LANDLORD AND TENANT LAW This unique collection of essays, written by leading practitioners, policy makers and academics, looks at patterns of landlord and tenant law: past, present and future. Each sector is explored—commercial, long residential, housing, and agricultural—by taking a look backwards and forwards. The chapters explore the role that legislative, judicial, and policy developments, and market forces have played, and will continue to play, in shaping the law. Two chapters are devoted to the seminal case of Street v Mountford and its contemporary significance. A comparison is also made with the position in Australia and the United States. The book provides a scholarly reflection on the principles of leasehold law that will be of interest to practitioners, academics, and students of landlord and tenant law.
Landlord and Tenant Law: Past, Present and Future
Edited by
Susan Bright
OXFORD AND PORTLAND, OREGON 2006
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Foreword The relationship of landlord and tenant is of considerable importance in social, political and economic terms. It can relate to a small inner city flat or a corner street shop, at one end of the spectrum, and to a superstore or a 1000 hectare farm at the other end. In these circumstances, it is scarcely surprising that the relationship of landlord and tenant and the law of England have had such a substantial mutual effect. The number of cases, indeed of important cases, arising out of disputes between landlords and tenants has been very substantial, over the past five centuries. The past 25 years are no exception. There has been a stream of legislation dealing both with the landlord and tenant relationship generally, and particular aspects of the relationship (perhaps most notably the residential aspect) over the past 120 years. Again the past 25 years have been no exception. There has hardly been a time since its inception that the Law Commission has not been considering more than one aspect of the relationship as being ripe for reform. The relationship is of considerable interest to lawyers for other reasons. The nature of leases is anomalous. They represent freestanding assignable interests in land, and are therefore subject to the law of real property; yet they also constitute contracts, which are classically common law concepts. The classification of a lease as a ‘chattel real’ seems something of a contradiction in terms, but it is consistent with its hybrid nature. To the practitioner, disputes between landlords and tenants give rise to a well- balanced mixture of factual disputes, real property law, equity and common law. To the legislator, landlord and tenant law gives rise to interesting policy problems, often involving knotty drafting problems and the difficult task of balancing the free market against social engineering. There are two well-known, respected and up-to-date works on the subject of landlord and tenant law (the sheer size of these books is a measure of the difficulty and importance of the topic), a number of excellent books on specific legal topics, and, from time to time, a number of stimulating articles on specific cases or areas. However, there is a gap in the market, and it is that gap which this admirable book fills. The gap is for a book which gathers together the most important and interesting current topics in the field of landlord and tenant law, and considers them in an authoritative, imaginative and engaging way. In her introduction, Susan Bright, who has done splendidly as editor of this book, summarises the thrust and purpose of each of the chapters. One only has to scan the titles and authors to see the aptness and breadth of the
vi
Foreword
topics, and to see how lucky the editor and publishers, and indeed the reader, is to have the guidance of a highly regarded expert in relation to each of those topics. I am delighted to have been invited to write this Foreword. I would unreservedly recommend this book to anyone with an interest in the relationship of landlord and tenant, whether a legislator, an academic lawyer, a practising lawyer, a politician, a social historian, or a sociologist. The topics identified in the first 11 chapters cover effectively all the important modern developments, and the likely future direction, of landlord and tenant law in England. I am very glad to see that these valuable chapters are given an international context, by the last two chapters, which relate to aspects of landlord and tenant law in Australia and the United States. David Neuberger 28 July 2006
Contents Foreword ..................................................................................................v Notes on Contributors .............................................................................ix Introduction ...........................................................................................xiii Table of Cases ......................................................................................xxiii Table of Statutes ...................................................................................xxxi
1 Landlord and Tenant Law: Mapping the Recent Past..........................1 Derek Wood 2 Street v Mountford Revisited .............................................................19 Susan Bright 3 Judicial Directions in Landlord and Tenant law: Different Policies for Different Sectors ...............................................41 Sarah Blandy and Caroline Hunter 4 Commercial Leases Past and Present: The Contribution of the Law Commission .....................................................................65 Stuart Bridge 5 Commercial Leases: Future Directions ...............................................83 Sandi Murdoch 6 Agricultural Tenancies: Past and Present..........................................111 Andrew Densham 7 Agricultural Tenancies: Future Directions........................................129 Michael Cardwell 8 Long Residential Leases: Past and Present .......................................147 Martin Davey 9 Long Residential Leases: Future Directions......................................171 David Clarke 10 Housing Law: Past and Present........................................................191 Andrew Arden and Martin Partington 11 Housing Law: The Future ...............................................................213 Andrew Arden and Martin Partington
12 Recent Developments in Australian Residential Tenancies Laws........233 Marcia Neave 13 Impoverished Tenants in 20th Century America ..............................257 Richard H Chused Index .....................................................................................................277
Notes on Contributors Andrew Arden QC is a barrister and Head of Arden Chambers, London. He has practised and written about housing law for over 30 years. He is General Editor of the Housing Encyclopaedia, Housing Law Reports and Journal of Housing Law, and an author of Arden and Partington's Housing Law, the Manual of Housing Law, Homelessness and Allocations, Quiet Enjoyment and a number of other books and articles on housing law. He has appeared in many of the leading housing cases. Sarah Blandy LLB, Solicitor. Sarah teaches property law at the University of Leeds. She qualified as a solicitor and worked as a housing lawyer in law centres and private practice, before moving into local authority employment and from there into academia. Sarah has researched and written widely on property law issues, from a socio-legal perspective. Susan Bright BCL, MA, Solicitor. Susan is a Professor of Land Law and Law Fellow at New College, Oxford. She qualified as a commercial property solicitor in London before becoming an academic lawyer. She has published extensively in the field of landlord and tenant law and is currently Bulletin Editor of Hill and Redman's Landlord and Tenant Law. Stuart Bridge MA, Barrister, and Law Commissioner for England and Wales since 2001. Stuart has responsibility at the Commission for the reform of property and trusts law and of family law. He practised as a Barrister on the North Eastern Circuit prior to taking up academic posts first at Leeds University, and then at Cambridge where he is a University Lecturer and a Fellow of Queens' College. He sits as a Civil-only Recorder. Michael Cardwell MA, Solicitor, is a professor in Law at the University of Leeds. After working in legal practice with Burges Salmon, Bristol, Michael joined the School of Law, University of Leeds, in 1990. His early research was directed to agricultural tenancies and European Community quota regimes. More recently, he has addressed also broader legal issues generated by Common Agricultural Policy reform, his publications including The European Model of Agriculture (OUP, 2004). Richard H Chused is a Professor of Law at Georgetown University Law Center in Washington, DC, where he has taught since 1973. During 2004–5 he taught at Hebrew University in Jerusalem as a Fulbright Scholar. His written work includes books and articles in property, gender and American legal history, copyright and family law. Martin Davey LLB is a Senior Lecturer in Law at the University of Manchester where he teaches property law and family law. He has published widely in the field of landlord and tenant law. He is the author, or co-author, of a
x Notes on Contributors number of books including Landlord and Tenant Law (Sweet & Maxwell 1999). He is President of the Northern Rent Assessment Panel, which is part of the Residential Property Tribunal Service. Andrew Densham CBE, Solicitor, was a partner of Burges Salmon for 35 years. Andrew's publications include Scamell and Densham's Law of Agricultural Holdings and Halsbury's Laws of England. He has been engaged almost exclusively in agricultural tenancies and latterly in milk quota and other claims arising out of European agricultural matters. He has been involved in over 500 tenancy successions and numerous agricultural arbitrations, including rent reviews, notice to quit disputes, notice to remedy and Agricultural Land Tribunal cases. David Clarke MA, LLM, Solicitor. David is Professor of Law and a ProVice-Chancellor at the University of Bristol. He is a consultant to Osborne Clarke, Solicitors, Bristol and a legal chairman for the Residential Property Tribunal Service. He has written and lectured extensively in the law of landlord and tenant and more recently on commonhold. He has recently been appointed as consultant editor for the Landlord and Tenant title for Halsbury's Laws of England. Caroline Hunter BA, PGDip HA, is senior lecturer in housing law at Sheffield Hallam University. Before moving into academia she worked as a housing advisor and barrister specialising in local government and housing law. She has written extensively on housing law, and is deputy general editor of the Encyclopedia of Housing law and practice, and Journal of Housing Law. Sandi Murdoch LLB, LLM. Sandi is a Senior Lecturer in the School of Law at the University of Reading. She has published widely in the field of landlord and tenant and, over a number of years, has participated in a number of major research projects into the structure of commercial leasing. She has also served on panels advising government on the reform of landlord and tenant law. Marcia Neave LLB (Hons), FASSA, AO holds a personal Chair at Monash University and has previously held chairs at Adelaide University and the Australian National University. In 2001 she was seconded to the Victorian Law Reform Commission as its foundation chairperson. She is the coauthor of Sackville and Neave, Property Law Cases and Materials and has also co-authored books on restrictive covenants and easements, wills and intestacy and family property law. Martin Partington CBE was a Law Commissioner from 2001–5. He is now Special Consultant to the Law Commission and, as such, continues to lead the Commission's work on the reform of Housing Law. He is also Emeritus Professor at the University of Bristol. He has written extensively on housing law and is on the Editorial Committee of the Journal of Housing Law. A barrister, he is a member of Arden Chambers in London.
xi
Notes on Contributors
Derek Wood CBE QC has been a member of the chambers now known as Falcon Chambers since 1965. He has practised in all areas of property litigation since that date and appeared in many leading cases. He has sat as a Recorder and Deputy High Court Judge and is a Bencher of the Middle Temple. He has served as chairman or member of various Government advisory committees on property, planning, transport and rating. He was Principal of St Hugh's College Oxford from 1991 to 2002 and is an Honorary Fellow of St Hugh's College and University College, Oxford.
Introduction Leases underpin much land use in Great Britain. Approximately one in three homes is rented, one third of agricultural land is tenanted, and almost two-thirds of commercial property is leased. The concept of a lease is ancient, being developed over centuries by the courts and added to piecemeal by legislation, with socio-economic events acting as catalysts. In recent years, the pace of change in leasehold law has been stepped up. The subject area is now vast: few individuals would now regard themselves as ‘landlord and tenant lawyers’ but would instead see themselves as specialists in housing, agriculture, commercial property, property litigation or conveyancing. Whereas 100 years ago it made sense to think of it as one subject, based around the common law principles of landlord and tenant law with little statutory regulation, there are now discrete and hugely specialised branches of law requiring a mastery not only of the common law but many complex statutory codes. As Derek Wood notes in his opening chapter, the last 20 years alone have seen the same number of Acts of Parliament with prime significance. Landlord and tenant law is now very different from the common law subject of 100 years ago. This process of transformation of leasehold law is set to continue, as human rights legislation, social housing measures, judicial developments, extensive Law Commission activity, and changing economic and trade policies all impact on the regulation and uses of leases. The collection of essays in this book is the result of a conference bringing together academics, practitioners, policy makers and judges around this theme of ‘landlord and tenant law: past, present and future’. The mix of the speakers and delegates at the conference, many of whom have been active in shaping the law as it is today, enabled discussion, and the resulting chapters of this book, to extend over a wide range of issues. The aim of the conference, and of this book, is to stand back from the detail of the law in order to look at trends, to see how the broad patterns of the present day law have emerged, and to think about what the future might hold. This is achieved, notwithstanding the emergence of the separate strands of landlord and tenant law (or laws) by taking a look backwards, and forwards, in each sector. It is this model that provides the structure to this book. The opening chapter by Derek Wood provides an overview of the changes within landlord and tenant law over the last 20 years—common law, business tenancies, long residential leases, housing, and agricultural tenancies. Later chapters build upon this foundation with more detailed commentary on the movements and trends within particular sectors of the
xiv Introduction United Kingdom leasehold market. Thus, within each sector, there is one chapter looking back, and one forward. There are two chapters exploring the seminal case of Street v Mountford,1 one from a doctrinal perspective, and the other placing it within the broader policy framework. Finally, there are two chapters that compare this picture with the position in the United States and Australia, taking the residential sector as the basis for discussion. The various chapters of the book reveal how issues of policy, economics, law, and justice play a role in shaping the law within the differing sectors. This introduction does not need to provide a summary of each chapter as the reader can easily glean what each chapter covers from the chapter title alone. Instead, this introduction seeks to draw together some of the ideas and themes that emerge from the study of ‘landlord and tenant law: past, present and future’. Notwithstanding the great diversity that there is in the law of landlord and tenant between the sectors, there remains at the heart of the subject certain commonalities shared by the different branches. Of course, at a very basic level, what is common to all landlord and tenant relationships is that they reflect, as David Clarke expresses it in his chapter, a ‘division of interests, or a split in ownership, in the property as a whole’. Even at this point, however, one of the contemporary issues emerges as a point for discussion which is drawn out by both David Clarke and Martin Davey. In the case of long residential leases the division of interest between freeholder and leaseholder is not always seen as acceptable. As is explained by David Clarke, leases can be used by investors in order to exert on-going control over, and extract profit from, the management of the property. The potential for abuse of this relationship has led to numerous legislative interventions. In addition, it is now accepted politically that the leaseholder who purchases a long lease for a premium should be seen as having ‘already paid for the house or flat built on the land’ (Martin Davey). The reforms of recent years—enfranchisement rights, control of management costs, transfer of management to leaseholders, and the introduction of commonhold—all stem from this concern that the division of interest in the residential leasehold relationship is no longer appropriate. In other sectors, the broad division of interest does not present such issues. The tenant receives exclusive possession for the term upon payment for occupation, and the landlord retains a capital value in the reversion, which the landlord has a genuine interest in protecting. Whilst the issues that are played out in these sectors are varied, most stem from a concern to ensure that there is an appropriate balance in protecting this division of interest. Should the tenant have the right to remain in occupation even
1
[1985] 1 AC 809 (HL).
Introduction xv when the term has expired provided that an appropriate payment is made? What if such a right to remain impacts upon the capital value of the landlord’s interest? Should the tenant be able to move on from the property, free of ongoing liabilities, if his occupational needs change? Should the tenant receive compensation upon leaving the premises for things done at the tenant’s expense that have enhanced the capital value of the premises? Should a tenant be made responsible for the cost of maintaining the property if he has only a limited interest in it? Should the tenant have to pay for property which is not fit for the purpose? Should the landlord be able to terminate the lease early for tenant default, and if so, when? Only if the default threatens the capital value of the reversion or the income stream, or also in other cases? The law has responded to these questions variously by introducing schemes giving security of tenure, rights of succession, control of alienation rights, rights to compensation for improvements, relief from forfeiture, regulation of rent levels, and landlord repairing obligations. The ebb and flow of these measures is traced in the chapters of this book. Achieving an appropriate balance is not easy. What is ‘appropriate’ raises big questions about policy and justice. Striking an appropriate balance is not only about fairness as between the parties but also about the promotion of the wider public interest. There are some who may question as to whether ‘fairness’ ought to enter the equation at all. As Andrew Densham notes, the dominant political model of ‘laissez-faire’ in the 19th century held back intervention in the field of agriculture. Indeed, even now, in each sector there is still (again?) a strong non-interventionist thread running through. Even in the residential sector, where intervention is at its strongest, it is left to the parties to agree such things as the length of the lease and the rent payable. In the private housing market there has been a steady retreat from the more interventionist days that gave security, succession rights, and powerful control of rent levels. In other sectors (barring the long residential lease), there has similarly been a move away from a heavy regulatory hand. Indeed, the promotion of flexibility through freedom of contract now underpins government policy in both the agricultural and commercial sectors. The explanation for this movement lies in part in the economic impact of regulation. In the agricultural sector, the security of tenure and succession rights introduced in the last 50 years made it almost impossible for new entrants to farming to find land to rent. The restrictive agricultural tenancy laws that were strangling the tenanted sector have been replaced by a regime dominated by free market principles. Given the wider pressures upon farmers, well charted by Michael Cardwell, it is important that the regulatory regime is flexible, enabling farmers to diversify beyond strictly agricultural production, and to do so in ways that are environmentally sensitive. Similarly in the business sector, perceiving the function of the property market as being ‘to provide business premises on terms that meet occupiers’ needs, subject
xvi Introduction to market conditions’,2 the government is anxious to promote flexibility. The Landlord and Tenant Act 1954, Part II, giving tenants rights of renewal, is now effectively optional. The approach has been to encourage variety and flexibility in lease structures by promoting good practice and leaving the details to the contractual leasehold bargain. As Sandi Murdoch notes, this may not be enough. There is a case for saying that small business tenants, who make a significant contribution to the economy, need better protection. There is also likely to be further control on alienation to enable tenants to respond more quickly to the expansion and contraction of their businesses. In the private residential sector, too, the loosening of the strict controls of the Rent Act 1977, has, as Derek Wood notes, encouraged a much stronger investment market to grow. It is often only through understanding this ebb and flow of the wider political and legislative climate that common law doctrines can be explained. As Derek Wood comments, Lord Templeman in Street v Mountford3 makes it clear that the grant of exclusive possession for a term at a rent creates a tenancy. In later cases the application of this strong doctrinal position is put under strain. There are cases where an occupier moves in before the tenancy is agreed, or stays on when it runs out, and is held not to have a tenancy. Explaining these cases consistently with Street v Mountford4 can be done, but is not easy. This is what I do in my chapter. It is, however, the recently developed concept of the tolerated trespasser that most starkly exposes the limitations of a purely doctrinal approach to law. These former secure tenants of local authorities look very much as if they should be tenants, but they are not. To treat ‘like cases alike’ by the application of clear legal rules risks ignoring the fact that the wider context in which the issues arise will alter the ‘meaning’ that a particular outcome carries. The reality is that most of the cases involving classification of agreements can only be fully understood by taking into account these wider considerations; in particular the statutory context, the market in rental property and the relative bargaining strengths of the parties. The idea that policy underlies these cases is fully explored in the chapter by Sarah Blandy and Caroline Hunter. Taking similar case law as the basis for analysis, they show that there is a divergent approach in commercial and social rented cases. In the latter, the courts respect the need for local authorities to exercise important managerial functions which may necessitate occupiers being left without protected status. At the same time, the understanding is that local authorities can generally be trusted to make sensible decisions which will distinguish between the
2 ODPM, Commercial Property Leases: Options for Deterring or Outlawing the Use of Upwards Only Rent Review Clauses, May 2004, Appendix A, [9]. 3 [1985] AC 809 (HL). 4 Ibid.
Introduction xvii deserving and the undeserving. In the commercial sector, the courts have become comfortable with the idea of respecting the contractual autonomy of the parties; in cases where there is equality of bargaining power, and in a sector in which contracting out is legislatively sanctioned, the parties are given considerable freedom to shape how the occupation is to be classified. Of course it is in the private residential sector, the home territory of Street v Mountford, that there is neither the equality of bargaining often met in the commercial sector, nor the trusted landlord of the social rented sector. A further common feature of leases is that they share a doctrinal basis involving a duality of interests, as both estate (usually)5 and contract. This basic doctrinal position is coming under fire in different ways. As mentioned in my chapter, the acceptance that there can be such a thing as a nonestate lease6 in Bruton v London and Quadrant Housing Trust7 seems to shift the lease’s centre of gravity away from the grant of a proprietary interest in land to a contractual relationship involving the grant of exclusive possession for a term. An even stronger doctrinal challenge comes from the housing law reforms under discussion. The chapters co-authored by Martin Partington and Andrew Arden reveal a process of disengagement of housing law from its roots in landlord and tenant law. The goal of the Law Commission is to move away from the concept of a lease, so that regulation would instead be centred upon a contract that grants a right to occupy property as a home. Whether this is as a lease or licence would be unimportant. This progression has also taken place in Australia. In her chapter, Marcia Neave observes that the seminal report on Law and Poverty in Australia argued that many of the deficiencies in residential tenancy laws were the result of a lease being treated as an estate in land rather than as a consumer contract for the provision of housing.8 This is important not only for what it says about the merely residual role that notions of ‘property’ and ‘estate’ now play in residential rental relationships but, and more significantly, in terms of how we think about the relationship. Ideologically there has been a considerable shift from thinking of residential leases as being essentially about the grant of a property interest to seeing them as consumer contracts. It is not only short-term renting that is seen in this way, but Martin Davey remarks on how the same process has taken place in the context of long residential leases. It is a short journey from the acknowledgement that the law should reflect the theory that the leaseholder has already paid for the house or flat to saying that the principles enshrined in the law should be based closely on the model of consumer protection; it is not the
5 6 7 8
Where the landlord has no estate, the tenant cannot possess an estate. This is also described by commentators as a non-proprietary lease or a contractual lease. [2000] 1 AC 406 (HL). R Sackville, Law and Poverty in Australia: Second Main Report (Canberra, AGPS, 1975).
xviii
Introduction
property rights of the landlord that are dominant but the need to protect the tenant’s investment so that his asset is appropriately managed and serviced at reasonable cost and does not gradually waste away. This process is not reflected to such an extent in either the commercial or agricultural sectors. None of the writers of the chapters on commercial and agricultural tenancies make reference to it. Yet it is a process that is, perhaps, also at work in the commercial sector. A number of developments have occurred in the law as it affects business tenancies which could be said to reflect this concern to emphasise the needs of the tenant as a consumer, or at least to redress the contractual imbalance that may result from the often unequal bargaining relationship. The primary motivation behind the Landlord and Tenant (Covenants) Act 1995 Act was arguably the perceived inequity in original tenant liability. The important decision of the Court of Appeal in Chartered Trust plc v Davies9 acknowledges both that a landlord may have obligations to protect the tenant’s interest, even if not explicitly spelt out in the lease, and that the tenant can end the lease if there is a repudiatory breach by the landlord. The debate that has run for many years as to whether upward only rent review should be prohibited is motivated (arguably) not only by the perceived economic impact of rents being held above market levels in a falling market, but also by a sense of injustice, of tenants unable to negotiate for two-way review. The Landlord and Tenant Act 1988 was also concerned to strengthen the hand of the tenant against the landlord who was able to block attempts at alienation. The Law Commission’s proposals on termination of tenancies, discussed by Stuart Bridge, also proceed on the basis that the present law of forfeiture is unjust. This collection also contains various reflections on the process of reform. Stuart Bridge’s chapter opens with the ambitious goals of the Law Commission in its early days; codification of (the whole of) landlord and tenant law. Later these were to be toned down, acknowledging both the difficulties in amending laws that are party political, and the cost implications of undertaking major reviews of entire areas of law. Reform will not happen until the political climate is right. Martin Davey tracks the extremely long process of enfranchisement, which began in the 1880s but did not materialize until 1967. During one 40 year period there was an incredible 143 Bills on the subject. The law of renting houses was identified as a topic ripe for reform in the 1960s, but the ambitious Renting Homes project (referred to both in Stuart Bridge’s chapter, and in the chapters by Martin Partington and Andrew Arden), has become possible only because of recent political consensus on the balance between landlord and tenant. In the commercial sector, the powerful landlord lobby has undoubtedly shaped, and prevented,
9
(1998) 76 P & CR 396 (CA).
Introduction xix reform. The Landlord and Tenant (Covenants) Bill became, as Derek Wood notes, a political battleground and the 1995 Act is a compromise, not reflecting the full vision of the Law Commission (as is noted by Baroness Hale in the recent House of Lords case of London Diocesan Fund v Avonridge Property Company Ltd).10 As Charles Harpum reflected elsewhere, the 1995 Act ‘demonstrates that law reform legislation . . . is subject to the buffets of politics—interest group rather than party politics on this occasion. It is not a perfect piece of legislation because of the circumstances under which it was enacted . . . . Issues of detailed policy were in the process of evolving even as the drafting went on.’11 More recently, intense lobbying from the property industry has deflected reform on upward only rent review. But legal developments also occur in other ways. In her chapter, Marcia Neave suggests that the vocabulary of human rights contributes to the development of housing law as a distinct body of principles in England, something which has no parallel in Australia. In practice, however, the impact of human rights law upon the development of substantive law has been slight to date. As noted by Martin Partington and Andrew Arden, this may change as at the time of writing a key decision of the House of Lords is awaited on the width of Article 8 (the right to respect for the home).12 Where human rights law has already had a marked impact, however, is upon procedure as it has made important inroads in reinforcing the importance of following due process. Another issue that runs through the book is the impact that practice (lawyers) and process have upon the reality of law. The chapters by Martin Partington and Andrew Arden show the importance of a dedicated and concerned bar, and publication of specialist works and law reports. It is in no small part through the activism of members of the bar and an expansion of legal writing that housing law has emerged as a distinct discipline, bringing together the morass of law that affects housing rights, and so making the law more accessible. This is something that the near ‘codification’ of law through the Law Commission’s Renting Homes work will follow through. In the United States, there is nothing of the complexity of the law in England. The reasons are multifarious, and some are charted in the chapter by Richard Chused. In the context of housing law he describes the position of poor residential tenants before 1970 as ‘orphans of American law, left to fend for themselves in a largely hostile judicial environment’. The growing American economy and the civil rights movement sparked an era of reform.
10
[2005] UKHL 70 [38]. C Harpum, ‘The Law Commission and Land Law’ in S Bright and J Dewar, (eds), ‘Land Law Themes and Perspectives’ (Oxford, OUP, 1998) 161–62. 12 Since writing, the decision in Kay v LB of Lambeth; Leeds CC v Price [2006] UKHL 10; [2006] 2 WLR 570 affirms a conservative approach to the impact of human rights law on substantive housing law. 11
xx Introduction This political pressure, when coupled with legal services becoming available to the poor, led ‘in an historical blink of an eye’ to a change in the tone of tenants’ private legal status. It is this combination of the wider political mood, coupled with the availability of specialist legal services and lawyers committed to the cause of doing something about the problems of poor housing that have led to the changes. Throughout landlord and tenant law there are stories that show just how important ‘equality of arms’ and ‘access to justice’ is. Underlying the Law Commission’s work on termination of tenancies for tenant default is an acknowledgement that the court process must work more speedily and cost effectively. Again, the reforms contained in the Landlord and Tenant Act 1988, are prefaced in part on recognition that rights without effective remedies are inadequate. The need for a quick and efficient court system was raised as a key issue in the conference proceedings. As Martin Partington and Andrew Arden point out, the Renting Homes project plans to take this on board, with effective enforcement of rights and dispute resolution being the subject of an anticipated consultation exercise.13 It must, however, be noted that the continual cuts to the legal aid budget erode the hope of ‘equality of arms’ for many people. My thanks go out to many people for bringing this project together. When the conference was but a ‘twinkle in the eye’, Martin Partington and Stuart Bridge gave generously of their time to help shape and improve my embryonic ideas. Derek Wood has given invaluable support in thinking not only about how to put the conference together, but also in making sure that I did not overlook ‘key players’ in extending invites to delegates. John Colyer QC acted graciously as chair throughout the conference. Rowena Meager quietly recorded and noted the proceedings. Lord Justice Neuberger gave an entertaining after-dinner speech recalling the ‘life and times’ of a landlord and tenant lawyer. The delegates, all bringing something from their personal knowledge, ensured lively discussions. The conference speakers, all contributors to this book, have provided the food for thought. Time will tell if these chapters are prophetic or not. None of this could have got off the ground without financial support. For this I am deeply grateful to Falcon Chambers for its generous sponsorship of the conference dinner and to the Law Faculty at Oxford University for its support both towards the costs of the conference and for research assistance in the production of this book. My own time comes also at a price, and for this I thank the British Academy for the Research Readership which has enabled me to pursue this, and other, research projects. My sanity has been preserved (but who am I to judge?) by the invaluable assistance provided by Naomi Creutzfeldt-Banda in helping with the conference bookings and
13 An issue paper, Housing: Proportionate Dispute Resolution, was published in April 2006, accompanied by an online forum to promote discussion.
