Landlord and Tenant Act 1954, Part II — Severance of the reversion — The reversions on two leases of adjoining properties used for business purposes, and the ownership of a piece of land over which both lessees were given a right of way, were vested originally in the same owner — Subsequently both reversions were sold to a third party and the piece of land subject to the rights of way became vested in the appellants — A dispute arose between the lessees under the two leases, the respondents, and the appellants as to the application of the 1954 Act — The appellants argued that the reversion on the leases was severed by the transfers to the third party and the appellants and that they became entitled to a severed part of the reversion expectant upon the termination of the tenancies in the rights of way — Accordingly, they argued, section 140(1) of the Law of Property Act 1925 applied and that, so far as the appellants were concerned, the matter must be considered as if the only property originally comprised in the leases was the rights of way — On that hypothesis the rights of way were not within Part II of the 1954 Act at all because they were not property capable of being ‘occupied’ within section 23 of the Act: Land Reclamation Co Ltd v Basildon District Council — Hence, the terms of the leases having expired, the appellants claimed that they were entitled to their piece of land free of the rights of way — This somewhat involved argument was rejected by the Court of Appeal, but they did not reject the assumption that the concept of severance of the reversion applied although there were already in existence separate leases of each property by the same reversioner — Held that
This was an
appeal by Firmenich & Co, an unlimited company, from a decision of Whitford
J granting declarations asked for by the present respondents, the plaintiffs
below, Nevill Long & Co (Boards) Ltd and S A Wise (Timber) Ltd, in regard
to the application of Part II of the Landlord and Tenant Act 1954 to the
tenancies created by two leases. Whitford J’s decision was reported at (1981)
261 EG 461, [1982] 1 EGLR 69.
Michael Rich
QC and Joseph Harper (instructed by Tarlo Lyons) appeared on behalf of the
appellants; Donald Rattee QC and R Ham (instructed by Stilgoes) represented the
respondents.
Giving the
judgment of the court at the invitation of the Master of the Rolls, FOX LJ
said: This is an appeal from a decision of Whitford J in a matter concerning
the operation of the provisions of Part II of the Landlord and Tenant Act 1954.
By a lease of
May 12 1960 and made between Winckley Investments Ltd (‘Winckley’) of the one
part and Nevill Long & Co (Boards) Ltd (‘Long’) of the other part Winckley
demised to Long for a term of 21 years from Christmas 1959 a piece of land at
North Hyde Wharf, Hayes Road, Southall, Middlesex, together (inter alia)
with a right of way in common with Winckley and all persons having a like right
to pass and repass along a private road for all purposes connected with the
beneficial user of the demised premises. We will refer to the property
comprised in this lease as plot 1.
By a lease of
August 5 1960 and made between Winckley of the one part and S A Wise (Timber)
Ltd (‘Wise’) of the other part Winckley demised to Wise for a term of 21 years
from Christmas 1959 a piece of land adjoining plot 1 to the south of plot 1
together (inter alia) with a like right of way to that contained in the
lease from Winckley to Long. We will refer to the property comprised in this
lease as plot 2.
When the
leases were granted, Winckley was also the owner of land to the north of plot 1
(and adjoining it). The right of way granted by the leases passed over that
land. We will refer to it as plot 3.
In 1967
Winckley sold plot 3 (including the servient tenements of the rights of way)
which now belongs to the defendants.
In 1968 H J
Meek Investments Ltd (‘Meek’) acquired the issued share capital of Wise; Meek
has at all material times owned the share capital of Long. Meek also acquired
in 1968 the freehold reversion to the Wise lease and an option to acquire the
freehold reversion to Long’s lease also. That option was exercised, and the
freehold duly transferred to Meek, in 1969.
Although both
the freehold and leasehold interests in plots 1 and 2 consequently belonged to
members of the same group of companies, there has been no merger or
determination of the leases.
Long and Wise
are trading companies which carry on business in the timber trade. At all material
times they have occupied plots 1 and 2 respectively for the purpose of their
respective businesses.
In these
circumstances a dispute has arisen between the parties as to the application of
Part II of the Landlord and Tenant Act 1954 to the tenancies created by the
leases. Long and Wise (the plaintiffs) assert that the Act does apply. And by
the originating summons they ask for:
1. A declaration that Part
II of the Landlord and Tenant Act 1954 applies to the tenancies created by the
said leases and that the rights of way included in such tenancies will continue
after December 25 1980 in accordance with the provisions of section 24 of the
1954 Act.
2. A declaration that the
defendant is not the landlord in relation to such tenancies for the purposes of
Part II of the 1954 Act and is not entitled to serve notice terminating such
tenancies under section 25 of the 1954 Act.
The judge made
those declarations. The defendants appeal.
