Reversions are split where different landlords own land let by a lease. Severance of a reversion usually occurs after the grant of a lease. However, there remains but one tenancy. What then would be the position if the owners of a split reversion are unable to agree on a course of action when a tenant’s business lease expires?
EDF Energy Networks (EPN) plc v BOH Ltd [2009] EWHC 3193 (Ch); [2009] PLSCS 339concerned a reversion that was split before a business lease expired. The tenant acquired the freehold of the land that housed its electricity substation following the service of a section 25 notice by the relevant landowner. Consequently, it did not make an application to the court for the grant of a new business tenancy. None the less, it remained reliant on the continuation of its lease to obtain access to cabling to make essential repairs and upgrades.
The High Court had to decide whether the section 25 notice terminated the lease, even though it was served by only one of three reversioners and related solely to the substation land. The reversioners that owned the land adjoining the substation, which was used for access and cabling, argued that the section 25 notice was effective to terminate the lease of all the land comprised in the tenancy.
The judge noted that landlords are unable to serve section 25 notices in respect of part of land comprised in a tenancy where a reversion has not been split. He ruled that it would be astonishing if the severance of a reversion could change this, even though a tenant might occupy part only. The notice was therefore invalid.
The owners of the access land argued that the tenant had served a counter notice but that it was estopped or it had waived its right to challenge the validity of the section 25 notice. The court disagreed saying that. (i) this would confer substantive rights on the landlords that would not otherwise have existed; (ii) it would also deprive the tenant of statutory protection (which, at the relevant time, was achievable only with the permission of the court); (iii) the tenant had not appreciated that the notice was defective, and the substation owner had profited as a result; and (iv) the owners of the access land were seeking to rely on a counter notice that had not been served on them.
The court also decided that the lease of the substation land had not merged with the freehold. There was no reason why a merger could not occur in respect of part only of a leasehold interest or in the case of a split reversion. However, there is an equitable presumption against merger where a tenant will benefit from the continuation of its lease – and a merger would have prejudiced the tenant because the freehold substation did not benefit from easements over the access land.
Consequently, the lease remained in existence. It was protected by the Landlord and Tenant Act 1954 and could not be terminated without the consent of the utility company, as the freehold owner of the substation.
Allyson Colby is a property law consultant
