by Delyth Williams
The pace of litigation in the field of residential tenancies slowed down considerably in 1990 with only 12 cases reported in the columns of Estates Gazette. This article summarises the relevant case-law developments under the Rent Act 1977 and the Leasehold Reform Act 1967.
The working of the Rent Act 1977
The question of the operation of the rateable value limit rules for the protection afforded to a tenant under a protected tenancy was in issue in Guestheath Ltd v Mirza [0] 2 EGLR 111; [1990] 42 EG 137. In this case, owing to an error in the surveying of the subject premises, the incorrect rateable values of £680 (in April 1963) and £1,763 (in April 1973) had been entered on to the valuation list which resulted in the tenancy being outside the protection of the Rent Act 1977. These errors were corrected by agreement but the corrections only took effect from April 1 1972 and 1973. As the “appropriate day” in the instant case was March 23 1965 the alterations to the list were too late to satisfy the provisions of section 25(4) of the 1977 Act which require that the alterations to the list should take effect not later than the appropriate day. On this point Alliott J held that he could not depart from the plain meaning of section 25(4) of the 1977 Act so that the tenant was not protected by the 1977 Act. Further, the tenant could not rely on proprietary estoppel as there was no evidence that the tenant had acted to his detriment.
In Bostock v Bryant [0] 2 EGLR 101; [1990] 39 EG 64, J (the owner of the house) made an arrangement with the Bryant family in 1964 by which they should occupy the whole of the house except for one room, which was to be occupied by J. Under this arrangement J paid the general and water rates and the Bryants paid the gas and electricity bills. The Bryant father died in 1973 and J in 1987, whereupon Mrs B and a spinster daughter remained in the house.
The county court judge refused to make an order for possession and held that Mrs B and her daughter had a periodic tenancy which was a protected tenancy until J’s death and a statutory tenancy thereafter. J’s executor appealed relying on both Street v Mountford [5] 1 EGLR 128; (1985) 274 EG 821 and Barnes v Barratt [1970] 2 QB 657. The Court of Appeal was of the opinion that the more natural inference to be drawn from the payment by the Bryants of the gas and electricity bills was that it was simply a payment of their part of the expenses incurred. The Court of Appeal concluded that whether by the application of the decision in Barnes v Barratt or because the proper inference was that there was no payment of rent at all, the county court judge had reached the wrong conclusion.
The question of the interaction of the protection afforded by a statutory tenancy and a claim for possession by the mortgagees was considered by the Court of Appeal in Britannia Building Society v Earl [0] 1 EGLR 133; [1990] 25 EG 72. In this case the court considered the operation of section 98 of the 1977 Act and section 36 of the Administration of Justice Act 1970 in relation to the question of whether a mortgagee was entitled to possession of the subject premises against the subtenants. In this case the appellants were the second defendants in possession proceedings brought by the building society. The first defendant was the mortgagor, who had let the premises to the appellants subsequent to mortgaging the property. The mortgage deed excluded the mortgagor’s power to grant leases binding on the mortgagee and the tenancy was granted without the respondents’ consent. When the contractual term expired the appellants became statutory tenants. The county court judge granted possession against the defendants.
The Court of Appeal held that the position of the mortgagee was no different in regard to a statutory tenant as opposed to a protected tenant. In this regard, the mortgagee was not bound by an unauthorised contractual tenancy and did not become bound by a statutory tenancy when it arose. Further, the county court judge had not failed to exercise his power under section 36 of the Administration of Justice Act 1970. Owing to the definition of “mortgagor” under the 1970 Act as including “any person deriving title”, the appellants were not assignees deriving the title because they were statutory tenants. In the event, therefore, they could not seek relief under the 1970 Act.
In Steele v McMahon [0] 2 EGLR 114; [1990] 44 EG 65 the respondents undertook in 1983 to carry out certain works to a dwelling-house on the basis that on satisfactory completion of the works they would be granted a tenancy of the same. The works were duly completed and the tenancy was granted and it is to be noted that it was accepted that the tenancy granted would be a protected one under the 1977 Act. In 1987 the tenancy was assigned by the respondents to the appellants in consideration of a premium of £115,000 but the appellants attempted to reclaim that sum on the ground that it constituted an illegal premium. The respondents accepted that £42,616.55 was unlawful and repaid that amount but claimed that the balance of £72,383.45 fell within the exception to expenditure under section 120(3)(b).
