by Delyth Williams
The past 12 months or so have seen continued litigation on the scope and operation of the Landlord and Tenant Act 1954, Part II and on the improvements provisions of the Landlord and Tenant Act 1927. Many of these cases have been reported in the columns of Estates Gazette. This article summarises recent case law developments in this period.
Operation of the 1954 Act
It is easy for the busy practitioner to fail to ask whether the requirements of section 23 of the 1954 Act are complied with. In Aspinall Finance Ltd v Viscount Chelsea [9] 1 EGLR 103; [1989] 09 EG 77, the main question before Judge Paul Baker QC (sitting as a judge of the High Court) was whether the test of occupation under section 23 was satisfied. In this case, a lease of club premises became vested in A Ltd, which used them until 1984 as a licensed gaming club. The premises then became vacant because A Ltd was required to surrender its gaming licence as a condition of the grant of another gaming licence in respect of other, recently acquired, premises which it considered more suitable for its business.
In 1986 the landlord served a section 25 notice stating that an application for a new tenancy would not be opposed. When A Ltd applied for a new tenancy, the question arose whether the company was still in occupation and entitled to the benefit of the Act. A Ltd claimed that it always intended that the premises should be reopened as a gaming club. However, the Gaming Board was not willing to entertain an application for a certificate of consent to enable A Ltd to apply to the magistrates for a gaming licence until A Ltd had obtained a new lease of the premises. The court held that, although A Ltd had left the premises vacant, this did not necessarily mean that the tenant was no longer in occupation for the purposes of section 23. The correct test was that applied in I & H Caplan Ltd v Caplan (No 2) [3] 1 WLR 1247, viz whether the “thread of continuity” of business user continued or had been broken. Further, the relevant factors, none of which was conclusive, were the facts of the case, the time the business had not been carried on and whether the reasons for vacating were forced on the tenant or whether the tenant voluntarily went out of occupation. The tenants had elected to vacate, having chosen to carry on their business elsewhere and the thread of continuity had, therefore, been broken.
A question which sometimes arises is whether the tenant is protected by the 1954 Act or under the residential regime of the Rent Act 1977. In Henry Smith’s Charity Trustees v Wagle [9] 1 EGLR 124; [1989] 11 EG 75, premises adapted for studio purposes and designed for the working and residential requirements of artists were let in 1972 for a 17-year term and used for the purposes of a professional artist. The appellants were the assignee tenants, having acquired the lease in 1982 and used the premises for residential purposes only. At the time of the assignment, it was made clear that the lease was a business letting. The lease contained a rent review clause and the landlords applied for a declaration that the lease was not a letting within the 1977 Act. The Court of Appeal held that, on the facts, the premises were let for mixed residential-business purposes. The lease was not a letting of a separate dwelling, so that it could not fall within the 1977 Act. The actual use was not the deciding factor, as there had been no consensual change from mixed use to the current residential use.
In Webb v Barnet London Borough Council [9] 1 EGLR 49; 11 EG 80, the landlord granted a 21-year lease to the appellant, who covenanted to use the demised premises only for residential purposes and for the purposes of trade or business for which they were let, namely as a motor-body repairs workshop. Between 1965 and 1979, the appellant lived there with his family and carried on his motor repair business. In 1981, he claimed the right to buy the freehold in accordance with the Housing Act 1980 (now the Housing Act 1985) and the landlords at first acknowledged that he was eligible. Then, in 1983, the landlords informed him that his tenancy was a business tenancy and ineligible for the right to buy.
