Residential property — Letting to company — Company set up for the purpose — Company nominating director and shareholder as tenant — Attempt to set up company-let outside Rent Act 1977 — Occupier refused to give up possession — Whether company-let a sham — Whether on construction a lease to company or to occupier
The plaintiff provides flats to let to companies only. A company can have a protected tenancy under the Rent Act 1977 but, because of the requirement of residence, cannot obtain a statutory tenancy and security of tenure. The plaintiff offered the second defendant, Miss Helen Rose, a flat, at 45 Priory Road, London NW6, provided the lease was granted to a company. She bought a company, Plustitle Ltd, the first defendant, for £150 and became a shareholder and director. The company was then granted a six-month lease of the flat at a rent of £345 per month. The lease gave the company the right to nominate an occupier and Miss Rose signed the agreement as the managing director of the company and went into occupation. The lease was renewed on one occasion, but in May 1987, following a disagreement over a rent increase, the plaintiff sought possession of the flat. Miss Rose appealed the decision in the court below that she should give up possession, contending that the letting to Plustitle Ltd was a sham and the tenancy was granted to her.
Held The appeal was dismissed. A sham exists where the parties say one thing intending another: Antoniades v Villiers[1988] 1 EGLR 59. However, in the present case the judge found as a fact that it was the intention of both parties, with all the knowledge of what was involved, that the flat should be let to a company and not to Miss Rose personally. The reasoning that led to that conclusion could not be faulted.
However, once the letting has been found not to be a sham, the lease must be construed. Looking at the substance and not only at the form, the letting was one to Plustitle Ltd, as both parties always intended that it should be. The company was not the plaintiff’s agent, as in the letting in Gisborne v Burton [1988] 38 EG 129. The company was the only tenant to whom the plaintiff was prepared to let, and the covenants in the lease were perfectly capable of being complied with by the company through its nominee (Miss Rose) and enforced against the company by the plaintiff. Unlike the position in Street v Mountford [1985] 1 EGLR 128, the transaction did represent the true position. There is no reason why public policy should override the transaction which was deliberately intended to avoid, but not evade, the Rent Acts.
Snook v London & West Riding Investments Ltd
[1967] 2 QB 786 at p 802 applied.
Philip Walter (instructed by S Newman & Co) appeared for the appellants; and Christopher Coney (instructed by Graham Harvey & Co) appeared for the respondent.
