by Delyth Williams
In the last 12 months or so over 30 interesting cases have been reported in Estates Gazette on the topic of residential tenancies, encompassing the Rent Act 1977 and the Leasehold Reform Act 1967. This article analyses these recent developments and it is hoped that it will act as a source of initial reference for the busy practitioner. While the Housing Act 1988 makes substantial amendments to the residential tenancies regime, the Rent Act 1977 still applies, as amended in some instances, to tenancies entered into before the commencement of the relevant part of the 1988 Act.
Does the Rent Act apply?
One of the main issues of concern for the practitioner is whether the Rent Act 1977 applies to the “occupation” in question. Following the decision of the House of Lords in Street v Mountford [5] 1 EGLR 128; (1985) 274 EG 821, several cases have reached the law reports, culminating in the decisions in Antoniades v Villiers and A G Securities v Vaughan [1988] 2 EGLR 78; [1988] 47 EG 193. In the A G Securities case, the accommodation consisted of four bedrooms, lounge, sitting-room, kitchen and bathroom and was occupied by four individuals each having a short-term licence agreement granting a right to use the flat in common with others with a like right but expressly negativing a right to exclusive possession of any part of the flat. The licence agreements began at different dates, were for different periods and varied slightly in the rents charged. The occupants had replaced earlier occupants when vacancies occurred. Notices to quit were served on the occupants and the rent officer determined a fair rent on the basis that the occupancy agreements created a joint tenancy. The county court judge held that the occupants were licensees under separate licence agreements.
The Court of Appeal held that, despite different commencement dates, different rents and some difference in interests, the occupants (at the date of the notices to quit) were entitled jointly to exclusive possession of the flat for a term at a rent. Sir George Waller (dissenting) seriously doubted whether the “four unities” required for a joint tenancy were present. The House of Lords was of the opinion that the overlap of periods of occupation did not create a single term by an amalgam of the individual periods and, further, that there was no single sum of money payable for use and occupation of the flat. The House of Lords held that Sir George Waller was correct in being unable to find the requirements for the creation of a joint tenancy, so that the only conclusion possible was that the occupancies were four separate licences.
In the Antoniades case, the occupants were an unmarried couple and had each signed a detailed agreement which stated that it conferred a personal licence only and negatived the grant of exclusive possession. The agreements, which were modelled on those in Somma v Hazelhurst [8] EGD 269; (1978) 246 EG 311, further provided that the licensor would be entitled to use the rooms in common with the licensees and would also be entitled to permit other persons to do so. In the instant case, the accommodation consisted of a bedroom, a bedsitting-room, kitchen and bathroom. The Court of Appeal held that the agreements were not a sham but genuine licence agreements which set out the true bargain between the parties so that the licensor was entitled to possession. The House of Lords was of the opinion that the Court of Appeal had reached the wrong conclusion, as the two agreements were interdependent and it would be unreal to regard them as separate and independent licences. The facts showed that the couple had applied jointly to rent the flat and sought and enjoyed exclusive occupation of the whole of the flat with the result that they had a joint tenancy protected by the Rent Act. Further, a clause in the agreement reserving to the owner power to go into the flat jointly with the couple was inconsistent with the provisions of the Rent Act and was a “pretence” as defined in Lord Templeman’s speech.
In Nicolaou v Pitt [9] 21 EG 71 the appellants entered into agreements with the respondents for the use and occupation of the first floor of a house which consisted of one two-bedded and one single-bedded room. Each agreement was expressed as a “licence” and reserved a right to the appellants to nominate further occupiers. Subsequently, when two of the respondents married (and the other two occupiers left), the appellants granted two new licences to the remaining respondents. When the marriage failed, one of the respondents left and the appellants purported to terminate the licences.
The Court of Appeal held that, as the county court judge had found as a fact that the appellants were not to be believed that they retained the intention to nominate a further occupier, that finding of fact could not be interfered with. It followed, therefore, as a matter of fact that exclusive possession had been granted and a tenancy in law had arisen.
