Sale of land – Perpetuity – Option to purchase additional plots – Right to purchase triggered in specified events including vendor offering plots for sale – Claimant purporting to exercise option – Section 9(2) of Perpetuities and Accumulations Act 1964 – Whether option void for perpetuity – Whether right to acquire plots exercised within 21-year perpetuity period under section 9(2) – Whether period running from date of grant of right or date when right becoming exercisable – Claim dismissed
Pursuant to a 1984 sale agreement, the claimant purchased certain freehold land for £48,000, together with an option to purchase two small adjacent plots, comprising 2,670 square yards in total, at a price of £0.6175 per square yard. The option was stated to be exercisable by the claimant, or his successors in title, in the event that: (i) the vendor did not obtain planning permission to erect a detached dwelling house on each of the plots within five years from the date of completion; or (ii) the vendor’s planning application was refused and any appeal was unsuccessful; or (iii) the vendor offered the plots for sale. The option was registered against the vendor’s interest in the plots as a Class C (iv) land charge.
In 1989, the vendor conveyed its retained land to the defendant and his sister, who obtained first registration of title to that land. The sister later died, whereupon the land became vested in the defendant alone.
In 2009, the claimant purported to exercise the option. He brought a claim against the defendant, seeking an order for specific performance of the obligation to sell the plots on payment of the appropriate price, which he quantified at £1,648. The defendant contended that he was not obliged to sell since the option had become void for remoteness, having been granted more than 21 years previously. He relied on the perpetuity period of 21 years laid down by section 9(2) of the Perpetuities and Accumulations Act 1964 in respect of an option to acquire an interest in land for valuable consideration.
The claimant submitted that a right to purchase land in the event that the vendor offered it for sale was properly characterised as a right of pre-emption, which created no interest in the land, and did not become an option within section 9(2), unless and until it became capable of exercise. He argued that the perpetuity period therefore ran from 1989, when the vendor had first offered the plots for sale to the defendant and his sister, with the result that he was still in time to exercise his rights under the 1984 agreement.
Held: The claim was dismissed.
Although the 1984 sale agreement did not expressly limit the rights conferred by the “option” clause in point of time, it was saved from being void by the “wait and see” rule under section 3(3) of the 1964 Act, whereby, if the option were exercised within the applicable perpetuity period, then it would be treated as if it were not subject to the perpetuity rule.
The clause in the 1984 agreement effectively granted two rights, arising from the different conditions in which the right to purchase the plots would arise. The first two conditions, as to planning permission, created an option. The third, as to the vendor offering the plots for sale, created a right of pre-emption. A right of pre-emption was distinguishable from an option by the fact that it was entirely dependent on the volition of the grantor: Pritchard v Briggs [1980] Ch 338 applied. The option would become exercisable in the event that the vendor failed to obtain planning permission within five years or that such an application was refused without an appeal being lodged and succeeding. Those events were outside the control of the grantor. By contrast, the right of pre-emption would become exercisable only if the vendor offered the plots for sale, which was a matter entirely within its control. The right could not become exercisable independently of the grantor’s volition. There was no difficulty in regarding the same clause as giving rise to rights of a different nature, depending on a proper analysis of their character in law.
The right that the claimant sought to exercise, even if characterised as a right of pre-emption, was none the less subject to the perpetuity period laid down by section 9(2) of the 1964 Act. Section 9(2) was not confined to options in the strict sense but also applied to the creation of a right of pre-emption, which was treated for that purpose as a sub-class or species of option. Even if that were not correct, and an offer for sale was required before the right of pre-emption became an “option” within section 9(2), once section 9(2) was engaged then the perpetuity period had to be measured from the earlier date of the disposition that conferred the right of pre-emption in the first place. That was the date of the 1984 agreement. It could not have been intended that the 21-year period should run from a point in time, difficult to define, at which the grantor first made an offer to sell the land. The 1964 Act sought to achieve clarity as to the running of time for the perpetuity period by having a clearly ascertainable and definable start date for that period.
Since the perpetuity period had begun to run on the date of the 1984 agreement, it had come to an end in 2005. Accordingly, by the time the claimant purported to exercise the “option”, it had already become void for perpetuity and he was not entitled to acquire the plots: Wilson v Truelove [2003] EWHC 750 (Ch); [2003] 2 EGLR 63 distinguished.
David Gilchrist (instructed Napthens, of Preston) appeared for the claimant; Ian Foster (instructed by Gateley LLP, of Manchester) appeared for the defendant.
Sally Dobson, barrister