It will be
convenient if at this point we set out certain of the statutory provisions with
which we are concerned. They are as follows:
Landlord and
Tenant Act 1954 Part II
Section 23. (1) Subject to the provisions of this Act, this Part of this Act
applies to any tenancy where the property comprised in the tenancy is or
includes premises which are occupied by the tenant and are so occupied for the
purposes of a business carried on by him or for those and other purposes. (3)
In the following provisions of this Part of this Act the expression ‘the
holding’, in relation to a tenancy to which this Part of the Act applies, means
the property comprised in the tenancy, there being excluded any part thereof
which is occupied neither by the tenant nor by a person employed by the tenant
and so employed for the purposes of a business by reason of which the tenancy
is one to which this Part of this Act applies.
Section 24. (1) A tenancy to which this Part of this Act applies shall not
come to an end unless terminated in accordance with the provisions of this Part
of this Act; and, subject to the provisions of section twenty-nine of this Act,
the tenant under such a tenancy may apply to the court for a new tenancy —
(a) if the landlord has given notice under the
next following section to terminate the tenancy, or
(b) if the tenant has made a request for a new
tenancy in accordance with section twenty-six of this Act.
Section 25. (1) The landlord may terminate a tenancy to which this Part of
this Act applies by a notice given to the tenant in the prescribed form
specifying the date at which the tenancy is to come to an end (hereinafter
referred to as ‘the date of termination’) . . .
Section 29. (1) Subject to the provisions of this Act, on an application under
subsection (1) of section twenty-four of this Act for a new tenancy the court
shall make an order for the grant of a tenancy comprising such property, at
such rent and on such other terms, as are hereinafter provided.
Section 32. (1) and (3) as amended by the Law of Property Act 1969, sections 7
and 8:
(1) Subject to the following provisions of this
section an order under section twenty-nine of this Act for the grant of a new
tenancy shall be an order for the grant of a new tenancy of the holding; and in
the absence of agreement between the landlord and the tenant as to the property
which constitutes the holding the court shall in the order designate that
property by reference to the circumstances existing at the date of the order.
(3) Where the current tenancy includes rights enjoyed by the tenant in
connection with the holding, those rights shall be included in a tenancy
ordered to be granted under section twenty-nine of this Act . . .
Law of
Property Act 1925 section 140(1) and (2) provides
as follows:
(1) Notwithstanding the severance by conveyance,
surrender, or otherwise of the reversionary estate in any land comprised in a
lease, and notwithstanding the avoidance or cesser in any other manner of the
term granted by a lease as to part only of the land comprised therein, every
condition or right of re-entry, and every other condition contained in the
lease, shall be apportioned, and shall remain annexed to the severed parts of
the reversionary estate as severed, and shall be in force with respect to the
term whereon each severed part is reversionary, or the term in the part of the
land as to which the term has not been surrendered, or has not been avoided or
has not otherwise ceased, in like manner as if the land comprised in each
severed part, or the land as to which the term remains subsisting, as the case
may be, had alone originally been comprised in the lease.
(2) In this section ‘right of re-entry’ includes
a right to determine the lease by notice to quit or otherwise; but where the
notice is served by a person entitled to a severed part of the reversion so
that it extends to part only of the land demised, the lessee may within one
month determine the lease in regard to the rest of the land by giving to the
owner of the reversionary estate therein a counter notice expiring at the same
time as the original notice.
The argument
of the defendant is, broadly, as follows:
The reversion
expectant upon the determination of the leases became severed by the transfer
of the freeholds to Meek and the defendants. The defendants are entitled to a
severed part of the reversion expectant upon the termination of the tenancies
in the rights of way.
Under the
provisions of section 140(1) of the Law of Property Act 1925 a reversioner may
exercise his rights of re-entry or to quit in respect of his severed part as if
the land comprised in the severed part had alone originally been comprised in
the lease. Accordingly the matter must be approached, so far as the defendants
are concerned, as if the only property originally comprised in the leases were
the rights of way. On that hypothesis the rights of way are not within Part II
of the Landlord and Tenant Act 1954 at all because they are not property which
is capable of being ‘occupied’ within section 23: see Land Reclamation Co
Ltd v Basildon District Council [1979] 1 WLR 767.
The Act does
not apply to a tenancy of a right of way only (Land Reclamation Co
case). Accordingly the 21-year periods for which the leases were granted having
expired, the defendant is entitled to plot 3 free of the rights of way and can
exercise, unhindered by the 1954 Act, all rights of re-entry to which they are
entitled under the leases.
We do not feel
able to accept that argument.
