The ‘competent landlord’ provisions of the Landlord and Tenant Act 1954 mean what they say, so that a business subtenancy can be terminated by the head landlord before
expiry of a contractual mesne interest–No new interest to be inferred from the fact that subtenants continued to pay rent to mesne landlords while disputing the Act’s effect
This was an
appeal by MTC (Cars) Ltd, of Portland Place, London W1, from a decision of
Templeman J in the Chancery Division on June 14 1974 granting possession of 4-8
Ledbury Mews North, Bayswater, London W11, to the respondent, Mrs Mabel Jenny
Lewis, of Llanarth, Cardiganshire. The judgment below was reported at (1974)
231 EG 1417.
Mr J S Colyer
(instructed by Goodman, Derrick & Co) appeared for the appellants, and Mr M
Essayan (instructed by Underwood & Co) represented the respondent.
Giving
judgment, RUSSELL LJ said that the respondent plaintiff was the freeholder of
business premises of which the appellant defendants held an underlease for a
term ending on December 20 1968, three days before their immediate landlords’
term expired. After the expiry of their contractual terms the defendants and
their immediate landlords continued to pay their respective rents, the latter becoming
tenants of the plaintiff from year to year and the defendants, who were in
possession, remaining as subtenants under a statutory continuation of their
subtenancy by virtue of the Landlord and Tenant Act 1954. On November 13 1972
the plaintiff gave the defendants’ immediate landlords notice to quit
terminating their yearly contractual tenancy on December 23 1973, and on
November 21 1972, acting as ‘competent landlord’ within the meaning of the Act,
she gave to the defendants a notice under section 25 determining their tenancy
on May 31 1973, a date which was of course prior to that on which their
immediate landlords’ tenancy was to determine. The defendants now asserted that
there was no power to serve a notice under section 25 with a termination date earlier
than the expiry of any contractual mesne tenancy there might be.
Subsections
(3) and (4) of section 25, which were the statutory provisions governing in the
case of all tenancies what termination date could be specified in a notice
under the section, appeared to him (his Lordship) to be designed to recognise
and prevent the overriding of a tenant’s contractual rights. They were not
directed to the situation where the tenant’s contractual rights had come to an
end and only the artificial continuation of the tenancy under the statute
existed. In such a case, he (Russell LJ) thought the statute imposed no fetter
on the date of termination to be specified in the notice. It only required the
date of the notice to be appropriately related in point of time to the selected
termination date. It might at first sight appear strange that by a section 25
notice the defendants’ subtenancy could be terminated before the end of the
mesne landlords’ contractual tenancy and by the plaintiff’s own direct action
without reference to the mesne landlords, thereby, for example, depriving the
latter of profit rental while they remained liable for the rent to the
plaintiff under the head lease. However, the plaintiff was only in a position
to give a section 25 notice to the defendants because of the relatively short
interest of the mesne landlords in reversion. By paragraph 3 of the sixth
schedule to the Act, moreover, the acts of the plaintiff as the competent
landlord were made binding on the mesne landlords, and by paragraph 4 of the
same schedule the mesne landlords, so long as they had not consented to those
acts, were made entitled to compensation from her for any loss that may be
caused to them. Those provisions deprived what appeared to be the plain result
of the language of section 25 of any strangeness or oddity that might otherwise
have occurred. Accordingly the judge was quite correct in holding that the date
specified in the plaintiff’s section 25 notice could not in law be criticised.
A second point
had been taken by the defendants based on the fact that after May 31 1973 and
up to December 23 1973 they (the defendants) had continued to pay sums by way
of rent to the mesne landlords. That fact, it was contended, involved the
creation of a new contractual tenancy between the mesne landlords and the
defendants which was protected by the Act. It was abundantly plain that after
service of the section 25 notice the defendants had maintained that it was a
thoroughly bad notice, and if it were so they were perfectly entitled to assert
that their tenancy continued to be protected by the statute, and, being
protected by the statute, naturally they would continue to pay rent at the old
rate to the mesne landlords as long as the latter remained the owners of the
reversion. He (his Lordship) could see no justification for attributing the
receipt and payment of rent after May 31 1973 to the creation of a new
subtenancy when the defendants themselves asserted that what they were doing
was simply paying the sums which they would be obliged to pay on the footing of
the statutory continuation of their tenancy. A passage from the judgment of
Denning LJ in Marcroft Wagons Ltd v Smith [1951] 2 KB 496 at 506
might be aptly quoted, although it was a rent restriction case:
‘If the
acceptance of rent can be explained on some other footing than that a
contractual tenancy existed, as, for instance, by reason of an existing or
possible statutory right to payment, then a new tenancy should not be
inferred.’
Although that
was in a different context it seemed to be an extremely sound approach which
could be applied to the instant case.
STAMP LJ and
SIR JOHN PENNYCUICK agreed, and the appeal was dismissed. Leave to appeal to
the House of Lords was refused.
