Landlord and tenant — Leasehold Reform Act 1967 — Enfranchisement — Restrictive covenants — Whether covenants against development can be included in conveyance under section 10(4)
The appellant tenants held leases, entered into in
1977 and 1978, of houses and premises respectively. In March 1995 the tenants
gave notices under the Leasehold Reform Act 1967 to purchase the freehold of
their respective houses. The respondent landlord admitted the tenants’ rights
and was prepared to convey the freeholds subject to the inclusion of certain
restrictive covenants against construction or works. The tenants challenged the
inclusion of the covenants in the conveyances. The tenants’ contentions, in the
court below, that section 10(4) of the 1967 Act was concerned with covenants
relating to user, and not development, were dismissed. The appellants appealed.
dismissed. The explanation or explication of ‘restrictive covenants’ given in
the Land Charges Act 1925 prevails as the formula most appropriately available
to identify the whole range of restrictive covenants and not merely those that
are narrowly user provisions. By using that latter expression in the 1967 Act,
the draftsman intended to attract the whole range of restrictive covenants as
understood by that same formula in the Land Charges Act 1925. Taking the
wording of section 10(4)(b) on its own, the reference related to all
restrictive covenants and not just to user covenants. The covenants in issue
were of a type properly included in a conveyance.
No cases are referred to
in this report
This was an appeal by Brett Langevad and Mary
Louise Manuela Langevad from a decision of Judge Cowell, in Central London
County Court, who had given judgment for the respondent, Chiswick Quay
Freeholds Ltd, on a point of construction on section 10(4) of the Leasehold
Reform Act 1967.
Paul Morgan QC (instructed by Dewar Hogan)
appeared for the appellants; Jonathan Small (instructed by Lawrence Graham)
represented the respondent.
Giving the judgment of the court, at the
invitation of Butler-Sloss LJ, BUXTON
LJ said: This appeal from Central London County Court, the judgment
being given by Judge Cowell on 14 February 1997, involves a short point of
construction on section 10(4) of the Leasehold Reform Act 1967.
The facts are in a very short compass. There were
before the learned judge two applications, one by Mr and Mrs McAully and one by
Mr and Mrs Langevad. They both involve identical facts and the same point. The
applicants (now the appellants) are lessees under leases entered into, in one
case, in 1977 and, in the other case, in 1978 of houses and premises
respectively at 22 and 37 Chiswick Quay in Hounslow. Chiswick Quay Estate
comprises 68 individual houses each originally let on 125-year leases at
various dates between 1975 and 1978. We were told in the respondent’s skeleton
argument that the estate was designed in a particular style in the early 1970s,
situated around a marina. It is a private estate with its own grounds,
pavements and street lighting. On 1 March 1995 both families of applicants
served a notice on the landlord, the respondent to this appeal, a company
called Chiswick Quay Freeholds Ltd, seeking the freehold of their house under
the Leasehold Reform Act 1967. The landlord company has admitted
the conditions set out in the Leasehold Reform Act 1967.
We perhaps might mention in passing, although it
does not affect in any way the outcome of the substantive appeal, that, as we
understand it, the respondent company, Chiswick Quay Freeholds Ltd, is a
company formed for the specific purpose of holding the freehold of the
development that we have described, and, again, as far as we understand it, in
a form that is familiar in such arrangements, the shareholders in the company
are the persons who are resident upon the estate. As I say, however, that does
not effect the substance of this appeal.
The company wishes to include in the conveyance to
the applicants certain restrictive covenants. A number of those were not in
issue. But there were in issue before the learned judge below three covenants
numbered 9, 10 and 11. Before I cite the actual terms of the section under
which the dispute arises, it is convenient to say that the general structure of
section 10(4) is that it sets out various types of covenant that it is open to
a landlord to seek to include in the conveyance that he offers in order to
convey the freehold to the tenant under the tenant’s rights under the Leasehold
Reform Act. However, by section 10(5) he is not entitled to include in the
conveyance any such provision that is unreasonable in all the circumstances,
the circumstances to be taken into account in making that judgment being set
out in that same section 10(5).
The dispute before the judge and before us was
concerned and is concerned solely with whether covenants 9, 10 and 11 are
covenants of the type that the landlord can seek to include. If they are not
covenants of such type they of course fall; if they are covenants of such type
the question still remains, or potentially still remains, as to whether the
particular covenant in these cases is unreasonable in all the circumstances. We
are not concerned with that latter question; we are simply concerned with the
first question of construction.
