Author Archive for Francis Davey

Adverse possession of the river bed II

Published
by
Francis Davey
on 04/02/2010
in Adverse possession and Uncategorized
. 16 Comments

Port of London Authority v Ashmore [2010] EWCA Civ 30 is a really odd decision by the Court of Appeal to the extent I had to read it through carefully twice to be sure I understood its effect. I am still not sure that I do.

You may remember that we reported on Mr Ashmore’s attempts to resists the Port of London Authority’s attempts to register their ownership of the bed of the River Thames on the ground that he had acquired title to it (well a part of it) by adverse possession where the judge at first instance found that he had established factual possession and an intention to possess.

Unfortunately that decision was taken by the judge the hearing of a preliminary issue. The order for a trial of a preliminary issue was made by consent. The issue being:

Whether it is possible for the owner of a vessel that is moored in a particular place on a tidal river or other area of tidal water to acquire title by adverse possession to the sea or river bed or the foreshore for the footprint of that vessel where:

(a) the title to the sea or river bed or the foreshore has not been registered; and

(b) the vessel rests on the bed or the foreshore at low tide.

An agreed statement of assumed facts for the preliminary issue only was agreed and submitted to the judge.

Here things start to get odd. At the trial of the preliminary issue the Port of London conceded that title to the bed of a tidal river can (in principle at least) be acquired by adverse possession. That would seem, almost, to be a concession that the preliminary issue should be found in Mr Ashmore’s favour (indeed it would cease to be an issue). While it might be possible to find some very narrow difference between the preliminary issue as stated and the authority’s concession, they do not appear to have taken that position. As far as I can tell (and I am happy to be corrected) the authority agreed with the proposition to be tried, so the preliminary hearing would seem to be pointless.

Not to be deterred by this, the parties argued whether Mr Ashmore had in fact (based on the agreed assumed facts) established both factual possession and an intention to possess. The points taken are dealt with in my earlier post. Having found for Mr Ashmore on this issue, the judge was bound to answer the preliminary question in the affirmative. If, on the assumed facts, Mr Ashmore had established adverse possession, then it was clearly possible for someone to do that in principle because the judge found that someone had. The judge’s order included the following statement:

1. It is possible for the owner of a vessel that is moored in a particular place on a tidal river to acquire title by adverse possession to the river bed or the foreshore for the footprint of that vessel where:

(a) the title to the river bed or the foreshore has not been registered; and

(b) the vessel rests on the bed or the foreshore at low tide.

This isn’t quite the same wording as that used in the original order since it omits the phrase “or other area of tidal water”. But, strictly speaking, the judge’s narrower statement implies the more general one: if A is possible then surely one of A or B is possible.

The Port of London Authority decided to appeal this decision. Why they should do so given that they appear to accept the point in issue I do not know. They were given permission. At the hearing, counsel for the Port of London Authority explained that the authority conceded that there could be circumstances in which the owner of a vessel moored on a tidal river might acquire title by adverse possession to a part of the river bed or foreshore. What he wanted the Court of Appeal to do was to indicate in its judgment what circumstances those might be.

He suggested the following:

(1) An owner of a vessel that is moored on or over the bed of tidal waters will only be capable of being in adverse possession of the bed by reason only of that mooring if he can prove that it would not have been possible for the vessel to float off at Mean High Water if released from its moorings.

(2) An owner of a vessel that is moored on or over the bed of non-tidal waters will only be capable of being in adverse possession of the bed by reason only of that mooring if he can prove that it would not have been possible for the vessel to float off if released from its moorings where the waters were at their average depth during the preceding calendar year.

(3) The principles set out above do not prevent the owner of the vessel from showing by other acts that he was in possession of the land upon or over which the vessel was moored or which included such land.

Unsurprisingly the court refused to make a judgment in those terms. First because it did not think it appropriate to set down an arbitrary test for the acquiring of adverse possession to the river bed and second because principles (1) and (2) could not be applied to the case before it since the agreed statement of assumed facts did not give sufficient information to decide whether they did or did not apply.

For myself I would have refused the appeal on the basis that the order made by the judge on a preliminary issue had been conceded by the appellant. End of story.

Perhaps because of the peculiar nature of the case before it, the court decided it needed to do some peculiar reasoning as well.  The court discerned in the trial judge’s decision a qualification to the declaration he made, namely that it was not intended by the judge to be made in general terms, but was confined to the agreed statement of assumed facts. The court appears to have thought it should not have been made in the general terms it was.

With the greatest respect to the Court of Appeal, who must have struggled with the peculiar way the case was presented before them, that must be a nonsense. If on specific facts a judge finds that X is the case, then it must be true as a completely general proposition that it is possible for X to be the case. The judge’s decision cannot be faulted for its generality which follows inevitably for his finding on the facts before him and the question he was asked to resolve.

The court decided that there was no useful purpose in deciding whether the judge’s decision on the facts before him was right. The court also felt that it could not, in allowing the appeal, qualify the order that the judge made by confining it to the agreed statement of assumed facts. There was nothing for it but to set aside that part (paragraph 1) of the judge’s order. Unfortunately there is no report of the rest of the order, so it is impossible for us to see what state the case is left in. Very nearly back to square one by the sounds of it.

