Rent Act and Landlord and Tenant Act 1954–Whether tenancies regulated tenancies or business tenancies–Landlords in two cases contended that tenancies were business tenancies–Lord Denning’s illustrative cases–Possibility of character of tenancy changing from regulated to business–Doctor with consulting rooms in Harley Street who saw patients very occasionally at his residence elsewhere held to have regulated tenancy of the latter–Accountant on the other hand who, without knowledge of landlords, equipped and used residential flat for the purpose of an import business held to occupy it for the purpose of a business within Part II of 1954 Act
These were
appeals by two different landlords from decisions of Deputy Judge Goldstein at
West London County Court in which he held in favour of the tenants in both
cases that the tenancies were regulated and not business tenancies. The appeal
by the Royal Life Saving Society concerned a maisonette at 14 Devonshire
Street, London W1, let to Dr Ernest Donald Page. The appeal by Cheryl
Investments Ltd related to a flat in Knightsbridge let to Roland Saldanha, an
accountant, who was a partner in a firm called ‘Best Marine Enterprises,’
concerned with the importation and processing of sea foods.
J Colyer QC
and P de la Piquerie (instructed by Rees, Kon, Freeman & Co) appeared on
behalf of the appellants in the first of the above appeals; A Walker
(instructed by Eric Hauser & Co) represented the respondent. J Colyer QC
and D Parry (instructed by Dawson & Co) appeared on behalf of the
appellants in the second appeal; C L Falconer (instructed by Monro, Pennefather
& Co) represented the respondent.
Giving
judgment, LORD DENNING MR said: Here we have a topsy-turvy situation. Two
landlords contend that their tenants are ‘business tenants’ and entitled to
have their tenancies continued under the statute in that behalf, whereas the
tenants contend that they are not so entitled at all. The reason for this
oddity is because, if the tenants are not ‘business tenants,’ their tenancies
are ‘regulated tenancies’ and they are protected by the Rent Acts. The
protection under the Rent Acts is much better for the tenants than the
protection under the business statute. So the landlords seek to chase them out
of the Rent Acts and put them into the business Acts.
The statutes
on this subject cannot properly be understood except in the light of their
history. I will, therefore, sketch it in broad outline, taking by way of
illustration a situation which used to be very common. It is where a shopkeeper
lives over the shop, or a doctor has his consulting room in his house. For over
35 years from 1920 onwards such a person was protected by the Rent Acts, not
only in respect of the amount of rent, but also from eviction. The Acts
distinctly declared that the application of them ‘to any house or part of a
house shall not be excluded by reason only that part of the premises is used as
a shop or office or for business, trade or professional purposes,’ see section
12(2)(ii) of the 1920 Act. This protection was carried so far that when a lady
ran a guest house as a business and had her own bedroom and sitting room
there–entirely ancillary to the business–she was protected by the Rent Acts,
see Vickery v Martin [1944] KB 679.
This
protection was continued until 1957. There was no break in 1954, for although
the Landlord and Tenant Act 1954 (which I will call the Business Tenancy Act)
gave rights to tenants of business premises, it did not apply to tenancies
which were protected by the Rent Acts–see section 43(1)(c) of the 1954 Act. But
in 1957 there was a fundamental change. By the Rent Act 1957 most houses were
decontrolled. Thenceforward the shopkeeper who lived over the shop, and the
doctor who had his consulting room in his house, were no longer protected by
the Rent Acts. They were protected only by the Business Tenancy Act 1954–see
section 11(7) and Schedule 4, paragraph 11, to the 1957 Act.
In 1965 there
was another fundamental change. By the Rent Act 1965 Parliament restored
protection for the tenants of dwelling-houses who lived at home away from the
business. But this time Parliament did not give this protection to the
shopkeeper or the doctor who lived over the shop or the consulting room. Parliament
left them to the protection of the Business Tenancy Act 1954. From 1965 onwards
Parliament divided tenancies into two separate and distinct categories:
‘regulated tenancies’ and ‘business tenancies’. Every tenancy had to be placed
into one category or the other. ‘Regulated tenancies’ were dwelling-houses
protected by the Rent Acts. ‘Business tenancies’ were premises protected by the
Business Tenancy Act 1954. This dichotomy was made by the 1965 Act and has been
continued by the Acts of 1968 and 1977. See section 9(5) of the 1968 Act and
section 24(3) of the 1977 Act.
The result is
this. If a house is let as a separate dwelling (without being occupied in whole
or in part for business purposes) it is a ‘regulated tenancy’. But, if it is
occupied by the tenant ‘for the purposes of a business carried on by him or for
those and other purposes’ it is a ‘business tenancy’: see section 23(1) of the
1954 Act. It cannot be both. It is of the first importance now to be able to
place a tenancy into the correct category, because the two categories are very
different animals.
