Landlord and tenant — Whether lease created a ‘perpetually renewable leasehold’ operating as a demise for 2,000 years — Lease of shop premises with residential accommodation — Correct approach to question of construction — Covenant for renewal in the present lease construed to provide that the like covenant in the second lease would allow only one further renewal, the effect being that the present lease could under its terms be renewed twice only — Landlords entitled to declaration to that effect
This was an
originating summons for construction, the declaration sought being that a lease
between the plaintiff company, Marjorie Burnett Ltd, and the defendant, William
Barclay, dated August 3 1971, for seven years from June 24 1971, was not a
perpetually renewable lease but could be renewed twice only. The lease
comprised a shop, dwelling-house and outbuildings at 179 Ashley Road, Boscombe,
Bournemouth.
J M Henty
(instructed by Lennon & Co, of Swindon) appeared on behalf of the plaintiff
company; the defendant did not appear and was not represented.
Giving
judgment, NOURSE J said: This is an originating summons in which the primary
relief sought is a declaration that upon the true construction of a lease it is
not a perpetually renewable lease but can be renewed twice only.
The matter
arises in this way. The lease is dated August 3 1971. It was made between the
plaintiff in these proceedings, a company called Marjorie Burnett Ltd, as
landlord of the first part, another company as tenant of the second part and
certain individuals as sureties of the third part. At some time between the
date of the lease and 1975 it appears that it was assigned to the defendant in
these proceedings, William Barclay. The property comprised in the lease is a
dwelling-house, shop and outbuildings known as 179 Ashley Road, Boscombe,
Bournemouth. It appears that those are shop premises with residential
accommodation above or beside them. The lease was expressed to be for a term of
seven years from June 24 1971 at the yearly rent of £650. It was mainly in
common form and I do not need to refer to any of its other provisions until I
reach clause 6. That is the clause which has given rise to the question which I
now have to decide. It reads as follows:
If the tenant
shall be desirous of taking a new lease of the demised premises after the
expiration of the term hereby granted . . .
There are then
provisions which are in a not very elegant form, but the effect of them is
clear enough. It is that the tenant can give the landlord notice of the desire
to take a new lease. Then clause 6 goes on as follows:
then the
landlord will at or before the expiration of the term hereby granted, if there
shall then be no subsisting breach of any of the tenant’s obligations under
this present lease — and now I come to some important words — grant to the
tenant a new lease of the premises hereby demised for a further term of seven
years, to commence from and after the expiration of the term hereby granted at
a rent to be agreed between the parties.
There are then
provisions for the rent to be fixed in default of agreement. Then come the
final words of the clause, which are also important. They read as follows:
And such
lease shall also contain a like covenant for renewal for a further term of
seven years on the expiration of the term thereby granted.
What happened
was that in June 1975, some three years before the term granted by the lease
expired, a firm of solicitors acting for the defendant wrote to the solicitors
acting for the plaintiff, suggesting that the lease was a perpetually renewable
lease for the purposes of paragraph 5 of the 15th Schedule to the Law of
Property Act 1922 and that it had therefore taken effect as a lease for a term
of 2,000 years. Mr Henty, who appears for the plaintiff, says, and this must be
right, that that contention could only have been based on clause 6 of the
lease.
That
suggestion was refuted by the plaintiff’s solicitors, who said that in their
view clause 6 gave the tenant options to renew for two periods of seven years
and no more. At that stage the area of the dispute which I have to resolve was
defined.
There were two
further letters from the defendant’s solicitors, the second in October 1975,
which indicated that the defendant did not resile from the suggestion which had
previously been made on his behalf. It appears that on December 15 1977 the
defendant exercised the option for a new lease, pursuant to the provisions of
clause 6.
On June 24
1978 the term of seven years granted by the lease expired. On November 13 1978
the plaintiff company issued the originating summons which is now before me.
That led to a letter from another firm of solicitors acting on the defendant’s
behalf. The letter was dated January 26 1979. It made an offer to the plaintiff
that the defendant would be content to have these proceedings heard without
argument on his part, provided that the plaintiff was prepared to abandon its
claim for costs. That offer was accepted by the plaintiff by a letter of March
2 1979, and that is how the matter has now come before the court. Mr Henty, as
I have said, is here to represent the plaintiff company, but the defendant does
not appear and is not represented. The position nevertheless is that Mr Henty
has to make out a case for the declaration which the plaintiff seeks.
The way in
which he has sought to do that is this. First he has referred me to Woodfall
on Landlord and Tenant, 28th ed, vol 1, para 2071, where I find this
passage:
The leaning
of the courts has been against perpetual renewals, so that in order to
establish this construction the intention has to be unequivocally expressed,
and a proviso in general terms that the lease to be granted shall contain the
same covenants and agreements as the lease containing the covenant or option
has been repeatedly held not to extend to the covenant or option for renewal.
There is then
a reference to three old cases, the most recent of which, Moore v Foley,
was decided in 1801 and is in 6 Ves 232. At the beginning of the next
paragraph, 2072, there is this sentence:
But although,
prima facie, a lessor was taken not to have intended to give such a covenant
the court will give effect thereto if there is in the lease evidence of such
intention.
