Landlord and tenant — Removal of fixtures — Effect of surrender of tenancy by operation of law, followed by grant of new tenancy to same tenant, on tenant’s right to remove fixtures under old tenancy — Unusual case concerning a letting of Her Majesty’s Theatre in the Haymarket — Question of right of removal, not directly, but in connection with the determination of rent under a rent review clause in lease — Interim award in the form of a special case for opinion of court by an official referee acting as arbitrator — In determining the ‘open market rental value’ it was necessary to decide whether the value of tenants’ fixtures, in the shape of carpets, curtains, seating and other equipment, should be taken into account — This in turn depended on whether the tenants had lost the right to remove these fixtures when they surrendered the old tenancy on entering into a new one, so that as a matter of law the fixtures reverted to the landlords — Authorities reviewed by judge, including Leschallas v Woolf and Slough Picture Hall Co (Ltd) v Wade — Held that in the present case there was a clear inference that it was not the intention of the parties that the tenant should be taken to give up his right to remove the fixtures on the determination of his old tenancy — It was not the usual practice on a surrender and regrant to include an express provision to safeguard the tenant’s interest — But the judge’s advice to the draftsmen of leases for the future should be noted.
This matter
came before the court for decision on an interim award made by Judge Hawser,
one of the official referees, who was sitting as an arbitrator. The award was
in the form of a special case setting out a number of specific questions and
the arbitrator’s answers thereon. The landlords were The New Zealand Government
Property Corporation and the tenants were H M & S Ltd. The subject of the
proceedings was Her Majesty’s Theatre in the Haymarket and the relevant
particulars of the leases and the questions in the interim award are set out in
the judgment of Woolf J.
R Sears QC and
A Porter (instructed by Allen & Overy) appeared on behalf of the landlords;
Ronald Bernstein QC and K Reynolds (instructed by Nicholson, Graham &
Jones) represented the tenants.
Giving
judgment, WOOLF J said: The issue in this case is as to the effect of a
surrender of a tenancy by operation of law, on the grant of a new tenancy, on
the tenant’s right to remove fixtures under the old tenancy. The issue comes
before the court in somewhat unusual circumstances and by an abnormal route.
The
respondents are tenants of Her Majesty’s Theatre in the Haymarket and the
claimants are their landlords. The respondents are tenants under an underlease
made on February 8 1973, which I will call the ‘new lease’. That new lease has
a rent review clause which provided that the rent for the second seven years of
the term was to be the open market rental value of the demised premises, and
defined ‘open market rental value’ as:
The annual
rental value of the demised premises in the open market which might reasonably
be demanded by a willing landlord on a lease for a term of years certain
equivalent in length to the residue unexpired at the review date of the term of
years hereby granted with vacant possession at the commencement of the term but
upon the supposition (if not a fact) that the Lessee has complied with all the
obligations as to repair and decoration . . . and there being disregarded (if
applicable) those matters set out in paragraphs (a)(b) and (c) of section 34 of
the Landlord and Tenant Act 1954.
After the
procedure for rent review prescribed in the new lease had been instituted, the
parties failed to agree upon a new rent and they therefore entered into an
agreement dated August 28 1978 whereby they referred their disputes and
differences and all matters of fact and law arising therein to the award of a
circuit judge discharging the functions of an official referee.
On August 24
1979 His Honour Judge Hawser made an interim award in the form of a special
case for the decision of this court, Judge Hawser sitting as an arbitrator
appointed by consent under section 11 of the Arbitration Act 1950 and Order 36
of the Rules of the Supreme Court. By the interim award the learned judge gave
answers to three questions as follows:
Question 1: Is
the open market rental value to be determined on the basis that the lease has
ended, that the tenant has vacated and that the tenant has removed any tenant’s
fixtures that he could lawfully remove at the end of the term?
Answer: Yes.
Question 2: If
the answer to Question 1 is yes is the open market rental value to be
determined on the basis that upon vacating the tenant removed:
(a) all the said fixtures whenever annexed or
(b) such of the said fixtures as were annexed
after July 1 1971 or
(c) none of the said fixtures.