Introduction xxi ensuring things ran smoothly throughout (barring the delegate’s broken arm!), and by Catherine Lee who has helped to edit the book, delivering on her assurance that she has an eye for detail. You were both great to work with: thanks. I also need to thank Richard Hart for agreeing to publish this book. There is too little dialogue between academics, practitioners, policy makers and decision makers. The conference from which this book grew brought together experts from diverse backgrounds to discuss these changes. It was a great occasion. My hope is that this book will stimulate further debate, discussion, and thought on the nature of landlord and tenant law. Susan Bright January 2006
Table of Cases A USTRALIA
Fisher v Aboriginal Hostels Ltd [1998] VSCA 130 ...............................241 Jones v Bartlett (2000) CLR 166 (HC)..................................................243 Progressive Mailing House v Tabali (1985) 157 CLR 17 (HC) .............240 Radaich v Smith (1959) 101 CLR 209 (HC) ...................................20, 241 Shevill v Builders Licensing Board (1982) 149 CLR 620 (HC) .............240 Western Australia v Ward [2002] 213 CLR 1, [2002] HCA 28...............32 Wood Factory v Kiritos [1985] 2 NSWLR 105 (CA).............................240
E UROPEAN C OURT O F H UMAN R IGHTS
Connors v UK (2005) 40 EHRR 9 ........................................................211 James v UK [1981] HRLR 408 .............................................................160
E UROPEAN C OURT O F J USTICE
R v Ministry of Agriculture, Fisheries and Food, ex parte Bostock (Case C-2/92) [1994] ECR I-955 .....................131–32 Wachauf v Bundesamt für Ernährung und Forstwirtschaft (Case 5/88) [1989] ECR 2609..................................132
U NITED K INGDOM
Abbahall v Smee [2002] EWCA 1831, [2003] 1 WLR 1472 .................182 Addiscombe Garden Estates v Crabbe [1958] 1 QB 513 (CA)..................2 Adler v Upper Grosvenor Street Investments [1957] 1 WLR 227 (QBD)..........................................................95, 104 AG Securities v Vaughan [1990] 1 AC 417 (HL) ..........32, 34–38, 43, 201 Allied Dunbar Assurance plc v Homebase Ltd [2002] EWCA Civ 666 .........................................................95–96, 103 Antoniades v Villiers [1990] 1 AC 417 (HL).................32, 34–38, 43, 201 Arbib v Earl Cadogan [2005] EWLands LRA-23 2004.........................184 Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59, [2001] 1 WLR 2180 (HL)........................................5
xxiv Table of Cases Aslan v Murphy (Nos 1 and 2) [1990] 1 WLR 766 (CA)........................37 Auwoth v Johnson (1832) 5 C & P 239, 172 ER 955...........................113 Bailey (CH) v Memorial Enterprises [1974] 1 WLR 728 (CA)..................3 Banjo v Brent LBC [2005] EWCA Civ 292, [2005] 1 WLR 2520 ...............................................................45, 56, 61 Bankway Properties Ltd v Pensfold-Dunsford [2001] EWCA Civ 528, [2001] 1 WLR 1369 .....................................37 Barrett v Morgan [2000] 2 AC 264 (HL) ..................................................8 Basingstoke and Deane BC v The Host Group [1988] 1 WLR 348 (CA).....................................................................10 Begum (FC) v Tower Hamlets LBC [2003] UKHL 5, [2003] 2 AC 430...............................................................................210 Begum (Rikha) v Tower Hamlets LBC [2005] EWCA Civ 340, [2005] 1 WLR 2103 .........................................................................229 Belevedere Court Management Ltd v Frogmore Developments Ltd [1997] QB 858 (CA) ...........................................162 BHP Petroleum Great Britain Ltd v Chesterfield Properties Ltd [2001] EWCA Civ 1797, [2002] Ch 194 ....................76 Billson v Residential Apartments Ltd [1992] 1 AC 494 (HL)............79–81 Birmingham CC v McCann [2003] EWCA Civ 1783, [2004] HLR 27 .................................................................................211 Bland v Ingrams Estates Ltd [2001] Ch 767 (CA) ..................................81 Bocardo SA v S & M Hotels Ltd [1980] 1 WLR 17 (CA)...............95, 104 Bradney v Birmingham CC [2003] EWCA Civ 1783, [2004] HLR 27 .................................................................................211 Bristol CC v Lovell [1998] 1 WLR 446 (HL)........................................205 Bristol CC v Mousah (1998) 30 HLR 32 (CA) .............................205, 209 Bristol DC v Clark [1975] 1 WLR 1443 (CA) ......................200, 205, 209 British Anzani (Felixstowe) v International Marine Management [1980] QB 137 (QBD) .....................................................3 Broadgate Square plc v Lehman Bros Ltd [1995] 1 EGLR 97 (CA)........10 Bruton v London and Quadrant Housing Trust [1998] QB 823 (CA); [2000] 1 AC 406 (HL) ...........................xv, 3, 30, 32, 38 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) ..................27–30, 56–60 Cambusmore Estate Trustees v Little [1991] SLT (Land Ct) 33 ............140 Cannock Chase DC v Kelly [1978] 1 WLR 1 (CA)...............200, 205, 209 Cardiothoracic Institute v Shrewdcrest Ltd [1986] 1 WLR 368 (Ch) .........................................................23, 26, 56 Centrovincial Estates plc v Bulk Storage Ltd (1983) 46 P & CR 393 (Ch)...............................................................75 Chartered Trust plc v Davies (1998) 76 P & CR 396 (CA)....................xvi Clear Channel UK Ltd v Manchester CC [2005] EWCA Civ 1304 .........53 Cole v Kelly [1920] 2 KB 106 (CA).........................................................22
Table of Cases xxv Co-operative Insurance Society v Argyll Stores (Holdings) [1998] AC 1 (HL) .................................................................................2 Crawley BC v Ure [1996] QB 13 (CA)..................................................201 Crédit Suisse v Beegas Nominees [1994] 4 All ER 803 (Ch) .....................7 Creery v Summersell [1949] Ch 751......................................................103 Croydon (Unique) Ltd v Wright [2001] Ch 318 (CA) .............................81 Cruise v Mount [1933] Ch 278 (Ch) .....................................................243 Design Progression Ltd v Thurloe Properties Ltd [2004] EWHC Ch 324, [2005] 1 WLR 1 .......................................5, 74 Din v Wandsworth LBC [1983] 1 AC 657 (HL) .............................198–99 Doe d Cheny v Batten (1775) 1 Cowp 243, 98 ER 1066........................22 Doe d Lord v Crago (1848) 6 CB 90, 136 ER 1185 ...............................22 Dresden Estates Ltd v Collinson (1987) 55 P & CR 47 (CA) .................52 Family Housing Association v Jones [1990] 1 WLR 779 (CA)................51 Family Housing Association v Miah (1982) 5 HLR 94 (CA)...................50 Featherstone v Staples [1986] 1 WLR 861 (CA)........................................3 Footwear Corp v Amplight [1999] 1 WLR 551 (Ch) ................................5 Francis Jackson Developments Ltd v Stemp [1943] 2 All ER 601 (CA) ............................................................20, 45 Friends Provident Life Office v British Railways Board [1996] 1 All ER 336 (CA) ..........................................................6, 8, 75 Gisborne v Burton [1989] QB 390 (CA) ...................................................3 Go West Ltd v Spigarolo [2003] EWCA Civ 17, [2003] QB 1140............5 Greenwich LBC v McGrady (1982) 6 HLR 36 (CA) ............................201 Greenwich LBC v Regan (1996) 28 HLR 469 (CA)....................57–58, 60 Griffiths v St Helens BC [2006] EWCA Civ 160...................................220 Hagee (London) Ltd v AB Erikson and Larson [1976] QB 209 (CA)...................................................47, 53–54, 71, 89 Hall v Harlow DC [2006] EWCA Civ 156 ...........................................222 Hammersmith and Fulham LBC v Jastrzebski (ChD, 20 October 2000).....................................................................26 Hammersmith and Fulham RLBC v Monk [1992] 1 AC 478 (HL)......................................................................201 Hankey v Clavering [1942] 2 KB 326 (CA)...............................................4 Harrow LBC v Johnstone [1997] 1 WLR 459 (HL)..............................201 Helena Housing Ltd v Pinder [2005] EWCA Civ 1010...............28–30, 60 Hill v Griffin [1987] 1 EGLR 81 (CA) ..................................................103 Isaac v Hotel de Paris Ltd [1960] 1 WLR 239 (PC)................................24 Javad v Aqil [1991] 1 WLR 1007 (CA).................................22–24, 54, 61 Jenkin R Lewis v Kerman [1971] Ch 477 (CA).........................................8 Jewell v McGowan Gloucester County Cou rt (15 March 2001) (unreported); [2002] EWCA Civ 145....................142 Johnson v Moreton [1980] AC 37 (HL)..............3, 11, 113, 117, 126, 129
xxvi Table of Cases Kay v LB of Lambeth [2004] EWCA Civ 926, [2004] HLR 56; [2006] UKHL 10, [2006] 2 WLR 570........................................................xvii, 38, 211–12 Kensington and Chelsea RLBC v Hayden (1984) 17 HLR 114 (CA) ...................................................................50 Lambeth LBC v Howard [2001] EWCA Civ 468, (2001) 33 HLR 58 ............................................................................209 Lambeth LBC v O’Kane [2005] EWCA Civ 1010 ......................28–30, 60 Leadenhall Residential 2 Ltd v Stirling [2001] EWCA Civ 1011, [2002] 1 WLR 499...........................................28, 30 Lee v Leeds CC [2002] EWCA Civ 6, [2002] 1 WLR 1488..................210 Leeds CC v Price [2005] EWCA Civ 289, [2005] 1 WLR 1825; [2006] UKHL 10, [2006] 2 WLR 570........................................................xvii, 38, 211–12 London Diocesan Fund v Avonridge Property Co Ltd [2005] UKHL 70.........................................................................xvii, 76 Longrigg Burrough & Trounson v Smith (1979) 251 EG 847 ................26 Malekshad v Howard de Walden Estates Ltd [2002] UKHL 49, [2003] 1 AC 1013 .................................................15 Manchester CC v Cochrane [1999] 1 WLR 809 (CA)...................205, 210 Manchester CC v Romano and Samari [2004] EWCA Civ 834, [2005] 1 WLR 2775 ...................................210 Manfield Ltd v Botchin [1970] 2 QB 612 (QBD)....................................53 Mannai Investment Company Ltd v Eagle Star Assurance Company Ltd [1997] AC 749 (HL)................................................3, 17 Marchant v Charters [1977] 1 WLR 1181 (CA)....................................172 Marcroft Wagons Ltd v Smith [1951] 2 KB 496 (CA)...........20, 26–27, 61 McClinton v McFall (1974) 232 EG 707 (CA) ......................................118 Mendoza v Ghaidan [2004] UKHL 30, [2004] 2 AC 557 .....................208 Michalak v Wandsworth LBC [2002] EWCA Civ 271, [2003] 1 WLR 617 ...........................................................................210 Mikeover Ltd v Brady [1989] 3 All ER 618 (CA) .......................35–36, 38 Mountford v Hodkinson [1956] 1 WLR 422 (CA)................................119 Murray Bull & Co v Murray [1953] 1 QB 211 (QBD) ...........................20 National Car Parks Ltd v Trinity Development Co (Banbury) Ltd [2001] EWCA Civ 1686 ............................33–34, 52–53 NCR Ltd v Riverland Portfolio (No 1) Ltd [2004] EWHC 921; [2005] EWCA Civ 312 ...................................6, 96 Newham LBC v Hawkins [2005] EWCA Civ 451 ................21, 28, 59–60 Newham LBC v Kibata [2003] EWCA Civ 1785, [2004] HLR 28 .................................................................................211 Newlon Housing Trust v Al-Sulaimen [1999] 1 AC 313 (HL) ..............201 North British Housing Association Ltd v Matthews [2004] EWCA Civ 1736, [2005] 1 WLR 3133 .................................221
Table of Cases xxvii Norwich Union Life Insurance Society Ltd v British Railways Board [1987] 2 EGLR 137 (Ch) ...........................................................7 Norwich Union Life Insurance Society Ltd v Shopmoor Ltd [1999] 1 WLR 531 (Ch) .......................................................................5 O’May v City of London Real Property Co Ltd [1983] 2 AC 726 (HL)........................................................................88 Orchard Trading Estate Management Ltd v Johnson Security Ltd [2002] EWCA Civ 406 .................................................176 Parker v Parker [2003] EWHC 1846 ......................................................23 Parry v Harding [1925] 1 KB 111 (KBD)..............................................213 Pemberton v Southwark LBC [2000] 1 WLR 1672 (CA)..................28, 58 Poplar Housing & Regeneration Community Association Ltd v Donoghue [2001] EWCA Civ 595, [2002] QB 48....................................................................................209 Post Office v Aquarius [1985] 2 EGLR 105 (Ch)......................................7 Powley v Walker (1793) 5 Term Rep 373, 101 ER 208 ........................113 Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462........................................................................113 Qazi v Harrow LBC [2003] UKHL 43; [2004] 1 AC 983.................................................................201, 209–12 Quick v Taff Ely Borough Council [1986] QB 809 (CA) ..............7, 76–77 R v Ealing LBC, ex parte McBain [1985] 1 WLR 1351 (CA) ...............199 R v Hillingdon LBC, ex parte Islam [1983] 1 AC 688 (HL) ...........198–99 R v Hillingdon LBC, ex parte Puhlhofer [1986] 1 AC 484 (HL) ..........199 R v Hillingdon LBC, ex parte Streeting [1980] 1 WLR 1425 (CA)...........................................................198–99 R v Secretary of State for the Environment, ex parte Tower Hamlets LBC [1993] QB 632 (CA)\ .................................................205 R v Waveney DC, ex parte Bowers [1983] QB 238 (CA) ................198–99 R (Holding and Barnes plc, Alconbury Developments Ltd and Premier Leisure UK Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295 .................................................210 R (on the application of McLellan) v Bracknell Forest BC [2001] EWCA Civ 1510, [2002] QB 1129 .......................................209 Ratcliffe v Sandwell MBC [2002] EWCA Civ 6, [2002] 1 WLR 1488 .........................................................................210 Ravenscroft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12 (QBD) ............................................................................7 Receiver for the Metropolitan Police District v Palacegate Properties Ltd [2001] Ch 131 (CA) ....................................................89 Reigate and Banstead BC v Benfield [2001] EWCA Civ 1510, [2002] QB 1129................................................................................209 Rexhaven Ltd v Nurse (1995) 28 HLR 241 (Ch) ....................................79
xxviii Table of Cases RG Kensington Management Co Ltd v Hutchinson IDH Ltd [2002] EWHC Ch 1180....................................................................178 Rhone v Stephens [1994] 2 AC 310 (HL)..............................................177 Rous v Mitchell [1991] 1 WLR 469 (CA) .............................................119 Segal Securities Ltd v Thoseby [1963] 1 QB 887 (QBD) .........................80 Sheffield CC v Smart [2002] EWCA Civ 4 ............................................210 Somma v Hazelhurst [1978] 1 WLR 1014 (CA)............................197, 241 Sopwith v Stutchbury (1985) 17 HLR 50 (CA) .................................23–24 Southwark LBC v Williams [1971] Ch 734 (CA)..................192, 200, 209 Street v Mountford [1985] 1 AC 809 (HL) ......................i, xii, xiv-xv, 2–3, 19–21, 23, 25–26, 28–34, 36–39, 43, 51–52, 54, 172, 201, 241 Swindon BC (formerly Thamesdown BC) v Aston [2002] EWCA Civ 1850 ...............................................................28, 30 Thompson v Elmbridge BC [1987] 1 WLR 1425 (CA) ...................57, 222 Tito v Waddell [1975] 1 WLR 1303 (Ch)..............................................194 Tower Hamlets LBC v Ayinde (1994) 26 HLR 631 (CA)..................25, 55 29 Equities Ltd v Bank Leumi (UK) [1986] 1 WLR 1490 (CA)...................................................................74 Walji v Mount Cook Land Ltd [2000] EWCA Civ 356 ..........................57 Walsh v Lonsdale (1882) LR 21 Ch D 9 (CA) ......................................245 Wandsworth LBC v Winder [1985] AC 461 (HL) ........................205, 211 Westminster CC v Basson (1991) 23 HLR 225 (CA) ........................26, 55 Westminster CC v Clarke [1992] 2 AC 288 (HL) .............................51, 56 Wheeler v Mercer [1957] AC 416 (HL).............................................53, 61 Woodward v Docherty [1974] 1 WLR 966 (CA) ..................192, 200, 209
U NITED S TATES O F A MERICA
Altz v Leiberson 233 NY 16, 134 NE 703 (1922)...........................264–65 Bornstein v Faden 133 NYS 608 (NY App Div, 1912)..........................264 Bowles v Mahoney 202 F 2d 320, 91 US App DC 155 (1953)..............265 Bradley v Nestor 67 How Pr 76 (NY Com Pleas, 1884) .......................264 Braitman v Overlook Terrace Corp 68 NJ 368, 346 A 2d 76 (1975) ..........................................................................265 Brown v Board of Education 347 US 483, 74 S Ct 686 (1954) ............268 Gillick v Jackson 83 NYS 29 (NY App Div, 1903) ...............................264 Goldberg v Kelly 397 US 254, 90 S Ct 1011 (1970) .............................271 Hanna v Fletcher 231 F 2d 469, 97 US App DC 310 (1956) ................264 Helmsley v Borough of Fort Lee 78 NJ 200, 394 A 2d 65 (1978) ..........................................................................275 Inganamort v Borough of Fort Lee 62 NJ 521, 303 A 2d 298 (1973) ........................................................................275
Table of Cases xxix Jacobs & Youngs v Kent 230 NY 239, 129 NE 889 (1921)..................265 Jaffe v Harteau 56 NY 398 (1874)........................................................264 Jane Doe v Dominion Bank of Washington 963 F 2d 1552 (DC Cir, 1992)..................................................................................271 Javins v First National Realty Corporation 428 F 2d 1071, 138 US App DC 369 (DC Cir, 1970)..........................77, 258, 270, 275 Kline v 1500 Massachusetts Avenue Apartment Corp 439 F 2d 477 (DC Cir, 1970) ...........................................................271 MacPherson v Buick Motor Co 217 NY 382, 111 NE 1050 (1916).........................................................................266 Marini v Ireland 56 NJ 130, 265 A 2d 526 (NJ 1970)....................................................................258, 270–71, 275 Mayes v Jackson Township Tent Leveling Board 103 NJ 362, 511 A 2d 589 (1986) ........................................................................275 Michaels v Brookchester 26 NJ 379, 140 A 2d 199 (1958)...................265 Moore v Townshend 33 NJL 284 (1869) ..............................................261 Murry v Albertson 50 NJL 167, 13 A 394 (1888).................................260 Patton v Texas Co 13 NJ Super 42, 80 A 2d 231 (1951) ......................265 Pines v Perssion 14 Wise 2d 590, 111 NW 2d 409 (1961) ...................269 Reste Realty Corp v Cooper 53 NJ 444, 251 A 2d 268 (1969).............270 Robinson v Diamond Housing Corp 463 F 2d 853 (DC Cir, 1972) ...........................................................271 Schipper v Levitt & Sons Inc 44 NJ 70, 207 A 2d 314 (1965) .............265 Schmidt v Pettit 8 DC 179 (1873) .........................................................266 Schwartz v Apple 48 NYS 253 (NY City Ct, 1897) ..............................264 Stewart v Childs 86 NJL 648, 92 A 392 (1914) ....................................261 Sun Printing and Publishing Association v Remington Paper and Power Co Inc 235 NY 338, 139 NE 470 (1923).......................265 Thorpe v Housing Authority of the City of Durham 393 US 268, 89 S Ct 518 (1969) ......................................................271 Whetzel v Fisher Management Company 282 F 2d 943, 108 US App DC 385 (1960) .............................................................265 Wood v Lucy, Lady Duff-Gordon 222 NY 88, 118 NE 214 (1917)...........................................................................265 Ziegler v Brennan 78 NYS 342 (NY App Div, 1902) ............................264
WTO
US – Subsidies on Upland Cotton (Panel Report, 8 Sept 2004) WT/DS267/R and (Appellate Body Report, 3 March 2005) WT/DS267/AB/R ..............................................................................139
Table of Statutes A USTRALIA
Business Tenancies (Fair Dealings) Act 2003 (NT) ..............................2003 Charter of Rights (ACT)........................................................................255 Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ..........233 Commonwealth Trade Practices Act 1974 (Cth) Pt V...................................................................................................242 Fair Trading Act 1999 (Vic) Pt 2B .................................................................................................242 s 3............................................................................................................42 s 32W ....................................................................................................242 Fair Trading Acts...................................................................................242 Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (Tas) .....................................................................233 Family Violence Act 2004 (Tas) s 17 ...................................................................................................251 Leases (Commercial and Retail) Act 2001 (ACT)..................................233 National Security Act 1939 (Cth) ..........................................................234 National Security (Landlord and Tenant) Regulations 1941 (Cth) ........234 Privacy Act 1988 (Cth)..........................................................................253 Div 3, ss 16A-16F..................................................................................253 Property Law Act 1958 (Vic) ss 52–54............................................................................................245 Property, Stock and Business Agents Amendment (Tenant Databases) Regulations 2004 (NSW) ...................................254 Property, Stock and Business Agents Regulations 2003 (NSW) Sch 6A, ss 4–5...................................................................................254 Residential Tenancies Act 1978 (SA) .............................................233, 235 Residential Tenancies Act 1980 (Vic) ............................................233, 235 s 4..........................................................................................................241 Residential Tenancies Act 1987 (NSW) .........................................233, 235 s 3..........................................................................................................241 s 15................................................................................................237, 240 ss 25–26 ................................................................................................244 ss 30–32 ................................................................................................248 ss 46–49 ................................................................................................248 s 58................................................................................................246, 250
xxxii
Table of Statutes
Residential Tenancies Act 1987 (NSW) continued s 60H.....................................................................................................250 s 61........................................................................................................240 s 63A .....................................................................................................250 ss 68–69A..............................................................................................251 s 631......................................................................................................251 Residential Tenancies Act 1987 (WA)............................................233, 235 s 4..........................................................................................................237 s 5(2)(d).................................................................................................241 s 38........................................................................................................244 s 42........................................................................................................244 s 82(3) ...................................................................................................244 Residential Tenancies Act 1994 (Qld) ...................................233, 235, 253 s 15........................................................................................................237 ss 53–53A..............................................................................................248 s 103......................................................................................................244 s 106......................................................................................................244 ss 123A–128..........................................................................................246 ss 165–165A..........................................................................................250 s 186A ...................................................................................................246 s 284C ...................................................................................................254 s 284C(1)...............................................................................................253 s 284E ...................................................................................................254 s 284H...................................................................................................254 Residential Tenancies Act 1995 (SA) .............................................233, 235 s 5..........................................................................................................237 s 56..................................................................................................248–49 s 68................................................................................................244, 246 s 69........................................................................................................244 Residential Tenancies Act 1997 (ACT) ..........................................233, 235 s 38........................................................................................................248 ss 107E-107H........................................................................................254 Residential Tenancies Act 1997 (Vic)...............................233–35, 243, 246 Pt 2........................................................................................................243 Pt 3........................................................................................................241 Div 5 .....................................................................................................243 Pt 4........................................................................................................241 Div 5 .....................................................................................................243 s 3..........................................................................................................246 s 4..........................................................................................................237 ss 6–8 ....................................................................................................239 ss 10–12 ................................................................................................239 s 21........................................................................................................239 s 28........................................................................................................242
Table of Statutes xxxiii s 29........................................................................................................245 s 30........................................................................................................254 s 31........................................................................................................247 s 33........................................................................................................247 ss 35–36 ................................................................................................248 s 40........................................................................................................247 s 42........................................................................................................247 s 44..................................................................................................248–49 s 44(4A).................................................................................................249 s 45..................................................................................................248–49 s 46........................................................................................................248 s 47..................................................................................................248–49 s 48........................................................................................................248 ss 50–51 ................................................................................................247 s 60........................................................................................................244 ss 68–69 ................................................................................................244 s 72........................................................................................................247 ss 74–79 ................................................................................................246 s 94A .....................................................................................................242 s 95........................................................................................................247 s 97..........................................................................................245, 247–48 s 98........................................................................................................248 s 114......................................................................................................244 s 116......................................................................................................244 s 120......................................................................................................244 s 129......................................................................................................247 ss 131–34 ..............................................................................................246 s 144A ...................................................................................................242 s 146......................................................................................................247 ss 148–49 ..............................................................................................248 s 150......................................................................................................247 s 171......................................................................................................244 s 173......................................................................................................244 s 180......................................................................................................244 s 188......................................................................................................247 ss 190–193 ............................................................................................246 s 220......................................................................................................250 s 234......................................................................................................251 s 238......................................................................................................250 ss 239–40 ......................................................................................246, 250 ss 248–49 ..............................................................................................250 ss 254–255 ............................................................................................255 ss 258–259 ............................................................................................255 s 262A ...................................................................................................255
xxxiv
Table of Statutes
Residential Tenancies Act 1997 (Vic) continued s 263......................................................................................................250 ss 331–32 ..............................................................................................251 s 406......................................................................................................248 s 411......................................................................................................248 s 431......................................................................................................248 s 437......................................................................................................248 s 493......................................................................................................248 s 496......................................................................................................248 s 497......................................................................................................247 Residential Tenancies Act 1999 (NT) ............................................233, 235 s 5..........................................................................................................237 Residential Tenancies (Amendment) Act 2002 (Vic) s 26 ...................................................................................................250 Residential Tenancies (Further Amendment) Act 2005 (Vic) .................241 Residential Tenancies and Other Legislation Amendment Act 2003 (Qld) .............................................................253 Residential Tenancy Act 1997 (Tas) ..............................................233, 235 s 5..........................................................................................................237 s 10........................................................................................................241 s 20........................................................................................................248 s 32........................................................................................................244 s 38........................................................................................................246 s 64B .....................................................................................................245 Retail and Commercial Leases Act 1995 (SA) .......................................233 Retail Leases Act 1994 (NSW) ..............................................................233 Retail Leases Act 2003 (Vic)..................................................................233 Retail Shop Leases Act 1994 (Qld)........................................................233 Retirement Villages Act 1986 (Vic)........................................................242 Retirement Villages Act 1987 (SA) ........................................................242 Retirement Villages Act 1992 (WA).......................................................242 Retirement Villages Act 1995 (NT) .......................................................242 Retirement Villages Act 1999 (NSW) ....................................................242 Retirement Villages Act 1999 (Qld).......................................................242 Retirement Villages Act 2004 (Tas) .......................................................242 Trade Practices Act 1974 (Cth)..............................................................106
E UROPEAN C OMMUNITY
Council Regulation (EEC) 857/84 adopting general rules for the application of the levy in the milk and milk products sector [1984] OJ L90/13 Art 7(4) as amended by Council Regulation (EEC) 590/85 [1985] OJ L68/1 ....................131
Table of Statutes xxxv Council Regulation (EC) 1259/1999 establishing common rules for direct support schemes under the common agricultural policy [1999] OJ L160/113 Art 4 .................................................................................................141 Council Regulation (EC) 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers [2003] OJ L270/1 (2003 Horizontal Regulation)...................................................139, 143 Recital (3)..............................................................................................140 Art 2(a)..................................................................................................130 Art 2(c)..................................................................................................130 Art 10(1) ...............................................................................................141 Art 71....................................................................................................133 Annex III ...............................................................................................138 Annex IV ...............................................................................................139 Annex VI as amended by Council Regulation (EC) 319/2006 [2006] OJ L58/32.....................................................138 Council Regulation (EC) 1788/2003 establishing a levy in the milk and milk products sector [2003] OJ L270/123 Art 17(4)...........................................................................................131 Council Regulation (EC) 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) [2005] OJ L277/1 ........................................141 European Convention on Human Rights and Fundamental Freedoms (ECHR).......................................208, 212, 256 Art 6 ........................................................................................208–10, 256 Art 8................................................................xvii, 201, 208–12, 256, 258 Art 8(2) .................................................................................................211 Art 14 ..............................................................................................208–10 Protocol 1, Art 1 ...................................................................................208 Horizontal Regulation 2003. See Council Regulation (EC) 1782/2003 Treaty of Rome .................................................................................120
INTERNATIONAL
International Covenant on Civil and Political Rights (ICCPR) ..............255 International Covenant on Economic, Social and Cultural Rights (ICESCR) .................................................................255 Uruguay Round Agreement on Agriculture .............................131–33, 145 Annex 2.................................................................................................133 para 6 ....................................................................................................133 para 6(e) ................................................................................................139
xxxvi
Table of Statutes
WHO Constitution Preamble ...........................................................................................210 WTO Decision on the Doha Work Programme 2004, WT/L/579..........145
U NITED K INGDOM
Acts of Enclosure...................................................................................151 Agricultural Holdings Act 1900 ............................................................115 Agricultural Holdings Act 1906 ............................................................115 ss 2–4 ....................................................................................................115 Agricultural Holdings Act 1908 ............................................................115 Agricultural Holdings Act 1914 ............................................................115 Agricultural Holdings Act 1923 ............................................................117 Agricultural Holdings Act 1948...................2–3, 71, 115, 117–18, 120–22 s 2......................................................................................................2, 118 s 3..........................................................................................................118 s 5..........................................................................................................119 s 8..........................................................................................................119 s 24(1)–(2) .............................................................................................119 s 25(1) ...................................................................................................119 s 25(5)–(6) .............................................................................................119 s 94(1) ...................................................................................................118 Agricultural Holdings Act 1984 ............................................................119 Agricultural Holdings Act 1986 .................................11, 71, 115, 122–24, 139–40, 142–43 s 2............................................................................................................11 s 66(1) ...................................................................................................143 s 96(1) ...........................................................................................139, 141 Sch 3 Case B ...................................................................................................126 Case C ...........................................................................................140, 142 Case D...................................................................................................142 Case E ...................................................................................................142 para 9(2)................................................................................................142 para 10(1)(d) .........................................................................................142 para 11(2)..............................................................................................142 Agricultural Holdings Acts ................................................114–15, 118–19 Agricultural Holdings (England) Act 1875 ..........................11, 71, 114–15 s 20........................................................................................................115 s 51........................................................................................................114 s 53........................................................................................................114 Agricultural Holdings (England) Act 1883 ......................................114–15 s 3..........................................................................................................114
