Landlord and tenant — Certainty of term — Whether lease for uncertain duration determinable when landlord requires land for road widening valid as a term — Whether yearly tenancy determined by a notice to quit where no road widening envisaged
agreement dated December 19 1930 the London County Council (‘LCC’) let to a Mr
Nathan a strip of land with a frontage of 36 ft to Walworth Road, Southwark,
London SE17, and a depth of 25ft at a rent of £30 pa from December 19 1930
‘until the tenancy shall be determined as hereinafter provided’ — Clause 6 of
the agreement provided that the tenancy was to continue ‘. . . until the said
land is required by the Council for the purpose of the widening of Walworth
Road and the street-paving works rendered necessary thereby and the Council
shall give two months’ notice to the tenant at least prior to the day of determination
when the said land is so required and thereupon the tenant shall give vacant
possession to the Council . . .’ — The Walworth Road has still not been widened
and the freehold to the land is now vested in the appellant second to fourth
defendants, who, on July 21 1988, purchased the property at auction from the
first defendants, the London Residuary Body (‘the LRB’) — On March 31 1988 the
LRB gave a notice to the respondent plaintiffs, Prudential Assurance Co Ltd, in
which the benefit of the agreement is now vested, pursuant to section 25 of the
Landlord and Tenant Act 1954 seeking to terminate the tenancy on December 19
1988 — Although that notice had no effect under the 1954 Act it was accepted
that a notice under section 25 of the Act is capable of being an effective
common law notice to quit — The Court of Appeal, in reversing the decision of
Millett J, held that, although the agreement could be determined by a notice to
quit when the land was required for road widening, the notice to quit was void
and of no effect
uncertain term, did not create a lease and the tenancy from year to year
enjoyed by the tenant as a result of entering into possession and paying a
yearly rent can be determined by six months’ notice by either landlord or
tenant — The principle in Lace v Chantler that a term must be
certain applies to all leases and tenancy agreements — A power for one party
only to determine is inconsistent with the concept of a term from year to year
— Re Midland Railway Co’s Agreement and Ashburn Anstalt v Arnold
were wrongly decided
The following
cases are referred to in this report.
Ashburn
Anstalt v Arnold (No 2) [1989] Ch 1; [1988]
2 WLR 706; [1988] 2 All ER 147; (1988) 55 P&CR 137; [1988] 1 EGLR 64;
[1988] 23 EG 128, CA
Cheshire
Lines Committee v Lewis & Co (1880) 50
LJQB 121
Doe d
Rigge v Bell (1793) 5 Term Rep 471; 5 Durn
& East 471
Doe d
Warner v Browne (1807) 8 East 165
Lace v Chantler [1944] KB 368
Midland
Railway Co’s Agreement, Re: Clay (Charles) & Sons Ltd v British Railways Board [1971] Ch 725; [1971] 2 WLR 625;
[1971] 1 All ER 1007; (1971) 22 P&CR 360, CA 3680
Say v Smith (1530) 1 Plow 269
This was an
appeal by the second to fourth defendants, Barron Investments Ltd, Alan Moss Bayes
and Joan Estelle Bayes, from the decision of the Court of Appeal ([1991] 1 EGLR
90; [1991] 25 EG 120), which had allowed an appeal by the respondent
plaintiffs, Prudential Assurance Co Ltd, from the judgment of Millett J that
the notice dated March 31 1988 given by the first defendants, the London
Residuary Body, validly determined the agreement of December 19 1930.
Alan Steinfeld
QC and Stephen Lloyd (instructed by Clifford Watts Compton) appeared for the
appellants; David Neuberger QC and Paul de la Piquerie (instructed by Berwin
Leighton) represented the respondents.
In his speech,
LORD TEMPLEMAN said: This appeal arises out of a memorandum of agreement
dated December 19 1930 and said to have created a lease for a term which was
not limited to expire by effluxion of time and cannot now be determined by the
landlord.
By the
agreement, London County Council let to one Mr Nathan a strip of land with a
frontage of 36 ft to Walworth Road, a thoroughfare in Southwark, and a depth of
25 ft at a rent of £30 pa from December 19 1930 ‘until the tenancy shall be
determined as hereinafter provided’. The only relevant proviso for
determination is contained in clause 6, which reads as follows:
The tenancy
shall continue until the said land is required by the Council for the purpose
of the widening of Walworth Road and the street paving works rendered necessary
thereby and the Council shall give two months’ notice to the tenant at least
prior to the day of determination when the said land is so required and
thereupon the tenant shall give vacant possession to the Council of the said
land . . .
