Landlord and Tenant Act 1954, Part I — Subtenancy of flat granted to appellant for a term longer than residue of headlease — Effect of grant as assignment of headlease — Whether appellant in consequence acquired a long tenancy at a low rent protected by Part I of 1954 Act — Whether appellant’s flat was let as a separate dwelling — Appellant’s tenancy failed to fulfil the qualifying condition — Flat not let as a separate dwelling — Unfortunate result for appellant — No security of tenure and no recoupment of capital expenditure
obtained the tenancy of a basement flat from a headlessee, a company which was
in negotiation with the freeholders for the surrender of the headlease and
about dilapidations — The headlease was due to expire on December 25 1987 but
the company, some 39 days before the expiry date, sublet the basement to the
appellant for a term of three years, at a rent of £2,400 a year — This may have
been an attempt to confer some security on the appellant, but, as will be seen,
it was mistaken — The appellant spent some £35,000 on works to the flat, in
fact all her capital resources — The freehold landlords became aware that works
were in progress, some of them in breach of covenants in the headlease
prohibiting alterations and the cutting of principal walls — The landlords
served a section 146 notice and later a writ claiming forfeiture of the
headlease — Early in 1988 they re-entered on the basement, which was apparently
unoccupied and full of builder’s materials and unpacked furniture — The
appellant, however, managed to get back into occupation and the landlords added
her to their action against the company lessees
appellant’s contentions at the trial were that the agreement, which on the face
of it granted her a subtenancy of the basement, operated as a matter of law as
an assignment of the residue of the head tenancy in respect of the flat; that
her assignment tenancy of the basement came to an end on the term date of the
headlease, December 25 1987; that the rateable value of the basement flat was
at all times within the Rent Act limits; and that the end result was that the
appellant acquired a long tenancy at a low rent protected by the provisions of
Part I of the Landlord and Tenant Act 1954 — There was also an allegation of
estoppel at the trial but this was rejected by the judge and there was no
appeal in respect of it — The judge rejected the appellant’s contentions as a
whole and granted the landlords, Grosvenor Estate Belgravia, possession of the
basement flat — The judge expressed sympathy with the appellant, who had spent
money on the landlords’ property and now found herself with no security of
tenure — She appealed
of Appeal the relevant statutory provisions were examined in detail together
with some relevant case law — It was clear that the fatal flaw in the
appellant’s case was that she did not fulfil the ‘qualifying condition’ in
section 2(1) of the Landlord and Tenant Act 1954 — That condition required that
the circumstances were such that on the coming to an end of the long tenancy
the tenant would, if the tenancy had not been one at a low rent, be entitled by
virtue of the Rent Act to retain possession of the property comprised in the
tenancy — The qualifying condition therefore threw one back on section 1 of the
Rent Act 1977, which required the tenancy to be one under which the flat was
‘let as a separate dwelling’ — Unfortunately, the flat in this case was not let
to the appellant or anyone else as a separate dwelling; it was let under the
headlease with the rest of the premises comprised in that lease, 15 and 16 West
Halkin Street, London SW1 — Perhaps, as Ralph Gibson LJ suggested, if the
appellant had been granted a tenancy for one month and thereafter a weekly
tenancy, she would have been protected as a statutory tenancy against the
landlords, provided that she could show that she was in occupation of the
basement flat as her residence — As it was, the appellant had lost her security
of tenure and money spent on works to the flat (unless the plea voiced by
Nourse LJ at the end of his judgment were to produce some effect)
also rejected an alternative submission on behalf of the appellant, based on
section 137(3) of the Rent Act 1977, which meant interpreting the words ‘is
itself subject to a protected or statutory tenancy’ as if they included a
tenancy which would be a protected tenancy if it were let at a rack rent — This
was an unacceptably extended construction
was dismissed
The following cases are referred to in
this report.