Answer: (b).
Then Question
3 in an amended form:
In respect of
each of the said fixtures which added to the letting value of the premises, is
it to be treated as an improvement made immediately before July 1 1971 or as an
improvement made when it was annexed to the premises?
and the answer
was:
When it was
annexed to the premises.
Before me, the
parties accepted that the learned judge’s answer to Question 1 is correct, and
most of the argument has turned on Question 2. The reference to July 1 1971 in
Question 2(b) is because that was the date at which the parties agree they had
agreed the material terms for the grant of a new lease. Were it not for that
agreement the critical date, subject to the provisions of the 1954 Act, would
be the date on which the new lease was made, namely February 8 1973.
The reason why
the answer to the second question is important in order to resolve the issues
between the parties is that prior to the new lease there had been an earlier
lease of the premises and the landlord contends that on the new lease being
entered into the tenant lost the right which previously existed during the
currency of the old tenancy to remove the tenant’s fixtures. If, but only if,
this were right would their value have to be taken into account in determining
the increase of rent payable as a result of the review.
The old lease
was made on July 11 1899 between the Carlton Hotel Ltd, as lessors, and Herbert
Beerbohm Tree and Playhouse Ltd, whereby in consideration of the expense
incurred by the said Herbert Beerbohm Tree in erecting the theatre, the lessors,
at the request of the said Tree, demised the theatre to Playhouse Ltd for 72
years from October 10 1898 (less 10 days) so that the term was due to expire at
the end of September 1970.
By an
agreement dated December 29 1952 G C Dobell & Co Ltd being the then lessees
agreed first to assign to the respondent the premises demised by the lease for
the residue of the term thereby created and second to sell to the respondent
the fixtures
fittings carpets curtains seating and other contents and equipment as now in
and about the said Theatre and belonging to the Vendors
for the price
of £30,000.
By the date on
which the term granted by the underlease was due to expire, the freehold
reversion had become vested in the claimants. The claimants in due course
served notice on the respondents to determine the old tenancy under section 25
of the Landlord and Tenant Act 1954. The respondent served the appropriate
counter-notice and commenced proceedings in the Chancery Division for a new
tenancy. Those proceedings were adjourned pending negotiations between the
parties which on February 8 1973
October 1 1970, that being the date the term of the old lease expired; the old
tenancy having been continued in the interim by section 24 of the 1954 Act.
The new lease
described the premises demised as:
ALL THAT
piece of land situate in the Parish of St James in the said City of Westminster
and being on the west side of The Haymarket and the south side of King Charles
II Street Together with the buildings erected thereon and known as Her
Majesty’s Theatre which land and buildings are delineated on the plan annexed
hereto and are thereon edged red and are hereinafter called ‘the demised
premises’.
The new lease contained
a covenant to repair which was in these terms:
THE LESSEE .
. . covenants . . . to put and keep the demised premises and the appurtenances
thereof including the Landlord’s fixtures doors windows and window frames and
all fittings pipes and the sanitary and water apparatus and the painting
papering and decoration thereof in good and substantial repair and condition
and properly fitted up and decorated in a state in every respect fit for
theatrical representations of a high class character (damage by fire and other
insured risks save where the insurance moneys shall be irrecoverable in
consequence of any act or default of the Lessee only excepted).
The tenant
also covenanted:
Not at any
time during the said term to use the demised premises for any other purposes
than those of a Theatre used for the production of plays concerts, etc.
and covenanted
To yield up
the demised premises with the fixtures and fittings and additions thereto
(tenants fixtures only excepted) at the expiration or sooner determination of
the said term in good and substantial repair and condition (Landlords fixtures
and fittings being duly renewed and replaced) in accordance with the several
covenants hereinbefore contained.
There was also
a collateral agreement dated February 8 1973 whereby:
In
consideration of the Respondent having that day exchanged the New Underlease
and having incurred or been about to incur substantial expenditure estimated as
shown in the Schedule thereto
the respondent
agreed
to fulfil its
repairing obligations under the lease the Claimants agreed that they would
during the first 4 years of the term grant to the Respondent in each of those
years an allowance of £5,000 as a deduction from rent subject to the production
of certified receipts.