Regulated
tenancy
When a tenancy
is a ‘regulated tenancy’ the tenant is protected by the Rent Acts. So long as
the contractual tenancy continues, the tenant is a ‘protected tenant’. He is
protected in respect of the rent he can be charged. As soon as the contractual
tenancy is determined by effluxion of time or expiry of notice to quit, he
becomes a ‘statutory tenant’. This is a privilege which is personal to him,
and, after he dies, to his widow or a member of the family residing with him.
He cannot assign it to anyone else. His residence there must be continuous. If
he ceases to reside there, he loses his right as statutory tenant: and he
cannot revive it by going in again. It is so personal that, if the tenant is a
limited company, it has no right to continue the tenancy after the contractual
tenancy has come to an end.
Business
tenancy
This is
altogether different. During the contractual tenancy, the tenant is there under
the terms of the contract. But, once the contractual tenancy comes to an end
(by effluxion of time or notice to quit) there is automatically a continuation
of the tenancy for an indefinite time in the future unless and until it is
terminated in accordance with the statute. There has to be at least six months’
notice, and not more than 12 months’ notice. Until it is so terminated, the
relations of the parties are governed by the terms of the contract of tenancy.
This ‘continuation tenancy’ is nothing like a ‘statutory tenancy’. It is not a
personal privilege of the tenant. It is a piece of property which he can assign
or dispose of to a third person, provided that it was not prohibited by the
terms of the contract. And he can give it up on proffering notice to the
landlord.
Application
of the statute
There was much
discussion before us as to the meaning of the Business Tenancy Act 1954 (I use
those words because I think ‘Landlord and Tenant Act 1954’ is a little
confusing): especially the word ‘purposes’ in section 23(1); the time or times
at which those ‘purposes’ had to exist; and the effect of a change by the
tenant in the use to which he put the property. Could he take himself in or out
of the Act at his option? I found all
these matters so confusing that I do not propose to attempt a solution today. I
am only going to take four simple illustrations to show how the statute works:
for they will suffice for our present cases.
First, take the case where a professional man is the tenant of two
premises: one his office where he works, the other his flat, conveniently near,
where he has his home. He has then a ‘business tenancy’ of his office, and a
‘regulated tenancy’ of his home. This remains the situation even though he
takes papers home and works on them at evenings or weekends and occasionally
sees a client at home. He cannot in such a case be said to be occupying his
flat ‘for the purpose of’ his profession. He is occupying it for the purpose of
his home, even though he incidentally does some work there, see Sweet v Parsley
[1970] AC 132 at p 155 by Lord Morris of Borth-y-Gest.
Second, take the case where a professional man takes a tenancy of one house
for the very purpose of carrying on his profession in one room and of residing
in the rest of the house with his family. Like the doctor who has a consulting
room in his house. He has not then a ‘regulated tenancy’ at all. His tenancy is
a ‘business tenancy’ and nothing else. He is clearly occupying part of the
house ‘for the purpose of’ his profession, as one purpose; and the other
part for the purpose of his dwelling as another purpose. Each purpose is
significant. Neither is merely incidental to the other.
Third, suppose now that the first man decides to give up his office and to
do all his work from his home, there being nothing in the tenancy of his home
to prevent his doing it. In that case he becomes in the same position as the
second man. He ceases to have a ‘regulated tenancy’ of his home. He has only a
‘business tenancy’ of it.
Fourth, suppose now that the second man decides to give up his office at
home and to take a tenancy of an office elsewhere so as to carry on his
profession elsewhere. He then has a ‘business tenancy’ of his new premises. But
he does not get a ‘regulated tenancy’ of his original home, even though he
occupies it now only as his home, because it was never let to him as a separate
dwelling, unless the landlord agrees to the change.
Those
illustrations point to the solution of the present two cases.
THE ROYAL LIFE SAVING SOCIETY v ERNEST DONALD PAGE
No 14
Devonshire Street is a house with four floors. It is owned by the Howard de
Walden Marylebone Estate. In 1945 they let it on a long lease to the Royal Life
Saving Society for 64 1/2 years. That society occupy most of the house
themselves but in 1960 they let the top two floors as a maisonette to a Mr Gut.
It was for 14 years at a rent of £600 a year. There was a covenant prohibiting
assignment without the landlord’s consent. There was no restriction on the use
which the tenant made of the premises. But it would appear that the maisonette
was constructed for use as a separate dwelling, and that the letting was, ‘as a
separate dwelling’ within the tests laid down in Wolfe v Hogan
[1949] 2 KB 194 at pp 204-5.
