ON APPEAL FROM THE CENTRAL LONDON
CIVIL JUSTICE CENTRE
His Honour Judge Dight
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE AIKENS
LORD JUSTICE LEWISON
| SMITH & ANR
|- and -
|JAFTON PROPERTIES LIMITED
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Mr Anthony Radevsky (instructed by Wallace LLP) for the Respondent
Hearing date : 24 October 2011
Crown Copyright ©
Lord Justice Lewison:
"If there is a lease of four flats, flats 1 to 4, and there are two assignments of part of the demised premises held under the lease, one to A of flats 1 and 2, and another to B of the remaining two flats, flats 3 and 4, then for the purposes of section 5 of the Leasehold Reform Housing and Urban Development Act 1993 ("the 1993 Act"):
(a) is A the tenant of his two flats and B the tenant of his two flats, or
(b) are A and B together to be regarded as the tenants of all four flats?
If (a) is correct, then A and B are qualifying tenants for the purposes of the 1993 Act. If (b) is correct then they are not."
i) a transfer of flats 1 and 2, with lower ground floor storage space, to Mr Smith alone;
ii) a transfer of flats 3 and 4, also with lower ground floor storage space, to Mr Dennis alone; and
iii) a transfer of the remainder of the Property (essentially its common parts) to Messrs Smith and Dennis jointly.
The transfers purported to apportion, without the consent of the landlord, the yearly rent payable under the lease as to £34 in respect of the premises transferred to Mr Smith, £34 in respect of the premises transferred to Mr Dennis, and £17 in respect of the premises transferred to Messrs Smith and Dennis jointly.
i) Mr Smith is registered as sole proprietor of a leasehold interest in flats 1 and 2 (and associated storage space) under title number EGL544839;
ii) Mr Dennis is registered as sole proprietor of a leasehold interest in flats 3 and 4 (and associated storage space) under title number EGL544842; and
iii) Messrs Smith and Dennis are jointly registered as the proprietor of the remainder of the Property under title number EGL544844.
The 1993 Act
"Where apart from this subsection-
(a) a person would be regarded for the purposes of this Chapter as being (or as being among those constituting) the qualifying tenant of a flat contained in any particular premises consisting of the whole or part of a building, but
(b) that person would also be regarded for those purposes as being (or as being among those constituting) the qualifying tenant of each of two or more other flats contained in those premises,
then, whether that person is tenant of the flats referred to in paragraphs (a) and (b) under a single lease or otherwise, there shall be taken for those purposes to be no qualifying tenant of any of those flats."
The common law
"So covenant will lie against the assignee of part of an estate for not repairing his part; "for it is dividable, and follows the land," with which the defendant as assignee is chargeable by the common law, or by the stat. 32 H. 8, c. 37. Congham v. King, Cro. Car. 222. Upon the whole, therefore, we think that the condition of this assignee is in point of law different from that of a lessee chargeable on the privity of contract; and being chargeable on the privity of estate, and in respect of the land, his rent is upon principle apportionable as the rent of a lessee is, or as his rent would be in an action of debt or replevin."
"The rent, according to the authorities I have cited, is divisible. There is absolutely no evidence and no presumption upon which to found an inference that she holds an undivided share in the lands jointly or as tenant in common, in the ordinary sense of the term, with others. In one sense, of course, it may be contended that a number of tenants, each holding a divided portion and each contributing to the entire rent, are tenants in common…. But the authorities recognize a divided share, and the inference here is overwhelming that it is a divided share that the defendant holds."
"The law is, I think, well settled that where a lessee of demised premises assigns portion of these premises to a stranger, the assignee is liable to the lessor upon the covenants contained in the lease only in so far as those covenants affect the lands in his possession; and, as regards rent, only for an apportioned part of the rent properly chargeable in respect of the land actually vested in him."
