Hill and Redman Chapt 10-17.do PDF

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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 10 The maintenance of the physical
condition and management of the demised premises
Chapter 10 The maintenance of the physical condition and management of the

demised premises
Editors
Jonathan Karas QC, Edward Cole and Tiffany Scott

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condition and management of the demised premises/A Introduction
HR A[7380.1]
In the absence of express agreement, the obligations of the landlord and tenant relating to the fabric and management of
demised premises are limited1 though in some instances statute intervenes2. A well-drafted lease, therefore, will make
express provision for how the parties are to apportion responsibility for the fabric and management of the demised
premises, the building or land on which the demised premises are situated and the land over which ancillary rights may
have been granted. Such a lease will provide a code by which the parties may know who is responsible for which parts
of the premises and who is to bear the cost of any works or services required.
1 See HR A[7380.196] and A[7380.196] below.
2 See HR A[7380.211] - A[7380.255] and Chapter 11 below.
HR A[7380.2]
A number of concepts are regularly encountered in provisions in leases dealing with the fabric and management of
premises. These concepts are found when dealing with express obligations and those implied at common law or by
statute. They may be categorised under two headings:
(1) the subject matter of the covenants1; and

(2) the activity required or prohibited by the covenants2.
In addition there is a body of case law which has built up concerning the standard of work which is required or
permitted by covenants contained in leases3 as well as specific issues relating to the extent of the parties' obligations
and the enforcement of those obligations depending on whether one is considering the obligations of the tenant4 or of
the landlord5. Specific issues also arise in relation to obligations to insure premises (and expend any moneys received
from insurance on the fabric of the premises)6 and in relation to the recovery of service charges for expenditure
incurred7. This Chapter deals with these various topics. The next Chapter deals with the statutory regime which
regulates service charges and the management of residential premises.
HR A[7380.3]
1 See HR [A7380.4] FF below.
2 See HR A[7380.26] FF below.

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3 See HR A[7380.69] ff below.