Brown v Brash [1948] 2 KB 247; [1948] 1
All ER 922, CA
Cadogan v Henthorne [1957] 1 WLR 1;
[1956] 3 All ER 851
Cow v Casey [1949] 1 KB 474; (1949)
65 TLR 84; [1949] 1 All ER 197, CA
Crown Lodge Investments (Surbiton) Ltd v Nalecz [1967] 1 WLR
647; [1967] 1 All ER 489, CA
Haines v Herbert [1963] 1 WLR 1401;
[1963] 3 All ER 715, CA
Herbert v Byrne [1964] 1 WLR 519; [1964]
1 All ER 882, CA
Horford Investments Ltd v Lambert [1976] Ch
39; [1973] 3 WLR 872; [1974] 1 All ER 131; (1973) 27 P&CR 88, CA
Knightsbridge Estates Trust Ltd v Deeley [1950] 2 KB
228; [1950] 1 All ER 577; (1950) 66 TLR 867, CA
Milmo v Carreras [1946] KB 306
Palmer v McNamara Unreported The
Times November 18 1990
Regalian Securities Ltd v Ramsden [1981] 1 WLR
611; [1981] 2 All ER 65; (1981) 14 HLR 84, HL
Whitham v Bullock [1939] 2 KB 81; [1939]
2 All ER 310; (1939) 55 TLR 617, CA
This was an appeal by Miss Diana Cochran
from the decision of Judge Phelan, at West London County Court, whereby he ordered
that the plaintiffs (the present respondents), Grosvenor Estate Belgravia,
should recover possession of the basement flat at 15-16 West Halkin Street,
London SW1.
Norman Primost and James Guthrie
(instructed by Philip Conway Thomas) appeared on behalf of the appellant; Kirk
Reynolds (instructed by Boodle Hatfield) represented the respondents.
Giving the first judgment at the
invitation of Lloyd LJ, RALPH GIBSON LJ said: Miss Diana Cochran, the
appellant, appeals from the decision of His Honour Judge Phelan given on March
5 1990 in West London County Court whereby he ordered that Grosvenor Estate
Belgravia (‘the landlords’) should recover possession of the basement flat at
15-16 West Halkin Street, London SW1.
The judge was greatly concerned by the
apparent injustice to the appellant which the rules of law might have worked
upon her in the unusual circumstances of this case. He said that she was an
innocent victim of very bad advice. On his view of the law, she had no right to
remain in her flat even if, contrary to his findings upon the facts, she had at
the relevant time been in occupation of the flat as her residence. She had
spent capital, in the order of £35,000, upon the landlords’ property but had no
right to remain in possession under the Rent Acts or under Part I of the
Landlord and Tenant Act 1954. The question as to how many of the items of
furniture and equipment purchased by the appellant may be removable by her has
not been examined.
This state of affairs has come about, if
the judge was right, because of the working of a long-established principle of
the common law relating to landlords and tenants upon the provisions of
statutes intended to protect tenants in the occupation of their homes. The
principle to which I refer is that where there is a grant of a subtenancy for a
term equal to or in excess of the remainder of the term vested in a mesne
landlord the subtenancy operates as an assignment by operation of law of the
lease vested in the mesne landlord: Milmo v Carreras [1946] KB
306. If the appellant had been a lawful subtenant in occupation of the flat as
her home she would have had a right to remain in it. As an assignee of the
headlease as to the basement flat she had no right to remain, according to the
decision of the judge, even if she were resident in it as her home at the
material date.
In my judgment, for the reasons which
follow, the learned judge was correct in his view of the law and this appeal
must fail.
Facts and proceedings
(i)
By a lease dated August 20 1925 (‘the headlease’) the Duke of
Westminster let to a Mrs Wood property described as 15-16 West Halkin Street
and 16 Halkin Mews for a term of 63 years expiring on December 25 1987 at a
rent of £500 pa. It was provided in the lease that the demised premises should
be used as private residential flats. It is common ground that the premises
were then divided into flats, although there has been some change in the
division over the years, and that by that lease neither the premises as a whole
nor any part thereof were or was let as a separate dwelling. The lease
prohibited assignment by deed of the premises or any part thereof without
written consent, but there was no prohibition on subletting.
(ii)
The reversion was assigned by the Duke to the landlords in 1940. In June
1985 the headlease was assigned to Conway Associates Ltd (‘the company’). The
premises were at that time divided into some 13 flats. In November 1987 the
basement, which at one stage had been divided into two flats, was empty. The
company was in negotiation with the landlords for the surrender of the
headlease and for some compromise upon a payment for dilapidations in respect
of which a notice had been served in 1986. The negotiations were broken off.