The schedule
included items which would appear to be tenant’s fixtures in normal
circumstances and subject to the questions in issue in this case.
The tenants
have never sought to remove the tenant’s fixtures which were attached to the
premises during the old tenancy. However, this does not affect the importance
of the answer given by the learned judge to the second question, since in
carrying out the hypothetical exercises involved in fixing the rent, although
those fixtures have not in fact been removed, if they are still removable by
the tenants they would have to be ignored in fixing the increased rent. If they
cannot be removed they would be treated as being included in the demise and
would have to be taken into account subject to the correct answer to the third
question, which I will deal with as a separate matter.
In considering
the effect of surrender by operation of law of the old tenancy which was
continued under the 1954 Act, it is convenient to begin by stating certain
general principles which are not in dispute.
Tenant’s
fixtures are normally only removable by the tenant during the term and for such
longer period of possession which is (and I quote from Hill & Redman’s
Law of Landlord and Tenant, 16th ed, p 529) ‘in such circumstances that he
is entitled to consider himself as tenant’. So the right to remove continues
while a business tenancy is continued under the 1954 Act. It is always open to
the parties to make special provisions as to the right of removal, subject to
such a special agreement not being inconsistent with rights of third parties.
There is a qualification to these general principles where the tenancy
terminates in such circumstances that the tenant would not have time to remove
fixtures. Then the right of removal continues for a reasonable time after the
expiration of the term. I would refer in that connection to V G Smith v City
Petroleum Co Ltd [1940] 1 All ER 260.
In accord with
the general principles if there is an express surrender of a tenancy by a
tenant, the right to remove subject to the terms of the surrender ends with the
surrender. Furthermore, I regard myself as being bound by the authorities to
which I will have to refer hereafter, to take the same view where there is an
express surrender followed by an express grant of a new lease between the same
parties of the same premises. There is, however, no clear authority on what is
to be the position where a tenancy comes to an end by normal effluxion of time
and there is a new tenancy entered into immediately following the termination
of the old tenancy. Where the tenant holds over as a yearly tenant, however,
the position appears to be that the right to remove continues in accordance
with the general principles which I have stated above.
Before turning
to the authorities, it is right that I should make it clear that it is my view
that the ordinary tenant, untutored in the intricacies of the law of landlord
and tenant, would never expect that by taking a new tenancy he could, if
nothing were said, lose the right, which could be of considerable value, to
remove tenant’s fixtures. In this respect I can see very real differences in
practical terms between an express surrender and a surrender by operation of
law. In the case of an express surrender which is silent about what is to
happen to fixtures. I can well understand why the courts have taken the view
that the tenant has given up all his rights to what is then part of the
premises. Where, however, there is no express surrender, it seems to me the
position is different because what the parties have in mind is granting to the
tenant new rights and not taking away old rights except in so far as they are
inconsistent with the new rights. I mention this because it is clear from the
reasoning set out in the case by the learned judge that he was influenced in
giving the answer which he did to the second question by the fact that he
regarded the authorities, as I do, as binding on him in respect of express
surrender and took the view that there was no logical basis for differentiating
between the effect of an express surrender and of a surrender by the operation
of law.
