Lease – Assignment — Collective enfranchisement – Appellants purchasing lease of property with no covenant against assignment – Appellants converting property into four flats transferring two flats to each appellant separately and common parts jointly – Whether appellants entitled to collective enfranchisement of property — Appeal allowed
In January 1926, the then freeholder owner of the property granted a lease of the whole property for a term of 99 years at an annual rent of £85 payable quarterly in advance. There were no express covenants against assignment or underletting. In 2004, the appellants bought the lease at auction and assigned it to a company of which they owned 75% of the shares and were its only directors. The property was in a dilapidated state but the company carried out substantial refurbishment works and created four separate flats.
Following completion of the works, in 2008, the company executed three transfers purporting to assign the property comprised in the lease in three parts: a transfer of flats 1 and 2 with lower ground floor storage space to the first appellant alone, a transfer of flats 3 and 4 with lower ground floor storage space to the second appellant alone, and a transfer of the common parts, to the appellants jointly, with apportionment of the yearly rent. The claimants were registered at the Land Registry. The respondent (the current freeholder) had not been consulted about the assignments and did not consent to them or to the apportionment of the rent.
In July 2009 the appellants served a notice under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 claiming the right of collective enfranchisement of the whole property. The judge rejected their application and found, as a preliminary issue, that the appellants were excluded from being qualifying tenants by virtue of section 5(5) of the 1993 Act for the purpose of Chapter 1 of Part 1 of the Act. The judge considered that the issue was concluded in the respondent’s favour by the decision of the Court of Appeal in Lester v Ridd [1989] 1 EGLR 114; [1989] 22 EG 101 to the effect, inter alia, that the land comprised in the original lease had to be looked at as a whole despite any subsequent partition. The appellants appealed.
Held: The appeal was allowed.
(1) An assignee’s liability to pay the rent and perform the obligations of the lessee depended on privity of estate alone. If the assignee was the assignee of part only of the leased property then the rent and other obligations for which he was liable were those referable to the part of the leased property assigned to him. He was not liable for the rent or other obligations referable to the part of the leased property that had not been assigned to him. The rationale for those propositions was that the assignee only had privity of estate as regards the part of the leased property of which he was the assignee. He had no privity of estate as regards that part of the leased property that had not been assigned to him. The landlord might enter any part of the leased land and distrain for the rent for the whole. But the remedy of distress had nothing to do with privity of estate, save to the extent that a relation of landlord and tenant had to exist.
If the assignee only had privity of estate as regards that part of the leased property that had been assigned to him, it followed that the estate itself had been severed. That could be the only principle justifying the conclusion reached in Dooner v Odlum [1914] 2 IR 411 and United Dairies Ltd v Public Trustee [1923] 1 KB 469, that the obligations became separate: City of London v Fell [1993] 49 EG 113 considered.
(2) The decision of the Court of Appeal in Lester did not cast any doubt on the proposition that, following a physical severance of the land comprised in a term of years, the tenant’s obligations were likewise severed and apportioned between the respective parts of the land. The right to sue an assignee was an additional remedy given to the landlord by the common law, and did not deprive him of his contractual remedy against the original tenant. Thus the landlord could not complain if this additional remedy was not as complete as that which he stipulated for in his deed as against the lessee, and which he still retained. Moreover if the landlord wished to prevent an assignment of part, he had only to include a covenant to that effect in the original contract of tenancy. In Lester, the question had been there were two contracts of tenancy and, on the facts of that case, the decision that there was only one was entirely correct. The question whether the severance of the legal estate resulted in two separate tenancies did not arise in the instant case.
Therefore, in the instant case, at common law, the first appellant was the tenant of flats 1 and 2 and the second appellant was the tenant of flats 3 and 4. That conclusion was entirely consistent with accepted legal parlance: City of London considered.
(3) The 1993 Act used “lease” and “tenancy” interchangeably. It was not concerned with the contract but with the tenure or status of the holder of the leasehold estate. There was nothing in the definitions in section 101 of the 1993 Act which displaced the conclusions reached at common law. Accordingly, neither appellant was excluded from being a qualifying tenant as the result of section 5(5) of the 1993 Act and both were entitled in principle to exercise the right of collective enfranchisement.
Stephen Jourdan QC (instructed by Forsters LLP) appeared for the appellants; Anthony Radevsky (instructed by Wallace LLP) appeared for the respondent.
Eileen O’Grady, barrister
