England and Wales Lands Tribunal

Sheffield City Council v Cheetham & Ors [2004] EWLands LRX_32_2004 (12 May 2005)

LRX/32/2004

LANDS TRIBUNAL ACT 1949

Leasehold Enfranchisement – Terms of transfer – Leasehold Reform Act 1967, s.10(4) – Covenant not to acquire rights – Section 23 – Material enhancement of value of landlord's property

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF A LEASEHOLD

VALUATION TRIBUNAL OF THE NORTHERN RENT ASSESSMENT PANEL

BETWEEN SHEFFIELD CITY COUNCIL Appellant

and

DAVID CHEETHAM and Others Respondent

Re: Numbers 12,15,20,28,29 and 49

Durvale Court,

Sheffield S17 3PT

Before: His Honour Judge Michael Rich QC

Sitting at Procession House, 110 New Bridge Street, London, EC4V 6JL

On 10 May 2005

Jason Hill, instructed by the Sheffield City Council on behalf of the Appellant

David Cheetam appeared on behalf of the respondents.


 


DECISION

Nature of the Appeal

This is an appeal against the decision of the Northern Rent Assessment Panel sitting as a Leasehold Valuation Tribunal ("LVT") on 9^th January 2004 to determine the terms of the freehold transfers in six cases, wherein there had been a multiple application to determine the price of acquisition of the freehold under s.8 of the Leasehold Reform Act 1967. The LVT accordingly had jurisdiction under s.20(2) of the Act to determine, insofar as they were not agreed, what provisions ought to be contained in the conveyance of the properties under s.10 of the Act.

The Appellant, as freeholder, had sought to have included in each Transfer a provision to be contained in clause 7(2) in the following terms:

"The Transferees shall not acquire or seek to acquire any right of light air way water drainage support or other easement in respect of the Property which would in any manner diminish obstruct or interfere with the free and unrestricted use either for building or any other purpose of the Retained Land or the Council's adjoining or neighbouring land being King Ecgbert School (including the playing fields thereof) and the Rowan School (including the playing fields thereof) or any part thereof the approximate boundaries whereof are in relation to the Head Lease shown edged green on the attached plan."

It was accepted that such provision could be required under s.10(4) of the Act only if it was a "restrictive covenant" within the meaning of that sub-section. The LVT held that the provision did not fall within that definition and so concluded that it should not be included in the Transfer.

The Appellant sought the permission of the Lands Tribunal to appeal on the ground, amongst others, that the LVT had been wrong so to hold, and on 2^nd September 2004, the President gave permission on the ground that the point was arguable. Without the benefit of such argument, I find the meaning and effect of the proposed clause upon the Transferee's right to use the Property to be transferred difficult to ascertain, but as it had appeared to me, on preliminary reading of the arguments, that there were other reasons why the Appellant was not entitled to require the inclusion of this provision in the conveyance, I invited argument on those other reasons before inviting argument on the ground upon which permission had been given. Having heard argument on the applicability of paragraphs (b) and (c) of s.10(4) of the Act, I have not thought it necessary to hear argument as to whether, as I accept is arguable, the proposed provision would properly be categorised as a restrictive covenant within the meaning of that sub-section. My conclusion on the other matters, on the material which the Appellant has seen fit to place before the Tribunal is so clear that it did not seem to me to be a proper expenditure of the Tribunal's time to hear argument on other matters.

Factual Background

No evidence was called before the LVT, although the LVT did view the property. Before the Lands Tribunal, no evidence was called and no agreed statement of facts prepared. Nevertheless Mr Cheetham who appeared in person on his own behalf, and, with their consent and the permission of the Tribunal, also on behalf of the lessees of nos 20, 28 and 29 Durvale Court was willing to agree certain relevant facts at the hearing of the appeal. I am told that the other lessees who were applicants before the LVT have agreed the terms of their conveyances before the hearing of this appeal.