In 1963 the tenant,
Mr Gut, made arrangements to assign the lease to Dr Ernest Donald Page. He was
a medical practitioner who had his consulting rooms at 52 Harley Street. His
major appointment was medical adviser to Selfridges and he did clinics there
five days a week. He took this maisonette in Devonshire Street so that he could
live there as his home. But he thought that in the future he might possibly
want to use it occasionally so as to see patients there. So, when he took the
assignment, he asked for consent to do so. Such consent was readily given by
the Royal Life Saving Society (his immediate landlords) and by the Howard de
Walden Estate (the head landlords). It was a consent to carry on his profession
in the maisonette. After the assignment he moved in and occupied it as his
home. He put both addresses (Harley Street and Devonshire Street) in the
Medical Directory. He had separate notepaper for each address and put both
telephone numbers on each. This was, of course, so that anyone who wished to
telephone him could get him at one or the other place. But he did very little
professional work at the maisonette. Over the whole period of the tenancy, he
had only seen about one patient a year there. The last patient was in distress
18 months ago. He summarised the position in one sentence: ‘Harley Street is my
professional address, and the other is my home.’
On those facts
it is quite clear that 14 Devonshire Street was let as a separate dwelling and
occupied by Dr Page as a separate dwelling. There was only one significant
purpose for which he occupied it. It was for his home. He carried on his
profession elsewhere in Harley Street. His purpose is evidenced by his actual
use of it. Such user as he made in Devonshire Street for his profession was not
a significant user. It was only incidental to his use of it as his home. He
comes within my first illustration. He is, therefore, protected by the Rent
Acts as a ‘regulated tenancy.’
The Royal Life
Saving Society later on alleged that he was a business tenant and gave him notice
to terminate under the Business Tenancy Act 1954. He was quite right to ignore
it. He is entitled to stay on as a statutory tenant under the Rent Acts. I
agree with the judge, and would dismiss the appeal.
CHERYL INVESTMENTS LTD v ROLAND SALDANHA
Beaufort
Gardens is a fine London square, in which there were in former times large
houses occupied by well-to-do families and their servants. These houses have
long since been converted into apartment houses. In particular 46-47 Beaufort
Gardens have been turned into 25 separate apartments. These are owned by a
property company called Cheryl Investments Ltd which is run by a Mr Welcoop. In
December 1975 the company advertised these apartments in the Evening
Standard, in these words:
Knightsbridge.
Essex House, near Harrods, serviced flat and flatlets. Doubles from 20 guineas,
flats from 27 guineas. Short-long lets.
Mr Roland
Saldanha answered the advertisement. He had been living in Weybridge, but he
wanted a permanent residence in the centre of London. He was shown one of these
flats which he liked. It had a large double room with twin beds in it, a
bathroom and a toilet. It had no separate kitchen, but there was an entrance
hall with a cooker in it which could be used as a kitchen. The company provided
the furniture and service in the shape of a maid to clean it and change the
towels, etc. It took her half an hour a day. The charge was £36.75 a week, plus
5 per cent surcharge.
His stay there
turned out to be very unhappy, with quarrels between him and the landlords.
Eventually on February 9 1977 the company gave him notice to quit on March 26
1977. He claimed the protection of the Rent Acts. He said: ‘I am a
fully-fledged tenant entitled to full protection under the Rent Acts.’ The company took proceedings in the county
court claiming that he was not a tenant but a licensee. They relied on Appah
v Parncliffe Investments [1964] 1 WLR 1064. But the judge held that he
was a tenant, and that the amount in respect of attendance did not form a
substantial part of the whole rent: see section 7 of the 1977 Act, and Palser
v Grinling [1948] AC 291. So the judge decided those points in favour of
Mr Saldanha, and there is no appeal on them. But on the day of the trial,
September 27 1977, after previous notice, the plaintiffs amended their
particulars of claim so as to assert that Mr Saldanha occupied the flat for
business purposes and was, therefore, not entitled to the protection of the
Rent Acts and asked for a declaration accordingly. The judge rejected this
claim. It is from this decision that the company appeal to this court.
Now on this
point the evidence was this: Mr Saldanha is an accountant by profession. He is
a partner in a firm called ‘Best Marine Enterprises.’ They carry on the business of importing sea
foods from India and processing them in Scotland. The firm has no trade
premises. The two partners carry on the business from their own homes. The
other partner works at his home at Basildon. Mr Saldanha works at the flat in
Beaufort Gardens and goes from there out to visit clients. When he went into
the flat he had a telephone specially installed for his own use, with the
number 589 0232. He put a table in the hall. He had a typewriter there, files
and lots of paper. ‘The usual
cases. He had notepaper printed:
Best, Marine
Enterprises. Importers of Quality Sea-foods. Telephone 589 0232. PO Box 211,
Knightsbridge, London SW3.
