Commercial Property Titles ~ Autumn 2008


Arrears of Rent – A Landlord’s Rights
With the economy in the doldrums, commercial landlords can reasonably expect to face an increasing problem with rent arrears and breaches of lease terms by tenants. In such cases, a landlord has rights which can be enforced without a court order but, as in all such matters, it is important to take professional advice before you act.
When faced with arrears of rent, one possible solution is to exercise the remedy of distraint, the law relating to which has recently been revised. A landlord is entitled to enter a tenant’s premises to seize goods of sufficient value to secure the payment of overdue rent. If the rent remains unpaid, the landlord can sell the goods distrained to pay the rent due. There are complex rules which limit which goods can be distrained and when, but it can be an effective remedy if used correctly.
The biggest problems with the use of distraint are that not only does it almost inevitably destroy any goodwill between the landlord and tenant, but also the seizure of goods often removes the only source of income for the tenant from which the rent might be paid.
Another possible remedy is that of forfeiture, under which the landlord enters the premises and repossesses them, terminating the lease. This remedy is normally only available for rent arrears, not for other breaches of the rent agreement. This has the effect of making the tenant’s liability for rent terminate from the date the premises are taken over by the landlord. In the present market, finding another tenant may not be easy, a factor that should be borne in mind if forfeiture is being considered.
“The right strategy to adopt towards any tenant demands careful consideration of the individual circumstances,” says <<CONTACT DETAILS>>. “We can advise you on your options and help you decide which approach to take.”
Car Parking – Management Company Has Right to Decide Charge
On trading estates, car parks and roads are a frequent source of dispute. The division of the cost of their repair can be an issue, particularly where, for example, one trader has particularly heavy traffic to and from their unit. Another area for dispute is where there are common parking areas and, again, these disputes often revolve around unequal use, especially where the parking is inadequate for the needs of the traders as a whole.
A recent case, which dealt with parking spaces, is typical. It involved an industrial estate which had a maximum of 370 parking spaces for 87 units (roughly 4 per unit). The units had been bought on 999 year leases and the usual service charge arrangements were in place, the estate being managed by a management company owned by the lease holders. Six of the units on the estate were occupied by car repairers and these made use of an average of more than a dozen spaces each. This created parking problems for the other users of the estate and sometimes led to the access roads being blocked. The problem was particularly acute early in the morning and was exacerbated by cars being parked overnight.
The rates charge for the parking area amounted to £33,000 per annum. The management company sought to apportion this on the basis of the number of parking spaces used by each business, through the service charges made on each occupier. This was protested by some of the occupiers and an alternative was proposed based on the rateable values of the units. This in turn was regarded as unfair by other occupiers. Eventually, it was proposed that overnight parking would be banned altogether, except for a limited number of spaces which would be made available in return for a payment.
The car repairers opposed this scheme on the basis that the impact on their businesses would be disproportionate and that the terms of the service charge agreement required each occupier to contribute proportionately to the total service costs. The court considered that the management company had erred by ignoring the market rate for overnight parking and simply seeking to cover the rates bill from income from the lease holders. Secondly, the apportionment of the rates bill based on the use of overnight parking was not basing the charge on a proportionate use of the parking available.
The management company appealed and the Court of Appeal reversed the decision of the lower court. The scheme proposed was reasonable and therefore the method by which the fees had been set was not in point. It was not for the management company to prove that the scheme was reasonable but for those opposing it to prove that it was unreasonable.
Says <<CONTACT DETAILS>>, “The dispute clearly arose because the problem itself had not been anticipated and therefore no mechanism had been put in place to deal with it. We can advise you on any property disputes you may have or on creating management agreements for properties.”
Partner Note
Shah and others v Colvia Management Co Ltd. [2008] EWCA Civ 195.
Continuing Breaches Good Grounds for Ending Lease
A commercial tenant at Heathrow Airport, whose use of his business premises had been the subject of numerous enforcement notices because of breaches of planning regulations, received from his landlord a notice under Section 25 of the Landlord and Tenant Act terminating his tenancy and stating that the grant of a new tenancy would be opposed on the grounds of the tenant’s breaches of his obligations under the lease.
The tenant went to court to force the landlord to grant a new tenancy.
