Legal update

Citation

Waterson, G. and Lee, R. (2005), "Legal update", Property Management, Vol. 23 No. 5. https://doi.org/10.1108/pm.2005.11323eab.001

Legal update

Estate agents commissionFoxtons Ltd v. Thesleff & Antr [2005] EWCA Civ 514 [2005] 21 EG 140

This case raised the question of whether in a dispute over the estate agent’s entitlement to commission, the focus of he court should be on the wording of the relevant regulations or only on the contract between the parties.

The appellant estate agent was instructed by the first respondent acting on behalf of his mother, the second respondent. The parties originally entered into a sole agency agreement but this was later varied in writing to a multiple agency agreement. Under the agreement commission was payable “if at any time unconditional contracts for the sale of the property are exchanged”. A further clause stated that “All Foxtons fees become payable upon exchange of contracts”

The appellant introduced a purchaser whose offer on the property was accepted. Contracts were exchanged and a 10 per cent deposit was paid to the respondents. The purchaser failed to complete in time and forfeited his deposit of £86,000. The appellant claimed its 3 per cent commission. The respondent refused to pay claiming that the first respondent was not liable as he was only acting as an agent for his mother and secondly that they both believed that the commission was payable only when the sale and purchase were completed.

The respondent’s first argument was quickly rejected. Although the first respondent was acting as an agent for his mother he was also liable because the parties had contracted on that basis. The contract clearly specified that it was made with the person to whom it was addressed, in this case the first respondent who had instructed the agent, and the first respondent had not signed it “as agent only”.

In respect of the second argument the appellants contended that the County Court judge had erred in concluding that the word “purchaser” meant a person who completed the sale and purchase by reference to the Estate Agents (Provision of Information) Regulations 1991 which covered sole agency clauses, and in also construing the “achieved sale price” as being the price achieved on completion.

The appeal was allowed unanimously. Their Lordships held that there was no ambiguity in the contract. Although at common law an estate agent’s commission is normally payable out of the proceeds of sale upon completion of the sale that does not prevent the parties from agreeing differently. Under this agreement commission was payable upon exchange of contracts. Contracts were exchanged and commission was therefore payable. The commission agreement did comply with the Estate Agents Provision of Information Regulations 1991 because the word “purchaser” in those regulations was not limited to a person to whom the freehold was actually transferred, it also included the person who contracted unconditionally to purchase. As May LJ stated:

The Recorder considered that, because the definition of “sole agency” in Foxton’s terms was derived from the 1991 Regulations, the word “purchaser” should have the meaning provided for in the regulations. I disagree. The regulations are not there to provide obligatory definitions for expressions used in estate agents’ terms. They are there to require terms to be explained to the client. It is to be supposed that the respondent here will never have seen the regulations.

Thus, what matters to the client is the wording of the contract that he signs rather than the wording of the regulations.

TrespassLaiqat v. Majid and others [2005] EWCH 1305 (QB)

In this case the appellant owned the property next door to a hot food take away shop owned by the respondents. The respondents installed an extractor fan in the wall separating the two properties that projected 750 mm into the airspace above the back yard of the appellant’s property at a height of 4.5 m above the ground. The appellant claimed that this constituted a trespass into her airspace and she sought an injunction ordering its removal or repositioning.

In the County Court the judge held that the claim failed because the fan did not constitute a trespass that interfered with the use of the ground beneath. It could not be said that the fan was at a height that would interfere with any normal activity in the garden. The claimant appealed on the ground that the judge had misdirected himself in law in reaching this conclusion.

Silber J reviewed the authorities on trespass to airspace, in particular: Anchor Brewhouse Developments Ltd v. Berkley House (Docklands Developments) Ltd [1987} 38 BLR 82, Kelsen v. Imperial Tobacco Co. Ltd [1957] QB 334 and Bernstein v. Skyviews General Ltd [1978] QB 479. He concluded that all the authorities establish that intrusion into a neighbour’s airspace amounts to trespass unless the interference is at such great height, such as a high flying aircraft, that it does not interfere with the claimant’s airspace. He emphasised the statement made by Scott J in the Anchor Brewhouse case that “if somebody erects on his own land a structure part of which invades the air space above the land of another, the invasion is trespass” and that this proposition was accepted by Griffiths J in the Bernstein v. Skyviews case where he stated that “adjoining owners…have no right to erect structures overhanging or passing over their neighbour’s land.” In both cases the judges had accepted that over flying aircraft represent an exception to this basic rule and that this had been recognised by Parliament in legislation.

