of claim under the
Leasehold Reform Act 1967 is dated December 18 1978, that is to say, the first
possible date. By virtue of section 1 of the Act the tenant had to show
residence for the last five years (or he could have shown five out of the last
10 years). During the greater part of the five years Commander Poland did not
physically occupy the property, and the question is whether the judge was right
to hold that, notwithstanding that fact, the details of which I shall set out
shortly, he can be said to have occupied the house as his residence for those
five years.
The Commander
went into occupation of the house but in August 1974 he went abroad, returning
in November. He wrote to the landlords before leaving, saying: ‘For your
information I am going away for about two months on August 4. I may be letting
the house while I am away.’ In 1975 he
again went abroad. The judge found that the applicants ‘left England for the
purpose of sailing Matchless (their yacht) to South Africa thence to
Brazil, from there to the United States where they intended to take part in the
Newport-Bermuda race, and eventually bring ‘Matchless’ back to England.’ Before going, the applicant wrote asking for
a licence to sublet. While he was away, Commander Poland left behind Mr and Mrs
Rentjel as handyman and cook, and, for a period, Mrs Poland’s mother, who lived
in South Africa, stayed in the house for some months. The property was left
with Harrods to let if they could. The judge found that the ground rent due on
December 25 1975 was not paid and the mortgage instalments fell into arrear.
The applicants’ daughter, Mrs Fisher, was left in charge, but neither she nor
her brother could trace the applicants. I do not set out the details of what
happened during the remainder of 1976, save to say that, on or about December
17 1976, Mr Wordley, on behalf of the mortgagees, took possession of the house
and changed the locks. The judge found that, by December 21, they had taken
possession and this fact had been made clear to the Poland family. Mr Wordley
was threatening to sell the furniture from the house, but held his hand when
Mrs Fisher said that her father would be returning shortly.
The house
suffered considerable storm damage. 1976 was the long, hot summer, and the
gutters had become blocked. When there was very heavy rainfall in the autumn rainwater
poured into the house and ceilings were damaged. Mr and Mrs Rentjel left. Mr
Wordley had been faced with the security of his mortgage deteriorating as a
result of flood damage.
Commander and
Mrs Poland returned to the United Kingdom in January 1977. On February 15 1977
a letter was written on behalf of Mr Wordley to the landlords, saying: ‘Will
you please note that our clients are now mortgagees in possession of 3 Cheyne
Gardens, SW3, and in future all demands for ground rent should be made to them care
of ourselves.’ When asked about the
relationship between Commander Poland and himself, Mr Wordley said, concerning
this period: ‘Commander Poland would have been ejected if he had moved back in
without some payment to us’ and, in another answer: ‘If he had discharged the
outstanding debt we would have let him back in, but not until then.’
On March 18
Commander Poland was handed the keys but, by letter of the same date, he
acknowledged that he held the keys of the property to the order of Mr Wordley
and agreed to return them on demand, and he acknowledged to Mr Wordley
‘That you
peaceably obtained lawful possession with the consent of my family and continue
to remain lawful mortgagee in lawful possession.
(2) That I have no right to possession at the present
time.’
On September 5
1977 Commander Poland signed a letter to Mr Wordley in the following terms:
I acknowledge
that I no longer hold the keys of 3 Cheyne Gardens, SW3, to your order and that
I am lawful mortgagor in possession subject to the terms and conditions of the
original . . . mortgage.
Commander
Poland and his wife reoccupied the house on May 30 1979. This was the earliest
date on which it was possible to reoccupy the house, because until then it was
unfit.
The learned
judge held that, on December 18 1978, Commander Poland was occupying the house
as his residence and he had been doing so for the last five years. Accordingly,
he had the right to acquire the freehold. The landlords now appeal.
Section 1 of
the Leasehold Reform Act 1967 reads as follows:
1. Tenants
entitled to enfranchisement or extension.
