Construction of agreement — Validity of notice — Tenancy of uncertain duration — Land let until highway authority requiring it “for road-widening purposes” — Condition never effected — Present landlord not a highway authority — Whether grant bad for uncertainty — Whether periodic yearly tenancy to be implied — Whether notice to quit valid — Judgment in favour of landlord at first instance that notice to quit valid — Tenant’s appeal allowed in Court of Appeal — First instance order restored in House of Lords
In December 1930, London County Council acquired from N a small strip of land fronting 263-265 Walworth Road, London SE17, when they contemplated widening the road. They then leased it back to N together with a right to put a temporary building on it until such time as the “Land is required by the council for the purposes of the widening of Walworth Road…” (clause 6). By clause 1, the tenant was to pay £30 pa payable quarterly until the tenancy was determined. N’s interest became vested in the Prudential Assurance Co Ltd, which in 1975 sublet the premises to the London Electricity Board, still currently in occupation. The proposal to widen the road was never carried into effect. The LCC’s rights became vested in the GLC, as the successor to the LCC, and then in the London Residuary Body, which was not a highway authority. The LRB sold the land to the defendants in 1988, but prior to the sale the LRB purported to serve a notice under section 25 of the Landlord and Tenant Act 1954 determining the Prudential’s interest. It was common ground that the notice was not effective under section 25.
On the issue whether, treated as a common law notice to quit, it was effective to determine the tenancy created under the agreement of December 1930, Millett J in the High Court [1991] 1 EGLR 90; [1991] 25 EG 120 upheld the notice to quit that had been served by the LRB. He held, inter alia, that the agreement granted the tenant a periodic yearly tenancy and not a tenancy for a fixed but uncertain term; that clause 6 imposed a restriction on the landlord’s right to serve a notice to quit terminating the periodic tenancy but that the restriction was not repugnant to the nature of the yearly tenancy and was valid. The Prudential successfully appealed to the Court of Appeal which held that the notice to quit was ineffective and that the landlord could not give a valid notice until the land was required for road-widening purposes in conformity with clause 6 of the agreement: [1992] 06 EG 145. The Court of Appeal regarded itself bound by its decisions in Re Midland Railway Co’s Agreement [1971] Ch 725 and Ashburn Anstalt v Arnold [1988] 1 EGLR 64; [1988] 23 EG 128. The LRB appealed to the House of Lords. The Law of Property Act 1925 provides by section 1(1): “The only estates in land which are capable of … being conveyed.. . at law are — (a) an estate in fee simple absolute in possession; (b) a term of years absolute”. In Say v Smith (1530) 1 Plowden 269, a lease for a certain term purported to add an uncertain term; the lease was held valid only as to the certain term.
Held The appeal by the LRB was allowed.
1. The principle in Lace v Chantler [1944] KB 368, where a lease was granted for the duration of the war, reaffirmed 500 years of judicial acceptance of the requirement that a term must be certain and applied to all leases and tenancy agreements. A tenancy from year to year was saved from being uncertain because each party had power by notice to determine at the end of any year. The term continued until determined as if both parties made a new agreement at the end of each year for a new term for the ensuing year. A power for nobody to determine or for one party only to be able to determine was inconsistent with the concept of a term from year to year.
2. In Re Midland Railway Co’s Agreement (supra), there was no clearly expressed bargain that the term should continue until the crack of doom if the demised land was not required for the landlord’s undertaking or if the undertaking ceased to exist. In the present case there was no clearly expressed bargain that the tenant should be entitled to enjoy his temporary structures in perpetuity if Walworth Road was never widened. In any event, principle and precedent dictated that it was beyond the power of the landlord and the tenant to create a term which was uncertain.
3. A term in a lease must be either certain or uncertain. It could not be partly certain because the tenant could determine it at any time and partly uncertain because the landlord could not determine it for an uncertain period. If the landlord did not grant and the tenant did not take a certain term the grant did not create a lease.
4. In the present case the Court of Appeal were bound by the decisions in Re Midland Railways and Ashburn Anstalt. However, both those cases were wrongly decided. A grant for an uncertain term did not create a lease. A grant for an uncertain term which took the form of a yearly tenancy which could not be determined by the landlord did not create a lease.
5. (per Lord Browne-Wilkinson) As a result of this decision, it was difficult to think of a more unsatisfactory outcome or one further away from what the parties to the 1930 agreement could ever have contemplated. N’s successor in title would be left with the freehold of the remainder of nos 263-5 which, though retail premises, would have no frontage to a shopping street: the LCC’s successor in title would have the freehold to a strip of land with a road frontage but probably incapable of being used save in conjunction with the land from which it was severed in 1930. It was not a result which their contract, if given effect to, could ever have produced. However, for the House of Lords to depart from a rule relating to land law which had been established for many centuries might upset long-established titles. Therefore it was to be hoped that the Law Commission might look at the subject to see whether there was in fact any good reason now for maintaining a rule which operated to defeat contractually agreed arrangements between the parties (of which all successors in title were aware) and which was capable of producing such an extraordinary result as that in the present case.
Alan Steinfeld QC and Stephen Lloyd (instructed by Clifford Watts Compton) appeared for the appellant LRB; David Neuberger QC and Paul de la Piquerie (instructed by Berwin Leighton) appeared for the Prudential.