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condition and management of the demised premises/B The subject matter of the covenants
B
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condition and management of the demised premises/B The subject matter of the covenants/Generally
Generally
HR A[7380.4]
The first matter to consider is for which parts of the premises the parties are responsible. There are a number of words
and phrases by which the subject matter of the parties' obligations relating to the fabric and management of premises
can be defined. The following are those most commonly encountered.
"The demised premises"
HR A[7380.5]
Often an obligation will refer to the premises demised by the lease or to part of those premises. What constitutes the
demised premises under a lease is considered in Chapter 3 above1.
HR A[7380.6]
1 See HR A[1501] et seq.
"Fixtures", "tenant's fixtures", "landlord's fixtures"
HR A[7380.7]
What constitutes a fixture is considered in Chapter 31.
HR A[7380.8]
1 See HR A[1641] et seq.
"The building", "common parts", "the estate" etc
HR A[7380.9]
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An obligation will sometimes refer to a "building"1, to "common parts" or to an "estate" (or some such other defined
area). How these words will be construed will depend upon the context. In the context of the Housing Act 1985 the
phrase "common parts" in relation to a dwelling house is defined to mean any part of a building comprising a dwelling
house and any other premises which the tenant is entitled under the terms of the tenancy to use in common with the
occupiers of other dwelling houses let by the landlord2. In other contexts, common parts may extend to the structure
and exterior of the building and any common facilities within it3. In the case of complex structures in multiple
occupation it may be difficult to discern what comprises the "building", what is included within 'common parts' and
what precisely is "the estate" in which the demised premises are situated. Accordingly, a well drawn lease will include
express and precise definitions of these words tailored to the physical circumstances.
HR A[7380.10]
1 For example, Rapid Results College Ltd v Angell [1986] 1 EGLR 53, CA.
2 See Housing Act 1985, s 116; see HR D[845] - [850].
3 See eg Landlord and Tenant Act 1987, s 60(1).
"Party walls", structures "used in common" with other premises
HR A[7380.11]
'Party wall' is a term of art. It means a wall which separates land or buildings in different ownership and unless the
context indicates otherwise this is the meaning it will bear in a lease1. Sometimes covenants extend to structures "used
for the demised premises in common with" other premises: a roof not immediately contiguous with the demised
premises but benefiting those premises is capable of amounting to a "mutual structure"2.
HR A[7380.12]
1 See HR A[7380.162] - alterations: removal of party walls.
2 Twyman v Charrington [1994] 1 EGLR 243.
"Structure"
HR A[7380.13]
Obligations may expressly or impliedly1 extend to the "structure" of defined premises (whether those premises are, eg
the demised premises themselves, a particular "building", "common parts" or an "estate"). The precise meaning will
depend on the context and in particular the physical nature of the premises in question.
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The word usually refers to subsidiary parts of the premises and will usually involve more than simply the load bearing
elements; for example, the four walls, the roof and foundations may comprise the structure even if they are not load
bearing. The constituent parts of the premises to which this word refers will usually comprise the basic fabric and parts
of the demised premises as distinguished from its decorations and fittings2.
In the context of the Landlord and Tenant Act 1985 the word "structure" when used of a dwelling house has been
considered to mean something less than the overall dwelling house itself but to consist of those elements of the overall
dwelling house which give it its essential appearance, stability and shape: the word does not extend to the many and
various ways in which the dwelling house will be fitted out, equipped, decorated and generally made to be habitable3.
Thus, in the case of a flat, the structure may comprise the outside walls of the flat, the outside of its inner party walls,
the outer sides of horizontal divisions between the flats, and the structural framework, joists and beams directly
supporting the floors, ceilings and walls of the flat4. In the case of a top floor flat it may apply to the roof5.
HR A[7380.14]
1 See eg Landlord and Tenant Act 1985, s 11; HR A[7380.239] FF below.
2 Pearlman v Keepers and Governors of Harrow School [1979] QB 56, CA. See too Granada Theatres Ltd v Freehold Investments
(Leytonstone) Ltd [1953] 1 WLR 84, Vaisey J [1959] Ch 592, CA.
3 Irvine v Moran [1991] 1 EGLR 261; see too Douglas-Scott v Scorgie [1984] 1 WLR 716.
4 Campden Hill Towers Ltd v Gardner [1977] QB 823.
5 Douglas-Scott v Scorgie [1984] 1 WLR 716. A roof terrace (other than the surface layer) has been held to be part of the structure of a
building: Ibrahim v Dovecorn Reversions Ltd [2001] 2 EGLR 46 applying Hallisey v Petmoor Developments Ltd [2000] EGCS 124 (a case
concerning the words 'exterior fabric').
"Exterior"
HR A[7380.15]
The "exterior" of a building will generally include all external parts of that building including the windows and window
frames1. In most cases the walls which enclose the premises will form part of the "exterior" of those premises even if
they are not themselves exposed to the air2: thus, basement walls may form part of the "exterior" of the premises of
which they form part3.
In drafting leases where a building is in multiple occupation, it is important to make clear to what the word "exterior"
refers. For instance, in one case the phrase "maintenance of the exterior" referred to the exterior of the demised premises
rather than the exterior of the whole building in which those premises were situated4. In the context of the Landlord and
Tenant Act 1985 it has been held that where the dwelling house forms part of a larger building, then the subject matter
of the covenant implied by s 11 of that Act is the structure and exterior of the dwelling house and not that of the
building as a whole and that anything which in the ordinary use of words would be regarded as part of the structure or
of the exterior of the particular "dwelling-house", regarded as a separate part of the building, would be within the scope
of the obligation5.
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Likewise, it is important to have regard to the specific nature of the structure of the building: it has been left open
whether the steel frame of a building constructed with curtain walling or cladding comprises the "exterior" of the
building6.
In the context of a "dwelling-house" within the Landlord and Tenant Act 1985 the "exterior" will not include those parts
of the demised premises which are not part of the building itself7 such as its garden8, a garage9 or boundary fences10.
The "exterior", however, will extend to essential means of access which are an integral part of the house (such as a path
or steps)11.
HR A[7380.16]
1 Ball v Plummer (1879) 23 Sol J 656; Holding & Barnes v Hill House Hammond Ltd [2000] L & TR 428, Neuberger J (rvsd on appeal at
[2002] 2 P & CR 11 but not on this point).
2 Green v Eales (1841) 2 QB 225; compare too Fincar SRL v 109/113 Mount Street Management Co Ltd [1999] L & TR 161 (tanking in
basement).
3 Pembery v Lamdin [1940] 2 All ER 434.
4 Rapid Results College Ltd v Angell [1986] 1 EGLR 53, CA.
5 Campden Hill Towers Ltd v Gardner [1977] QB 823, CA. See too Douglas-Scott v Scorgie [1984] 1 WLR 716.
6 Plough Investments Ltd v Manchester City Council [1989] 1 EGLR 244.
7 Brown v Liverpool Corpn [1969] 3 All ER 1345, CA per Sachs LG at 1347.
8 Hopwood v Cannock Chase District Council [1975] 1 WLR 373, CA; McCauley v Bristol City Council [1992] QB 134, CA.
9 Irvine v Moran [1991] 1 EGLR 261.
10 Brown v Liverpool Corpn [1969] 3 All ER 1345, CA.
11 Brown v Liverpool Corpn, but compare King v South Northamptonshire District Council [1992] 06 EG 152.
"Interior"
HR A[7380.17]
On the face of things the "interior" of premises will be all those parts which are internal to the premises and do not
comprise the exterior. An obligation in respect of the "interior" of premises without further qualification may extend to
all parts of the interior (whether or not these parts are included within the "structure" of the premises1). If, however, a
tenant covenants to repair the "interior" of the demised premises but the landlord covenants to repair the "structure" of
the demised premises, then this is an indication that the tenant's obligation does not extend to the structural parts of the
interior. As with the other words considered in this section, in construing what is meant by the "interior" of premises it
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will be necessary to have regard to the nature of the premises themselves and to the interlocking obligations between
landlord and tenant.
HR A[7380.18]
1 For a discussion of the word "structure" see HR A[7380.13] above.
"Main structure", "main walls", "main timbers"
HR A[7380.19]
An obligation extending to the "main structure" will usually be more restrictive than one simply relating to the
"structure"1. Which parts of the premises comprise the "structure" or the "main structure" will depend on the context
and, in particular, the nature of the premises in question and the particular lease viewed as a whole2. In general, the
word "main" refers to principal parts: thus the phrase the "main walls" has been construed to mean those which support
the structure of the building or have directly to do with its stability3. Likewise, the "main timbers" will ordinarily refer
to the principal wooden parts but in the context of a modern building may extend to iron beams4 or a steel frame5.
HR A[7380.20]
1 Toff v McDowell (1995) 69 P & CR 535 at 541 (a case in which the floor and ceiling separating one flat from another in a building
converted into flats has been held not to comprise the "main structure"); Ibrahim v Dovecorn Reversions Ltd [2001] 2 EGLR 46 at 49 (roof
terrace save for surface area within "main structure").
2 See eg Petersson v Pitt Place (Epsom) Ltd [2001] 1 L & TR 21, CA (unclearly drafted lease construed so that roof terrace not included
in "main structure"); Hallisey v Petmoor Developments Ltd [2000] EGCS 124, Patten J (roof terrace within obligation to maintain "main
structure"); see too Ibrahim v Dovecorn Reversions Ltd [2001] 2 EGLR 46.
3 Holiday Fellowship Ltd v Hereford [1959] 1 WLR 211, CA. The "walls" of a building can, depending on the structure, be made of glass:
see eg Boswell v Crucible Steel Co of America [1935] 1 KB 119, CA.
4 Manchester Bonded Warehouse Ltd v Carr (1880) 5 CPD 507.
"Roofs" and "balconies"
HR A[7380.21]
The extent of a roof will depend upon the nature of the building to which the covenant relates: at least in some
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circumstances the word "roof" will include skylights1. Depending on the context the word "balcony" may not extend to
a roof terrace2--this word is more apt to describe an "overhanging ballustraded platform, projecting from the wall of a
building"3.
HR A[7380.22]
1 Taylor v Webb [1937] 2 KB 283; cf Holiday Fellowship Ltd v Hereford [1959] 1 WLR 211. But skylights may in other contexts be
included within the words "windows": see HR A[7380.23].
2 Petersson v Pitt Place (Epsom) Ltd [2001] L & TR 21, CA.
3 Ibrahim v Dovecorn Reversions Ltd [2001] 2 EGLR 46, Rimer J.
"Windows"
HR A[7380.23]
Again what amounts to a window within the scope of a covenant will depend upon the nature of the building to which
the covenant relates and the context: windows need not always be vertical and may consist of skylights1.
1 See Easton v Isted [1903] 1 Ch 405; see too Ayling v Wade [1961] 2 QB 288.
"Installations"
HR A[7380.24]
This word appears to refer to plant, machinery and other equipment which is installed in a building. This word appears
in the context of the Landlord and Tenant Act 1985, s 11 where the landlord is under obligations in respect of
"installations ... for the supply of water, gas and electricity and for sanitation"1.
HR A[7380.25]
1 See HR A[7380.239] and HR A[20243].