In Stribling v Wickham [9] EGCS 41, the appellant was the owner of the freehold of a flat which, in 1984, consisted of four rooms furnished as two bedrooms, sitting-room and dining-room; the dining-room was later furnished as a bedroom. In November 1984, three agreements, which purported to be licences, were granted to three parties to occupy the flat and these were renewed at six-monthly intervals until May 1987. During the period 1984 to 1987, two of the original parties left and two others, signing identical agreements, went into occupation of the flat. In May 1987, three separate agreements (in identical terms) were signed by occupants at that time purporting to grant licences to use the premises on a shared basis to April 1988.
The agreements were headed “Licence” and recited that the licensor was not willing to grant exclusive possession of any part of the premises. The Court of Appeal held that, as a matter of construction, the agreements could not be taken together as creating a joint tenancy.
There could not have been a joint tenancy as: (i) the flat was suitable for use by a multiple but shifting population and was so used; (ii) each occupant had a specific right to terminate on giving 28 days’ notice and one of them specifically did so; and (iii) each licensee had a specific obligation to pay the amount reserved by his agreement only.
These were matters wholly inconsistent with a joint tenancy and they represented the realities of the transaction and a genuine and sensible arrangement for the benefit of both sides to the transaction.
Mixed residential and business user
In some cases, the practitioner may be faced with the question of whether the occupancy of particular premises is protected by the Rent Act or the Landlord and Tenant Act 1954 Pt II. In Henry Smith’s Charity Trustees v Wagle [9] 11 EG 75, the premises in question were adapted for studio purposes and designed for the working and residential requirements of artists. In 1972, the premises were let for a term of 17 years and were used for the purposes of a professional artist. The appellants were the assignee tenants, having acquired the lease in 1982, and used the premises for residential purposes only. At the time of the assignment, it was made clear that the lease was a business letting. The lease contained a rent review clause and the landlords applied for a declaration that the lease was not a letting within the Rent Act 1977. The Court of Appeal held that, on the facts, the premises were let for mixed residential-business purposes. In the instant case, the lease granted in 1972 was not a letting of a separate dwelling, so that the lease could not fall within the 1977 Act. The actual use of the premises was not the deciding factor, as there had been no consensual change from mixed use to the current residential use.
In Webb v Barnet London Borough Council [9] 11 EG 80, the landlord granted a 21-year lease to the appellant, who covenanted to use the demised premises only for residential purposes and for the purposes of trade or business for which they are let, namely as a motor body repairs workshop. Between 1965 and 1979, the appellant lived at the demised premises with his family and carried on his motor repair business.
In 1981, the appellant claimed the right to buy the freehold in accordance with the Housing Act 1980 (now the Housing Act 1985) and the landlords at first acknowledged that the appellant was eligible. Then, in 1983, the landlords informed the appellant that his tenancy was a business tenancy and ineligible for the right to buy. The Court of Appeal was of the opinion that an applicant qualifies to exercise the right to buy under the Housing Act 1985 if he has a secure tenancy, which is defined as “a tenancy under which a dwelling-house is let as a separate dwelling”. Although the appellant had a tenancy within the meaning of the 1954 Act until he ceased his business activities in 1979 and, even though such a tenancy was not a secure tenancy by reason of para 11 of Schedule 1 to the 1985 Act, there remained the question as to whether the premises were “let as a separate dwelling”.
The relevant time for considering whether the premises were “let as a separate dwelling” was at the time of the letting. At the time of the letting to W in 1965, the premises were not let “as a separate dwelling”, as it was intended that W would use part of the demised premises for business purposes; it was a letting for mixed residential and business. It was clear from Cheryl Investments v Saldanha [8] 1 WLR 1329, Pulleng v Curran (1980) 44 P & CR 58 and Russell v Booker (1982) 263 EG 513 that mere cessation of a use by a tenant would not change the status of the original letting.