By the
agreement, the tenant was authorised to erect ‘temporary one storey shops or
buildings of one storey and for the retention of such shops or buildings as
temporary structures’ until the land was required for road widening and he was
then bound to remove the temporary structures and clear the land. The council
agreed to pay all the costs of road making and paving works. The agreement was
clearly intended to be of short duration and could have been secured by a lease
for a fixed term, say five or 10 years, with power for the landlord to
determine before the expiry of that period for the purpose of the road
widening. Unfortunately the agreement was not so drafted. Over 60 years later
Walworth Road has not been widened, the freehold is now vested in the appellant
second to fourth defendants, who purchased the property from the first
defendants, the London Residuary Body, after they had issued a notice to quit.
The defendants have no road-making powers and it does not appear that the road
will ever be widened. The benefit of the agreement is now vested in the respondent
plaintiffs, the Prudential Assurance Co Ltd. The agreement purported to grant a
term of uncertain duration which, if valid, now entitles the tenant to stay
there for ever and a day at the 1930 rent of £30; valuers acting for both
parties have agreed that the annual current commercial rent exceeds £10,000.
A demise for
years is a contract for the exclusive possession and profit of land for some
determinate period. Such an estate is called a ‘term’. Thus Coke on
Littleton, 19th ed (1832) para 45b, said:
Terminus in
the understanding of the law does not only signify the limits and limitation of
time, but also the estate and interest that passes for that time.
Blackstone in
his Commentaries, 1st ed (1766) Book II, said, at p 143:
Every estate
which must expire at a period certain and prefixed, by whatever words created,
is an estate for years. And therefore this estate is frequently called a term, terminus,
because its duration or continuance is bounded, limited, and determined: for
every such estate must have a certain beginning, and certain end.
In Say
v Smith (1530) 1 Plow 269 a lease for a certain term purported to add a
term which was uncertain; the lease was held valid only as to the certain term.
Anthony Brown J is reported at p 272 to have said:
Every
contract sufficient to make a lease for years ought to have certainty in three
limitations, viz in the commencement of the term, in the continuance of it, and
in the end of it; so that all these ought to be known at the commencement of
the lease, and words in a lease, which don’t make this appear, are but babble .
. . And these three are in effect but one matter, showing the certainty of the
time for which the lessee shall have the land, and if any of these fail, it is
not a good lease, for then there wants certainty.
The Law of
Property Act 1925, taking up the same theme, provided that:
1. — (1) The only estates in
land which are capable of subsisting or of being conveyed or created at law are
—
(a) An estate in fee simple absolute in
possession;
(b) A term of years absolute.
Section
205(1)(xxvii) was in these terms:
‘Term of
years absolute’ means a term of years . . . either certain or liable to
determination by notice, re-entry, operation of law, or by a provision for
cesser on redemption, or in any other event (other than the dropping of a life,
or the determination of a determinable life interest); . . . and in this
definition the expression ‘term of years’ includes a term for less than a year,
or for a year or years and a fraction of a year or from year to year;
The term
expressed to be granted by the agreement in the present case does not fall
within this definition.
Ancient
authority, recognised by the 1925 Act, was applied in Lace v Chantler
[1944] KB 368. A dwelling-house was let at the rent of 16s 5d per week. Lord
Greene MR (no less) said at pp 370-371:
Normally there
could be no question that this was an ordinary weekly tenancy, duly
determinable by a week’s notice, but the parties in the rent-book agreed to a
term which appears there expressed by the words ‘furnished for duration’, which
must mean the duration of the war. The question immediately arises whether a
tenancy for the duration of the war creates a good leasehold interest. In my
opinion, it does not. A term created by a leasehold tenancy agreement must be
expressed either with certainty and specifically or by reference to something
which can, at the time when the lease takes effect, be looked to as a certain
ascertainment of what the term is meant to be. In the present case, when this
tenancy agreement took effect, the term was completely uncertain. It was
impossible to say how long the tenancy would last. Mr Sturge in his argument
has maintained that such a lease would be valid, and that, even if the term is
uncertain at its beginning when the lease takes effect, the fact that at some
future time it will be rendered certain is sufficient to make it a good lease.
In my opinion, that argument is not to be sustained.
I do not
propose to go into the authorities on the matter, but in Foa’s ‘Landlord and
Tenant’ 6th ed, p 115, the law is stated in this way, and, in my view,
correctly: ‘The habendum in a lease must point out the period during which the
enjoyment of the premises is to be had; so that the duration, as well as the
commencement of the term, must be stated. The certainty of a lease as to its
continuance must be ascertainable either by the express limitation of the
parties at the time the lease is made, or by reference to some collateral act
which may, with equal certainty, measure the continuance of it, otherwise it is
void . . .’