Turning to the
authorities, I start with Foa’s General Law of Landlord and Tenant, 8th
ed (1957). I do so because Mr Bernstein, appearing on behalf of the respondent,
found this his most embarrassing hurdle because in fact he was one of the
editors responsible for the relevant edition of this authoritative textbook. I
refer first of all to paragraph 1075:
The mere fact
that the tenant retains possession of the demised premises after the expiration
of his interest does not extend the period during which he may sever fixtures,
even though the reason for his holding over is that his successor in the
tenancy has failed to pay him an agreed price for them. And where the
continuance in possession is under a new lease or agreement, his right to carry
away the fixtures is determined, and he is in the same situation as if the
landlord, being seised of the land together with the fixtures, had demised both
to him; so that if a tenant taking a fresh lease of the demised premises wishes
to preserve his right to remove fixtures they must be made the subject of a
special agreement. So, where the old lease has come to an end by surrender, the
transaction being what is usually termed one of surrender and renewal; though
where such a surrender is one by operation of law upon the taking of a new
lease, it may, in certain circumstances, be inferred that what are surrendered
and re-demised are, not the premises in their actual condition, but the
premises minus the tenant’s fixtures. But if nothing be said about the
fixtures at all, there would seem to be no ground for drawing such an
inference, and the general rule will not be displaced. It is thought, however,
that the ordinary case where a tenant holds over by arrangement after the
expiration of a lease, and pays rent on a tenancy from year to year, is not a
continuance in possession under a ‘new agreement’ within the meaning of the
above rule, and that the right to remove fixtures when he gives up possession
being one of the terms of the lease applicable to his new holding, the special
agreement here spoken of would be implied.
And then
paragraph 1076:
The general
principle appears equally to apply (apart from cases of fresh holding) where
the tenant by his own act puts an end to the term, as where it expires by
effluxion of time; so that after a surrender, for instance, the
has been said that the right does not survive the time when the agreement upon
which it is founded is made: the tenant as from that time being in the same
position as if he had contracted to sell his lease. Upon a forfeiture, in spite
of a somewhat guarded dictum of the Court of Appeal, that possibly the
tenant may have a reasonable time afterwards, when he remains in possession, to
sever his fixtures, it has more than once been decided that he has no such
right, and that a person claiming under him is in no better position than himself.
The only part
of the passages to which I have referred from which Mr Bernstein can get any
comfort at all is the qualification which is made in respect of surrenders by
operation of law that: ‘It may, in certain circumstances, be inferred that what
are surrendered and re-demised are, not the premises in their actual condition,
but the premises minus the tenant’s fixtures.’
However, that
passage has to be read in conjunction with the following sentence, which
indicates that if nothing is said about fixtures at all there would be no
ground for drawing such an inference.
The next
textbook to which I shall refer is Hill and Redman’s Law of Landlord and
Tenant, 16th ed, paragraph 425 (p 529):
Time for
removal. — Where fixtures are removable by a tenant he is only entitled to
exercise this right during the term, and if he omits to do so they become the
absolute property of the reversioner, save that if the tenant remains in
possession after the term in such circumstances that he is entitled still to
consider himself as tenant, his right to remove fixtures continues as long as
this state of things lasts; and if he is a tenant holding on an uncertain
tenancy, then his right to remove fixtures continues for a reasonable time
after the determination of the tenancy. This rule applies in whatever manner
the term comes to an end, whether by effluxion of time or by surrender or
forfeiture; save that, in case of surrender or forfeiture, a third party, such
as a mortgagee of the fixtures from the tenant, is entitled to a reasonable
time within which to remove them. A tenant, who is entitled to remove fixtures
under the stipulations of the lease, can remove them within a reasonable time
after the determination of the term.
From the
principle that the tenant is not at liberty to remove fixtures after the
determination of the term, including a determination by surrender, it follows
that where there is a surrender, followed by the grant of a new lease to the
same lessee, the new lease includes the former tenant’s fixtures as part of the
demised premises, and, in the absence of express stipulation, any right which
he had to remove them is gone. Similarly, tenant’s fixtures left by a former
tenant do not become tenant’s fixtures of the subsequent tenant.
As I read that
passage, there is not the same difficulty in Mr Bernstein’s way because that
passage is at least open to the interpretation that it is referring to a
situation where there is an express surrender followed by a regrant; and it is
not dealing with the question of surrender by operation of law.
The third
textbook is Woodfall on Landlord and Tenant, 28th ed, and in relation to
Woodfall I refer to paragraphs 1572 and 1573. Without setting out the
paragraphs in full in this judgment, it is sufficient if I draw particular
attention to this statement in paragraph 1573:
On
negotiating a renewal, a tenant must be careful to preserve his right to
fixtures, for without some express stipulation he may lose his right of
removal.