“Board”
The question before the House of Lords in Otter v Norman [8] 2 EGLR 128; [1988] 39 EG 79, was as to the meaning of “board” under section 7(1) of the Rent Act 1977. Section 7(1) provides that a tenancy is not a protected tenancy if, under the tenancy, the dwelling-house is bona fide let at a rent which includes payments in respect of board. In this case, the tenant had a bedsitting-room which was one of 36 such rooms in the landlord’s house. Part of the consideration for the tenant’s rent of £70 per week was a continental breakfast which was served in a communal dining-room in the basement of the house. The tenant contended that “board” required the provision of one main meal in addition to breakfast. The House of Lords considered that the decision of the majority in Wilkes v Goodwin [1923] 2 KB 86, to the effect that any amount of board which is more than de minimis would suffice to exclude a tenancy from Rent Act protection, was correct. The House of Lords was also of the opinion that the provision of “board” “includes the ancillary services involved in preparing it and the provision of crockery and cutlery with which to eat it”. In the instant case, there was a bona fide contract for the rent to include payment for board.
Low rent
The question of the exclusion from Rent Act protection where the rent payable is less than two-thirds of the rateable value of the dwelling-house on the appropriate day was considered by the Court of Appeal in Investment & Freehold English Estates Ltd v Casement [8] 1 EGLR 100; [1988] 15 EG 99. The provision in question was contained in section 80(1) of the Housing Act 1969 (now in section 5(4) of the 1977 Act) and was to the effect that, in determining whether a long tenancy is a tenancy at a low rent, sums payable, inter alia, in respect of services, are to be disregarded (to prevent a long tenancy being brought into the Rent Act sphere by an increase in service charge). In the instant case, the tenancy was granted in 1972 but the lease contained certain provisions which created difficulty, namely: (i) a proviso designed to ensure that the fixed rent, together with the variable portion which included the service charge, should never exceed two-thirds of the rateable value; and (ii) an agreement that if in future the law “shall have been amended” (so that the service charge did not have the effect of bringing the rent above two-thirds of the rateable value) the above proviso would have no effect and the landlord would be at liberty to demand a full contribution towards his expenditure. The Court of Appeal held that the draftsman of the lease had provided for a contingency if the Leasehold Reform Act 1967 should be amended and it mattered not that the event of amendment had already taken place. The parties anticipated that the rent and service charge might exceed two-thirds of the rateable value and the payment of a premium would be restricted. The parties also intended that if the law changed the landlord would be able to recover the service charge and the landlord was so entitled.
Company lets
Whether a company let was a sham was the main issue in question in Hilton v Plustitle Ltd [8] EGCS 147; [1989] 05 EG 94, where the plaintiff offered flats to let but to companies only and offered Miss R a flat provided the lease was granted to a company. Miss R purchased a company for £150 (Plustitle Ltd) and became a shareholder and director. The company was subsequently granted a six-month lease of the flat, at a rent of £345 per month, under which the company could nominate an occupier and Miss R signed the agreement and went into occupation. The lease was renewed once but, following a disagreement over rent, the plaintiff sought possession and Miss R then contended that the letting to the company was a sham. The Court of Appeal held that a sham exists where the parties to the agreement say one thing intending another but, in the present case, the county court judge had found as a fact that it was the intention of both parties that the flat should be let to a company and not to Miss R personally. The Court of Appeal was of the opinion that, once the letting had been found to be a sham, the lease must be properly construed and, further, looking at the substance and not only at the form, the letting was to Plustitle Ltd as both parties had always intended that it should be. The company was the only tenant to whom the plaintiff was prepared to let and the covenants in the lease were perfectly capable of being complied with by the company through its nominee. The Court of Appeal concluded that the transaction did represent the true position and there was no reason why public policy should override a transaction which was intended to avoid the Rent Acts.