Can anyone throw any light on how this muddle came about, or why the Court of Appeal felt compelled to make the very odd decision that they did?

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Sale and leaseback – a transaction at an undervalue?

Published
by
Francis Davey
on 13/01/2010
in Assured Shorthold tenancy, Housing law - All, Leasehold and shared ownership and assured-tenancy
. 2 Comments

Could the sale and leaseback of a house be a transaction at an undervalue and thus be caught by section 423 of the Insolvency Act 1986? This was the main question considered by the High Court in Delaney v Chen although some other points of interest were discussed.

The background is that the respondents to the appeal – known as “the victims” through the report – had successfully sued a Mrs Chiu and Mr Ding and obtained not only judgment but a respectable costs order. £30,000 of costs was paid, by order, out of money held in court, but on 7th May 2008 an interim order for the payment of a further £30,000 costs was made along with an interim charging order against Chiu and Ding’s home.

Meanwhile Mr Ding was obviously alive to his family’s situation with a large costs order in the offing. He took steps to sell the house as he explained “the sale was done with the best interest of my family retain a roof over their heads and to reduce my debts and outgoings it was not to cheat anyone or deprive any creditors”.

The plan was that the home would be sold for £210,000 to the Mr Delaney, the appellant a property investor and long-time acquaintance of the family, who would lease back the property to Chiu and Ding. Slightly unusually the leaseback happened first. A tenancy for 21 years plus one day was granted on 1st May to commence on the dame day, 8th May 2008 the the transfer of the home would take place.

We are told that the interim charging order had not been drawn up immediately and so could of course not have protected the respondents against the sale of the home.

The respondents solution to this was to make an application for the court to exercise its powers under s.423. on the grounds that the sale and leaseback was a transaction at an undervalue. The District Judge agreed with them and made an ordered that Mr Delaney transfer the home back to the sellers, subject to a charge in his favour for the sum of £160,435.15, the value of a mortgage which had been discharged on the sale of the home.

One of the aims the court strives for in making an order under s.423 is “restoring the position to what it would have been if the transaction had not been entered into”, which was plainly not satisfied, Mr Delaney being out of pocket over £100,000.

The decision that the transaction was at an undervalue seems to have been made on the following basis. The evidence of Mr Delaney’s valuer was accepted without objection. It put the value an unencumbered freehold of the home at £275,000. The judge found that since the tenancy was not assignable it had no value in money or money’s worth and therefore that the transaction had taken place at an undervalue of £65,000.

Clearly from Mr Delaney’s perspective there was a great deal of difference between the unencumbered freehold and one subject to a tenancy for a fixed term of 21 years. At first sight it would seem self-evident that the judge’s reasoning was plainly wrong.

There was unfortunately no direct evidence as to the value of the freehold reversion as against the freehold. The figure given by Mr Delaney’s valuer was £115,000 but on the 16th September 2008 (the wrong date) and even then purely on the basis of the property as a source of revenue, not taking into account the very real possibility of the tenancy ending early. Even so this would indicate, and the High Court accepted, that the valuation of reversion was considerably less than £275,000 and the judge found that £210,000 was a fair value for the reversion.

On appeal the victims argued on the authority of In re MC Bacon Ltd (No 1) [1990] BCLC 324 that the correct perspective for assessing whether a transaction was made at an undervalue was the seller’s not the buyer’s. Before the transaction the seller had a freehold worth £275,000 afterward they had £210,000 in cash (part of which discharged the mortgage of course) and a tenancy worth nothing.

While it is not always true that there is a perfect symmetry in such matters, if I own an asset which is worth a great deal to someone else, I can usually realise that value so it is not worthless to me. So it was, found the High Court, with Chiu and Ding in particular they could have surrendered the tenancy for payment, so that the tenancy must have had a value of £65,000 – a figure that Mr Delaney or another property developer would have paid for it.

The appeal was allowed.

Two points that don’t seem to have been raised spring to mind. First the fact that there was no provision for rent review seems to have been relied on by the district judge. We aren’t told what the lease did say, but if it was merely silent on rent review, then s.13 of the Housing Act 1988 gives the landlord and mechanism for keeping the rent in step with the market.

Second, surely Messrs Chiu and Ding now have a property which they can turn back into a freehold at a later date by exercising a right of enfranchisement under the Leasehold Reform Act 1967, now that the low rent test has been abolished? Or is there some arcane twist in the 1967 Act I have missed (the power to terminate on death perhaps)?

Despite those queries, it does seem a commonsense result. It is also a reminder that just because something is a long lease doesn’t mean it can’t also be an assured shorthold tenancy. Alarming but true.

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Service charges up, enfranchisement down: some LVT statistics

Published
by
Francis Davey
on 27/12/2009
in Housing law - All and Leasehold and shared ownership
. 0 Comments

As food for reader’s thought as 2009 draws to an end, a quick comment on a recent written answer given to the Shadow Housing minister Grant Shapps. Since many readers’ will be full of seasonal fare I thought some pictures rather than words would be more apt.