The basement flat was offered to the appellant by Mr Conway, a director of the
company. She decided to take it and made arrangements for substantial works of
improvement to be carried out. On November 16 1987, some 39 days before the end
of the headlease, the company let to the appellant the basement, described as flats
L and M, at the premises for a term of three years at a rent of £2,400 pa. The
letting was made by an agreement in writing and not by deed.
(iii)
The appellant, before taking the tenancy, had obtained estimates for the
repair, renovation and redecoration of the basement flat. Her sister lived in
another flat in 15-16 West Halkin Street. The appellant moved some of her
possessions into the basement flat before the grant of the tenancy and she
moved some or all of them out and in again thereafter, depending upon the
progress of the works. It was at all times her intention to make her home in
the basement flat but, in the view of the judge, she did not go into ‘actual
and personal occupation, residential in quality’ at any time before January
1988. Her home before that date was, he held, in her sister’s flat.
(iv)
On December 3 1987 the landlords became aware, through an inspection by
their building surveyor, that works were being carried out in the basement.
Part of that work constituted a breach of the covenant in the headlease, which
prohibited alterations to any part of the premises and cutting of principal
walls. On December 8 1987 a section 146 notice in respect of those breaches was
served on the company. On December 14 1987 a writ was served by the landlords
on the company, claiming forfeiture of the headlease. On January 13 1988
judgment for possession was obtained in default of defence. On February 3 1988
the landlords re-entered upon the basement, which was then apparently
unoccupied, being full of builder’s materials and of unpacked items of
furniture. There were fittings for the kitchen and for the bathroom, but they
had not been installed or plumbed in. The appellant got into occupation, or got
back into occupation, of the basement flat on February 4 1988.
(v)
By order of March 7 1988 the appellant was added as a defendant in the
landlords’ action against the company; execution was stayed as against her and
the proceedings transferred to the county court.
(vi)
The case for the appellant at the trial was originally that the tenancy
agreement of November 16 1987 operated as an assignment to her of the residue
of the term of the headlease in respect of the basement flat to December 25
1987; on that date her contractual tenancy terminated; and she became a
statutory tenant under the Rent Act 1977 pursuant to section 2 and/or section
137(3). There was also a contention that by reason of certain alleged
representations the landlords were estopped from denying that the appellant had
a valid tenancy. By amendment at the trial the appellant claimed that her
tenancy, acquired by assignment by operation of law through the grant of the
tenancy agreement, was a long tenancy at a low rent protected by Part I of the
1954 Act.
(vii)
The allegation of estoppel was rejected by the learned judge and there
has been no appeal against that finding. It has not been alleged that the
expenditure of money by the appellant upon the flat gave rise to any equity
which she could enforce against the landlords.
(viii)
The rateable value of the basement flat was at all times within the
limits for protection under the Rent Acts.
(ix)
Although, as against the company, the headlease was terminated by
forfeiture on December 8 1987, the writ was not then served on the appellant.
It has been common ground in this court that the appellant’s assigned tenancy
of the basement under the headlease came to an end at the term date on December
25 1987.
Statutory provisions
For examination of the submissions made
for the appellant, it is necessary to set out the relevant parts of the 1977
Act and of the 1954 Act. The effect of the tenancy agreement for three years
dated November 16 1987, as vesting in the appellant from that date until
December 25 1987 the tenancy of the basement flat under the headlease, has not
been disputed by the landlords. It was accepted by the judge and is plainly
right. Upon the coming to an end of that tenancy the appellant became entitled
to a statutory tenancy of the basement flat if that tenancy was a protected
tenancy and if she was then occupying the dwelling-house as her residence. The
question whether a tenancy is a protected tenancy is to be answered by
reference to certain questions which include whether the premises ‘is let as a
separate dwelling’ and whether the premises or the tenancy fall within any of
the exceptions from protection.
The Rent Act 1977 provides:
1. — Subject to this Part of this Act, a
tenancy under which a dwelling-house (which may be a house or part of a house)
is let as a separate dwelling is a protected tenancy for the purposes of this
Act.
2. — (1)
Subject to this Part of this Act —
(a) after the termination of a protected tenancy
of a dwelling-house the person who, immediately before that termination, was
the protected tenant of the dwelling-house shall, if and so long as he occupies
the dwelling-house as his residence, be the statutory tenant of it . . .
Section 4 defines exceptions by reference
to dwelling-houses above certain rateable values. The details are not relevant.