The question of whether successive lettings to companies were shams was the matter at issue in the Court of Appeal in Estavest Investments Ltd v Commercial Express Travel Ltd [8] 2 EGLR 91; [1988] 49 EG 73. In this case, the flat premises in question were let by a leasing agreement to a limited company of which the second defendant (S) was either herself a director or was, perhaps, additionally the daughter of the managing director of that company. When that lease terminated in July 1983, a second lease was entered into with a different limited company of which S was the sole director. The facts showed that, from 1977 onwards, S was the sole occupier but the tenants in each case were limited companies with which she had some association or another. The leases were in fairly standard form, including a substantial number of tenants’ covenants, while the rents were paid by the companies and there was no evidence that the amounts came from S’s pockets. The landlords’ policy was to let the flat only to limited companies in order to exclude security of tenure under the Rent Act. The Court of Appeal agreed with the decision of the assistant recorder that there was no evidence upon which the leases could be held to be shams. In the instant case, there was no common intention as enunciated in Snook v London & West Riding Investments Ltd [1967] 2 QB 786 “to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations which the parties intend to create”. The fact that the lettings were made to companies with the avowed intention of preventing the security of tenure under the Rent Act applying did not make the transactions shams.
Agreement to give up possession
An important decision was reached in Appleton v Aspin [8] 1 EGLR 95; [1988] 04 EG 123 where Mr and Mrs A purchased no 12 and Mrs P (Mrs A’s mother) purchased no 7. Mrs P conveyed no 7 to Mrs A but continued to live there pursuant to an oral agreement. Mr and Mrs A agreed to sell nos 7 and 12 to the plaintiff with vacant possession. As regards no 7, the plaintiff insisted on the insertion of a special clause in the contract whereby Mrs P undertook to assert no right of possession or occupation against the plaintiff “whether arising by statute or by reason of any equitable interest or otherwise”. Mrs P signed the contract which contained this clause. When Mr and Mrs A failed to complete the sale, the plaintiff commenced proceedings for specific performance. The Court of Appeal held that section 98(1) of the Rent Act 1977 rendered the agreement unenforceable; such an agreement was against the policy of the Rent Act.
Statutory tenancies and statutory succession
The question of whether a tenant continued to occupy a flat as his residence was considered in Brickfield Properties Ltd v Hughes [8] 1 EGLR 106 in which the respondent was the statutory tenant of a flat in London but, after his retirement in 1978, began to stay with his wife in a cottage in Lancashire which his wife had inherited and which had previously been used for holidays only. The statutory tenant had not been back to London until 1987 and his wife had been back on only three occasions. Since 1978, the flat had been occupied by the couple’s four children and three of them (together with the husband of one of them) still lived there or had done so until recently. The county court judge found no difficulty in establishing a corpus possessionis in the form of the furniture left in the flat, together with occupation by the children. In the matter of the animus revertendi, the county court judge took account of the statutory tenant’s statement in evidence that he continued to regard the flat as his London home, that he would probably go back to the flat if his wife died first and that, in a few years’ time, both he and his wife (both in their 70s) might well have to move back to the flat because of difficulties of living in the cottage. The county court judge concluded that the statutory tenancy continued to subsist. In the Court of Appeal, Neill LJ formulated four guidelines as to the correct approach to be adopted by a county court judge in such circumstances, namely:
(1) Where the tenant’s absence is more prolonged than is to be explained by holiday or ordinary business reasons and is unintermittent, the onus lies on the tenant of establishing an intention to return if he seeks the protection of the Act.
(2) An inward intention, however, is not enough. It must be accompanied by some outward and visible sign of the tenant’s intention. The continued occupation by a caretaker or relative or the continued presence of furniture may be sufficient, but in each case the question is whether or not the person or furniture can be regarded as a genuine symbol of his intention to return “home”.