The Court of Appeal was of the opinion that an applicant qualifies to exercise the right to buy under the Housing Act 1985 if he has a secure tenancy, which is defined as “a tenancy under which a dwelling-house is let as a separate dwelling”. Although the appellant had a tenancy within the meaning of the 1954 Act until he ceased his business activities, and even though such a tenancy was not a secure tenancy by reason of para 11 of Schedule 1 to the 1985 Act, there remained the question as to whether the premises were “let as a separate dwelling”. The relevant time for considering whether the premises were so let was the time of the letting. At that time they were not let “as a separate dwelling” and, as it was intended that W would use part for business purposes, the letting was for mixed residential and business use. It was clear from Cheryl Investments Ltd v Saldanha [8] 1 WLR 1329, Pulleng v Curran (1980) 44 P&CR 58 and Russell v Booker (1982) 263 EG 513 that mere cessation of a use by a tenant would not change the status of the original letting.
In Shelley v United Artists Corporation Ltd [9] 1 EGLR 98; [1989] 08 EG 115, S was tenant of an office suite under a lease granted by U Ltd: the landlord company occupied the remainder of the building but was itself the tenant of B Ltd, another company. S’s lease was for a term which expired on June 20 1988, while U Ltd’s lease was for a term which expired on June 24 1988. The mesne landlord served a notice under section 25 and then (a) made a section 26 request to B Ltd and (b) exercised an option under the headlease to obtain a further term at a rent to be determined in accordance with a provision in the lease. S served a counternotice on U Ltd. Both the section 26 request and the exercise of the option were acknowledged by B Ltd. S then issued an originating summons, within the statutory time-table imposed by section 29(3), in which U Ltd was named as the defendant. After the expiration of the time-limit, U Ltd advised S that the company was not the competent landlord for the purposes ofS’ proceedings but that the competent landlord was B Ltd. Two summonses were subsequently issued: (a) by S seeking an order that B Ltd be joined as a second defendant or that B Ltd be substituted for U Ltd and for such extensions of time as may be appropriate; and (b) by U Ltd seeking an order that S’ originating summons be dismissed or that U Ltd should cease to be a party to the proceedings.
The Court of Appeal held, inter alia, that the doctrine in Walsh v Lonsdale (1882) 21 Ch D 9 could be invoked in this case. At the date the appellants applied to the court, the respondent could not have enforced the agreement it had for the grant of the new 14-year lease without abandoning its right to elect at a later date not to exercise its option. However, this right of abandonment was a provision for the exclusive benefit of the respondent and was no obstacle to the grant of the lease. Further, it could not be accepted that the respondent was the competent landlord by reason of its residual rights to remain in possession, as those rights applied only when what must be regarded as a notice to quit was given. The Court of Appeal added that, although section 28 may have applied, it did not enable the appellants to argue for an addition to the fag-end of the headlease expiring in June 1988. When the respondent served the section 25 notice stating that it would not oppose a new lease, it was representing that it was the competent landlord. When it ceased to be the competent landlord, its former representation became a misrepresentation, which should have been corrected. That failure caused the appellants to regard the respondent as the competent landlord for the purposes of the counternotice and the application to the court. Accordingly, had the respondent been granted a lease by B Ltd in its own name, the respondent would have been estopped from denying that it was the competent landlord and a related company could be in no better position and was bound.
In Pearson v Alyo [9] EGCS 153, the respondents (Dr and Mrs A) were the registered joint tenants of the fee simple interest in the demised premises. By an agreement of March 1984, the premises were let to the appellants for a three-year term until March 22 1987. The tenancy was continued under the 1954 Act, and on November 3 1987 the respondents purported to give the appellants a section 25 notice terminating their tenancy on May 20 1988, but the notice gave the name of the landlord as “Dr Ahmad Alyo”. The appellants served a counternotice and applied to the county court for a new tenancy.
The county court judge held that the section 25 notice was valid. The Court of Appeal held that, on a proper construction of section 44(1) of the 1954 Act (as amended), the “competent landlord” was Dr A and his wife. This provision was concerned only with the legal owners and not with the respondent’s interest as the person solely and absolutely entitled to the property in equity. In addition, the validity of a section 25 notice was to be judged, objectively, at the date at which it was given. The question was not whether the inaccuracy actually prejudiced the particular person to whom the notice was given but whether it was capable of prejudicing a reasonable tenant in the position of that person. Finally, a court cannot make an order for a new tenancy under section 29 save against the “landlord” as defined in the Act, which in fact means Dr A and his wife. The tenant’s appeal was therefore allowed.
