Leasehold Reform Act 1967 — Application by tenant to acquire freehold — Appeal from decision of Court of Appeal who had allowed an appeal from the trial judge — Issue as to whether rent payable by tenant was less than two-thirds of the rateable value on the appropriate day — Question as to what was ‘the appropriate day’ — Subject to a decision as to whether the tenancy was at the requisite low rent on the appropriate day, the tenant fulfilled the qualifying conditions for the acquisition of the freehold — His lease was for 51 years from 1964 and his rent at the material time was £51.44 a year — The lease was originally of two derelict cottages and 6 acres of land — After reconstruction the cottages were shown in the valuation list with rateable values of £42 and £34 on May 9 1966 and February 6 1967 respectively — The tenant subsequently constructed on an adjoining forecourt a garage building first rated on December 22 1971 with a rateable value of £24 — Having obtained possession of one of the cottages which had been sublet, the tenant occupied both cottages as a single dwelling-house — The cottages and garages constituted the premises of which the tenant gave notice under the 1967 Act on February 18 1981 to purchase the freehold — The county court judge held that, as the tenant’s rent of £51.44 was less than two-thirds of the combined rateable values of the cottages and garages (£100), the rent was a low rent and the tenant was therefore entitled to acquire the freehold — The Court of Appeal reversed this decision on the ground that £51.44 was more than two-thirds of the relevant rateable value, which was £76, the aggregate rateable value of the cottages (excluding the garages) — Held by the House of Lords, affirming the decision of the Court of Appeal, that by virtue of section 4(1)(a) of the 1967 Act the appropriate day in relation to ‘the house in question’ fell to be determined under section 25(3) of the Rent Act 1977 — The ‘house in question’ consisted of the two cottages which appeared for the first time together in the valuation list on February 6 1967 — The ‘appropriate day’ was not later than that date and the aggregate rateable value was then £76 — It was clearly provided by section 4(1)(a) of the 1967 Act that for the purpose of determining the appropriate day the only question was when the house was first rated either as a single hereditament or two or more hereditaments — If the garages had been built before February 6 1967 their rateable value would have had to be taken into account under section 4(2) — Appeal dismissed
No cases are
referred to in this report.
This was an
appeal by James Dixon, the tenant, from the decision of the Court of Appeal
allowing an appeal by the landlord, Lancelot Guy Allgood, from the decision of
Judge H G Hall, at Hexham County Court, in favour of the tenant’s claim to be
entitled to purchase the house and premises known as Riverside Cottages at
Acomb, Hexham, Northumberland, under the provisions of the Leasehold Reform Act
1967. The decision of the Court of Appeal is reported at [1987] 1 EGLR 93.
Michael J Gadd
(instructed by Park Nelson, agents for Septimas G Ward & Rose, of Newcastle
upon Tyne) appeared on behalf of the appellant; Nigel Hague QC and John H Fryer
Spedding (instructed by Hyde Mahon & Bridges Sawtell, agents for Wilkinson
Maughan, of Newcastle upon Tyne) represented the respondent.
In his speech,
LORD TEMPLEMAN said: The Leasehold Reform Act 1967 enables a tenant occupying a
dwelling-house as his residence under a long lease at a low rent to acquire the
freehold of the house and premises. A low rent is less than two-thirds of the
rateable value.
By a lease
dated December 31 1964 the appellant, the tenant, became the tenant of two
derelict cottages and 6 acres of land at Acomb, Hexham in the county of
Northumberland, for a term of 51 years. The rent was £52 a year. The tenant
reconstructed one of the cottages, which he named ‘Riverside Cottage,’ for
which a rateable value was first shown in the valuation list on May 9 1966; the
rateable value was £42. The tenant occupied Riverside Cottage as his residence.
The second cottage was then reconstructed by the tenant, named ‘Riverside
Cottage East’ and sublet. A rateable value for Riverside Cottage East was first
shown in the valuation list on February 6 1967; the rateable value was £34. The
two cottages formed a pair of semi-detached houses divided by vertical internal
walls. Adjoining the cottages was a forecourt. The tenant constructed on the
forecourt a single building with five doors which he used to garage cars and as
a domestic store-room. The new building was separately rated on December 22
1971 under the description ‘five garages adjoining Riverside Cottage’; the
rateable value was £24. In 1977 the tenant obtained vacant possession of
Riverside Cottage East, inserted doors in the vertical walls dividing Riverside
Cottage from Riverside Cottage East and, the trial judge held, thereby
converted both cottages into one dwelling-house which he calls ‘Riverside Cottages’
and which he occupies as his residence. A small part of the land comprised in
the lease was compulsorily acquired and the tenant’s rent payable under the
lease for the remaining 5 1/2 acres or thereabouts, including Riverside
Cottages, was reduced to £51.44.