(1) This Part of this Act shall have effect to
confer on a tenant of a leasehold house, occupying the house as his residence,
a right to acquire on fair terms the freehold or an extended lease of the house
and premises where–
(a) his tenancy is a long tenancy at a low rent
and subject to subsections (5) and (6) below the rateable value of the house
and premises on the appropriate days is not (or was not) more than £200 or, if
it is in Greater London, than £400; and
(b) at the relevant time (that is to say, at the
time when he gives notice in accordance with this Act of his desire to have the
freehold or to have an extended lease, as the case may be) he has been tenant
of the house under a long tenancy at a low rent, and occupying it as his
residence, for the last five years or for periods amounting to five years in
the last ten years;
and to confer
the like right in the other cases for which provision is made in this Part of
this Act.
(2) In this Part of this Act references, in
relation to any tenancy, to the tenant occupying a house as his residence shall
be construed as applying where, but only where, the tenant is, in right of the
tenancy, occupying it as his only or main residence (whether or not he uses it
also for other purposes); but–
(a) references to a person occupying a house
shall apply where he occupies it in part only; and . . .
It is
submitted on behalf of the appellants, firstly, that Commander Poland and Mrs
Poland were not occupying the house from the time in 1975 when they went abroad
up to and including the date of the notice; secondly, that, in any event, they
were not occupying the house from the time that the mortgagees took possession
in December 1976. The county court judge found in favour of the tenants on both
points.
I will deal first
with the second of the above submissions, namely, the effect of the mortgage.
The judge
found facts as follows: on a date in December ‘in a series of telephone calls
or at a meeting (Mr Wordley) told Mr and Mrs Fisher (the daughter of Commander
and Mrs Poland) and Mr P K Poland that he was advised that First National could
enter into possession as mortgagees by changing the locks and that is what they
intended to do. No member of the Poland family made any protest. Mr Wordley
obtained keys from the builder and changed the locks.’ Then the judge went on in dealing with this
particular point and said this:
There must be
many circumstances in which the actions of a mortgagee in seeking to enforce
his charge might well prevent the mortgagor from occupying premises as his
residence. The mortgagee might arrange for supplies of water and electricity to
be cut off, he might (as First National threatened to do) sell the furniture
and household effects. There may well be circumstances in which the changing of
the locks would be sufficient. It is important, however, to look at the
changing of the locks in this case in its context. At the time the house was
uninhabitable. Commander and Mrs Poland could not have lived there even if they
had wanted to. Certainly Mr Wordley did not expect them to. I bear in mind that
Mr Wordley said ‘Commander Poland would have been ejected if he had moved back
in without making some payment to us.’
The judge then
said that, because the threat to sell the furniture was not carried out, because
Commander Poland was allowed to go to the premises and was given keys, and
because the premises were uninhabitable, he came to the conclusion that the
actions of First National did not interrupt the applicants’ occupancy.
I cannot
agree. The question is: was Commander Poland ‘occupying the house as his
residence’? The fact that he went to the
house by permission of Mr Wordley cannot make him occupy it as his residence.
It was certainly not in right of a tenancy, as subsection (2) requires, when he
went there. Furthermore, in the letter of March 18 1977, Commander Poland made
it absolutely clear that he was going with the permission of Mr Wordley and not
otherwise. In my judgment, it cannot possibly be said that Commander Poland was
occupying the house as his residence between December 1976 and September 5
1977.
I now consider
the argument which the appellants regard as more important, namely, whether
Commander Poland and Mrs Poland were or were not occupying the house as their
residence from October 1975 until the time of the notice.
