Dominal Securities Ltd v McLeod

Tenancy of furnished flat–Rent determined by rent tribunal registered under Part VI of Rent Act 1968–Previous rent inclusive of rates and new Part VI registered rent also inclusive–Landlord continued to pay rates–By Rent Act 1974 section 5(1), the rent registered was ‘deemed to be registered’ under Part IV of the 1968 Act–By section 47(2) of 1968 Act the amount to be registered was to be the same as if the rates were not borne by the landlord–Whether tenant must pay rates in addition to the deemed registered rent–Nothing in these transitional provisions to say that the deemed registered rent was to be treated as exclusive This was an appeal by W B McLeod, tenant of a furnished dwelling, Flat 3, 13 Essendine Road, London W9, from a decision reached ‘reluctantly’ by Judge Leslie in Bloomsbury and Marylebone County Court in an action against the tenant by the landlords seeking possession, arrears of rent, and mesne profits. The principal dispute concerned the quantum of recoverable rent, and this question depended on whether the landlord was entitled to recover any, and if so what, amount in respect of rates in addition to the amount deemed to be registered. Andrew Bano (instructed by Paul Boateng, of Paddington Law Centre) appeared for the tenant; Derek Wood QC (instructed by Kaufman, Kramer & Shebson) represented the landlords. Giving judgment MEGAW LJ said that the tenancy agreement was originally on a fixed-term basis but subsequently the tenant remained in possession as a monthly tenant. As the premises were furnished he did not become a statutory tenant. The contractual rent was £81.90 per month, but on September 6 1972 the Westminster Rent Tribunal fixed a rent of £52 a month, and that rent was registered under Part VI of the Rent Act 1968. Thereafter the tenant paid that rent and the landlords continued to pay the rates. It was the intention and understanding of the parties that the £52 rent was, like the contractual rent which preceded it, an inclusive rent. By section 5(1) of the Rent Act 1974, where, immediately before the commencement of that Act, the rent of a furnished dwelling was registered under the relevant Part (Part VI) of the 1968 Act, and the letting on that date became a protected furnished tenancy by virtue of section 1 of the 1974 Act, the amount registered under Part VI of the 1968 Act was to be deemed to be registered under Part IV of that Act. By section 47(2) of the 1968 Act, where the rates were borne by the landlord the amount to be registered under Part IV of that Act was to be ‘the same’ as if the rates were not so borne. The landlords asserted that since September 19 1976, when a notice to quit given to the tenant had expired, they had been entitled to recover from the tenant what they had paid, and would pay, in rates in addition to the rent of £52 a month. The learned county court judge so held. It was by reference to subsections (2) and (3) of section 47 of the 1968 Act that the landlords claimed that what had been an inclusive rent registered under Part VI was converted into an exclusive rent registered under Part IV. But the purpose of those subsections in their original context, applying to unfurnished tenancies, was the sensible purpose of ensuring that, if the landlord was responsible for paying the rates, it should not be necessary to have a fresh figure agreed or assessed for the fair rent whenever there was a change in the amount of the rates. If there was a contractual rent which was inclusive, it should in effect be converted, for the purpose of registration under Part IV, into an exclusive rent, but reducing its amount, and the landlord would then be entitled to recover from the tenant, separately, the actual amount of the rates from time to time paid by him. It appeared to lose the qualities of fairness and good sense if an inclusive rent fixed under Part VI were, by statutory provision, to be converted into an exclusive one. The question in the present case would not arise in respect of tenancies created after the 1974 Act came into force. Mr Wood, for the landlords, pointed out that there were no doubt many pre-1974 Act furnished lettings where the rent, by contract or as fixed by the Rent Tribunal, was exclusive and not inclusive, and in these transitional provisions (as section 5 was) Parliament might have been looking for simplicity and uniformity. Moreover, section 5(2) enabled prompt correction to be made of any anomalies or unfairnesses which might arise if the landlords’ construction of section 5(1) was correct. His Lordship did not find it an attractive proposition that Parliament, realising the existence of a potential injustice in the provisions of section 5(1) in cases such as this, thought it right to leave those provisions to be enacted, but to mitigate the potential injustice by enabling a tenant, as and when and if he realised what was happening, to make an application which might have the effect of rectifying the injustice as from the date when the application was actually made. In his Lordship’s view, section 5(1) did in the present case only what its words said. The £52, though not actually registered under Part IV of the 1968 Act, was deemed to be so registered. But it was not deemed to be that which it was not–ie an exclusive rent. His Lordship would allow the appeal. BROWNE LJ, agreeing, said that section 47(3) operated only where section 47(2) applied, and section 47(3) could not apply unless the register contained the note (that the rates were borne by the landlord) which section 47(2) required to be made. There was nothing to say that the register should be ‘deemed’ to contain such a note or required such a note to be made. SHAW LJ also agreed. The appeal was allowed, with costs in the Court of Appeal and below, and legal aid taxation of the appellant’s costs.