The need to
define with absolute precision the physical extent of the premises to be
demised should not need to be emphasised. It is obvious that it is essential
for both landlord and tenant to know the land, buildings or parts of buildings
which are available for use by the tenant. For example, in two cases which we
commented upon earlier in the year — Davies v Yadegar [1990] 09
EG 67 and Haines v Florensa [1990] 09 EG 70 — the court had to
decide whether the airspace above the roof had been included in leases of two
top-floor flats; the ruling in both cases was that the leases meant that the
tenants were entitled to extend their flats upwards.
The precise
physical extent of the premises will also be relevant in many other contexts,
for example when construing the exact effect of repairing obligations, when
deciding whether the landlord is carrying out works of construction for the
purposes of a break clause, or opposing the grant of a new tenancy under Part
II of the 1954 Act, or inevitably at a rent review. Again, we have recently
commented on an intriguing argument raised by a tenant whose demise was only of
the airspace of part of a building surrounded by a non-structural skin; namely
that a landlord cannot carry out structural works to the demised premises
where a lease takes this form, for the very good reason that the demise does
not include any structure. Although unsuccessful in City Offices (Regent
Street) Ltd v Europa Acceptance Group plc [1990] 05 EG 71, this is a
contention which could well hold good in some circumstances.
Traditionally,
lawyers have always tended to define the demised premises by reference to a
verbal description, a habit which can prove remarkably unfortunate when
disputes do materialise. Happily, modern practice is to define the premises by
reference to a plan, an approach which, in principle, seems much less prone to
error but which, in practice, can break down in the face of small-scale or
inaccurate drawings. In any event, it must be borne in mind that the wording
used by the draftsman will dictate the role of any plan: if he uses the words
‘for identification purposes only’ then the verbal description will prevail
over any inconsistent plan; if he uses the words ‘more particularly delineated’
then the plan will prevail over the verbal description.
The
application of these basic principles was central to a recent rent review case
— Kensington Pension Developments Ltd v Royal Garden Hotel
(Oddenino’s) Ltd [1990] 27 EG 79. The issue was the precise extent of the
premises for the purposes of a rent review. The lease in question had been
granted in 1964 on the basis that the landlord would complete the construction
of hotel and shop premises on the land which was being demised to the
defendants. Unfortunately, part of the hotel was actually constructed on land
which, according to the plan, fell outside the demise. Was that part of the
building to be assumed to be within the demise for the purposes of review?
The
landlord’s first argument was that, despite the use of the phrase ‘more particularly
delineated . . . on the plan annexed hereto’, the plain intention of the
parties to demise the whole building should prevail. This was firmly, if
reluctantly, rejected by Harman J. The effect of the phrase ‘more particularly
delineated’ is well established; the plan must prevail.
The judge
did, however, take more kindly to the landlord’s second contention. This was
that there is plenty of authority for the proposition that, where a tenant
actually occupies other land in conjunction with the demised land, that
other land is presumed to be part of the demise, irrespective of whether it
belongs to the landlord or to a third party. Accordingly, the landlord can
regain from the tenant possession of all the land at the end of the lease (if
the ‘other’ land belongs to a third party whose title has not yet been barred
under the Limitation Acts then clearly the landlord is susceptible to a claim
for possession by the third party). Furthermore, it has been accepted that,
during the currency of the lease, the landlord can compel the tenant to perform
his obligations under the lease in respect of the ‘other’ land — see JF
Perrott & Co Ltd v Cohen [1951] 1 KB 705.
In the light
of this authority, it was not surprising that Harman J was able to conclude
that the tenant must be treated as occupying that part of the hotel which fell
outside the delineated boundary under the terms of the lease of the remainder.
It was therefore susceptible to a review on the basis of a lease of the whole
building. A sensible ruling, but one which would not have been necessary had
the original draftsman paid more attention to detail.
obligations of a stakeholder
A
‘stakeholder’, in the sense of an independent person who holds deposit money
(rather than its older meaning of the person entrusted with the stake money by
the two parties to a wager), is a familiar figure in property transactions.
Such a role is usually, though not invariably, taken by a solicitor, auctioneer
or estate agent and the basis on which he is to operate will normally be found
in the contract of sale, lease or whatever in respect of which the deposit is
paid. Where that contract is silent on the matter, it is for the law to decide
upon the stakeholder’s rights and duties, and this has in the past required the
courts to examine the precise nature of the stakeholder’s office and the legal
relationships which exist between him and the parties to the main transaction.
To the
question: ‘What is a stakeholder?’, many people would probably answer: ‘The
agent of both parties’, without considering too deeply what the implications of
such an answer would be. An agency relationship in the full sense would impose
upon the agent a fiduciary obligation to account for any interest earned by the
‘stake’ while in his possession, and yet, if there is one thing which is clear
about a stakeholder, it is that he is entitled to keep any interest for
himself. (This entitlement is, of course, qualified, in the case of persons
carrying on ‘estate agency work’, by section 13 of the Estate Agents Act 1979,
but the general legal principle remains.)
Furthermore, if a true ‘agent of both parties’ ran off with the money,
it is difficult to see any ground on which one party would be held responsible
for the loss to the other; and yet it is clear that where the stakeholder is
the choice of only one party (eg an auctioneer appointed by the vendor), it is
that party who alone must bear the loss.
Liability to
pay interest and responsibility for defaulting stakeholders have been the
courts’ main preoccupations in previous cases; a recent decision, however,
indicates that there may be other situations in which the underlying nature of
a stakeholder’s office needs to be examined.
The case in
question, Hastingwood Property Ltd v Saunders Bearman Anselm (a firm)
(1990) 140 NLJ 817, concerned a joint venture agreement (for the purchase,
development and resale of a particular property) entered into between the
plaintiffs, a firm of property developers, and another property company
(Wimpole) which had been set up by the defendant firm of solicitors. As part of
this arrangement, the plaintiffs paid a sum of £80,000 to the defendants, to be
held by them as stakeholders in a designated deposit account until either
vacant possession and planning permission were obtained or a specified
time-limit expired. The agreement further stipulated that, if the venture did
not proceed, the deposit plus interest should be returned to the plaintiffs,
subject to a deduction equal to one-half of all professional fees and expenses
incurred in the project.
In the
event, planning permission was not obtained by the specified date, whereupon
the defendants (acting as agents for Wimpole) notified the plaintiffs that the
agreement was terminated. The defendants also enclosed a list of expenses
incurred which amounted to more than £200,000, and stated that as a result the
plaintiffs were entitled to nothing from the deposit account. The plaintiffs
thereupon commenced legal proceedings, claiming that the defendants had
breached their obligations as stakeholders (for which they should pay damages)
and that they should in the meantime also be ordered to replace the money in
the designated account.
Edward Nugee
QC, sitting as a deputy High Court judge, was pressed with two arguments on
behalf of the plaintiffs. First, it was asserted that a stakeholder, as the
agent of both parties, is powerless to dispose of the stake money until he is
instructed to do so by both parties or by a court or arbitrator with
jurisdiction to determine the issue. As to this, the deputy judge ruled that a
stakeholder is not, in truth, the agent of both parties but rather a principal
contracting party in his own right; in consequence he is perfectly entitled to
make up his own mind whether the money is due to one of the parties (subject,
of course, to becoming personally liable if he is wrong). It followed that
neither party could force the stakeholder to keep the money on deposit.
The
plaintiffs’ second argument, that the defendants’ status as solicitors made a
crucial difference (since the court has an inherent jurisdiction to control
solicitors) was also firmly rejected by the judge, so that the plaintiffs’
claim failed.