In argument
before the county court judge it was submitted that, having regard to the terms
of section 3(2) of the Rent Act 1968, cases decided under the Rent Act did not
assist in deciding what was required to comply with section 1 of the Leasehold
Reform Act. Reference has also been made to Brown v Brash [1948]
2 KB 247. I have found the analysis of occupation in the judgment of Asquith LJ
extremely helpful. But, in my opinion, it is also helpful to look at both
sections–ie section 3(2) of the Rent Act 1968 as well as section 1 of the
Leasehold Reform Act–in order to ascertain the way in which section 1 of the
Leasehold Reform Act should be interpreted. Section 1 requires the tenant to
have been occupying the house as his residence for the last five years and, by
subsection (2), that is to be construed as ‘applying where, but only where,
the tenant is, in right of the tenancy, occupying it as his only or main
residence.’ I emphasise the words ‘only
where’ because it shows that the section should be applied strictly. Section
3(2) of the Rent Act 1968 reads as follows:
(2) In paragraph (a) of subsection (1) above and
in Schedule 1 to this Act, the phrase ‘if and so long as he occupies the
dwelling-house as his residence’ shall be construed as requiring the fulfilment
of the same, and only the same, qualifications (whether as to residence or
otherwise) as had to be fulfilled before the commencement of this Act to
entitle a tenant, within the meaning of the Increase of Rent and Mortgage
Interest (Restrictions) Act 1920, to retain possession, by virtue of that Act
and not by virtue of a tenancy, of a dwelling-house to which that Act applied.
It is
important to notice the words ‘the same, and only the same, qualifications.’
It seems to me
that, comparing those two sections, they are each confining the definitions
strictly, but strictly with different emphases. In the Rent Act the meaning of
‘occupation’ is to be construed for the purposes of the Rent Act as it had been
up to that time. Were it not for section 3 there might be other qualifications
to be included. The object of the Rent Act was to provide accommodation for
persons and, in cases under the Rent Acts, occupation had been very much
discussed and the law made clear. In the Leasehold Reform Act, which is
concerned with conferring the right to acquire on fair terms a freehold or
extended lease of the house, occupation is restricted to those cases where, and
only where, ‘the tenant is, in right of the tenancy, occupying (the house) as
his only or main residence.’
There is a
further provision in the Leasehold Reform Act which enables a tenant to qualify
if he has occupied the house as his residence ‘for the last five years of for
periods amounting to five years in the last ten years.’ This clearly contemplates periods when the
residential occupation is interrupted. But, if the interruptions were to be
confined to sublettings, I would have expected the subsection to say so.
How should the
test be applied in relation to the Leasehold Reform Act? Going away for a short holiday clearly does
not involve a break but, when asking whether the tenant is occupying it as his
residence when he is not physically living in it, the court must look more
critically than under the Rent Act. As in the case of the Rent Act it is a
question of fact and degree; but to adopt precisely the same criteria does not
give effect to the differences, eg ‘and only the same’ in the Rent Act and the
five years out of 10 which qualifies under the Leasehold Reform Act. The
difference lies in the purposes of the two Acts. The Rent Acts are to provide
accommodation and the court need only look at the qualifications established
prior to 1968. The Leasehold Reform Act is to enable a tenant to acquire
compulsorily a greater interest in his house. It confers a right on a tenant
who can fulfil certain conditions to acquire compulsorily the freehold
belonging to his landlord on terms prescribed in the Act. The terms are laid
down in the Act to be fair terms but, nevertheless, the landlord has no choice.
It is compulsory.
In my opinion,
the words ‘where but only where’ themselves imply a strict approach and,
therefore, ‘occupying it as his only or main residence’ must be approached to
see whether the occupation has been of a nature to entitle the tenants to the
benefit of a compulsory freehold or extended lease. Furthermore, the phrase
‘occupying as’ implies an existing state of affairs. It is not ‘for the purpose
of’ his only residence. It is ‘as his only residence.’ Once it becomes clear that the tenant is not
physically in occupation the onus is firmly on him to show that the steps which
he has taken to maintain occupation are clear. Going away for a short holiday
is simple, but the longer the period the more difficult it becomes to infer
continued occupation. If the family (wife or children) are still in physical
occupation, then the position is clear, but to infer occupation because
furniture is left in the house or because there is a caretaker requires closer
examination. If the period is short the inference of continued occupation may
be easy, but where many months are concerned very much more doubtful. The
tenant does not lose the benefit of his periods of genuine occupation because
of the provisions allowing aggregation.