It was common ground that the appellant’s tenancy of the basement under the
assignment at an apportioned part of the 1925 rent of £500 pa was a tenancy at
a low rent.
Section 5 deals with tenancies at low
rents:
(1)
a tenancy is not a protected tenancy if under the tenancy either no rent
is payable or . . . the rent payable is less than two-thirds of the rateable
value which is or was the rateable value of the dwelling-house on the
appropriate day.
Section 137 deals with the effect upon
subtenancies of determination of superior tenancies. The appellant relied on
subsection (3), which provides:
(3)
Where a dwelling-house —
(a) forms part of premises which have been let as
a whole on a superior tenancy but do not constitute a dwelling-house let on a
statutorily protected tenancy; and
(b) is itself subject to a protected or statutory
tenancy,
then, from the coming to an end of the
superior tenancy this Act shall apply in relation to the dwelling-house as if,
in lieu of the superior tenancy, there had been separate tenancies of the
dwelling-house and of the remainder of the premises, for the like purposes as
under the superior tenancy, and at rents equal to the just proportion of the
rent under the superior tenancy.
The alternative claim for the appellant,
which became the principal argument in this court, was based upon the 1954 Act.
An account of the ways in which protection has been given to tenants on long
tenancies over the years by different enactments is set out in Chapter 7,
section 14, of Megarry’s The Rent Acts 11th ed, 1988, at pp 164-167.
The relevant provisions of the Landlord
and Tenant Act 1954, Part I, are now as follows:
1. — On the termination in accordance with
the provisions of this Part of this Act of a tenancy to which this section
applies the tenant shall be entitled to the protection of the Rent Act subject
to and in accordance with those provisions.
2. — (1)
The foregoing section applies to any long tenancy at a low rent, being a
tenancy as respects which for the time being the following condition
(hereinafter referred to as ‘the qualifying condition’) is fulfilled, that is
to say that the circumstances (as respects the property comprised in the
tenancy, the use of that property, and all other relevant matters) are such
that on the coming to an end of the tenancy at that time the tenant would, if
the tenancy had not been one at a low rent, be entitled by virtue of the Rent
Act to retain possession of the whole or part of the property comprised in the
tenancy.
. . .
(4)
In this Part of this Act the expression ‘long tenancy’ means a tenancy
granted for a term of years certain exceeding twenty-one years, whether or not
subsequently extended by act of the parties or by any enactment.
(5)
In this Part of this Act the expression ‘tenancy at a low rent’ means a
tenancy the rent payable in respect whereof . . . is less than two-thirds of
the rateable value of the property comprised in the tenancy; . . .
Express provision is made by section
22(3) with reference to determining whether property ‘was let as a separate
dwelling’:
In determining, for the purposes of any
provision of this Part of this Act, whether the property comprised in a
tenancy, or any part of that property, was let as a separate dwelling, the
nature of the property or part at the time of the creation of the tenancy shall
be deemed to have been the same as its nature at the time in relation to which
the question arises, and the purpose for which it was let under the tenancy
shall be deemed to have been the same as the purpose for which it is or was
used at the last-mentioned time.
Submissions for the appellant
Mr Primost’s primary submission was based
on Part I of the 1954 Act. It proceeded as follows:
(i)
The letting by the company operated as an assignment of the basement
flat at a rent equal to an apportioned part of the annual rent of £500 payable
under the headlease: Whitham v Bullock [1939] 2 KB 81. The
appellant thereby became a direct tenant of the landlords of the basement flat
for the residue of the term expiring on December 25 1987.
(ii)
On that term date the appellant held a long tenancy at a low rent of the
basement flat and was thus within section 1 of the 1954 Act.
(iii)
The question whether the qualifying condition under section 2(1) is
satisfied must be determined by reference to the facts at the end of the
contractual term: see section 22(3). At that date, if the tenancy had not been
a tenancy at a low rent, the appellant would have been entitled to retain
possession of the basement flat by virtue of the Rent Act 1977 because it was
let to her as a separate dwelling and she occupied it as her home.
(iv)
The judge was wrong to hold that the appellant’s occupation did not at
the material time satisfy the requirement of the Rent Acts. Reference was made
in the appellant’s written submission to Brown v Brash [1948] 2
KB 247; Herbert v Byrne [1964] 1 WLR 519; Haines v Herbert
[1963] 1 WLR 1401; Regalian Securities v Ramsden [1981] 1 WLR 611
and to Palmer v McNamara, The Times November 18 1990*.