Table of Statutes xxxvii s 54........................................................................................................115 Agricultural Holdings (Scotland) Act 1991 ...................................142, 144 s 39........................................................................................................144 s 85(2A)–(2B) ........................................................................................142 Agricultural Holdings (Scotland) Act 2003............................................142 ss 40–41 ................................................................................................144 s 69........................................................................................................142 Agricultural (Miscellaneous Provisions) Act 1949 .................................120 Agricultural (Miscellaneous Provisions) Act 1954 .................................120 Agricultural (Miscellaneous Provisions) Act 1963 .................................120 Agricultural (Miscellaneous Provisions) Act 1968 .................................120 Agricultural (Miscellaneous Provisions) Act 1972 .................................120 Agricultural (Miscellaneous Provisions) Act 1976 ...........................120–22 ss 16–24 ................................................................................................121 Agricultural (Miscellaneous Provisions) Acts.................................118, 120 Agricultural Tenancies Act 1995............................12, 71, 122–24, 126, -133–35, 139–40, 142 s 1..........................................................................................................143 ss 5–6 ......................................................................................................12 ss 9–14 ....................................................................................................12 s 16..........................................................................................................12 s 20(1) ...................................................................................................143 s 38(1) ...........................................................................................139, 141 s 38(2) ...................................................................................................143 Agriculture Act 1920 .............................................................................115 s 10........................................................................................................115 Agriculture Act 1947.........................................................................2, 117 s 11........................................................................................................140 Agriculture Act 1958 .......................................................................119–20 Agriculture Act 1984 .............................................................................122 Agriculture Act 1986 .............................................................................132 Agriculture (Scotland) Act 1948 Sch 6 .................................................................................................140 Anti-Social Behaviour Act 2003.................................................204–5, 209 s 16........................................................................................................222 Arbitration Act 1996 .................................................................12, 123–24 s 28..........................................................................................................12 Artizans and Labourers Dwellings Act 1868 .........................................206 Asylum and Immigration Act 1996 .......................................................203 Capital Transfer Tax Act 1984 ..............................................................123 Civil Partnerships Act 2004...................................................................209 Common Lodging Houses Acts .............................................................192 Commonhold and Leasehold Reform Act 2002.........................................15–17, 148–49, 163, 166, 168, 175
xxxviii Table of Statutes Pt I.................................................................................................177, 181 Pt II ...............................................................................................186, 189 Ch 1 ......................................................................................................188 s 38........................................................................................................183 s 38(2)(a) ...............................................................................................183 ss 43–49 ................................................................................................181 s 49(3) ...................................................................................................182 s 51........................................................................................................182 s 51(2) ...................................................................................................182 s 51(4) ...................................................................................................182 ss 71–113 ..............................................................................................163 s 73........................................................................................................188 s 76........................................................................................................173 s 117..............................................................................................166, 175 s 119......................................................................................................166 s 120..............................................................................................166, 175 s 128......................................................................................................175 ss 131–132 ............................................................................................166 s 132(2) .................................................................................................166 s 138..............................................................................................166, 175 s 164..............................................................................................169, 176 s 166......................................................................................................169 ss 167–71 ......................................................................................168, 176 Corn Production Act 1917 ..............................................................115–16 Criminal Law Act 1977 s 6 .......................................................................................................79 Customs and Excise Warehousing Act 1869..........................................112 Defective Premises Act 1972....................................................................59 Disability Discrimination Act 1995 .......................................................210 Homelessness Act 2002 .................................................................206, 220 Housing Act 1961 s 32 ...................................................................................................196 Housing Act 1974 ...................................................................................15 Housing Act 1980 ...................................12, 15, 45, 50, 163, 197–98, 200 s 48(2) .....................................................................................................50 s 85A .....................................................................................................222 Housing Act 1985.......................45–46, 50, 56, 60, 62, 77, 163, 196, 209 s 79..................................................................................................50, 216 s 79(3) ...............................................................................................50–51 s 82A .....................................................................................................204 s 84(2) .....................................................................................................45 s 85 .......................................................................................28, 30, 45, 59 s 85(2) ...............................................................................................30, 59 s 85(3)–(4) ...............................................................................................59
Table of Statutes xxxix s 85A .....................................................................................................205 s 138......................................................................................................205 s 604........................................................................................................77 Housing Act 1988 ..................13, 45–46, 48, 50, 71, 147, 158, 198, 202–3, 206 Pt 1, Ch 2 ..............................................................................................216 Pt 4........................................................................................................203 s 1....................................................................................................50, 147 s 6A .......................................................................................................204 s 7(4) .......................................................................................................45 s 9............................................................................................................45 s 20B .....................................................................................................204 Sch 1, paras 3–3C..................................................................................147 Sch 2, ground 8 .....................................................................................227 Housing Act 1996.....................15, 71, 162–63, 165, 168, 179, 203–4, 206, 236 Pt 3..........................................................................................................16 Ch 2 ......................................................................................................216 s 81........................................................................................................176 s 85........................................................................................................162 ss 153A-E ..............................................................................................204 s 193......................................................................................................220 s 204......................................................................................................200 Housing Act 2004 .............................................77–78, 194, 206, 219, 231 ss 216–17 ..............................................................................................225 Housing Acts ...................................................................................44, 192 Housing (Homeless Persons) Act 1977 ..........................192, 197–200, 209 Housing Finance Act 1972 ....................................................................193 Housing and Planning Act 1986............................................................199 Housing (Scotland) Act 2001 ................................................................221 Housing of the Working Classes Act 1885 ............................................206 Human Rights Act 1998............................................78, 191, 208–10, 256 s 3(1) .....................................................................................................212 Inheritance Tax Act 1984 ......................................................................123 Land Registration Act 2002 ....................................................................88 s 28........................................................................................................182 Landlord and Tenant Act 1730 .............................................................113 Landlord and Tenant Act 1927 .........................................................46, 76 Pt I.....................................................................................................46, 68 s 19(1).................................................................................4, 6, 72, 75, 87 s 19(1)(A) ..................................................................................................6 Landlord and Tenant Act 1954 ....................11, 17, 44, 47–49, 52–54, 56, 62, 69–72, 88, 101–2, 109, 158 Pt I.........................................................................................................158
xl
Table of Statutes
Pt II ........................................................xiv, 2, 10, 47, 61, 68–71, 88, 118 s 2(4) .....................................................................................................173 s 23(1) .....................................................................................................49 s 23(2) .....................................................................................................50 s 24..........................................................................................................47 s 30(1) .....................................................................................................47 s 30(1)(f)..................................................................................................10 s 38..........................................................................................................47 s 38(4) .....................................................................................................89 s 38A .......................................................................................................89 Landlord and Tenant Act 1985 .............................................................168 s 8........................................................................................................7, 77 s 8(4) .......................................................................................................77 s 11 .....................................................................................7, 77, 196, 210 s 19........................................................................................................179 Landlord and Tenant Act 1987 ...............................................16, 162, 175 Pt I.................................................................................................162, 179 Pt III ......................................................................................................162 s 1............................................................................................................16 s 3............................................................................................................16 s 21........................................................................................................162 s 24A .....................................................................................................162 Landlord and Tenant Act 1988 ...................xvi, xviii, 4–5, 72, 74, 88, 100 s 1(3) .........................................................................................................5 s 1(3)(b).....................................................................................................5 Landlord and Tenant Acts .....................................................................195 Landlord and Tenant (Covenants) Act 1995 ..............................xvi–xvii, 4, 6, 74, 76, 88, 95–96, 100, 104 s 5(2) .........................................................................................................6 ss 6–8 ........................................................................................................6 s 11............................................................................................................6 ss 16–19 ....................................................................................................6 s 22......................................................................................................6, 88 s 24..........................................................................................................96 Law Commissions Act .............................................................................66 Law of Property Act 1922 Sch 15, para 10(1) ............................................................................188 Law of Property Act 1925 s 1(1) .....................................................................................................147 s 52........................................................................................................147 s 54(2) ...................................................................................................147 s 146....................................................................................................8, 80 s 146(2) ...................................................................................................79 s 146(4) .................................................................................................103
Table of Statutes xli s 146(8)–(10) .............................................................................................8 s 147..........................................................................................................8 s 153..............................................................................................180, 187 s 205(1)(xxvii) .......................................................................................147 Law of Property Act 1969.................................................................47, 70 Leasehold Property (Repairs) Act 1938 .....................................................8 Leasehold Reform Act 1967.........................14–15, 148, 160, 164, 166, 175–77, 179, 184 s 1............................................................................................................14 s 1(1)(b)...................................................................................................14 s 3 .............................................................................................................4 s 3(1) .....................................................................................................173 s 9............................................................................................................15 s 19..........................................................................................................14 s 39(1) ...................................................................................................147 Leasehold Reform, Housing and Urban Development Act 1993 .....................................15–16, 148, 163–67, 175–76, 178–79 Pt I Ch I .........................................................................................................16 Ch II ................................................................................................16, 164 Ch III.......................................................................................................15 Pt II .......................................................................................................176 s 7..........................................................................................................173 s 9(2)(a) .................................................................................................173 Sch 6........................................................................................................16 para 4 ....................................................................................................175 para 4(2A) .....................................................................................175, 180 Local Government and Housing Act 1989 s 186 .................................................................................................158 Sch 10....................................................................................................158 National Assistance Act 148..................................................................192 Protection from Eviction Act 1964..................................................79, 193 Protection from Eviction Act 1977 ..........................................................79 Public Health Act 1936 .........................................................................196 Public Health Acts .................................................................................195 Regulatory Reform Act 2001 ..........................................................71, 124 Rent Act 1957 .................................................................................68, 198 Rent Act 1965 .......................................................................................193 Rent Act 1974 .................................................................192–93, 200, 209 Rent Act 1977.............................................................................xiv, 12–13 s 5..........................................................................................................147 Rent Acts .......................................................2, 12, 14, 17, 21, 23, 43, 68, 70–71, 147, 166, 192–93, 195, 198, 213–14, 217
xlii Table of Statutes Rentcharges Act 1977............................................................................176 Repeal of the Corn Laws 1846..............................................................112 Settled Estates Act 1856 ........................................................................151 Settled Land Acts (19th Century) ..........................................................151 Statutory Instruments Agricultural Holdings (Notices to Remedy and Notices to Quit) Order 1964 ............................................................119 Agriculture (Maintenance, Repair and Insurance of Fixed Equipment) Regulations 1948 .................................................119 Common Agricultural Policy Single Payment and Support Schemes (Cross Compliance) (England) Regulations 2004, SI 2004/3196.......................................................139 Sch 7......................................................................................................139 Common Agricultural Policy Single Payment and Support Schemes Regulations 2005, SI 2005/219 Reg 11 ..............................................................................................141 Commonhold and Leasehold Reform Act 2002 (Commencement No 5 and Saving and Transitional Provision) Order 2004, SI 2004/3056...............................................168 Commonhold Regulations 2004 Reg 11(1)(b)......................................................................................182 Reg 11(2) ..........................................................................................182 Dairy Produce Quotas Regulations 2005, No SI 2005/465 Reg 14 ..............................................................................................131 Draft Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006.....................................................................143 Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 .......10, 17, 47–49, 71, 89, 97, 102–3 Art 22......................................................................................................89 Unfair Terms in Consumer Contracts Regulations 1999................................................106, 207, 218–19, 242
U NITED S TATES O F A MERICA
Anti-Eviction Act 1974..........................................................................274 Civil Rights Act 1964 ............................................................................268 Constitution...........................................................................................271 Economic Stabilisation Act 1970...........................................................273 Fair Housing Act 1968 ..........................................................................268 Federal Agriculture Improvement and Reform Act 1996.......................138 Federal Rules of Civil Procedure............................................................266
Table of Statutes xliii Summary Eviction Statute (NJ)..............................................................270 Tenement House Act 1867 ....................................................................261 Tenement House Act 1879 ....................................................................261 Tenement House Act 1887 ....................................................................261 Tenement House Act 1901...............................................................261–62 Uniform Condominium Act 1980..........................................................274 Uniform Residential Landlord-Tenant Act 1972....................................271 Voting Rights Act 1965 .........................................................................268 Wagner Steagall Act 1937......................................................................266
1 Landlord and Tenant Law: Mapping the Recent Past DEREK WOOD
T
HE PURPOSE OF this chapter is to mark out and discuss the principal developments in the law of landlord and tenant which have taken place in the last 20 or so years. It also raises some questions about developments which might take place in the future, and considers the status of this branch of the law as a subject for academic study. The chapter cannot be more than the most general review, conveying the author’s own impressions of what is important. Many of the topics raised are discussed in greater detail in later chapters. In the period in question there have been some 20 Acts of Parliament of prime significance, spanning the general law as well as the more specific areas of business, agricultural and residential lettings, and leasehold enfranchisement. But a summary of this kind cannot bind itself strictly to a 20-year time horizon. It might be easier to impose that limit on the citation of cases, rather than legislation, but across the field many important developments which started before 1985 have been continued, or in some cases continued and then reversed. A more challenging starting-point might have been the publication in 1950 of the Final Report of the Leasehold Committee chaired by Lord Justice Jenkins,1 which contains recommendations on leasehold enfranchisement, the tenure and rents of business premises, repairs and improvements. But its terms of reference excluded some topics of present-day importance, in particular residential and agricultural lettings, and it has little to say about the general law. In any case, going back a mere 20 years is quite complicated enough. The thinking of the Jenkins’ Committee nevertheless has some contemporary echoes, and some reference to their Report will be made. The overall question to be asked is whether landlords or tenants can claim that the law has been improved, either from their opposing points of 1
Lord Justice Jenkins (Chair), ‘Leasehold Committee: Final Report’ (Cmd 7982, 1950).
2 Derek Wood view, or for their joint benefit, within this broadly defined period. Has the letting market improved or deteriorated? Is it easier or harder to carry on a business or live in leasehold property? Insofar as the relationship of landlord and tenant is a perpetual power struggle, are there any clear winners or losers? The broad verdict seems to be that the law itself has been clarified and made more workable in a number of important areas; the Law Commission has not been allowed to exercise the amount of influence it should have done; parliamentary draftsmen, particularly in the field of leasehold reform, have left us with some appallingly bad drafting; and there has been significant growth in the number of specialist practitioners, and in the literature. It has not been possible to include within this review the development of the law relating to remedies. Specific performance of tenant’s covenants was reviewed by the House of Lords in Co-operative Insurance Society v Argyll Stores (Holdings),2 and the rights of tenants to obtain mandatory orders, or have receivers appointed in cases where landlords are in default of their obligations, have been expanded. Nor is there the space to discuss developments in criminal law, including harassment.
FORM AND SUBSTANCE
Just within the timescale, in Street v Mountford,3 the House of Lords had important things to say about the nature of tenancy itself. When statute law began to invade the common law relationship of landlord and tenant, beginning with the Rent Acts in the First World War, practitioners, noting that this restrictive legislation applied only to lettings, began to look for other legal relationships which, although in their substance produced the same practical result as a letting, might nevertheless be expressed in some other form. The development of the concept of the contractual licence during this period provided the obvious escape route. When security of tenure was given to farmers by the Agriculture Act 1947 (re-enacted in the Agricultural Holdings Act 1948), Parliament was already alert to this device. Section 2 of the 1948 Act provided that most licences to occupy agricultural land would automatically be converted into tenancies from year to year. The hint was not taken when Part II of the Landlord and Tenant Act 1954 gave security of tenure to business tenants; and again landlords of commercial property tried to evade the Act by granting licences. It took Jenkins LJ himself, in Addiscombe Garden Estates v Crabbe, to hold that the relationship is determined by the law and not by the label which the parties choose to put upon it.4 Lord Templeman in 2 3 4
[1998] AC 1 (HL). [1985] AC 809 (HL). [1958] 1 QB 513 528(CA).
Mapping the Recent Past 3 the later case of Street v Mountford makes it quite clear that the grant of exclusive possession for a term at a rent creates a tenancy.5 The thinking behind Street v Mountford can be linked with the law’s rejection of other devices to circumvent statutory security of tenure. To take agricultural lettings as an example, in Johnson v Moreton,6 a tenant’s covenant not to serve a counter-notice to a landlord’s notice to quit, which would have invoked security of tenure under the 1948 Act, was held to be void for illegality. A letting by an owner to a farming partnership in which the owner was one of the partners, holding a veto over serving a similar counter-notice, was overruled by the Court of Appeal in the case of Featherstone v Staples.7 In Gisborne v Burton,8 it was held that the grant of a tenancy by the landlord to his wife, with a sub-tenancy to the farmer unprotected against the freeholder, was ineffective to deprive the farmer of security of tenure. The decision of the House of Lords in Bruton v London and Quadrant Housing Trust,9 may, however, have taken the Street v Mountford doctrine one step too far. It was held in that case that the question whether the parties have created a relationship of landlord and tenant depends exclusively on the terms of the contract between them. The fact that the so-called landlord might not have a legal estate out of which a tenancy could be granted was thought to be irrelevant. The decision is controversial and can perhaps best be explained on the basis of tenancy by estoppel. The other important area in which judges have introduced a new sense of realism is in the interpretation of leases and the technical procedures involved in the service of notices, with which the law of landlord and tenant is bedevilled. In CH Bailey v Memorial Enterprises, Lord Denning MR and Sachs LJ said that a lease of business premises is to be interpreted as a commercial contract between business people.10 When a rent review was not completed until after the review date, the rent became payable retrospectively from the date of review, ancient theories about the nature of rent notwithstanding. In British Anzani (Felixstowe) v International Marine Management,11 Forbes J overthrew the theory that the rent of business premises was a special category of debt against which there could be no equitable set-off. Lord Steyn, in Mannai Investment Company Ltd v Eagle Star Assurance Company Ltd,12 has performed a similar service in relation to the interpretation of procedural notices, overruling in the process the 5 6 7 8 9 10 11 12
[1985] [1980] [1986] [1989] [2000] [1974] [1980] [1997]
AC 809 (HL) 816. AC 37 (HL). 1 WLR 861 (CA). QB 390 (CA). 1 AC 406 (HL). 1 WLR 728 (CA) 732 (Lord Denning MR), 736 (Sachs LJ). QB 137 (QBD). AC 749 (HL).
4 Derek Wood highly technical decision of the Court of Appeal in Hankey v Clavering,13 which had, in the past, supported a flourishing practice for county court advocates. The question now is: whatever technical defects a notice may have in the naming of dates, parties or property, how would the reasonable recipient of the notice interpret it? Lord Steyn’s claim, in his speech, that he was bringing a breath of commercial fresh air into a technical area of land law did less than justice to the groundbreakers who had preceded him. It may also be said that the test of the ‘reasonable recipient’ is still going to keep advocates in business. The decision does however rid the case law of some of the more shameful and unmeritorious technicalities.
ASSIGNMENT OF LEASES
A lease is a piece of property which imposes long-term contractual liabilities on the lessee. At common law the original lessor and lessee continue to be liable on their covenants for the whole of the term of the lease, however, many times the reversion or term may be assigned. Long leases of houses and flats, or of development sites, are normally freely assignable. By contrast, lettings of agricultural land and short residential lettings are normally personal to the tenant and non-assignable. There are, of course, many exceptions to this general pattern. A middle ground is occupied by leases mostly of commercial property where the tenant can assign or underlet with consent which, either by the terms of the lease or by implication under Section 19(1) of the Landlord and Tenant Act 1927, cannot be unreasonably withheld. In the marketplace, it is important that tenants of business premises should be able to assign their leases or grant underlettings, in good times and bad. Their business may be expanding or contracting. They may become insolvent. But, a landlord who has chosen his original tenant with some care has a real interest in ensuring that an assignee is of sufficient calibre to take responsibility for the premises in the original tenant’s place. The Landlord and Tenant Act 1988 and the Landlord and Tenant (Covenants) Act 1995 have profoundly changed the way in which assignments and underlettings are now handled. Before the 1988 Act came into force, tenants who applied to their landlord for consent to assign or underlet found that the landlord held all the cards. If consent was refused, the tenant had three choices: apply to the court for a declaration that consent had been unreasonably withheld, go ahead with the transaction anyway and challenge the landlord to forfeit the lease, or accept the decision and do nothing. In most cases the second course was not practical, because few prospective assignees or undertenants
13
[1942] 2 KB 326 (CA).
Mapping the Recent Past 5 would be prepared to complete in the face of a refusal, and take the chance that any later contest in court would be decided in their favour. In court, relying on the first course, the burden fell on the tenant to prove that the landlord’s consent had been unreasonably withheld, and a refusal of consent would be regarded as reasonable if a landlord, acting reasonably, might have refused consent, even if many other landlords might have given it. If a landlord was found by the court to have acted unreasonably, the tenant’s only remedy was a declaration that the transaction could proceed. The courts were sympathetic to applications for a speedy hearing, but even then, the prospective assignee or undertenant might have gone away by the time the case was finished. There being no implied covenant to give consent if it was reasonable to do so, the tenant had no remedy in damages. The 1988 Act has significantly altered the balance of power. A landlord who is asked for a decision is now under a duty to give it within a reasonable time.14 If consent is refused, or is given subject to conditions, reasons for the refusal or the conditions must be given in writing.15 A failure within a reasonable time to give any decision at all will be treated as an unreasonable withholding of consent.16 The burden is on the landlord to justify the reasons for any adverse decision.17 The landlord cannot add new reasons to the written reasons given within the initial reasonable time.18 The previous test of reasonableness has, however, remained unaltered: it is sufficient if the landlord can show that the decision adverse to the tenant was a reasonable one, even though a decision the other way might be equally or even more reasonable.19 But, a landlord who has unreasonably withheld or delayed the giving of consent is liable to the tenant in damages.20 A number of recent cases has emphasised the severity of the new regime.21 A landlord who is still tempted to play cat and mouse with the tenant may have to pay exemplary damages.22 The 1988 Act has put new burdens of responsibility on practitioners. Landlords have to be told that they must make up their minds quickly. The Court of Appeal has recently held that it is unreasonable for the tenant to expect a response within 8 days, even though the formal application had been well-documented in
14
S 1(3). S 1(3)(b). 16 Design Progression Ltd v Thurloe Properties Ltd [2004] EWHC Ch 324, [2005] 1 WLR 1. 17 Footwear Corp v Amplight [1999] 1 WLR 551 (Ch). 18 Norwich Union Life Insurance Society Ltd v Shopmoor Ltd [1999] 1 WLR 531 (Ch). 19 Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59, [2001] 1 WLR 2180 (HL). 20 Norwich Union Life Insurance Society Ltd v Shopmoor Ltd [1999] 1 WLR 531 (Ch). 21 Ibid; Footwear Corp v Amplight [1999] 1 WLR 551 (Ch); Go West Ltd v Spigarolo [2003] EWCA Civ 17, [2003] QB 1140. 22 Design Progression Ltd v Thurloe Properties Ltd [2004] EWHC Ch 324, [2005] 1 WLR 1. 15
6 Derek Wood advance,23 but the handling of these transactions has undoubtedly been sharpened up. The Landlord and Tenant (Covenants) Act 1995 has invaded the common law even more dramatically. In the case of all leases granted after 1 January 1996, tenants are released from their personal liability under the covenants of the lease after assignment, unless the assignment is unlawful or takes effect by operation of law.24 Correspondingly, a landlord may be released from its liability on an assignment of the reversion if the tenant consents, or, if consent is refused, the court permits it.25 The drafting of the Bill, however, created a political battleground, and the amelioration of the position of tenants had to be matched by concessions to landlords. First, in the case of all new leases, Section 19(1) of the 1927 Act was overridden to the extent that it is now open to the parties to lay down conditions for the granting of consent which have to be met before it has to be given; and those conditions are not subject to an overriding test of reasonableness.26 Second, the outgoing tenant may be required to guarantee the performance of the incoming tenant’s obligations under the lease, either by an express condition written into the lease or, in any case, if it is reasonable for the landlord to make that requirement.27 These conditions, ‘authorised guarantee agreements’, have become common form in commercial leasehold conveyancing, and, it may be said, have noticeably oiled the wheels in the machinery for obtaining consent to assign. The mere abolition of privity of contract would undoubtedly and rightly have hardened landlords’ attitudes to the transmission of leases. Again, under the 1995 Act, in the case of all leases, new or old, a landlord wishing to pursue a former tenant or guarantor for a ‘fixed charge’ such as rent, must serve notice of claim within 6 months of the current tenant’s default.28 If payment is made in full, the former tenant or guarantor can call for an overriding lease from the landlord.29 Third, and consistent with the decision of the Court of Appeal in Friends Provident Life Office v British Railways Board,30 section 18 of the 1995 Act provides that an original tenant or guarantor will only be liable for obligations arising under subsequent variations of the lease if the right or obligation to make variations arises out of the terms of the lease as they stood before the original tenant parted with its interest.
23
NCR v Riverland Portfolio (No1) [2005] EWCA Civ 312. Ss 5(2) and 11. 25 Ss 6–8. 26 Landlord and Tenant Act 1927 s 19(1)(A) inserted by Landlord and Tenant (Covenants) Act 1995 s 22. 27 Landlord and Tenant (Covenants) Act 1995 s 16. 28 S 17. 29 S 19. 30 [1996] 1 All ER 336 (CA). 24
Mapping the Recent Past 7 REPAIRING OBLIGATIONS
In March 1996, the Law Commission published its paper ‘Landlord and Tenant: Responsibility for State and Condition of Property’.31 The paper is an important review of repairing and similar obligations. The paper does not propose any changes to the general law relating to repairs. The rationalisation of what had previously been a highly technical area, with difficult and unconvincing distinctions between ‘repair’ and ‘improvement’, and between supervening and inherent defects, had begun with the important decision of Forbes J in Ravenseft Properties Ltd v Davstone (Holdings) Ltd,32 and was continued by Hoffmann J in Post Office v Aquarius.33 The same judge had interesting comments to make on the scope of an unusually widely drawn repairing covenant in Norwich Union Life Insurance Society Ltd v British Railways Board.34 The revised approach to the concept of repair would not protect the tenant in Credit Suisse v Beegas Nominees,35 from having to re-clad an entire building. The Law Commission’s report highlights the general absence of landlords’ implied repairing covenants outside the scope of section 11 of the Landlord and Tenant Act 1985 (leases of dwellings for terms of less than 7 years), and recommends the general implication of a repairing covenant into all leases of buildings or parts of buildings. Lettings of agricultural property and oral leases would be excluded. Second, to reverse the lamentable situation revealed in Quick v Taff Ely Borough Council,36 the Commission proposed a more general implication of an obligation on the part of residential landlords that dwellings are fit for habitation. A revision of the absurdly narrow limits within which section 8 of the 1985 Act currently operates is long overdue. The first recommendation is more controversial than the second. Indeed, the second can hardly be regarded as controversial at all, and there seems to be no reason why it should not immediately be enacted.