I should be
reluctant to upset the judgment of the county court judge on a question of
primary fact, but there is no dispute about the primary facts. Here the
question is one of mixed fact and law. It is the approach to these primary
facts and the inferences to be drawn.
In my
judgment, bearing in mind the considerations that I have mentioned above as to
the different emphasis and approach under the Leasehold Reform Act and
accepting, as I do, the findings of primary fact by the learned judge, I am
satisfied that Commander Poland’s arrangements about subletting were such as to
make him cease to occupy the house as his residence. He was physically abroad
and had left it to his daughter and Harrods to sublet. It was not a mere
intention. In my judgment, from the time he left the house having that
intention he was no longer ‘occupying it as his only or main residence.’
I would,
therefore, allow the appeal.
Agreeing,
EVELEIGH LJ, whose judgment was read by Waller LJ, said: In Halsbury’s Laws
of England 3rd ed vol 14 at p 15 it is stated:
An occupier
is one who actually exercises the rights of an owner in possession. The primary
element of occupation is possession, but it includes something more, for mere
legal possession cannot constitute an occupation. The owner of a vacant house
is in possession, though not in occupation; but, if he furnishes the house and
keeps it ready for habitation, he is an occupier, though he may not have
resided in it for a considerable time. . . . So a trader occupies premises by
merely keeping his stock, tools, vehicles or other goods upon those premises. A
merchant or businessman occupies an office or counting house by using it during
ordinary hours by himself or his clerks for the purpose of his business.
In R v St
Pancras Assessment Committee (1877) 2 QBD 581, Lush J said at p 588:
Occupation
includes possession as its primary element but it also includes something more.
Legal possession does not, of itself, constitute an occupation. The owner of a
vacant house is in possession, and may maintain trespass against anyone who
invades it, but as long as he leaves it vacant he is not rateable for it as an
occupier. If he, however, furnishes it and keeps it ready for habitation
whenever he pleases to go into it he is an occupier, though he may not reside
in it one day in a year.
That passage
was adopted by Hood J in Poowong Shire v Gillen (1907) VLR 37 at
p 40.
In Martin
Estates Co Ltd v Watt and Huntern [1925] NI 79 at p 85, Moore LJ
said:
Occupation
means that the owner is in actual physical enjoyment of the house, property or
estate by himself, his agents or servants. Strictly speaking, occupation by the
owner cannot include the case of subtenants for the actual occupation is in
them. A limited form of occupation is residence which involves the dwelling for
some period of the year on the premises personally of the owner or his family,
or alternatively at least of his domestic servants.
I find
assistance in the present case from the above quotations but must, of course,
bear in mind that we have to construe the precise words of section 1 of the
Leasehold Reform Act 1967 ‘occupying it as his residence.’ I do not regard these words as the equivalent
of ‘lives and resides.’ In Re Gibbons
[1920] 1 Ch 372 at p 379 Lord Sterndale MR said:
The
difference between the words ‘reside’ and ‘occupy’ and ‘enjoy the use of’ is
perfectly well known. If he meant to restrict it to residence I do not see the
reason for his not using the appropriate word ‘reside.’
I am of the
opinion that a person may occupy premises as his residence, even though he is
absent for a very long period. It may well be, however, that a long absence
will necessitate the acquisition of another residence which will prevent the
tenant from claiming that the premises were his ‘only or main residence,’ which
is the requirement of section 1(2) of the Act. It seems to me that, if a person
takes the tenancy of a house and furnishes it and keeps it ready for his own
habitation ‘whenever he pleases to go into it,’ he is, as Lush J said, ‘an
occupier, though he may not reside in it one day in a year,’ and I would
further say that he occupies it as a residence. Moreover, I would say that he occupies
it as his residence provided that it is understood that the expression ‘his
residence’ is not used in a context which implies his main residence. It means
he keeps it for himself to live in. If, however, he sublets the property, he
ceases to occupy it as his residence because, as Moore LJ explained (supra),
the occupation is in the subtenant. It may not be inaccurate, however, still to
refer to the premises as his residence. That in isolation would be a
permissible description of the property, but it does not mean that he is in
occupation.