By section
23(1) the provisions of Part II of the 1954 Act apply to ‘any tenancy where the
property comprised in the tenancy is or includes premises which are occupied by
the tenant and are so occupied for the purposes of a business carried on by him
. . .’ That is an exact description of
the tenancies created by the leases. It is quite true that, as decided in Land
Reclamation Co Ltd v Basildon Council (supra), a right of way is not
property which can be described as ‘occupied’ by the tenant and if it is the
only property comprised in the tenancy is outside the Act. But nevertheless
Part II
case, that property ‘includes’ property which is occupied by the tenant for the
purposes of his business. The position is as stated by Buckley LJ in the Land
Reclamation case at p 774 where he says:
So it [ie the
1954 Act] will apply when part only of the whole property comprised in the
lease is occupied by the tenant for business purposes. This may occur where the
tenant uses some part of the property comprised in the lease for purposes other
than business purposes; or it might occur where some part of the property
comprised in the lease was, by its incorporeal nature, incapable of occupation.
The latter
example is this case. We should refer also to the judgment of Shaw LJ at p 782.
Thus far,
therefore, the tenancies created by the leases will continue until determined
in accordance with the Act. Further a new tenancy granted under the Act will be
a new tenancy of the holding (section 32(1)). There is excluded from the
definition of the holding (section 23(3)) property which is not occupied by the
tenant. Section 32(3), however, provides that ‘rights’ enjoyed by the tenant in
connection with the holding shall be included in the new tenancy. The rights of
way must, we think, come within that provision.
There remains
the question what is the relevant tenancy for the purposes of section
23(1)? Originally, in the case of each
lease, it was the tenancy thereby created. Since then there has been a
severance of the reversions. Does that create a separate tenancy in respect of
each severed part of the reversion in consequence of the provisions of section
140(1) of the Law of Property Act 1925?
In our view it does not. The position was dealt with by the Court of
Appeal in Jelley v Buckman [1974] QB 488 at p 497. Stamp LJ,
giving the judgment of the court, after referring to section 140 of the Law of
Property Act 1925, said this:
Now it is no
doubt correct that the effect of the legislation is that each reversioner has
rights and remedies similar to those which he would have had if he had granted
a separate tenancy of the land in respect of which he is owner. But it is one
thing to say that each reversioner has rights and remedies similar to or even
indistinguishable from the rights and remedies which he would have had if there
had been two separate tenancies and quite another thing to say that this
operates against the tenant and that he therefore has two tenancies; and we
cannot read section 140 as producing the latter result. We can find nothing in
the section to suggest for a moment that the legislature intended that
following a severance to which the lessee was not a party he should find
himself holding part of his land under one tenancy and part under another. In
relation to a lease for years as opposed to a weekly tenancy the change in the
law would be dramatic and had the legislature intended to create that result
one would expect to find some clear expression of that intention.
In our
opinion, it must follow that, notwithstanding the severance of the reversions,
there continued in existence under each of the leases a single tenancy of the
property thereby demised including the right of way. Further since, in the case
of each lease, the actual land was occupied for the purpose of the lessee’s
business, each such tenancy must be within section 23 of the 1954 Act.
If there was a
tenancy to which the 1954 Act applies, the tenancy continues in existence until
determined in accordance with the provisions of the Act. There has been no
determination. The expiration of the 21 years of the terms cannot itself have
caused it; a purpose of the 1954 Act is to prevent that. It is said, however,
that this fails to take account of the operation of section 140 of the Law of
Property Act 1925.
Thus, it is
argued that where the land comprised in the severed part of a reversion is or
includes premises to which section 23 applies, the Act of 1954 modifies the
mode of determination so that a notice is required to be served under section
24(3) or section 25. But where the land comprised in the severed part is not
such that the Act of 1954 modifies the mode of termination, then the mode of
termination provided by the lease (and the remedies consequent upon that)
remain in force. This, it is said, is the position here because the statutory
fiction in section 140(1) removes the right of way from the scope of the 1954
Act. We do not accept that. The position in our view is as follows. There is,
for the reasons which we have indicated, a subsisting single tenancy under each
lease which continues notwithstanding the severance. That tenancy will not come
to an end unless terminated in accordance with the provisions of the Act
(section 24(1)). Now the landlord can indeed terminate the tenancy (section
25(1)). The expression ‘the landlord’ is defined by section 44(1) as follows:
. . . the
expression ‘the landlord’, in relation to a tenancy (in this section referred
to as ‘the relevant tenancy’), means the person (whether or not he is the
immediate landlord) who is the owner of that interest in the property comprised
in the relevant tenancy which for the time being fulfils the following
conditions, that is to say —
(a) that it is an interest in reversion
expectant (whether immediately or not) on the termination of the relevant
tenancy, and
(b) that it is either the fee simple or a
tenancy which will not come to an end within fourteen months or less by
effluxion of time or by virtue of a notice to quit already given by the
landlord . . .