The
legislature concluded that it was inconvenient for leases for the duration of
the war to be void and therefore by the Validation of War-time Leases Act 1944
Parliament provided that any agreement entered into before or after the passing
of the Act which purported to grant a tenancy for the duration of the war:
1.— (1) . . . shall have effect
as if it granted or provided for the grant of a tenancy for a term of ten
years, subject to a right exercisable either by the landlord or the tenant to
determine the tenancy, if the war ends before the expiration of that term, by
at least one month’s notice in writing given after the end of the war; . . .
Parliament
granted the fixed and certain term which the agreements between the parties
lacked in the case of tenancies for the duration of the war and which the
present agreement lacks.
When the
agreement in the present case was made, it failed to grant an estate in the
land. The tenant, however, entered into possession and paid the yearly rent of
£30 reserved by the agreement. The tenant entering under a void lease became,
by virtue of possession and the payment of a yearly rent, a yearly tenant
holding on the terms of the agreement so far as those terms were consistent
with the yearly tenancy. A yearly tenancy is determinable by the landlord or
the tenant at the end of the first or any subsequent year of the tenancy by six
months’ notice unless the agreement between the parties provides otherwise.
Thus in Doe d Rigge v Bell (1793) 5 Term Rep 471 a parole
agreement for a seven-year lease did not comply with the Statute of Frauds, but
the tenant entered and paid a yearly rent and it was held that he was tenant
from year to year on the terms of the agreement. Lord Kenyon CJ said at p 472:
Though the
agreement be void by the Statute of Frauds as to the duration of the lease, it
must regulate the terms on which the tenancy subsists in other respects, as to
the rent, the time of year when the tenant is to quit, etc. . . . Now, in this
case, it was agreed, that the defendant should quit at Candlemas; and though
the agreement is void as to the number of years for which the defendant was to
hold, if the lessor choose to determine the tenancy before the expiration of
the seven years, he can only put an end to it at Candlemas.
Now it is said
that when in the present case the tenant entered pursuant to the agreement and
paid a yearly rent he became a tenant from year to year on the terms of the
agreement including clause 6 which prevents the landlord from giving notice to
quit until the land is required for road widening. This submission would make a
nonsense of the rule that a grant for an uncertain term does not create a lease
and would make nonsense of the concept of a tenancy from year to year because
it is of the essence of a tenancy from year to year that both the landlord and
the tenant shall be entitled to give notice determining the tenancy.
In Doe d
Warner v Browne (1807) 8 East 165 there was an agreement to lease at
a rent of £40 pa and it was agreed that the landlord, W Warner, should not
raise the rent nor turn out the tenant ‘so long as the rent is duly paid
quarterly, and he does not expose to sale or sell any article that may be
injurious to W Warner in his business’. The tenant duly paid his rent and did
not commit any breach of covenant. The landlord gave six months’ notice and it
was held that the notice was good. Those were the days when it was possible to
have a lease for life. Lord Ellenborough CJ asked at p 166:
. . . what
estate the defendant was contended to have?
and whether he were not in this dilemma; that either his estate might
enure for life, at his option; and then according to Lord Coke, such an
estate would, in legal contemplation, be an estate for life; which could not be
created by parol: or if not for life, being for no assignable period, it must
operate as a tenancy from year to year; in which case it would be inconsistent
with and repugnant to the nature of such an estate, that it should not be determinable
at the pleasure of either party giving the regular notice.
Lawrence J
said at p 167:
If this
interest be not determinable so long as the tenant complies with the terms of
the agreement, it would operate as an estate for life; which can only be
created by deed. . . . The notion of a tenancy from year to year, the lessor
binding himself not to give notice to quit, which was once thrown out by Lord Mansfield,
has been long exploded.
In Cheshire
Lines Committee v Lewis & Co (1880) 50 LJQB 121 an agreement for
a weekly tenancy contained an undertaking by the landlord not to give notice to
quit until the landlord required to pull down the demised buildings. Lush J,
after citing Doe d Warner v Browne (1807) 8 East 165, said of
that case, at p 124:
This
reasoning applies with at least equal force to the present case. This is not a
mere constructive tenancy as that was. It is as explicit as words can make it
that the defendants are to hold ‘upon a weekly tenancy at a weekly rental, and
that the tenancy is to be determined by either of the parties on giving a
week’s notice to the other’. There is this difference between the two cases,
that in Doe d Browne v Warner the lessor engaged not to turn out
the tenant so long as he observed the conditions, and in this case Radcliffe
engages that the tenant shall hold until the company require to pull down the
buildings. But, as that is an event which may never happen, the distinction is
merely between the contingency of the tenant breaking the conditions and the
contingency of the company wanting the premises in order to pull them down. The
restriction is as repugnant to the nature of the tenancy in the one case as is
in the other. It is therefore no legal answer to the ejectment to say that the contingency
provided for has not happened.