Notices and counternotices
The successful operation of the 1954 Act’s procedures is dependent upon the proper service of the Act’s various notices. In Long Acre Securities Ltd v Electro Acoustic Industries Ltd [0] 06 EG 103, the respondent originally occupied premises under a lease that fell within the Act. By a consent order, the county court judge ordered that the respondent be granted a new lease commencing on July 25 1987 and expiring on March 25 1988; the appellant landlord served on the respondent a section 25 notice stating the date of termination as March 1 1989. On March 4 1988, the respondent served a notice under section 27(2) to terminate the tenancy on June 24 1988, but the respondent had given up business occupation by March 25 1988. The county court judge held that the appellant’s section 25 notice was of no effect as the contractual tenancy did not continue by virtue of section 24; the respondent was not in occupation for business purposes and the 1954 Act ceased to apply. The Court of Appeal held that under the Act a tenant holding a term certain who does not want to continue his tenancy is expected to give not less than three months’ notice to the landlord under section 27(1) or (2), as the case may be. Where a tenant does not wish to stay for the period of any section 25 notice that may have been served by the landlord, there is no bar on the tenant’s serving a three-month notice under section 27(2) expiring on any quarter day, as in the instant case. In the event, the lease terminated on June 24 1988 and the respondent was liable for rent to that date.
In Lex Service plc v Johns (soon to be reported in Estates Gazette), the tenant was the lessee of showrooms and the original term of the lease was 12 months from December 25 1973 and thereafter at six months’ notice. Two notices were served by the landlord on April 5 1988 (accompanied by a letter of the same date) and were expressed as terminating the tenancy on December 24 1988. The notices were sent by the recorded delivery service and the postman’s delivery book indicated that the two notices were received by someone on April 18 1988, but the signature was illegible. The tenant contended that he had not received the notices, and so had not served a counternotice nor had made an application to the court for a new tenancy. The main question before the Court of Appeal was whether the notices had been properly served, and this called upon the court to consider the provisions of the 1954 Act, section 7 of the Interpretation Act 1978, and the resulting case law. For present purposes, section 7 provides:
Where an Act authorises or requires any document to be served by post (whether the expression “serve” or the expression “give” or “send” or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, prepaying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
In the Court of Appeal, both Glidewell and Balcombe LJJ agreed that the tenant had not succeeded in proving “the contrary” for the purposes of section 7 so that, as service of the notices had been properly effected and no counternotice served nor application to the court for a new tenancy made, the tenant’s tenancy had properly come to an end on December 24 1988. Glidewell LJ was of the opinion that the real issue was whether there was sufficient contrary evidence to displace the statutory provision under section 7 that service was deemed to have been effected. Glidewell LJ suggested that:
… what for this purpose is necessary to prove the contrary is either positive evidence that the document has been returned to the sender, or if it be sent by registered or recorded delivery post, that there is no acknowledgement of its ever having been received by the recipient. If there were evidence of such a document having been received by some person but it were proved that that person was not the person upon whom the document was required to be served and that the person who received the document had not brought it to the attention of the person upon whom it was required to be served, then that, I would accept, would prove that the document had not been properly served. But in the absence of such evidence then, in my judgment, the contrary is not proved.
It is to be noted that Balcombe LJ reserved his position on these circumstances.
Finally, the Landlord and Tenant Act 1954, Part II (Notices) (Amendments) Regulations 1989 (SI 1989 No 1548) came into force on September 29 1989 and replaced Forms 1, 3, 13 and 15 in Schedule 2 to the Landlord and Tenant Act 1954, Part II (Notices) (Regulations) 1983. The notices now expressly require a tenant to notify the landlord whether he is willing to give up possession of the property let to him as well as whether he is unwilling to do that.
