When
property is being leased, particularly where it is part of a larger unit, it is
essential that the lease should clearly define the precise limits of the
demised property. This means that not only should the physical boundaries be
clearly delineated, so also should the nature and extent of any additional
rights over adjoining premises which are to be conferred on the tenant and of
any rights which are to be reserved to the landlord. These are matters which
should, of course, be dealt with when the lease is drafted; amendments to the
lease can be negotiated at a later stage, but this is always a chancy business.
The respective positions of the parties may have become polarised not only by
subsequent events, but also by the intervention of the ‘over-the-barrel’
syndrome. Two recently reported decisions provide neat illustrations of the
problems which can arise.
The first, Hatfield
v Moss [1988] 2 EGLR 58, concerned a dispute over the physical extent of
the demised property, a second-floor flat in a converted building. The problem
arose over the ownership of a large area of roofspace, which was adjacent to
the flat in question and which the tenant, the defendant, had converted into a
playroom and storage area. The landlord’s complaint was that this space was not
within the demise and therefore remained his property.
The plan of
the flat, which was ‘for the purpose of identification’, showed this roofspace
as outside the demise, however, the parcels clause clearly demised the main
roof and the lease did not reserve to the landlord any rights of access to the
roof. At the date of the lease the only access to the roofspace was via the
defendant’s flat, although at some later date, when water tanks were being
installed, a ceiling trap had been cut giving access from the flat below.
Not
surprisingly, the Court of Appeal upheld the trial judge’s decision that the
roofspace was included in the demise. Given the well-established principle
that, where the wording of a parcels clause is both explicit and clear, it
cannot be overruled by a plan which is attached ‘for identification only’, the
outcome was fairly predictable. The central issue was whether or not the
wording was clear and, in the light of its terms and the factual background,
the odds were always in favour of the tenant.
This is not,
of course, to say that the result was necessarily fair. The drafting of the
lease was sloppy and it is impossible to tell, 25 years later, whether the
original parties to the lease had had any positive intentions regarding the
roofspace. What is regrettable is that, in circumstances where a suitably
detailed plan (it appears to have been an architect’s plan) was available
(although, it has to be admitted, it was not, in the event, completely
accurate), the draftsman failed to have it properly checked so that it could
have been made the governing description; the willingness to regard words as a
more accurate description of the physical limits of property than a detailed
plan remains a mystery — although the poor quality of many plans is usually
offered as the explanation, this cannot be any sort of justification.
The second
case, Trailfinders Ltd v Razuki [1988] 30 EG 59, was not
concerned with the physical dimensions of the demised property but rather with
the nature and extent of rights which had been reserved to the landlords. Here
the plaintiffs, a travel agency which operated from a number of premises in
Earl’s Court Road, acquired an additional property in the area which it wished
to link to their computer system. Their problem was that the cabling necessary
to achieve this objective would have to run across an intervening property of
which they were the landlords and the defendants were the tenants. The latter
disputed their right to lay this cabling.
The lease
excepted and reserved to the landlord ‘the free and uninterrupted running and
passage of water, soil, gas and electric current from other buildings and lands
of the landlords, and other properties adjoining or near to the hereby demised
premises, through the channels, sewers, drains, watercourses, pipes, wires and
other conduits which are now, or may hereafter during the term hereby granted,
be in, under or over the said demised premises.’ It was accepted by both sides that the landlords
could only insist on laying the computer cables if to do so fell within the
ambit of this clause.
Judge Finlay
QC rejected submissions by the tenants that the reference to ‘electric current’
should be taken to mean only that emanating from the main supply at full
voltage, and that to attach cables to the wall of the demised premises (as was
proposed) would mean that these were ‘on’ rather than ‘in, under or over’ the
premises. The case therefore hinged on whether the wording of the lease was apt
to permit the installation of an entirely novel system of cabling.
The judge
decided that it was not and that the landlords were therefore not entitled to
lay the cables. In coming to this conclusion he rejected the tenants’
contention that there was no right to lay any new cabling; in his view
the words ‘which are now or may hereafter . . . be in . . .’ clearly permitted
the installation of some new cables. However, he was satisfied that, in the
absence of clear words conferring a right to lay new cables, the existing
wording merely operated to confirm the right of the landlords to replace
existing pipes and cables and to enjoy the same rights of passage in relation
to those as were enjoyed in respect of the originals.
As was
acknowledged by the judge, this outcome had inconvenient, and possibly very expensive,
consequences for the landlords. Such matters are, of course, irrelevant to a
judge whose function is to construe the agreement reached by the parties. They
are not irrelevant for the draftsman who has the difficult and unenviable task
of trying to anticipate the future needs of his client and to ensure that they
be satisfactorily encompassed by wording which at draft stage may well be
negotiated without difficulty. The terminology of this particular lease was in
a standard form and those responsible for drafting leases relating to premises
which form part only of the landlord’s property will need to bear in mind that
they should, henceforth, ensure that a right to lay completely novel pipe or
cable systems is included.
The
provisions in Part II of the Landlord and Tenant Act 1954 relating to interim
rent are reasonably well known, if not universally admired. The wording of
section 24A ensures that interim rent will be below a market rent: it has to be
determined on the basis of a yearly tenancy and, furthermore, the court must
have regard to the rent payable under the existing tenancy. It is now well
accepted that this latter requirement is designed to cushion the tenant from
the impact of the new market rent. Although there are good reasons why interim
rent should be below a market rent, many landlords would not accept these and
any substantial discount on market rent merely compounds the offence.
The selection
of the correct valuation date can also be of considerable importance and neither
landlords nor tenants will derive much comfort from the confusion apparent in
the latest ruling by the Court of Appeal on interim rent, Conway v Arthur
8 [1988] 2 EGLR 113. Here, the tenant’s application for a new tenancy was
resolved by the county court — the central dispute concerning the level of rent
under the new lease. The judge also ruled on the amount of interim rent payable
and it was from this aspect of the decision that the tenant was appealing.
In
determining the interim rent, the trial judge had given no reasons for his
award but had simply settled on a figure which represented a 15% discount on
the sum he had awarded as the rent under the new lease. The tenant argued that
this conclusion must have been based on an error of law; in arriving at a
figure which was only 15% below the current market rent but 330% above the
existing rent, the judge could not possibly have had sufficient regard to the
existing rent, as required by section 24A.
Although the
landlord argued, quite rightly, that this does not require the court to
give a discount, the Court of Appeal concluded that the trial judge had been
wrong and that the case must go back for a retrial. Given that, because of
unexplained delays, the interim rent would have to be back-dated for three
years, their lordships were satisfied that the judge’s ruling, if allowed to
stand, would mean the tenant paying more than market rent for part of that
period. They were also disturbed that the judge, who had fixed the rent for the
new lease at a figure which was nearer to the tenant’s proposed rent than the
landlord’s, should, without explanation, have gone well above the tenant’s
proposal relating to interim rent (especially in the absence of any proposal at
all from the landlord).
With
respect, both the arguments put to the court and the judgment display some
confusion. It seems to this writer that the problem in this case stemmed not
from the size of the discount but from the selection of an incorrect valuation
date. The trial judge appears to have given a reasonably standard discount on
the market rent for the new tenancy; what he should have been discounting, for
the purposes of interim rent, was the market rent for the property at the
commencement of the interim period. If the correct values had been applied
there would have been no question of the tenant being in danger of paying more
than the market rent.