These
authorities indicate plainly enough that the agreement in the present case did
not create a lease and that the tenancy from year to year enjoyed by the tenant
as a result of entering into possession and paying a yearly rent can be
determined by six months’ notice by either landlord or tenant. The landlord has
admittedly served such a notice. The Court of Appeal have, however, concluded
that the notice was ineffective and that the landlord cannot give a valid notice
until the land is required ‘for the purposes of the widening of Walworth Road’
in conformity with clause 6 of the agreement.
The notion of
a tenancy from year to year, the landlord binding himself not to give notice to
quit, which was once rejected by Lord Mansfield and exploded long before 1807
according to Lawrence J in Doe d Warner v Browne (1807) 8 East
165 at p 167, was, however, revived and applied by the Court of Appeal in Re
Midland Railway Co’s Agreement [1971] Ch 725. In that case a lease for a
period of six months from June 10 1920 was expressed to continue from half-year
to half-year until determined. The agreement provided for the determination of
the agreement by three months’ written notice given by either party to the
other subject to a proviso that the landlords should not exercise that right
unless they required the premises for their undertaking. The successors to the
landlords served six months’ written notice to quit under the Landlord and Tenant
Act 1954 although they did not require the premises for their undertaking. The
Court of Appeal, upholding Foster J, declared that the notice to quit was
invalid and of no effect because the landlords did not require the premises for
their undertaking. The Court of Appeal held that the decision in Lace v Chantler
[1944] KB 368 did not apply to a periodic tenancy and declined to follow Doe
d Warner v Browne (1807) 8 East 165 or Cheshire Lines Committee
v Lewis & Co (1880) 50 LJQB 121. Russell LJ, delivering the judgment
of the court, held that the decision in Lace v Chantler [1944] KB
368 did not apply to a tenancy from year to year and said, at p 733C:
. . . we are
persuaded that, there being no authority to prevent us, it is preferable as a
matter of justice to hold parties to their clearly expressed bargain rather
than to introduce for the first time in 1971 an extension of a doctrine of land
law so as to deny the efficacy of that bargain.
My lords, I
consider that the principle in Lace v Chantler [1944] KB 368,
reaffirming 500 years of judicial acceptance of the requirement that a term
must be certain, applies to all leases and tenancy agreements. A tenancy from
year to year is saved from being uncertain because each party has power by
notice to determine at the end of any year. The term continues until determined
as if both parties made a new agreement at the end of each year for a new term
for the ensuing year. A power for nobody to determine, or for one party only to
be able to determine, is inconsistent with the concept of a term from year to
year: see Doe d Warner v Browne (1807) 8 East 165 and Cheshire
Lines Committee v Lewis & Co (1880) 50 LJQB 121. In Re
Midland Railway Co’s Agreement [1971] Ch 725 there was no ‘clearly
expressed bargain’ that the term should continue until the crack of doom if the
demised land was not required for the landlord’s undertaking or if the
undertaking ceased to exist. In the present case there was no ‘clearly
expressed bargain’ that the tenant shall be entitled to enjoy his ‘temporary
structures’ in perpetuity if Walworth Road is never widened. In any event,
principle and precedent dictate that it is beyond the power of the landlord and
the tenant to create a term which is uncertain.
A lease can be
made for five years subject to the tenant’s right to determine if the war ends
before the expiry of five years. A lease can be made from year to year subject
to a fetter on the right of the landlord to determine the lease before the
expiry of five years unless the war ends. Both leases are valid because they
create a determinable certain term of five years. A lease might purport to be
made for the duration of the war subject to the tenant’s right to determine
before the end of the war. A lease might be made from year to year subject to a
fetter on the right of the landlord to determine the lease before the war ends.
Both leases would be invalid because each purported to create an uncertain
term. A term must be either certain or uncertain. It cannot be partly certain
because the tenant can determine it at any time and partly uncertain because
the landlord cannot determine it for an uncertain period. If the landlord does
not grant and the tenant does not take a certain term, the grant does not
create a lease.