*Editor’s note: Also reported at [1991] 1
EGLR 121.
(v)
In the alternative, it was submitted that the appellant was entitled to
protection under section 137(3). Mr Primost did not argue that the letting by
the company could for this purpose be regarded as a ‘protected tenancy’ to
which the basement flat was subject, but he contended that the phrase in
section 137(3)(b) ‘and is itself subject to a protected or statutory tenancy’
must be construed as meaning, or as extending to include, a tenancy which would
be a protected tenancy if it were let at a rack-rent. The basis for that
submission was, if I understood it correctly, that unless it had such meaning
it would be otiose, since the protection would be provided by section 1 of the
1977 Act.
Conclusion
The misfortune which, if my view of the
law is right, the appellant suffered is made plain by the fact that, if the
tenancy agreement had been for a term of one month and thereafter on a weekly
tenancy, she would have been protected as a statutory tenant against the
landlords provided that she could show that she was in occupation of the
basement flat as her residence. Mr Reynolds, for the landlords, accepted that
that was so. We do not know why the tenancy agreement was made in the form
adopted by the company. The landlords were rightly concerned to establish, if
they could, that the law does not protect an assignee in possession of a part
of premises held under a long lease at a low rent in the circumstances of this
case at the end of the long lease. The consequences for landlords if the
appellant’s contention were correct would be substantial. For example, where a
lawful subtenant holds over under the Rent Acts the subtenant becomes liable to
pay to the head-landlord the rent reserved under his subtenancy. If this
appellant were entitled to remain in occupation after the term date of the
headlease under section 3 of the 1954 Act she would have been liable to pay to
the landlords not the £2,400 pa reserved by the three-year tenancy agreement
but an apportioned part of the £500 pa reserved by the headlease, which would
have been less than £40 pa. That rent could have been increased to a fair rent
under the provisions of the Rent Act, but only by a process commenced by a
notice served not less than six months before the termination date: see section
4(2) of the 1954 Act.
The submission based upon sections 1, 2
and 22(3) of the 1954 Act fails, in my judgment, for the following reasons. The
appellant, at the end of the headlease, was not tenant of the basement flat on
a protected tenancy because the flat was not let as a separate dwelling within
the meaning of that phrase in section 1 of the 1977 Act. The flat was not let
to the appellant or to anyone else as a separate dwelling: it was let under the
headlease with the rest of the premises at 15-16 West Halkin Street. If the
appellant was in occupation of the flat at the material time she clearly
occupied it as a separate dwelling, but that is not the test.
Mr Primost argued that section 22(3)
requires the court to look at the situation at the end of the headlease and to
see whether the premises were at that date let as a separate dwelling. The
relevant words in the subsection are:
In determining . . . whether the
[basement flat] was let as a separate dwelling, the nature of the property . .
. at the time of the creation of the tenancy shall be deemed to have been the
same as its nature [at the term date], and the purpose for which it was let
under the tenancy shall be deemed to have been the same as the purpose for
which it . . . was used at [that date].
There has been no relevant change in the
nature of the property. The contention is that the purpose for which it was let
in 1925 must be deemed to have been that for which it was used at the term
date, namely occupation as a separate dwelling and therefore it was let in 1925
for occupation as a separate dwelling.
I accept that we are required to treat
the purpose for which the basement was let in 1925 as having been for
occupation as separate
does not follow that the basement was therefore let in 1925 as a
separate dwelling. The purpose for which all the premises at 15-16 West Halkin
Street were let in 1925 was the same as in 1985: namely for occupation as
separate residential flats, but the basement flat was not under the headlease
or at any time ‘let as a separate dwelling’. The word ‘separate’ is not
of significance in this context, as has been common ground: it was directed
only to exclude cases in which the letting of a dwelling involved sharing with
another or an essential feaure of a dwelling such as a kitchen: see per
Russell LJ in Horford Investments Ltd v Lambert [1976] Ch 39 at p
45: but, as was decided in that case, the requirement is that the dwelling be
let as a dwelling and that requirement is not met by showing that it was
let under one tenancy with other dwellings. That case was decided with
reference to section 1 of the 1968 Act, but there is no relevant difference
between that section and the current section in the 1977 Act.