Since the breaches were mainly ones of planning regulations, which represented the continuing commission of criminal offences, the court had no difficulty in accepting the landlord’s argument that its opposition to the lease was justified.
Says <<CONTACT DETAILS>>, “In this case it is difficult to see how the tenant thought he had a reasonable case to argue, so presumably the proceedings were brought in order to delay his having to vacate the premises, allowing him to continue to trade for as long a time as possible. If you have problems, with tenants or your landlord, we can advise you on how best to deal with them.”
Partner Note
Fowles v Heathrow Airport [2008] EWHC 219 (Ch).
Disabled Tenant Not Discriminated Against
The House of Lords has ruled that a disabled council tenant who was evicted from his flat for breach of the terms of his tenancy agreement had not suffered disability discrimination. The judgment overturned a previous decision by the Court of Appeal in favour of the tenant and has far-reaching implications.
The case concerned Courtney Malcolm, a tenant of Lewisham London Borough Council, who suffered from schizophrenia. He sublet his flat, in breach of the tenancy agreement, and so was served notice to quit. Mr Malcolm contended that he was disabled under the Disability Discrimination Act 1995 and that the Council had discriminated against him.
In determining whether or not Mr Malcolm had been treated less favourably on account of his disability, the Law Lords considered the nature of the treatment to which he had been subjected. The Landlord had sought to repossess the flat and it was agreed that the reason for this decision was the tenant’s having sublet the property.
Lord Bingham pointed out that Lewisham Council, as a social landlord with a long waiting list, could not allow a tenancy to continue when the tenant was absent. He concluded that the Council’s decision was based purely on housing management criteria and had nothing to do with Mr Malcolm’s mental disability. Indeed, at the time of the decision, the Council was not aware that he was disabled.
In deciding whether Mr Malcolm had been treated unfairly, Lord Bingham stated that the correct comparison to be made was with a tenant who did not have a mental disability but who had breached the terms of their tenancy by subletting. In such circumstances, a non-disabled tenant would have been equally in breach of their tenancy agreement and would have been treated in the same way.
For these reasons, the Law Lords held that Mr Malcolm had not been treated less favourably and had not suffered disability discrimination.
“Landlords should not be afraid to stick to the principles of the tenancy agreement, providing it has been properly worded,” says <<CONTACT DETAILS>>. “A landlord will only fall foul of the Disability Discrimination Act if they know that a tenant is disabled and treat that person less favourably than they would a tenant without a disability in the same circumstances.”
Partner Note
Lewisham London Borough Council v Malcolm. See
Reported in The Times, June 26 2008. See
Fraud Not Sufficient to Extend Time Limit for Possession
A recent case dealt with issues arising when a tenant is less than honest in his dealings with his landlord – in this instance, a local authority.
The circumstances were that a tenant hid the fact of his mother’s death from his local council for three years because he knew that were the council to discover the fact, it would seek possession of the council house in which he lived and to re-house him in a smaller property.
The tenant continued to pay rent in his mother’s name and did not inform the Registrar or the council of her death. In general, he continued to behave exactly as though she were still alive.
When the council eventually learned what had happened, it sought possession of the property. By this time, however, the normal time limit laid down by statute for commencing repossession proceedings (no later than 12 months after the mother’s death) had expired. The council claimed that the proceedings had not been commenced in time because of the tenant’s deception.
The Court of Appeal agreed that the fraud of the tenant was not in doubt, but held that since the local authority had failed to act within the time limit laid down by statute for commencing repossession proceedings, it could not be granted a possession order. The fact that the result was unfair and frustrated the purpose of the statute, as well as depriving tenants in greater need of a property of that size, was considered to be unfortunate, but a wrong that needed to be righted by Parliament, not by the Court.
Partner Note
Newport City Council v Charles. Court of Appeal, published 11 August 2008. Reported in The Times, 11 August 2008.
Get it in Writing
The court has shown once again an unwillingness to impute the existence of contractual relations where they cannot be shown to exist. The case concerned the construction of football club Coventry City’s Ricoh Arena.