Graph of leasehold business in the LVT

Our first picture shows a turnaround in the core leasehold work carried out by the LVT with enfranchisement and lease extension applications down and service charge disputes up. The fall in old LVT work probably stems from the collapse in the housing market and poor availability of credit. I would like to think that better publicity of the service charge jurisdiction has pushed s.27A applications higher, but that may also be due to increasing financial straights in which leaseholders find themselves and a concomitant reluctance to pay anything that is not strictly required.

Graph of market and fair rent applications to the LVT

Our second chart (to the same scale) shows that fair rents determinations still outnumber those for market rents despite the diminishing number of rent act protected tenancies. Even I, well known as a specialist in the odd and obscure, do not see many cases involving such tenancies any more. Despite an overall decline in the number of fair rent cases over 4 years, both series are up on last year. Perhaps also an indication that people fight harder for their money when there is less of it about.

The other jurisdictions carried out by the residential property tribunal service’s tribunals are miniscule by comparison. Even Housing Act 2004 work, which has shown a steady rise, amounts to less than 3% of all cases.

Happy 2010.

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A strange new beast in the forest

Published
by
Francis Davey
on 09/12/2009
in Housing law - All and Trusts and Estoppel
. 2 Comments

The case of Clarence House v National Westminster Bank [2009] EWCA Civ 1311 deals with a relatively new form of transaction that seems, at present, to be confined to City property transactions. I report it here because it may become more widespread.

This new beast is the virtual assignment. The idea is a simple one: a tenant, usually one who is also a landlord of sub-tenants, by a contract assigns all the economic rights and obligations of their lease to a third party, without actually assigning the lease itself. Most modern commercial leases prohibit (at least without consent) the assignment of the lease; parting with or sharing possession or a declaration of trust of the lease in favour of someone else. A virtual assignment is designed to side-step these prohibitions.

This is what National Westminster Bank had agreed with a Gibraltarian company New Liberty Property Holdings Ltd, their lease having the usual assortment of prohibitions against assignment etc.

Clarence House was rather unhappy about this, as Ward LJ put it:

Who was this unforthcoming Gibraltarian company who had been foist upon it without its knowledge or consent in place of its approved tenant, a copper-bottomed high street bank? The respondent made plain how unhappy it was dealing with the interloper, especially in the light of the disconcerting fact that since its involvement, the rent was in arrears. Their concerns could not be assuaged. Their concerns were not without foundation. We have now been informed that on 28th October Provisional Liquidators of New Liberty were appointed.

They applied to the High Court for a declaration that the virtual assignment was a breach of the terms of the lease as being a parting with or sharing of possession or a declaration of trust. The judge found for National Westminster, the Court of Appeal dismissed Clarence House’s appeal.

Clearly National Wesminster were not in literal possession of the premises (it was sublet) and so could neither share possession nor part with it, but landlord and tenant lawyers use the term “possession” more broadly. In particular s.205(1)(xix) of the Law of Property Act 1925 defines possession to include “receipt of rents and profits or the right to receive the same, if any”.

The Court rejected the suggestion that New Liberty were in receipt of rents for two reasons: the first was that they received the rents as agents of the landlord and, although they immediately became the property of New Liberty (as a result of the virtual assignment) there was an instant of time when they were not. I confess I am unhappy with an argument based on a scintilla temporis. Much better, in my view, was the second reason which was that it is entirely possible to assign the chose in action representing the right to receive rents while retaining the reversion: it is the latter, not the former, on which s.205(1)(xix) bites and which represent possession in the technical legal meaning of the word. Thus New Liberty were never in possession and so possession could not have been shared with or given to them.

The Court also took the view that a virtual assignment is not a trust. Ward LJ puts it thus:

I recognise that Virtual Assignments are strange new beasts in the forest; that one must circle around them suspiciously and cautiously; but the moment one gets close and has a good sniff, the overwhelming smell is of contract, not trust. Although the judge would not for a moment have expressed himself in such an inelegant way, so lacking jurisprudential precision, this was the central finding on this point and he was correct in that conclusion.

That must, I think, be right.

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Chancery or Family? – the former matrimonial home

Published
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Francis Davey
on 09/12/2009
in Housing law - All and Trusts and Estoppel
. 0 Comments

In Smith v Smith the Court of Appeal considered the conflict between TOLATA and its family law jurisdiction.

The background is a sad one. The Smiths married in 2004. They bought what I assume to be a lovely house of 3,800 square feet in 5 floors and with substantial gardens both front and back for a total of £6 million. They spent another £7.4 million on “elaborate works of renovation” (with contributions of £1.5 million from Mr Smith and £0.4 million from Mrs Smith, the rest being funded by a mortgage). Mrs Smith directed the works and “her energy and flair were major contributors to its ultimate style and beauty”.

In April 2007 they moved into the house, but their marriage had already hit difficulties and Mr Smith eventually moved out of the home for good in January 2008 — they had lived together in the home for only 6 months.