Lord Scarman in that case at p 52 said:
The section affords protection to the
tenancy of a house only if the house is let as a separate dwelling. The section
directs attention to the letting, that is to say, the terms of the tenancy . .
. In my opinion there is here a principle of cardinal importance; whether a
tenancy of a house . . . is protected depends upon the terms of the tenancy,
not upon subsequent events. If, as may happen, subsequent events modify or
alter the terms of the tenancy, they are relevant: otherwise, not.
That principle, of course, cannot be
applied if the statute requires otherwise. In the Horford Investments
case, this court was not considering the effect of the provisions of the 1954
Act. In Crown Lodge Investments (Surbiton) Ltd v Nalecz [1967] 1
WLR 647 Winn LJ considered the proper construction of section 22(3) of the 1954
Act and said:
Upon construction of that subsection I am
quite unable to accept [the] submission that the true meaning is that where the
court is called upon, as it is by that section, to consider whether any part of
the property comprised in a tenancy . . . was let as a separate dwelling, the
court is to look at the purpose for which that part was used at the end of the
tenancy; and, having found that it was used as a dwelling-house, decide the
question posed by saying that it was let as a separate dwelling-house. As I
read the section . . . it poses for the court the question whether the part of
the property let was let as a separate dwelling, and directs the court, in
approaching the decision of that question, to have regard, inter alia, to the
purpose for which that part was let under the tenancy of the whole, it being
comprised in the whole of the property that was let. In this case the purpose
for which the part, as well as the whole, was let under the original tenancy at
the beginning of the 90-year term is quite clearly residential use. That is as
far as the matter goes. The court having been directed to accept, by the words
I have referred to, that the part in question was let at the beginning of the
long-term tenancy for residential use, ie, for the purpose of residential use,
the question remains: albeit the part was let as comprised in the whole for the
purpose of it being used residentially, was that part let separately as a
separate dwelling-house? That is an
entirely different question, not determined by that subsection: if it were
thereby determined, the question would be begged, and the court would not be
left free to make its own determination of it.
That analysis of the meaning of section
22(3) seems to me to be right and I would adopt and apply it. It does not
enable the court to hold that the basement was ever let as a dwelling:
there was no letting by the landlords when the tenancy agreement was made by
the company which had the effect of assigning the headlease as to the basement
flat to the appellant. The letting under which the appellant held the basement
flat was under the headlease.
Mr Primost argued that the Crown Lodge
case is distinguishable because the court was not there concerned with the
assignment of a separate dwelling-house out of the whole of the premises held
under the original long lease. That difference, in my judgment, does not affect
the application of section 22(3) to this case. The section requires that we
treat the purpose for which the basement flat was let under the headlease as
being for occupation as a single and separate dwelling. It does not require us
to hold that under the headlease the basement was let as a separate dwelling.
It was not. We could not hold that it was unless directed by statute so to
hold. The statute, in my judgment, does not so direct.
The alternative case under section 137 of
the 1977 Act seems to me to be unsustainable. The provision, given its ordinary
meaning, is not otiose. As is stated in the notes to this section in the County
Court Practice, the provision contained in section 137(3) was introduced to
deal with the problems exposed by Cow v Casey [1949] 1 KB 474 and
Knightsbridge Estates Trust Ltd v Deeley [1950] 2 KB 228: see Cadogan
(Earl) v Henthorne [1957] 1 WLR 1. The appellant’s tenancy of the
basement flat was not ‘subject to a protected or statutory tenancy’ distinct
from the tenancy of the whole premises. The tenancy which the appellant held by
assignment was not itself, for the reasons already given, a protected tenancy
and it is impossible to read section 137(3)(b) as if it read ‘would be
subject to a protected or statutory tenancy’ if let on different terms.
It appeared to all members of this court
that the appellant had failed to show that she had a protected tenancy of the
basement flat and, therefore, it was not necessary to decide the question
whether the judge was right in holding that, if the tenancy was protected, upon
the termination of it on December 25 1987, the appellant was not ‘occupying the
basement flat as her residence’: section 2(1)(a) of the 1977 Act. We did
not hear argument upon the point. Upon the judge’s findings, it was clearly a
finely balanced issue on the facts and I say no more than that the grounds of
appeal seemed to me to raise arguable points of apparent substance.