It is convenient to set out in full covenants 9,
10 and 11 because, although nothing
turns on their exact terms, those terms do illustrate the nature of the dispute
in this case:
9. Not without the previous consent of the Vendor
to affix or place anywhere outside the Property any aerial, satellite dish,
cable or other apparatus in connection with any receiving or transmitting set
for wireless, telegraphy, telephone or television.
10. Not without the previous or written consent
of the Vendor to construct build or erect or suffer to be built constructed or
erected on the Property any building or works or to pull down or alter or in
any manner interfere with the structural integrity or external arrangement of
the Property.
11. Not to construct or erect any fence, wall or
other barrier around the Property save that the Purchaser may plant a hedge or
row of shrubs not exceeding 3 feet 6 inches in height around the back garden of
the Property.
Section 10(4) of the Leasehold Reform Act has to
be set out in full, since it is to the judgment of that section that these
covenants that I have just described have to be submitted. Section 10(4) reads
as follows:
As regards restrictive covenants (that is to say
any covenant or agreement restrictive of the user of any land or premises), a
conveyance executed to give effect to section 8 above shall include —
(a) such provisions (if any) as the
landlord may require to secure that the tenant is bound by, or to indemnify the
landlord against breaches of, restrictive covenants which affect the house and
premises otherwise than by virtue of the tenancy or any agreement collateral
thereto and are enforceable for the benefit of other property; and
(b) such provisions (if any) as the
landlord or the tenant may require to secure the continuance (with suitable
adaptations) of restrictions arising by virtue of the tenancy or any agreement
collateral thereto, being either —
(i) restrictions affecting the house and premises
which are capable of benefiting other property and (if enforceable only by the
landlord) are such as materially to enhance the value of the other property; or
(ii) restrictions affecting other property which
are such as materially to enhance the value of the house and premises;
I do not think I need read subsection (c).
It will be seen that the whole of section 10(4)
applies to, and only applies to, ‘restrictive covenants’ as described in the
opening two lines of the subsection. In common understanding, at least in the
common understanding of lawyers, ‘restrictive covenants’ include all negative
obligations that, putting it shortly, run with the land and benefit the
dominant tenement. So the expression would commonly be expected to include not
only covenants against the use of land in a narrow sense (for instance, not to
use the land as a fish and chip shop) but also covenants against what might be
called the development of land or the building on it: such as, as an example,
covenant 10 in our case. But it has to be accepted that that understanding did
not appear to the draftsman to be so clear that he thought it safe to use the
expression ‘restrictive covenants’ without more. He put in a phrase of
explanation for use in this Act — the phrase ‘(covenant or agreement
restrictive of the user of any land or premises)’. Taken in isolation,
therefore, as the learned judge pointed out, this refers only to covenants against
use in the narrow or literal sense. The covenants with which we are concerned
do not relate to the use of land in that sense, but to its development or the
building upon it, whatever use thereafter may be made of the land so developed
or built upon.
The appellants’ case, which failed before the
learned judge, was that, in this instance, use means use in what I will
describe as the narrow or colloquial sense of use, that is to say user as
opposed to development: therefore, none of the covenants with which we are
concerned on that argument was a covenant that could be required in law by the
landlord under the terms of section 10(4)(b). In my judgment, however,
it would be remarkable if the draftsman, by his parenthetical reference to the
word ‘user’, had indeed intended to limit clause 10(4) to covenants against
user in the literal sense. There are a number of reasons, apart from simple
impression, for thinking that that could not have been his intention.
We were taken to a number of other statutory formulae.
Of those the most striking is that to be found in section 2(5)(ii) of the Land
Charges Act 1972 dealing with Class D land charges. Those include a restrictive
covenant and the Act says for that purpose:
a restrictive covenant is a covenant or agreement…
restrictive of the user of land…
That phraseology has never been thought to be
limited to narrow user covenants in the literal sense of that word, and, in my
judgment, the system of registration would operate in a far different way from
that in which it does if that were to be the case. Moreover, that formulation
was not invented in 1972. It goes back to section 10(1) of the Land Charges Act
1925, that is to say it is to be found in the codification of the law of real
property of 1925, and thus an expression used at a time when the understanding
of the nature and ambit of a restrictive covenant was already and quite clearly
that which I ventured to suggest earlier in this judgment. Second, another part
of the 1925 legislation, the Land Registration Act 1925, section 50, sidenoted
‘notices of restrictive covenants’. Section 50(1) reads:
Any person entitled to the benefit of a
restrictive covenant or agreement… with respect to the building on or other
user of registered land may apply to the registrar to enter notice thereof on
the register,…
and various provisions are made for that
application.