Mr Smith continued to pay the outgoings on the house which amounted, he said, to some £228,000 a year. In addition he had annual outgoings of £18,000 (an allowance paid to his wife), £100,000 (rent on his own home) and obvious other living expenses (I suppose one is expected to think this leaves little change out of his net income of £350,000 per year — readers with social housing practices may think otherwise).

Mr Smith petitioned for divorce in May 2008, Mrs Smith answered in July 2008, indicating her intention to resist her husband’s petition. Mr Smith’s solicitors pressed Mrs Smith concerning the house, telling her that a sale was both urgent and inevitable. Mrs Smith disagreed.

In October 2008 Mr Smith applied for an order under s.14 of the Trusts of Land and Appointment of Trustees Act. He also applied for an order for a sale of the family home under s.17 of the Women’s Property Act 1882 and for an occupation order prohibiting Mrs Smith to exercise her right to occupy the home under s.33(3)(d) of the Family Law Act 1996.

Just before the hearing Mr Smith was paid an exceptional commission of £720,000 (net) on a corporate deal that had been made in March 2009. This rather put the Kaibosh on the case that he had advanced, namely that he could barely afford to maintain the family home (with other outgoings) on his income. At the hearing he described the commission as a “once-in-a-lifetime payment” and argued that although he could, in the short term, afford to maintain the property, it was unreasonable to expect him to do so.

Mrs Smith argued that the application was premature given the pending matrimonial proceedings.

The recorder held that:

  • the home was “far larger than could objectively be justified by reference to [Mrs Smith's] reasonable housing need”
  • the purpose for which the property was acquired was to provide a home for both of them while they lived together and that purpose could no longer be achieved

He ordered that the home be sold with completion no earlier than 3 months from his order. The net proceeds of sale were then to be divided into two sums and placed on deposit pending agreement between the parties or an order of the court.

In the matrimonial proceedings, the judge found that Mrs Smith had behaved in such a way that the husband could not reasonably be expected to live with her and their marriage had broken down irretrievably. He therefore granted a decree nisi.

On appeal Mrs Smith argued that:

  • the order for sale was premature in advance of a decree of divorce
  • in particular the substantial and exceptional payment to the husband (so that he no longer needed to sell the home urgently) meant that the TOLATA application should not have been heard in advance of the divorce
  • finding that the purpose for which the home had been acquired was now defeated, effectively pre-empted the inquiry as to whether the marriage had irretrievably broken down that was to be decided in matrimonial proceedings
  • as a general rule TOLATA was an inappropriate vehicle for the resolution of issues between husband and wife.

Wilson LJ set out the approach a court should take to an application under TOLATA between separated spouses. As a general rule it is better if questions of shared property are dealt with as part of divorce proceedings:

It is in principle much more desirable that an issue, as here, about sale of the home should be resolved within an application for ancillary relief. For there the court will undertake a holistic examination of all aspects of the parties’ finances, needs, contributions etc; will devise the fairest set of arrangements for the future housing and finances of each of them; and, to that end, will provide for the transfer of capital, as well perhaps as for payment of future income, from one to the other. By an order under TOLATA, on the other hand, the court lays down only one piece of the jigsaw, namely that the home be sold, without its being able to survey the whole picture by laying down the others.

So a court faced with such an application should carry out a threshold enquiry, asking itself whether the issues raised by the application could reasonable be left to be resolved within an application for ancillary relief following divorce. In doing so the court will have regard to whether (within a time-frame “tolerable in all the circumstances) the parties will become able to apply for ancillary relief.

Further the court should consider whether there is a “measurable chance” that on such an application for ancillary relief one of the parties might preserve their occupation of the home or secure an outright transfer of ownership (or a variation of the trust). If so, an order for sale under TOLATA is unlikely to be right.

Wilson LJ found on the facts that the delay before ancillary relief was not tolerable and that there was no measurable chance that Mrs Smith would retain occupation of the home or otherwise preserve her right to live there. The recorder’s decision was therefore correct.

A second point raised by Mrs Smith at first instance was that before making a TOLATA order in her circumstances, the recorder would have to be satisfied that it would have been appropriate to make an occupation order. The recorder disagreed, but found that the requirements for such an order were satisfied. The Court of Appeal agreed.

One point that surprised Wilson LJ, but which had not been addressed by either party in proceedings, was the nature of the recorder’s order. Where was Mrs Smith supposed to live after sale while the proceeds of sale were languishing in a deposit account pending a judicial determination or an agreement. That would be a circumstance that should be taken into account under s.15(2) of TOLATA. He said:

One might wonder whether such a strategy would be likely to prove as satisfactory for the wife as a submission to the recorder that no order under TOLATA should be made until the husband had made satisfactory proposals for these two allied aspects of her needs. But, although had I been in the recorder’s shoes, I would myself have invited submissions in these respects, he cannot fairly be criticised for not having done so and thus for not having in any way addressed the wife’s needs following sale.

A point to consider in the face of a similar TOLATA application in future.

An interesting and important case for those dealing with matrimonial home disputes. TOLATA may be an alternative to waiting for ancillary relief to be resolved.