The properties were built on land owned by the Appellant between the two schools, referred to in the proposed Clause 7(2), by Ackroyd and Abbott Limited ("the developer") to whom the Appellant granted the land for a term of 99 years from 1^st December 1979. Mr Cheetham's lease of the house built on plot 21 which is now known as 49 Durvale Court, which lease is no doubt typical of those the subject of application to the LVT, was granted to him and his wife on 7^th August 1981 for a term expiring 10 days before the head lease. No doubt because the Appellant had in mind both the development potential of the adjoining playing fields and the provisions of the 1967 Act, the head lease included a clause 4(2) whereby it was "agreed and declared" that:

"The Lessee shall not acquire or seek to acquire any right of light air way drainage support or other easement in respect of the demised property which would in any manner diminish obstruct or interfere with the free and unrestricted use either for building or any other purpose of any adjoining or neighbouring property of the Council and these presents shall not be deemed or construed to include any implied grant of any such right as aforesaid."

Although the developer was not required to include any such provision in the underleases granted to the purchasers of the houses now to be enfranchised, this clause was reproduced in the grant to Mr and Mrs Cheetham as clause 4(2) of their underlease and, I assume was similarly reproduced in the underleases of the other applicants.

Mr Cheetham's property is built with windows overlooking the King Ecgbert School playing fields some 2 metres from its boundary. Beyond the boundary there is, within a strip some 8 metres wide, a fall in the ground, although I have not been told over what vertical height. This strip was, on 7^th June 2004, conveyed by the Appellant to trustees for residents of the estate built by the developer. That contains at clause 5(A) a provision in the same terms as clause 4(2) of the Lease. Apparently this strip has been divided and the lessees of nos 28, 29 and 49 each own the freehold of the part of the strip between the bottom of their gardens and the remaining part of the playing fields. I have heard no submission as to the effect of such transfer upon the enforceability of Clause 5(A). Those other properties also have windows overlooking the playing fields although separated from them by a somewhat greater distance than in the case of Mr Cheetham's property. No 20 faces towards the Rowan School playing fields having windows overlooking those fields although set back from that boundary by a distance which was estimated from the plan as about 10 metres. There is no such difference of levels between that property and those playing fields as is the case between the other three properties and the King Ecgbert playing fields.

I was told that the owners of the three properties facing King Ecgbert School playing fields had made gates from their gardens on to the slope which has now been incorporated into their gardens and have now made gates from their parts of the strip on to the adjoining playing fields. It is however accepted that, irrespective of the provisions of the lease and underleases, no easement could arise by prescription in favour of a lessee over the land of the lessor. On the other hand the covenant of quiet enjoyment and the principle of non-derogation of grant would prevent the landlord from seeking to deprive the tenant of rights essential to the enjoyment of the property demised. Mr Hill, who appears for the Appellant, submits that the intention of the Clause 4(2) in the Lease and underleases was to prevent rights arising by way of prescription after any enfranchisement had entitled the underlessees to the freehold.

Statutory Provisions

Section 10(2) of the Act makes provision for the effect of a conveyance executed to give effect to the right of enfranchisement under s.8 of the Act in regard to the following rights specifically mentioned in the proposed clause 7(2), in so far is as necessary in order to secure to the tenant the same rights as were available to him under the lease:

"(a) rights of support for any building or part of a building;

(b) rights of light and air …

(c) rights to the passage of water … or to .. drainage .."

In respect of such rights the conveyance is to have effect

"to grant with the house and premises all such easements and rights over other property, so far as the landlord is capable of granting them, as are necessary to secure to the tenant as nearly as may be the same rights as at the relevant time were available to him under or by virtue of the tenancy."

What such rights are, if any, would be a matter of evidence.

Section 10(3) makes provision for the inclusion of provisions as to rights of way which

"the tenant may require for the purpose of securing to him rights .. which are necessary for the reasonable enjoyment of the house and premises as they have been enjoyed during the tenancy .."

As I understand it, no such requirement has been made by the applicants in these cases and so the conveyances will make no provision for rights of way over the Appellant's playing fields.

Section 23(1) of the Act provides that:

" any agreement relating to a tenancy … shall be void in so far as it purports to .. modify any right to acquire the freehold under this Part of this Act".