New lease terms and court proceedings
In National Car Parks Ltd v The Paternoster Consortium Ltd [9] EGCS 87, Sir Nicolas Browne-Wilkinson V-C had to consider the question of the length of the new lease and whether the landlord should be given a breakclause provision. The plaintiff was the underlessee of premises at Paternoster Square, London, and, in September 1986, served a section 26 notice on the defendant requesting a new tenancy and specifying the commencement date as August 25 1987. In October 1986, the defendant served a counternotice stating that any application for a new lease would be opposed on the ground in section 30(1)(f). The Vice-Chancellor held that the defendant’s evidence showed that the various interests in Paternoster Square and the local planning authority were in favour of the area’s redevelopment. There was every possibility of the development’s proceeding. Accordingly, it was right to insert a break clause in the new lease. In addition, a 14-year term was appropriate for the new lease, commencing from the date of the issue of the summons on December 9 1986. The break clause should give the right to the lessor to terminate the lease on giving not less than six months’ notice.
The complexities of section 24A, with the court proceedings, gave rise to difficult issues in Benedictus v Jalaram Ltd [9] 1 ELGR 251. The appellants were the tenants of premises under a lease which had expired in March 1982, but they remained in possession and applied for a new tenancy in February 1983. On March 1 1983, the respondent landlords gave notice that they would oppose the tenants’ application on a number of specified grounds relating to breaches of covenant by the tenants. In April 1983, the landlords applied to the court for an interim rent under section 24A and, in June 1983, the tenants applied to the court for a new tenancy, which the landlords opposed on the appropriate form. The tenants later stated that they were not in occupation, and their application for a new tenancy was dismissed in June 1987. In answer to the landlords’ remaining claim for an interim rent as from April 1983, the tenants contended that they had not been in occupation of the premises after the expiry of the lease in March 1982 and so their tenancy was not within the 1954 Act and that, accordingly, the interim rent provisions did not apply and the court had no jurisdiction. In the county court, the answer was ordered to be struck out as an abuse of the process of the court.
The Court of Appeal held that the tenants’ contention that the court had no jurisdiction because the tenants were not in occupation did not give rise to any question of the court’s jurisdiction but concerned solely the tenants’ claim for a new tenancy. That claim, and their application to the court in June 1983, incorporated “pleadings” the substance of which showed that they were then contending that the 1954 Act applied to their tenancy. Further, the matters relied upon as reflected in the pleadings were capable of establishing an estoppel by convention; the “pleadings” established that the tenants applied for a new tenancy. An application for a new tenancy can be made only if a tenant is in occupation of the premises for the purposes of a business, and an applicant should know that a landlord can then, and not before, apply for an interim rent. It is an abuse of the process of the court to “plead” a claim for a tenancy under the 1954 Act and then deny that the Act applies in answer to a claim for interim rent; estoppel by convention was established. There was no obligation to allow the tenants to adduce evidence that the landlords knew the tenants were not in occupation and to show that the assumption that founded estoppel was not present. The tenants in this case had not withdrawn their application for a new tenancy but had pursued it for four years.
In Khalique v Law Land plc [9] 1 EGLR 105; [1989] 18 EG 111, the landlord applied for leave to appeal out of time from the decision of an assistant recorder and to adduce new evidence. The facts were that a new tenancy of an Indian restaurant was agreed in principle, the remaining outstanding issues being as to rent, duration and some of the terms. The assistant recorder had heard evidence from two experts and a number of other witnesses and had viewed premises alleged to be comparable but had excluded from consideration two comparables in the same street as the premises in question. The assistant recorder determined a rent of £20,500 pa for a 10-year term with a provision for rent review five years before termination of the lease. There was also a provision for an increase of £1,000 pa if a new shop front were provided. The landlord sought to adduce new evidence of an agreed rent relating to one of the comparables which the assistant recorder had excluded and evidence of another agreed rent. The Court of Appeal, relying on the comments of Lord Wilberforce in Mulholland v Mitchell [1971] AC 666, refused leave to call this further evidence.