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Mortgage possession defeated by constructive trust

Published
by
Francis Davey
on 25/11/2009
in Housing law - All, Mortgage possession and Trusts and Estoppel
. 6 Comments

An opportunity to indulge in schadenfreude at the expense of a mortgage lender is offered by HSBC v Dyche [2009] EWHC 2954 (Ch) where a claim for possession by a mortgagee was dismissed because the actual occupant of the property was beneficiary under a constructive trust. The decision gives an example of the doctrine of the common intention constructive trust, and touches on the preconditions for overreaching to occur.

I’ll take a slightly different approach to the court and discuss each issue as it arises in the chronology.

the Constructive Trust

In 1976 Mr and Mrs Collelldeval (the C’s) moved into the property, which they held on trust for themselves as joint beneficial tenants. In 1988 Mr C was declared bankrupt (severing the joint beneficial tenancy). Some efforts were made to reclaim the property from the C’s by the trustee in bankruptcy and the Coventry Building Society (who held a charge over the property) but neither succeeded.

At this time (unsurprisingly) the C’s were unable to obtain a mortgage on the property to (for example) discharge the Coventry Building Society mortgage or otherwise deal with their indebtedness. Shortly before his discharge from bankruptcy Mr C appears to have come to the following agreement with those involved.

  • the property would be sold to the C’s’ daughter Amanda-Jane Dyche (the first defendant) and her husband (the D’s) for £25,000 (a price that did not represent the value of the house)
  • the proceeds of sale would be used to discharge the Coventry Building Society’s mortgage, leaving £18,000 to be paid to the trustee (and thus for the benefit of Mr C’s general creditors) and a small surplus for other purposes
  • the D’s would borrow £17,000 from Lloyds’ Bank secured by a mortgage on the property (and borrow a further £8,000 from a friend
  • the C’s would continue to live in the property and pay the D’s instalments to be used to reduce the mortgage indebtedness
  • when the Lloyds’ mortgage was discharged, the property would be re-conveyed to the C’s

The judge believed Mr C’s evidence that this was the deal because he (and his late wife) had continued to beneficially occupy the property. They had made payments to the D’s and some contemporaneous documentation also appeared to support his contention.

His analysis was that the arrangement created a common intention constructive trust with the D’s as trustees and the C’s as beneficiaries. Mr C has (of course) no interest in the property so could not convey it to the D’s but that, thought the judge, was really irrelevant because a constructive trust could be imposed from the moment of conveyance.

What kind of beneficial interest?

Mr C suffered more misfortune because in August 1994 Mrs C died. Mrs D argued that Mr C must have held the property as a beneficial tenant in common, as a result Mrs C’s interest would have fallen into her estate (and one presumes some of it might have come to Mrs D). The judge found no reason to accept that. The C’s had held the property as joint beneficial tenants until 1988 and would have continued to do so but for the bankruptcy.

Overreaching

The D’s divorced some 9 years later. In the divorce it was agreed that Mr D would sell his interest in the property to Mrs D for £5,000. At the same date, Mrs D obtained a mortgage from HSBC. In order to convince them that Mr C had no interest in the property she gave them a copy of an assured shorthold tenancy showing Mr C as a tenant and with a forged version (as the judge found) of his signature.

Mr C got wind of the transfer of the property into Mrs D’s sole name. She told him that she would transfer the property to him once the transfer to her had completed. The judge called this a deception (the transfer had already happened). The HSBC mortgage was used (amongst other things) for Mrs D’s own benefit, although some money was paid to discharge a debt to Lloyds (more on this later).

It was argued by HSBC that Mr C’s interest had been overreached by the sale and mortgage. I cannot see how such an argument can hope to have succeeded since (as any student knows) for a statutory overreaching to be effective the proceeds of sale (or mortgage) must be paid to 2 or more trustees. In this case they were not.

There was some discussion as to whether there were two transactions (transfer to Mrs D, then mortgage) or one (on the principle of Abbey National Building Society v Cann [1991] 1 AC 56, but of course either transaction taken individually or both taken together involved one and one only recipient of the purchase money.

This was not the first basis for the court’s decision. The judge held that in the transfer to Mrs D she was not a good faith purchaser (a requirement of statutory overreaching) since she was acting in breach of trust. As a result that transfer could not overreach Mr C’s interest.

The Result

The end result was that Mr C remained a beneficiary under a trust of the property. Since he was in actual occupation his interest overrode that of HSBC. He won, they lost. As the judge pointed out: they could have made more enquiries but they did not. A textbook example of the operation of overriding interests and one that should not have surprised the bank once the constructive trust point was found in Mr C’s favour.

What about the Lloyds’ mortgage? You remember there was an original loan secured on the property which Mr C was supposed to pay off. There was also another loan, some of which was paid off by the HSBC mortgage. What about subrogation I hear my readers ask? No-one was able to – or had thought to – produce sufficient evidence to make that argument a runner. The court was not able to tell even if the second loan had been secured on the property (in which case the subrogation argument might have been good) or not and it appears that the first loan was paid off before the HSBC mortgage.

