Wood v Waddington [2015] EWCA Civ 538

A reminder of the dangers of failing to expressly include rights in a transfer.

In this case the owners were saved on appeal by section 62 of the Law of Property Act 1925, but this case is a stark warning to those purchasing property, be it residential or commercial, to ensure that the rights they want to be able to exercise can in fact be exercised.

In this case, the dominant and servient land were originally owned by the same person. When the land was divided up and sold (to the Wood’s predecessor in title) specific rights were granted, but there was also a catch-all provision granting the benefit of all “liberties privileges and advantages of a continuous nature now used or enjoyed by or over the Property”.

The case concerned a right of way over a track on Waddington’s land. The right to use the track was not expressly stated in the transfer to the Woods’ predecessor, but they relied on the catch-all provision or, alternatively, section 62 of the Law of Property Act 1925 which provides, broadly, that any transfer of land includes all rights enjoyed at the time of the conveyance of the land. The Woods also sought to assert that they had an implied right, but this failed because the right wasn’t necessary for the “reasonably convenient enjoyment” of the land.

It is settled law that rights of way are not continuous rights and, therefore, the judge at first instance held that the Woods couldn’t rely on the catch-all provision in the transfer. This was upheld by the Court of Appeal so the Woods were left with a section 62 argument, which was refused on first instance because the right was rarely used.

The Court of Appeal held that the historic use of a track as little as once a month was apparent and regular enough for the Woods to rely on section 62, and the historic evidence the Woods produced as to the use of the track prior to the division of the land was crucial to this finding. Perhaps surprisingly, the Court did not consider that the fact that the two pieces of land were owned by the same person at the time of the first division prevented section 62 coming to the Woods’ aid, even though a person cannot exercise rights over its own land. The extent of the right was the extent proved by historic use so, in this case, the Woods were able to use vehicles to pass over the track. The Court also confirmed that the same rules about excessive user apply with rights claimed under section 62 and that an intensification of use as a result of a change in the character of the benefiting land from domestic to commercial would not stop the Woods being able to exercise the right.

Purchasers should ensure that where it is not possible to acquire an express grant, first, they are satisfied that the right exists and, second, that sufficient evidence is acquired from the seller to prove that right should it be challenged in the future. Sellers will often be quite happy to help during the course of a sale, but may ‘disappear’ when issues become problematic at some point in the future.

Chaplair Ltd v Kumari [2015] EWCA Civ 798

Good news for landlords who need to recover their costs from tenants in breach of the lease where the sum claimed is deemed to be a ‘small claim’.

The Court of Appeal has confirmed that where a lease contains a costs indemnity from the tenant to the landlord the landlord is entitled to recover more than the Small Claims Court limit.

This case concerned a residential lease where the tenant was in arrears of rent and service charge. The landlord issued a claim to recover the arrears, which were below the small claims limit. The tenant, with others, challenged the sum of service charge payable and the matter was referred to the Leasehold Valuation Tribunal. The LVT found for the landlord, but only has limited power to award costs so the landlord referred the claim for costs back to the County Court, relying on the contractual indemnity in the lease.

The claim was refused at first instance, but allowed by the Court of Appeal who confirmed that under the contractual terms of the lease the tenant was liable for the landlord’s costs on an indemnity basis, and this contractual provision takes precedence over the Civil Procedure Rules. It is worth remembering that ‘indemnity basis’ does not mean 100% recovery, and the Court does still retain some discretion as to the total sum to be awarded.

Whilst this case is useful for confirming the legal principal, from a practical perspective we would advise ensuring that the legal costs incurred up to the point of issue, and claimed under the indemnity in the lease, are specifically included in the particulars of claim. Our experience is that small claims for rent arrears are often undefended and any request for default judgment will be dealt with by the Central Money Claims Court. If the request for judgment includes costs in excess of those permitted by the CPR it will likely be refused and you are then left in a position where you are incurring more costs, and time, arguing with the Court about the indemnity. This can be avoided if the costs are expressly set out in the particulars of claim.

 

Arnold v Britton [2015] UKSC 36

A reminder that the courts will not re-write a contract because the practical result was not as envisaged.

It is difficult not to feel some sympathy for the leaseholders in this case who all held 99 year leases of chalets in a caravan park in South Wales. The leases commenced in December 1974 and included a covenant requiring the leaseholders to pay a proportionate part of the expenses and outgoings for the park and provided for a service charge ‘in the sum of £90 plus VAT for the first year of the term, increasing thereafter by ‘ten pounds per hundred for every subsequent year’.

The landlord argued that this meant that the fixed service charge sum of £90 increased at a compound rate of 10% in each subsequent year, this meant that by the end of the term the leaseholders would be paying a service charge in excess of £500,000. The leaseholders argued that the lease in fact only required them to pay a fair proportion of the costs subject to a maximum of £90, increasing year on year by 10% on a compound basis.

The leaseholders succeeded at first instance, but the landlord succeeded on appeal. The matter went to the Supreme Court where the Court held that its role was to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’. Lord Neuberger made it clear that commercial common sense and the surrounding circumstances should not undervalue the language actually used when construing the clause and a Court should be slow to reject the natural meaning of a provision just because it seems imprudent.  He also said that commercial common sense cannot be invoked retrospectively, it is only relevant to how matters were perceived by the parties at the date of the contract.

The Supreme Court went on to find for the landlord, confirming that the purpose of the clause was to set the sum payable as service charge and that the Court was not entitled to re-write the provision because matters did not turn out as expected.

Whilst this may seem unfair for the leaseholders, it was not a particularly onerous exercise to calculate how the service charge would increase throughout the term and this case serves as a warning to all to think about how service charges are to be calculated at the outset of the lease, and going forward. It can often be useful to include a worked example in the lease to avoid any confusion.

For more information about any of these cases or for advice on a contentious property issue please contact Michael Clark