I would dismiss the appeal.
Agreeing, NOURSE LJ said: The
so-called tenancy agreement of November 16 1987 did not create a subtenancy of
the basement flat. It operated as an assignment of the lease dated February 28
1925 so far as it related to that flat. The 1925 lease expired on December 25
1987. Thereafter, Miss Cochran could retain possession only if she were
entitled to the protection of the Rent Acts by virtue of Part I of the Landlord
and Tenant Act 1954. That Part of that Act applies to any long residential
tenancy at a low rent, being a tenancy as respects which for the time being
‘the qualifying condition’ is fulfilled: see section 2(1).
It is agreed that Miss Cochran had a long
tenancy of the flat at a low rent. The question is whether is fulfilled the
qualifying condition defined by section 2(1) as follows:
. . . the circumstances (as respects the
property comprised in the tenancy, the use of that property, and all other
relevant matters) are such that on the coming to an end of the tenancy at that
time the tenant would, if the tenancy had not been one at a low rent, be
entitled by virtue of the [Rent Act 1977] to retain possession of the whole or
part of the property comprised in the tenancy.
That definition throws one back to
section 1 of the Rent Act 1977, the first part of which is in these terms:
Subject to this Part of this Act, a
tenancy under which a dwelling-house (which may be a house or part of a house)
is let as a separate dwelling is a protected tenancy for the purposes of this
Act.
It follows that after the expiry of the
1925 lease Miss Cochran could retain possession of the flat only if her tenancy
were one under which it was ‘let as a separate dwelling’. Can it be said to
have been so let? I do not think it can.
The word ‘let’ is synonymous with ‘leased’. You cannot describe a transaction
as a lease unless it creates some lesser estate out of a greater one. The 1987
tenancy agreement having taken effect as an assignment of the 1925 lease so far
as it related to the flat, that is to say as an assurance of the totality of an
existing estate, it cannot be said that the flat was leased by that agreement.
The only lease or letting of the flat was that effected by the 1925 lease and
at this point Miss Cochran is faced with the insuperable objection that it was
not thereby let as a separate dwelling: cf Horford Investments Ltd v Lambert
[1976] Ch 39.
On the language of section 2(1) of the
1954 Act and section 1 of the 1977 Act I am therefore of the opinion that the
flat, although it could certainly have been said to be ‘held’ or ‘occupied’ as
a separate dwelling, was not so ‘let’. Does section 22(3) of the 1954 Act have
any different effect? I do not think
that it does. I agree with Ralph Gibson LJ that the limited effect of that
subsection was correctly expressed by Winn LJ in Crown Lodge (Surbiton)
Investments Ltd v Nalecz [1967] 1 WLR 647 at p 652.
I therefore agree that Miss Cochran’s
tenancy of the basement flat did not fulfil the qualifying condition prescribed
by section 2(1) of the 1954 Act. In regard to her alternative claim based on
section 137(3) of the 1977 Act, there is nothing which I wish to add to the
reasoning of Ralph Gibson LJ. On these two questions the decision of Judge
Phelan was entirely correct. The plaintiffs are therefore entitled to
possession of the flat
The result is that Miss Cochran has been
the victim of the misguided, although no doubt well-intentioned, attempt of
Conway Associates Ltd to give her some security of tenure in the basement flat,
on the faith of which she has expended, as the judge found, ‘something like
£35,000 in all upon this flat, really all her capital resources’. Now she is
left with no security of tenure and with no
reasonably be assumed, has resulted in the permanent improvement of the
plaintiffs’ property. For this very unfortunate state of affairs the plaintiffs
are not at all responsible and they are not to be criticised for wishing to
establish the rights which the law has given them. It is not the function of
the courts to make judgments on the general merits of circumstances of which
they may not be fully aware. But it is sometimes appropriate, as I think it is
appropriate here, to ask a successful party to consider where those merits may
lie and, if found to be in favour of the other party, to consider whether he
should take some step in recognition of them.
I, too, would dismiss this appeal.
LLOYD LJ also agreed and did not add anything.
The appeal was dismissed with costs, the
order for costs not to be enforced without leave. Leave to appeal to the House
of Lords refused but application for a stay pending petition to House granted
on terms.
