Key points
• Whether a chattel becomes part of the land depends on the degree and the object of the annexation to the land
• A house built in such a way that it could not be removed except by destruction must have been intended to form part of the land
Whether a chattel has become part of the land can be a fascinating area of property law. Just a few months ago, the High Court ruled on the issue in Tower Hamlets London Borough Council v Bromley London Borough Council [2015] EWHC 1954 (Ch); [2015] PLSCS 211 – a case involving a sculpture by Henry Moore. A new case – Spielplatz Ltd v Pearson (and another) [2015] EWCA Civ 804; [2015] PLSCS 239 – provides another illustration of the issue.
Background to the proceedings
Spielplatz (German for “playground”), a woodland naturist resort situated near St Albans, is reputed to be the largest naturist development in the country. Set over some 12 acres of green belt land, it includes 64 plots. Spielplatz Ltd lets the plots to its members. In most cases the tenant builds a chalet on the plot. Some of the chalets are used for holidays, but in many cases the tenants are resident year round.
Mr and Mrs Pearson paid £36,000 for their chalet in 1992. The same year they were granted an annual written tenancy of the plot on which it is set. The tenancy contained all the usual obligations, including an obligation requiring the tenants to repair. A less common covenant, but one consistent with the nature of the development, imposes rules as to when dress must and must not (except during inclement weather) be worn at the resort.
The Pearsons occupy the chalet as their residence and claim to have spent some £100,000 renovating it. These works led to the dispute with their landlord. After “some unfriendly correspondence” between Spielplatz and the Pearsons, notice to quit was served and possession sought.
Spielplatz’s claim was simplicity itself: the Pearsons have a common law yearly tenancy of a plot that can be terminated by giving (as they did) six months’ notice. In response, the Pearsons argued that they had an assured tenancy, which can be terminated only by court order under the Housing Act 1988. They also maintained (not surprisingly in view of their expenditure) that they owned the chalet.
Judicial pronouncements
In county court proceedings, however, the judge took an intermediate position. She considered that the key issue was whether the chalet had in law become attached, or annexed to the land. If it had, the Pearsons had an assured tenancy (as they had a tenancy of a dwelling).
Having heard expert evidence that the chalet could not be moved without first being dismantled, or pulled down, the court decided that the chalet was no
longer a chattel. It had become part of the land, the Pearsons had an assured tenancy and Spielplatz was not entitled to possession. The fact that the parties believed that the chalet belonged to the Pearsons did not alter the outcome: whether a chattel has become annexed to the land is a question of law.
Dismissing the landlord’s appeal, the Court of Appeal in a unanimous decision (given by Sir Colin Rimmer) upheld the reasoning of the county court on the annexing issue and dismissed the other grounds of appeal.
On the annexation issue the court followed the lower court by citing the House of Lords in Elitestone Ltd v Morris and another [1997] 2 EGLR 115: in any particular case the answer to the question depended on the degree and the object of the annexation to the land; and that, assessed objectively, a house built in such a way that it could not be removed except by destruction could not have been intended to remain a chattel; it must have been intended to form part of the land. However, the subjective intention of the parties cannot affect the question whether the chattel has, in law, become part of the freehold. These principles were applied correctly by the county court.
Spielplatz also argued that even if the chalet had become part of the land the grant of the tenancy should be interpreted as a tenancy of the soil of the plot with the Pearsons having a gratuitous licence to occupy the chalet. This, it was submitted, reflected the social purposes that applied when the tenancy was granted back in 1992.
Such an interpretation would avoid an assured tenancy being granted and the application of the repairing covenant under the Landlord and Tenant Act 1995. This submission was rejected as an “impossible” argument: there was no evidence that the parties intended to “create such a bizarre scheme”.
Nor did the submission that the tenancy was a holiday let and therefore not assured fare any better. It was intended that the Pearsons would occupy all year; they were granted a yearly tenancy and they were not using the chalet for a holiday.
Eventual outcome
So the Pearsons have long-term security (as the tenancy was granted prior to February 1997, it is a fully assured tenancy) and a market rent presumably now applies. Will they argue that their works to the chalet amount to “tenant’s improvements” and how easy will it be to find relevant market-comparable evidence for dwellings on naturist sites such as theirs?
This ruling might affect others living on the estate, or living in similar developments elsewhere. There could well be other potential assured tenants waiting in the wings.
Professor James Driscoll is a solicitor and a writer
