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Uncertainty in leases – Is it a vice?

Published online by Cambridge University Press:  02 January 2018

Susan Bright*
Affiliation:
Oxford

Extract

John owns a workshop which he wants to redevelop. Securing the necessary financing and obtaining planning permission will take a few months and in the meantime he is happy to let Mike use the workshop for E30 a week. They draw up a simple form of agreement whereby John lets the property to Mark at the agreed rent ‘until John is in a position to proceed with the redevelopment’. John and Mark are content with the arrangement: Mark has the security of knowing he can occupy the premises for several months; John is getting some income from the property.

Type
Research Article
Copyright
Copyright © Society of Legal Scholars 1993

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References

Notes

1. [1992] 3 All ER 504.

2. For example, in Say v Smith (1530) 1 Plowden 269 Anthony Brown J said ‘Every contract sufficient to make a lease for years ought to have certainty in three limitations, viz, in the commencement of the term, in the continuance of it, and in the end of it’ (at 272).

3. Re Midland Railway Company's Agreement [1971] I Ch 725 and Ashburn Anrtalt v Arnold [1988] 2 All ER 147 are expressly overruled; Breams Property Investment v Strougler [1948] 2 KB 1 and Eker v Becker (1946) 174 LT 410 are inconsistent with the decision.

4. [1944] 1 All ER 305.

5. [1992] 3 All ER 504 at 506.

6. Re Midland Railway Company's Agreement [1971] Ch 725 at 732.

7. [1971] Ch 725 at 732.

8. See, for example, Lord Templeman in Prudential Assurance Company Limited v London Residuary Body [1992] 3 All ER 504 at 510.

9. Some writers recognise the difficulties of fitting periodic tenancies into the requirements of a certain term. See, for example, Simpson Introduction to the History of Land Law (1961) p 235; Gray Elements of Land Law (1987) p 437.

10. (1865) 9 B & S 15; see also Queens Club Gardens Estates u Bignell [1924] 1 KB 117 at 125, 130.

11. (1946) 174 LT 410.

14. ‘… until the cessation of the present hostilities between Great Britain and Germany, meaning thereby the actual day of the cease fire order and not the day whereon peace terms are signed’.

13. Other cases are generally consistent with either view of Lace. The judgement in Say v Smith (1530) 1 Plowden 269 suggests that the reason for the certainty requirements may lie (in part at least) in the difficulty in construing the arrangement in the absence of words delimiting the estate:‘… all these ought to be known at the commencement of the lease, and words in a lease, which don't make this appear are but babble …’ (emphasis added). In Birell v Carcy (1989) 58 P&CR 184 an agreement that the tenant could occupy workshops ‘so long as the company is trading’ was held to be ‘insufficiently certain’. However, this could be taken to mean that it was objectionable either because no-one would be able to predict when (if at all) the company would cease trading, or because the phrase itself was too imprecise - what would count as ceasing trading? Taking the last order? Being unable to meet liabilities? The date of a winding up order?

14. [1988] 2 All ER 147.

15. [1988] 2 All ER 147 at 156.

16. [1991] EGCS 126.

17. Re Midland Railway Company's Agreement [1971] I Ch 725.

18. [1948] 2 KB 1.

19. In Breams Property Investment this restriction applied only for the first three years of the term.

20. (1880) 50 LJQB 121. In Doe d Warner v Browne (1807) 8 East 165 Lord Ellenborough CJ said that ‘it would be inconsistent with, and repugnant to the nature of such an estate, that it should not be determinable at the pleasure of either party giving the regular notice.’

21. [1974] Ch 1.

22. ‘This… would make a nonsense of the rule that a grant for an uncertain term does not create a lease and would make nonsense of the concept of a tenancy from year to year because it is of the essence of a tenancy from year to year that both the landlord and the tenant shall be entitled to give notice determining the tenancy’, [1992] 3 All ER 504 at 508.

23. Most cases involve total restrictions or partial restrictions that have, de facto, become total. Only Breams Property Investment Co Ltd v Strougler [1948] 2KB 1 and Re Midland Railway [1971] 1 Ch 725 involved partial restrictions which were held non-repugnant.

24. ‘A grant for an uncertain term which takes the form of a yearly tenancy which cannot be determined by the landlord does not create a lease’, [1992] 3 All ER 504 at 511 (see also at 510).

25. ‘A lease might be made from year to year subject to a fetter on the right of the landlord to determine the lease before the war ends. [This lease] would be invalid because … [it] purported to create an uncertain term’, [1992] 3 All ER 504 at 510. No reference is made to the Breams Investment case and the other case accepting a partial restriction (Re Midland Railway) is overruled.

26. [1971] 1 Ch 725.

27. ‘Our instinct… is to give effect if possible to the bargain made by the parties … [We] see no reason why an express curb on the power to determine which the common law would confer upon the lessor should be rejected as repugnant to the nature of the leasehold interest granted’, [1971] 1 Ch 725 at 733.

28. See Treitel, The LAW of contract (8th edn, 1991) p 49.

29. See, for example, Beer v Bowden [1981] 1 All ER 1070′Had this been a contract of sale or an ordinary commercial contract of some sort, there would be a great deal to be said for the view that from the date of the first rent review in March 1973 the contract was void for uncertainty, the parties having failed to agree on a vital term of the contract. But here there is a subsisting estate, and a subsisting estate in land, the lease, which is to continue until 1982, 14 years from the date of the lease itself, Geoffrey Lane LJ at 1075/6.

30. [1944] 1 All ER 305.

31. (1530) 1 Plowden 269.

