Landlord and tenant — Repairing covenant — Long leases — Breach — Forfeiture — Notices under section 146 of Law of Property Act 1925 — Payments of rent demanded and accepted after notice — Continuing breach — Whether, when a waiver has taken place, a fresh notice under section 146 must necessarily be served — Relevance of condition of property between service of notices and commencement of proceedings — Decision of Court of Appeal in Penton v Barnett binding despite the ‘puzzling and surprising’ nature of that decision (Farimani v Gates) — Lessees’ appeal dismissed
appellants (defendants below) in these proceedings were head lessees of
properties consisting of seven terraced shops with flats above let under seven
leases for 99-year terms — The leases contained full repairing covenants and
provisos for re-entry on breach of covenant — There had, in fact, been
continuous failure to repair from which the subtenants suffered, the disrepair
affecting mainly the flats over the shops — Eventually the lessors, the
borough, served notices under section 146(1) of the 1925 Act — The schedule of
works required ran to seven pages and included a note (of which a point was
made in the litigation) to the effect that the schedule was an interim one and
did not represent the full extent of the lessees’ liability — Events moved
forward at a leisurely tempo, an invocation by the lessees in 1983 of the
Leasehold Property (Repairs) Act 1938, leave given to the lessors to proceed in
1985, proceedings transferred to the official referees’ court after starting in
the county court, and judgment given towards the end of 1988 — The time between
the service of the notices under section 146 and the decision in the Court of
Appeal was nearly six years
period between July 20 1983, when the notices under section 146(1) of the Law
of Property Act 1925 were served, and March 25 1985 the ground rents of £12 per
annum on each lease were demanded by, tendered to and accepted by the lessors —
Proceedings for possession were commenced by the lessors and a decision was
given in their favour by Judge Fox-Andrews QC, sitting as an official referee —
The lessees appealed
of Appeal a minor issue was quickly dealt with — It was suggested that the
‘interim’ note in the schedule of works invalidated the section 146 notice by
making it insufficently specific — It was held to be merely a reservation of
possible rights and threw no doubt on the specific nature of the defects relied
on as a ground for forfeiture: this view was supported by Fox v Jolly — The more
serious issue was posed by the submission that the lessors’ right of forfeiture
had been waived by the acceptance of rent after the service of the section 146
notice — It was also submitted that this consequence could not be excluded by
reliance on a continuing breach as this required the service of a fresh section
146 notice, which had not taken place in the present case — In considering this
submission the court referred to the cases of Penton v Barnett, Guillemard v Silverthorne,
New River Co v Crumpton and Farimani v Gates, the first of which they reviewed in
detail — They accepted that Penton v Barnett was binding on the court and that it
was authority for the proposition that, in the case of continuing breach, no
further notice under section 146 was necessary if there had been no change in
the condition of the premises — Staughton LJ thought that the same principle
would probably apply if the only change in condition was by way of
deterioration — In the present case, however, it was accepted that any
deterioration had been minimal, so that it was unnecessary to extend the
principle beyond the actual ratio in Penton’s case — The court noted the
observations of Griffiths and Slade LJJ in the Farimani case to the effect that
the decision in Penton was ‘puzzling and surprising’, but they also had
accepted that it was binding on the Court of Appeal — In the present case the
court refused an application for leave to appeal to the House of Lords, leaving
it to the House to decide, if asked, whether to investigate the matter further
was to uphold the decision of Judge Fox-Andrews that the lessors’ right of
forfeiture had not been waived and that they were entitled to possession —
Appeal dismissed
The following
cases are referred to in this report.
Farimani v Gates [1984] EGD 467; (1984) 271 EG 887, [1984] 2 EGLR 66,
CA
Fox v Jolly [1916] AC 1
Guillemard v Silverthorne (1908) 99 LT 584
New River
Company v Crumpton [1917] 1 KB 763
Penton v Barnett [1898] 1 QB 276
This was an
appeal by leaseholders, Discreet Selling Estates Ltd, from a decision of Judge
Fox-Andrews QC, sitting as an official referee, granting the lessors, Greenwich
London Borough Council, possession of premises at 53-65 Well Hall Road, London
SE9, and refusing the leaseholders relief from forfeiture.