The sole issue related to the time at which the expenditure on the works was incurred and the appellants relied on the decisions in Henry Smith’s Charity Trustees v Hemmings (1981) 260 EG 178 and Brett v Brett Essex Golf Club Ltd [6] 1 EGLR 154; (1986) 278 EG 1476 in support of their contention that in order to qualify for the exception in section 120(3)(b) the expenditure must be restricted to that which is incurred while the assignor is the tenant under the tenancy which is assigned. The Court of Appeal held that the object of section 120 was to prevent the assignor of a protected tenancy from making a profit out of the statutory protection at the expense of the assignee tenant and that there was no justification for imposing the additional restriction contended for by the appellants. The county court judge was correct and the exception in section 120(3)(b) was not restricted to expenditure incurred after the tenancy, which is the subject of the assignment, has been granted.
Obtaining possession
The question of the meaning of “suitable alternative accommodation” was considered by the Court of Appeal in Jones v Cook [0] 2 EGLR 108; [1990] 42 EG 129. In this case the respondent owners were executors under a will and wished to obtain possession of the demised cottage premises and offered another cottage (being about 400 yds away from the demised premises) as suitable alternative accommodation. In this context it is to be noted that the accommodation is deemed to be suitable under para 4(1)(a) of Schedule 15, Part IV to the 1977 Act provided that it fulfils the relevant conditions in para 5 of the same schedule. The dispute in this case was as to whether the accommodation was similar as regards extent to the accommodation offered by the local housing authority under para 5(1)(a), which provides that for the purposes of para 4 the relevant conditions are that the accommodation is reasonably suitable to the needs of the tenant and his family as regards proximity to place of work and either:
(a) similar as regards rental and extent to the accommodation afforded by dwelling-houses provided in the neighbourhood by any [local housing authority] for persons whose needs as regards extent are, in the opinion of the court, similar to those of the tenant and of his family; or
(b) reasonably suitable to the means of the tenant and to the needs of the tenant and his family as regards extent and character…
In this context a certificate of the local housing authority stating:
(a) the extent of the accommodation afforded by dwelling-houses provided by the authority to meet the needs of tenants with families of such number as may be specified in the certificate, and
(b) the amount of the rent charged by the authority for dwelling-houses affording accommodation of that extent,
shall be conclusive evidence of the facts so stated.
The conclusiveness of this certificate is only in relation to the facts of extent and the rent and not in relation to the similarity as regards rental and extent which involves the judgment or opinion of the court and in the instant case the county court judge treated the certificate as removing from him the duty of deciding whether the accommodation proffered was suitable alternative accommodation. In addition the certificate did not comply with the statutory requirements and the Court of Appeal held that the county court judge had erred in considering himself bound by the certificate which was in any case invalid. In the absence of a conclusive certificate being correctly applied, the deeming provision in para 4 of the schedule did not apply.
Complex issues of fact were raised in Empson v Forde [0] 1 EGLR 131; [1990] 18 EG 99 where the landlords wished to carry out repairs to the demised premises which was occupied by statutory tenants and the landlords contended that they required the tenants to move out on a temporary basis while the repairs were being undertaken. The tenants were worried that the repairs might include improvements which could increase the rent and, in addition, they feared that they would not be allowed back into the premises. The landlords served a notice to quit, alleged the premises were overcrowded and also relied on Cases 1 and 3 in Schedule 15 to the 1977 Act. The county court judge held that the landlords had failed to satisfy Cases 1 and 3 as the tenants had not refused access for the carrying out of the repairs. The Court of Appeal held that the matter was essentially one of fact for the county court judge and there were no grounds for impugning his judgment.
