Procter v Procter (Court of Appeal)
Edward Peters appeared for the successful Appellants in an important and interesting Court of Appeal case (with leading judgment by Lewison LJ) concerning:
- The creation of tenancies (and the nature of possession) where there are joint landlords and joint tenants, and there is a partial overlap between the individuals constituting the landlord and the individuals constituting the tenant (A – AB, AB – ABCD etc). Is it possible to infer a tenancy from conduct in such circumstances, or to grant such a tenancy orally? Or can it only be created in writing, using the statutory machinery in s. 72 of the Law of Property Act 1925?
- As part of that question, can possession (or exclusive possession) be inferred where there is a partial overlap between the individuals constituting the landowner and the persons claiming to be in possession of the land ? Is that conceptually possible in such circumstances ?
- Is a tenancy at will a true tenancy ?
- Does the Agricultural Holdings Act 1986 apply to tenancies at will (including ‘interests at will’ under s. 54 of the Law of Property Act 1925)? Are there any exceptions to that ?
- What factors are relevant to the application of the Agricultural Holdings Act 1986 in circumstances of mixed agricultural and non-agricultural user, and to what extent might profitability, prior disuse of land (e.g. “set-aside”), and farm “diversification” be relevant?
The essential facts of the case were that the freehold of a farm was vested in ABC. A partnership comprised of ABCDE had farmed the land, and paid a rent to ABC for the right to do so. There was no written tenancy agreement, but the Judge held that there had been an intention to create legal relations between ABC and ABCDE in relation to the occupation of the land, notwithstanding they were all part of the same family. The Judge held that, applying Street v Mountford, he would have inferred a tenancy from conduct, if it had not been for the partial overlap between the parties constituting the landlord and the parties constituting the tenant. However, he held that the overlap between the parties meant that there could be no tenancy in such circumstances, unless there was a written ‘conveyance’ within the scope of s. 72 of the Law of Property Act 1925.
The Court of Appeal allowed the appeal, and held (i) at common law a valid tenancy could be inferred from conduct notwithstanding the partial overlap between the parties constituting the landlord and the parties constituting the tenant, and that conceptually there could be exclusive possession in such circumstances; (ii) the Judge had held that the rent had (marginally) not been at the best rent reasonably obtainable, and hence the tenancy was an “interest at will” under s. 54 of the Law of Property Act 1925; but a tenancy at will was within the scope of s. 2 of the Agricultural Holdings Act 1986; (iii) the Judge had been entitled to hold that the tenancy was agricultural in character, notwithstanding that, within the aim of farm diversification, c. 27% of the holding had been converted into a golf course.
There are six principal points of relevance for landlord and tenant & real property lawyers:
First, can a tenancy from A as landlord to AB jointly as tenant (or AB to ABC, etc) be inferred from conduct at common law, or created orally; or can such a tenancy only be created in writing using the machinery in s. 72 of the Law of Property Act 1925 ?
Answer: Yes.
The Court of Appeal held that at common law a tenancy can be inferred from conduct or created orally even where there is an overlap between the persons constituting the landlord and the persons constituting the tenant, and does not need to be in writing or rely on s. 72.
In order to reach that conclusion the Court of Appeal had to consider landlord and tenant and real property law from the origins of landlord and tenant in the middle ages, through the impact of the Statute of Uses (1535), to the common law position in the 19th century, before assessing the impact of the 1870s Judicature Acts and the Law of Property Act 1925, having regard to matters including estates held in common pre and post 1925, the law of merger, and contractual obligations where there is an overlap between covenantor and covenantee. Having done so it disapproved various contrary obiter dicta of the House of Lords in Rye v Rye [1962] AC 496.
Secondly, is it possible to have possession (or, in the L&T context, exclusive possession), in circumstances where there is an overlap between the individuals comprising the landlord and the individuals comprising the tenant?
Answer: Yes.
The reasons why that is possible are as follows. First, possession is a single possession, although it may be exercised by several persons jointly. Thus as against A and B, A, B and C are in the position of a single owner. Second, following the grant of the tenancy, A and B are entitled to possession in two capacities; and to two different types of possession. As joint landlords they are entitled to possession in the sense of receipt of rents and profits; and as joint tenants they are entitled, together with C, to physical possession of the land. Put another way, they have exchanged their right to physical possession of the land for symbolic possession in the shape of receipt of rents and profits.
Thirdly, is it possible to infer the grant of exclusive possession where there is a partial overlap between the individuals constituting the landowner and the persons claiming to be in possession of the land ?
Answer: Yes.
The Court of Appeal in Procter v Procter followed various 19th century cases where a tenancy had been inferred in such circumstances, or where adverse possession had been established notwithstanding an overlap between the persons in possession and the freeholder.
Fourthly, is a tenancy at will a true tenancy ?
Answer: Yes.
The Court of Appeal held (based on authorities starting with Littleton’s Tenures from the 15th century) that although a tenancy at will is terminable at will, it is in all respects a tenancy properly so called, carrying with it possession of the land whilst it subsists.
Fifthly, can a tenancy at will be protected by the Agricultural Holdings Act 1986?
Answer: Yes.
The Court of Appeal held that land held under a Tenancy at Will is land “let … for an interest less than a tenancy from year to year” within the meaning of s. 2 of the 1986 Act; as a matter of language, and having regard to both the policy and the machinery of the Act.
That includes an ‘interest at will’ created by s. 54 of the Law of Property Act 1925: as, for instance, in Procter, where the Judge had held that the rent had (very marginally) not been at “the best rent reasonably obtainable”, so that it was not within the exceptions created by s. 54(2) of the 1925 Act or s. 2(5)(a) of the Law of Property (Miscellaneous Provisions) Act 1989.
The application of the 1986 Act to tenancies at will (or licences) was subject to some exceptions where the relationship was entirely parasitic upon and ancillary to a wholly different legal relationship, and not “true transactions between landlord and tenant in respect of agricultural holdings”; such as where it was simply part of a loan security, or parasitic on an agreement for sale.
Sixthly, could a tenancy with mixed agricultural and non-agricultural user be protected by the Agricultural Holdings Act 1986, in circumstances where c. 27% of the holding was a golf course, and various houses on the holding were let under ASTs?
Answer: Yes.
The Judge had been entitled to hold that the “character” of the holding was still agricultural.
The relative profitability of the different activities was relevant, with the tenants’ profits still being largely derived from agricultural activity. It was also relevant that the golf course had been created as ancillary to the farm business by way of farm “diversification”: the report which had encouraged the creation of the golf course had been by an agricultural advisory board (ADAS), and the course had been created in large part on land that had already been taken out of use for agriculture and designated as “set-aside”. Lewison LJ observed: “If putting unproductive land to productive uses were to change the character of a tenancy, that would be a serious disincentive to the efficient use of land.”
Where a Judge had made an evaluative judgment based on a variety of factors, the Court of Appeal should respect the balance struck by the trial judge, the more so here where the trial judge had been immersed in the relevant evidence over a seven day trial.
A copy of the full judgment can be found here.
Edward Peters, for the successful Appellants, was instructed by Ebery Williams.
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