Martin Mann QC
and Stephen Rubin (instructed by Druces & Attlee) appeared on behalf of the
appellants; John Colyer QC and Colin Braham (instructed by Mr S Singh,
Greenwich London Borough Council represented the respondent borough.
Giving the
first judgment at the invitation of Neill LJ, STAUGHTON LJ said:
Discreet Selling Estates Ltd (whom I shall call ‘the head lessees’) appeal from
an order of His Honour Judge Fox-Andrews QC, sitting as an official referee, on
November 1 1988. The order declared as follows:
(1) that the plaintiffs made lawfully re-entry
into numbers 53-65 Well Hall Road, London SE9, on April 15 1985;
(2) that the plaintiffs are entitled to
possession of the said premises forthwith;
(3) that the defendants’ application for relief
from forfeiture be denied;
(4) that the defendants do pay to the plaintiffs
damages to be assessed.
It seems that
the date April 15 in para (1) should be April 16.
There were
initially three grounds raised in the notice of appeal. The first was that a
notice given under section 146 of the Law of Property Act 1925 was invalid
because in some respect it described itself as ‘interim’. Second, it is said
that a fresh notice has to be served in respect of breaches of repairing
covenants if there has been a waiver by demand and acceptance of rent after the
original notice has been served. Third, the question is raised whether the
judge should have granted the head lessees relief against forfeiture. Ground 3
has been abandoned. I am not surprised. The two grounds that remain raise
questions of law.
The facts.
On May 9 1930
the Metropolitan Borough of Woolwich granted seven leases to Laing’s Properties
Ltd in respect of nos 53, 55, 57, 59, 61, 63 and 65 Well Hall Road. The leases
were for a period of 99 years from December 25 1929 at an annual rent of £12
payable in arrears on the usual quarter days. They were all in identical form.
There was a covenant by the head lessees in these terms:
AND ALSO
shall and will at all times during the said term maintain and keep the said
premises and every part thereof and appurtenant thereto including the fixtures
therein and the walls and fences and drains in good and substantial repair
order and condition with all proper whitewashing papering cleansing and
amendments AND particularly shall and will well and properly paint all the
external wood and ironwork of and belonging to the said premises with two coats
of good oil colour in every third year of the said term and in like manner
paint all the inside wood and ironwork of and belonging thereto in every seventh
year of the said term the first third year and the first seventh year
respectively to be computed from the date of these presents AND ALSO shall
allow the Lessors by their agent or agents at all reasonable times to enter the
said premises to view the state of repair and condition of the same and all
defects of reparation then and there found to give or leave on the said
premises notice in writing to the Lessees AND that they the Lessees will within
a period of three calendar months after such notice or sooner if requisite
repair and make good the same according to such notice and the covenant in that
behalf hereinbefore contained.
There was also
a proviso for re-entry in the event of breach of covenant. These were seven
terraced shops with flats above them.
On February 6
1973 Laing’s Properties Ltd assigned their interest to the head lessees,
Discreet Selling Estates Ltd. At some time also the Metropolitan Borough of
Woolwich has been succeeded by the London Borough of Greenwich.
From February
1974 there was extensive, persistent and, at times, deliberate failure to
repair in many respects, some of which were serious. The subtenants of some of
the flats came to live in great discomfort owing to leaking roofs and such
like. Eventually, on July 20 1983, the London Borough of Greenwich served
notices under section 146(1) of the Law of Property Act 1925. That subsection
provides:
A right of
re-entry or forfeiture under any proviso or stipulation in a lease for a breach
of any covenant or condition in the lease shall not be enforceable, by action
or otherwise, unless and until the lessor serves on the lessee a notice —
(a) specifying the particular breach complained
of; and
(b) if the breach is capable of remedy,
requiring the lessee to remedy the breach; and
(c) in any case, requiring the lessee to make
compensation in money for the breach;
and the
lessee fails, within a reasonable time thereafter, to remedy the breach, if it
is capable of remedy, and to make reasonable compensation in money, to the
satisfaction of the lessor, for the breach.