Thus, Silber J concluded that none of the cases supported the County Court judge’s view that a party only trespasses if his offending activity “would interfere with any normal activity in the garden.”

The appeal on the question of trespass was allowed. However, Silber, J. remitted the issue of whether the appropriate relief would be an injunction or damages to the County Court judge as he was the only person in possession of all of the factual information necessary for the exercise of this discretion.

Occupiers liabilitySearson v. Brioland Ltd [2005] EWCA Civ 55

The respondent in this case was an 82-year-old woman in good health and with good mobility. She attended a wedding at the respondents hotel and conference centre. On leaving the building to speak to a friend who she had spotted in the car park, she tripped over a white painted 2.8 cm high sill and injured herself. She brought a claim against the defendants under S2 Occupiers Liability Act 1957. She argued that although there was no doubt that if she had been looking she would have seen the sill, one would not normally expect to find a step on the way out of a building consequently she was not looking. Thus, the appellants should have either removed it or erected a warning sign. The argument succeeded in the County Court where it was held that the defendants had not discharged their duty of care under S2 of the Act.

On appeal the appellants argued that the judge had erred in that there was no evidence upon which the judge could base his finding that the premises were not reasonably safe. The door complied with building regulations and there had been no previous accidents, even though it was used by many people. The judge had therefore erred in finding that there had been no reason to expect the sill and no reason why the respondent should have seen it.

The appeal was dismissed. The question of whether or not the premises were reasonably safe was one for the judge to make on the basis of the facts. Thus, in order for the appeal to succeed the appellant would need to show that the judge had erred in law and this they were unable to do.

The judge had been entitled to find as a fact that a person leaving the building would not expect to find a raised step and thus the fact that it was painted white and clearly visible was not relevant unless she should have been looking. The judge was entitled to find that there was no reason why she should have been. Furthermore the fact that there had been no previous accidents did not prove or disprove anything. It could be that other people had fallen and not been injured, or not seriously, and thus had not reported the incident. The fact that the door complied with building regulations did not exclude common law negligence and thus the judge had not erred in law.

Restrictive covenantsBlumenthal v. Church Commissioners for England [2004] EWCA Civ 1688; [2005] 12 EG 220

This case concerns the question of whether certain of the covenants contained in a long sub-lease (96 three-quarter years from 24 June 1951) were in essence positive or negative, since only if the latter were the case would the Lands Tribunal have jurisdiction to modify them under s.84 of the Law of Property Act 1925 (as amended). The particular covenant in question related to the use of part of the basement of what were essentially substantial residential premises situated in Paddington, West London, divided into a number of flats and maisonettes, except that under the original terms of the lease the remainder of the basement and the ground floor and first floor of the premises had been restricted to use as the headquarters of the Royal Society of Literature with [presumably associated] club rooms, this having subsequently been changed permit to residential user by a deed of variation entered into in June 2001.

As to the part of the basement that was the subject of this dispute, this was subject to a covenant in the following terms:

[That the lessee would keep and use that part of the premises] … as a self-contained flat for the lodging of one housekeeper or caretaker only employed by [the Society] in or about the messuage and such housekeeper’s or caretakers husband or wife as the case may be but having no other person living with him or her and no consideration by way of rent or any other payment or return shall be received other than actual service as a housekeeper or caretaker.

The present lessee wished this covenant to be modified to allow the part of the basement in question to be used in conjunction with one or other of the various permutations of residential user that had been permitted by the earlier deed of variation.

The Court of Appeal held that on balance the covenant did not impose a positive obligation on the lessee as to the use of that part of the premises: it was in substance merely a restriction as to its use and accordingly the Lands Tribunal did indeed have jurisdiction to consider the lessee’s application to have the covenant modified.