TERMINATION OF TENANCIES
At the beginning of 2004, the Law Commission circulated for comment its Consultation Paper ‘Termination of Tenancies for Tenant Default’.37 The different circumstances in which a lease or tenancy can come to an end 31 Law Commission, ‘Landlord and Tenant: Responsibility for State and Condition of Property’ (Law Com No 238, HC 236, 1996). 32 [1980] QB 12 (QBD). 33 [1985] 2 EGLR 105 (Ch). 34 [1987] 2 EGLR 137 (Ch). 35 [1994] 4 All ER 803 (Ch). 36 [1986] QB 809 (CA). 37 Law Commission, ‘Termination of Tenancies for Tenant Default’ (CP No 174, 2004).
8 Derek Wood (expiry by effluxion of time, notice to quit or break, surrender or forfeiture) have not changed much since Coke wrote his commentary on Littleton, and are not likely to do so. In Barrett v Morgan, Lord Millett carefully explained the difference between surrender and tenant’s notice to quit.38 The very limited circumstances in which a variation in the terms of a lease will result in an implied surrender and a re-grant of a new lease, laid down by Russell LJ in Jenkin R Lewis v Kerman,39 were emphasised in the Friends Provident case in 1996.40 The thrust of the Law Commission’s recommendations is to rationalise and streamline the law and practice relating to forfeiture and relief from forfeiture, except in the case of residential tenancies granted for a term of less than 21 years, where the doctrine of forfeiture has already been eroded. Outside housing law, the current law is dominated by section 146 of the Law of Property Act 1925, which is not universal in its application to all cases of tenant default, notably the non-payment of rent. There are special provisions about decorating and repairing obligations in section 147 of the 1925 Act and the Leasehold Property (Repairs) Act 1938. Sub-sections (8) to (10) of section 146 deal with some highly specialised cases and are obscurely drafted. The Commission suggests that denial of title should no longer be a ground of forfeiture, and that tenant’s insolvency should be dealt with separately. Those cases apart, the Commission recommends that the existing procedure should be replaced by a new procedure, beginning with the service of a notice of default and leading to the making of an unconditional or conditional termination order by the court. The Commission proposes that the doctrine of waiver as such should be abolished, but would permit the court to take into account the conduct of the landlord, including conduct which would reasonably lead the tenant to believe that an act of default would not be fatal to the continuance of the tenancy, in deciding whether or not to grant a termination order. It is correct that the doctrine of waiver sometimes unfairly deprives the landlord of a right of forfeiture. Waiver by acceptance of rent, with knowledge of the breach, is a conspicuous example now that many tenants pay their rent electronically. The proposals would also improve the current system of vesting orders in favour of underlessees, and they deserve our support. BUSINESS TENANCIES
The leasehold system is fundamental to the efficient functioning of the nation’s business. Not many of the people conducting business in commercial property own the freehold. The overwhelming majority of shops, 38 39 40
[2000] 2 AC 264 (HL) 270–72. [1971] Ch 477 (CA). [1996] 1 All ER 336 (CA) 344–45.
Mapping the Recent Past 9 offices and industrial and warehouse property, whether they are situated in town centres or business parks, are held on leases. The system is attractive to the business community, because it does not tie up large amounts of capital which can be better deployed elsewhere. Correspondingly the ownership of business premises for letting has become an attractive vehicle in the investment market. For most of the time over the past 20 years, it has outperformed investment in equities, bonds and gilts. The lease is also an important financial instrument in the funding of redevelopment schemes. The ultimate funder may be a bank, pension fund or similar institution, securing its capital advances to a developer by owning the freehold and taking its return through rental receipts. Town centre sites owned by local authorities are commonly redeveloped under building agreements with developers, leading to the grant of a long lease reserving as rent a stated percentage of the net profits receivable from tenants of individual units. There are, of course, many other financial structures, but these forms of leasing, and variants upon them, are a common market phenomenon. Despite market anxieties at the end of the 1980s and the beginning of the 1990s, investors have shown a marked preference for occupational leases taken for terms of between 15 and 35 years with upward-only rent reviews. When rent review clauses were introduced in the 1960s and 1970s, reviews usually occurred at intervals of 7 years, the terms of leases having been commonly fixed as multiples of seven. Five is now the preferred frequency. Rent review is such an important feature of the commercial property market, that it is not surprising that it has generated a large amount of case law and, within the valuation profession, greater sophistication in professional practice. Typically, a rent review is triggered by one party (usually the landlord) giving notice to the other. At the beginning of the period under review in this chapter, there was considerable discussion over whether time was of the essence for the giving of a notice, and whether a notice did or did not comply with the formal requirements laid down, or apparently laid down, by the terms of the particular lease in question. Draftsmen of rent review clauses have become aware of the problems, and they now rarely arise. In the last 20 years, the valuation formula has become much more a focus of attention. There is a fiction involved. Under the terms of the actual lease, the actual tenant whose rent is being reviewed will, of course, remain in possession for the residue of the term, paying the reviewed rent. The valuation, however, assumes a new letting with vacant possession, the actual tenant having notionally vacated. The terms of the new letting are normally prescribed as being the same as those of the actual lease, except as to the amount of rent itself. Where there is an ambiguity, courts have insisted that, so far as possible, the terms of the existing lease must be implied into the hypothetical lease. Its duration will be the same as the unexpired residue of the actual term; rent reviews will occur at the same frequency; and all the
10 Derek Wood terms and conditions will be the same. The decision of the Court of Appeal in Basingstoke and Deane BC v The Host Group,41 exemplifies, but by no means exhausts, the large amount of case law on this subject. One particularly tricky issue, which has infuriated landlords, is the matter of the discount which would normally be allowed to a new incoming tenant taking the premises vacant, to allow for fitting-out and setting-up. The discount is deducible from comparable lettings in the market; but landlords would say that this is inappropriate when the party paying the rent is an actual tenant already comfortably established in continuing occupation. This problem too has tested the ingenuity of draftsmen and the courts.42 Upward-only rent reviews have been seen as particularly irksome by retail tenants, especially at times when the retail market has been falling. The government has twice set up working-parties to consider how this position might be ameliorated, requesting the property industry to come to some voluntary solution, and uttering veiled hints that, in the absence of voluntary agreement, it might make upward-only rent review clauses illegal. A voluntary system has been demonstrated by the University of Reading on two occasions, not surprisingly, to be unworkable.43 The market has for the most part ignored it, except where tenants have been in a sufficiently strong bargaining position to negotiate open rent review terms for themselves. This history is discussed by Sandi Murdoch in more detail in chapter 4. A statutory prohibition on upward-only rent reviews would be a most surprising intervention in what is essentially an open commercial market. It would have a profound effect on yields, significantly undermine confidence in investment and lead landlords (whenever they could) to demand a higher base rent at the beginning of the lease. Prospective statutory intervention of this kind would stand in crude contrast with the extraordinary resilience of Part II of the Landlord and Tenant Act 1954, perhaps the most successful brainchild of the Jenkins Committee. The Act has achieved an almost impossible balance between giving security and continuity to business tenants and, by ensuring that lease renewals are always on market terms, maintaining reversionary values. It has not, because of section 30(1)(f), stood in the way of redevelopment. It is not surprising that it ran unamended until 1969, and since then, has been significantly altered once by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. The main effect of the Order was to relax many of the procedural requirements concerning the giving of notices and counter-notices and to allow both parties a greater procedural opportunity to protect their position, either in getting a new tenancy or having it refused. 41
[1988] 1 WLR 348 (CA). Broadgate Square plc v Lehman Bros Ltd [1995] 1 EGLR 97 (CA). N Crosby, C Hughes and S Murdoch, Monitoring the Code of Practice for Commercial Leases (Interim Report) (London, ODPM, 2004); N Crosby, C Hughes and S Murdoch, Monitoring the 2002 Code of Practice for Commercial Leases (London, ODPM, 2005). 42 43
Mapping the Recent Past 11 It was well known in insurance circles that failure to comply with the strict time limits laid down by this Act, in its original form, was a fruitful source of claims against solicitors. The Order also made some perhaps over-elaborate changes to the rules for the charging of a revised interim rent while proceedings for a new tenancy are on foot. Notwithstanding the easier processes now available for contracting-out of the 1954 Act, it still applies to most business tenancies and will continue, in my view, to act as a stabilising influence in the market.
AGRICULTURAL HOLDINGS
The important sector of business property unaffected by the 1954 Act is agricultural land. The Agricultural Holdings Act 1986 was a consolidating Act, bringing together a code of statutory protection for tenant farmers and their families which had been developed since the Second World War. For centuries, the standard form of letting agricultural land has been the tenancy from year to year, commencing either at the beginning of the growing season (Lady Day) or after harvest (Michaelmas). Tenancies from year to year may be terminated at common law by a 6 months’ notice to quit expiring on an anniversary. This period was extended to 12 months by statute in 1875,44 but the tenure of farmland was otherwise precarious. Compensation on quitting for growing crops, improvements and other tenant right matters had been governed from time immemorial by custom, and also attained statutory recognition in 1875. In his speech in Johnson v Moreton, Lord Salmon eloquently explained why that system had to be changed.45 The 1986 Act then brought into one place the elaborate system of security of tenure enjoyed by tenant farmers introduced in 1947 and 1948. This system of security placed considerable restrictions on the circumstances in which a notice to quit could take effect, and was reinforced by dispute-resolution procedures which were unnecessarily complicated. On top of that, the 1986 Act consolidated the significant rights of succession, on the death or retirement of the tenant, which had been acquired in 1976 and 1984 by members of the tenant’s family who had been working on the farm. In 1995, it was considered that the pendulum had swung too far. Rights of succession could be exercised by two generations after the original tenant. The statutory conversion of most licences into tenancies under section 2 of the 1986 Act was catching many owners and, indeed farmers, by surprise. Parliament had decided not to close the loophole of an unprotected letting of a farm for a fixed term of between one and two years. 44 45
Agricultural Holdings (England) Act 1875. [1980] AC 37 (HL) 52.
12 Derek Wood Otherwise, owners were turning more and more to other commercial arrangements, such as contracting or management agreements, and the supply of land for letting was drying up. The Agricultural Tenancies Act 1995, applicable to all but a few new tenancies granted after 1 September 1995, has changed the picture completely. With some statutory modifications, contracts of tenancy now mean what they say. If they are granted for terms of two years or more, they will continue after the term date as tenancies from year to year, but may be determined by not less than 12, nor more than 24, months’, notice to quit.46 There is a statutory right to rent review, unless it has been expressly excluded or expressly provided for under the terms of the tenancy.47 The traditional right to remove fixtures and claim compensation on quitting is retained.48 There are no rights of renewal, much less succession. Disputes are simply resolved under the Arbitration Act 1996.49 The 1995 Act is said to have introduced much greater freedom into the agricultural letting market and created a much more straightforward relationship between owner and farmer. Having for more than 40 years enjoyed substantially greater security of tenure than tenants of other business premises, tenants under farm business tenancies introduced by this Act enjoy far less.
RESIDENTIAL LETTINGS
Similarly, there has been a considerable re-balancing in the protection given by statute to short-term residential tenants. Protection under the Rent Acts reached its zenith in the Rent Act 1977. The number of tenants who continue to be protected by the 1977 Act is dwindling, and that and earlier Acts did not apply to tenants of public sector landlords. In their unadulterated form, the Rent Acts strongly protected tenants and members of their family. Grounds for possession had to be made out in court, and even if a ground was established, possession would not be ordered unless it was reasonable to do so. The practice among county court judges, with famous exceptions, was to exercise that discretion in favour of the landlord very sparingly. A number of important changes occurred in quick succession and sometimes simultaneously. In altering the balance of power between council tenants and local authorities, the Conservative government by the Housing Act of 1980 gave tenants the right to buy their houses and the right to acquire long leases of their flats. They also gave them, under their existing tenancies, a measure of security of tenure approaching that enjoyed by tenants protected by the Rent Act. 46 47 48 49
Ss 5–6. Ss 9–14. S 16. S 28.
Mapping the Recent Past 13 To encourage investment in residential property for letting, new forms of unprotected tenancy have become available: shorthold, assured, and assured shorthold. In other cases, there is security of tenure analogous to, but not as sweeping as, that provided by the Rent Act 1977, notably under the statutory periodic tenancies arising under the Housing Act 1988. Rent control has also been relaxed. Other structural changes have taken place. Insofar as they were not divested of their estates by the right to buy, many local housing authorities have transferred their stock to housing associations, and the old-fashioned council tenancy is becoming a thing of the past. The ability to create private residential lettings outside the scope of the Rent Act produced for a while a strong investment market for individuals, buying houses and flats for letting, until the market became glutted. Judges have become attuned to the new climate. In particular, practitioners have noticed that judges are markedly more willing now to grant orders for possession, even under the Rent Act, noticing, no doubt, that Parliament does not attach the same sanctity to security of tenure as it previously did. The effect of these changes is that housing law has become highly fragmented during the last two decades, and the Law Commission’s current overhaul is timely.50 No one will be more conscious than the Commissioners, however, of the fact that the law of housing goes far beyond sound economic and social policy. It arouses strong political passions and is, unfortunately, one of those many areas in which politicians may seize the opportunity to make a name for themselves. This weakness is exemplified by the story of leasehold enfranchisement, which is now discussed in a little more detail.
LEASEHOLD REFORM
The attitude of policy-makers of all political persuasions to the long leasehold tenure of houses and flats stands in strong contrast to their treatment of all other kinds of letting. The standard model for home ownership is the fully fledged freeholder, with or without mortgage. If long leaseholders are to be compared with that model, they are at an obvious disadvantage which affects their security of tenure, their long-term financial prospects and any thoughts they might have about their heirs. A lease is a wasting asset. Its value ebbs away, back into the reversion, as the term draws down. The trend of legislation has been to reverse that flow. The desire of householders in leasehold estates or 50 Law Commission, ‘Renting Homes–1: Status and Security’ (CP No 162, 2002); Law Commission, ‘Renting Homes–2: Co-occupation, Transfer and Succession’ (CP No 168, 2002); Law Commission, ‘Renting Homes Law’ (Law Com No 284, Cm 6018, 2003).
14 Derek Wood blocks of flats to exercise greater control over the management of their property and its environment has also had a part to play. It may not be an exaggeration to say that the ownership of the freehold reversion to a residential long lease by a landlord who is at arm’s length from the tenant is now viewed as a politically unacceptable form of investment.51 The narrative of the enfranchisement of houses, compared with flats, is longer and more complete, and illustrates the point. After 80 years of public debate, beginning with the report of the Royal Commission on the Housing of the Working Classes 1884–85 (which by a majority supported it) to the Jenkins Committee reporting in 1950 (which by a majority opposed it), a Labour government in 1967 introduced leasehold enfranchisement for houses. The outline of the Leasehold Reform Act 1967 is well known. A tenant of a leasehold house, occupying the house as his residence, was given the right to acquire ‘on fair terms’ the freehold or an extended lease of the house and premises where the tenancy was a long tenancy at a low rent, and the rateable value of the house and premises was below the limits of the same rateable values which set the boundary for the application of the Rent Acts. A tenancy was a long tenancy if its term exceeded 21 years.52 The rent was a low rent if the amount payable was less than two-thirds of the rateable value on the appropriate day for determining it.53 The tenant could choose between acquiring the freehold or an extended lease for an additional term of 50 years.54 When he made his claim, he must have been occupying the house in right of the tenancy as his only or main residence for the last 5 years, or for periods amounting to 5 years in the last 10 years.55 This residency test ensured that a tenant could not claim rights under the 1967 Act in respect of more than one house, and that a claim could not be made by a corporate entity which was incapable of ‘residing’ according to the meaning attached to that word in the Act. The criticism that the anticipated break-up of leasehold estates would destroy the running of the positive covenants which enhanced their upkeep and appearance was met, at least in part, by allowing the landlords of such estates to impose approved management schemes on the new freeholders.56 The price payable on the acquisition of the freehold (which unsurprisingly turned out to be far and away the more popular claim) was based upon the somewhat woolly philosophy that ‘the land belongs in equity to the land owner and the house belongs in equity to the occupying leaseholder’. This was translated into law by providing that the tenant would pay a price for the freehold reversion based upon a number of assumptions including 51 52 53 54 55 56
See ch 9 by David Clarke and ch 12 by Marcia Neave. Leasehold Reform Act 1967 s 3. S 1(1)(b). S 1. Ibid. S 19.
Mapping the Recent Past 15 especially the assumption that the property was sold subject to the existing lease extended for another 50 years after its term date.57 Since 1967, the cause of leasehold enfranchisement has flourished. Under the Housing Act 1974, introduced as a Bill by a Labour government and adopted by a Conservative government, more houses were brought within the scheme by an increase in the qualifying rateable value limits, but with a technical adjustment favouring landlords in the method of valuing houses within the upper band. Another Conservative government, in its Housing Act 1980, which had conferred the ‘right to buy’ on council tenants, reduced the 5-year residential qualification to three, to bring it into line with the ‘right to buy’ provisions. Two further Conservative measures increased enfranchisement rights. Under the Leasehold Reform, Housing and Urban Development Act 1993 (Part I Chapter III), all houses were brought within the scheme of enfranchisement, irrespective of their rateable value or any other previously applicable financial limit, and a new ‘low rent’ test was accordingly introduced. A partial counter-measure was a further adjustment of the valuation formula in favour of landlords. The Housing Act 1996, among other things, removed altogether the ‘low rent’ test where the tenancy was for an original term of over 35 years and was not for other reasons excluded from the Act. The final chapter of this part of the history is set out in New Labour’s Commonhold and Leasehold Reform Act 2002, under which the residence test was abolished altogether (except in two highly specific cases). In the meantime, the 1993 and 1996 Acts had reformed and simplified the arrangement for introducing schemes of management. The effect of the abolition of the residence test is profound. It means that corporate, as well as individual long leaseholders, can enfranchise and that any long leaseholder can enfranchise as many properties as he, she or it holds under long leases. This is far removed from the perhaps rather commonplace ideas which underpinned the 1967 Act. Housing land, whether it consists of an individual plot or a significant residential estate, is unlikely in the future to be developed or held under the long leasehold system, even if the individual residents in actual occupation are short-term tenants paying a periodic rack rent or its equivalent. The story behind the enfranchisement of flats is equally dramatic. The 1967 Act only applied to houses, and there was an amount of case law which centred on the meaning of the word ‘house’. This sub-branch of litigation continues to flourish.58 But the authors of the 1967 Act balked at the enfranchisement of flats. In the 1980s, when long leasehold ownership of flats became increasing popular, pressure from tenants at the unsatisfactory way in which some properties were managed by corporate landlords 57 58
S 9. Malekshad v Howard de Walden Estates Limited [2002] UKHL 49, [2003] 1 AC 1013.
16 Derek Wood resulted in the setting up of a Committee of Inquiry under the chairmanship of Mr Edward Nugee QC.59 Its report in 1985 recommended greater statutory control over management and the levying of service charges. These recommendations were carried into another Conservative measure—the Landlord and Tenant Act 1987—together with an early attempt to give residents the right, under certain circumstances, to acquire the freehold from their landlord. The notoriously badly drafted 1987 Act, rushed onto the statute book before a general election, was considerably amended, expanded and reinforced by Part III of the Housing Act 1996. The essence of the right conferred by the 1987 Act was a ‘right of first refusal’, enabling tenants of blocks containing two or more flats to acquire the reversion or, if it became necessary, to recapture it when the landlord disposes of his interest. The Act is brought into play if more than half of the flats in the block are occupied by tenants who do not fall within narrowly drawn categories.60 The Act is full of exceptions and procedural hazards. For instance, the purchase is effected through a nominee, the price payable is the price at which the landlord is willing to sell, and if the landlord’s offer is rejected, there is a restriction on selling to a third party at a lower price. This Act is, however, much overshadowed by the provisions for collective enfranchisement of blocks of flats, and the rights of individual leaseholders to claim extended leases of their flats, under Chapters I and II of Part I of the Leasehold Reform, Housing and Urban Development Act 1993 as significantly amended by the Commonhold and Leasehold Reform Act 2002. The broad effect of the 1993 Act was to enable tenants of blocks containing two or more flats to acquire the freehold if at least 75 per cent of the internal floor space of the building was used for residential purposes, and at least two-thirds of the flats within it were held by ‘qualifying tenants’, that is to say tenants with long tenancies who were not business tenants. The price payable was the aggregate of the freeholder’s current interest in the premises, one-half of the marriage value, that is, the increased value attributable to the freehold by virtue of the participating tenants being able to grant themselves extended rights, plus any additional compensation for the loss in value of other property.61 Under Chapter II of the 1993 Act, qualifying tenants could add another 90 years to the term of their existing leases, upon payment of suitable compensation. The 2002 Act significantly enlarged the scope of these rights by applying the scheme to buildings with a greater non-residential content, narrowing the scope of an exemption in favour of resident landlords and above all by
59 Nugee Committee, Report of the Committee of Inquiry on the Management of Privately Owned Blocks of Flats (HMSO, London 1985). 60 Ss 1 and 3. 61 Sch 6.
Mapping the Recent Past 17 abolishing any requirement that a qualifying tenant must satisfy a test of residence. As in the case of houses, the 2002 Act has opened up the prospect of enfranchisement of more than one property, and by corporate entities as well as individuals, although in somewhat different terms. The 2002 Act envisages that the right of collective enfranchisement will be exercised by a nominee Right to Enfranchise (RTE) company. The drafting of both Acts has generated a great deal of professional criticism. Much of the case law has been bound up with arguments about the technical requirements relating to notices and counter-notices, quite against the spirit of Mannai and the philosophy underlying the Regulatory Reform Order of 2003, which smoothed out the procedures under the 1954 Act. The whole of the legislation falling under the general heading of ‘enfranchisement’ has been characterised by a determination to drive the long leasehold landlord out of business, with little or no regard to the need to frame the law in an intelligible and workable form.
LITERATURE
The continuing importance of leases in every branch of the property market, and the huge growth in legislation which has been referred to, have brought about a corresponding expansion in the literature on the subject. A compact and complete library for a practitioner in the law of landlord and tenant would previously have included Woodfall and Hill and Redman, each bound in two volumes. Outside Woodfall, the most reliable guide to the law and practice under the 1954 Act was to be found in the now superseded County Court Practice. There were Scammell, and Jackson and Muir Watt, on agricultural holdings, and of course Megarry on the Rent Acts. Woodfall is now a four-volume encyclopaedia. Hill and Redman runs to six volumes plus a Special Bulletin. Megarry has acquired an additional volume. The Rent Review Handbook is another encyclopaedia. Dowding and Reynolds have published a substantial text book on Dilapidations: The Modern Law and Practice. Reynolds and Clark have produced a comparable volume on the Renewal of Business Tenancies. There are two important text books on leasehold enfranchisement. Under the general title of Landlord and Tenant, the author’s chambers’ library lists 58 titles, plus ten on housing law, headed by Arden and Partington’s magisterial loose-leaf volume and the five-volume Encyclopaedia. Works on agricultural holdings are additional to these numbers. Andrew Arden began to publish his important series of Housing Law Reports in 1981. James Muir Watt initiated the equally brilliantly edited series of Estates Gazette Law Reports in 1985, nearly half of which are devoted to the law of landlord and tenant. In 2000, the Landlord and Tenant Reports themselves were started by Sweet and Maxwell, and there is now a Landlord and Tenant Law Review.
18 Derek Wood This naturally leads to the question whether there are any parts of the subject which can sensibly be taught on law degree courses. It must be obvious that no one studying land law can afford to be ignorant of the importance of leases and tenancy agreements in every branch of property. In some ways, a knowledge of the working of the leasehold market may be more important for business studies or land economy. Conceptually, an academic teacher of law might say that the law of landlord and tenant is merely a branch of the doctrine of estates. It is essentially a subject for practitioners (conveyancers or litigators) and it would be true to say that a student cannot get very far into the subject before drowning in its practical complexity. For those who practise in the area, it creates severe intellectual challenges; and while it may not stand on the same level, from a student’s point of view, as the core topics of contract, tort and equity, it possesses a unique blend of property and contract law—to say nothing of statutory interpretation—which makes it more interesting than some of the other down-to-earth subjects appearing on current syllabuses. The development of this branch of the law is also a part of our social history. The question is finely balanced.
FUTURE DEVELOPMENTS
Finally, to return to the market and the world of the practitioner, some brief remarks can be made about possible future directions for the development of the law. It is possible that a period of great change has come to an end. Landlords and tenants generally are not looking for further major shifts in the balance of power. But, that is to ignore the trouble-making potential of flat-dwellers. The law undoubtedly needs more tidying-up. The Law Commission is looking at the termination of tenancies and the codification of housing law. Its existing work on repairing obligations deserves parliamentary time. The trend against technicality, and towards reducing the significance of technical defects in the drafting of notices and the strict observance of procedural timetables, should continue. The rules for the collective and individual enfranchisement of long leases of flats have created the most conspicuous mess and should be revised. On the ground, beyond the realm of policy, the relationship between individual landlords and their tenants will, we may be sure, be as lively and as quarrelsome as it always has been.
2 Street v Mountford Revisited SUSAN BRIGHT 1
INTRODUCTION
A
COLLECTION OF papers looking at ‘landlord and tenant law: past, present and future’ should not fail to look at the impact of the decision of the House of Lords in Street v Mountford.2 Without doubt, it is one of the most important cases in this area over the last 100 years as it deals with the central question of when an occupation agreement is a tenancy. The ratio of Street v Mountford is narrow. Mr Street granted Mrs Mountford the right to occupy rooms for a weekly rent, subject to termination by written notice. The terms were set out in a written agreement, which was called a ‘licence’. It was conceded that Mrs Mountford had exclusive possession. The House of Lords held that this agreement was a tenancy: the parties were not free to attach their own label to the agreement. As Lord Templeman said, if ‘the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence’.3 There was no doubting that a contract existed; that Mrs Mountford had exclusive possession; that a rent was agreed; or, that there was a term. All the case is authority for, therefore, is that if there is a written agreement between an owner and occupier which confers exclusive possession at a rent for a term, the parties cannot chose to call this a licence if it is otherwise a tenancy. Street v Mountford has, however, acquired an importance beyond this narrow point. This is for two main reasons. The first is that Street v Mountford is often understood to stand for propositions that are wider than the actual ratio. Lord Templeman’s speech was not confined to
1 Many thanks to Ben McFarlane for his willingness to listen and help with the ideas expressed here as they took shape. 2 [1985] 1 AC 809 (HL). 3 Ibid, p 819.
20 Susan Bright ‘labelling’ cases: he discussed, as if governed by the same legal principles, cases in which there was no formal agreement between the owner and the occupier and no label attached to the relationship by the parties.4 In addition, Lord Templeman rejected the approach taken by a long line of cases on the lease–licence distinction which had attached pre-eminence to whether or not the parties intended to create a tenancy or only a ‘personal privilege’. These pre-Street v Mountford cases had supported the view that there would not be a tenancy if the parties did not agree to create one. In Murray Bull & Co v Murray,5 a company director stayed in occupation of his residential flat after his employment ended, under an express agreement with the company that he would stay as a quarterly tenant until he found somewhere else, or until the company needed the flat. Both parties had agreed that he should not be a controlled tenant. This was upheld by McNair J as a licence on the basis that ‘both parties intended that the relationship should be that of licensee and no more, though they may not have used that precise term’.6 In Street v Mountford, Lord Templeman said that Murray Ball was wrongly decided. Exclusive possession, not intention, is the key. Quoting Windeyer J in Radaich v Smith, Lord Templeman said: ‘a legal right of exclusive possession is a tenancy . . . .’7 The result is that Street v Mountford is often thought to stand for the dual propositions that the grant of exclusive possession for a term creates a lease, and that the parties’ intentions are relevant only to show an intention to create legal relations and an intention to confer exclusive possession on the occupier. It is exclusive possession that is emphasised, not intention. The danger of articulating things this way is that it underplays the role that the intention of the parties still does play in categorising the relationship: there are many cases where an occupier enjoys exclusive possession but does not have a (meaningful) tenancy because the parties do not intend to create one. It is not enough to simply know whether there is a licence or a tenancy; it really matters to an occupier to know the type of tenancy involved. In many of the difficult cases looked at in this chapter, the occupier has a ‘tenancy at will’. This is not a meaningful tenancy in any sense. It is not proprietary as it is not an ‘estate in land’, and it is not a tenancy that attracts statutory protection (except (probably) in the private residential sector).8 So, although technically a tenancy, it makes little difference to the occupier whether it is called that or a licence.