A specimen of
one of the notices is before us. Para 2 recited the covenant in the lease, and
continued:
In the breach
of the said covenants the dilapidations mentioned in the schedule hereto have
been allowed to accrue.
3 I require
you to remedy all the said breaches and to pay the costs of the lessor’s
surveyor, valuer and legal department.
4 A
reasonable time for remedying the said breaches is four months from exercise
their right of re-entry under the lease and also claim damages.
5 You have
the right to serve a counter-notice claiming the benefit of the Leasehold
Property (Repairs) Act 1938.
Attached to
the notice was a schedule of seven pages in the form of a specification listing
the works to be carried out. On the first page there is the heading
‘Preliminaries’ and three items, the third of which is:
This schedule
is an interim one and does not represent the full extent of the tenant’s
liability under the covenants in the Lease.
On July 25
1983 the head lessees served a counternotice under section 1 of the Leasehold
Property (Repairs) Act 1938. That section requires a landlord to obtain leave
of the court before proceeding, by action or otherwise, for enforcement of any
right of re-entry or forfeiture. On September 23 1983 an originating
application for leave was issued in the Woolwich County Court. Some 16 months
later, on January 16 1985, leave was granted by His Honour Judge James.
Meanwhile, the London Borough of Greenwich had continued to demand and receive
the rent, that is to say, £12 per annum for each of the seven numbered premises
or £84 per annum in all.
The last
occasion upon which rent was demanded, tendered and accepted was March 25 1985.
We are told that even after that date demands were made, possibly because it
was impossible to stop the machine making them, but rent was not accepted.
Nobody attaches any importance to those subsequent demands.
Then, on April
16 1985, seven summonses were issued in the Woolwich County Court for
possession, mesne profits and damages. In due course they were transferred to
the High Court, and later to an official referee. For one reason or another the
trial did not start until August 18 1988, that is, three years and four months
later. Judgment was delivered on November 1 1988.
The issues
which we have to consider are now largely issues of law. I would, however,
observe that this is not a case of the statutory requirements being invoked to
protect a residential tenant who has failed to repair the house that he is
living in, in breach of his covenant to his landlord. These appellants are
mesne landlords. The premises were sublet. The shops, we are told, were not in
any state of disrepair. It was in the flats over them where there was
disrepair. In so far as those were inhabited, it was the residential tenants in
those flats who would seem to have been shabbily treated. The concern of the
London Borough of Greenwich, as far as one can detect from the history of this
matter, has not been wholly, or possibly even mainly, to protect the value of
their reversion. They seem to be more concerned, properly perhaps, with
environmental health in their borough and the need to provide housing for their
inhabitants. However, all that is of no relevance to the issues we have to
decide.
I take first
the question of the interim nature of the section 146 notices. I have read para
3 of the preliminaries in the schedule attached to the notice. A clause which
is at first sight somewhat similar was found in the case of Fox v Jolly
[1916] 1 AC 1. That was concerned with section 14 of the Conveyancing and Law
of Property Act 1881, but the section is, I am told, identical to section
146(1) of the Law of Property Act 1925. The relevant term of the notice, set
out at p 5 of the report, notes that the completion of the items mentioned in
the schedule does not excuse the execution of other repairs if found necessary.
It was argued
that this note, right at the end of a long list of defects, invalidated the
whole notice because it was no longer sufficiently specific. That argument was
dealt with in the speech of Lord Sumner at p 20:
The
concluding words of the notice are said to open a vista of further repairs,
which, being unspecified, fail to satisfy the section. It is true these further
matters are not specified, but neither are they complained of. These are not
words requiring the lessee to remedy something, but they reserve the lessor’s
rights in case he should hereafter discover any breach of which he does not at
present complain. I see nothing against this in the section. It does not say
that the landlord can serve such a notice once only, or that, if he reserves
further
which he does.