An interesting case. I would be interested to know what readers think about the “not a purchaser in good faith” point.

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The track to the old Piggery

Published
by
Francis Davey
on 20/11/2009
in Housing law - All
. 2 Comments

Thompson v Bee [2009] EWCA Civ 1212 illustrates a neat point of property law and inheritance that could come up in a variety of circumstances but in this concerns an easement.

In Hamsterley stands Pear Tree House on the main village street. Round the side and to the back of the house runs the Track which leads ultimately to a plot of land known to locals as the Garth where there was at one time a piggery and slaughterhouse. Mr and Mrs Bee now live in the House and Mr Thompson owns the Garth. He wishes to build three houses on the Garth and has the planning permission to do so, but any access to the Garth must be via the Track and the Bees, as is the way in such cases, are adamant the the Track is to be used for no such purpose.

The Bees conceded that without the Track the Garth was landlocked so that there must be an easement of necessity running over the Track but, they said, it was limited to agricultural purposes.

Edith Thompson had owned both the House and the Garth. She disposed of her property by will as follows:

I GIVE to my said Grand-daughter Jane Hodgson my dwellinghouse known as Pear Tree House Hamsterley subject nevertheless to a right of way as existing at the date of my death to the garth at the rear thereof and to Croft Field ….

I GIVE the garth containing one acre together with the piggery and slaughterhouse erected thereon and together with the right of way from Hamsterley main street across the rear of Pear Tree House at all times and for all purposes connected with the said garth to my son George Thompson.

Jane Hodgson married Mr Bee and became Mrs Bee. George Thompson gave the Garth to Stephen Thompson. There might be an argument as to whether the mention of the piggery and slaughterhouse limited the right to agricultural purposes, but the Court of Appeal decided that “for all purposes” meant what it said. So the terms of the will would seem, read alone, to give Mr Thompson the easement he wanted.

Not so said counsel for the Bees, applying pure logic as follows: when Edith Thompson died, all her property was owned by her executors. No easements could have come into being at that time because you cannot own an easement over your own property. Then the executors made an assent to Mrs Bee of the house subject to “all rights of way and easements affecting the same.” but of course there was no easement over the Track at that stage, so Mrs Bee took the property absent any easement. The assent to Mr Thompson was also said to be “together with all rights of way and easements affecting the same.” but by then it was too late since no easement had been reserved in the assent to Mrs Bee. QED.

The Court of Appeal thought otherwise. They held that the will and the assents should be read together. Section 36(2) Administration of Estates Act 1925 provides that (unless there is a contrary intention expressed) assents take effect from the date of death, what is known as the “relation back” and so they should be read together with the terms of the will. The will and the assents are, in substance, one transaction. The unfortunate (if logical) conclusion that the order of assents could make a difference to the existence of easements was thus avoided.

Mr Thompson’s ambitions were ultimately thwarted. Although it was found that an easement over the Track to the Garth had been granted that was not limited as to the nature of its use, the Court of appeal found that access for 3 houses would be excessive and made a declaration to that effect.

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Outstanding rent reviews – a cautionary tale

Published
by
Francis Davey
on 20/11/2009
in Housing law - All
. 0 Comments

Bello v Ideal View [2009] EWHC 2808 (QB) — a case not yet available on bailii — illustrates the dangers with leaving a rent review outstanding.

Mr Bello bought what appear from the transcript to be residential premises at an auction in July 2005. The had been let on a 50 year lease in May 1969 at an annual rent of £60 to be paid quarterly. The terms of sale excluded the seller’s liability for arrears of rent above £60 per annum. Such an exclusion should make any purchaser’s ear’s prick up because it suggests there may be an outstanding rent review and thus an possible additional liability for rent.

Unfortunately for Mr Bello that was the case. The lease provided for a rent review after the first 25 years of the term in March 1994. No review had taken place.

The freehold was purchased by the Ideal View in 2006, who, after some communication with Mr Bello which produced what the court described as “no constructive response”, invoked the arbitration mechanism built into the rent review clause. The arbitrator’s award, dated 22 August 2997, set the rent due from 25th March 1994 at £1,700 per annum.

The rent review clause was unremarkable and it provided, in the usual way, that the increased rent would be due from the first payment date (in this case the 22nd September 2007) after the determination of the arbitrator:

until such new rent shall have been determined the rent firstly hereinbefore reserved shall continue to be payable and any difference between that and the said new rent during such period as this last proviso operates shall be added to and be payable with the next instalment of rent due after the said new rent has been determined

Very bad news for Mr Bello who did not pay the arrears when they fell due (indeed it appears that he had paid no rent since taking possession of the property — not even the £60 per annum). The freeholders obtained possession in October 2008 and Mr Bello appealed to the High Court.

I don’t believe that nearly legal has dealt with questions about time being of the essence before, so it might be worth explaining the principles as an aside at this point. Contracts will, usually, consist of reciprocal obligations: I do this if you do that. In some cases your obligation will be a condition precedent for mine so that failure to perform your side of the bargain will relieve me of my obligation to perform my side.