It is right to
say that with regard to Woodfall, like Hill and Redman, it does
not expressly close the door to the right of removal continuing notwithstanding
a surrender by operation of law, as opposed to an express surrender.
Mr Bernstein
took me through all the authorities which were relevant, which are cited in Foa,
so as to support his contention that in the case of a surrender by operation of
law, it is still open to the court to take the view which he submitted was in
accord with commercial realities of the situation, namely, that such a
surrender does not automatically bring to an end the right of removal of
tenant’s fixtures. In the end, the result turns on three cases which I must now
examine.
The first of
those cases is Leschallas v Woolf [1908] 1 Ch 641. I do not think
it is necessary to extend this judgment by reading the headnote. It will
suffice if I indicate that that was a case where there were three parties
involved, landlord, tenant and subtenant. The tenant surrendered and there was
a new tenancy granted direct to the subtenant. The decision was one of Parker J
and at p 650 he said as follows:
Assuming,
however, that I am wrong in this, I will pass to the second point in the case .
. . Now it seems to me that a tenant who contracts for the surrender of his
lease to his landlord is in the same position as if he had contracted to sell
the lease, and cannot as against the surrenderee, any more than he could as
against a purchaser, remove fixtures which were upon the freehold at the date
of the contract, even though they might be of the nature of tenant’s or trade
fixtures. No contract for the surrender of the lease would, however, affect his
subtenants or alter their rights without their consent, though, if a sublessee
stepped in and rightfully removed fixtures after such a contract to surrender,
the lessee might be unable to complete the surrender which he had contracted to
make, or might be bound to make compensation for breach of his contract. I also
think that a contract to surrender a lease is a contract to surrender in
possession free from subtenancies, and is not a contract to surrender subject
to such subtenancies as may have been created by the surrenderor.
This position
appears to have been accepted by the solicitors for both parties.
And there he
is referring to that case. I can miss out that and continue later on at p 651:
On the
construction of the surrender I am of opinion that all fixtures are included in
the premises surrendered. If, as I think is at any rate arguable, the defendant
was a consenting party to this surrender, his tenancy would be determined
thereby, and any right he might have to remove fixtures would be gone . . .
The defendant
that is the
subtenant
claims now,
not only that he had the right to remove during those three days the fixtures
which had been affixed by him to the freehold during his tenancy under
the former
tenant
but that the
right continued after the determination of such tenancy by the acceptance of a
new tenancy under the agreement of August 7. It seems to me that there is no
precise authority deciding that a tenant loses his right to remove tenant’s
fixtures by the surrender of his tenancy to, and the acceptance of a new
tenancy from, his landlord.
It is quite
clear that he loses the right by a surrender alone, but it is said that this
applies only when he ceases to be the tenant, and not to cases where the
tenancy is merely surrendered in order that a new tenancy on the same or
different terms may be created so that he does not go out of possession of the
property at all. In my opinion, however, if the tenant upon the surrender of
his lease in order that a new lease may be granted makes no stipulation to the
contrary, he does lose his right to remove tenant’s fixtures, for the surrender
of the demised premises prima facie includes fixtures, and the subject
of the new lease is prima facie what is surrendered in order to be
re-demised. Furthermore, it may well be that the value of the fixtures the
right to remove which is thus abandoned is a material consideration in settling
the terms of the new lease. The right to remove fixtures erected during the
term is, I think, a right coupled with and dependent upon the termor’s
interest. Prima facie when this interest ceases the right is gone,
though there are, no doubt, exceptional cases in which, where the termor has
remained in possession after the expiration of his term under such
circumstances that the period of such possession can be looked upon as a mere
prolongation of the term, he has been allowed to exercise the right after the
term is ended.
And then he
says that that seems to him to be the effect of a number of decisions, and
adds:
The law on
the subject is summed up more or less by Thesiger LJ in Ex parte Brook
(1878) 10 ChD 100, 109. I will read the following passage in his judgment: ‘The
general presumption of law with reference to tenant’s fixtures remaining
affixed to the freehold when a term comes to an end is, that ‘they become a
gift in law to him in reversion’, and are, therefore, not removable.’