In so far as it may be the effect or the intended effect of clause 4(2) of the underleases to deprive the tenant of the rights they would otherwise acquire by virtue of their acquisition of the freehold, it is therefore void and of no effect. It has not however been discussed or evidenced before the LVT or this Tribunal whether the applicants did in fact have available to them rights within s10(2) of the Act which clause 4(2) would be ineffective to deprive them of.

The Appellant seeks to impose the proposed clause 7(2) in the conveyance by virtue of s.10(4) of the Act. Paragraph (b) requires the inclusion in the conveyance of

"such provisions .. as the landlord .. may require to secure the continuance (with suitable adaptations) of restrictions arising by virtue of the tenancy .."

Clause 7(2) of the proposed Transfer, of course, reproduces with adaptations the provisions of Clause 4(2) of the underlease. In so far, however, as the proposed restrictions would have the effect of continuing a restriction which is void under s.23, then the provisions of Clause 4(2) of the underlease, as so avoided, are not restrictions arising by virtue of the tenancy. For this reason, in the course of argument Mr Hill relied exclusively on paragaph (c) which requires the inclusion of such further provisions as the landlord may require upon conditions no more onerous than are otherwise required in order to satisfy paragraph (b). These are that they:

"will not interfere with the reasonable enjoyment of the house and premises as they have been enjoyed during the tenancy but will materially enhance the value of the other property in which the landlord has an interest."

The provisions of the underlease are therefore significant only in setting the context for the Appellant's requirement for them to be reproduced in the Transfer.

Enhancing Value of Landlord's Property

The LVT gave some consideration to the value of the proposed clause to the Appellant in the following passage in paragraph 6(e) of its Decision:

"The Tribunal notes that in a practical sense the Respondent [that is the present Appellant] still of course has available to it perfectly adequate remedies to preclude the Applicants from acquiring that which it feared will adversely affect the value of the school playing fields. For, as previously stated, no rights etc. can yet have been acquired. For example, an injunction would be available to prevent user leading to a future right of way being claimed or similarly to a possible [right] in relation to light, by the exercise of the registration of a notional obstruction under the Rights of Light Act 1959."

In my judgement consideration of the way in which the proposed clause would operate in respect of the possible rights listed in it shows how completely futile it is. In respect to a right to light s.3 of the Prescription Act 1832 provides that:

"When the access and use of light to and for any dwelling house .. has been actually enjoyed therewith for the full period of twenty years without interruption, the right thereto shall be deemed absolute and indefeasible .. unless it shall appear that the same was enjoyed by some consent or agreement made or given for that purpose by deed or writing."

The proposed clause does not make the enjoyment of light a matter of consent and so would have no effect in preventing the running of the prescription period. In the course of argument Mr Hill felt constrained to accept that registration of a light obstruction notice under the Rights of Light Act 1959 would not merely, as the LVT assumed, be an alternative way of obtaining protection if there is any need for protection in order to preserve the development value of the playing fields, it would be the only way, short of erection of a physical obstruction, of doing so, even if the proposed clause was included.

In regard to air, Mr Hill had to accept that the agreed facts did not indicate any possibility of the applicants' obtaining any easement over the Appellant's property.

In regard to rights of way, which it would appear are the chief source of the Appellant's concern, because, as I am told, the playing fields are open and unpoliced, I do not see how the proposed covenant is to work. The covenant not to seek to acquire any right does not prevent the acquisition of a right if it is exercised openly and without interruption for the requisite period. An injunction against trespass is as simple a remedy as seeking to enforce a covenant not to seek to acquire rights. The only difference that the proposed covenant might make, so far as I have been able to understand, is that if a right were obtained by 20 years enjoyment the covenantee might have a claim in damages for the further limitation period of 12 years. Mr Hill did not seek to argue that such possibility constituted a material enhancement of the value of the playing fields, and in the absence of any evidence, I do not think that I could so hold.