He issued
business statements on that very notepaper. A copy of one was found by the maid
in a wastepaper basket showing that the firm had imported goods at a total cost
of £49,903.30 and sold them for £58,152.35. The maid (whose evidence the judge
explicitly accepted in preference to his) said: ‘I presumed Mr Saldanha
conducted business there.’
On that
evidence I should have thought it plain that Mr Saldanha was occupying this
flat, not only as his dwelling, but also for the purposes of a business carried
on by him in partnership with another. When he took the flat it was, no doubt,
let to him as a separate dwelling. It was obviously a residential flat with
just one large room with twin beds in it. No one can doubt that it was
constructed for use as a dwelling and let to him as such within Wolfe v Hogan
[1949] 2 KB 194 at p 204. But as soon as he equipped it for the purposes of his
business of importing sea foods–with telephone, table and printed notepaper–and
afterwards used it by receiving business calls there, seeing customers there
and issuing business statements from there–it is plain that he was occupying it
‘for the purposes of a business carried on by him.’ This was a significant purpose for which he
was occupying the flat, as well as a dwelling. It was his only home, and he was
carrying on his business from it. It comes within my second illustration.
He did it all
surreptitiously. He tried to keep all knowledge of it from the landlord: but
that does not alter the fact that, once discovered, it means that his was a
‘business tenancy’ within section 23 of the Landlord and Tenant Act 1954. Some
may say: ‘This is a very strange result. It means that he can alter the nature
of his tenancy surreptitiously without the consent of his landlord, and thus
get a statutory continuation of it with all the consequences that this entails
for the landlord.’ That is true: but I
see no escape from the words of the Acts. Section 40 clearly contemplates that
the landlord may sometimes be quite unaware of the purposes for which a tenant
is occupying the premises. It enables a landlord to serve a notice on the
tenant so as to find out. But, strange as the result may be, it does open a way
to the landlord by which he can get possession. He can give notice of
termination to the tenant and oppose any grant of a new tenancy on the ground that
he has surreptitiously, without the consent of the landlord, changed the use of
the holding, see section 30(1)(c) of the 1954 Act. I should have thought that
the landlord might well be successful. It places him in a better position to
evict the tenant than if the tenancy was a ‘regulated tenancy’ protected under
the Rent Acts.
The judge took
a different view. He said: ‘I think he (Mr Saldanha) is carrying on some
business on the premises, but of a nominal kind, and not worth even
considering. It is, in my view, de minimis. It amounts to having a few
files at home and making a few telephone calls at home.’ It is to be noticed that the judge is there
speaking of the actual ‘use’ made of the premises: whereas the statute requires
us to look at ‘the purpose’ for which he is occupying it. A professional man
may occupy premises for the ‘purposes’ of seeing clients, but he may make
little ‘use’ of them because no clients come to see him. On the evidence it
seems to me that Mr Saldanha is in the same position as the man in my second
illustration. He has only one home–the flat in Beaufort Gardens–and he is
occupying it, not only for the purpose of his home, but also for the purpose of
a business carried on by him: and that was a significant purpose. It cannot be
dismissed by invoking the maxim de minimis non curat lex. That maxim
must not be too easily invoked. A man cannot excuse himself from a breach of
contract by saying that it did no damage. Nor is it permissible for a man sued
in tort to say: ‘It was only a little wrong and did only a little damage.’ So here, I do not think the ‘purpose’ of Mr
Saldanha can be excused by saying: ‘It was only a little used.’
I would ask:
what is the alternative? It could only
be that Mr Saldanha would be protected by the Rent Acts and be able to stay
there, using the flat for business purposes as much as he liked.
On the case of
Mr Saldanha, therefore, I take a different view from the judge. I think that at
the expiry of the notice to quit Mr Saldanha was occupying this flat for the
purposes of a business carried on by him. So the landlords are entitled to a
declaration to that effect. I would allow the appeal in this case.
GEOFFREY LANE
LJ delivered a judgment agreeing with the Master of the Rolls.
EVELEIGH LJ
also agreed.
In the case of
Cheryl Investments Ltd v Saldanha the appeal was allowed with
costs in the Court of Appeal, no order being made as to costs below. In the
case of Royal Life Saving Society v Page the appeal was dismissed
with costs. Leave to appeal to the House of Lords was refused.