Pausing there:
so far as an express surrender is concerned, it seems to me that that statement
by Parker J is clearly binding upon me and should be given effect to by me in
coming to my conclusion about this case. In saying that it is binding upon me I
do have regard to the fact that that is a decision which has been referred to
thereafter by the Court of Appeal, and by other courts, and has never been
doubted as an expression of the law, subject to one matter which I
will refer to hereafter in a later case. The learned judge later on goes on to
say this:
‘But, however
that may be, we are clearly of opinion that the case of a surrender of a lease
by a tenant, while tenant’s fixtures remain affixed to the freehold, does not,
either upon principle or the authority of decided cases, give any right to the
tenant subsequently to remove such fixtures. At the date of the surrender they
form part of the freehold, and the law has no right to limit the effect of the
surrender by excluding from it that which legally passes by it, and which has
not been excluded from it by the bargain of the parties,’ Possibly, where the
surrender is a surrender by operation of law upon the taking of a new lease, it
may, under certain circumstances, be inferred that what is surrendered and
re-demised is not the premises in their actual condition, but the premises
minus the tenant’s fixtures. Possibly also, parcel or no parcel being a
question of fact, evidence might be admitted under this head. There may, too,
be cases where the terms of the existing tenancy are varied only without the creation
of a new tenancy: but in the present case I am of opinion that what
and he refers
to the tenant
contracted to
surrender, and did surrender, included all fixtures; that what was agreed to be
let to the defendant under the agreement of August 7 1907 was that [the tenant]
agreed to surrender, and subsequently did surrender; and that, by accepting the
tenancy commencing on August 12 1907, the defendant himself surrendered such
tenancy as he might have had in the premises, and with it any right which he might
have had to remove fixtures as an incident of the tenancy. This, indeed, seems
to me to be the only conclusion consistent with the surrounding facts.
So far as that
second passage of the judgment of Parker J is concerned, and particularly his
reference to surrenders by operation of law, it could be said, and said with
justification, that that passage is in fact obiter. None the less, I
think it is right to approach this case on the basis that that passage should
be regarded as setting out the appropriate approach to the law and one which I
propose to adopt.
The next case
to which I should refer is the case of Slough Picture Hall Co (Ltd) v Wade
(1916) 32 TLR 542. The facts of that case are complicated, and again I do not
propose to read those facts or indeed read the headnote. Certain of the effect
of the judgment can, however, be understood from a passage at p 543 that refers
to the fact that on April 14 1915 a series of events took place, the legal
effect of which the learned judge, Scrutton J, said was of great importance. He
then refers to that series of events and goes on:
Both Wilson
Wilson was the
tenant
and his
sublessee thus surrendered their interest in the premises to the landlords, who
let to Mrs Wade, who relet to the Picture Hall Company.
What is being
described in that passage is a situation whereby what was originally a letting
by a landlord to a tenant, and a letting by a tenant to a subtenant, is
replaced by a situation where the subtenant enters into a new agreement with a
new tenant after the original tenant has given up its tenancy. The learned
judge refers to the case which I have just cited, Leschallas v Woolf,
and then recites what Parker J held, and goes on:
I have come
to the conclusion that this is a precise authority on the point before me and I
must follow it. Wilson must have surrendered his tenancy to the brewers when he
sold his interest to Mrs Wade and consented to her granting a tenancy to the
Slough Picture Hall Company. The Picture Hall Company surrendered their
subtenancy when they accepted a new sub-tenancy from Mrs Wade, who had acquired
her tenancy from the brewers. As a general rule fixtures cannot be removed
after the end of the term except by express agreement. In cases where the
tenancy determines on an uncertain event, as in a lease for lives, the tenant
may have a reasonable time to remove fixtures after the end of the last life. I
have considered the suggestion of Mr Justice Parker, at p 654, that ‘possibly
where the surrender is by operation of law upon the taking of a new lease it
may under certain circumstances be inferred that what is surrendered and
redemised is not the premises in their actual condition, but the premises minus
the tenant’s fixtures. Possibly also, parcel or no parcel being a question of
fact, evidence might be admitted under this head.’ But in this case nothing was said about the
fixtures at all, and I can find no ground for implying an exception out of the
ordinary consequences of a surrender or for treating the premises demised to
and sublet by Mrs Wade as anything less than the whole premises.
