Skinns v Greenwood

Leasehold enfranchisement –– Leasehold Reform Act 1967 –– Claim to enfranchisement –– Whether lease a long tenancy under 1967 Act –– Whether lease within proviso to section 3(1) of 1967 Act –– Whether notice of determination required to be more than three months –– Whether tenant entitled to enfranchise In the 1960s, the appellant tenant and her husband were granted, by the appellant’s parents, a lease of a dwelling-house for a term of 90 years. The lease was subject to a proviso that after the death of the last to die of the two persons comprising the tenant, their executors or administrators, or the landlord, may, at any time, determine the lease by giving not less than one month’s notice to the other party. In 1996, the appellant’s husband died. In 1997, her father died and her brother became the landlord. In 1998, the appellant claimed the right to enfranchise under the Leasehold Reform Act 1967. The landlord disputed that right, contending that the lease was not a long tenancy within the meaning of the Act. The appellant appealed against a decision of Hughes J, who had allowed the landlord’s appeal from the decision of the county court judge, that the lease was not a long tenancy. Held: The appeal was dismissed. A decision as to whether a tenancy is a long tenancy within section 3(1) of the 1967 Act is a decision to be made by reference to the terms of the lease, rather than to the terms of any notice that might be given pursuant to the lease. Paragraph (b) of the proviso to section 3(1), which states that the length of the notice is not more than three months, provides a ceiling on the length of the contractual notice period required to determine a tenancy. This forms an integral part of the mechanism to distinguish leases that are genuinely intended to be determinable upon death or marriage from devices to avoid the consequences of the Act. The lease did not require a notice of more than three months. The proviso was satisfied; the lease was not a long tenancy within the 1967 Act. The following cases are referred to in this report. Cadogan v McGirk [1996] 4 All ER 643; (1996) 73 P&CR 483; [1996] 2 EGLR 75; [1996] 39 EG 175; (1997) 29 HLR 294 Fairview, Church Street, Bromyard, Re [1974] 1 WLR 579; [1974] 1 All ER 1233; 27 P&CR 348, Ch Proma Ltd v Curtis (1989) 59 P&CR 242; [1990] 1 EGLR 117; [1990] 02 EG 74 This was the hearing of an appeal by the tenant, Frances Skinns, from a decision of Hughes J, allowing an appeal by the landlord, David Geenwood, from a decision of Judge Brunning, sitting in Nottingham County Court, in proceedings by the tenant under the Leasehold Reform Act 1967. Jason Cox (instructed by Maclaren Britton, of Nottingham) appeared for the appellant; Stanley Gallagher (instructed by Fraser Brown) represented the respondent. Giving the first judgment, KENNEDY LJ said: 1. This is a tenant’s appeal by leave of Pill LJ from a decision of Hughes J, who, on 21 June 2001, at Nottingham, allowed the landlord’s appeal from a decision of Judge Brunning sitting in Nottingham County Court. Issue 2. The point at issue is the proper construction of the proviso to section 3(1) of the Leasehold Reform Act 1967, and its application to the terms of the relevant lease. Background facts 3. The background facts are not in dispute. During the 1960s, the tenant’s parents purchased a house for the use of the tenant (their daughter) and her husband, and they both began to live in the house at 58 Mapperley Orchard, Arnold, Nottingham. In May 1994, the arrangement was formalised in a lease. The parents became the landlords, and the daughter and her husband became the tenants. The lease was for a term of 90 years, and the rent was fixed at £520 pa without provision for review. Underletting was prohibited, and, by clause 5.6, the lease provided: At any time after the death of the last to die of the two persons comprising the tenant his executors or administrators or other person in whom the Term is vested or the landlord may at any time by giving not less than one month’s notice to the other party require that the term shall cease and upon expiration of such notice the Term shall determine… 4. In 1996, the daughter’s husband died, and she became the sole tenant. Her security of tenure was unimpaired. In 1997, her father died and her brother became the landlord. 5. Under the Leasehold Reform Act 1967, a tenant who enjoys a long tenancy can seek to acquire the freehold, and the tenant sought to exercise that right to enfranchisement in 1998 by serving notice of her desire to acquire the freehold. The landlord, in response, disputed her right to do so, contending that the tenancy was not a long tenancy within the meaning of the 1967 Act, and that was the first issue that Judge Brunning had to decide when the matter was argued before him in September 2000. It is the only effective issue at this stage. Statute 6. The definition of a long tenancy is in section 3(1) of the 1967 Act, as amended, and so far as material it reads: long tenancy means… a tenancy granted for a term of years certain exceeding twenty-one years, whether or not the tenancy is (or may become) terminable before the end of that term by notice given by or to the tenant or by re-entry, forfeiture or otherwise… Provided that a tenancy granted so as to become terminable by notice after a death or marriage is not to be treated as a long tenancy if –– (a) the notice is capable of being given at any time after the death or marriage of the tenant; (b) the length of the notice is not more than three months; and 54 (c) the terms of the tenancy preclude both –– (i) its assignment… and (ii) the subletting of the whole of the premises comprised in it. What is in dispute? 7. The critical question in the litigation is whether the relevant lease falls within the proviso to section 3(1) and so is not to be treated as a “long tenancy”, having regard to, in particular, para (b) of the proviso and clause 5.6 of the lease. 