4 5 6 7 8
Such as: Marcroft Wagons Ltd v Smith [1951] 2 KB 496 (CA). [1953] 1 QB 211 (QBD). Ibid, p 217. [1985] 1 AC 809 (HL) 827; Radaich v Smith (1959) 101 CLR (HC) is an Australian case. Francis Jackson Developments Ltd v Stemp [1943] 2 All ER 601 (CA).
Street v Mountford Revisited 21 As will be seen below, the courts in many modern cases still say that ‘the agreement can, and should, take effect in the way the parties intend’.9 The challenge is to explain how it can be true both that the parties cannot choose to call a tenancy by another name, and that in cases undoubtedly involving exclusive possession the courts will find that there is no meaningful tenancy, if the parties clearly do not intend to create one. Street v Mountford has also assumed significance beyond the labelling point because of the obiter remarks of Lord Templeman when he said that ‘the court should . . . be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts’.10 This has provided later courts with a weapon to draw against more crafty ways of trying to avoid the housing controls. In revisiting Street v Mountford, the first part of this chapter (Part A) will discuss those cases in which an occupier enjoys exclusive possession but does not have a (meaningful11) tenancy, and which, therefore, sit uncomfortably with the wider perception of what Street v Mountford stands for. The second part of the chapter (Part B) will then turn more specifically to consider the impact that Street v Mountford has had on the ‘core Street v Mountford cases’, namely those in which the parties have entered into a written occupation agreement.
PART A: STREET V MOUNTFORD, MOVING IN AND STAYING ON
As mentioned above, Street v Mountford was a simple case where the parties had entered into a written agreement governing the terms of the occupation. Often this does not happen. The occupier may simply move in, and start paying rent on a regular basis, with relatively little (if any) discussion of other terms and with no documentation.12 Uncertainty can also arise at the other end of the relationship. The tenancy comes to an end, but the occupier stays in possession and continues to pay a periodic rent to the owner, without there being any new agreement. In these cases, as there is no document setting out what has been agreed, the question as to the nature of the occupation has to be worked out from what is known. It is tempting to say that what matters is simply finding out if there is exclusive possession or not. As there often will be exclusive possession, the fact that a periodic rent is being paid shows both that there is an intention to create legal relations and can be used to infer that the occupier has a periodic tenancy. This is often taken to be the historic approach 9
Newham LBC v Hawkins [2005] EWCA Civ 451 [36] (Arden LJ). [1985] 1 AC 809 (HL) 825. 11 See text accompanying n 8. 12 Although rent is not necessary for a tenancy it usually indicates contractual intent, which is necessary. 10
22 Susan Bright which appeared to focus upon the known facts, and used these to create a presumption of a periodic tenancy (both in the moving in and staying on cases).13 So, for example, in Doe v Batten, where the owner accepted ‘rent’ from a former tenant, it was said that the occupier would get a new tenancy, unless the owner could prove that he had made it clear that he was intending to recover possession and that the ‘rent’ was accepted only as ‘mesne profits’.14 But, this has only ever been a presumption. Even in the case of Doe d Lord v Crago,15 which is often cited in support of this common law presumption, it was expressly stated that it was open to the owner to avoid the implication of a periodic tenancy by giving some other explanation as to the basis upon which he was receiving rent. As Nicholls LJ said in Javad v Aqil, the law steps in to fill in the gaps, however, where there is evidence of what the parties intended, the law does not need to look only to the facts of exclusive possession and periodic payment to fill them in.16 What the parties intend has always been at the heart of categorising the relationship. Only if there is an unexplained payment of rent coupled with exclusive possession, would the courts use the presumption to infer a periodic tenancy. This presumption is seldom used nowadays.17 In most cases, the wider context and discussions between the parties provide an explanation as to the basis upon which the rent is being paid. The more modern approach still asks the same basic question: quo animo (with what intent is the rent received). However, the answer usually found in recent cases is that the payment is not for a periodic tenancy. Instead, the courts tend to find that there is only a licence or tenancy at will (especially if the parties are still trying to agree terms). The biggest change that has occurred is that the courts now take into account the statutory regimes that apply to tenancies in working out what the parties intended. The meaning of finding a tenancy has changed with the introduction of statutory security of tenure. Where a tenancy would attract protected status (giving the occupier a right to remain beyond what has been agreed between the parties), the courts are much less likely to find that this is what the parties intended where it is clear from the context that the arrangement is only
13 For instance, see: Cole v Kelly [1920] 2 KB 106 (CA) 132: ‘... a holding over with the consent of the landlord prima facie gives rise to a tenancy at will, which by subsequent payment of rent may be converted into a tenancy from year to year.’ 14 Doe d Cheny v Batten (1775) 1 Cowp 243, 98 ER 1066. Mesnse profits are damages or restitutionary payments for occupation without consent. 15 6 CB 90, 98; 136 ER 1185, 1188 (Wilde CJ): ‘. . . it is competent to either the receiver or payer of such rent to prove the circumstances under which the payments as for rent were so made, and by such circumstances to repel the legal implication which would result from the receipt of rent, unexplained.’ 16 Javad v Aqil [1991] 1 WLR 1007 (CA) 1012. 17 In Javad v Aqil [1999] 1 WLR 1007 (CA), Nicholls LJ described it as an arid issue as to whether the ‘so-called “old common law presumption’ ‘no longer exists or is virtually never used in practice’ (p 1017).
Street v Mountford Revisited 23 intended to be a temporary or interim one. This is an explicit part of the judicial reasoning in many cases. In Javid v Aqil, Nicholls LJ states that the parties: cannot sensibly be taken to have agreed that [the occupier] . . . shall have a periodic tenancy, with all the consequences flowing from that, at a time when . . . he has been permitted to go into possession or remain in possession merely as an interim measure (emphasis added).18
This approach sits rather uncomfortably alongside Street v Mountford, which clearly states that it is not up to the parties to attach their own label to an occupation agreement. Lord Templeman’s comments in Street v Mountford that ‘the Rent Acts must not be allowed to alter or influence the construction of an agreement’,19 also look strange alongside the clear acknowledgement in the moving in and staying on cases that the fact that a tenancy would attract protected status for the occupier makes it less likely that the parties would intend a periodic tenancy. One way of explaining the different approaches is to say that Street v Mountford is simply an authority on how to categorise a written agreement intended to govern a new occupation relationship; it has nothing to say about the ‘staying on’ cases, or the cases where an occupier simply moves in without anything being recorded in writing. This is true as a matter of strict authority: it is important to understand that Street v Mountford is only a case to do with ‘labelling’. But, this answer ignores the fact that the emphasis given both to the parties’ intentions, and the statutory context in these cases appears to run against the spirit of what Lord Templeman said in Street v Mountford. Moving in Cases and Doctrine Much of this tension can be removed by returning to some basic doctrinal issues. In Street v Mountford, Lord Templeman stated that ‘the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent’ (emphasis added).20 In most of the moving in and staying on cases where the occupier has been held to be only a licensee or a tenant at will, the parties are still trying to sort things out. The fact that the parties have not reached a settled agreement and only intend the present arrangement to be temporary, supports the idea that 18 Ibid, pp 1012–13. See also: Cardiothoracic Institute v Shrewdcrest Ltd [1986] 1 WLR 368 (Ch) 378; Sopwith v Stutchbury (1985) 17 HLR 50 (CA) 74; Parker v Parker [2003] EWHC 1846 [268]. 19 [1985] 1 AC 809 (HL) 825. 20 Ibid, p 826. In order for there to be a ‘term’, the beginning, duration and end-date of the lease must be ascertainable at the commencement of the lease. A renewable term (period) is allowed, but the parties must then have agreed that this period is the term of the lease. If the parties have simply agreed that the occupier can stay until they agree ‘x’, this is not a term.
24 Susan Bright there is no ‘term certain’. One of the leading moving in cases is Javad v Aqil.21 In this case, the landlord allowed the business tenant into the premises because he had nowhere else to go, and ‘the landlord took pity on him.’ The tenant paid £2,500 ‘as rent for three months in advance’, but, the plan was always to negotiate for the grant of a 10 year lease. It was understood that the ‘property was to be returned to the landlord if the parties were unable to agree terms.’ So, if we ask what the parties intended, the correct answer was surely that they intended that the occupier could stay whilst they sorted out the lease, but that if the negotiations broke down, the occupier would have to leave. The occupier enjoyed exclusive possession and paid rent, but the parties never intended the interim arrangement to be a tenancy. In doctrinal terms, there was no term. It would be wrong to infer from the rental payment that they intended a periodic tenancy, as they clearly did not mean for the occupier to have the right to stay for successive periods subject only to notice to quit being served.22 The old presumption that a rental payment creates a periodic tenancy cannot be used in the face of an explicit agreement to the contrary. If there is no term certain, there can be no (meaningful23) tenancy. Here, the choices were either that there was a licence (but this had not been properly pleaded in Javad v Aqil), or that there was a tenancy at will.24 The Court of Appeal held it to be a tenancy at will. Similarly, in Isaac v Hotel de Paris Ltd, the Privy Council held that a bar manager who was allowed to run a bar and paid rent whilst the parties were trying to agree the formal contract, was only a licensee.25 It is explained by Lord Denning on the basis that it was intended only to be a ‘personal privilege’,26 but it fits with the idea that whilst parties are negotiating and only intend a temporary arrangement, no tenancy can be found because there is no term agreed. Again, in Sopwith v Stuchbury, a person let into residential occupation pending agreement of terms of a tenancy was held to be an (unprotected) licensee.27 In all of these moving in cases, no periodic tenancy has been found: the parties are still trying to reach agreement; the owner has not accepted the idea that the occupier can stay for any 21
[1991] 1 WLR 1007 (CA). At one point in the proceedings, the occupier had argued that there was a term certain for three months, but this claim was not pursued. 23 See text accompanying n 8. 24 In the county court, the case had been argued on the basis that there was either a tenancy at will or a periodic tenancy. This precluded the argument before the Court of Appeal that there might have been a licence or that there might have been a lease for ‘three months’ certain based on the rental payment. Nicholls LJ notes that the question of a pro rata repayment of the three months rent arose briefly when the occupier left following a disagreement, but was never settled because the occupier returned to the property shortly afterwards. As a tenancy at will, it would be the case that the occupier is entitled to pro rate repayment if he leaves. 25 [1960] 1 WLR 239 (PC). 26 Ibid, p 245. 27 (1985) 17 HLR 50 (CA). As this was a private sector case, tenant at will status would have given protection. 22
Street v Mountford Revisited 25 fixed period; and, it is understood by the parties that if they do not reach agreement the occupier will have to leave. This cannot be a ‘term of years’. Viewed in this light, the cases are entirely consistent with Street v Mountford. The difficulty with this, as an explanation of the moving in cases, is that it does not closely reflect the reasoning that is used by the courts. The judiciary do not say that there is a tenancy at will (or licence) because the parties intended that either one of them should be free to end the arrangement at a moment’s notice. Instead, the courts say that there is a tenancy at will (or licence) because the parties did not intend to be saddled with all the statutory consequences that would flow from finding a periodic tenancy.
Staying on Cases and Doctrine The analysis in the staying on cases is more complex. In the moving in cases, it is unlikely that someone will be allowed to move into property who is not intended to be a tenant without there being some kind of discussion between the parties. From that discussion, the courts can work out what the parties intended. In the staying on cases, the occupier is already there, and it may be that there is no real change in what is done from when the tenancy was continuing, and so no new discussions to draw on. There is the further complication that the occupier may not be the original tenant. Often the dispute concerns someone who lived with the tenant, and stays when the tenant leaves. Nonetheless, the cases follow a similar pattern to the moving in cases. If there is no alternative explanation offered as to why the rent is being paid and accepted by the owner, there is likely to be a tenancy. In Ayinde, the occupier took over a flat from her relations when they returned to Nigeria.28 They surrendered their tenancy, and the occupier paid the rent and wrote repeatedly to the local authority asking for the tenancy to be transferred into her name. However, she never received any significant response. She was in exclusive possession and paying rent: accordingly, she was held to be a tenant. She was never given any reason to doubt that she was being treated as a lawful occupier, and it was said that the ‘court will be slow to withhold the implication [of a tenancy] where all the badges of a tenancy are there, especially when the situation is allowed to linger on for more than a short period’.29 In Ayinde, there was no other explanation offered as to why the local authority accepted rent. However, often there is some other explanation, and then the courts will not find a tenancy, unless this is what the parties intended.
28 29
Tower Hamlets LBC v Ayinde (1994) 26 HLR 631 (CA). Ibid, p 636.
26 Susan Bright The staying on cases in which the courts say that there is no new tenancy tend to fall into three main categories. One is where the occupier stays on, alleging that she has a right to remain, and the landlord allows the occupation to continue whilst investigating this claim. The second is where the occupier stays whilst the parties negotiate the future arrangements; as in the moving in cases, the fact that the occupation is being allowed as an interim measure whilst the parties are negotiating, means that there is no term agreed. The final category is where the landlord has the right to recover possession, but gives a period of ‘grace’ to the occupier. This includes the category most difficult to reconcile with Street v Mountford, what has become known as the ‘tolerated trespasser’ cases, where a secure tenant of a local authority stays, paying ‘rent’, even though the secure tenancy has come to an end following a possession order. An example of the first ‘no tenancy’ category is Jastrzebski, where the occupiers claimed rights to succeed to a secure tenancy and remained whilst the local authority considered these claims.30 The local authority wrote explaining that the occupiers were there without consent, and that the payments were being accepted as ‘mesne profits’. It was held that there was no tenancy. Similarly, in Longrigg Burrough, ‘rent’ was accepted after a fixed term lease had expired, but the reason was that the occupier had refused to leave, claiming that he had security of tenure. The Court of Appeal ordered possession, and said that he had no contractual tenancy.31 Precisely what status the occupier has during this period is a little unclear. In Jastrzebski, Sir Oliver Popplewell described the occupiers as being ‘in a nebulous state to which the law does not seem to be able to attach a particular label’.32 Usually, the courts avoid attaching a label: it is sufficient to say that there is no tenancy. Nonetheless, if the owner clearly tells the occupier that she is unlawfully present and that any payment is received as mesne profits rather than rent, it must surely be the case that as there is no consensual occupation the occupier will be a trespasser.33 The result in these cases is easy to explain doctrinally: there is no consensual occupation, and the owner accepts the ‘payment’ only whilst checking if he has good grounds to remove the occupier. This cannot be a tenancy. An example of the second ‘no tenancy’ category can be found in Cardiothoracic Institute v Shrewdcrest Ltd.34 Here, a business tenant had occupied the property under a series of ‘contracted out’ leases (although 30
Hammersmith and Fulham LBC v Jastrzebski (ChD, 20 October 2000). Longrigg Burrough & Trounson v Smith (1979) 251 EG 847. 32 Hammersmith and Fulham LBC v Jastrzebski (ChD, 20 October 2000). This statement comes after discussing Marcroft Wagons Ltd v Smith [1951] 2 KB 496 (CA), and noting the difficulty that the Court of Appeal had there labelling the relationship. There is, however, an important difference. In Marcroft Wagons, the owner had allowed the occupier to stay and not asserted that she was unlawfully present. 33 This is supported by Westminster CC v Basson (1991) 23 HLR 225 (CA). 34 [1986] 1 WLR 368 (Ch). 31
Street v Mountford Revisited 27 business tenancies they were contracted out of the statutory regime and thus would not confer rights of renewal). After the last lease ended, the tenant remained whilst trying to agree new terms. In the meantime, the parties ‘agreed in principle’ to a series of fixed term extensions, but Knox J found that they were never in fact binding agreements. There was, therefore, only a tenancy at will (as in the moving in cases where there are on-going negotiations). As with the moving in cases, this case can be explained on the basis that there is no agreed term, although again the judicial language used to explain the result is in terms of the parties not intending to create a periodic tenancy, rather than focusing upon the absence of term. The final ‘no tenancy’ cases occur where the landlord has a right to recover possession but holds back on actual eviction for the time being. In Marcroft Wagons v Smith, the tenant had died, and her daughter, who had been living with her, asked for her name to be put in the rent book.35 The landlord’s agent refused to do this, stating that the property was required for one of the landlord’s employees. He did, however, say that he did not want to disturb her, and accepted two weeks rent. The Court of Appeal accepted that in cases where someone is staying on, it is reasonable to allow them a bit of time whilst the landlord is considering his position, but was troubled by the fact that it was six months before the landlord began possession proceedings.36 Nonetheless, it was held that it was not too long, and that the daughter did not have a tenancy. 3. Tolerated Trespass and Doctrine As Roxburgh J noted in Marcroft Wagons v Smith, it is very difficult to put a label on the occupier’s status in these cases.37 The occupier is not a trespasser, as she is there with consent, and whereas Denning LJ was content to describe her as a licensee, Roxburgh J considered that jurists might need to invent a name. This has happened, with surprising and conceptually difficult consequences, in the tolerated trespass cases involving local authorities and (former) secure tenants. The leading case in this area remains Burrows v Brent LBC, where an immediate order for possession had been granted against a secure tenant, Miss Burrows.38 The local authority came to an arrangement with her in which she agreed to pay a ‘rent charge’, and an agreed amount towards the arrears, but she failed to keep up with these payments. More than two years later, the local authority executed the warrant for possession. Miss Burrows argued that the agreement reached with her had made her a new tenant, but the House of Lords disagreed. The 35
[1951] 2 KB 496 (CA). It is clear that Lord Evershed MR was troubled by the fact that any alternative would penalize the owner for having shown kindness in allowing the daughter to stay. 37 [1951] 2 KB 496 (CA). 38 Burrows v Brent LBC [1996] 1 WLR 1448 (HL). 36
28 Susan Bright agreement was simply one to ‘forbear from executing the order’. Once the possession order ended the secure tenancy, Miss Burrows became a ‘trespasser whom the landlord has agreed not to evict—a “tolerated trespasser” pending either the revival of the old tenancy or the breach of the agreed conditions.’39 There are now many, many thousands of occupiers of local authority property who have this status. They have no statutory rights, no security of tenure, and are unable to enforce any landlord covenants in the former tenancy. Unless Street v Mountford is very narrowly confined, it is difficult to square the finding of tolerated trespass status with Street v Mountford, particularly in cases involving more than the occupier simply staying put and paying ‘rent’. In many cases, as in Burrows v Brent itself, there is an agreement or understanding reached between the occupier and the owner that she can stay, so long as she keeps up with the payments. The arrangement is not intended only to be a temporary one, whilst the parties negotiate something else. Nonetheless, the approach of the courts in tolerated trespasser cases is to say that there will only be a new tenancy if forced to this result. In Burrows v Brent Lord Browne-Wilkinson said: It cannot be right to impute to the parties an intention to create a legal relationship such as a secure tenancy or licence unless the legal structures within which they made their agreement force that conclusion.40 (emphasis added)
This has been seized upon in later cases, so that even action which suggests that the local authority is treating the occupier as a new tenant, such as sending out tenancy letters, new tenancy conditions or notices of rent increase, will not create a tenancy.41 Why is there not a new tenancy in the tolerated trespasser cases? These cases are clearly policy driven: if by allowing the occupier to stay, the local authority is treated as creating a new tenancy, this could cause landlords to evict as soon as the secure tenancy ends, and discourage them from making ‘reasonable and humane concessions’ which allow the occupier to remain in possession.42 Interestingly, there has been very little judicial discussion as to how the tolerated trespasser cases fit with Street v Mountford.43 39 Ibid, p 1455. The former tenancy may be revived by court order under the Housing Act 1985 s 85. 40 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1454. 41 Newham LBC v Hawkins [2005] EWCA Civ 451; Lambeth LBC v O’Kane, Helena Housing Ltd v Pinder [2005] EWCA Civ 1010. But, the cases do not all go one way. In both Leadenhall Residential 2 Ltd v Stirling [2001] EWCA Civ 1011, [2002] 1 WLR 499 (private sector) and Swindon BC (formerly Thamesdown BC) v Aston [2002] EWCA Civ 1850 there was a new tenancy. 42 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1454. See also: Pemberton v Southwark LBC [2000] 1 WLR 1672 (CA) 1677. Policy is not one way. There are sound policy reasons as to why occupiers should not be left in tolerated trespasser status for many years with no effective rights. 43 Street v Mountford was not mentioned by the House of Lords in Burrows v Brent LBC [1996] 1 WLR 1448 (HL).
Street v Mountford Revisited 29 The Court of Appeal recently addressed the relationship between tolerated trespass and Street v Mountford in the cases of O’Kane and Pinder.44 Here, the tolerated trespass cases are explained by reference to the intent of the parties. According to Arden LJ: [Street v Mountford] established that, provided the parties intended to enter into legal relations, the question whether their relationship was one of landlord and tenant depended on whether the indicia of that relationship were present. The Burrows case, on the other hand, decides that the question whether the parties entered into a new tenancy turns on what the parties’ intentions were when the former tenant remained in occupation.45
This could mean that in the tolerated trespass cases, all that the local authority is saying is that it will (for now) forbear from executing the possession order, rather than intending to enter into a new contractual relationship. This is consistent with the passage from Burrows v Brent LBC to which Arden LJ refers. There are various problems with trying to explain the tolerated trespass cases as involving no contractual intent. First, if the local authority has said that the occupier can stay so long as she pays, this looks like a contractual arrangement. To explain away these cases as instances of there being no contractual intent may not always fit the facts. More importantly, to say that the local authority is simply promising to ‘forbear’ from executing the possession order overlooks the very strong positive message that the local authority is giving to the occupier. It is not simply conveying a rather limited assurance that it will not, for now, kick the occupier out. Instead, there is usually a much more positive assurance wrapped up in this to the effect that it is consenting to the continuing occupation provided that the former tenant keeps up her payments. Indeed, even in Burrows v Brent LBC, which contained a written acknowledgement stating that ‘if payments cease or are irregular the council will seek to evict’, the House of Lords accepted that Ms Burrows would interpret the arrangement as giving her the right to occupy. So, if it is intentions that are looked to, and they are to be objectively construed, then it looks very much as if the local authority is promising that the occupier can stay conditionally on making the due payments. Finally, if it is the parties’ intentions that are crucial, we would expect the courts to pay close attention to exactly what is said to the occupier. In practice they do not. The cases do not turn on fine points of linguistic interpretation as to exactly what was said. It has become a (simple) rule of law that in the case of secure tenancies where the date for possession has passed or a suspended possession order has been breached, the former tenant
44 45
Lambeth LBC v O’Kane, Helena Housing Ltd v Pinder [2005] EWCA Civ 1010. Ibid, [60].
30 Susan Bright becomes a tolerated trespasser unless the court is forced to find a new tenancy. Although the origins of the doctrine may be based upon the parties’ intentions, the tolerated trespass cases have now evolved to become a law unto themselves. The only way of fitting them with Street v Mountford is to see them as cases involving ‘special circumstances’.46 This is what the Court of Appeal did in the private residential case of Leadenhall v Stirling.47 In Leadenhall, the occupier stayed on after the tenancy had been ended by a possession order, paying rent and arrears. Counsel for both parties accepted that when the rent was put up this created a new tenancy. The Court of Appeal agreed.48 The same result did not follow in Burrows v Brent LBC seemingly because of the different statutory regime.49 What makes the tolerated trespass cases different (special) is the combination of there being a local authority landlord, and the court’s discretionary powers under Section 85 of the Housing Act 1985 to postpone etc possession.50 This reading of Burrows v Brent LBC does make it possible for there to be an increase in the occupation payment made by tolerated trespassers without creating a new tenancy, as is consistent with the express result in more recent tolerated trespasser cases. Even if the increase looks like a contractual variation, it still takes place during the limbo period, which means that even if the other criteria for a new tenancy are met, it is prevented from creating a lease because of the special circumstances. The ‘special circumstances’ identified by Latham LJ in Leadenhall v Stirling could be said to fit with Lord Templeman’s exceptional cases in Street v Mountford. There is no need to point to a new tenancy to explain why there is exclusive possession: the occupation could be said to be referable to the tenancy in limbo. This is consistent with what Lord BrowneWilkinson says in Burrows v Brent LBC.51
46 In Street v Mountford, Lord Templeman accepted that in ‘special circumstances’ there would be no tenancy even if all the indicia of a tenancy were present; namely, where there is no intention to enter into contractual relations, the possession is referable to some other legal relationship, or the owner has no power to grant a tenancy. In fact, only the second category is exceptional: in the others one of the indicia of a tenancy is absent (subject to how Bruton v London and Quadrant Housing Trust [2000] 1 AC 406 (HL) is read). 47 Leadenhall Residential 2 Ltd v Stirling [2001] EWCA Civ 1011, [2002] 1 WLR 499. 48 Ibid, [31]. 49 Leadenhall Residential 2 Ltd v Stirling [2001] EWCA Civ 1011, [2002] 1 WLR 499 [34] (Latham LJ) [29] (Lloyd J). 50 Although the status continues, even after a stock transfer: Lambeth LBC v O’Kane, Helena Housing Ltd v Pinder [2005] EWCA Civ 1010. 51 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1455. The status of tolerated trespasser does not appear to depend upon continuing revivability: Lambeth LBC v O’Kane, Helena Housing Ltd v Pinder [2005] EWCA Civ 1010. But see: Swindon BC (formerly Thamesdown BC) v Aston [2002] EWCA Civ 1850 (where a new tenancy was found when the possession order had ceased to be enforceable, and a s 85(2) revival was, therefore, not possible).
Street v Mountford Revisited 31 Fitting it all Together Where does this review of the case law leave Street v Mountford? Whilst Street v Mountford can be understood as a narrow case to do only with labelling, it was not intended to be so confined. Lord Templeman sought to downplay the role of the parties’ intentions, and to emphasise the importance of exclusive possession and the fact that classification is a matter for the law, not the parties. Nonetheless, subsequent cases show that what the parties intend often remains central to the classification. It is only in the narrow context of labelling that the parties intentions are unimportant. The moving in and staying on cases show a great reluctance to find a tenancy if this is not what the parties intended. In practice, unless the owner has accepted that the occupier can stay either for an agreed period or indefinitely (subject to notice), there will not be a tenancy. Even if the occupier is there with the owner’s consent, enjoying possession and paying rent, there will not be a tenancy if this is not what they mean. Intention is important, but, consistently with Street v Mountford, it is not only intention to create legal relations and intention to grant exclusive possession that matter, but also intention to create a term. Contexts vary. The occupier may be a trespasser, occupying against the owner’s will. The owner may be looking into whether the occupier can be removed; planning to evict but giving the occupier a little more time; or, the parties may still be talking about their future plans. In none of these cases will the occupier have a leasehold estate. It is the tolerated trespass cases that remain the most difficult to reconcile with Street v Mountford. The occupier looks like a tenant: she has possession, and has been encouraged to think that she can stay for renewable periods so long as she pays the rent. Only policy concerns explain why this is not treated as a tenancy.
PART B: STREET V MOUNTFORD AND EXPRESS AGREEMENTS
Where there is a written occupation agreement between the parties, the courts use Street v Mountford as the guide for determining if there is a tenancy or not. Although the principles look clear (contractual intent, exclusive possession and term), the proper construction of the agreement is often far from simple. There have been difficulties in three main areas: working out whether the rights that the occupier has are extensive enough to amount to exclusive possession; applying Street v Mountford when there is multiple occupation; and, identifying the true agreement where there is a seeming divergence between the recorded agreement and the relationship in practice.