In Baker v MacIver [0] 2 EGLR 104; [1990] 40 EG 123 the respondent landlord had let the demised premises to the tenant on a monthly tenancy which was protected by the 1977 Act, but before the tenancy was entered into, both parties agreed that the tenant would give up possession upon three months’ notice should the landlord require the house. When the landlord was made redundant from his employment as a farm manager he had to leave the house he occupied under the Rent (Agriculture) Act 1976 and he gave the tenant notice to quit. Although the landlord was offered a tenancy of a cottage by his former employer (and £20,000 for giving up his tenancy) he preferred to recover possession of his own house.
The county court judge decided that it was reasonable for a possession order to be made and that the premises were reasonably required by the plaintiff for his own occupation. Further, the tenant had not discharged the onus of proof that there would be greater hardship on him if the order for possession was made. The Court of Appeal was of the opinion that the question of greater hardship was pre-eminently a question for the judge but that, having regard to the respective financial positions of the parties and the availability of alternative accommodation, the judge in the instant case had arrived at a finding of greater hardship which was opposite to that supported by the evidence.
Some complex issues of fact and law were considered by the Court of Appeal in Mistry v Isidore [0] 2 EGLR 97; [1990] 31 EG 43 where the landlord sought possession of a flat held on a regulated tenancy and the tenancy agreement in question contained a notification under Case 11. The flat was on the first floor of a four-floor building with the ground floor comprising a shop from which the landlord and his brother carried on the business of newsagents and confectioners. From 1987 the landlord began to use the first-floor flat to enable him to participate in running the business and slept in the flat five or six nights per week, although there were no facilities for washing and cooking at the flat. The landlord occupied the flat on this basis for some nine weeks in 1987 before letting the flat to the tenant. The tenant contended that the same interpretation should be placed on occupation for the purposes of Case 11 as was placed on occupation as a residence for the purposes of section 2(1)(a) of the 1977 Act in Hampstead Way Investments Ltd v Lewis-Weare [1985] 1 EGLR 120; (1985) 274 EG 281. The Court of Appeal was of the opinion that the tenant’s contention was inconsistent with both the pattern of the 1977 Act and the decision in Naish v Curzon [1985] 1 EGLR 117; (1984) 273 EG 1221. The county court judge had held that the landlord had occupied the flat as his residence and the Court of Appeal found that he had correctly applied the law.
Registration of rent
In Rakhit v Carty [0] 2 EGLR 95; [1990] 31 EG 40 the appellant-tenant held a furnished tenancy of the demised flat for 364 days at a rent of £450 per month but remained in possession after the expiry of the term and a registered rent of £380 per month was determined. However, unknown to the parties, there had been a much earlier registration of a fair rent of £550 pa when the flat was unfurnished. On an action for possession, the county court judge made an order for possession together with an order for payment of arrears of rent and mesne profits and dismissed the tenant’s counterclaim in respect of overpaid rent. The tenant’s appeal on the counterclaim was based on the contention that the decision in Kent v Millmead Properties Ltd (1982) 266 EG 899 was decided per incuriam. The Court of Appeal was of the opinion that neither the decision in Kent nor Cheniston Investments Ltd v Waddock [1988] 2 EGLR 136; [1988] 46 EG 88 should be followed with the result that the tenant’s counterclaim to recover overpaid rent would be upheld.
Leasehold Reform Act
In Proma Ltd v Curtis [0] 1 EGLR 117; Wrotham Park Settled Estates granted a 121-year building lease to Lowndes Securities Ltd in 1973. Under the lease the lessee covenanted to erect three houses and not to sublet the completed buildings except in accordance with a draft underlease in the form set out in a schedule. The draft underlease made the term subject to a proviso permitting the underlessee to surrender the lease after the death of a defined party. The object of the proviso in the draft underlease was to ensure that the underleases were not long tenancies under the 1967 Act. The Housing Act 1980 amended section 3(1) of the 1967 Act by providing that the exception applied only where the death was that of the tenant or the tenancy “was granted before 18th April 1980 or in pursuance of a contract entered into before that date”. The respondents, who in 1984 had acquired an underlease granted in 1982, in the draft form, claimed they were entitled to acquire the freehold under the 1967 Act.