There is a division made by the draftsman between
building on, on the one hand, and user, on the other. Mr Paul Morgan QC, who
argued this case for the appellants, drew attention to the failure to use the
available formula in the Land Charges Act. However, it has to be noted that the
expression used is a covenant with respect to building on or other user of
registered land. It appears, therefore, that the draftsman thought that
building on land (that is to say development on land) could be comprehended
within the expression user; or, at least, that is a conclusion reasonably to be
drawn from the way in which he expressed himself.
There is one other part of the 1925 code that is
of more help to the appellants, section 84 of the Law of Property Act 1925. The
relevant part reads as follows:
(1) The Lands Tribunal shall… have power from
time to time, on the application of any person interested in any freehold land
affected by any restriction arising under covenant or otherwise as to the user
thereof or the building thereon, by order wholly or partially to discharge or
modify any such restriction…
It is right, however, to remark about section 84
of the Law of Property Act that, although the sidenote to the section is ‘power
to discharge or modify restrictive covenants affecting land’, the terms of the
section itself purport to be a definition or explanation of that expression
‘restrictive covenants’. They are therefore less compelling as an aid to our
problem of construction than the more definitional terms adopted in the Land
Charges Act. It is also right (although I make this point with caution, because
it was not fully explored before us) that the powers of the Lands Tribunal
under section 84 may go wider than powers in relation to restrictive covenants
in the property lawyer’s sense of that word. In my judgment, therefore, this
example is less compelling as an assistance to us than the other parts of the
1925 code that I have already cited.
I consider, therefore, that the explanation or
explication of ‘restrictive covenants’ given in the Land Charges Act prevails
as the formula most appropriately available to identify the whole range of
restrictive covenants, and not merely those that are narrowly user provisions.
By using that latter expression in the Leasehold Reform Act, the draftsman
intended to attract the whole range of restrictive covenants as understood by
that same formula in the Land Charges Act. I am therefore more persuaded than
was the judge that, taking the wording of section 10(4)(b) on its own,
the reference must be to all restrictive covenants and not just to user
covenants; and, therefore, that covenants 9, 10 and 11 are of a type properly
included in a conveyance. The judge, however, held that, even if that point was
not clear, the matter was strongly affected by section 10(4)(a). I
agree. That consideration, which the judge below held to be determinative, puts
beyond doubt a matter that, on the wording of the legislation, is, in my view,
already clear. ‘Restrictive covenants’ in subsection (a) must mean the
same as in subsection (b). It would, however, be extraordinary if the
liberty given in (a) were limited to narrow user covenants, because that
would not give the landlord proper and extensive protection, in so far as it is
required, in respect of restrictive covenants entered into by him. There is no
rational reason for making the distinction in subsection (a) that the
appellants’ argument forces upon that subsection. It was put to us that even
with the benefit of section 10(4), as understood by the judge, the landlord
would still not have full protection, because he was not protected in respect
of a tenant’s breach of positive covenants; but even if such a lacuna does
exist in this legislation, that is no reason to constrain the section as
creating a far wider lacuna.
We were also taken within the Act itself to
section 19, which is a section dealing with management powers for the general
benefit of the neighbourhood, and to section 19(8) which provides that such a
scheme may provide for regulating the redevelopment, use or appearance of
property of which tenants have acquired the landlord’s interest. Mr Morgan drew
attention to the fact that use and redevelopment are dealt with separately and,
apparently, as different phenomena. That is quite right, but I do not find that
particularly persuasive so far as the construction of the phrase ‘user of land’
in section 10(4) is concerned. As Mr Morgan rightly said, section 19 deals with
a very different operation and a very different type of social problem from
that which is addressed by section 10, and section 19 would be required, and
would be appropriate, whatever the correct construction of section 10(4)(b)
might be. The point, therefore, is purely a verbal one, and the fact that, as I
say, the expression may be used in that sense in section 19 cannot offset the
very strong reasons for upholding the judge’s construction in respect of
section 10(4).
In my judgment, therefore, the judge was right,
and this appeal should be dismissed. In reaching that conclusion, I should say
that I was not assisted by such cases as do exist on section 10, which were
mentioned in the skeleton arguments and which I read with advantage, but none
of them directly addresses, and hardly indirectly addresses, the problem facing
us. Nor was I assisted by any general reflection upon what is the overall
social intention of the 1967 Act or the allocation that it makes between the
interests of the landlord and the tenant. I reach my conclusions, as did the
judge below, solely on the construction of the words used by the draftsman in
the 1967 Act.
ALDOUS and BUTLER-SLOSS LJJ agreed and did not add anything.
Appeal dismissed.