On February 18
1981 the tenant served notice on his landlord, the respondent, claiming to
purchase under the Act of 1967 the freehold of the house and premises
‘Riverside Cottages’. The notice as amended on June 22 1981 claims that ‘the
rateable value of the cottages and premises at the ‘appropriate day’ was £100′.
It is conceded that ‘the premises’ of Riverside Cottages includes an area of
about half-an-acre comprising the driveway, garden and forecourt with the five
garages erected thereon used for the purposes of the cottages.
The trial
judge, Judge H G Hall, held that the tenant was entitled to acquire the
freehold of the cottages and premises because his rent of £51.44 was less than
two-thirds of £100, the aggregate rateable value of the cottages including the
garages. The Court of Appeal (Slade LJ and Waite J) reversed the trial judge
because the rent of £51.44 was more than two-thirds of £76, the aggregate
rateable value of the cottages excluding the garages. The tenant appeals.
The Act of
1967, as amended, and so far as material, provides as follows:
1(1) . . . this Act shall have effect to confer on
a tenant of a leasehold house, occupying the house as his residence, a right to
acquire on fair terms the freehold . . . of the house and premises where — . .
. (b) at the relevant time (that is to say, at the time when he gives
notice in accordance with this Act of his desire to have the freehold . . .) he
has been tenant of the house under a long tenancy at a low rent, and occupying
it as his residence, for the last three years . . .
The tenant
fulfilled all these conditions if he was a tenant at a ‘low rent’.
2(1) . . . ‘house’ includes any building designed
or adapted for living in and reasonably so called . . .
The trial
judge found that though the cottages had originally been two houses they had
become one ‘house’ as defined by the Act by the relevant date when the tenant
gave notice to purchase under the Act.
2(3) . . . premises [in relation to a house let to
and occupied by a tenant means] any garage, outhouse, garden, yard and
appurtenances which at the relevant time are let to him with the house and are
occupied with and used for the purposes of the house . . .
The five
garages and forecourt were part of the premises of the cottages at the relevant
time, namely February 18 1981 when the tenant gave notice to purchase under the
Act.
If the tenant
is entitled to purchase the cottages, the purchase will by virtue of the Act of
1967 include ‘the premises’, ie the five garages, the courtyard and any other
outhouses and appurtenances of the cottages, ‘at the relevant time,’ ie
February 18 1981 when the tenant served notice under the Act. The price payable
by the tenant will be the amount which on February 18 1981 the cottages and
premises if sold for an estate in fee simple subject to the tenant’s tenancy
might have been expected to realise in the open market.
3(1) . . . ‘long tenancy’ means . . . a tenancy
granted for a term of years certain exceeding 21 years . . .
The tenant’s
lease was for 51 years.
4(1) . . . a tenancy of any property is a tenancy
at a low rent at any time when rent is not payable under the tenancy in respect
of the property at a yearly rate equal to or more than two-thirds of the
rateable value of the property on the appropriate day . . .
The rent of
£51.44 payable by the tenant was more than two-thirds of the rateable value of
the cottages, £76, until the garages were built and rated on December 22 1971.
If the ‘appropriate day’ falls before December 22 1971, the tenant is not
entitled to purchase the cottages and premises under the Act.
4(1)(a) ‘appropriate day’ means the 23rd March 1965
or such later day as by virtue of section 25(3) of the Rent Act 1977 would be
the appropriate day for purposes of that Act in relation to a dwelling-house
consisting of the house in question;
The date March
23 1965 was the date on which the Bill for the Rent Act 1965 was introduced.
That Act contained, in section 43(3), provisions similar to section 25(3) of
the Rent Act 1977 and by the First Schedule para 1(3) directed that a tenancy
was to be exempt from the restrictions imposed by the Rent Act 1965 if the rent
payable was less than two-thirds of the rateable value ‘on the appropriate
day’.
The cottages
were not rated on March 23 1965. The ‘appropriate day’ is by virtue of section
4(1)(a) to be determined under section 25(3) of the Act of 1977 in
relation to ‘the house in question’, ie the cottages excluding the garages.