However, in
considering the present case, one must concentrate upon the actual words in the
Act ‘occupying it as his residence for the last five years or for periods
amounting to five years in the last ten years.’
The words ‘occupying as his residence’ taken in conjunction with the
recognition of periods amounting to five years in the last 10 years indicate to
me that the period or periods contemplated by the subsection are those periods
when he is using and enjoying the property as a residence for himself. He may
do this, although he is absent from the premises. In such a case, as I have
said, the premises may then be unlikely to be his main residence.
The facts
referred to in the judgment of Waller LJ and those specifically emphasised by
Megaw LJ lead to the conclusion, in my judgment, that Commander Poland was not
during the disputed period occupying the premises as his residence. He was not
keeping it ready for habitation by himself whenever he pleased to go into it.
He did not intend to exercise his right as a tenant to occupy the house as his
residence at any time during that period.
During the
period when the mortgagee was in possession the case permits of a short answer.
Commander Poland could not exercise the rights of an owner in possession and
could not be regarded as the occupier.
Also agreeing,
MEGAW LJ said: When Commander Poland and his wife left England in early October
1975 they intended that the house should be sublet. They left instructions that
the necessary steps should be taken to that end. An estate agent had, in fact,
been instructed. It appears from the evidence that Commander Poland, during his
absence abroad, believed, or at least hoped, that the house had in fact been
let, in accordance with his intention. That was at least one reason why,
according to Commander Poland, the rent which became due from him to his
landlords remained unpaid during his absence abroad. He believed that those
whom he had left in charge of his affairs (in so far as he did leave anyone in
charge) would be in funds to pay, and would be duly paying, the rent out of the
money which they as his agents were receiving, so he thought, from the
subletting.
[His lordship
referred to letters written by Commander Poland and to a paragraph in the
judgment of Judge Parker.]
Whatever may
be the relationship between the criteria applicable, respectively, in assessing
‘occupying as his residence’ in section 1 of the Leasehold Reform Act 1967 and
in section 3(2) of the Rent Act 1968, it seems to me that, as regards the
former statutory provision, a tenant cannot be said to be occupying a house as
his residence during a period of time in respect of which he has no intention
of occupying it or residing in it because of his belief, or expectation,
whether it is accurate or not, that he has given up his legal right to occupy
or reside in the house. He has, in respect of that period of time, to use the
expression used in the judgment of the court in Brown v Brash
[1948] 2 KB 247 at p 255, no animus possidendi: no intention of
asserting or exercising an immediate right of possession. That is an essential
element.
The tenant may
have the intention of resuming occupation as his residence in the future. For
the purposes of section 1 of the 1967 Act, progress toward the achievement of
the five-year qualification period may resume after intermission. But the
period of intermission cannot itself count towards the five-year period.
‘Occupying as his residence’ necessarily involves as one essential element–at
any rate where the tenant is not, in the ordinary sense of the words, actually
living in the house–the tenant’s own state of mind as to his relationship
with–his legal rights as to occupation of–the house. If his own state of mind
is the belief or expectation that he has by his own act put it outside his
lawful right to occupy the house as his residence, as and when he wills, during
a period of time, then he cannot be regarded as occupying it as his residence
during that period. He has no animus possidendi.
With great
respect to the learned judge and to his very careful judgment, I disagree also
with his conclusion that Commander Poland and Mrs Poland could, on any
permissible interpretation of section 1 of the Act, be regarded as occupying
the house as their residence between December 1976 and September 1977, when the
mortgagees had lawfully taken possession and would have lawfully prevented the
tenants from residing in the house if they had sought to do so.
The appeal
was allowed with costs in the Court of Appeal and below. Leave to appeal to the
House of Lords was refused.