32 Susan Bright Finding Exclusive Possession In some cases, the question of whether or not the right label has been attached by the parties will turn on whether or not there is exclusive possession. This is quite different from working out if there is a ‘pretence’: the agreement is taken at face value, but the court has to work out whether the combination of rights and obligations created confer exclusive possession. This begs the question: what is exclusive possession? Lord Templeman stated: A tenant armed with exclusive possession can keep out strangers and keep out the landlord, unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.52
It is this right to exclude, and the territorial control inherent to it, that distinguishes the lease from the licence. If the landlord has an unlimited right to enter the property, or to introduce other persons to share the property, this will prevent the occupier from being a tenant.53 Exclusory powers are not, however, necessarily absolute. An occupier may have the right to exclude some, but not all. Until recently, it was widely thought that there could only be a lease if the occupier had possession to the exclusion of the whole world, including the power to exclude the true or superior owner.54 The decision of the House of Lords in Bruton v London and Quadrant Housing Trust suggests otherwise.55 In this case, the grantor housing trust had only a licence in the property, and purported to grant a ‘weekly licence’ to Mr Bruton. The housing trust could not, of course, grant the power to exclude the superior owner, the freeholder, because of the nemo dat principle. The House of Lords held that Mr Bruton, nonetheless, had exclusive possession, and, therefore, a tenancy. This means that it will be sufficient for a tenancy to show that the grantee has exclusive possession in the sense of having the legal right to exclude all, including the grantor, save for someone with a superior title.56 52
Street v Mountford [1985] 1 AC 809 (HL) 816. Smith suggests an alternative: ‘There is a strong argument that exclusive possession is based upon the right to prevent the owner from entering at will, rather than the owner’s having no right to introduce other occupiers’: R Smith, Property Law, 5th edn, (Harlow, Pearson, 2005) 370. This is not consistent with Lord Oliver in AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL) 469. 54 See: Bruton v London and Quadrant Housing Trust [1998] QB 834 (CA) 845 (Millett LJ). 55 [2000] 1 AC 406 (HL). This case elicits a range of reactions, particularly as to whether the resultant tenancy can be described as ‘proprietary’. See: S Bright, ‘Leases, Exclusive Possession and Estates’ (2000) 116 LQR 7; M Pawlowski, ‘Occupational Rights in Leasehold Law: Time for Rationalisation?’ (2002) 66 Conv 550; P Routley, ‘Tenancies and Estoppel – After Bruton v London & Quadrant Housing Trust’ (2000) 63 MLR 424; M Dixon, ‘The Non-proprietary Lease: The Rise of the Feudal Phoenix’ (2000) 59 CLJ 25; M Harwood, ‘Leases: Are They Still Not Really Real?’ (2000) 20 LS 503; and JP Hinojosa, ‘On Property Leases, Licenses, Horses and Carts: Revisiting Bruton v London and Quadrant Housing Trust’ (2005) 69 Conv 114. 56 See: Western Australia v Ward [2002] 213 CLR 1, [2002] HCA 28 [478] (McHugh J). 53
Street v Mountford Revisited 33 It is, however, often difficult to tell whether the landlord has retained possession to himself, or simply preserved (limited) rights of entry. In NCP v Trinity Development, the Court of Appeal had to decide if a ‘licence’ agreement to operate a car park was in fact a tenancy.57 This turned on whether or not the agreement conferred exclusive possession. There were two particular clauses around which this issue focussed. One of these clauses provided that the licensee would allow entry to the licensor’s employees in the exercise by them of the ‘licensor’s rights of possession’, and give assistance to allow the licensor to carry out resurfacing. Another clause allowed the licensor to have 40 car parking spaces. The problem is that there are no hard and fast rules as to exactly how much involvement by the owner in relation to the property will mean that there is no exclusive possession. It is clear that there is no exclusive possession if: the owner can require the occupier to move to other property; has the right to put someone else in to share occupation; or, can himself come and go at will. But, in other cases, it may involve the difficult task of working out if the owner’s ongoing involvement is such that it simply cannot be said that the occupier has a ‘stake in the land’. Even the fact that the owner has reserved rights of entry can be ambiguous; although it may suggest that no exclusive possession has been granted, it could alternatively be explained as necessary to protect the landlord’s interest when exclusive possession has been given.58 Finding out if there is exclusive possession looks like a factual exercise: the court has to look at the rights reserved, and granted, and decide whether or not this amounts to the grant of exclusive possession. In NCP v Trinity Development, however, the Court of Appeal did not confine themselves in this manner.59 As well as looking at the extent of these rights, they also attached significance to the fact that the parties had expressed this agreement to be only a licence. Whilst only a pointer, this could help the courts to work out what the substance was. As the parties had described the arrangement as a licence, this made it less likely that exclusive possession was intended, and to ignore their choice of wording was inconsistent with freedom of contract. The fact that the parties had called the agreement a licence was used to help the court decide that there was no exclusive possession, and therefore no tenancy. Although there is no direct conflict between this approach and Street v Mountford, the cases do sit uncomfortably alongside one another. Street v Mountford says that the parties cannot
57 National Car Parks Ltd v Trinity Development Company (Banbury) Ltd [2001] EWCA Civ 1686. 58 In Street v Mountford [1985] AC 809, Lord Templeman says that such an express reservation ‘only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant’ (p 818). 59 National Car Parks Ltd v Trinity Development Company (Banbury) Ltd [2001] EWCA Civ 1686.
34 Susan Bright choose the label to attach. But what NCP v Trinity shows is that the label that they do choose can influence how the document is read, at least in cases where the parties are professionally advised.60
Multiple Occupation In Street v Mountford, there was only one occupier and the issue was the simple one of whether she was a licensee or a tenant. Lord Templeman did not address the difficulties that can arise in cases involving multiple occupation. Where a property is occupied by more than one person, the first question that must be asked is whether the arrangement is one made with a series of individuals, or if the arrangement is made to the occupiers as a collective.61 If there is a series of separate and individual arrangements, the occupiers will either be licensees or individual tenants of the separate parts of the property let to them. The greater difficulty arises in understanding what is required in order for there to be a lease to a group. A lease to a group is no more than a coowned lease. This means that there must be both co-ownership and exclusive possession. There are two methods of co-ownership of land: the joint tenancy, for which the ‘four unities’ are required (time, title, interest and possession) and the tenancy in common (which requires only ‘unity of possession’). It may be that some of the difficulties perceived by commentators to be found in the case law is due to the obscurity of the concept of ‘unity of possession’. This can be illustrated by discussion of the decision of the House of Lords in AG Securities v Vaughan.62 A large flat was let to four occupants who moved in at different times, paid different rents and signed separate agreements denying exclusive possession. The House of Lords held them to be licensees. In his book Plural Ownership, Roger Smith asks why there was no tenancy in common in AG Securities v Vaughan,63 questioning why the four occupiers did not have unity of possession, and, therefore, were not coowners.64 The answer lies, perhaps, in being very careful to distinguish ‘unity of occupation’ and ‘unity of possession’. Several writers describe unity of possession (the one requirement for a tenancy in common) as if it
60 Ibid. Both Buxton LJ [41] and Arden LJ [29] referred to the fact that the parties were (presumably) given appropriate advice. 61 There is a further complication that can arise if there are separate agreements to disguise a collective agreement; this is discussed below under ‘the pretence issue’. 62 AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL). 63 Ibid. 64 R Smith, Plural Ownership (Oxford, OUP, 2005) 24. See also: P Sparkes, ‘Co-tenants, Joint Tenants and Tenants in Common’ (1989) 18 Anglo–Am L Rev 151, 153.
Street v Mountford Revisited 35 is only to do with physical occupation. In explaining unity of possession, Megarry and Wade says that ‘each co-owner is as much entitled to possession of any part of the land as the others’,65 and the way that this concept is discussed, both there and elsewhere, suggests that it is simply to do with the co-owners not being able to physically exclude another co-owner from a part of the property. In this sense, the four occupiers in AG Securities v Vaughan did have unity of possession, as they had not been granted individual occupational rights of any particular of the property but, together, shared the whole. But, unity of possession is not simply to do with de facto occupation, it is to do with the legal right to exclude non-owners from the property. As Gray and Gray write, ‘exclusory power is central to the notion of possession.’66 The occupiers in AG Securities Vaughan had not been granted the right to exclude others, either collectively or individually. Lord Oliver puts this most clearly: None of them has individually nor have they collectively the right or power lawfully to exclude a further nominee of the licensor within the prescribed maximum . . . . The landlord is not excluded for he continues to enjoy the premises through his invitees, even though he may for the time being have precluded himself by contract with each from withdrawing the invitation.67
Possession appears to mean much the same thing whether it is used in connection with the phrase ‘unity of possession’ or ‘exclusive possession’. Unless a single occupier has the right to exclude others she cannot have a tenancy. Unless multiple occupiers have collectively the right to exclude others there can be no ‘joint lease’ as there will be neither unity of possession nor exclusive possession. There is, however, a further complication with multiple occupiers. It seems that in order for there to be a joint lease it is not enough that there is unity of possession and exclusive possession; in addition, all of the four unities must be satisfied.68 It is not clear why. The authority is not so overwhelming that this 65 Megarry and Wade, The Law of Real Property, 6th edn, (London, Sweet & Maxwell, 2000) 477. 66 K Gray and S Gray, Elements of Land Law, 4th edn, (Oxford, OUP, 2005) 489. Similarly, in order to establish an adverse possession claim it is not sufficient to show factual occupation but something stronger, a degree of exclusive control of the land, is necessary. 67 AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL) 471. 68 This is implicit in the approach taken by the House of Lords in AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL): see, for example, Lord Jauncey, p 474. In Mikeover Ltd v Brady [1989] 3 All ER 618 (CA) Slade LJ proceeds on this assumption. His express statement that the ‘four unities must be present for the creation of a joint tenancy’ (p 625) is, strictly, undeniably true as joint tenancy could mean co-ownership. Could it possibly be the case that this requirement of four unities for a joint lease has simply arisen because of the linguistic confusion that could come from the phrase ‘joint tenancy’ bearing two meanings (the ‘co-ownership/to distinguish tenancy in common’ sense and the ‘joint lease’ sense) and the transplanting of the legal conditions for one of these meanings to the other context?
36 Susan Bright issue could not be re-examined. In the leading case, AG Securities v Vaughan, the focus was upon the separateness of the arrangements and the absence of any kind of unity; what is said about the four unities may be obiter.69 In the related appeal, Antoniades v Villiers, where the same assumption about the need for the four unities appears to have been made, the focus was upon whether the separate agreements were really interdependent.70 In Mikeover v Brady, there is no detailed reasoning to support Slade LJ’s assertion that the four unities are needed.71 This doctrinal requirement has practical consequences. In Mikeover v Brady a couple signed two separate licence agreements, each containing an obligation to pay one half of the total rent for the flat.72 Slade LJ accepted that there was ‘a right of joint exclusive occupation of the property.’73 Nonetheless, there was no lease simply because the absence of a joint monetary obligation meant that there could be no unity of interest.74 This meant that the owner could evict the remaining occupier, as without a lease he did not have security of tenure. If it is ever accepted that there can be a joint lease with only unity of possession, there would, however, be difficulties. The scheme of the property legislation is to impose a statutory trust so that the co-owners have a joint tenancy at law, leading to the imposition of joint and several obligations on the co-owners even though they have not contracted on this basis. This peculiarity arises from the fact that the co-ownership rules have not been developed thoughtfully with reference to short term leases. Whilst the language of joint tenancies may be appropriate for long leases with a capital value, it does not really fit with rack rent leases where the true value of the lease to the occupier is the right to shelter rather than a monetary interest.
The ‘Pretence’ Issue In Street v Mountford, the issue was simply one of labelling the relationship as the owner conceded that exclusive possession had been granted. Since Street v Mountford, the legal debate about the parties’ ability to create ‘personal’ agreements has focussed on the effect of agreements drafted by owners in such a way that the indicia of a tenancy are absent. In the case of
69
AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL). Ibid. 71 [1989] 3 All ER 618 (CA). 72 Ibid. 73 Ibid, p 625. He presumably meant exclusive possession. 74 Views differ as to whether unity of interest does require a joint monetary obligation. The requirement is supported by Sparkes and Thompson: Sparkes (n 64) 152–53; MP Thompson, Co-ownership (London, Sweet & Maxell, 1988) 63. Smith questions it: Smith, Property Law (n 53) 369. 70
Street v Mountford Revisited 37 single occupation agreements, this can be done through denying exclusive possession as, for example, in Aslan v Murphy where the occupier of a tiny room was denied access to it for 90 minutes daily.75 Where there is a couple, the owner may, as in Antoniades v Villiers, use two identical ‘licence’ agreements which state that the occupier may be required to share with someone of the landlord’s choosing, and require the occupier to pay only a share of the rent.76 This means that there is neither exclusive possession, nor the unity of interest that is said to be necessary for a joint tenancy. These cases raise difficult issues. On the face of the agreements, the parties do not intend to create the rights that are necessary in order for there to be a tenancy. The problem is, however, that the substantive rights and obligations contained in the agreement do not always reflect those that are enjoyed in practice, and the style of the agreement may be simply a form of ‘dressing up’ imposed by the owner to hide the reality. Courts have dealt with these cases by developing the doctrines of sham and pretence. These enable the courts to ask whether the rights and obligations set out in the agreement are genuine; having discovered the genuinely intended rights the courts can then determine if there is a tenancy or not.77 The approach adopted by the courts to deal with these ‘dressing up’ cases throws up difficult issues, both doctrinally and practically. In Street v Mountford, the House of Lords respected the contractual agreement reached, but said that the parties could not attach their own label. In the ‘pretence’ cases, the courts have to tread carefully to ensure that they do not end up re-writing the parties’ agreement. It is only legitimate to override the recorded agreement where the courts can be confident that this does not reflect the true agreement reached. But this is not always the approach followed, and the courts risk engineering results in the interest of perceived justice. In Bankway v Pensfold-Dunsford, the Court of Appeal denied possession to a landlord against a protected tenant.78 The ground for possession was a mandatory ground based on rent arrears (a legitimate ground), but the arrears came about because of a review clause that lifted the rent from £4,690 per annum to £25,000 per annum. The reason why the clause was put in these terms was undoubtedly to ensure that the tenant could be forced out of the property through his inability to pay such a high rent. Nonetheless, it was a genuine rent review clause. The Court of Appeal disallowed possession on the novel ground that it was in substance an unlawful contracting out. This goes beyond a search for the true agreement.
75
Aslan v Murphy (Nos 1 and 2) [1990] 1 WLR 766 (CA). AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL). 77 See: S Bright, ‘Avoiding Tenancy Legislation: Sham and Contracting Out Revisited’ [2002] CLJ 146. 78 Bankway Properties Ltd v Penfold-Dunsford [2001] EWCA Civ 528, [2001] 1 WLR 1369. 76
38 Susan Bright There are also practical difficulties. How can a court be sure that the intention expressed in the agreement is not the true intention? Just because a provision has not been operated (yet) does not mean that it must be nongenuine. There was no material difference between Antoniades v Villers,79 and Mikeover v Brady,80 except for the fact that one of the occupiers left in Mikeover v Brady, and the landlord did not make the remaining occupier pay the entire rent. This fact meant that the court could hardly say that the separate obligation to pay was not genuine. In Antoniades v Villiers, this provision was never put to the test, so although it looked artificial (as it did in Mikeover v Brady) it may have been a genuine provision that never had to be called on. There is again the risk that the courts could effectively rewrite the parties’ bargain. It is important, therefore, that the ‘pretence’ doctrine is restrictively used.
CONCLUDING REMARKS
Street v Mountford is undoubtedly an important case, but it does, perhaps, settle somewhat less than it is sometimes credited for. It is, in part, a product of its times; a decision reached when homes for private rental were in short supply, and housing laws gave considerable protection to tenants but very little to non-tenants (creating the risk of abuse of the bargaining power held by the owner). The wider housing context may help to explain the seeming width of some of the remarks in Lord Templeman’s speech. As authority, however, it decides only that the parties cannot chose to attach the label of ‘licence’ to a relationship which otherwise has the hallmarks of a tenancy. In other cases, where there is no clear agreement reached between the parties, the courts do draw on what it was that the parties intended to create in order to categorise the relationship. They also do so even in the case of written agreements where the issue is whether or not exclusive possession has been granted. Street v Mountford did not tell us what is needed for there to be a joint lease, and, although later case-law has set down the rules, this has been done without much analysis or explanation as to why the four unities are needed. Further, there are now new battlegrounds emerging. The impact of the Bruton decision, with its relative concept of exclusive possession, is still being played out in the courts.81 But the most difficult area, and one of immense social importance, is the tolerated trespass cases. Doctrinally the basis for these cases is unclear. There remain many unanswered questions.
79
AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417 (HL). Mikeover Ltd v Brady [1989] 3 All ER 618 (CA). 81 In Kay v LB of Lambeth; Leeds CC v Price [2006] UKHL 10; [2006] 2 WLR 570 the House of Lords accepted the concept of the ‘non-estate’ lease without discussion. 80
Street v Mountford Revisited 39 It is here that the limits of Street v Mountford are most likely to be tested. It is these cases that have brought the conflict between doctrine and policy most clearly into play. The case law prior to the development of the tolerated trespasser concept can be squeezed into the doctrinal mould formed by Street v Mountford, but it is not always a comfortable fit. The tolerated trespasser cases require even more straining to fit. What they expose is that policy concerns drive many of the results. It may be that Street v Mountford is, after all, similarly best seen as based on policy, reflecting the housing need and legislative context of past times. Maybe Street v Mountford needs to be revisited.
3 Judicial Directions in Landlord and Tenant Law: Different Policies for Different Sectors SARAH BLANDY AND CAROLINE HUNTER
INTRODUCTION
W
HILE THIS BOOK seeks to bring a gaze onto ‘landlord and tenant law’, it also illustrates that, in fact, it might be more realistic to talk about ‘landlord and tenant laws’. During the 20th century, the law relating to landlord and tenant has moved from one of general common law principles applicable to all types of land, to a growing diversification based on the nature of the user of the land through the development of different statutory regimes. In this chapter, we want to examine how the (generally senior) judiciary has responded to this diversification, in particular by examining their attitudes to two different sectors with very different policy contexts: the social rented and the commercial. Analysis of judicial decision-making of the same issues across the two different sectors provides some valuable insights into judicial directions in landlord and tenant law. This chapter focuses on matters connected to the status of occupiers, and how the courts have responded to those cases which have tested the extent of security granted by the legislative regimes. Accordingly, it provides a complementary approach to the doctrinal analysis adopted by Susan Bright in the preceding chapter. The chapter begins with theories of judicial decision-making and considers some existing research as a background to our analytical concerns and methods. We then briefly sketch the history of legal regulation of the two sectors, and recent policy and social changes concerning them. The meat of the chapter examines the way in which the judiciary has approached questions concerning the contested status of occupancy in each sector, and the policy justifications which emerge from these decisions. This section orders the material in a similar manner to the preceding chapter, by distinguishing ‘moving in’ and ‘staying on’ cases. The final part of the chapter discusses our conclusions.
42 Sarah Blandy and Caroline Hunter UNDERSTANDING JUDICIAL DECISIONS
In seeking to analyse judicial decision-making, this chapter takes a ‘law in context’ approach which sees law (including judicial decisions) as ‘linked to the interests or needs of its time’.1 Therefore, decisions are analysed in relation to the broader context in which they are made, and we are alert for indications that the judiciary is taking this context into account. This approach has been developed in opposition to the idea that legal doctrine constitutes ‘a self-contained body of knowledge capable [only] of being interpreted in terms of its own distinctive techniques’.2 We are not concerned here with the literature on judges and politics, nor the politics of the judiciary, but rather the more sociological approach to examining the types of argument used to justify decisions.3 Justification, if needed, can be found in the words of Lord Browne-Wilkinson explaining ‘a principle which lies at the heart of the common law’: ‘The judge looks for what are called ‘the merits’ and having found them seeks to reach a result, consistent with legal reasoning, whereby the deserving win and the undeserving lose’.4 Before turning to specific decisions in relation to each tenure group, we first consider some of the existing research into judicial decision making, which has primarily focused on the House of Lords. How can we understand the decisions from the higher courts, and the House of Lords in particular? A traditionalist might argue that legislative interpretation is some pure technical process divorced from politics, but as Robson argues in relation to decisions on homeless persons, policy choices are made by judges: ‘There may be cogent reasons for their [the Law Lords] choices of policy but they are precisely that, policy choices’.5 Robson shows that both the traditionally opposing strands of doctrinal analysis, purposive and literal, are used to support these choices. He also comments that judges will be ‘activists when they have problems with the written law and its “gaps”’, but are content to comply when ‘they are broadly in agreement with the impact of a restricted interpretation’.6 In Robertson’s study of House of Lords’ judicial decision making, he remarked that: Judges are widely free to make creative decisions in both common law and statutory construction cases; they really can choose what to decide, with very little constraint, both because of the nature of law and the institutional setting within which 1
D Nelken, ‘Getting the Law Out of Context’ (1996) 19 Socio-Legal Newsletter 12, 12. R Cotterell, The Sociology of Law, 2nd edn, (London, Butterworths, 1992) 196. 3 As set out in N MacCormick, Legal Reasoning and Legal Theory (Oxford, Clarendon Press, 1978). 4 Cited in M Zander, The Law-making Process, 5th edn, (London, Butterworths, 1999) 303. 5 P Robson, ‘The House of Lords and Homeless People’s Rights’ (2000) 22(4) J of Soc Wel and Fam L 415, 419. 6 Ibid, p 427. 2
Judicial Directions in Landlord and Tenant Law 43 they work; in exercising this freedom they act as problem solvers in a highly pragmatic manner.7
The same point has been made by practitioners, in the context of landlord and tenant law. For example, Cheffings comments that the courts ‘are not shy at seeking ways around decisions that are inconvenient’.8 However, Valverde suggests that pragmatism and formalism do not constitute a binary divide but a continuum, pointing out that arguments based on both can be found in the same ‘legal field—even within one and the same judicial decision.’9 What analysis of judicial decision-making has been made in relation to landlord and tenant law? Partington considered the implementation of the Rent Acts.10 He notes that judges were not consistent in their hostility to the Rent Acts, but their ‘natural’ tendency to favour landlords over tenants was exacerbated by ‘rules of evidence which do not permit adequate discussion of the general social background to cases in this area’.11 What we have here, then, in relation to the control of private sector landlords, is an argument that judges pay insufficient attention to the policy arena. Robson, considering the same area of law at a later date (significantly, after the decision favouring tenants in Street v Mountford12) points to a more divergent view amongst judges. The decision in Street v Mountford was swiftly followed by the more ambivalent one in AG Securities v Vaughan; Antoniades v Villiers.13 Robson suggests that: Tenants have fared both well and badly. Their treatment, it is suggested, lies in the extent to which an overall shared outlook is absent within the small group of social policy decision-makers which is the House of Lords.14
Whereas the private rented sector is seen as reflecting the approach of ‘maximising the individual landlord’s property rights’ (as per Partington), or indeed, as revealing no policy consensus (as per Robson), can we see something rather different emerging in relation to the management of social housing? Robertson, after an examination of a series of homelessness cases in the House of Lords, concludes that: Law Lords cannot escape a sense of being managers of last resort to the welfare system whose line managers they wish to trust to get on with the job of looking 7
D Robertson, Judicial Discretion in the House of Lords (Oxford, OUP, 1998) 21. N Cheffings, ‘Without Prejudice’ [2001] EG 154, 156. 9 M Valverde, ‘Pragmatism and Non-pragmatist Knowledge Practices in American Law’ (2003) 26 Pol and Leg Anth Rev 86, 99. 10 M Partington, ‘Landlord and Tenant: The British Experience’ in E Kamenka and A E-S Tay, (eds), Law and Social Control (London, Edward Arnold, 1980). 11 Ibid, p 178. 12 [1985] AC 809 (HL). 13 [1990] 1 AC 417 (HL). 14 Robson (n 5) 430. 8
44 Sarah Blandy and Caroline Hunter after the inadequate in whatever is the most efficient manner. There is a deep paternalism here, and a trust in a paternalistic welfare system which knows best, rather than an emotionally neutral rights-declaring orientation.15
It is not our intention here to enter into the sort of detailed investigation of the views of different House of Lords judges that has been undertaken by both Robertson and Robson. We are concerned more with the apparent policy justifications which are given in the judgments and how they differ between the two areas of landlord and tenant. We would argue, however, that what we can see in the area of the rights of social housing tenants is a similar approach to that identified by Robertson in relation to homelessness law, viz one of trusting the landlords to manage in what is seen to be the most efficient manner. The type of focus which has been placed on decisions of the House of Lords in relation to matters of welfare law (in particular housing and accordingly local authorities) is absent when we move on to consider those relating to business tenancies. The concern about policy-making amongst the judiciary, although seen in relation to some areas of private law, for instance, that relating to damages for negligence,16 and restraint of trade,17 has not arisen in relation to the commercial landlord–tenant relationship. In the commercial sector, it is also much more difficult to find ‘landmark’ House of Lords decisions. We might speculate why there is less judicial activity in the House of Lords on the Landlord and Tenant Act 1954 than the relevant parts of the Housing Acts. This may be due to the fact that in commercial cases, both parties will have to take the funding risk of litigation, whereas many of the public sector cases appeals have been made by tenants funded by legal aid. Local authorities have also been able to secure funding from other authorities to support appeals—this type of solidarity is much less likely between commercial landlords. Indeed, another reason why there have been fewer House of Lords cases may be that the commercial rented sector gives rise to fewer points of principle which pass the threshold for leave to appeal to the House of Lords.
A BRIEF OVERVIEW OF THE TWO SECTORS
In order to understand the different policy contexts in which the two sectors operate, we set out here a brief overview of the origins of legal regulation, and recent trends for each sector.
15
Robertson (n 7) 363. J Bell, Policy Arguments in Judicial Decisions (Oxford, Clarendon Press, 1982) ch 3; Robertson, (n 7), ch 6. 17 Bell, ibid, ch 6. 16
Judicial Directions in Landlord and Tenant Law 45 Social Tenancies Until 1980, the security of ‘social tenants’ was not regulated by statute.18 Rather, their tenancies were governed by common law principles—most were periodic and terminable by notice to quit. For those whose landlords were local authorities, there was the possibility of using judicial review to challenge evictions, but the law at that time was not well-developed. The Housing Act 1980 introduced the concept of the secure tenant for both local authority and housing association tenants. The move to security had come out of pressure from the tenants’ movement, although, ironically, it was enacted alongside the right to buy, which was in part responsible for the subsequent social problems encountered by the sector. The law was consolidated into the Housing Act 1985. In 1988, however, housing associations were moved out of the 1985 regime, and into the new one applicable to private tenants: the Housing Act 1988. In practice, however, it is fair to say that the security for the vast majority of housing association tenants has remained closer to that of local authority tenants than private sector tenants. This is due to the fact that housing associations, at the behest of the Housing Corporation,19 have sought to give tenants maximum security; that is, fully assured tenancies under the Housing Act 1988, while the private sector has made use of assured shorthold tenancies. The grounds for possession generally relied on by housing associations are in much the same terms as those under the Housing Act 1985 for secure tenants. Therefore, today, the majority of tenants of social landlords will either be secure under the Housing Act 1985 or, if they are tenants of registered social landlords whose tenancies commenced after 15 January 1989, assured tenants under the Housing Act 1988. Under both Acts, tenants20 and in some specific instances, outlined below, licensees, who fulfil the basic requirements of occupying the dwelling as their only or principal home, acquire security of tenure. This means that they cannot be evicted without a court order, and only on the specific grounds set out in each Act. Furthermore, in relation to the grounds most commonly used (breach of tenancy agreement, rent arrears, anti-social behaviour), the judge must also decide whether or not it is reasonable to grant possession,21 and has a further discretion even if he concludes it is reasonable to grant possession, whether or not to suspend the possession order on terms.22 18 We use this term to cover both local authority landlords and registered social landlords, which are made up primarily of housing associations. 19 See currently, Housing Corporation, Regulatory Code and Guidance (London, Housing Corporation, 2005) [3.5.2]. 20 But a tenant at will has protection only in the private sector: Francis Jackson Developments Ltd v Stemp [1943] 2 All ER 601 (CA). Protected status in the public sector was denied to a tenant at will in Banjo v Brent LBC [2005] EWCA Civ 292, [2005] 1 WLR 2520. 21 Housing Act 1985 s 84(2); Housing Act 1988 s 7(4). 22 Housing Act 1985 s 85; Housing Act 1988 s 9.