The decision
of the Court of Appeal in Re Midland Railway Co’s Agreement [1971] Ch
725 was taken a little further in Ashburn Anstalt v Arnold [1989]
Ch 1*. That case, if it was correct, would make it unnecessary for a lease to
be of a certain duration. In an agreement for the sale of land the vendor
reserved the right to remain
payment of rent ‘save that it can be required by Matlodge [the purchaser] to
give possession on not less than one quarter’s notice in writing upon Matlodge
certifying that it is ready at the expiration of such notice forthwith to
proceed with the development of the property and the neighbouring property
involving, inter alia, the demolition of the property’. The Court of
Appeal held that this reservation created a tenancy. The tenancy was not from
year to year but for a term which would continue until Matlodge certified that
it was ready to proceed with the development of the property. The Court of
Appeal held that the term was not uncertain because the vendor could either
give a quarter’s notice or vacate the property without giving notice. But, of
course, the same could be said of the situation in Lace v Chantler
[1944] KB 368. The cumulative result of the two Court of Appeal authorities Re
Midland Railway Co’s Agreement [1971] Ch 725 and Ashburn’s case
would therefore destroy the need for any term to be certain.
*Editor’s
note: Also reported also at [1988] 1 EGLR 64.
In the present
case the Court of Appeal were bound by the decisions in Re Midland Railway
Co’s Agreement [1971] Ch 725 and Ashburn’s case. In my opinion, both
these cases were wrongly decided. A grant for an uncertain term does not create
a lease. A grant for an uncertain term which takes the form of a yearly tenancy
which cannot be determined by the landlord does not create a lease. I would
allow the appeal. The trial judge, Millett J, reached the conclusion that the
six months’ notice was a good notice. He was, of course, bound by the Court of
Appeal decisions but managed to construe the memorandum of agreement so as to
render clause 6 ineffective in fettering the right of the landlord to serve a
notice to quit after the landlord had ceased to be a road-widening authority.
In the circumstances this question of construction need not be considered. For
the reasons which I have given the order made by Millett J must be restored.
The respondents must pay the costs of the appellants before the House and in
the courts below.
LORDS
GRIFFITHS, GOFF OF CHIEVELEY and MUSTILL
agreed with the speech of Lord Templeman and the reasons given and did not add
observations of their own.
Agreeing, LORD
BROWNE-WILKINSON said: I agree with the speech of my noble and learned
friend Lord Templeman that this appeal must be allowed for the reasons he
gives. However, I reach that conclusion with no satisfaction.
Before 1930,
Mr Nathan owned shop premises, 263-265 Walworth Road, with a frontage to the
street. The agreement, made in 1930 between London County Council and Mr
Nathan, was part of a sale-and-leaseback arrangement whereby a part of Mr
Nathan’s land (‘the strip’) was sold to the council for road widening. Mr
Nathan retained the freehold of the remainder of nos 263-265. By the agreement,
the strip was leased back to Mr Nathan for continued use, with the rest of
263-265 Walworth Road, until required for road widening. Until today, the
remainder of nos 263-265 together with the strip has been let and occupied as
one single set of retail shop premises with a frontage to the Walworth Road. As
a result of our decision, Mr Nathan’s successor in title will be left with the
freehold of the remainder of nos 263-265 which, though retail premises, will
have no frontage to a shopping street: the council’s successors in title will
have the freehold to a strip of land with a road frontage but probably
incapable of being used save in conjunction with the land from which it was
severed in 1930, ie the remainder of nos 263-265.
It is
difficult to think of a more unsatisfactory outcome or one further away from
what the parties to the 1930 agreement can ever have contemplated. Certainly it
was not a result which their contract, if given effect to, could ever have
produced. If the 1930 agreement had taken effect fully, there could never have
come a time when the freehold to the remainder of nos 263-265 would be left
without a road frontage.
This bizarre
outcome results from the application of an ancient and technical rule of law
which requires the maximum duration of a term of years to be ascertainable from
the outset. No one has produced any satisfactory rationale for the genesis of
this rule. No one has been able to point to any useful purpose that it serves
at the present day. If, by overruling the existing authorities, this House were
able to change only the law for the future I would have urged your lordships to
do so. But for this House to depart from a rule relating to land law which has
been established for many centuries might upset long-established titles. I
must, therefore, confine myself to expressing the hope that the Law Commission
might look at the subject to see whether there is, in fact, any good reason now
for maintaining a rule which operates to defeat contractually agreed
arrangements between the parties (of which all successors in title are aware)
and which is capable of producing such an extraordinary result as that in the
present case.