"… the liability of an assignee to pay the rent, which the original lessee has covenanted to pay, arises, not from privity of contract, but from privity of estate. It is not because the lessee has entered into the covenant with the lessor, but because he has vested in him the lands which are charged with the rent, that the assignee becomes liable. The covenant to pay the rent, in addition to the personal liability which it imposes upon the lessee who enters into it, also affixes upon the land itself a liability to pay."
"… it will be found that throughout [previous cases] the principle was recognized that, in order to free the assignee of part of the lands from payment of the entire rent, he must hold the part in physical severalty. When he does so there is no privity of estate, as between him and the reversioner, in the entire of the lands. … The determination of the assignee's liability depends on privity of estate, and I am unable to draw a distinction between a case where the act of severance is that of the covenantor and a case where the severance had taken place before the covenant was entered into. In neither case is there full privity of estate, and therefore, there is no liability on the part of the assignee for the whole rent."
"Where the leased property has been physically divided amongst two or more assignees it is clear that the obligations of the lease, so far as they affect the assignees, become separate, and each of the assignees is liable, while he is assignee, to perform the covenants so far as they affect his divided part of the leased property."
"Where leased land is physically divided it is possible to say that the covenant imposed by law through privity of estate on the assignee is confined to the part of the land in respect of which there is privity of estate between the assignee and the landlord, but where the land is not physically divided, it is not possible to split the covenant into two covenants capable of enforcement."
i) The assignee's liability to pay the rent and perform the obligations of the lessee depend on privity of estate alone;
ii) If the assignee is the assignee of part only of the leased property then the rent and other obligations for which he is liable are those referable to the part of the leased property assigned to him;
iii) He is not liable for the rent or other obligations referable to the part of the leased property that has not been assigned to him;
iv) The rationale for these propositions is that the assignee only has privity of estate as regards the part of the leased property of which he is the assignee. He has no privity of estate as regards that part of the leased property that has not been assigned to him;
v) The landlord may enter any part of the leased land and distrain for the rent for the whole. But the remedy of distress has nothing to do with privity of estate, save to the extent that a relation of landlord and tenant must exist.
Lester v Ridd
"(1) In this Act "agricultural holding" means the aggregate of the land (whether agricultural land or not) comprised in a contract of tenancy which is a contract for an agricultural tenancy.
(2) For the purpose of this section, a contract of tenancy relating to any land is a contract for an agricultural tenancy if, having regard to - (a) the terms of the tenancy, (b) the actual or contemplated use of the land at the time of the conclusion of the contract and subsequently, and (c) any other relevant circumstances, the whole of the land comprised in the contract, subject to such exceptions only as do not substantially affect the character of the tenancy, is let for use as agricultural land."
"One question to be considered is whether the effect of the partition, or of the partition and the subsequent assignment to the plaintiffs of their part of the land, is to create two separate tenancies of two separate holdings, each of which has to be looked at on its own. But if that is not the effect, it is still necessary, despite the partition, to look at the land comprised in the 1902 lease as a whole. If the land is looked at as a whole, the answer, in my judgment, must be … that the whole of the land, with an exception only which does not substantially affect the character of the tenancy, is still let for use as agricultural land. If the land comprised in the 1902 lease has to be looked at as a whole the plaintiffs must fail because, on that approach, the [house] assigned to them, of which they desire to have the freehold, is still comprised in an agricultural holding."