Then right at
the end of his speech Lord Sumner said:
To hold this
notice to be in law no compliance with the section would, in my opinion, arm
the tenant with a quibble, where only a shield against oppression was intended.
It seems to me
that what Lord Sumner there said is equally applicable to the notice in this
case. The notice here specified the defects of which the landlords complained.
It reserved rights in respect of any other defects which might exist save, as I
think, the right to rely on any other defects as a ground of forfeiture pursuant
to this notice. The notice listed specifically those defects which were relied
on as a ground of forfeiture. The additional observation merely sought to
preserve the landlords’ rights in other respects so far as concerned any other
defects which might exist. Accordingly, I hold that there is nothing in that
point.
The second
ground of waiver raises a more substantial issue. It has been accepted below
and in this court that a demand for and acceptance of rent is, as a matter of
law, a waiver of a right of forfeiture. To one with little acquaintance with
this branch of the law, the doctrine seems surprising. Acceptance of rent at a
time when a section 146 notice has been served or some other breach is
complained of is, I suppose, usually accidental. There is, it would seem, no
room for inquiry into the facts under this doctrine — no question of what must
have been the common intention of the parties.
A striking
example of that is to be found in the case of Penton v Barnett
[1898] 1 QB 276. In that case a notice under the Conveyancing Act 1881 was
served stating a time within which the required repairs should be done. Three
days after the expiry of that time a quarter’s rent became due on December 25
1896. No repairs had been done and the rent was not paid. On January 14 1897
the landlords issued a writ claiming, first, forfeiture and, second, payment of
the rent. The case came on, on some date which is not specified, before Ridley
J. He dismissed the landlords’ claim. It reached the Court of Appeal on October
30 1897. The appeal was allowed and the landlords succeeded.
It is to be
noticed that there was no waiver of forfeiture until the writ was issued, and
the writ itself claimed both possession and the rent. How, then, could it be
said that claiming the rent was a waiver of the right to possession, when the
two were claimed in the very same document?
However, A L Smith LJ said at p 279:
It is
perfectly well settled that the acceptance of rent is an acknowledgment of the
existence of the tenancy, and if the case depended solely on that, I should
have thought that the action was not maintainable . . .
As I have
said, it has been accepted before us that this doctrine of waiver is settled
law, and I draw attention to it only in case this dispute goes further or for
the consideration of those who have charge of the reform of the law. It may be
that the doctrine is of greater importance now than it was in 1897, when a writ
could be issued in January, a trial heard and an appeal determined by this
court by the end of October. In these days, when it takes twice that time even
to obtain leave from a county court judge to serve a notice under section 146
and something like four times that period to have the application for
possession determined, it would seem that the doctrine of waiver of forfeiture
is of far greater significance than it was in 1897.
Returning to Penton’s
case, one observes that, despite the doctrine of waiver, the claim for
forfeiture succeeded in this court. What was the ratio of the decision? Mr Mann draws attention first to the judgment
of A L Smith LJ at p 279:
. . . it is
pointed out that the claim for rent is at most an election to treat the
defendant as tenant up to December 25, and that, inasmuch as between that date
and January 14 following the premises were in the same state of disrepair in
which they had previously been, there was a breach of covenant between those
dates in respect of which the plaintiff could maintain its action for
possession.
Much the same
reasoning is to be found in the judgment of Collins LJ at p 281.
The common
sense of the matter is that the tenant is to have full notice of what he is
required to do. He has had notice and has failed to act on it; and with regard
to that, the physical condition of the premises which he was required to make
good was the same when the action was brought as when the notice was given.
Under these circumstances, I agree that the requirements of the Conveyancing
Act have been complied with . . .
By contrast,
the reasoning of Rigby LJ appears to be different. He said at p 281 that the
landlord
brought his
action for possession, and in it he claimed for a quarter’s rent due on the
previous December 25. In my opinion, this claim does not constitute a waiver of
the forfeiture. All that was laid down in Dendy v Nicholl was
that an action for rent was as good as a waiver of forfeiture as an action of
ejectment was as a determination of the tenancy. If there had not been a
recurring breach, but something which had happened once for all, the state of
things might have been different; but in this case, in my opinion, there is
nothing in the statement of claim inconsistent with an election to determine
the lease from December 25.