What happened was that extensive discussions had taken place between two construction companies involved as contractor and subcontractor, which had led to the agreement of a number of terms – such as those dealing with the contract price, how variations would be dealt with, the scope of the subcontractor’s works and so on – but not others, such as the limit of liability under the warranties on the subcontract. One of the things agreed was that a contract would not come into effect until executed. At the completion of the work, the contractor sought to claim against the subcontractor. The subcontractor rejected the claims on the basis that there was no contractual agreement providing how such claims would be made. The contractor disagreed and claimed that, in any event, it had a right of action based on the common law principle of negligence.
The court’s conclusion was that in the absence of a formal signed and executed contract and the agreement of essential terms, no contract existed.
In the absence of a contract, the subcontractor’s entitlement to payment was limited to a reasonable remuneration for works completed, on the basis called ‘quantum meruit’ by lawyers. However, the contractor’s attempt to obtain restitution for negligence through the common law was not successful.
Says <<CONTACT DETAILS>>, “This case illustrates the importance of getting the correct paperwork agreed and in place as soon as possible in such circumstances and at least agreeing in writing the major important terms of the contract, even if details need to be agreed later.”
Partner Note
Haden Young v Laing O'Rourke Midlands Limited [2008] EWHC 1016 (TCC). See
There is a good analysis of the issues at
Head Lessee Can be Qualifying Tenant
In certain circumstances, the Leasehold Reform, Housing and Urban Development Act 1993 allows ‘qualifying tenants’ of private landlords to require the landlord to give them a new lease. Private landlords with significant property portfolios have faced a series of claims under the legislation and recently conjoined appeals were heard by the House of Lords to decide whether a lessee could be a qualifying tenant regardless of the nature or extent of the property that was let.
The first claim was made by a company, which was the head lessee of a six-storey building that was split between commercial and residential use. The second claim was made by a trust, which was the head lessee of a five-storey block, all of which was sublet for residential purposes. In both cases the head lessee also let the common parts of the building from the landlord and the underleases were not leases which themselves would have created the right to make a claim under the Act.
The Law Lords ruled that in both cases the head tenants were qualifying tenants under the Act and thus could demand a new lease from the landlord. The fact that the lease included property other than flats, or was for part of a larger block, did not exclude the tenant from being a qualifying tenant.
This decision has significant implications for landlords as it means they could well face demands for new leases from head lessees that were previously not considered to be qualifying tenants under the Act.
Partner Note
Earl Cadogan v 26 Cadogan Square Ltd. [2008] UKHL 44.
Howard de Walden Estates v Aggio.
In Brief
Attempt to Avoid Forfeiture Fails
A tenant who ran into arrears of rent and sought to prevent forfeiture of his lease by assigning it to another tenant (without the landlord’s consent, which was required under the lease) failed to persuade the court that the landlord could not repossess the property.
The landlord had taken no action that could be construed as legitimising the new tenancy, making all demands for rent to the original tenant. Had the landlord demanded rent from the ‘new tenant’, it would have been difficult to sustain the argument that the transfer of the lease was not accepted.
When tenants breach their lease agreements, the response of the landlord can be important in deciding whether their rights have been preserved. If you have troublesome tenants, it is advisable to seek legal advice as soon as possible in order to protect your interests.
Partner Note
Greenwood Reversions v World Environmental Foundation [2008] EWCA Civ 47.
In Brief
Human Rights Act Applies to Social Landlord
The Human Rights Act 1998 applies only to public bodies, so where a claim under the Act is made, it is first necessary to ascertain whether the organisation against which the claim is made is a public body.
Recently, the question came before the Divisional Court as to whether a registered social landlord was a public body for the purposes of the Act. The conclusion of the Court was that the management and allocation of housing stock was a public function, in the sense that it was subsidised by the public purse because of the role it played in the implementation of Government housing policy, and in that regard the social landlord effectively stood in the place of a local authority.
Accordingly, the decisions of the registered social landlord could be challenged under the Act.
Partner Note
Regina (Weaver) v London and Quadrant Housing Trust. The Times, 8 July 2008. See
In Brief
New Health and Safety Guidance
The Health and Safety Executive (HSE) has updated its website on managing occupational health risks in the construction industry, providing new information for Construction Design and Management coordinators (CDMs). The website gives information for CDMs, clients, designers, principal contractors and contractors on how to manage occupational health risks and meet the requirements of the Construction (Design and Management) Regulations 2007. See and also
In addition, the HSE has issued a site inspection – workplace transport checklist to help reduce risk from vehicles ( and a quick guide to managing the risks when using scaffolding (
Is Twice the Size Materially Bigger?