(3) In addition the tenant must show that there is a “practical possibility” — to use the phrase used in Tickner v Hearn [0] 1 WLR 1406 and by Ormrod LJ in Gofor Investments Ltd v Roberts (1975) 29 P&CR 366 — or a “real possibility” — to use Upjohn LJ’s expression in Gofor — of the fulfilment of that intention within a reasonable time. What is a reasonable time depends on the circumstances, but it is to be noted that, in Gofor, the Court of Appeal declined to interfere with the judge’s finding that in the circumstances of that case 10 years was a reasonable time.
(4) The protection of the Act can be claimed even though the tenant has another home or residence — the two words appear to be synonymous in this context (see Lord Brandon in Hampstead Way Investments Ltd v Lewis-Weare [5] 1 EGLR 120) — but the court will look with particular care at two-home cases.
The Court of Appeal held that, although this was a borderline case, it was impossible on the authorities to interfere with the decision reached by the county court judge after a careful consideration of the law and the facts.
In Robert Thackray’s Estates Ltd v Kaye [8] EGCS 158; [1989] 16 EG 95, the appellant-tenant had held a lease of a mews house (no 6) since 1985 but, in October 1986, the landlords moved her to an adjoining property (no 5) because they wanted to refurbish the premises. When the refurbishment of no 6 was completed, the landlords informed the tenant that she could return, but she refused, contending that she needed to undertake further work herself. The tenant asked to stay in no 5 but stated she would return to no 6 only if certain work was undertaken. Eventually, the landlords changed the locks of no 6, commenced proceedings for the possession of nos 5 and 6 and contended that, although the tenant had a tenancy of no 6, she was not in occupation for the purposes of a statutory tenancy under section 2 of the Rent Act 1977. The Court of Appeal held that the tenant did not have a tenancy of no 5, although she had had a statutory tenancy of no 6. However, the court was of the opinion that, if a person ceases to occupy the premises for an unreasonable period of time with no intention (or no genuine intention) of returning, that person no longer occupies for the purposes of section 2 of the 1977 Act. In the present case, the tenant wanted to stay in no 5 because it was more spacious but, from February to August 1987, she evinced no genuine intention of returning to no 6 so that the animus revertendi was insufficient.
The question of the operation of the rules under Schedule 1 to the Rent Act 1977 for obtaining a statutory tenancy by succession was considered in Chios Property Investment Co Ltd v Lopez [8] 1 EGLR 98; [1988] 05 EG 57. In this case, the respondent had lived with the deceased tenant for some two years with the initial intention of cohabiting but, thereafter, of marrying when financial circumstances permitted. When the tenant died, the respondent claimed to be a member of the tenant’s family residing with him at the time of, and for a period of six months immediately before, his death. The judge, at first instance, formulated the test as being that the claimant has to show “that a sufficient state of permanence and stability has been reached in the relationship with the deceased protected or statutory tenant for it to be said that in all the circumstances the occupant was a member of the original tenant’s family”. The judge held that this test was satisfied and the Court of Appeal was of the opinion that there were no grounds for interfering with the conclusion. The landlords criticised the decision because of the comparative shortness of the relationship between the respondent and the deceased tenant, the absence of children and the fact that the respondent had kept her maiden name, but the Court of Appeal took the view that this was an exceptional case which should not be regarded as setting a precedent.
In Sefton Holdings Ltd v Cairns [8] 1 EGLR 99; [1988] 14 EG 58, the claimant had come to live with the family (at that stage consisting of father, mother and daughter) in 1941 (when she was 23) after both her parents had died. The daughter of the family became the first statutory successor to the tenancy on her father’s death in 1965 and, when the daughter died in 1986, the claimant contended that she was entitled to remain in possession as the second statutory successor. She argued that she had continued to live in the house for some 45 years and was treated by the parents as a daughter and by the first successor as a sister. The Court of Appeal was of the opinion that the word “family” had to be given its ordinary everyday meaning and that there was a distinction between being a member of the family and being a member of the household and, further, there was a distinction between being a member of the family and living as, or being treated as, a member of the family. The Court of Appeal concluded that the claimant could not be said to be a member of the first successor’s family.