46 Sarah Blandy and Caroline Hunter During the period from 1980, the nature of social housing in England and Wales has undergone a severe transformation. In England in 1976, it made up 31 per cent of the stock, and of that 29 per cent was local authority housing.23 Since then, a number of factors, in particular exercise of the right to buy, have led to a reduction in the size of the stock. That reduction has inevitably led to a change in the nature of the tenants, a process of residualisation, so that the population has become increasingly poor and economically marginal, and the sector has become a safety net for those who cannot gain access to market based forms of provision.24 Another relevant policy change is the transfer of stock from local authorities to housing associations through the process of large scale voluntary transfers. Under this policy, swathes of council housing have been transferred to housing associations, mostly specially constituted for this purpose.25 Transferred tenants change from being secure under Housing Act 1985 to being assured under Housing Act 1988. This trend seems likely to continue. Although the majority of social tenants still have a local authority for a landlord, the proportion of those with housing association landlords has risen from just over 2 per cent in 1976 to nearly 8 per cent in 2003.26 In the cases which we consider below, the landlords have principally been local authorities. It remains to be seen whether the transfer to the voluntary/ charitable sector will change the approach taken by judges which we identify.
Commercial Tenancies An overview of the legislative framework relating to this sector reveals both its longer history and its simpler development, in comparison with the social rented sector. The first statutory intervention, Part I of the Landlord and Tenant Act 1927, aimed to redress the imbalance between landlords and tenants which was a result of the shortage of business premises following the First World War. It did so by provisions designed to ensure that the landlord did not profit, at the end of a tenancy, from any improvements undertaken and goodwill built up by the tenant. However, in practice, the 1927 Act made it difficult for tenants to establish a claim for compensation, and did not enhance their security of tenure.
23 24 25 26
S Wilcox, UK Housing Review 2004/05 (London, CIH/CML, 2004) Table 17b. P Malpass, Housing and the Welfare State (Basingstoke, Palgrave Macmillan, 2005) ch 6. Ibid, ch 10. Wilcox (n 23) Table 17b.
Judicial Directions in Landlord and Tenant Law 47 A review of the legislation in 1950 by the Leasehold Committee (chaired by Lord Justice Jenkins) summarised the tensions in balancing the landlord’s property and management interests, and the tenant’s need for security which are still fundamental to this sector today.27 While acknowledging the need for security to protect tenants’ interests, it was said that this should not be of such an extent as to: Protect the bad tenant or perpetuate the inefficient business; [. . .] prevent the due expansion of existing businesses or the setting up of new ones; [. . .] promote stagnation and interfere with redevelopment or other desirable change.28
The policy context of the commercial sector remains much the same today and judicial decisions have to balance the same interests. The Landlord and Tenant Act 1954, Part II (with amendments in 1969 and 200329 which are outlined later) has provided the statutory framework for the commercial property market for 50 years. Protection is given where premises are occupied for business purposes,30 but only if there is a periodic tenancy or a fixed term tenancy of at least six months. The cornerstone is the provision that a business tenant’s existing lease will continue until determined in accordance with the 1954 Act,31 and there is a right to apply for lease renewal. The landlord can oppose the application to renew only on certain specified grounds. In most cases where there is a statutory right to renewal, the landlord and tenant in practice agree the terms of the new tenancy without the aid of the court. The grounds upon which the landlord is able to resist the tenant’s right to renew the tenancy,32 are similar to the grounds for possession which must be made out against residential tenants and reflect the broad policy concerns identified above.33 In contrast to the residential sector, the Landlord and Tenant Act 1954 (as amended) allows the parties to agree to a lease which excludes the security of tenure provisions, and for the tenant to surrender the lease (abandoning any renewal rights).34 Until recently, both types of agreement required court approval, but as Lord Denning said in Hagee (London) Ltd v Erikson and Larson, ‘the county court invariably approves such an agreement when it is made by business people, properly advised by their lawyers’.35 27
Lord Justice Jenkins (Chair), ‘Leasehold Committee: Final Report’ (Cmd 7982, 1950). Ibid, [143]. 29 Brought about by the Law of Property Act 1969, and the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (which came into force in 2004) respectively. 30 With exclusions for agricultural leases, mining leases and service tenancies: s 43. 31 S 24. 32 S 30(1). 33 See text accompanying n 28. 34 S 38. 35 [1976] QB 209 (CA) 215. This view still holds true today; research found a final refusal rate of between 0.8% and 3.3%; see DS Cowan, et al, Section 38 Landlord and Tenant Act 1954—Failed Applications (London, ODPM, 2003). 28
48 Sarah Blandy and Caroline Hunter In 1992, the Law Commission published a review which (eventually) led to the recent reforms to the statutory framework for the business sector.36 The review was necessary because the sector in 1954, and indeed in 1969 when contracting out was introduced, consisted of a myriad of small business tenants potentially needing protection from landlords, but had since developed in such a way that ‘many business tenants are more substantial businesses than their landlords’.37 Commentators have queried whether it is now necessary for business tenants to have greater security than that enjoyed by (generally private) residential shorthold tenants under the Housing Act 1988. Some have called for repeal of the Act altogether, leaving market forces to prevail. For example, it has been pointed out that, although the 1954 Act is an ‘unusually well drafted piece of legislation’, its original aims of preventing unfairness to tenants have been superseded by a need for flexibility, and the contracting out provisions mean that ‘the fundamental rationale for the existence of the statutory protection concerned could be called into question’.38 The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 brought in changes which, according to the Office of the Deputy Prime Minister, are designed to make the renewal and determination of business tenancies quicker, easier, fairer and cheaper, while leaving the main features of the 1954 Act intact.39 Agreements to exclude security and for tenants’ surrender no longer require court approval. The complex system of notices and counter-notices in respect of terminating and renewing tenancies, and in respect of interim rent, has been streamlined. This now minimal statutory framework applies across a very diverse sector, where separate property markets operate in respect of office, retail, and industrial premises. In each of these markets, which are subject to different economic cycles, the investment market exerts a strong influence on the landlord–tenant relationship. A recent report by the University of Reading found that flexibility, in the sense of enabling tenants to respond to a changing business environment during the lease, is increasing.40 However, small business tenants are still subject to ‘onerous, non-negotiable leases’, and upward only rent review clauses were standard. Some writers have concluded
36 Law Commission, ‘Landlord and Tenant: Business Tenancies: A Periodic Review of the Landlord and Tenant Act 1954 Part II’ (Law Com No 208, 1992). 37 M Driscoll, ‘Landlord and Tenant Act 1954: The Case for Its Repeal or, Failing That, Its Reform: Part 2’ (2003) 7(1) Landlord and Tenant Rev 4, 4. 38 D Neuberger, ‘The Finer Stephens Innocent Property Lecture 2000: Our Not So Flexible Friend’ (2000) EG 139, 139 and 141. 39 Office of the Deputy Prime Minister, Business Tenancies: New Procedures Under the Landlord and Tenant Act 1954, Part 2 (London, ODPM, 2004). 40 N Crosby, C Hughes and S Murdoch, Monitoring the 2002 Code of Practice for Commercial Leases (London, ODPM, 2005).
Judicial Directions in Landlord and Tenant Law 49 that ‘the political will is now in favour of greater regulation’,41 and indeed the government is currently considering whether to legislate on commercial property leases.42 Nevertheless, between the recent deregulation brought in by the Regulatory Reform Order 2003 and the prospect of further regulation on rent reviews, it can still be said of the commercial property sector that: ‘Save for the few areas where there is statutory regulation, the relationship between landlord and tenant will be dominated by the terms of the lease agreed between them’.43 An important difference between the commercial and the social rented residential sector is that negotiation of leases is common in the former, and non-existent in the latter. This overview shows a similar trajectory for legal regulation of both sectors, in that common law principles of landlord and tenant have been overtaken by statutory regulation. While further regulation is contemplated in the commercial sector, the Law Commission’s proposals for the reform of housing law would remove all residential tenancies from the realm of property law to the status solely of contract.44 It is also clear that there are very different policy principles underpinning the current statutory regimes as they operate at the beginning of the 21st century. The social rented sector is increasingly part of a residualised regime of welfare provision, while the commercial rented sector is an important part of a flourishing capitalist market. How then have these different policy imperatives driven the courts’ approaches to similar legal problems? STATUS OF OCCUPIERS
This issue is central to both legislative regimes, and is the focus of this chapter. Questions about the status of occupiers can arise at the outset, when occupation of residential or commercial property commences, and also when occupation continues at the end of a tenancy. In both landlord and tenant sectors examined here, it is clear which types of occupancy are within the scope of the relevant legislation. We are therefore concerned with evasions of, and arrangements outside, the statutory frameworks. The Landlord and Tenant Act 1954 applies to any tenancy where the demised property is, or includes, premises ‘which are occupied by the tenant and are so occupied for the purposes of a business carried on by him’,45 41
C Hunt, ‘Threat of Legislation Hangs Heavily’ [2003] EG 140, 140. Office of the Deputy Prime Minister, Hansard col 12WS (15 March 2005): ‘We will therefore continue to monitor the situation and retain the option to legislate in future if necessary.’ 43 S Bright and G Gilbert, Landlord and Tenant Law: The Nature of Tenancies (Oxford, Clarendon Press, 1995) 14. 44 Law Commission, ‘Renting Homes’ (Law Com No 284, Cm 6018, 2003). 45 S 23(1). 42
50 Sarah Blandy and Caroline Hunter with ‘business’ being given a wide definition.46 In the social rented sector, the Housing Act 1985 and the Housing Act 1988 both refer expressly to tenancies of a dwelling-house,47 but each statute creates a specific type of tenancy, respectively secure and assured. These specific tenancy types carry with them particular rights, apply only to the tenants of particular categories of landlord, and are dependent on the tenant occupying the property as his only or principal home. Moving in Here, we examine the courts’ decisions on arrangements which were made when the occupation commenced, and intended to be outside the statutory framework for both sectors. Such arrangements have taken the form of express agreements for a licence or tenancy at will. Bright and Gilbert suggest that in similar fact situations, the courts have tended to find licences in the private residential sector, and tenancies at will in the commercial sector.48 As we will see, a number of recent cases indicate that licences in the business sector are alive and well, particularly where expressly created to exclude the protection offered by the Act. First, however, we turn to licences in the social rented sector. One of the areas of greatest judicial activity in the 1980s related to the lease/licence distinction, and in particular how it played out for those in private rented accommodation.49 Legislative drafting in the Housing Act 1980 aimed to eliminate this debate. Accordingly, Section 48(2) of the Act provided that where under a licence: The circumstances are such that, if the licence were a tenancy, it would be a secure tenancy then . . . this Part of this Act applies to the licence as it applies to a secure tenancy.
In two cases,50 it was held that for Section 48(2) to apply, the licence had to grant exclusive possession. This was, of course, perfectly possible at the time given the state of the case law, but when the law was consolidated in 1985, the equivalent provision, Section 79(3) was worded slightly differently and provided that: The provisions of this Part apply in relation to a licence to occupy a dwellinghouse (whether or not granted for a consideration) as they apply in relation to a tenancy. 46
S 23(2). Housing Act 1985 s 79; Housing Act 1988 s 1. 48 Bright and Gilbert (n 43) 142. 49 See S Bright ch 2 of this volume. 50 Family Housing Association v Miah (1982) 5 HLR 94 (CA); Kensington and Chelsea RLBC v Hayden (1984) 17 HLR 114 (CA). 47
Judicial Directions in Landlord and Tenant Law 51 In Family Housing Association v Jones,51 the Court of Appeal held that given the decision in Street v Mountford, Section 79(3) must have been intended to alter the law and would confer security on a licensee who did not have exclusive possession. The issue came before the House of Lords in Westminster CC v Clarke.52 Mr Clarke was a homeless single man, who had been housed by Westminster City Council in a hostel. The hostel comprised 31 single rooms each with ‘limited cooking facilities’. The rooms were occupied by homeless single men with a range of different vulnerabilities. The occupiers, including Mr Clarke, signed a ‘licence to occupy’ which included a provision stating that exclusive occupation was not being granted and that: The accommodation allotted to you may be changed from time to time without notice as the council directs and you may be required to share such accommodation with any other person as required by the council.53
The issues which had to be considered by the House of Lords were whether Section 79(3) actually applied to non-exclusive licences, and if, in the circumstances, the licence which Mr Clarke had signed was non-exclusive. The simple answer to these questions was that the decision in Jones was wrong: Section 79(3) did not apply to non-exclusive licenses, and the licence here was non-exclusive.54 The first part of the decision is perhaps not so surprising. How, though, is the second justified? This is done entirely through considering the needs of the council as a landlord. Lord Templeman stated that: In reaching this conclusion I take into account the object of the Council, namely the provision of temporary accommodation for vulnerable homeless persons, the necessity for the Council to retain possession of all the rooms in order to make and administer arrangements for the suitable accommodation of all the occupiers and the need for the council to retain possession of every room not only in the interests of the Council as the owners of the terrace but also for the purpose of providing for the occupiers’ supervision and assistance.55
It was also suggested by Lord Templeman that this was: [A] very special case which depends on the peculiar nature of the hostel maintained by the council, the use of the hostel by the council, the totality, immediacy and objectives of the powers exercisable by the council and the restrictions imposed on Mr Clark.56 51 52 53 54 55 56
[1990] 1 WLR 779 (CA) 791. [1992] 2 AC 288 (HL). Ibid, p 297. Ibid, p 300. Ibid, p 302. Ibid.
52 Sarah Blandy and Caroline Hunter However, as Cowan pointed out at the time, the situation really was not very unusual, with many local authorities providing such facilities.57 For our purposes, the key point is the justification for the decision. In policy terms, the appeal is again to the needs of a social landlord in managing its stock. Its managerial needs require the rights of the occupier to be kept to a minimum. We now turn to the commercial sector where, given that it is possible to contract out of the 1954 Act, it is perhaps surprising that the courts are kept busy with cases concerning the status of occupiers. However, landlords apparently find the contracting-out process burdensome,58 and the option of contracting out provides a particular context for the decisions in commercial cases. Arguably, judges are influenced by the fact that express attempts to avoid protection are legitimated in this sector. In terms of the wider context, considerable information is now available to the judiciary about the sector as a whole,59 and about the way in which lawyers proceed when negotiating terms of occupation, as well as what those terms are likely to be. The same case law applies to lease/licence cases as in the residential sector, although: The indicia, which may make it more apparent in the case of a residential tenant or a residential occupier that he is indeed a tenant, may be less applicable or be less likely to have that effect in the case of business tenancies.60
It is apparent from many recent cases that the judiciary deals confidently with business licence cases on the basis of familiarity with typical leases. In National Car Parks Ltd v Trinity Development Company (Banbury) Ltd, the parties had signed a written agreement expressed to be a licence, and there was no suggestion that any of its terms constituted a sham.61 In departing from the view that the degree of control exercised by the lessor is the decisive factor in such cases, Arden LJ said that it would: Be a strong thing for the law to disregard totally the parties’ choice of wording and to do so would be inconsistent with the general principle of freedom of contract and the principle that documents should be interpreted as a whole.62
Therefore, in contrast with the approach laid down in Street v Mountford, here the freedom of the parties to contract, and their intentions as to the type of that contract, are of paramount importance. Arden LJ went on to draw a distinction between the situation where ‘healthy scepticism’ was 57
DS Cowan, ‘A Public Dimension to a Private Problem’ [1992] Conv 285, 290. J Morgan, ‘Avoiding Statutory Protection: Short Tenancies and Tenancies at Will’ [2000] Journal of Business Law 332. 59 Crosby (n 40). 60 Dresden Estates Ltd v Collinson (1987) 55 P & CR 47 (CA) 52 (Glidewell, LJ). 61 [2001] EWCA Civ 1686. 62 Ibid, [28]. 58
Judicial Directions in Landlord and Tenant Law 53 required because ‘the parties’ bargaining positions are asymmetrical’, with the situation, as in this case: Where two commercial parties have entered in to an agreement of this nature, calling it a licence, have received appropriate advice, they were aware of the importance of the term and they were intending to enter into such an agreement with an appreciation of its significance.63
The same familiarity with commercial realities and their accompanying legal documents can be seen in the comments of Parker LJ in Clear Channel UK Ltd v Manchester CC,64 where the occupier was arguing that a tenancy had been created despite an express clause in the contract declaring that it constituted a licence and did not confer a tenancy: the fact remains that this was a contract negotiated between two substantial parties of equal bargaining power and with the benefit of full legal advice. Where the contract so negotiated contains not merely a label but a clause which sets out in unequivocal terms the parties’ intention as to its legal effect, I would in any event have taken some persuading that its true effect was directly contrary to that expressed intention.65
In such circumstances, the healthy scepticism approach referred to by Arden LJ in National Car Parks is not required. We now turn to how the courts have treated the tenancy at will, a personal relationship between the parties which does not give rise to any proprietary interest. Soon after the introduction of the 1954 Act, it was established by Wheeler v Mercer that tenancies at will arising by operation of law are excluded from its protection.66 In that decision, we can see purposive interpretation of the legislation from Viscount Simonds, literal analysis from Lord Cohen, and a ‘where but for this decision would society end up?’ argument67 from Lord Somervell of Harrow, who said: ‘It would be absurd if a prospective purchaser, who had entered into possession pending completion, was within the Act’.68 All these different approaches arrived at the same decision. In the earlier cases concerning express agreements for tenancies at will, a protectionist stance was taken by the judiciary. In Manfield Ltd v Botchin, Cooke J was concerned lest ‘the policy of the Act was being evaded by the creation of tenancies at will of business premises’.69 This concern was echoed in Hagee. Here, Scarman LJ held, in words very reminiscent of Lord 63 64 65 66 67 68 69
Ibid, [26] and [29]. [2005] EWCA Civ 1304. Ibid, [29]. [1957] AC 416 (HL). A type of judicial approach identified by MacCormick (n 3) 104. Wheeler v Mercer [1957] AC 416 (HL) 435. Manfield Ltd v Botchin [1970] 2 QB 612 (QBD) 625.
54 Sarah Blandy and Caroline Hunter Templeman’s famous dictum in Street v Mountford, that: ‘Parties cannot impose on an agreement, by a choice of label, a nature or character which on its proper construction it does not possess’.70 In the same case, Lord Denning MR said that an express tenancy at will ‘is very rare. The court will look into it very closely to see whether or not it really is a tenancy at will or whether it is a cloak for a periodic tenancy’, but expressed the view that the occupier who enters into a tenancy at will ‘on proper advice with his eyes open . . . is bound by it’.71 Here, we see a forerunner of the more laissez-faire approach from the courts exemplified in the later licence cases discussed above. Indeed, the context has changed so that by 2000 it could be said that: ‘The three methods most favoured by landlords as ways of circumventing the 1954 Act are the licence, the express tenancy at will and the short lease’.72 ‘Classic’, rather than express, tenancies at will are commonly implied where an occupier is let in to the premises while the terms of the lease are negotiated. Increasingly frequently, the terms of the lease being negotiated while the premises are occupied under a tenancy at will include contractingout of the 1954 Act’s protection. In Javad v Aqil, Nicholls LJ warned that the courts must be wary of: Inferring or imputing from conduct, such as payment of rent and the carrying out of repairs, whose explanation lies in the parties’ expectation that they will be able to reach agreement on the larger terms, an intention to grant a lesser interest, such as a periodic tenancy, which the parties never had in contemplation at all.73
This perspective, from a later decision than Hagee, respects freely negotiated commercial transactions, rather than deeming one party to be in need of protection. Again, we find an emphasis on the intention of the parties, perhaps hardly surprising against the background of legislation which permits contracting out. This approach can be compared with that of the licence cases in the social rented sector, where the major factors are the purposes and the managerial needs of the local authority landlord.
Staying on In this section, we discuss the courts’ approaches to cases concerning occupiers who remain in occupation after their original tenancy, or (in the social rented sector) that of another person with whom they were living, has come 70 71 72 73
Hagee (London) Ltd v Erikson and Larson [1976] QB 209 (CA) 217. Ibid, p 215. Morgan (n 58) 332. [1991] 1 WLR 1007 (CA) 1014.
Judicial Directions in Landlord and Tenant Law 55 to an end. The status of such an occupier could potentially be that of tenant protected by the relevant legislation, tenant at will, tenant at sufferance, licensee, or tolerated trespasser.74 In the social rented sector, it is not uncommon for occupiers to remain in occupation after the tenant has departed. In general, they will be treated as unlawful occupiers and the social landlord will simply evict. In some cases, however, the landlord has accepted rent from the occupier. Does such acceptance create a tenancy to which security can attach? The answer to this question would seem to depend on two factors: the speed of action and attitude of the local authority, and the openness of the occupier. Therefore, in Westminster CC v Basson, the tenant moved out of the property leaving his former partner, Ms Basson, in occupation.75 Once the authority found out that this was the case, they wrote to her stating that she would be liable for specified charges for use and occupation, but that ‘in making the payments as Use and Occupation Charges this arrangement is not intended as the creation of a tenancy or a licence akin to a tenancy in any way whatsoever.’ Ms Basson subsequently applied for and received a rent rebate, and forms and internal documents referred to her paying rent and having a tenancy. Some 12 months later, the authority commenced possession proceedings, but subsequently the authority issued Ms Basson with a rent book. The county court rejected a claim that a tenancy had been created. In upholding this decision, the Court of Appeal found that the council’s letter was ‘entirely inconsistent with the proposition that the appellant was remaining in the council premises with [their] consent’.76 The subsequent events could not displace that inference. By contrast, in Tower Hamlets LBC v Ayinde, Mrs Ayinde remained in possession after the tenants had departed and over a period of two years tried to regularise her position.77 She paid ‘rent’ for the property and no steps were taken to evict her for some five years. Nourse LJ considered that the case must ‘be decided with well-established principles of the law of landlord and tenant’.78 In applying those principles, he found that a landlord with the knowledge of the council which had accepted rent without protest must unanswerably have accepted the rent-payer as a tenant. Wall J, agreeing with Nourse LJ, sought to distinguish Basson on the following basis: Inactivity by a local authority in the face of an ulteriorly motivated passivity by an unlawful occupier is one thing; inactivity in the face of persistent, honest and 74 Or, of course, a tenant by estoppel. We have decided not to discuss this status of occupier here because in the social rented sector cases are so rare, and in the commercial sector so complex, that comparisons are not fruitful. 75 (1991) 23 HLR 225 (CA). 76 Ibid, p 228. 77 (1994) 26 HLR 631 (CA). 78 Ibid, p 636.
56 Sarah Blandy and Caroline Hunter open assertions by an occupier of premises who is in exclusive possession, is paying rent on her own account and who is loudly asserting that she is a tenant leads, in my judgment on the facts of this case to what I conceive to be the only possible solution namely that she is indeed what she asserts.79
The key here in some ways seems to be the ‘deserving’ nature of the person holding over, in particular, their honesty and openness. This is a wellknown concept in welfare law—although the reasons for considering some deserving or not may change over time.80 Tenancies at will are rarely found, or even argued, in the social rented sector. However, Banjo v Brent LBC concerned a tenant holding over following a long tenancy, a tenancy type excluded from protection under the Housing Act 1985.81 Chadwick LJ, in a purposive analysis, found that this was not: ‘A case in which unusual facts point to a lacuna in the law which the courts must strive to fill. The law is clear. Parliament did not intend to provide security in cases of this nature’.82 Therefore, even if both landlord and tenant conditions were fulfilled, no statutory tenancy arose. This was not because of any intention of the parties. Rather it is justified because the policy of the 1985 Act was not to give security to this type of occupier, that is, a former long-leaseholder, however deserving. In the commercial sector, where an occupier holds over following the determination of a tenancy, the courts have been slow to find a periodic, and therefore protected, tenancy. The same considerations are applied as to tenancies at will at the commencement of occupation (discussed above), particularly where the occupier is holding over pending negotiations on the terms of a new lease. In Cardiothoracic Institute v Shrewdcrest Ltd, Knox J took into account ‘the machinery of the 1954 Act and the parties’ knowledge of its operation’ in deciding that there was no intention to create a periodic tenancy, pending agreement on a contracted-out tenancy.83 His Honour approved of a line of cases in which the existence of statutory protection had been ‘treated as a significant factor in evaluating the parties’ intentions in paying and receiving rent.’84
79
Ibid, p 639. See for example R Cranston, Legal Foundations of the Welfare State (London, Weidenfeld & Nicolson, 1985) ch 2; DS Cowan, Homelessness: The (In-)appropriate Applicant (Dartmouth, Aldershot, 1997) ch 2. Cowan suggests that the homeless may in some circumstances be seen as undeserving, and this may certainly have been the case with Mr Clarke in Westminster CC v Clarke [1992] 2 AC 288 (HL). See also Lord Browne-Wilkinson’s remarks (n 4). 81 [2005] EWCA Civ 292, [2005] 1 WLR 2520. 82 Ibid, [37]. 83 [1986] 1 WLR 368 (Ch) 379. 84 Ibid. 80
Judicial Directions in Landlord and Tenant Law 57 The continuing judicial awareness that landlords’ common law rights have been interfered with encourages decisions which aim to redress the balance. However, the decision in Walji v Mount Cook Land Ltd goes against this trend.85 It involved a lease for 7 years which had been agreed but not documented. Charles J held that it would be ‘sensible and reasonable for the law to fill the gap in the agreement reached between the parties by implying a periodic tenancy from what they did agree and all the surrounding circumstances’,86 which included the fact that ‘the Walji partnership could easily have found alternative premises in the “tenants’ market” that existed in May 1995’.87 Judicial confidence and knowledge of how the sector operates, allowed for a decision which departed from the norm. The final category of occupier status to be discussed here is that of the tolerated trespasser. For most social landlords, the reduction of rent arrears is a high priority. Arrears management, where other methods fail, is achieved through court action.88 At the court hearing, once the arrears are proved, the court will generally grant a suspended possession order, and in some cases an outright possession order, dependent in part on which the landlord is seeking.89 However, even after the possession order has been obtained, the landlord does not really want vacant possession of the property; what is desired is a regular income stream including a payment off the arrears. Indeed, vacant possession, whether caused by the tenant leaving voluntarily, or whether enforced by bailiffs, makes it far less likely that any payment of the arrears will be obtained. Therefore, as Lord Woolf recognised, social landlords do not really want possession.90 Yet, the legal structures are such that it is a possession order which they seek. However, once obtained, many landlords will permit the tenant to remain, notwithstanding an outright order or breach of a suspended order.91 What then is the status of the ‘tenant’ who has been allowed to remain in possession in these circumstances? This question was considered in two cases in 1996. The first was decided by the Court of Appeal in Greenwich LBC v Regan.92 The second, Burrows v Brent LBC, was decided some 10 months afterwards by the House of Lords.93 Both cases have been followed by a significant number 85
[2000] EWCA Civ 356. Ibid, [24]. 87 Ibid, [22]. 88 See H Pawson, et al, The Use of Possession Actions and Evictions by Social Landlords (London, ODPM, 2005). 89 On the outcomes of such cases see C Hunter, et al, The Exercise of Judicial Discretion in Rent Arrears Cases (London, DCA, 2005). 90 H Woolf, Access to Justice (London, HMSO, 1996) 202. 91 Which entitles the landlord to immediate possession, see Thompson v Elmbridge BC [1987] 1 WLR 1425 (CA). 92 (1996) 28 HLR 469 (CA). 93 [1996] 1 WLR 1448 (HL). 86
58 Sarah Blandy and Caroline Hunter of subsequent cases in the Court of Appeal, which have sought to work out the implications of these initial decisions for the landlord–tenant relationship. This is not the place for a detailed legal analysis of the decisions.94 Put briefly, the argument in both cases was that a new secure tenancy had been created. In Burrows, the tenant was permitted to remain in possession after the making of an outright possession order and, in Greenwich, allowed to remain in possession after failing to abide by the terms of a suspended order. In both cases the argument for a new tenancy with full security was based on the occupier continuing to pay ‘rent’ and a sum off the arrears after these events. The landlords argued that no new tenancy had been created, and both the Court of Appeal and House of Lords agreed. The issue became defining the status of a ‘tenant’ who continued in occupation after an order. It was resolved by the introduction of what seems to be an entirely contradictory concept: the ‘tolerated trespasser’. Contradictory in the sense that a trespasser is, by his or her very nature, occupying contrary to the wishes of the landlord, and surely a trespasser cannot really be expected to make regular payments? In Greenwich, the court briefly passed over alternative legal options as to the status of such an occupier: A landlord may allow a former tenant to remain in occupation after the expiry of his former tenancy without assent or dissent in which case he becomes a tenant at sufferance. Where the tenant’s continued occupation is with the landlord’s consent he may either be a tenant at will or a tenant under a new periodic tenancy. In the present case, the judge proposed another and more attractive alternative.95
Bright has described the tolerated trespasser as: A public sector tenant whose tenancy has been brought to an end by a possession order but who remains in possession of his or her home, paying for occupation, without the local authority taking any active steps to evict him or her. This situation can persist for many years. During this period, the occupier has no status as a tenant and enjoys none of the usual tenancy rights.96
Bright quotes Clarke LJ’s description of the tolerated trespasser in Pemberton v Southwark LBC as a ‘recent, somewhat bizarre, addition to the dramatis personae of the law’.97 How does Lord Browne-Wilkinson arrive at this bizarre position? First, his Lordship states that secure tenancies are not to be considered in the same way as other ‘ordinary’ tenancies.98 Since 94 See S Bright, ‘The Concept of the Tolerated Trespasser: An Analysis’ (2003) 119 LQR 495 and ch 2 of this volume for such an analysis. 95 Greenwich LBC v Regan (1996) 28 HLR 469 (CA) 475 (Millett LJ). 96 Bright (n 94) 495. 97 [2000] 1 WLR 1672 (CA) 1683. 98 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1455.