Section 25 of
the Rent Act 1977 provides:
(1) . . . the rateable value on any day of a
dwelling-house shall be ascertained for the purposes of this Act as follows: —
(a) if the dwelling-house is a hereditament for which a rateable value
is then shown in the valuation list, it shall be that rateable value; (b)
if the dwelling-house . . . consists of . . . more than one such hereditament,
its rateable value shall be taken to be such value as is found by . . .
aggregation of the rateable . . . values so shown. . . . (3). . . ‘the
appropriate day’ — (a) in relation to any dwelling-house which, on 23rd
March 1965, was or formed part of a hereditament for which a rateable value was
shown in the valuation list then in force, or consisted or formed part of more
than one such hereditament, means that date, and (b) in relation to any
other dwelling-house, means the date on which such a value is or was first
shown in the valuation list. (4) Where, after the date which is the appropriate
day in relation to any dwelling-house, the valuation list is altered so as to
vary the rateable value of the hereditament of which the dwelling-house
consists or forms part and the alteration has effect from a date not later than
the appropriate day, the rateable value of the dwelling-house on the
appropriate day shall be ascertained as if the value shown in the valuation
list on the appropriate day had been the value shown in the list as altered . .
.
By section
37(6) of the Act of 1967, as amended, section 25(1)(2) and (4) of the Act of
1977 shall apply to the ascertainment for purposes of the Act of 1967 of the
rateable value of a house and premises or any other property as they apply to
the ascertainment of that of a dwelling-house for the purposes of the Rent Act.
The
dwelling-house, Riverside Cottages, which now embraces both the former
Riverside Cottage and the former Riverside Cottage East, consists of two
hereditaments, namely, the former Riverside Cottage and Riverside Cottage East
both of which appeared in the valuation list on February 6 1967. The
appropriate day for the purposes of determining the rateable value of the
dwelling-house now occupied by the tenant is not later than February 6 1967 and
the aggregate rateable value of the two hereditaments which now constitute the
tenant’s dwelling-house is £76. The rent payable by the tenant is £51.44, which
is more than two-thirds of the rateable value of £76 on the appropriate day,
and it follows that the tenant is not entitled to purchase the freehold
reversion of Riverside Cottages and premises.
Slade LJ
delivering judgment in the Court of Appeal in the present case pointed out that
there is a clear and unequivocal difference between the provisions of the Act
of 1967 which entitle a tenant to purchase ‘the house and premises’ and the
provisions of section 4(1)(a) which require the appropriate day to be
determined in relation to a dwelling-house ‘consisting of the house in
question’. The reason for this distinction is not far to seek. A hereditament
for rateable purposes is not limited to buildings:
where two or
more properties are within the same curtilage or contiguous to one another, and
are in the same occupation . . . they are, as a general rule, to be treated for
rating purposes as if they formed parts of a single hereditament. There are,
however, exceptional cases, where for some special reason they may be treated
as two or more hereditaments. That may happen, for instance, when they are
situate in different rating areas, or because they were valued at different
times . . . : or because they were at one time in different occupations . . .;
or because one part is used for an entirely different purpose . . .: per
Denning LJ in Gilbert (Valuation Officer) v S Hickinbottom & Sons
Ltd [1956] 2 QB 40, 48.
The Act of
1967 was inspired by the plight of a large number of lessees of houses whose
building leases granted in the 19th century were coming to an end. A tenant of
a house under such a lease held a wasting asset which was difficult or
impossible to sell; he was faced with the prospect of large dilapidation claims
and was not entitled to security of tenure under the Rent Acts. By fixing March
25 1965 as the appropriate day for houses rated before that day, the Act of
1967 indicated clearly that events taking place after March 25 1965 resulting
in an increase or decrease of rateable value were to be ignored. Changes in
rateable value could take place as a result of a quinquennial or other general
revaluation or as a consequence of changes taking place to a particular
hereditament which included a house. The rateable value of such a hereditament
might be reduced as a result of deterioration of the house or the
neighbourhood. The rateable value of the hereditament could be increased by an
extension or improvement to the house itself or by the erection of a building
in the curtilage of the house. All these changes must be ignored. For example,
if in the present case Riverside Cottages had been rated before March 25 1965,
the hereditament comprising Riverside Cottages would have included the
courtyard. If after March 25 1965 the tenant had erected five garages in the
curtilage of Riverside Cottages, the rating authority might have increased the
rateable value of Riverside Cottages or might have rated the five garages as a
separate hereditament. Whether the garages were rated with the cottages or as a
separate hereditament, the rateable value attributable to Riverside Cottages
and the premises including the five garages for the purposes of the Act of 1967
would remain the rateable value as fixed on March 25 1965. A tenant of a house
rated on March 25 1965 cannot improve his position under the Act of 1967 by
building in the curtilage of the house garages or other buildings which become
rated as a separate hereditament or lead to an increase in the rateable value
of the house. Under the Act of 1967 the tenant is entitled to purchase both the
house and the garages which are included in the curtilage as premises, provided
that the rent payable for the house and premises is less than two-thirds of the
rateable value of the house on March 25 1965. Similarly, in the present case
the tenant could not improve his position under the Act of 1967 by building
five garages in the curtilage of the cottages after the appropriate day. It is
significant that section 25(4) of the Act of 1977 does permit an increase in
rateable value after the appropriate day in limited circumstances. By section
25(4) such a variation is taken into account but only where the
words if a garage is built in the courtyard of a house before the appropriate
day but is not rated until after the appropriate day or is not taken into
account in the rateable value of the house until after the appropriate day,
nevertheless effect can be given to the variation for the purposes of the Act
of 1967 if the variation when it takes place ‘has effect from a date not later
than the appropriate day’. But unless the conditions specified in section 25(4)
are satisfied, events which take place after the appropriate day must be disregarded,
and the appropriate day itself is by section 4(1) of the Act of 1967 judged by
reference to the first day upon which the house as a single hereditament or as
two or more hereditaments first appears in the valuation list.