When a contract stipulates that something must be done by a particular time, that stipulation may or may not be such a condition precedent. If it is we say that it makes “time of the essence”, if not we say that time is “not of the essence”. Time is usually not of the essence unless a contract states so expressly or it is implied by the nature of the contract. A party aggrieved by the other’s delay may always serve a notice, stipulating a time for the obligation to be carried out, which will (provided the time allowed is reasonable) make time of the essence from then on.

In United Scientific Holdings v Burnley [1978] AC 904 (which contains an excellent summary of the principle and its evolution in both law and equity by Lord Diplock) the House of Lords held that in a rent review clause time is presumed not to be of the essence. A landlord’s delay does not, of itself, relieve a tenant of their obligation to pay the reviewed rent.

In Mr Bello’s case, HHJ Behar, found that the lease did not (either expressly or impliedly) make time of the essence for the rent review. In my view an almost inevitable conclusion taking into account the unremarkable nature of the clause and authority such as Burnley. Mr Bello’s only hope was that, in some way, delay on behalf of the landlord should prevent the rent arrears (or some of them) from being collected.

Mr Bello, who appears to have been the author of his own misfortune on this point, had not participated in the arbitration. That, thought HHJ Behar, prevented Mr Bello from raising arguments as to delay in court. The High Court agreed with the judge and found that Mr Bello was bound to fail for that reason alone.

The judge had also dismissed Mr Bello reliance on the landlord’s delay on substantive grounds, finding that there was no evidence sufficient to raise an estoppel in Mr Bello’s favour. Permission was given to Mr Bello to appeal against this finding and, there having been full argument by council on the point, the High Court rules on the question, as follows:

  • delay, without more, will not prevent a landlord from recovering rent arrears from a late rent review, there has to be evidence of something that would amount to an estoppel or waiver (for example some kind of representation by or conduct on behalf of the landlord on which a tenant had relied)
  • S.19 of the Limitation Act 1980 was of no assistance since the rent was due from 22 September 2007; the landlord’s claims being well within the limitation period.

I am not surprised by the outcome of this case, but it should serve as a warning to those buying old leasehold property to check the status of any rent review. It also illustrates the foolishness of refusing, ostrich-like, to participate in a rent review arbitration.

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Little Shop on the Corner

Published
by
Francis Davey
on 16/11/2009
in Housing law - All
. 1 Comment

I have the Nearly Legal leadership’s indulgence in allowing me to post about Patel v Keles [2009] EWCA Civ 1187 which touches on one of the more unnatural (at least to housing lawyers) areas of my practice, namely the renewal of business tenancies under the Landlord and Tenant Act 1954, and which may be of interest to a minority only of our readers.

Mr and Mrs Patel ran a newsagent on Tudor Street opposite the main entrance of the Inner Temple and thus familiar to most members of the bar. They were tenants under a lease for 5 years commencing in 2002 of Mr and Mrs Keles whose holding extended to other properties, including the adjacent coffee shop.

The 1954 Act gives (unless excluded by agreement in the proper form) a form of security of tenure to most business tenants (rather better than that afforded to private residential tenants under an assured tenancy). If a landlord is unwilling to renew a tenancy, the tenant may apply to the court for a new tenancy which will be granted unless the landlord proves it has a statutory ground of opposition.

The Patels applied for a new tenancy, their landlords opposed the grant on the ground (found in s.30(1)(g)) that:

on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence.

At trial the Circuit Judge allowed the application, finding that the landlords, and in particular Mr Keles who gave evidence, had failed to establish the requisite intention to occupy. A number of factors influenced the judge. For instance that Mr Keles had been involved in the running of the coffee shop, but had let it for 20 years in 2007; or that Mr Keles had no need, himself, to run his own business from the property.

The most contentious (and interesting) point taken on appeal concerned the judge’s conclusions based on an undertaking given by Mr Keles. It is, apparently, in s.30(1)(g) cases for the landlord to offer an undertaking to the court as a way of assuring the court of its settled intention. Mr Keles did just this, offering:

not to use the premises for two years for any purpose other than as a newsagents’ business carried on by [Mr and Mrs Keles]

My reaction was — what an odd sort of an undertaking to give. The necessary intention required by s.30(1)(g) is positive: to occupy the property to run one’s own business, while the undertaking given was negative in form and would be satisfied by the property lying empty. What is more it is strictly time limited to a period of two years. The judge felt that, not only did the undertaking not assist Mr Keles, it actually hindered him because it put in question his settled intention to run his own business from the property “for the foreseeable future”.

And here is the interesting legal point. What kind of intention does s.30(1)(g) require? Would an intention to run a business from the property for a very brief time and then to sell the property thereafter be sufficient? Both the trial judge and the Court of Appeal held that the proper interpretation of s.30(1)(g) must take into account the provisions of s.30(2), which states:

(2) The landlord shall not be entitled to oppose an application [under section 24(1) of this Act, or make an application under section 29(2) of this Act,] on the ground specified in paragraph (g) of the last foregoing subsection if the interest of the landlord, or an interest which has merged in that interest and but for the merger would be the interest of the landlord, was purchased or created after the beginning of the period of five years which ends with the termination of the current tenancy, and at all times since the purchase or creation thereof the holding has been comprised in a tenancy or successive tenancies of the description specified in subsection (1) of section 23 of this Act.”