Judicial Directions in Landlord and Tenant Law 59 Section 85(2) of the Housing Act 1985 permits the court to vary the order prior to execution, until the date of execution the court can change the date on which possession is to be given and thereby ‘revive a secure tenancy which has already been terminated’.99 Further Section 85(4) of the Housing Act 1985 Act provides a specific power to the court to discharge or rescind an order for possession. These put secure tenants in a different position.100 Yet, this ignores the fact that Section 85(4) only relates to instances where the court has already decided to adjourn, stay, postpone or suspend the order for possession, and has imposed conditions which have been complied with.101 This would seem to have no application in the case of an outright order. Even Lord Browne-Wilkinson admits his method is ‘clumsy’.102 Nonetheless, the House of Lords was willing to accept that Section 85 was sufficient reason to overcome the evident absurdities found by the Court of Appeal in Burrows when hearing the case.103 There, it had been pointed out that at the rate of agreement reached between Brent and Ms Burrows it would have taken her 14 years to pay them off, during which time she would have been a mere trespasser. The answer to this from Lord Browne-Wilkinson, is the fact that she has the right to apply to the court to vary the order. Yet, unless she institutes the action and persuades the judge to exercise his powers, she will remain a tolerated trespasser for 14 years, and it is not clear that even if she pays for the full 14 years she will have a ‘right’ to have the tenancy revived. While the House of Lords mention in passing the effect of this limbo (no repairing covenants, no application of the Defective Premises Act 1972) their Lordships did not really consider the practical effects of their decision. They talk blithely of the tenant applying at any time to revive the tenancy and thereby retrospectively reviving the old secure tenancy, together with its covenants.104 Such issues have had to be considered in the numerous decisions which have since come before the Court of Appeal.105 How is this outcome justified by the House of Lords? In Burrows, Lord Browne-Wilkinson, who gave the leading judgment, begins by saying that the appeal ‘raises a question as to the rights of a tenant of a dwelling house let by a local authority’.106 Yet, the real driving force behind the conclusion can be seen later in the judgment:
99
Ibid. Ibid. 101 SS 85(2) and (3). 102 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1456. 103 (1995) 27 HLR 748 (CA). 104 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1456. 105 See Bright (n 94) for consideration of many of them, although they are still continuing some nine years since the decision; see most recently Newham LBC v Hawkins [2005] EWCA Civ 451. 106 Burrows v Brent LBC [1996] 1 WLR 1448 (HL) 1450–51. 100
60 Sarah Blandy and Caroline Hunter One factor which weighed heavily with the Court of Appeal in Regan (to which I also attach importance) is the practical effect of the decision under appeal, ie any consensual variation of an order for possession produces a new secure tenancy or licence. Local authorities and other public housing authorities try to conduct their housing functions as humane and reasonable landlords. In so doing they frequently need to grant indulgences to their tenants to reflect changes in the tenants’ circumstances.107
Therefore, here we have a view of the local authority landlord who makes ‘reasonable and humane’, concessions who can be expected to reach ‘sensible agreements’ with their tenants.108 As Lord Jauncey of Tullichettle put it: ‘Parliament cannot have intended to penalise a landlord who acted within the spirit of the 1985 Act by granting indulgences to defaulting tenants without going through time-wasting and expensive court proceedings.’109 It is important that it is local authority landlords who are at issue here, and it is clear that they can be expected to act in the paternalistic way referred to by Robertson.110 We might characterise the policy imperative which led to this decision as one which focuses on the needs of the landlord to manage its stock. It is presumed that the landlord will make decisions which are in the best interests of tenants, and therefore tenants can be left in a ‘limbo’ position, with their rights effectively abrogated. In the most recent decisions of the Court of Appeal, it has been emphasised that it will only be in exceptional circumstances that a new tenancy will be inferred rather than occupation as a tolerated trespasser;111 at least until a reconsideration of the point at which the House of Lords in the Burrows case ‘drew the balance between the interests of the tolerated trespasser and those of the former public sector landlord.’112 This formulation suggests that considerations of social policy, rather than doctrinal analysis, determine where the line is drawn.
CONCLUSIONS
In this ‘law in context’ analysis, we have focused on judicial decision-making related to the status of occupiers who are moving in, or staying on. By juxtaposing the case law in the two landlord and tenant sectors under discussion here, the divergent development between these sectors is highlighted. 107
Ibid, p 1455. Ibid. 109 Ibid, p 1460. 110 Robertson (n 7). 111 Newham LBC v Hawkins [2005] EWCA Civ 451; Lambeth LBC v O’Kane, Helena Housing Ltd v Pinder [2005] EWCA Civ 1010. 112 Lambeth LBC v O’Kane, Helena Housing Ltd v Pinder [2005] EWCA Civ 1010 [64] (Arden LJ). 108
Judicial Directions in Landlord and Tenant Law 61 We suggest that this can be explained by the fact that judges are very much influenced by a common sense understanding of the policies which underlie the two statutory regimes. This is not expressed as a formal aid to statutory interpretation, but rather legislative purpose is not far from the surface of many judgements. There have been few real problems of statutory interpretation, in either sector. The question of whether a former long leaseholder could be categorised as a secure tenant was discussed in Banjo, as was the issue of whether tenancies at will fell within statutory protection, in Wheeler. However, most of the cases examined here have concerned the relationship of legislative provision and the common law of landlord and tenant. In seeking to reach a decision, many judges make reference to the words of Lord Denning in Marcroft Wagons Ltd v Smith, that ‘it is not correct to consider the common law position separately from the new position’, where that new position has been created by legislation.113 The alteration of the common law position, often to the detriment of the landlord, seems to be a factor weighing heavily in some decisions. Under the Landlord and Tenant Act 1954, Part II, the judiciary has been able to find a wide range of possible occupancy statuses, although there have been no innovations to compete with the tolerated trespasser in the social rented sector. In commercial cases, it is not unusual for all the options to be canvassed; for example in Javad v Aqil, the tenant argued for a periodic tenancy or alternatively tenancy by estoppel, and the landlord countered with tenancy at will or licence.114 It has been suggested that this breadth of range is due to commercial properties lending ‘themselves to a variety of physical uses and are subject to very different types of contractual restriction and control’.115 We would argue that the history of judicial decision-making in these cases has encouraged a flexible, common law approach by advocates. In narrower policy terms, a change in outcomes and judicial reasoning can be discerned from the 1970s, possibly as a result of the appointment of judges with more commercial experience.116 A greater knowledge of how the sector operates is displayed, and the early concern to protect the interests of tenants (following the purpose of the Act) has given way to a more realistic, confident and laissez-faire judicial style. We suggest that over time, the distinctive features of the commercial tenancy, as well as the statutory freedom to opt out, have influenced judicial decisions in this field, virtually displacing concern for protection of the tenant. 113
[1951] 2 KB 496 (CA) 505. The estoppel claim got no further than the County Court, and although the licence argument was mooted at appeal, it was not allowed to proceed. 115 M Haley, ‘Licences of Commercial Premises: A Return to Form’ [2002] Journal of Business Law 310, 310. 116 See for example the article by Neuberger (n 38), now a Lord Justice of Appeal, discussing the continued relevance of the 1954 Act, Part II, in the current commercial context. 114
62 Sarah Blandy and Caroline Hunter The comparison of decisions on the lease/licence distinction in the two sectors brings out some interesting points. There is an assumption in the social rented sector that there is no deliberate attempt to evade the Housing Act, contrasting with that in the private rented sector. Specific circumstances apply, of vulnerable and, to an extent, undeserving (the homeless) tenants and responsible landlords. There is a much smaller area for disputes, focused on circumstances which were not contemplated by the legislation. In the commercial sector, deliberate evasion of the 1954 Act poses no problems in the business environment and is not contrary to public policy in any way. The judiciary now assumes that both parties have had the benefit of legal advice and there is no disparity of bargaining power. In circumstances not controlled by express agreements, such as tenants holding over or going into occupation while negotiations continue in respect of terms, there is scope for the judiciary to ‘fill the gap’ in the parties’ intentions and decide on occupier status based on all the circumstances. When determining the status of occupiers following possession orders in the social rented sector, the judiciary has been inventive in conjuring up a wholly new status of occupier, while at the same time relying on the age old concept and get out of ‘intention of the parties’. Although the tolerated trespasser provides the most extreme example of judicial innovation, room for judicial manoeuvre appears severely restricted by statute in the social rented sector. However, this restriction may be self-induced; Pawlowski has suggested that the tenant at sufferance is a ‘form of tolerated trespasser’,117 while Cafferkey makes the point that there are significant similarities between the tolerated trespasser and the tenant at will, based on caselaw from the commercial sector.118 The decisions do not take a rights-based approach to the occupation of social housing. While judges are willing to examine the bigger picture, it is within a very narrow framework, which puts the perspective of the landlord at its centre and relegates the occupier to an object of social welfare who is to be indulged only to the extent that the landlord considers it appropriate. In both sectors, the majority of landlord/tenant relationships fit comfortably into the relevant statutory scheme—or in the commercial sector, have contracted out in accordance with the law—so never come to the notice of the courts. We have focused on the cases at either end of the spectrum: homeless, vulnerable occupiers in the social rented sector; and commercial sector occupancies which have come unstuck. When deciding on these
117 M Pawlowski, ‘Occupational Rights in Leasehold Law: Time for Rationalization’ [2002] Conv 550. 118 A Cafferkey, ‘Tolerated Trespass—What Does This Mean for the Former Landlord and Tenant’ [1998] Conv 39.
Judicial Directions in Landlord and Tenant Law 63 cases, we suggest that the courts rely on principles of contract and property, but do so in the shadow of the legislation which would otherwise apply. At one end, the policy justifications given in judgments are concerned with landlord managerialism of undeserving occupiers, and at the other with freedom of contract in commercial property transactions.
4 Commercial Leases Past and Present: The Contribution of the Law Commission STUART BRIDGE*
INTRODUCTION
F
the inception of the Law Commission, it is an appropriate time to consider its contribution to the law of landlord and tenant. The statute creating the two Law Commissions (one for England and Wales, and the other for Scotland) received Royal assent on 15 June 1965. Work at the Law Commission, chaired by Sir Leslie Scarman, commenced on 21 June 1965. Its first publication followed shortly thereafter on 19 July: the First Programme of Law Reform.1 The First Programme is a fascinating document setting out a real vision for law reform, and a collective enthusiasm for the work that was necessary. It contains no less than 17 items, some of which were delegated to other bodies (ad hoc or inter-departmental committees, or, in one case, the Criminal Law Revision Committee.) Item VIII reads as follows: ORTY YEARS SINCE
The basic law of landlord and tenant, even apart from legislation controlling rents and securing tenure, is unduly complicated, anachronistic in many respects and difficult to ascertain. It is to be found in a very large number of statutes and cases, is largely self-contained and in the Commission’s view is suitable for ultimate codification.
An example of these difficulties was the law of waste and distress for rent, and the Commission decided that was a good place to start. Subject to this,
* The author acknowledges his gratitude for the assistance and support in writing this paper of Julia Jarzabkowski, Barrister, Law Commission, who presented an earlier draft on his behalf at the conference, and to Joel Wolchover, Research Assistant, Law Commission. 1 Law Commission, ‘The First Programme of Law Reform’ (Law Com No 1, 1965).
66 Stuart Bridge the first Commissioners recommended: ‘That an examination be made of the basic law of landlord and tenant with a view to its modernisation and simplification and the codification of such parts as may appear appropriate’.2 Codification was all the rage in the 1960s. The Law Commissions Act itself, defining the statutory duty of the newly created bodies (‘to take and keep under review all the law . . . with a view to its systematic development and reform’), gave special mention to ‘codification’ as one of the methods such development and reform might take.3 Landlord and tenant law was not alone in getting the codification treatment: also lined up, as Item I of the First Programme, was the entire law of contract, and criminal law and family law were soon to follow in the Second Programme, published in 1968.4 A major problem with codification, at least in the context of our common law jurisdiction, is what exactly it means. As the Commission once explained, ‘Codification of the law is an exercise which can be interpreted in a number of ways’.5 It can mean simply a comprehensive re-statement of the existing law (much of which may be contained in decided cases) in the interests of accessibility, without any reform of the rules themselves. Or, it may include clarification of such parts of the law as are uncertain, and incorporate reforms to deal with defects which have been identified. It is in this latter sense that the Commission has generally understood codification. The form it takes may also vary. The ideal may be a single statute of the law as revised providing a comprehensive statement accessible to all. But that is hardly realistic today, given the resources that would be required to effect such an objective. More likely is a series of instruments which together provides a composite body of principle to which reference can be made. Forty years on, we do not have a Code of Landlord and Tenant Law in any of these guises. Nor, do we have a Code of Criminal Law, or Contract, or Family Law. Only criminal law codification remains on the agenda of the Law Commission, all the others have withered on the vine. Landlord and tenant did not, in truth, ever get very far: An Interim Report on Distress for Rent was published in 1966, a Report on Business Tenancies in 1969, and a Report on the Obligations of Landlords and Tenants in 1975.6 2
Ibid, p 10. Law Commissions Act 1965 s 3(1). 4 Law Commission, ‘The Second Programme of Law Reform’ (Law Com No 14, 1967). 5 Law Commission, ‘Landlord and Tenant: Reform of the Law’ (Law Com No 162, Cm 145, 1987) [3.2]. 6 Respectively, Law Commission, ‘Landlord and Tenant: Interim Report on Distress for Rent’ (Law Com No 5, 1966); Law Commission, ‘Landlord and Tenant: Report on the Landlord and Tenant Act 1954 Part II’ (Law Com No 17, 1969); and Law Commission, ‘Codification of the Law of Landlord and Tenant: Report on Obligations of Landlords and Tenants’ (Law Com No 67, HC 377, 1975). 3
The Contribution of the Law Commission 67 But by 1978, the Commission was having to back-track. It seems to have bitten off rather more than it could chew: It is now clear to us that the task of preparing a complete code of the basic law of landlord and tenant is immense and cannot be completed for a long time unless resources are devoted to it on a scale which is at present impossible. We have therefore decided that it is not realistic to try to embody in one report, with clauses, all the material which would be required for a comprehensive code. . . . Such a report would be too large for us to produce as a single exercise: we also think that pressures on Parliamentary time would make it extremely unlikely that a Bill of the required length would be enacted.7
There are two factors at play here: resources, and implementation prospects. As far as prospects of implementation are concerned, the Commission was (by 1978) learning from experience. In particular, although it had published its Report on Obligations of Landlords and Tenants in 1975, no steps had been taken to implement the report, and government had recently intimated there were no prospects for introduction of a Bill during the current Parliament.8 Although the Commission stated in 1978 that it would in due course (on completion of the work then being conducted on termination of tenancies and covenants against dispositions, alterations and change of use) review its commitment to the codification project, that was really the end of it. By 1987, the Commission was indicating publicly that codification was at best ‘a long term aim—very long term, at the present rate of progress’.9 Codification of the entire law of landlord and tenant is now no longer a realistic objective. But that is not to say that we should not take such opportunities as may arise to clarify existing principles in the course of remedying defects in particular areas of landlord and tenant law. It could be said that the current Renting Homes project, based though it is on a new vision for the future of residential leases and licences, effects something of a codification of housing law at least as it applies between landlords and those occupying their properties. It is interesting, if one goes back to 1965, to observe in Item VIII of the First Programme, the tacit acceptance that legislation controlling rents and dealing with security of tenure was not ‘appropriate’ for consideration by the Law Commission. For good reason, the Commission has always tended to steer away from matters which are intensely political (in particular party political).10 Devoting public resources to a project which is only likely to bear legislative fruit in the event of a certain party being in government 7 8 9 10
Law Commission, ‘Annual Report 1978’ (Law Com No 92, HC 87, 1978) [2.34]. Nothing ever came of the 1975 Report. Law Commission, ‘Landlord and Tenant: Reform of the Law’ (n 5) [3.2]. Sir Michael Kerr, ‘Law Reform in Changing Times’ (1980) 96 LQR 515, 516.
68 Stuart Bridge would be extremely difficult to justify. It would lead to accusations of partiality, and the Commission’s true independence from government would come under scrutiny. But it may be that an area that is at one time controversial ceases to become so as the political climate changes, and the possibility of the Commission making a useful and important contribution to law reform may ultimately arise.11 It would have been inconceivable in 1965, when the Law Commission was founded, that it consider the legislative regulation of housing law. The 1950s had seen an attempt by the Conservative government to de-regulate the private sector of housing by removing residential tenancies from the control of the Rent Acts. Following the return of Labour in 1964, that de-regulation process was reversed, the Rent Act 1957 was shown the door, and new legislative controls on the powers of landlords were introduced, including (in response to the phenomenon of Rachmanism) the first statutory provisions imposing criminal liability for eviction and harassment. For the next 20 years or so, the political football of the Rent Acts was kicked between the parties of government (and further division was caused (at least initially) by the reforms of public sector housing law initiated by Margaret Thatcher’s administration in the early 1980s, notably the introduction of the public sector tenant’s right to buy and the statutory conferment of security of tenure on tenants of local authority landlords). Even in 1990, it would have been inconceivable that the Law Commission could undertake a broadly based housing law project. However, once the new Labour Government of 1997 accepted in principle the statutory changes wrought by the Conservatives in this area since 1979, the way was clear for the first review by the Law Commission of this vitally important area of the law. With a background of consensus, it is hard to think of a project more ideally suited to the resources and abilities of the Law Commission. The 40th anniversary of the Commission is, therefore, a most appropriate time to publish the Report and Bill on Rented Homes.12
BUSINESS TENANCIES: LANDLORD AND TENANT ACT 1954 PART II
The legislative regulation of business tenancies pre-dates the establishment of the Law Commission.13 Part I of the Landlord and Tenant Act 1927 11 For another recent example of changes to the political climate enabling the Commission to carry out particular law reform projects, see the inclusion of Cohabitation in the Ninth Programme of Law Reform: Law Commission, ‘9th Programme of Law Reform’ (Law Com No 293, HC 353, 2005). 12 Law Com No 297, Cm 6781, 2006. 13 For the history of regulation, see: M Haley ‘The Statutory Regulation of Business Tenancies: Private Property, Public Interest and Political Compromise’ (1999) 19 Legal Studies 207.
The Contribution of the Law Commission 69 (recognised as the first statutory incursion into this territory), was of relatively limited impact, conferring on business tenants the right to compensation on quitting the premises for their improvements and for loss of goodwill. The specific limitations of these provisions, and their failure to address concerns about the tenant’s security, were noted by the Leasehold Committee (the Jenkins Committee) when it reported in 1950.14 Three years later, government accepted that tenants should obtain better security: The landlord of business premises, when an existing tenancy comes to an end, should have the right to resume possession himself if he requires the premises for the purpose of his own business or for the purpose of a scheme of redevelopment. If, however, he does not require the premises for himself for one of these purposes, he is entitled as landlord to a fair contemporary market rent for the premises—neither more nor less: and if the sitting tenant is willing and able to pay that rent and to enter in to other reasonable terms of tenancy, then the sitting tenant has a greater right than any alternative tenant to the tenancy on those terms.15
Part II of the Landlord and Tenant Act 1954 duly followed. It set up an elaborate and complex court-based process which required landlords and tenants to engage in a carefully choreographed series of steps following expiry of the tenancy, should the landlord wish to terminate or the tenant wish to obtain a renewal. Not only did the legislation put the court at the very hub of the process of renewal or termination, it built numerous traps for the unwary with untold consequences for those who failed to abide by its strict time limits and other procedural requirements. There can be few statutes, if any, which have been the catalyst for more professional negligence claims than the 1954 Act. The Law Commission has reviewed the operation of the statute on two occasions, reporting in 1969 and 1992. On the first of these exercises, in the course of its examination of the law of landlord and tenant pursuant to Item VIII of its First Programme, it made several recommendations for its reform.16 Its view was that on the whole the legislation had worked well, but that in the 14 years of its existence, it had become apparent that ‘in several respects the provisions of the Act have given rise to uncertainty or are likely to cause inconvenience or even injustice.’17 To its Report was appended a 13 clause Bill. In accordance with the Commission’s invocation ‘that the relevant provisions should be clarified or amended
14
Lord Justice Jenkins (Chair), ‘Leasehold Committee: Final Report’ (Cmd 7982, 1950). Government Policy on Leasehold Property in England and Wales (Cmd 8713, 1953) [43]. 16 Law Commission, ‘Landlord and Tenant: Report on the Landlord and Tenant Act 1954, Part II’ (Law Com No 17, HC 38, 1969). 17 Ibid, [1]. 15
70 Stuart Bridge without delay, pending an overall review of the law relating to leases of business premises’,18 its recommendations were implemented within the year by the Law of Property Act 1969. If there is a single theme underlying the 1969 reforms, it is an acceptance that where commercial tenancies (as opposed to residential tenancies) are concerned, there is rather less need for paternalistic intervention, and rather more for contractual autonomy. In particular, it was difficult to justify the degree of overarching protectiveness still prevalent in the residential sector where the Rent Acts held sway. Two reforms in particular aimed at meeting the need for greater flexibility: extending to 6 months the period for which tenancies may be granted outside the operation of the Act, and permitting parties to ‘contract out’ of the protective machinery on condition that they obtain the prior sanction of the court. Twenty years later, the Law Commission conducted a ‘periodic review’ of Part II of the 1954 Act. In the following Report, it once more accepted the utility of the machinery contained in the statute, explaining: The 1954 Act is an established part of the commercial property market and the practices of that market develop and change over the years, so it is appropriate for the statutory provisions to be reviewed from time to time to ensure that they are still fulfilling their intended purpose.19
As in 1969, it made recommendations for reform, on the basis that, although the Act as a whole was working well, certain details could be amended to ‘increase its usefulness and eliminate unnecessary formalities’.20 The reforms were not radical. They aimed to retain the renewal process on the grounds of familiarity to professional advisers and property owners; to maintain the overall balance between landlord and tenant; and, to be broadly neutral. More significantly, perhaps, there was a recognition (sometime before the civil procedure revolution instigated by the Woolf reforms) that the statutory procedures were too court-based: Although it must always be possible to refer disputes to court, to ensure that those involved can enforce their statutory rights, it should not be necessary to take proceedings as a routine part of the procedure. Recourse to the court should be kept to a minimum to cut out expense and delay for the parties and to reduce unnecessary burdens on the court system.21
Unlike 1969, these recommendations were not seized upon with enthusiasm by government and implemented in a fervoured flurry of legislative activity. Indeed, for many years, it seemed unlikely that anything would happen at all. At last, in 2000, Government announced that it would consult on its 18 19 20 21
Ibid. Law Commission, ‘Business Tenancies’ (Law Com No 208, HC 224, 1992) [1.3]. Ibid, [1.3]. Ibid, [1.9].
The Contribution of the Law Commission 71 own proposals (themselves based upon the 1992 recommendations of the Commission) to improve the working of the 1954 Act. Shortly afterwards, Parliament passed the Regulatory Reform Act 2001, enabling the reform of existing primary legislation by means of statutory instrument. The business tenancy recommendations became in time something of a flagship for this new legislative procedure, and they were finally implemented (although not by any means in all respects) by the catchily titled Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. It came into force on 1 June 2004. There is, without a doubt, very considerable affection for Part II of the 1954 Act, at least among legal practitioners. It is part of the vernacular. Adept litigators have enjoyed the buzz of precipitous time limits; notices and counter-notices; arguments about waiver; applications to strike out; all of which gives the process a mystique and allows its actors to clothe themselves in the mantle of specialist. It would be a great loss to the folklore of the county court, if the business tenancy jurisdiction were to be lost. But as a result of the deep inroads made into the protectionist legislation governing residential tenancies (the Rent Acts) and agricultural holdings by the Housing Acts of 1988 and 1996 and the Agricultural Tenancies Act of 1995, Part II of the 1954 Act now presents as something of an anachronism. Indeed it seems rather surreal that the one sphere where there is robustly protective legislation holding back market forces is the commercial sector of lettings. It can be said, of course, that unlike the Rent Acts and the Agricultural Holdings Acts, application of the 1954 Act is in a sense voluntary. Since 1969, it has been possible to contract out of the protective machinery provided that prior judicial sanction has been obtained, and such sanction has always been forthcoming (assuming that the application came within the court’s jurisdiction22). Since 2004, contracting out no longer requires the blessing of the court, and the parties can do it of their own volition. It is not, of course, possible to predict with any degree of confidence the effect of this reform, but there must be a reasonable likelihood that in a few years’ time a diminishing rump of commercial tenancies remain within the confines of the 1954 Act (as the vast majority have been contracted out). If contracting out becomes the norm, then what will be the point of retaining the jurisdiction? Will it serve any useful purpose? Or will it simply provide an irritation (and sometimes a very costly irritation) for those who fail to comply with the (not particularly onerous) conditions necessary for successful contracting out? 22 ‘We are told that the court inevitably approves such an agreement when it is made by business people, properly advised by their lawyers. The court has no materials on which to refuse it’: Hagee (London) Ltd v AB Erikson & Larson [1976] QB 209 (CA) 215 (Lord Denning MR).
72 Stuart Bridge Neuberger J (as he then was) made this very point (with considerably more erudition and elegance) some 5 years ago, at a time when contracting out still required the intervention of the court: If, in 1954, the philosophical, social and commercial arguments favoured giving commercial tenants statutory protection, the legislature apparently thought that the position had shifted by 1969, so that it was open to parties to contract out from such protection. I would suggest that, in the ensuing 30 years, matters have now moved on to such an extent as to question the need for any protection.23
It is ironic that the recommendations of a ‘periodic review’ (which inevitably takes account of the economic circumstances then prevailing, together with such projections as are available) should have taken some 12 years to be implemented. It is to be hoped that next time the legislation is considered, a rather shorter time elapses between Report and implementation. In the light of the recent amendments to the 1954 Act, the central question of a future review may well concern the continuing justification for regulation of business tenancies.
ASSIGNMENT AND ASSIGNABILITY
Two important statutes can trace their ancestry to work of the Law Commission. In one case, Parliament enacted the Commission’s (eventual) recommendations wholesale, in the other, they were ravaged by the legislative process.
Landlord and Tenant Act 1988 For over 50 years, where a tenant had covenanted not to assign, sub-let or otherwise part with possession without the landlord’s prior consent, the tenant had been able to challenge the landlord’s refusal of such consent on the grounds of reasonableness or the imposition by the landlord of unreasonable conditions.24 This legislative modification of covenants restricting disposition was, however, limited in one important respect: it did not apply where the prohibition on disposition was absolute. It was, therefore, open to landlords (where they could obtain agreement by the tenant) to circumvent entirely the statutory protection, and to bar totally any dealing with the tenancy. As the Commission noted in a 1985 Report: It is difficult to avoid the suspicion this had not been fully appreciated during the Parliamentary proceedings. Otherwise why slam the front door on contracting-out 23 24
Sir David Neuberger, ‘Our Not So Flexible Friend’ Estates Gazette, 30 September 2000, 139. Landlord and Tenant Act 1927 s 19(1).
The Contribution of the Law Commission 73 by the words “notwithstanding any express provision to the contrary�
