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If You Go Down To The Woods Today You’re In For A Big Surprise!

Case law update: Smyth -Tyrrell and another v Bowden [2018] EWHC

In 1993, the Claimants asked the freeholder for a 15-year lease of a derelict house and barn in Cornwall, with a rent based on woodland value, to enable (but not require) the Claimants to renovate the buildings and rent them out for holiday lets.

The Claimants signed a 15-year lease, but it was never signed by the freeholder and therefore didn’t comply with the necessary legal formalities for it to be an effective lease. As the purported lease was invalid, the Court inferred a periodic tenancy as the Claimants were in possession of the buildings and paid rent on a quarterly basis.

The freeholder sought to terminate the tenancy by serving various notices on the Claimants in 2014. The Claimants issued proceedings at Court and sought a declaration that they had an agricultural tenancy or were entitled to a new lease under the Landlord and Tenant Act 1954 (“LTA 1954”) or they had an interest by way of proprietary estoppel.

The High Court held:

  1. that the letting was for tourism and not for agricultural purposes and therefore it was not protected under the Agricultural Holdings Act 1986;

  2. the Claimants were not entitled to a lease renewal under the LTA 1954. The freeholder had served a hostile notice pursuant to Section 25 of the LTA 1954 opposing the grant of a renewal lease on the basis that the freeholder intended to occupy the buildings for its own business purposes (ground (g)). Moreover, the Claimants’ business of holiday lets was not run by the Claimants but by a company controlled by the Claimants and, therefore, any protection afforded to the tenant by the LTA 1954 would be to the company rather than to the Claimants. In any event, the freeholder had served a hostile section 25 notice on both the company and the Claimants and the Court was satisfied of the freeholder’s intention to occupy for its own business purposes. Accordingly, even if the company had brought the proceedings, the freeholder would have successfully defeated this argument;

  3. that the Claimant’s promissory estoppel claim failed. At Court, the Claimants stated their belief that they would be able to remain indefinitely and ultimately acquire the freehold to the buildings. However, the freeholder did not know of this belief and gave no such assurance to the Claimants. In addition, the Court held that there had not been the required detrimental reliance; the deal struck between the parties had contemplated the Claimants’ initial expenditure on renovating the buildings and, indeed, the Claimants had not been required by the freeholder to carry out the renovation works.

Practical points

  • Obtain legal advice prior to entering into leases where you may be expending a large amount of money – a specialist solicitor would have advised the Claimants to consider seeking an option agreement prior to carrying out the renovation works.

 

by Siân Westby
Solicitor (Litigation)

Pierre Vannerem