So Rigby LJ
seems to have held that there was no waiver.
Mr Mann
submits that the ratio of that case was that no further notice was necessary if
the premises were in the same state of disrepair at the commencement of the
forfeiture proceedings as they had been in when the section 146 notice was
served, despite acceptance of rent in the meantime.
If one accepts
that submission, how does this case stand?
The judge divided the facts into three periods, one of which is
(conveniently for this case) the period from July 1983, when the section 146
notices were served, to April 1985, when the possession proceedings were
started. During that period the judge found that some repairs were done to
flats A and B at no 55, but these were minimal. He made no finding of any other
repairs and it would seem that there were none. Equally, the judge made no
finding that there was any further deterioration in the properties during that
period. I am content to assume with Mr Mann that there probably was further
deterioration during that period. It seems to me that one can disregard repairs
to two flats only which the judge classified as minimal.
I then pause
to consider what the law is in those circumstances. How can it be the law that
the landlord could forfeit property if its condition were the same at the start
of the possession proceedings as it had been when the notice was served, but
cannot do so if the property has been allowed to fall into worse condition,
that is to say, if the original defects still exist but they have either become
worse or are now accompanied by others?
That, to my
mind, makes no sense at all. As it was put in argument, all that a tenant would
have to do, after having paid his rent and persuaded the landlord to accept it,
would be to smash a few more windows or remove a few more tiles, so that he
could say that the landlord could no longer rely on his old section 146 notice
and must start all over again.
If, as Mr Mann
submits is the case, the ratio of Penton’s decision is that the previous
notice is still sufficient in the case of a continuing breach where the
condition of premises remains the same, that must also be the law when the
condition of premises has been allowed to get worse. It is said that the
landlord might allow months or years to pass by without giving any further
notice and then suddenly seek to forfeit the premises, to the surprise of the
tenant, relying on his old notice long ago. In such a case the long delay would
no doubt be taken into account in exercising the discretion to grant relief
against forfeiture, or it may be that some doctrine of acquiescence or estoppel
at common law or in equity would come to the aid of the tenant.
We have been
referred to two cases where there was a change in the condition of the property
between the date of the notice and the commencement of possession proceedings.
These were cases where the change consisted in improvement rather than in
further deterioration. They were both decisions at first instance. One was Guillemard
v Silverthorne (1908) 99 LT 584. There, as appears from p 585, certain
repairs had been done in compliance with the notice, and there was an
acceptance of rent. Ridley J at p 586 considered the ratio of the decision of
this court in Penton v Barnett. He said of that case:
. . . there
the ground of the decision was the shortness of the period which intervened
between the expiration of the notice and the issue of the writ, which permitted
of the inference being drawn that the condition of repair in which the premises
were at the two periods was substantially the same.
So Ridley J
attributed the same ratio to the Penton case as Mr Mann does. By
contrast, at p 587, Ridley J observed that some repairs had been done in the
case before him. He held that a fresh notice was necessary in that case and
dismissed the claim for possession.
Second, there
was New River Co v Crumpton [1917] 1 KB 762. At p 763 it is said
that between the date of the notice and the commencement of the action the
tenant did repairs in respect of three items on the list with which he had been
served but no more, and that the notice was substantially uncomplied with.
Rowlatt J held that no further notice was necessary in that case, and the
landlord’s application for possession succeeded. He said at p 766:
. . . what I
think that the Court of Appeal meant to hold was that the condition of the
premises at the time of action brought must be such that the notice shall still
be applicable, that is to say, that there shall be certain of the repairs
specified in the schedule which to the knowledge of the tenant are still
unexecuted. Here the tenant had done only three items out of a long list of
required repairs. She knew what she was required to do and what she had left
undone, and that, in my opinion, is enough. I cannot think that the fact of the
tenant doing a small portion of the required repairs makes the notice any the
less applicable to the residue which have not been done, or that the Court of
Appeal intended so to hold.