Whether a tenant’s application to the court for a new tenancy which erroneously named the landlord as plaintiff could be corrected was the issue in Teltscher Bros Ltd v London & India Dock Investments Ltd [9] 2 EGLR 261. The landlord served a section 25 notice and the tenant served a counternotice stating unwillingness to give up possession and sought to apply to the court for a new tenancy. However, the title of the summons incorrectly named the landlord as plaintiff and the tenant as defendant and sought an order that the plaintiff grant the defendant a new tenancy. The landlord’s solicitors refused to accept service of the summons on the ground that it was defective. Peter Gibson J held that, although the tenant’s originating summons contained on its face patent inconsistencies, in that the names of the landlord as plaintiff and the tenant as defendant had been transposed, they were mere irregularities covered by RSC Ord 2, r1(1) and they could be cured by an amendment correcting the summons under Ord 20, r5(3), it being conceded that the mistake was genuine and not misleading.
In Stevens & Cutting Ltd v Anderson [9] EGCS 114, the respondent was the owner of “Mayford Stores” and an adjoining lock-up shop and, in November 1971, let the stores to the appellant on a 15-year lease from April 1971. By a supplemental lease of July 9 1982, the respondent granted a lease of the shop to the appellant for a term of five years from April 1981 with both terms expiring on April 2 1986. In notices dated June 12 1985, two of the appellant company’s directors purported to request a new tenancy of each holding under section 26. The respondent replied that the tenancies were held by the appellant company and not by the two directors and, without admitting the validity of the notices, indicated that he would oppose any application for new tenancies on grounds (a) and (c) of section 30(1). The appellant then requested new tenancies by a notice of June 25 1985 and, by a letter of June 28 1985, the respondent expressed the same grounds of opposition.
The appellant applied to the county court on August 13 1985 seeking the grant of the two tenancies and the respondent put in his answer in October 1987. Proceedings were generally adjourned as negotiations continued but, eventually, on December 14 1987, the respondent realised that the appellant had made the application to the court less than two months after service of the section 26 notice contrary to section 29(3) of the Act. The county court judge dismissed the appellant’s application on the grounds that it had not been made in accordance with the timetable of the 1954 Act. The Court of Appeal held that, although the respondent’s solicitor became aware of the defective application more than two years later, and then acted promptly, his knowledge was not the respondent’s knowledge, so that there was no question of waiver by election. Estoppel required a representation of fact, reliance upon the representation, and detriment resulting from the reliance. No such representation could be spelt out of the landlord’s counternotice of June 28 1985 or of the answer in proceedings before the county court of October 1987 setting out the grounds of opposition. There was no representation arising out of the respondent’s conduct that if negotiations for new tenancies failed there would be no opposition. As it was impossible to say at what stage a representation, if any, was made, the appellant had suffered no detriment.
Opposing the grant of a new tenancy
Where a landlord seeks to oppose the grant of a new tenancy on the ground that he wishes to redevelop or reconstruct etc the premises, he must comply with section 30(1)(f) of the 1954 Act.