One of the bugbears of planning law is that it often contains terms that are not clearly defined and this imprecision provides copious room for argument. Recently, a case came to court to consider the meaning of the term ‘materially larger’ in the context of a planning application.
The case arose when a local authority granted planning permission to demolish an existing house and replace it with one which had a building footprint two and a half times that of the house being demolished and represented a four-fold increase in volumetric terms. It was argued that the increase was not material because the design of the new house involved the creation of some floor space which was below ground level.
The planners had concluded that the new property would not be ‘materially larger’ than the previous premises.
In the view of the Court of Appeal, whilst in certain circumstances a small increase in floor space could be considered to be material, it was harder to see how it could be asserted that such a large increase in floor space was not. The correct test was ‘was the new property materially larger?’ and not ‘did it make a material impact?’. The intention of the relevant planning law was to ensure that the proposed new building was similar in scale to the existing one. The local authority had misinterpreted the policy.
Partner Note
R [on the application of Heath & Hampstead Society] v Vlachos, Vlachos and Camden Borough Council [2008] EWCA Civ 193.
Landlord Successful in Opposing Assignment to New Company
Most leases contain clauses which permit their assignment from one tenant to another, provided this is done with the landlord’s approval, and they also contain a clause specifying that approval is not to be ‘unreasonably withheld’.
In a recent case, a landlord withheld approval for the transfer of a lease to a new tenant on the ground that the proposed new tenant was a newly-formed company and it was therefore not possible to judge whether it was ‘respectable and responsible’ and able to pay the £400,000 annual rent due. The landlord’s rejection gave no other reason for its decision.
The tenant went to court to get the decision reversed. Although the point that the proposed new tenant could not be demonstrated to be respectable and responsible was accepted, the tenant argued that the landlord had acted unreasonably in withholding consent to the transfer, as additional information might have been made available to give the necessary comfort to the landlord. The landlord argued that the right to withhold consent was an absolute right when the proposed assignee could not be demonstrated to be respectable and responsible. The landlord also argued that the tenant’s letter proposing the assignment was not an application for consent to assign the lease because it proposed that references on the assignee’s directors could be taken. The tenant argued that the landlord should have considered the application and demanded such further information and/or concessions it needed from the tenant in order to overcome its reservations about the proposed assignee.
The High Court could not accept the tenant’s argument. The landlord had the right to make a decision based on the information put in front of it. The tenant was free to make other proposals to overcome any objections.
The Court did, however, conclude that landlords are required to respond to requests for assignment within a reasonable time and to give the tenant reasons why the application to assign the lease has been refused. The burden of proof is on the landlord in such cases to show that it has acted reasonably.
Partner Note
Royal Bank of Scotland v Victoria St (no 3) Ltd.
Reported by Wragges, 16 June 2008.
Landowner Receives £1m Windfall on Compulsory Purchase
A recent ruling by the Court of Appeal has resulted in a property owner being awarded £1.6 million in compensation for the compulsory purchase of land with an agreed market valuation of only £15,000.
Rejecting an appeal by the London Borough of Wandsworth, the Court approved compensation amounting to over 100 times the market value of the property and 50 times the purchase price of £30,000. The case hinged on an interpretation of the 1961 Land Compensation Act, which was upheld by the Court.
When Wandsworth Council issued the compulsory purchase notice to Greenweb Ltd., the level of compensation was assessed, as always in such cases, by the Lands Tribunal.
As the land was being used as a park and planning permission for any other use was unlikely, the market valuation was assessed at £15,000. The reason for the Lands Tribunal’s assessment of the value of the property at £1.6 million stemmed from its former use. Prior to the Second World War, a Victorian terrace had existed on the site. The buildings were destroyed by enemy action during the War. The date of their destruction fell within the time limit to which the Act applies.