It may be that
the difference in the result between those two decisions arises wholly from the
different facts.
In Farimani
v Gates [1984] EGD 467 (also reported in the Estates Gazette itself)*
both Griffiths LJ and Slade LJ expressed some surprise at the decision in Penton’s
case, albeit obiter, as they did not need to express any view on that
aspect of the law. However, they both held that it was binding on this court.
*Editor’s
note: Reported at (1984) 271 EG 887, [1984] 2 EGLR 66.
It is enough
to decide this appeal if I say that on the facts there was no improvement in
the condition of the premises between the date of the notice and the
proceedings. All the previous defects, so far as the evidences goes, still
subsisted subject only to minimal repairs in the case of two flats which can
properly be disregarded. There was probably some deterioration. Mr Mann
concedes that Penton’s case is binding on this court as a decision that
no further notice under section 146 is necessary if there has been no change in
the condition of the premises. I do not see that the law can be different if
the only change is that matters have got worse. So I would hold on that ground
that there was no need for a further notice in this case.
I hesitate to
go further than that for fear of grafting a bad exception on to what I regard
as unfortunate law in the first place, that is to say, the doctrine that a
demand and acceptance of rent necessarily and as a matter of law and in all
circumstances amounts to a waiver of forfeiture. But Mr Colyer QC submits that
the true doctrine is this. All that is waived is the right to forfeit and not
the breach. In the case of a continuing breach, he submits that the right to
forfeit arises afresh on the very next day and can then be exercised.
That may well
be the right analysis. It seems to me that a notice under section 146 asserts
not only that the tenant is presently in breach but also that he will continue
to be in breach unless and until he carries out the repairs required. It must
necessarily assert that, if the landlord is to be able to rely at the trial on
further delay which will have occurred up to the commencement of proceedings.
In those circumstances I see no practical need for any fresh notice if a
landlord wishes to rely on that continuing breach as a ground of forfeiture in
the future and no legal reason why a fresh notice should be required in respect
of the same defects.
I would
dismiss this appeal.
SIR
ROUALEYN CUMMING-BRUCE agreed and did not add
anything.
Also agreeing,
NEILL LJ said: I only add a few words of my own in deference to the
argument of Mr Mann to the effect that, where a waiver has taken place, a fresh
notice under section 146(1) of the Law of Property Act 1925 has to be served.
Mr Mann bases
his argument on the wording of section 146(1) itself and on the later
provisions contained in section 18(1) of the Landlord and Tenant Act 1927 and
in section 1(1) of the Leasehold Property (Repairs) Act 1938. He submits that
the wording of section 146(1), when properly construed, shows quite clearly
that the right of re-entry should ante-date the service of the statutory
notice. Thus it is provided in that subsection that a right of re-entry or
forfeiture shall not be enforceable unless and until a lessor serves on a
lessee a notice containing the information set out in that subsection. Those
words, it is submitted, indicate that the right of re-entry should arise before
the notice contemplated by the subsection is served. Accordingly, so the
argument goes, where a right of re-entry or forfeiture has been waived and a
new right arises, that new right cannot be enforced unless a later notice is
served.
For my part,
if the matter were free from authority, I would see some force in that
argument, but this court is bound by the decision of the Court of Appeal in Penton
v Barnett [1898] 1 QB 276. I can see no satisfactory basis for
distinguishing this case from the decision in Penton’s case. The
breaches which were specified in the schedules attached to the seven notices
remained unremedied at the date when the actions began in April 1985. As it
seems to me, the plaintiffs in those circumstances were entitled to rely on the
matters set out in the notices for the purpose of the present proceedings.
Accordingly,
I, too, for the reasons given by Staughton LJ and for the reasons I have
endeavoured to add, would dismiss this appeal.
The appeal
was dismissed with costs; an application for leave to appeal to the House of
Lords was refused.