Licence to assign or underletNCR Ltd. v. Riverland Portfolio No. 1. Ltd (No. 2) [2005] EWCA Civ 312; [2005] 22 EG 134

This case actually involves a request by the tenant for a licence to underlet, but many of the points at issue, both as to the general principles as to the reasonableness or otherwise of a refusal of consent by the landlord; to some extent also, as to the time in which it is reasonable for the landlord to arrive at a decision; and as to the valuation aspects which might affect the value of the landlord’s reversion at the end of the existing lease (and in the context then of any anticipated application for renewal under the terms of Part II of the Landlord and Tenant Act 1954) would seem pretty much to apply to a request for a licence to assign also.

To summarise: the tenant held a lease of business premises for a term of 25 years from December 1984, and the lease contained an absolute prohibition on underletting unless the underlease was granted “at the best rent obtainable inn the open market without the grantor taking a premium or other capital consideration or (if greater) the rent then payable hereunder … ”; at the time of the application to sublet, it would appear that the property was significantly “over-rented” since the rent passing was £19.30p per square foot, whereas the current open market value was only £16.00 per square foot; accordingly, as part of the negotiations to sublet to a company named Telco Global Ltd. (but generally referred to as “T”) the tenants agreed to pay T a reverse premium of some £3,000,000 by instalments as a quid pro quo, it is to be assumed, for T taking on the liability to pay rent at a level significantly above current market value for the duration of the sublease.

The arrangements were explained to the landlord at the time of the request to sublet; the landlord was not very happy, either about the general situation or with the strength of T’s covenant; they were particularly unhappy about the situation which might arise at the end of the original lease if T as occupying business tenant then sought the grant of a new lease under Part II of the Landlord and Tenant Act 1954, and estimated a drop in the value of their reversion in such circumstances of about £500,000. After considering the matter for about three weeks (between 28 July when the tenant applied for licence to sublet until 20 August when the landlord made its decision), the landlords refused consent to sublet.

At first instance the judge held that, bearing in mind that the tenants would remain liable under their original covenants for the remainder of the existing term, the landlords had not arrived at their decision within a reasonable period of time, and also that the decision to refuse consent had been unreasonable in any event.

The Court of Appeal disagreed: the period of time taken to reach a decision was in the rather unusual circumstances of this case not unreasonable, and the landlords were entitled to take into account their concerns as to the effect on the value of their reversionary interest were the proposed sub-lessees to seek a new lease at the end of the existing term under the provisions of Part II of the Landlord and Tenant Act 1954.

Business tenanciesWessex Reserve Forces and Cadets Association v. White and Another [2005] EWHC 938 (QB); [2005] 22 EG 132 (CS)

This brief report, or rather case summary, raises interesting points: to sum up the main point at issue, the tenant wished to renew its business lease under the provisions of Part II of the Landlord and Tenant Act 1954; the landlords objected on the grounds that they intended to demolish the buildings on site at the termination of the tenancy, in accordance with s.30(1)(f) of the 1954 Act; unfortunately for the landlords, most of the buildings on site (and in particular two large huts) had been erected by the tenant and remained “tenants’ fixtures”, which could be removed by the tenant at the end of the tenancy but which the landlord had on the face of it no obvious or immediate right to demolish; logically, therefore, the landlords could not establish any reasonable prospect of actually being able to carry out such demolition; equally logically, therefore the landlords were not entitled to object to the tenant’s application for a new tenancy on the ground specified in s.30(1)(f). The case of Gregson v. Cyril Lord Ltd [1962] 184 EG 789 was referred to, among others, in support of the decision.

Residential tenanciesNorth British Housing Association Ltd. v. Matthews and related appeals; London & Quadrant Housing Trust v. Morgan [2004] EWCA Civ 1736; [2005] 13 EG 136

In this interesting case the Court of Appeal had to consider the circumstances in which the court might properly adjourn an application for possession by the landlord where an assured tenant owed more than eight weeks rent (or two months rent where the rent is payable monthly) both at the date of issue of the service of notice of intention to seek possession and at the date of the hearing pursuant to section 8 and Ground 8 of Schedule 2 the Housing Act 1988; the tenants in these cases had apparently fallen into arrears because of difficulties which they had experienced in claiming their housing benefit and the court(s) at first instance had declined to adjourn the possession hearings as requested by the tenants so that they might have the opportunity to sort out their housing benefit and reduce their arrears below the level set by Ground 8 of the 1988 Act, first on the ground that they had no jurisdiction to do so and second on the ground that even if they did then it would be an improper use of such discretion to adjourn the proceedings for this purpose.