8. For the tenant, it is contended that, to satisfy para (b) of the proviso, a lease must specify when a notice must end. It is not permissible for a lease to contemplate either party being given a notice that is going to run for more than three months. 9. For the landlord, the contention is that para (b) of the proviso is satisfied if, under the lease, it is possible to give less than three months’ notice. As Mr Stanley Gallagher, for the respondent, put it in his skeleton argument for this appeal: “The length of notice is not required to be more than three months.” In the courts below 10. Judge Brunning reminded himself to look first at the statutory intention as advocated by Megarry J in Re Fairview, Church Street, Bromyard [1974] 1 WLR 579 at p582F: When an expression in a statute is fairly open to two constructions, the court will adopt the construction which will effectuate the purpose of the Act and not the one which would stultify or lame it. This statute is, as the long title makes clear, “an Act to enable tenants of houses held on long leases at low rents to acquire the freehold or an extended lease”. That is subject to an exception in relation to certain types of tenancy as set out in the proviso to section 3(1), and, as Millett LJ said in Cadogan v McGirk [1996] 4 All ER 643* at 647J: It is the duty of the court to construe the 1993 Act (which extended the scope of the 1967 Act) fairly and with a view, if possible, to making it effective to confer on tenants those advantages which Parliament must have intended them to enjoy. That was said despite the fact, which the court recognised, that the statute can be regarded as being to some extent expropriatory of the landlord’s interests. * Editor’s note: Also reported at [1996] 2 EGLR 75 11. Those general observations distilled from other cases have their value, but, in this case, it is important not to lose sight of the fact that the proviso to section 3(1) is an integral part of the statute. Just as parliament intended that, in general, long tenancies at low rents should be enfranchisable, so it intended that certain types of tenancy should not suffer that fate. 12. Before Judge Brunning and before Hughes J, it was accepted that a landlord who wishes to avail himself of the wording of the proviso has to show that it applies to his lease; the burden is on him, and Judge Brunning found that, in the present case, the landlord failed to discharge that burden. The judge said that the wording of para (b) of the proviso could hardly be clearer, and he continued: The landlord may prescribe any period. A minimum period is irrelevant. We are here looking at the specified maximum period and if, since the Act was intended to enfranchise the claimant, the landlord wishes to prevent that, he must comply with the provisions as to notice. It is, I am satisfied, wholly insufficient merely to stipulate a minimum period. Neither is such minimum period capable of complying if, though it is possible to give notice within the three month period, there is no requirement so to give. 13. Hughes J gave four reasons for coming to the opposite conclusion: (i) All provisions in a lease for the giving of notice are requirements for a minimum of notice. A landlord cannot be prevented as a matter of good will from giving more notice than the lease requires of him. The purpose of a stipulation for landlord’s notice is to give the tenant a minimum period between being told he must leave and having to do so. (ii) Even if, as counsel for the tenant contended, in order to satisfy para (b) of the proviso a lease had to provide for a period of notice no greater than three months, the landlord might then choose not to serve notice at all, and the effect would be the same as if he gave a very long period of notice. The Act specifically envisages the notice being given “at any time after the death… of the tenant”. So there is no attempt to set boundaries to the period between death and the expiration of the notice. (iii) The purpose of the three-month rule in para (b) was “to prevent the landlord from entering into a lease under which, although he could determine it following the death of the tenant, he was nonetheless required as a matter of obligation to give to the tenant, or the tenant’s successors, so long a period of notice that the lease was not truly measured by the tenant’s life at all but was yet unenfranchised.” The judge accepted the submission on behalf of the landlord that “to come within the proviso the lease must be one in which the landlord has the contractural right to determine it by giving notice of not more than three months, that is to say, one in which the tenant knows that the lease can be brought to an end against the will of himself, or his successors, within three months of death. The proviso is not concerned to impose any obligation on the landlord to act, whether within three months of death or at all. The mischief at which the alteration of the proviso and the inclusion of para (b) was aimed is the lease under which the tenancy is going, as a matter of obligation, to continue well beyond death but yet the tenant is unenfranchised.” (iv) Clause 5.6 of the lease satisfies the requirements of the proviso because it “does not guarantee the continuation of the lease for any significant period beyond death. On the contrary, it enables the landlord to terminate it by one month’s notice after death”. History of the proviso 14. As originally enacted, section 3(1) of the 1967 Act read: Long tenancy means… a tenancy granted for a term of years certain exceeding twenty-one years… Provided that a tenancy granted so as to become terminable by notice after a death or marriage is not to be treated as a long tenancy. 