In Barth v Pritchard [9] EGCS 124, the respondent was the tenant of two floors of offices and also held a lease of the whole of the adjoining building. The respondent had made openings in the party wall between the two buildings to provide direct access to the two floors. As the respondent’s lease of the two floors was to terminate on June 24 1988, he served a section 26 request to which the appellants responded stating they would oppose any application for a new tenancy under section 30(1)(f). The appellants’ proposed works included, inter alia, resiting of the staircase, rewiring, provision of new toilets, installation of central heating, restoration of main roof, decoration and carpeting and the closure of the openings made by the respondent in the party wall. The county court judge said that one should consider the “quality of the work as a whole … and the work in relation to the premises …” and decided that, although some of the items were works of construction, they did not all affect the structure and, taken in the context of all the work, it could not be said that the appellants were proposing “substantial work of construction” as envisaged by section 30(1). The Court of Appeal held that the county court judge had not applied the wrong approach, as the authorities established that the “position as a whole” is to be considered in so far as works not themselves works of construction are directly related to or are ancillary to works which do amount to works of construction. The authorities cannot be read as indicating that proposed works, considered as a whole, could amount to construction if none of the items considered separately could be so regarded. It is only in the context of works which are, or might be, properly regarded as construction works that other works which are not themselves construction fall to be considered when the works are regarded as a whole. The decision in Cerex Jewels Ltd v Peachey Property Corporation plc [1986] 2 EGLR 65 would be distinguished. The Court of Appeal added that whether the proposed works individually or in the light of other work can be properly described as “construction” works depends on the facts in each case. It is implicit in ground (f) that the works will fall within that ground only if they involve directly the structure of the building in some way. Wooden partitions are unlikely to be construction, neither is the installation of wiring, plumbing, boilers or toilets.
The interrelationship of section 30(1)(f) and section 31A was considered by the Court of Appeal in Romulus Trading Co Ltd v Henry Smith’s Charity Trustees [9] EGCS 165, where the respondent company was the tenant of the demised premises of which the appellant trustees were the landlords. The landlords intended to carry out works to convert the demised premises into two maisonettes and a self-contained flat and such works included, inter alia, (i) demolition and construction of partitions; (ii) installation of new windows; (iii) demolition of a wall and construction of a rear extension; and (iv) associated plastering, plumbing and electrical work. The county court judge held that, although the works were extensive, they did not fall within section 30(1)(f). The Court of Appeal held that in its role it has to be careful not to review the findings of a trial judge as to what constitutes work of construction or reconstruction unless the evidence showed that the trial judge was plainly wrong. The Court of Appeal was of the opinion that for works to qualify as reconstruction within para (f) it must be shown primarily that they are works of rebuilding involving a substantial interference with the structure of the building, but structure is not necessarily confined to outside or other load-bearing walls; works or preparation ancillary to such works are properly included as works of reconstruction or construction as the case may be. Other closely associated work, such as the plastering of a new load-bearing wall, would also be included if that were an inseparable consequence of installation. Although there was material before the trial judge, he did not make any findings as to whether the works amounted to works of reconstruction of a substantial part of the premises or were substantial works of construction on part of the holding.
In considering the works in the context of section 31A(1), the Court of Appeal was of the opinion that the works intended are the works of demolition, reconstruction or construction referred to in section 30(1)(f), and there must be consideration of these works in deciding whether the business of the tenant would be interferred with “to a substantial extent and for a substantial time”.
In Cox v Binfield [9] 1 EGLR 97; [1989] 01 EG 69, ground-floor cafe premises comprising four rooms were demised under a lease, the benefit of which became vested in C. The landlord and her husband lived in three rooms on the upper floor of the two-storey building, the upstairs accommodation consisting only of a kitchen, bathroom and lavatory. B and her husband were 61 and 57 respectively, and the latter suffered from diabetes and was infirm in his legs. In reply to C’s request for a new tenancy under section 26 of the 1954 Act, B opposed the grant of a new tenancy on the ground that she required the premises partly to carry on a business of her own and partly as a residence. Her object was to accommodate her husband in two of the ground-floor rooms and to carry on the cafe business on a reduced scale from the remaining two rooms. The question in issue was whether B had the necessary “intention” to enable her to rely on this ground. The county court judge found that there was a genuine intention notwithstanding (i) that B’s husband had retired; (ii) that B had had nothing to do with the catering trade for at least 30 years, when she last assisted in the cafe; (iii) that, from the point of view of using the property as a source of income, she would probably be better advised to rely on the rental income from the letting; and (iv) that the plans were ill-thought-out and likely to fail. The Court of Appeal held that the county court judge had taken into account all the relevant facts and had not fallen into any error by making a finding that B had satisfied the requirements of section 30(1)(g). Although the county court judge thought that B’s plans in relation to the future running of the cafe were ill-thought-out and likely to fail, they were not so unrealistic that they could not be considered genuine for the purposes of establishing intention; he had accepted B’s evidence of her long association with the property and that she was strongly motivated by a desire to remain in it.