Then Mr Henty
referred me to two more recent decisions of the Court of Appeal, in each of
which it was held that the provisions of the lease in question were sufficient
to make it a perpetually renewable lease and thus to secure its conversion into
a 2,000-year term under the provisions of the 1922 Act. The first was Parkus
v Greenwood [1950] Ch 33 reported at first instance before Harman J.
Harman J was of the view that there was not in the case of the lease there
before him a covenant or obligation for perpetual renewal. His decision was
reversed by the Court of Appeal, but I would like to refer to a passage in his
judgment at p 37. Before I do that I should state that the words of the
material provision in that case were these. The landlord agreed that he would
grant a tenancy of the demised premises ‘for a further term of three years from
the expiration of the said term at the same rent and containing the like
agreements and provisions as are herein contained, including the present
covenant for renewal’. At p 37 Harman J said this:
Mr Albery . .
. pointed out that in the old conveyancing precedents these words were used to
create a perpetual right to renew and that a careful conveyancer if he wished
to avoid trouble and did not wish to have it said that there might be such a
perpetual right, would use the opposite words, namely ‘excluding this present
covenant’. All that I accept; none the less, in my judgment, this part of the
Act only operates to create a term of 2,000 years where the lease is on the
face of it perpetually renewable. You have to find expressly in the lease or agreement
a covenant or obligation for perpetual renewal. I do not find any such covenant
here. All I find is a covenant for renewal once.
Although, as I
have said, Harman J’s decision was reversed by the Court of Appeal [1950] Ch
644, that reversal proceeded on the footing that there was in fact a covenant
or obligation for perpetual renewal. There is nothing in the Court of Appeal’s
decision to displace the learned judge’s statement that you have to find
expressly in the lease or agreement a covenant or obligation for perpetual
renewal.
The second
case in the Court of Appeal was Caerphilly Concrete Products Ltd v Owen
[1972] 1 WLR 372. In that case it was again held that there was a covenant or
obligation for perpetual renewal. Again I will read the material words. There
was an agreement by the landlord to grant a lease for a further term of five
years ‘at the same rent and containing the like covenants and provisos as are
herein contained (including an option to renew such lease for the term of five
years at the expiration thereof)’. I find in the leading judgment of Russell LJ
in that case at p 375 this passage:
In the
present case the brackets make it abundantly plain that the parties are
explaining that ‘containing the like covenants and provisos’ is a phrase
intended to embrace an option. That is to say that the covenants and provisos
contained in the first lease, which the first lease requires the second lease
to contain, are not to be construed as a reference to those covenants and
provisos other than an option to renew, but as a reference to all those
covenants including an option to renew.
And then a
little later on he said this in reference to the material words:
If the words
. . . are repeated in the second lease without the words in parenthesis the second
lease will not be carrying out the requirement of the first lease: it will not
be granting an option for a further lease containing ‘the like covenants’ as
defined.
In construing
clause 6 of the lease in the present case I must therefore approach the matter
in this way. I must bear in mind that the leaning of the court s has been
against perpetual renewals. I have to find expressly in the lease a covenant or
obligation for perpetual renewal. And I have to look ahead to see what the
second lease will contain when the requirements of the covenant for renewal in
the first have been duly observed.
I now return
to clause 6 of the lease. What the landlord has to do, if the tenant gives it
notice of his desire to take a new lease, is to grant to the tenant a new lease
of the demised premises for a further term of seven years at a rent to be
agreed, and if not agreed to be fixed in the manner specified. Then it is
provided that such lease shall also contain a like covenant for renewal for a
further term of seven years on the expiration of the term thereby granted.
Mr Henty
really puts his case on this primary question in two ways. First, he takes the
simple course of asking me to see what provisions the second lease would
contain if it were to be granted pursuant to clause 6. He says that it would
inevitably be at a different rent from the £650 reserved by the first lease.
Then he says that the second lease would contain a like covenant for renewal
for a further term of seven years as that contained in clause 6 of the first
lease. But that convenant ends with the part of clause 6 which deals with the
provisions for fixing the rent in default of agreement. It does not seem to me
that the second lease could possibly contain the words ‘and such lease shall
also contain a like covenant for renewal for a further term of seven years on
the expiration of the term thereby granted’, because those words are not part
of the covenant for renewal and to include them would be to go further than
clause 6 requires. And so I agree with Mr Henty that the second lease would be
at a new rent and that it would contain the whole of clause 6, except for the
last three lines or so which I have just quoted. On that footing it is clear
that there is no express covenant or obligation for perpetual renewal. Indeed
the contrary is the case. There is an express provision in the lease to the
effect that it can be renewed twice only.
That would in
itself be enough to dispose of the primary question in these proceedings. But
Mr Henty goes on to take a second point, which appears to me to be one of equal
force, and that is this. He says that even supposing his first argument were
wrong I must bear in mind that what will happen if this is a perpetually
renewable lease is that it will be converted by the 1922 Act into a lease for a
term of 2,000 years. He says, and I can see no answer to this, that the notion
of a 2,000-year term is completely inimical to a lease which contains
provisions for rent review every seven years. And so again he says that as a matter
of construction clause 6 could not possibly have the effect for which the
defendant has contended. I agree with that contention also.
In the
circumstances it seems clear to me that the plaintiff company is entitled to
the primary declaration which it seeks. On that footing it is not necessary for
me to consider the second possible alternative raised by the originating
summons.