15. It was soon realised that the proviso could be used in such a way as to thwart the main intention of the legislation as set out in the long title. All that was necessary to prevent a tenancy, for a term exceeding 21 years, from being regarded as a long tenancy was for it to contain a provision that it was to be terminable by notice after the death of someone likely to live for a long time (eg the last surviving descendant of King George V living at the time of the grant). That type of provision as to when the tenancy would become terminable became known as a “Prince of Wales clause” or “royal lives clause”, and it was regarded by the government as an abuse. So, in the Housing Act 1980, the opportunity was taken to amend section 3(1) of the 1967 Act by narrowing the scope of the proviso. The words with which we are concerned then appeared in their present form. There was a later amendment to the proviso in 1993, which for present purposes does not matter. When introducing the 1980 amendment, Mr Finsberg, for the government, said that the proviso “was intended to deal with cases where there was a family or other special relationship between the parties”. Proma Ltd v Curtis 16. In Proma Ltd v Curtis (1989) 59 P&CR 242*, where the point at issue concerned part of the proviso now repealed, Nicholls LJ said at p245 that the 1980 amendment to the proviso was “to cut down the scope of the proviso”. Thenceforth, “the lease had to be one where the notice was capable of being given at any time after the death or marriage of the tenant, the notice required must not exceed 3 months in length and assignment or subletting had to be precluded by the terms of the lease”. In Proma, the tenant was able, under the terms of the lease, 55 to give “not less than six months'” notice to terminate the lease at any time after the death of the “Relevant Person”, and the relevant person was defined by a royal lives clause. Nicholls LJ, at p245, went on to observe that those requirements of the provision with which we are concerned were not met, in that “the giving of the termination notice was not geared to the death or marriage of the tenant, more than three months notice was required, and assignment and subletting of the whole was not absolutely prohibited”. * Editor’s note: Also reported at [1990] 1 EGLR 117 Discussion 17. So, in that case, Nicholls LJ, in the passages thatI have emphasised, was applying the words now in para (b) of the proviso to the period for which a notice once given by the tenant had to run, and, when analysed, the facts of Proma, to my mind, neatly illustrate the need for para (b) of the proviso and the true meaning of the words in that paragraph. Without those words, a tenancy could be granted so as to become terminable by notice after the death or marriage of the tenant, but the length of the notice required of the tenant could be so long as to defeat the overall purpose of the legislation. In other words, the tenant could be locked into what was, in reality, a long tenancy without any meaningful right to terminate by notice upon the occurence of either of the events to which para (a) refers, and without the right to enfranchise. As was pointed out during the course of argument, a landlord does not need similar protection, and if neither side wishes to terminate, no notice need be served. As Mr Gallagher submits: “Section 3(1) is concerned with the actual terms of the tenancy agreement, not how the parties may voluntarily elect to act consistent with the latitude afforded by those terms.” Furthermore, because a decision as to whether or not a tenancy is a long tenancy within section 3(1) is a decision to be made by reference to the terms of the lease, rather than to the terms of any notice that may be given pursuant to the lease, it is instructive to note that, in para (b), the length of the notice is referred to in the present tense. As Mr Gallagher points out, para (b) does not say “the length of notice shall be three months or less” or “the length of notice shall not be capable of being more than three months”, either of which would be appropriate if the appellant’s submissions were correct, and the words “capable of being given” appear in para (a), which is addressing itself to a possible future event. Indeed, if paras (a) and (b) are read together, so as to raise the question of whether, in this case, a notice to determine is capable of being given at any time after death, for a period of not more than three months, then it would seem that the answer to that question must be in the affirmative. 18. I accept that parliament could prescribe the maximum length, as well as the minimum length, of any notice that might be given (see, by way of analogy, section 25(2) of the Landlord and Tenant Act 1954), but I am not persuaded that it did so when amending the proviso to section 3(1) of the 1967 Act. In para 28 of his skeleton argument, Mr Gallagher submits that para (b) of the proviso, by imposing “a ceiling on the length of the contractural notice period required to determine the tenancy, forms an integral part of the mechanism to distinguish leases which are genuinely intended to be determinable on death or marriage from devices to avoid the consequences of the Act”. I agree. Conclusion 19. As Mr Gallagher points out, the tenancy with which we are concerned was precisely the sort of tenancy that was contemplated by parliament as being properly within the scope of the proviso when parliament was enacting the proviso in its restricted form. The wording used in clause 5.6 is, we were told, commonly used when seeking properly to take advantage of the proviso, and so it is with some relief that, for the reasons set out above, which may not be quite the same as those which commended themselves to Hughes J, I would dismiss this appeal. Costs 20. It was agreed that costs should follow the event. I would therefore dismiss the appeal with costs. We were told that both parties were legally aided. There will therefore have to be a detailed assessment. MANTELL LJ and SIR SWINTON THOMAS agreed and did not add anything. Appeal dismissed.