Registered land — Assignment — Transfer — Benefit of rights assigned to transferee — Lease forfeited for arrears of rent — Whether forfeiture valid where transfer of reversion executed and lessee notified — Appeal dismissed
The appellant was the lessee of business premises under a lease dated 25 January 1991. The first respondent was registered as the freehold proprietor of the premises on 10 November 1993. The appellant ceased trading on 1 May 1997 and was granted a licence to assign the lease to LSC. It also entered into a second charge over the leased premises in order to secure a loan that it had made to LSC. In November 1999, the appellant entered into a voluntary arrangement with its creditors.
On 28 February 2001, the first respondent assigned its reversionary interest to the third respondent, pursuant to the terms of a transfer on a standard Land Registry form under which “the transferor transfers the property to the transferee”. It recorded the receipt of the purchase price of £131m. Additional provisions included a statement that “the transferor assigns to the transferee the benefit of any rights claims title or covenant to which it is entitled in respect of the property” together with a covenant by the transferee “by way of indemnity” to perform all the transferor’s obligations relating to the property “at all times from the date of this transfer”. On the same day, the third respondent gave notice to LSC of the assignment and required LSC to pay the rent to it. The transfer was not registered at the Registry until 3 January 2002.
On 16 July 2001, the third respondent peaceably re-entered the premises on the ground of arrears of rent and granted a new lease to the second respondent. The county court held that, for the purposes of a valid forfeiture by the third respondent, it was sufficient that the transfer of the reversion had been executed and notice given to the lessee, notwithstanding that the transfer had not been registered. Applying section 141(2) of the Law of Property Act 1925, the court held that this had been done. The appellant appealed.
Held: The appeal was dismissed.
The judge had been right to hold that, following the transfer, the third respondent was the person entitled to the income of the land, and therefore the forfeiture was valid.
Where, at the date of forfeiture, the assignee of a reversionary interest, despite not being the registered freehold proprietor, had taken a valid equitable assignment of the rents and had given notice to the lessee, it was entitled (albeit only in equity) to receive the rents of the property. That was sufficient to bring it within section 141(2) on the natural reading of the section. The word “entitled” did not itself distinguish between legal and equitable interests; it merely connoted an enforceable right to the relevant income. An equitable assignee of the right to rent had such an enforceable right as against the assignor and, at least following notice, against the lessee.
Thus, in the present case, the third defendant was, for the time being, “the person… entitled to the income… of the land leased” within section 141(2). Nor did it matter if that, in theory, resulted in the third respondent having the right concurrently with the first defendant as legal owner. The section was designed to extend rights to enforce, without taking away existing rights. In any event, anything done by the first respondent could be done only in its capacity as trustee for the third respondent: Turner v Walsh [1909] 2 KB 484 and Commissioners of Customs and Excise v John Lewis Properties plc [2001] PLSCS 133 considered.
John Cherryman QC and Tom Weekes (instructed by Mischon de Reya) appeared for the appellant; Elizabeth Jones QC and Andrew Bruce (instructed by Richards Butler) appeared for the first and third respondents. The second, fourth and fifth respondents were not represented and did not appear.
Eileen O’Grady, barrister