When Wandsworth wished to acquire the land for its own development plans, Greenweb benefited from provisions of the Act that require the Lands Tribunal to assess compensation as if planning permission had been granted to rebuild the previous buildings, in spite of the fact that Greenweb had not received such permission, nor would the company be likely to receive planning permission. The Court was in no doubt about the proper interpretation of the relevant parts of the Act.
Greenweb became, in the words of the Court, ‘the fortunate recipient of an enormous windfall’.
“This ruling demonstrates that attention to the detail of planning law can sometimes reap unexpected rewards,” says <<CONTACT DETAILS>>.
Partner Note
Greenweb Ltd. v London Borough of Wandsworth. See
Misled Surveyor Still Liable
In a period of rising repossessions, when aspects of the professional work relating to repossessed properties can be expected to come under close scrutiny, a recent judgment could have implications for property professionals.
The case involved a surveyor, who was asked to produce a valuation for mortgage purposes of a house that was in the course of being built. The surveyor’s client misled him into surveying a house that was not the one on which the mortgage was being sought.  
Later, the client defaulted on the mortgage. When the lender repossessed the house, the error was discovered. The property the surveyor had valued was worth significantly more than the one he should have surveyed, with the result that the bank faced a loss of £30,000.
The bank sued the surveyor, alleging that he had not carried out the valuation with reasonable skill and care, because he had not taken sufficient steps to ensure he surveyed the right property. There was no issue over the quality of the survey itself. The case went as far as the Court of Appeal and the bank won. The Court rejected the argument that the surveyor had discharged his work with due skill and care and that the issue had arisen because he had been misled.
In similar circumstances, therefore, it appears that surveyors (and their professional indemnity insurers) will find it difficult to place a limit on their responsibility with regard to fundamental aspects of their work.
Partner Note
Platform Funding Ltd. v Bank of Scotland plc [2008] EWCA Civ 930.
Rectification Not Possible Where Document Not Created
Rectification is the term used when a ruling is made in order to ‘put right’ an agreement when this contains an error. In practice, such rulings are quite difficult to obtain, the courts generally preferring to enforce agreements as they are, not as one of the parties to the executed agreement thinks they should be.
In a recent case in point, the purchaser of a freehold office building went to court to obtain rectification of the agreement for sale. Part of the purchase documentation was dealt with by side letters, because the purchaser did not want its main lender to know that it had an outstanding loan from the vendor’s holding company. The purchaser had previously been the tenant of the vendor and the draft sale documentation contained a number of clauses, one of which stipulated that in the event of the resale of the building at a profit by the purchaser, or if the vendor obtained planning permission for residential development of the building, the purchaser would pay the vendor fifty per cent of the uplift in value. The uplift payment was also agreed, in negotiation, to be subject to abatement if the purchaser paid arrears of rent and settled a legal charge owed to the vendor’s parent company within five years of the sale.
In the draft agreement, however, the abatement of the uplift charge was stated to apply if the purchaser made the requisite payment before planning permission was applied for by the vendor. A further letter altered this to provide that the abatement of the uplift was to apply if the payment of the outstanding sum was made within six months of the agreement being executed. However, no side letters were ever executed to give this legal effect.  
In the event, no abatement of uplift clause was contained in the final agreement. The purchaser went to court to have the agreement rectified, claiming the omission of the abatement clause was a trick.
In this case, the court had to look carefully at the paper trail and try to understand the motives of the parties to the contract. The uplift abatement clause was initially found in the draft sale agreement but was removed from that at the purchaser’s request. The purchaser wished the clause to be inserted into the side letter. The removal of the clause was clear and had been properly communicated to the purchaser. Accordingly, ruled the court, the sale agreement was not subject to rectification, there being no intention that the abatement clause should have been contained in it.
Says <<CONTACT DETAILS>>, “This case appears to have arisen simply because the purchaser failed to ensure that the necessary side letters were put in place before the agreement for purchase was executed. In transactions of this type, taking care to make sure all the details have been agreed and appropriate documentation executed is especially important. Since the side letter never came into existence, the sale agreement could not be rectified and the purchaser was left with no remedy.”
Partner Note
Transview Properties Ltd. v City Site Properties Ltd. [2008] EWHC 1221 (Ch).