Roughly speaking: a landlord cannot use s.30(1)(g) if they bought the property within 5 years of the end of the existing tenancy. If Mr and Mrs Keles had found a buyer who wished to run their own business from the property and sold the reversion of the shop to them before the end of the tenancy, the buyer could not rely on s.30(1)(g) to evict Mr and Mrs Patel but read literally s.30(1)(g) could be understood to mean that Mr and Mrs Keles would be able to rely on s.30(1)(g) in order to take a very brief possession on their own account, already intending to sell the property to an identified buyer.

The Court of Appeal held that Circuit Judge was wrong in concluding that a landlord needed to show their intention under s.30(1)(g) “for the foreseeable future”, but they refused the appeal. In the Court’s view s.30(2) implied some prospective protection into s.30(1)(g), in particular the intended occupation must be more than “short term”. Furthermore if a landlord had a settled intention to sell within 5 years, that would defeat an application under s.30(1)(g). The Court also supported the Judge’s fact finding and the use made of the undertaking.

This case should make it more difficult for landlords to rely on s.30(1)(g) in the future and it may encourage more careful drafting of landlord’s undertakings.

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A housing uncooperative?

Published
by
Francis Davey
on 08/10/2009
in FLW case note, Housing law - All, Possession and assured-tenancy
. 8 Comments

The case of Mexfield Housing Co-Operative v Berrisford [2009] EWHC 2392 (Ch) illustrates the potentially precarious situation in which the tenant of a fully-mutual Housing Co-operative may find themselves.

The facts are simple. Miss Berrisford had been a tenant of Mexfield since 1993,  she had difficulty with her rent so that she fell into arrears (at the first hearing of the claim they were approximately £1,000). The judge accepted that the arrears had arisen through no fault of her own but were due to a “mix-up” in housing benefit. Whether due to the arrears or for some other reason (the judgment does not tell us) a notice to quit was served on her that would end her tenancy on 17th March 2008.

The Circuit Judge had dismissed the landlord’s application for summary judgment. It is not entirely clear what arguments arose in the County Court, but it appears that the arrears of rent were one matter that was in issue. Peter Smith J summarised as follows:

“The learned Judge below primarily decided the issue against the Appellant on the basis that they had waived the contractual obligation for an advance payment of rent. He rejected the Appellant’s submission based on Prudential Assurance v The London Residual Body H.L. [1992] 2 AC 386 that the tenancy was a periodic tenancy terminable on that basis and that any provision which purported to vary that would mean that the lease was of an uncertain duration and would therefore be void.”

It is not entirely clear what else was said in the County Court, but clearly the issue of rent was a red herring. This is because tenancies granted by fully mutual housing associations are excluded from being assured tenancies by paragraph 12(h) of Schedule 1 to the Housing Act 1988. Thus whether or not a tenant is in arrears, a notice to quit would normally be good to end a tenancy.

Miss Berrisford would appear to have no hope, and that was the view taken by Peter Smith J who granted summary judgment. Unless there is more to this than meets the eye (as there so often is) it seems rather tough on Miss Berrisford who had been a tenant for 15 years and whose arrears were not her fault (and were entirely paid off by the time of the appeal), but is it the right conclusion?

The idea behind excluding fully mutual housing associations from the protection of the assured tenancy regime must be that they will be regulated by (at the relevant time) the Housing Corporation and will be run by their tenants and so, one would hope, have a more tenant friendly attitude than a private landlord. I wonder whether a Weaver style argument could be deployed in defence of a case like this.

As those familiar with housing co-operatives will know they are extremely varied. Some have no regular injections of public money and select their tenants from applications made direct to the association, others have large annual grants and all tenants nominated by the local housing authority. It seems to me that somewhere on that scale a fully mutual housing association will become a public body so that public law arguments may be deployed in defence of a possession claim.

Something like this may have been attempted in Miss Berrisford’s case because it appears that an article 8 argument had at least been pleaded in the County Court where she was represented by counsel. In the High Court she was unrepresented and, I suspect, would have found a Weaver argument hard to deploy.

When Miss Berrisford became a tenant, the statutory guidance given by the Housing Corporation to tenants was contained in the “Tenant’s Guarantee: Guidance on the Management of Housing Accommodation by Registered Housing Associations which are Fully Mutual Co-operatives”.  Clause C4.1 of which states:

Housing co-operatives should offer their tenants contractual rights in their tenancy agreements which are at least equivalent to the statutory protection given by the relevant provisions of the Housing Act 1988 to assured tenants….

I think there must be at least an argument that in failing to comply with that obligation Mexfield were acting unlawfully (if they were a public body) and thus at least some protection for tenants in Miss Berrisford’s position.

What do readers think? Is there more relevant and recent guidance on the topic?

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