Fixed-term tenancy – Termination – Tenancy at will – Respondent landlords granting short-term tenancy to third party – Third party subletting to appellants on purported long-term leases — Respondent obtaining possession order against appellants — Appellants seeking permission to appeal – Whether judge entitled to find tenancy at will – Whether proprietary estoppel precluding respondents exercising rights over appellants – Application dismissed
The respondent was the freeholder of business premises that it wanted to developing for social housing. However, because the property lay under the Heathrow flight path, a detailed planning application was required and because the site had been used for semi-industrial purposes, environmental issues had to be resolved before planning permission could be granted. Meanwhile, the respondent entered into an agreement with R, under which it was granted a tenancy of the property for a fixed term of three months. The tenancy was not excluded from Part II of the Landlord and Tenant Act 1954, presumably because a tenancy for less than six months certain was an excluded tenancy under section 43 of that Act.
However, clause 2.2 of the agreement acknowledged that the three-month tenancy would terminate at the end of the term and provided that should the tenant hold over at the end of the term, the tenancy would be terminable by either party giving not less than one week’s notice, regardless of how the rent payable in respect of the occupation was calculated or paid.
The parties did not enter into further agreements and R continued to pay the rent under the 2004 agreement until he disappeared in 2006. However, R had allowed other parties to occupy parts of the premises; this included the appellants, to whom he purported to grant long leases.
The county court made an order for possession against R in absentia and the appellant. The judge found that, under clause 2.2, the tenancy at will that had come into existence in February 2005 continued in operation at the end of the three-month fixed-term tenancy. The appellants applied for permission to appeal and a stay of execution of the possession order.
Held: The application was dismissed.
The appellants were not entitled to 1954 Act protection and an appeal against the judgment would not have any prospect of success.
Clause 2.2 made it clear that the parties had intended the three-month tenancy to end in February 2005. They were not agreeing that it would hold over, but merely that, were the tenant to be allowed to remain in occupation after the February date, it would be on the basis of a tenancy term of one week’s notice. There was no evidence before the judge that would have led him to infer that the parties had intended to grant R anything more than a tenancy at will. There was no evidence from R, but there was evidence that the landlord wanted to keep the position as fluid as possible to enable the property to be developed as and when it obtained planning permission. The test for the appeal court was not what view it would have taken of the evidence at the trial, but whether the judge had been entitled on the evidence before him to reach the conclusion that he did. The judge had evidence that supported the conclusion that those arrangements gave rise to no more than a tenancy at will.
Furthermore, the appellants had failed to satisfy the court that, whatever might be the position at common law and under the 1954 Act, they would be entitled to assert a right in equity based on proprietary estoppel to compel the respondent to grant them new tenancies in satisfaction of the equity.
Although, in some cases, merely standing by caused the party seeking to assert the estoppel to change its position to its detriment, thereby giving rise to the equity, those principles were difficult to apply in the instant case. From 2004, the site had been let to R under the terms of the 2004 agreement. That agreement contained an absolute covenant against underletting and there was evidence before the judge that the respondent had been aware, at least from 2005, that the appellants were occupying parts of the premises and was carrying on their own businesses there. The respondent must have appreciated that if the appellants had tenancies or subtenancies, they had been granted in breach of covenant.
Howover, there was no evidence that the respondent had known the terms on which the appellants had been allowed into occupation of the property. Therefore, it could not be said that the respondent should be taken to have known that, by being permitted to remain there, the appellants believed that it was affirming not merely their right to be there as subtenants but their right to be there under terms of eight and 10 years respectively. A landlord was entitled to assume that even if subtenancies had been created, they would have been no more extensive than the one enjoyed by R.
The appellants had been put into a difficult position, not by the respondent but by R, who had deceived them into believing that he could granting the long leases. For those facts to be allowed to set up an equity against the respondent, it would be necessary to show that they had been aware of that position, knew that the appellants were spending money on their business in the belief that they would be entitled to enjoy the property for the full term granted by R and acquiesced in that knowledge. However, there was no evidence before the judge that could justify that finding.
Rosanna Bailey (instructed by CL Law Solicitors, of Heston) appeared for the appellants; Ben Maltz (instructed by Prince Evans Solicitors) appeared for the respondent.
Eileen O’Grady, barrister