That case does
create a difficulty from the tenant’s point of view in this case, over and
above that created by the words of Parker J in the first case that I cited,
because it indicates that, on the facts before Scrutton J, he was not prepared
to make an inference which Parker J envisaged as a possibility. However, it is
to be noted that there is a distinction between that case and this in that
unlike this case there was not in that case a straightforward grant of a new
tenancy which operated as the surrender of the earlier tenancy, the new tenancy
being between the same parties as the previous tenancy and, although on
different terms, in practical effect a continuation of the old tenancy.
I propose now
to approach this case relying on the same words as were considered by Scrutton
J from the judgment of Parker J. Basing myself on those words I have come to
the view that in this case there is a clear inference that it was not the
tenant’s intention to give up his right to remove the fixtures. It is correct
that the demise did not refer to fixtures and the lease expressly reserved the
right to remove tenant’s fixtures at the end of the term granted by the new
lease without indicating that tenant’s fixtures meant other than tenant’s
fixtures attached to the premises after the commencement of that lease.
However, so far as old fixtures are concerned, while I would accept that the
lease can be regarded as being neutral, there is a firm inference, even in the case
of a neutral lease, that the tenant was not intending to give up the right to
his old fixtures when he enters into a new lease with the same landlord. If the
parties turned their minds to the question I feel confident that that is what
they intended. If, not having turned their minds to it, they had been asked, I
feel confident the parties would have agreed that the tenant’s rights should
not be given up. Certainly that, in my view, would be the reaction of an
objective bystander. I do not regard the collateral agreement as being
inconsistent with this approach although I accept that there is a technical
argument to be based on the use of the word ‘repair’.
I regard my
view as being confirmed by the fact that in Mr Bernstein’s long experience in
this field, he has never seen a new lease, which resulted in the surrender of
an old lease by operation of law, which contained any provision to protect a
tenant’s right to remove fixtures. The very experienced solicitors acting for
the claimants were unable to find any lease for which they had been responsible
which protected a tenant’s rights in such circumstances. I cannot believe that
the very many tenants, of whom those practitioners can speak, whose old
tenancies must have been terminated by operation of law on the grant of a new
tenancy wanted to give up their right to remove the fixtures.
It may well be
that there are leases where there is an express reference by the lawyers who
were responsible for the drafting, to what was to happen on the taking of a new
lease. Such an express reference would indeed be desirable because, as I have
already indicated so far as the effects of a surrender by operation of the law
is concerned on the right to remove fixtures, the law is certainly far from
clear. The authorities do not deal with the matter precisely and, apart from Foa,
the textbooks, so far as my investigations have revealed, and those of counsel
who placed the relevant textbooks before me have revealed, do not deal with the
matter in clear language.
It follows from
what I have already said that, unlike the learned judge, I do not consider
myself bound to follow alternative (b) in a situation as here where there is
only a surrender by the operation of law, and not a surrender by express
agreement. Accordingly, it follows that my answer to Question 2 would be (a)
instead of (b) which was the answer of the learned judge.
So far as
Question 3 is concerned, I can deal with the matter shortly, and I will do so
by repeating as part of this judgment the reasons of the learned judge, upon
which I do not feel I can improve, for rejecting the tenants’ contention that
the limitation contained in section 34(2) on disregarding improvements made by
the tenant ran for 21 years in the case of tenant’s fixtures from the date on
which the tenants’ fixtures became irremovable and not 21 years from the date
on which they were affixed. It follows that in respect of the third question, I
would reject the respondents’ contentions which were argued before me.
It was ordered
that the matter be remitted to the arbitrator to continue the arbitration, the
interim award to be varied in the light of the court’s ruling that the open
market value was to be determined on the footing that the tenants were entitled
to remove all the tenants’ fixtures whenever annexed. The tenants were awarded
the costs of this hearing. A stay was granted pending consideration of an
appeal.