In essence the Court of Appeal did not agree with the first reason given, but did agree with the second: to quote from the headnote:

… It would be a proper exercise of the discretion to adjourn the hearing of a claim where (i) the case has been taken out of a list because a judge was not available; (ii) a defendant was prevented from attending court because of ill-health; (iii) a defendant had an arguable claim for damages ansd set-off such as would reduce the rent arrears; (iv) a defendant had an arguable defence based upon abuse of power by a public authority landlord; or (v) the landlord receives a cheque before or at the date of a hearing for a sum that would reduce the arrears below the ground 8 limits…

Even, as it says in the body of the law report, there might be less likely reasons which would justify the granting of an application by the tenant for an adjournment, such as where the tenant had been on his way to the hearing carrying all the arrears of rent in cash in his pocket and had been robbed, or where the local housing authority had promised to pay all the arrears of housing benefit but a computer failure had prevented it from doing so until the day after the hearing date.

However, said the court:

…the fact that the arrears are attributable to maladministration on the part of the housing benefit authority is not [such] an exceptional circumstance [as to justify an adjournment of the possession proceedings] It is a sad feature of contemporary life that housing benefit problems are widespread. To a substantial extent, these problems are, no doubt, the product of lack of resources. But we do not consider that the non-receipt of housing benefit can, of itself, amount to exceptional circumstances that would justify the exercise of the power to adjourn so as to enable the tenant to defeat the [landlord’s] cla [for possession]…

Leasehold enfranchisementSmith and Others v. Titanate Ltd. [2005] 20 EG 262

Whilst this case has so far apparently only been heard in the Central London County Court and is therefore only of relatively little value as a precedent, it may nonetheless be of some interest to readers. Briefly, the defendant company, Titanate Ltd., held the 52 year lease of a house situated in Mayfair, West London; the house had been sub-divided into six self-contained flats, and there was also an office on the premises, and the flats were let from time to time on short term agreements to visitors to London, students and others who required relatively short term accommodation. The office was used from 9 am to 5 pm weekdays by the manager of a company which arranged the lettings and provided cleaning and other services to the persons occupying the flats; where the letting was for more than six months a standard form of assured short-hold tenancy agreement; where the arrangement was intended to last less than six months it was, as the court found, based upon an oral agreement supplemented by a brief memorandum of terms and conditions. In both cases, the court held that the agreements gave rise to a tenancy rather than a mere residential licence.

The dispute arose because the tenant company had applied to the landlord to purchase the freehold of the premises under the terms of the Leasehold Reform Act 1967, as amended by the Commonhold and Leasehold Reform Act 2002, which did away in most cases with the need for the tenant to demonstrate a minimum period of two years physical occupation of the premises in order to establish a right to enfranchise. One of the exceptions to this, as it would appear from the law report however, is where the tenancy is a business tenancy for the purposes of the Landlord and Tenant Act 1954, where the need to establish such a period of occupation remains applicable.

The landlords asked the court for declaratory relief on the basis that the tenancy was a business tenancy and that as the tenant had not been in occupation of the building it was therefore not entitled to enfranchise.

The court disagreed: the tenant company did not occupy any of the self-contained flats as such, nor did they exercise such a close and detailed degree of control over the tenants as might suffice to establish occupation of the premises for the purposes of a business (as, for example, in Groveside Properties Ltd. v. Westminster Medical School [1983] 47 P&CR 507; [1983] 2EGLR 68; (1983) 267 EG 593 or in Linden v. Dept. of Health and Social Security [1986] 1EGLR 108; (1986) 277 EG 543)).

Accordingly, the tenancy was not a business tenancy for the purposes of Part II of the 1954 Act, and the landlords’ claim for a declaration was refused.

As to when a property with a mixed residential and retail user might properly be regarded as a “house” for the purposes of the 1967 Act, see the brief report of Hareford Ltd. v. Barnet L.B.C. noted at [2005] 23 EG 140 (CS)

Geoffrey Waterson and Rosalind LeeThe law is stated as it is understood to be as at 30 June 2005.