Rent is Payment Towards Purchase
A tenant who exercises his right to buy is entitled to expect the process to be carried out with reasonable speed by the landlord. When this does not occur, the tenant can serve an ‘operative notice of delay’ on the landlord. The effect of issuing such a notice is that any rent then paid is treated as being a payment on account of the purchase price.
In a recent case, a tenant served such a notice on Southwark London Borough Council. The tenant claimed that the whole of the £17,000 purchase price for the property had been paid as rent during the period of the Council’s delay and this therefore constituted a payment on account of the purchase price. The Council argued that since the tenant’s rent had been paid by way of housing benefit, the payments did not count towards the purchase price.
The Court of Appeal rejected the Council’s arguments. It did not matter who paid the rent during the delay period, only that the rent was paid.
Partner Note
Hanoman v Southwark London Borough Council (No 2) [2008] EWCA Civ 624. See
Social Landlord Cannot Vary Tenancy Unilaterally
A judge has ruled that a social landlord does not have the right to change a tenancy agreement, other than to make a rent change, without the consent of the tenant. Any change in an agreement must be in writing and signed by both parties.
In the case in point, the social landlord was the Peabody Trust, which sought a ruling against one of its tenants, Michael Reeve, who represented some 10,000 other tenants.
Registered social landlords, such as the Peabody Trust, ceased to enjoy the right to vary tenancy agreements following the introduction of the 1988 Housing Act. This is in contrast to local authorities, which retained such rights conferred by the 1985 Housing Act.
The judge did not accept the argument that it was impossible to manage such a large number of tenants without a method of unilaterally altering the terms of their tenancy agreements and concluded that the written agreement of each tenant was required.
He further stated that even if the standard tenancy agreement did allow a right to change the terms, any such change would not be binding as the Unfair Terms in Consumer Contracts Regulations apply. This is because a term allowing the landlord to change the agreement unilaterally would not have been individually negotiated and would therefore be considered to be in bad faith. In effect, it would be legally unfair.
“Landlords should take care when entering into agreements with their tenants and should seek advice on each individual contract,” says <<CONTACT DETAILS>>. “Relying on standard-form agreements could be a recipe for disaster.”
Partner Note
Governors of the Peabody Trust v Reeve, Times Law Report, June 9, 2008. See  
When a Home is Not a Dwelling
To most people, ‘dwelling’ is just a fancy term for ‘home’ or possibly ‘house’. However, the difference in the meaning of words is a common source of legal dispute, as was illustrated in a recent case that also has significance for tenants of holiday park homes and similar properties and their landlords.
The case concerned bungalows at a holiday park in Cornwall. As is common in such cases, the planning permission under which they had been built prohibited permanent occupation of the bungalows, which were stipulated as being for holiday purposes only. The tenants also covenanted with the park owner landlord ‘not to use the…bungalow for any purpose other than that of a holiday bungalow’. It was recognised that this restriction was not adhered to by several of the tenants.
As is also normal, the tenants were required to contribute to the costs of maintaining the site etc. by payment of service charges. The dispute arose because some of the owners claimed that the service charges were excessive and relied on the Landlord and Tenant Act, which provides that only reasonable service charges can be recovered from tenants of ‘a dwelling’. Specifically, the Act defines a dwelling as ‘a building or part of a building intended to be occupied as a separate dwelling…’. The tenants applied to the Leasehold Valuation Tribunal (LVT) for a ruling on the fairness of the charges.
The LVT refused to hear their claim on the ground that the holiday bungalows were not dwellings since they could not be used as permanent residences. The tenants appealed.
The question that needed to be settled was whether a home can be a dwelling, for the purposes of the Act, if it is a place in which a person cannot permanently reside. Unfortunately for the tenants, the Lands Tribunal could not agree that the protection offered by the Landlord and Tenant Act was intended to apply to premises such as the bungalows in this case.
Partner Note
King and others v Udlaw Ltd. (2008) Lands Tribunal LRX/186/2006.
When a Promise is Not a Promise
Nowadays, it is becoming less and less common for business to be transacted ‘on a handshake’ and a recent case highlights the dangers of failing to get formal documentation in place to confirm the terms of an agreement.