The Court of Appeal held that section 3(1) of the 1967 Act, as amended by the Housing Act 1980, contemplated a contract followed by completion; the question was whether there was an earlier contract. There was no such prior contract for the grant of the underlease in issue. The appellants could not rely on the terms of the headlease as, although this restricted the form of any underlease, it did not oblige the underlessors to let. Any underletting would not have been “in pursuance of a contract”. The amended proviso to section 3(1) was not satisfied; the underlease was a “long tenancy” and the respondents were entitled to enfranchise.
In Rennie v Proma Ltd [0] 1 EGLR 119; [1990] 17 EG 69 W granted in April 1982 a 99-year lease to R at a rent of £50 pa with a substantial premium. By a sale and leaseback in March 1985 W transferred to P Ltd the reversionary interest in the premises subject to P Ltd’s holding the premises upon trust for sale exercisable with the consent of B (the second appellant). Pursuant to a deed of 1982 P Ltd already held the property on similar terms, such a deed providing that the statutory power of appointing trustees should be exercisable by B. The leaseback agreement to W was executed and in March 1985 P Ltd was registered as proprietor subject to the restrictions that no disposition of title could be registered during B’s lifetime without his consent or without an order of the court or registrar.
The Court of Appeal held that the arrangement between W and P Ltd in 1985 was a relevant agreement that related to the tenancy for the purposes of section 23 of the 1967 Act. Any provision of any agreement which, but for its avoidance by section 23(1) of the 1967 Act, would have the effect of rendering specifically unenforceable the statutory contract between the tenant and his landlord excludes or modifies the right of enfranchisement within the meaning of section 23(1). The arrangements for B’s consent, but not those for the appointment of a second trustee, were therefore invalidated.
R, although having an interest in a tenancy of the premises, had no interest under the trust for sale affecting it and therefore it could not be said they were persons interested for the purposes of section 30 of the 1925 Act. However, the court was in a position to order that the restrictions in the proprietorship register be set aside and that P Ltd execute a transfer of its rights to the respondents. The transfer would then overreach the beneficial interests under the trust.
In Mosley v Cooper [0] 1 EGLR 124; [1990] 23 EG 66 the defendants were the freehold owners of an enfranchised property having purchased the lease and the freehold separately in June 1986. The previous freeholders were the trustees of the Phillimore Kensington Estate and the property was subject to a scheme under section 19 of the Act on such terms set out in a High Court order dated July 18 1977. The scheme included: (i) restrictions against parking vehicles, caravans, boats etc on forecourts; and (ii) restrictions against alterations to the exterior of the properties on the estate. The scheme provided for any enfranchised owner to obtain prior consent for alterations and to comply with notices regarding breaches of the restrictions.
The defendants, having purchased the house, proceeded to create a car-parking area out of the front garden without obtaining the trustees’ prior consent required under the scheme. At the trustees’ agent’s request work ceased while an application for consent was made. However, this was refused and the defendants did not reinstate the garden. While the landlords had taken the matter to the court the scheme did contain an arbitration clause which could have applied to this dispute. The trustees claimed an order that the defendants reinstate the property and the judge noted that the issue could have been decided by an arbitrator rather than at a trial.
The question before the court was the reasonableness or otherwise of the trustees’ refusal of consent. The trustees had previously granted consent for new hardstandings for a number of houses but had more recently totally banned them. The judge heard expert evidence and considered all the matters raised by them including impact on other street parking capacity, resulting congestion, the number of car hardstandings, visual impact and amenity and hazards caused to others.
The judge found the trustees’ refusal of consent reasonable in general terms and then chose to explore whether there were any particular circumstances to merit this particular decision as being unreasonable. The background to the change in policy by the trustees was explored and the fact that it occurred at about the same time as the defendant undertook the alterations. The judge concluded that the trustees were reasonably entitled to refuse consent as the new policy and its application was reasonable.
The High Court held that the trustees were reasonably entitled to reject the applicants’ request for consent. The judge, however, used his discretion to grant equitable relief to the plaintiffs. Nominal damages of £5 only were awarded to the plaintiffs and the judge stated that the plaintiffs would be entitled to an order of reinstatement which the court would be willing to make if the defendants did not reinstate.