32. The grant provided that ‘if the lessee pay at the end and term of every ten years, 10,000 tiles, … then he shall have a perpetual demise of the land, from ten years to ten years continually following, and out of the memory of man …’.

33. Cheshire Lines Committee v Lewis & Co (1880) 50 LJQB 121.

34. at 127. In Doe d Warner v Browne (1807) 8 East 165 the lease was potentially perpetual if the tenant never defaulted on his obligations and did not choose to end the relationship (unless construed as a lease for life in which event it was void for want of formalities).

35. Elsewhere he says ‘there was no “Clearly expressed bargain” that the tenant shall be entitled to enjoy his “temporary structures”in perpetuity if Walworth Road is never widened’ (emphasis added), Prudential Assurance Company Limited v London Residuary Body [1992] 3 All ER 504 at 510.

36. See, for example, the remarks of Sachs LJ in Caerphilly Concrete Products Ltd v Owen [1972] I WLR 372 where there was a five year lease granted at £l0 a year containing an option to renew: ‘It is difficult…to think that two business men would be talking in terms of five years if both - or indeed either - of them truly meant that a lease should be granted which went on ad infinitum’ (at 375).

37. [1992] 3 All ER 504 at 506.

38. [1992] 32 EG 59 (see (1993) Conv 71).

39. [1981] 1 All ER 161.

40. [1992] 1 All ER 1 ‘… I see no reason why this question should receive any different answer in the context of the contractual relationship of landlord and tenant than that which it would receive in any other contractual context’, Lord Bridge at 3. In a similar vein, see United Scientific Holdings Ltd v Burnley Borough Council [1977] 2 All ER 62 (whether time is of the essence); C H Bailey Ltd v Memorial Enterprises Ltd [1974] 1 WLR 728 (rent as a contractual payment) and Killick v Roberts [1991] 4 All ER 289 (rescission of tenancy).

41. [1944] 1 All ER 305.

42. [1978] 1 WLR 1387.

43. (1982) 43 P&CR 121. See also Collins The Law of Contract (1986) p 159.

44. See, for example, British Movietonews Ltd v London and District Cinemas [1952] AC 166 where Lord Simon said: ‘The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate - a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to the execution, or the like. Yet this does not in itself affect the bargain which they have made’. (at 185). See also Davis Contractors Ltd v Fareham DC [1956] 2 All ER 145.

45. Although Russell LJ approached the issue from a contractual perspective in Re Midland Railway [1971] 1 Ch 725 it seems unfair to hold the landlord to the original agreement and rental figure of a mere £l. Whilst Russell LJ asked whether there was any justification for extending the land law principle to deny the efficacy of the bargain he did not go on to see if there were any other reasons (such as the unfairness of the bargain over time) for interfering with the contractual arrangement.

46. Compare Treitel's comments on the effects of frustration: Treitel The Law of Contract (8th edn, 1991) at 808.

47. See Lord Browne-Wilkinson's comments on the unsatisfactory outcome in Prudential Assurance:‘It is difficult to think of a more unsatisfactory outcome or one further away from what the parties to the 1930 agreement can ever have contemplated. Certainly it was not a result which their contract, if given effect to, could ever have produced. If the 1930 agreement had taken effect fully, there could never have come a time when the freehold to the remainder of No 263-5 would be left without a road frontage.’, [1992] 3 All ER 504 at 511,512.

48. ‘No one has produced any satisfactory rationale for the genesis of this rule. No one has ever been able to point to any useful purpose that it serves in the present day.’ [1992] 3 All ER 504 at 512.

49. For a discussion of the issues in economic duress, see Halson ‘Opportunism, Economic Duress and Contractual Modifications’ (1991) 107 LQR 649 and Beatson ‘Duress, Restitution and Contract Renegotiation’ in Beatson The Use und Abuse of Unjust Enrichment.

50. For example, does the lease allocate responsibility for repair and renewal; are there alienation provisions; is there any provision for varying rent levels?

51. Whilst comparability is a difficult concept in itself (particularly if the lease is unusual, which it will be in the cases under consideration) the courts are used to receiving evidence on this in rent review cases. In any event, the leases in issue here can only be reopened if there is a gross disparity between the rent payable and market rents. This will reduce the need for direct comparability.

52. (1807) 8 East 165.

53. Centaploy v Matlodge [1974] Ch 1.

54. Cheshire Lines Committee v Lewis & Co (1880) 50 LJQB 121.

55. Compare the charterparty case of Clea Shipping v Bulk Oil International [1984] I All ER 129 where the owners of a vessel insisted on repairing it at great expense during a two year charter in order to recover the hire charge, even though the charterers has no further use for the vessel and it was scrapped at the end of the period. Lloyd J confirmed the arbitrator's finding that they should have restricted their claim to one of damages - it was wholly unreasonable to enforce the contract according to its strict legal terms. Although not directly analogous it would appear wholly unreasonable to make the landlord in Cheshire Lines demolish in order to recover possession.

56. ‘… on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises …’: Landlord and Tenant Act 1954 s 30(1)(f).

57. ‘… that on the termination of the current tenancy the landlord intends to occupy the holding for the purposes … of a business to be carried on by him …’: Landlord and Tenant Act 1954 s 30(l) (g).

58. Landlord and Tenant Act 1954, s 37.

59. [1992] 3 All ER 504 at 512.

60. Re Midland Railway Company's Agreement [1971] 1 Ch 725 at 732

* My thanks to Mindy Chen-Wishart for helpful discussion of some of the issues - the views and errors remain my own.

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* My thanks to Mindy Chen-Wishart for helpful discussion of some of the issues - the views and errors remain my own.