The case involved a property developer, who made an oral agreement with the management of a company that owned a block of flats to the effect that he would buy the block once he had obtained planning permission on the property. The details of the agreement were that if planning permission were achieved, the company would sell the property to the developer (or a company nominated by him) for £12 million and then the developer would develop and sell the property. The owner was also to be entitled to 50 per cent of the sale proceeds exceeding £24 million.
The developer spent a considerable amount of time and money on obtaining the requisite planning permission only to find that the owner of the flats then refused to enter into a contract for sale on the agreed terms.
The developer sought a lien (a charge) over the property to secure his interest, basing his case on the argument that the agreement had created proprietary estoppel against the property owner.
The doctrine of proprietary estoppel is that it is inequitable for the legal title holder of a property to deny a right to anyone who has acted to his or her detriment, having relied on an assurance from the owner of the legal title that he or she will acquire rights in or over the property.
The developer therefore argued that estoppel applied because he had acted to his detriment by spending the time and money necessary to obtain the planning permission and had done so on the basis of the assurance from the owner that the property would be sold to him on the terms agreed.
The case was appealed to the House of Lords. The Law Lords concluded that where the agreement was ‘subject to contract’, estoppel could not ordinarily arise because the prospective purchaser’s expectation of acquiring an interest in the property was subject to a contingency that was under the control of the other party and was therefore speculative. The other salient point is that oral agreements over land are not binding and the developer was aware of that.
In spite of the fact that the property owner’s behaviour was unconscionable, the case could not be made out. The question arose, therefore, of what compensation was appropriate for the developer.
The Lords considered the fair recompense for the developer would be the extent of unjust enrichment received by the property company, which was the value of the services it had received from the developer without having to pay for them.
The developer therefore stands to receive only a fair value for his efforts in obtaining the planning permission for the owner. Failing to put the appropriate documentation in place means that the developer will miss out on the considerable profit he was expecting. This case is yet another demonstration of the importance of putting binding contracts in place when arrangements such as this are made.
Partner Note
Yeoman’s Row Management Ltd. and another v James Cobbe [2008] UKHL 55.
See The Solicitors Journal, 5 August 2008 p 31.
When Does Possession End?
A recent case is of interest to public sector landlords as it dealt with the situation when a tenancy comes to an end but the tenant does not give up the property. When a tenant under a secure or assured periodic tenancy fails to give up possession of the property and the landlord does not act to evict the tenant after obtaining an order for possession, the tenant becomes a ‘tolerated trespasser’.
Mr Jones was a tenant of the London Borough of Merton, which was granted a possession order against him in early 2005. The order was not enforced and Mr Jones remained in occupation of his flat, thereby becoming a tolerated trespasser. He left the flat later that year, but he retained the keys and left some of his belongings there. He requested a housing transfer during that time.
In October 2005, the Council advised Mr Jones that he could not be transferred to new accommodation until his arrears of rent – which had built up to over £1,200 – were settled. His father paid the arrears and in November 2005 one of his friends removed his remaining property from the flat. No further rent was paid.

The Council advised Mr Jones that he should not terminate his tenancy until he was re-housed. This took place in June 2006. The Council also advised him that he was liable for the rent on his old flat until he was re-housed, because he had not brought his previous tenancy to an end, and until it had received notice of termination of his previous tenancy, which occurred in September 2006.
In December 2006, the County Court ordered him to pay the Council a sum equivalent to the rent he should have paid from October 2005 until September 2006. This amounted to over £3,000.
Mr Jones disputed the claim. In his view, he had vacated the flat in October 2005 and he also disputed that notice to terminate the tenancy had to be given. He argued that as a tolerated trespasser, his liability to pay rent ceased when he gave up possession of the flat. The Council argued that a tolerated trespasser does have to give notice to their former landlord that they have given up the property they occupied, thus allowing the landlord to re-let the property.
The Court of Appeal found that a tolerated trespasser does not have to give notice and has a liability to pay rent only until the property is given up. In the Court’s view, this was when Mr Jones removed his possessions from the flat (November 2005), not when he gave formal notice of his intention not to reside there.
Because of the numerous issues that arise when a tenant becomes a tolerated trespasser, the Government intends to abolish the status altogether, which should lead to greater clarity in landlord/tenant law in similar circumstances.
Partner Note
Jones v London Borough of Merton [2008] EWCA Civ 660. See

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