Lupin Ltd v 7-11 Princes Gate Ltd.
On 31 March 2020 HHJ Hellman, sitting in the County Court at Central London, handed down his judgment in this claim. Stephen Jourdan QC, instructed by Hamlins, appeared for the successful Claimant.
Summary
The first issue was as to the effect of the grant of an overriding or concurrent lease. If the freeholder of a building divided into flats held under long leases grants an overriding lease of one flat, does that sever the reversion, so that the tenant of the flat has two landlords, the freeholder of the building and the overriding tenant? The Judge said that it did. The overriding tenant becomes the landlord in respect of the flat itself. The freeholder remains the landlord of the remainder of the building over which the tenant enjoys easements.
The second issue arose under the Land Registration Act 2002. If a lease of a flat is granted containing a restrictive covenant by the landlord relating to part of the building other than the flat, and a notice of the lease is entered in the landlord’s registered title, does that confer priority on the restrictive covenant under the Land Registration Act 2002? The Judge held it did not, unless particulars of the covenant are entered in the landlord’s title.
The third issue was whether the benefit of a restrictive covenant can be an “appurtenance” of a flat for the purposes of the Leasehold Reform, Housing and Urban Development Act 1993. The Judge held the answer was “no”.
The fourth related to the service of a s.42 notice under the 1993 Act. If a tenant of a flat has two immediate landlords, one in respect of the flat and one in respect of easements over the rest of the block, and serves a notice claiming a new lease under s.42 of the 1993 Act on one of them, and then later serves another notice on the other, has a valid s.42 notice been served? The Judge held the answer was “yes”, and also that the service of the second notice extends the time for serving a counter-notice to the date specified in the second notice.
Brief summary of the facts
In 1989, the freehold owner of a block of flats just south of Hyde Park, F1, granted a long lease (“the Original Lease”) to a tenant, T, of the top floor flat, not including the roof which remained in the possession of F1. The Original Lease granted T easements over the remainder of the block. It also contained a restrictive covenant by F1 with T “not to build or erect any structure on the roof of the Building”.
A notice of the Original Lease was entered in the registered freehold title. But no particulars were entered of the restrictive covenant.
In 2010, F1 sold the freehold to a new owner, F2.
F2 shortly afterwards granted a 999 year overriding lease of the flat only (not the rest of the block) to an associated entity, ORT, granting the same easements over the rest of the block as those granted by the Original Lease. The overriding lease did not contain a covenant by F2 not to build on the roof.
The following table illustrates in three stages what happened:
|
STAGE 1
|
STAGE 2 |
STAGE 3 |
|
F1 – freeholder of block of flats |
F1 transfers freehold to F2 |
F2 grants 999 year overriding lease of flat only to ORT |
|
Original Lease of flat granted for original term of 73 years. Easements granted over rest of block. F1 covenant not to build on roof.
|
Original Lease of flat as before
|
Overriding Lease for 999 years. Easements granted over rest of block. But no covenant by F2 not to build on roof.
|
|
ORT - tenant under Overriding Lease
|
||
|
Original Lease of flat as before |
||
|
T |
T |
T |
The dispute
T claimed a new lease of the flat under Chapter 2 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993.
T originally served a s.42 notice claiming a new lease on ORT alone. ORT admitted the claim, but said the new lease should not contain the covenant not to build on the roof.
T then served further notices. It served one set of notices on F2 and ORT treating them as constituting together the “landlord”. It served another set treating ORT as the “landlord” and F2 as a “third party”. T said that the original notice was invalid, and one or the other of the new notices was valid. It applied for appropriate declarations.
The Judge’s decision
The first question was whether F2 and ORT were together “the landlord”. HHJ Hellman held that they were. The grant of the Overriding Lease severed the reversion on the Original Lease. ORT became the landlord in respect of the flat itself. But F2 remained the landlord in respect of the easements enjoyed by T over the rest of the block.
Further, under s.140 of the Law of Property Act 1925, the landlord covenants in the Original Lease had to be apportioned, and the restrictive covenant not to build on the roof should be apportioned to F2. The covenant touched and concerned the block (although the Judge did not think it touched and concerned any of the easements granted by the Original Lease). Therefore F2 remained bound by the restrictive covenant under s.142 of the 1925 Act and obliged to enter into the new lease to repeat the covenant for the additional term of 90 years.
The Judge held that: “The intention of the legislature would be defeated if a landlord could evade an inconvenient covenant by the simple expedient of giving an overriding lease of the flat which benefited from the covenant to another vehicle which the landlord owned and controlled.”
However, he rejected T’s alternative argument that F2 was the landlord because the restrictive covenant was an “appurtenance” and therefore part of the “flat”. That was because he considered that:
- A covenant cannot be an appurtenance. An “appurtenance” includes the benefit of an easement, but not a restrictive covenant. An appurtenance has to be something positive: something which can be used or enjoyed.
- F2 was not bound by the covenant not to build on the roof in equity under the law relating to restrictive covenants. Registration of notice of the Original Lease in the freehold title did not operate to confer priority on the restrictive covenant contained in the Original Lease. Priority protection would only be afforded if particulars of the covenant are entered in the landlord’s registered title.
As to the notices, he held that the original notice served on ORT alone together with the later notice served on F2 together constituted a valid s.42 notice, with the time for serving a counter-notice being the date specified in the later notice, which had the effect of extending time for serving a counter-notice.
He granted permission to appeal to F2 and ORT and directed that the appeal be heard by the Court of Appeal.
The Judgment can be downloaded here
Download DocumentBack to news listing
