13. April 2021
RED alert - Spring 2021 – 5 von 6 Insights
It is well known that a lease, properly so called, must grant exclusive possession of a property to a tenant. In circumstances where there are multiple landlords and tenants, and some of the individuals are the same (such as where persons A & B let property to A, B and C) some thought that it would be impossible for a lease to exist, since the tenants could not enjoy exclusive possession from themselves. However, the Court of Appeal has now confirmed that there can be partial overlap between the identities of the parties to a lease. Such parties are deemed to enjoy their rights in different capacities, so that the overlap does not create a paradox.
Various members of the Procter family had farmed a large estate in Yorkshire as a partnership. The freehold for the farm had been held by the trustees of a will trust and the identity of the trustees changed over time. The partners of the farm business also changed over time and it was clear that there was some overlap between the people acting as trustees of the will trust and the partners of the farm business. At one stage the farm partnership contained five people, being two parents and their three adult children. At the same time, the trustees of the will trust were the two parents and one of their children.
Unfortunately, relations between the partners disintegrated into what the High Court referred to as a "…war (possibly of attrition)…" between family members. Out of the various disputes that arose, one concerned the nature of the partnership's interest in the farmland and in particular, whether the partnership had a tenancy of the land. If it was to be proved that the freeholders had let the land to the partnership, the partners would need to show that they enjoyed exclusive possession of the land. This issue was fundamental to the case because if a tenancy could be inferred, security of tenure would be available to the tenants under the Agricultural Holdings Act 1986.
The ability to be able to enjoy land exclusively is a key constitute part of any tenancy. Essentially, the ability to enjoy exclusive possession means that the tenant must be able to exclude his landlord from the land in question.
In this case, it was found that persons A, B & C had held the freehold as trustees at the same time that persons A, B, C, D and E had been partners in the farm business. Given the overlap, a paradox arose as to how could it be said that the five partners had the right to exclude three of their number from the land.
Reversing the High Court's earlier decision, the Court of Appeal held that all of the partners of the farm business were the tenants of the freeholder trustees pursuant to an implied tenancy, which had arisen through the parties' conduct over a long period of time. In addressing the paradox concerning exclusive possession, the Court noted that:
This was a technical argument run for tactical reasons. While the apparent paradox convinced the High Court to rule that a tenancy did not exist, this would have had serious consequences for informal tenancies, particularly those entered into between family members or individuals conducting business in partnership. While arguments of this nature could also have been raised about a written lease, arguments of this nature are far more common when there is an implied contract, since parties will have far greater scope to argue about the terms and the tactical consequences. Written contracts therefore offer far greater protection from this type of dispute.
von Saleem Fazal
von Stephen Burke
von Edward Willis
von Alicia Convery
von Emma Dooley