Mr Gadd, who
appeared for the tenant, relied on section 4(2) of the Act of 1967. That
subsection provides:
Where . . . a
question arises under section 1(1) above whether [the tenant’s] tenancy of the
house is or was at any time a tenancy at a low rent, the question shall be
determined by reference to the rent and rateable value of the house and
premises as a whole, and in relation to a time before the relevant time shall
be so determined whether or not the property then occupied with the house or
any part of it was the same in all respects as that comprised in the house and
premises for purposes of the claim; . . .
If the five
garages had been built before February 6 1967, section 4(2) would have required
the garages to be taken into account although they were separately rated,
because of the requirement that the question shall be determined by reference
to the rateable value of the house and premises as a whole. Section 4(2) also
requires that Riverside Cottage East shall be taken into account
notwithstanding that Riverside Cottage East was sublet and did not form part of
‘the house’ on February 6 1967. But section 4(2) does not in my opinion alter
or cast any doubt on the clear direction in section 4(1)(a) that for the
purpose of determining the appropriate day the only question is when the house
was first rated either as a single hereditament or as two or more
hereditaments. In the present case, Riverside Cottages, the house, was rated as
two hereditaments on February 6 1967, which is therefore the appropriate day.
Mr Gadd also
submitted that ‘the house’ did not come into existence until 1977 when the two
cottages were converted into one house and that 1977 was, therefore, the
appropriate day and that the house then consisted of three hereditaments
comprised of the two cottages and the garages. But section 4(1)(a) of
the Act of 1967, read in conjunction with section 25(1) of the Act of 1977,
requires the appropriate day to be the day when ‘the house,’ consisting of two
cottages and no more, was first rated and that day was February 6 1967. A
tenant of two semi-detached houses, each rated at £50 on March 25 1965, could
not by inserting communicating doors between the two houses and converting them
into one house, rated in 1987 at £150, alter the appropriate day or increase
the rateable value for the purposes of the Act of 1967. In the present case,
‘the house’ created by the tenant in 1977 consisted of two hereditaments rated
for the first time by February 6 1967.
Mr Gadd, who
did not appear before the trial judge or the Court of Appeal, also sought to
raise the argument that ‘the house and premises’ did not consist of the whole 5
acres or thereabouts remaining subject to the lease, but was limited to the
area of about half-an-acre consisting of Riverside Cottages, the garages,
forecourt and garden, occupied and used for the purposes of the cottages.
Therefore the sum of £51.44 ought to be apportioned between the cottages and
premises on the one hand and the remainder of the 5 acres on the other hand.
Such an apportionment might well result in the rent apportioned to the cottages
and premises being less than two-thirds of the rateable value of £76. This
point was not raised prior to the appeal to this House. Moreover, it involves
questions of fact and evidence and would necessitate a retrial. Your Lordships
declined to allow Mr Gadd, in these circumstances, to take the point at this
late stage. In the result, in agreement with the reasons expressed by the Court
of Appeal, I would dismiss this appeal.
LORDS KEITH OF
KINKEL, BRANDON OF OAKBROOK, BRIGHTMAN and ACKNER agreed with the speech of
Lord Templeman and did not add anything.
Appeal
dismissed.