Several complex issues were considered by the Court of Appeal in Wates Estate Agency Services Ltd v Bartleys Ltd [9] 2 EGLR 87; [1989] 47 EG 151. The Governors of Dulwich College (the headlessors) granted a 21-year lease of a shop in 1971, under which BF covenanted not to use the shop otherwise than for trade as a florist. In 1978, the headlandlord, in consideration of a premium of £4,000, consented to the grant of a 10-year sublease by BF to the appellants (Wates), subject to a covenant by the sublessees that the premises were not to be used otherwise than for estate agency and related purposes. The headlessees sought clarification from the headlessors as to whether, on the expiration of the sublease, a further consent or premium would be necessary if the headlesses desired to grant a further sublease for the two-year residue of their headlease for estate agency purposes. The headlessor’s solicitors stated that no further premium would be required on the expiration of the sublease. In due course, the shares in BF Ltd were acquired by parties with estate agency interests, the objects of the company were changed to allow the company to carry out estate agency and the company’s name was changed to B Ltd (the respondents). The company also received an assurance from the headlessors that the premium paid for the licence to grant the sublease referred to the change of use for the full term of the headlease.
In March 1987, the appellant company applied for a new tenancy and the respondents opposed the application on, inter alia, ground (g) as they wished to occupy the premises for the purposes of their estate agency business. In the county court, the appellants’ submission that the respondents could not rely on ground (g) as the headlessors’ consent was not in terms to vary the user clause in the headlease, and therefore the headlessees could not use the premises for the purposes of their business, was dismissed. The Court of Appeal was of the opinion that the respondents could not rely on any contractual variation of the user clause of the headlease because the only valid contract, the licence to grant the sublease, did not in terms vary the user clause to permit estate agency use. The factual matrix showed that the headlessors intended to permit a change of use for the full term of the headlease. The promise was clear and unambiguous and such that, by the doctrine of estopped by convention, the headlessors could no longer rely on the original user clause. Finally, the respondents would not need the headlessors’ consent to use the premises as an estate agency for the residue of the term and were entitled to rely on ground (g).
In Meyer v Riddick [9] EGCS 144, the appellant was tenant of premises held on a 12-year lease expiring in June 1987 and the respondent landlords, who were trustees under a trust for sale, had acquired the reversionary interest in 1980. Two of the three respondents were partners in a firm of solicitors and the respondents opposed the tenant’s application for a new tenancy on ground (g) in section 30(1) as it was the respondents’ intention to use the premises for the purpose of their firm under a commercial lease. The county court judge referred to section 41(2) of the 1954 Act and held that, as two of the trustees were also beneficiaries, they had shown an intention to occupy. The Court of Appeal held that, where a landlord intended to oppose the grant of a new tenancy under section 30(1)(g), and relied on his beneficial interest under a trust, he had to show that his proposed occupation was, for the purposes of and in the manner intended, by virtue of his beneficial interest under that trust.
In this case, two of the respondent landlords (R and N) were partners in the firm, but the third, Mrs N, was not. In order to exclude Mrs N from the benefit of her beneficial interest under the trust for sale, it was necessary for the three trustees to let the premises under a lease to the partnership as a whole. In this way, the first two respondents (R and N) were entitled to occupy the premises not for the purposes of their business as beneficiaries of the trust but under the lease. That was not occupation as “beneficiaries” under the 1954 Act and did not satisfy ground (g).