The defendants
cannot, in relation to either of the single tenancies, be ‘the landlord’ within
that definition (because they own plot 3 only) and cannot, therefore, serve
notice under section 25 in relation to the single tenancies.
We think that
for the defendants to determine the tenancy by means of a notice by them alone
does not fit the statutory provisions and would indeed cut right across the
protection given by the 1954 Act. Thus, section 25 contemplates a notice in respect
of the whole of the property comprised in the tenancy. And the machinery set in
motion by the notice is dealing, so far as the present case is concerned, with
the whole also. Once an application for a new tenancy has been duly made, the
Act directs that a new tenancy of the holding and of the rights contained in
the current tenancy shall be granted unless one of the grounds of opposition in
section 30 is established. All but one of those grounds refer to ‘the holding’,
which does not suggest that a person having no interest in the holding could by
himself constitute ‘the landlord’ in respect of the tenancy.
We should add
that it seems to us that the defendants and Meek together could constitute ‘the
landlord’ for the purposes of section 25 (either by serving a single notice or
separate notices operating at the same time), since together they are entitled
to the entirety of the land comprised in the relevant reversion. In that
connection it seems to us that the wide meaning of reversion adopted by the court
in Martyn v Williams 1857 1 H & No 817 in relation to
incorporeal hereditaments would be appropriate here in relation to the right of
way. But if the tenancy were so brought to an end, it is clear that a new
tenancy could be granted including in each case the right of way (section 32).
But there is a
wider aspect of the whole matter.
The
defendants’ argument, it seems to us, places too much weight upon the statutory
fiction in section 140(1). What we are primarily concerned with in the present
case are the provisions of Part II of the 1954 Act. They are designed to
protect business tenancies. That protection is a matter of much importance to
the business community and we think that the proposition that there has been
removed from the protection of the Act property which prima facie is
within it needs to be approached with some caution. For the reasons which we
have indicated, it seems to us clear that, despite the severance, a single
tenancy remained in existence in respect of each lease. Prior to the severance,
that tenancy was, in each case, plainly within the protection of the 1954 Act.
We find it impossible to suppose that Parliament can have intended that the
severance of the reversion could remove from the protection of the Act rights
of access which might be of vital consequence to the business user of the
demised property which itself at all times remained within the protection of
the Act. The purpose of section 140 is to apportion conditions and rights of
re-entry on severance and not to create new rights. It is not a general deeming
provision that, where there has been a severance of the reversion, the severed
part was the only property originally comprised in the lease. We see no reason
to suppose that it was intended to have the effect of removing protective
statutory rights of the tenant who would not normally even be a party to the
severance. Whether there are circumstances in which a person can in relation to
a tenancy within Part II of the Landlord and Tenant Act 1954 (and contrary to
the decision in Dodson Bull Carpet Co Ltd v City of London
Corporation [1975] 1 WLR 781) serve a notice under section 25 in respect of
part only of the premises comprised in the tenancy (being a severed part of the
reversion) we need not decide. But if he can, we think that for the reasons
which we have indicated in relation to the intendment of the 1954 Act, that
would in no way justify the conclusion that the rights of way in the present
case are removed from the ambit of the 1954 Act by the severance of the reversion.
We were
referred to William Skelton & Son Ltd v Harrison & Pinder Ltd
[1975] QB 361. That case was different from the present in this respect, that
the plaintiffs there could not have obtained a new tenancy of the premises (the
first floor) because they were not in fact in occupation.
Judge Fay in
the William Skelton case said that, in the light of
never have been protected. Secondly, it may have been protected and lost protection.
Thirdly, it may continue to be protected. ‘Can this’, said the judge at p 372,
‘be the last case of the three, as Mr Finlay claims? If this is right the defendants can only
terminate by a section 25 notice, and this contemplates a counternotice and an
application by the tenant for a new tenancy. But he cannot get a new tenancy
because the court, unless the landlord agrees otherwise, can only grant a new
lease of the holding — section 32(1) — and the holding is defined in section
23(3) as excluding any property not occupied by the tenant. The plaintiffs do
not occupy, and thus cannot obtain a new lease.’ The judge concluded that the case came within
the second of his three classes.
Thus, in William
Skelton the plaintiff could not have obtained a new lease of the first
floor at all — quite apart from any question of the operation of section 140 of
the Law of Property Act 1925. But in the present case, in our view the
plaintiffs could obtain new leases of the rights of way because of the
provisions of section 32. The present case, therefore, falls within the third
of the three classes. In our view the plaintiffs are entitled to the
declarations sought and we would dismiss the appeal.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was refused.