"The effect in law of the partition of the demised premises in 1963 by the assignment of part to A. J. Burge and the remainder to W. J. Burge for the residue then unexpired, in each case, of the term of the 1902 lease was, notwithstanding that the landlord did not concur in the partition to sever the covenants of the lease so as to follow the land. Thus after comparable assignments of parts to separate assignees an action on the covenant would lie against each assignee of part for not repairing his part: Stevenson v Lambard (1802) 2 East 575, 580, per Lord Ellenborough CJ. Moreover, established authority shows that under the covenant for payment of rent the landlord could only sue an assignee of part only of the premises for an apportioned part of the rent: see Gamon v Vernon (1678) 2 Lev 231 ; Hare v Cator (1778) 2 Cowp 766, a decision of Lord Mansfield, and Stevenson v Lambard. Some doubts as to these authorities were expressed by Tindal CJ in Curtis v Spitty (1835) 1 Bing NC 756, but he nonetheless followed the earlier authorities; his doubts are recorded in the judgment of this court in Whitham v Bullock  2 KB 81, but it was not necessary to resolve them. The law has continued to be stated in the text books on the subject as being that an assignee of part of the land cannot be sued for the whole of the rent, but only for a proportionate part thereof. However, the proportionate part which the landlord could recover from an assignee of part only of the land would be the part of the whole rent which the court thought fairly attributable to the part of the land in question, and not necessarily the part of the rent which the several assignees had agreed among themselves, without the concurrence of the landlord, to be attributable to that part of the land. More importantly, however, it is clear and undoubted law that after assignments of separate parts of the land demised to separate assignees, the landlord can still distrain upon any part for the rent which accrues due for the whole, because the rent for the whole is considered to become due out of each and every part of the land: Curtis v Spitty, 1 Bing NC 756, and Whitham v Bullock  2 KB 81."
"… an apportionment of rent effected without the landlord's consent on an assignment of part of the demised premises is not, at least in all respects, binding on the lessor. It does not affect the landlord's right to distrain on that part for the rent of the whole: see Whitham v Bullock  2 KB 81, 86, per Clauson L.J. On the authorities it is not entirely clear whether the landlord ceases to be in a position to sue any one except the original lessee (whom he can sue in contract) for the whole rent and can only sue the tenants of the severed parts in respect of a proportion of the rent. This court expressly left this question open in Whitham v Bullock. Nevertheless, I think it is clear that if the landlord can only sue the tenants of the severed parts in respect of a proportion of the rent, such proportion is a fair proportion to be determined by the court. It is not necessarily the proportion which the assignor and assignee may have agreed between themselves. The proportion thus agreed is not as such binding on the landlord."
Conclusion at common law
"To what, in ordinary legal parlance, do we refer when we speak of a "tenancy"? I think that we refer to a particular legal relationship between tenant and landlord under which land is held by the one of the other. A "tenant," both by derivation and by usage, is someone who "holds" land of another, for which purpose it is immaterial whether he does so by contract or by estate. Although he may remain contractually liable to the landlord, an original tenant who has assigned the tenancy, equally with an assignee who has himself assigned, cannot properly be described as the tenant. He no longer holds the land. It is the assignee who now holds the land. It is he who has the tenancy."
Return to the 1993 Act
"(2) In this Part "lease" and "tenancy" have the same meaning, and both expressions include (where the context so permits)—
(a) a sub-lease or sub-tenancy, and
(b) an agreement for a lease or tenancy (or for a sub-lease or sub-tenancy),
but do not include a tenancy at will or at sufferance; and the expressions "landlord" and "tenant" , and references to letting, to the grant of a lease or to covenants or the terms of a lease, shall be construed accordingly.
(3) In this Part any reference (however expressed) to the lease held by a qualifying tenant of a flat is a reference to a lease held by him under which the demised premises consist of or include the flat (whether with or without one or more other flats).
(4) Where two or more persons jointly constitute either the landlord or the tenant or qualifying tenant in relation to a lease of a flat, any reference in this Part to the landlord or to the tenant or qualifying tenant is (unless the context otherwise requires) a reference to both or all of the persons who jointly constitute the landlord or the tenant or qualifying tenant, as the case may require."
"I accept that, as a matter of principle, it is legitimate to examine the operational provisions of a statute in order to decide whether they justify implying a restriction on the class of persons who can benefit from it, even though such a restriction cannot be gathered from the provisions which directly relate to the identification of such persons. However, it appears to me that it would normally only be right to imply such a restriction where it is plainly justified by the operational provisions, and where the nature of the restriction is clear."
Lord Justice Aikens:
Master of the Rolls: