Landlord and Tenant Act 1954 – Business lease – Statutory continuation of lease – Claimant asserting right of way across defendants’ land to lay and maintain electricity cables – Rights conferred by 1953 lease – Whether lease continuing under section 24(1) of Act after expiry of contractual term – Whether tenancy determined by section 25 notice given by one of several reversioners under severed reversion – Whether claimant estopped from asserting invalidity of notice – Whether part of lease extinguished by merger with freehold interest acquired by claimant – Claim allowed in part
The claimant electricity supplier operated a substation on the Wembley Stadium trading estate. In order to access the site, it was necessary to cross areas of land owned by the first and second defendants. Underground electricity cables also crossed their sites.
The first and second defendants claimed that the claimant had no right to cross their land or to maintain the underground cables. The claimant brought proceedings. It contended that it held the necessary rights pursuant to a lease of the substation site and other land that had been granted to its predecessor in 1953 by a common predecessor in title of the parties. The lease included a right of way over the lessor’s land for all purposes necessary for the enjoyment of the demised premises, together with a right to lay and maintain electricity cables under that land. The contractual term had expired in 1994. The claimant had since acquired the freehold of the substation site, but it contended that the lease had continued pursuant to Part II of the Landlord and Tenant Act 1954. The third defendant was included in the action because it occupied part of the land demised by the 1953 lease.
The case turned on: (i) the validity of a notice, under section 25 of the 1954 Act, served in 1993 by the then freeholder of the substation site; and (ii) whether the lease, or part of it, had otherwise been determined by merger with the freehold acquired by the claimant or by forfeiture or surrender. The claimant argued that the section 25 notice was invalid, having been served by only one of three reversioners under a severed reversion. The first and second defendants contended that there was no invalidity where the notice related to the only piece of land on which business activities sufficient to attract protection under the 1954 Act were being carried out. They further submitted that the claimant was estopped from asserting the invalidity of the notice, or had waived any invalidity, by serving a counter-notice.
Held: The claim was allowed in part.
(1) A tenancy attracted protection under Part II of the 1954 Act where the property included premises that were occupied by the tenant for business purposes. It was not necessary for the entire the property to be occupied for such purposes. Accordingly, even if the claimant was in business occupation of only part of the demised property, the 1953 lease would still be protected in respect of the entire property. If Part II protection applied, the entire tenancy would statutorily continue under section 24(1). Likewise, any section 25 notice served by the landlord had to relate to the entire property comprised in the tenancy; the landlord could not give a section 25 notice only in respect of the part of the demised premises that was in business occupation: Southport Old Links Ltd v Naylor [1985] 1 EGLR 66; (1985) 273 EG 767 applied. The severing of the reversion did not alter that basic position. Section 140 of the Law of Property Act 1925 did not create separate tenancies co-extensive with each severed part; there continued to be only one single tenancy: Jelly v Buckman [1974] QB 488 applied. Accordingly, a section 25 notice could not be served by only one of the severed reversioners, in respect only of that part of the demised property that was in business occupation. Any such proposition would be contrary to basic principles and the reasoning of the authorities: Dodson Bull Carpet Co Ltd v City of London Corporation [1975] 1 WLR 781 and Nevill Long & Co (Boards) Ltd v Firmenich & Co [1983] 2 EGLR 76; (1983) 268 EG 572 applied. The section 25 notice served on the claimant was invalid since it related only to the substation site and was given by only one of the three reversioners.
(2) The claimant was not estopped from asserting the invalidity of that notice. While a tenant could, by serving a counter-notice, either waive defects in a section 25 notice or estop itself from relying on them, this would normally occur where the landlord was fully entitled to serve such a notice and the only problem was a defect in the notice. The instant case was different because the reversioner who served the notice had not been entitled to do so under the statutory scheme. Any estoppel or waiver would therefore confer on the reversioner a substantive right that was not conferred by Part II and was directly contrary to the way in which the statutory scheme worked. It would amount to an arrangement that deprived the claimant of its Part II protection, contrary to the statutory prohibition on “contracting out” of Part II. In any event, the evidence in the instant case did not establish an estoppel or waiver.
(3) The claimant’s acquisition of the freehold of the substation site had not extinguished the leasehold interest in that site by merger. Although there was no reason why a merger could not occur in respect of part only of a leasehold interest, or in cases where the reversion was severed, there was an equitable presumption against any intention of merger where it would benefit the leaseholder to keep the two interests separate: Capital & Counties Bank Ltd v Rhodes [1903] 1 Ch 631 applied. The burden of proof lay on the first and second defendants to rebut that presumption, but they had not done so. Consequently, on the expiry of the term of the 1953 lease the tenancy had continued pursuant to section 24(1) of the 1954 Act because, at that date, the demised premises continued to include premises, namely the substation site, that were occupied by the claimant for business purposes. The evidence did not support any finding that the tenancy had been forfeited in respect of any part of the demised property.
(4) With regard to surrender, the claimant had abandoned the area of land that was now occupied by the third defendant and the reversioner had, with the passage of time, accepted that abandonment such that it would be inequitable for either of them to assert the continued existence of the lease in respect of that land. There had been a surrender of that part of the lease by operation of law. Consequently, the claimant’s lease continued save in respect of that area of land occupied by the third defendant.
Christopher Stoner (instructed by Eversheds LLP, of Cambridge) appeared for the claimant; Jonathan Small QC (instructed by Ahmud & Co) appeared for the first and second defendants; the third defendant appeared in person.
Sally Dobson, barrister