Pye v Stodday
Pye v Stodday Land Limited, Ripway Properties Limited Can a transferee serve a notice to quit before the transfer is registered? On 7 October 2016, Norris J handed down judgment in Pye v Stodday, Ripway, an appeal from the County Court at Preston considering the validity of a landlord’s notice to quit served in the registration gap. The case considered the law relating to the validity of various types of property notice, the scope of owner’s powers under the Land Registration Act 2002, the effect of section 141 of the Law of Property Act 1925 and the practical implications of the registration gap. Jamie Sutherland acted for the successful tenant at first instance and on appeal.
Mr Pye has a tenancy of farmland in Lancashire protected by the Agricultural Holdings Act 1986. His landlord, Stodday, had obtained planning permission for construction of a cycle track on part of the holding. On 19 June 2013, Stodday transferred the freehold of that part to a related company, Ripway, so that Ripway could serve a Case B notice to quit under the 1986 Act, relying on the planning permission for non-agricultural use. Ripway served its notice on 1 July 2013. At the same time, Stodday served a Case D notice to quit, relying on alleged rent arrears, in respect of the remainder of the holding. However, the transfer was not registered until 16 July 2013.
Accordingly, the notices had been served in the registration gap, between execution of the transfer and its completion by registration: the effect of section 27 of the Land Registration Act 2002 is that, until registration, Stodday remained registered proprietor, and legal owner, of the severed part, and Ripway had only an equitable interest.
Mr Pye challenged the validity of both notices to quit at common law, on the grounds that a valid notice to quit must be served by a registered proprietor and legal owner and that a valid notice to quit must relate to the whole of the land comprised in the landlord’s reversion. Ripway’s notice was invalid because it had only an equitable interest in the transferred land when it served its notice; and Stodday’s notice was invalid because it should have covered the entire holding, including the transferred part, on the basis that it remained registered proprietor and legal owner. Stodday and Ripway did not dispute that a valid notice to quit must relate to the landlord’s entire holding, but contended that a valid notice to quit could be served by a transferee in the registration gap, so that in this case both notices were effective. HHJ Beech found for Mr Pye at first instance and Ripway and Stodday appealed.
Mr Pye relied on the cases of Smith v Express Dairy [1954] JPL 45, Brown & Root v Sun Alliance [2001] Ch 733 and Renshaw v Magnet Properties South East LLP [2008] 1 EGLR 42, which had respectively decided that a landlord’s notice to quit, a tenant’s contractual break clause and a reversioner’s counter-notice on a collective enfranchisement should be served by the transferor, and registered proprietor, in the registration gap, and that notices served by the unregistered transferee would be invalid. Stodday and Ripway advanced several arguments. Firstly, they relied on the definition of “landlord” in section 96 of the Agricultural Holdings Act 1986, which embraces ‘any person for the time being entitled to receive the rents and profits of any land’. Following the transfer, Ripway had notified Mr Pye that he should pay rent for the transferred part to Ripway going forward. As Ripway was equitably entitled to the rent, therefore, it was argued that it fell within the definition of landlord in the 1986 Act and so was entitled to serve a notice to quit. However, Norris J rejected this argument, on the basis that a notice to quit served under the 1986 Act had to be valid at common law: the definition of “landlord” in the 1986 Act did not change the common law position that a notice to quit should be served by the legal proprietor.
Secondly, Ripway and Stodday relied on section 141 of the Law of Property Act 1925 and the Court of Appeal decision in Scribes West v Relsa Anstalt [2005] 1 WLR 1847. Section 141 provides that ‘the person from time to time entitled… to the income… of the land leased’ is able to recover the rent reserved, and enforce covenants and rights of re-entry contained in the lease. In Scribes West, it was held that the section does not draw any distinction between legal and equitable entitlement to the income. Accordingly, a transferee of the reversion, who had served notice on the tenant to pay rent to it, but whose transfer had not yet been registered, was held entitled to forfeit the lease by peaceable re-entry, as it was equitably entitled to the income. However, Norris J distinguished Scribes West on the narrow ground that section 141 only gives an entitlement to rely on contractual provisions contained in the lease; a notice to quit a periodic tenancy is an incident of the estate, rather than a provision of the lease, and so entitlement to serve a notice to quit in the registration gap cannot be drawn from section 141.
Thirdly, Ripway and Stodday relied on owner’s powers under the Land Registration Act 2002. Under sections 23 and 24, a person entitled to be registered as proprietor has ‘power to make a disposition of any kind permitted by the general law’. As Ripway was entitled to be registered as proprietor, the argument ran, it was entitled to serve notice to quit. Norris J rejected this argument on the basis that, ‘by the general law’, a person with only an equitable interest in a reversion was not entitled to serve a notice to quit. Finally, Ripway and Stodday contended that Mr Pye’s case relied on an overly formalistic approach which would cause significant practical difficulties to transferees who needed to serve notices in the registration gap. However, Norris J was not persuaded by this argument, considering that practical solutions could be found, including by way of the transferee being authorised as the transferor’s agent pending registration. The decision has confirmed the care that needs to be taken in ensuring that notices are served by the correct party in the registration gap. It is also timely, following shortly after the Law Commission’s 2016 consultation paper on Updating the Land Registration Act 2002: the Law Commission noted the difficulties that can be caused by the registration gap, but considered that practical solutions are available and that no change in the law is required.
The judgement can be found below.
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