In regard to rights of water or drainage I have already pointed out that any existing need for rights is to be treated as included in the conveyance by reason of s.10 (2) of the Act. In the absence of a grant, new rights can only be obtained by exercising them for the relevant prescription period openly and without force or permission. If however such rights were so exercised, Mr Hill was unable to explain to me how the proposed covenant would defeat the effect of the Prescription Act. It would again be necessary in order to avoid the acquisition of any such right by uninterrupted enjoyment to take action to interrupt the enjoyment. But that is open to the land owner upon the covenantor's doing that which may lead to the acquisition of a right, and the same considerations apply as I have analysed in regard to rights of way.

A right of support may be acquired by building on the land conveyed in a way that is dependent on support from the playing fields. I am willing to assume, without evidence, that the proximity of Mr and Mrs Cheetham's house to the playing fields coupled with the unknown change of levels may have created a necessity for support for that house from the Appellant's land. If so then the conveyance will have effect to grant such right by virtue of s.10(2). If that, as it appears to me, improbable position does not already obtain, it is quite impossible on the evidence to hold that a provision such as is proposed would materially enhance the value of the playing fields.

There is the same difficulty in regard to any other easement to which the proposed clause makes reference without identifying what is in mind. Mr Hill characterised the proposed provision as a "belt and braces" exercise, by which I take him to mean a precautionary provision against unforeseeable incidents. It is of the nature of such a provision that it cannot be justified. Once the insufficiency of relying upon the fact that such provision had been included in the original lease is appreciated, both because of the effect of s.23 of the Act and because paragraph (b) of s.10(4) requires a material enhancement of the landlord's other property in the same way as does paragraph (c), the inability to justify the clause becomes fatal to its inclusion.

Decision

For these reasons the appeal must be dismissed.

At the conclusion of the hearing, I announced this conclusion, and said that I would set out my reasons in writing, as I have now done. Mr Cheetham drew my attention to what is, apparently, an agreed provision of the proposed Transfer in clause 9 as follows:

"The Transferees declare that (notwithstanding the vesting in them of the freehold and leasehold interests in the Property) the Underlease shall continue in full force and effect and shall not merge or be extinguished in the fee simple thereof."

He asked me in dismissing the appeal to direct that such clause be excluded. Since however it had not been the subject of any decision of the LVT or of any appeal by him to this Tribunal, but had so far as I could ascertain, although I have not investigated that question, been agreed, I declined jurisdiction to make any order in respect of it.

Application for Costs

Nevertheless, the reference to this provision appeared to me to be significant when Mr Cheetham applied for costs on the ground that the Appellant had been unreasonable in bringing the appeal at all. I inquired of Mr Hill whether it was the contention of the Appellant that the continuance in force of the underlease gave them the benefit of the agreement and declaration contained in clause 4(2) in the underleasee, or, if not what was its effect. If, by agreement the Appellant already had the benefit, such as it may be, of an agreement in identical terms to the provision sought by this appeal, it seemed to me that the appeal would properly be categorised as abusive.

Mr Hill had no instructions in regards to this matter and did not feel able to disclaim on the Appellant's behalf such effect of the clause which they had agreed to have incorporated into the Transfer. In the circumstances I did not think it fair to hear further submissions on costs immediately. Mr Cheetham did not therefore have opportunity to develop his submission, including any reliance which he may wish to place on the criticism which the LVT saw fit to make of the Appellant's conduct at Paragraph 5(f) of their Decision.

I therefore direct that if Mr Cheetham wishes to make application for costs, he may do so in writing with his submissions in support no later than 10^th June 2005. A copy of any such submission is to be served on the Appellant by the same date. I allow such long period in order to give the parties the opportunity to seek to reach agreement either as to the appropriate order as to costs or as to the inclusion of and effect of including clause 9 in the proposed transfer. If Mr Cheetham so applies, the Appellant may make any representations thereon no later than 24^th June 2005 and I will in considering the application have regard to any submission in reply, limited however to matters in reply to the Appellant's representations, which Mr Cheetham lodges with the Tribunal by 7^th July 2005.

Dated: 12 May 2005

His Honour Judge Michael Rich QC