Compensation
A tenant of business premises may be entitled to claim compensation for improvements undertaken to the demised premises under the Landlord and Tenant Act 1927. In addition, in certain circumstances, compensation for disturbance may be payable under section 37 of the 1954 Act. In Hogarth Health Club v Westbourne Investments Ltd [0] 02 EG 69, the tenant held a 28-year lease from March 1967 and, in June 1979, gave notice to the landlord under the 1927 Act of its intention to make improvements to the premises. The landlord’s solicitors gave notice of objection and in November 1979 the tenant made an originating application to the county court for a certificate, under section 3 of the 1927 Act, that the improvements were “proper improvements” for the purposes of the Act but, by this date, the works appeared to have commenced. The works were completed in October 1981.
The Court of Appeal held that, as section 3 makes provision for the right of a landlord to object to a tenant’s making improvements, it followed from section 3(1)-(4) that the notice of intention to make improvements must be served by the tenant before the works commence. Section 3(5) negates the general right to compensation by introducing a requirement that the improvement must be completed within such time as may be agreed or determined by the court.
Such a requirement cannot be fulfilled if no time is agreed and the court would be unlikely to determine a time retrospectively. The court was of the opinion that the whole tenor of section 3 is consistent only with a certificate’s being granted before the works are completed. The intent and purpose of the section is to provide a tenant with the means of knowing in advance whether improvements that he proposes of calculating compensation be proper for the purposes of calculating compensation at the end of the tenancy.
In Plessey & Co Ltd v Eagle Pension Funds Ltd [9] EGCS 149, the Lands Tribunal had to consider several complex factors in assessing the operation of a tenant’s claim for compensation under section 37 of the 1954 Act. In this case, by an underlease of August 10 1976, P Ltd became the tenant of the top three floors of premises. In November 1977, a fire on the first floor resulted in the whole building being vacated for refurbishment work and, on account of the fire and following a proposal by Eagle Pension Funds Ltd, the superior landlord and the respondent in this appeal, the valuation list was altered and the hereditament was entered at a gross value of £100 (rateable value £60). The apportioned rateable value attributable to that part of the premises demised to P Ltd was £17.
On January 18 1985, Eagle Pension Funds Ltd served a notice to quit on P Ltd stating that a new lease would be opposed on ground (f) in section 30(1). P Ltd did not apply for a new lease and vacated the premises on September 26 1985. Although a rateable value of £21,097 for the P Ltd part of the hereditament was proposed in March 1979 by the valuation officer, and P Ltd paid rates based on that figure until the lease was determined, the valuation list was not amended until June 16 1986. Under section 37(5) P Ltd claimed disturbance compensation from Eagle Pension Funds based on 3 x £21,097, but the respondent landlord contended that, as the rateable value on the relevant date, namely January 18 1985, was only £17, the compensation due under section 37 was only 3 x £17.
The Lands Tribunal was of the opinion that the tenant’s appeal under section 37(5) of the 1954 Act had to be dismissed. The issue before the tribunal was whether, for the purposes of section 37(2), the rateable value of the holding at January 18 1985 was to be ascertained in accordance with section 37(5)(b), as the landlord maintained, or section 37(5)(c), as the tenant maintained.
The Lands Tribunal held that, at the date of termination specified by the landlord’s notice (January 18 1985), the whole building had a rateable value of £60 and, but for a delay in dealing with an appeal before the local valuation court, the rateable value would have been £21,097. On the express words of section 37(5)(b), the rateable value is to be determined by apportionment of the value in the list on January 18 1985. A later rateable value cannot be applied retrospectively.
It is to be noted that section 37 has been amended by the Local Government and Housing Act 1989 and these changes were explained in an article entitled “Disturbance Compensation: Community Charge and Non-domestic Rating” at [0] 03 EG 26.
Delyth Williams BA MCD LLB MRTPI ACIArb is principal lecturer in urban estate management in the School of the Built Environment at Liverpool Polytechnic and co-author of Assured Tenancies published by The Estates Gazette Ltd.