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condition and management of the demised premises/C The action required or prohibited
C
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condition and management of the demised premises/C The action required or prohibited/Generally
Generally
HR A[7380.26]
Next it is necessary to discern: (1) the extent of the works to the fabric for which each party may be responsible; (2) any
actions (such as alterations or waste) which affect the fabric of the premises and which are prohibited; (3) responsibility
for insuring the fabric and application of insurance moneys to the fabric of the premises; and (4) the sorts of services
which may be provided by a landlord and to which a tenant may be required to contribute through service charge
provisions. The extent of the obligations of the parties primarily depends upon the true construction of the words used in
the lease in the context of the particular building or part of a building demised though it is necessary to have regard to
statute and to the tortious remedy of waste1. Again, there are a number of words and phrases which are often
encountered and which the courts have interpreted.
HR A[7380.27]
1 See eg HR A[7380.211] FF below for statutory obligations and HR A[7380.91] FF for waste.
"Repair"
HR A[7380.28]
The concept of "repair" connotes the idea of making good damage so as to leave the subject matter so far as possible as
though it had not been damaged1. A state of disrepair connotes deterioration from some previous physical condition2.
As a matter of the ordinary usage of English, that which requires repair is in a condition worse than it was at some
earlier time3. Thus, there is no requirement "to repair" until the subject matter of the covenant has deteriorated and
purely preventative works are not within the scope of the concept4. On the other hand, some prophylactic measures may
be undertaken as part of the works to remedy deterioriation which has already occurred in order to prevent future
deterioration of a similar kind5.
In deciding whether there has been deterioration one must consider the condition of the subject matter at the time of
construction of the premises and not (if different) their condition at the date of the lease6. Even where a covenant to
repair does not expressly require a party to "put" the subject matter into repair, it will be construed as though it did,
since the obligation to "keep" premises in repair involves a duty to put them into repair in so far as they are out of it7.
Where decorative repair is in question one must look for damage to the decorations but where the obligation is merely
to keep the structure and exterior of the house in repair, the covenant will only come into operation where there has
been damage to the structure and exterior which requires to be made good8.
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HR A[7380.29]
1 Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716 per Atkins LJ.
2 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055.
3 Per Lawton LJ in Quick v Taff-Ely BC [1985] 3 All ER 321 at 328, [1986] QB 809 at 821. See too Southwark London Borough Council
v Mills [2001] AC 1. Quick v Taff-Ely BC has been applied in subsequent cases: see Secretary of State for the Environment v Euston Centre
Investments Ltd (No 2) [1994] EGCS 167, McNerny v Lambeth London Borough Council (1989) 21 HLR 188; Southwark London Borough
Council v McIntosh [2002] 1 EGLR 25; Lee v Leeds City Council [2002] EWCA Civ 6, [2002] 1 WLR 1488. See also Jackson v JH Watson
Property Investment Ltd [2008] 11 EG 94 at [20]-[23].
4 Mason v TotalFinaElf UK Ltd [2003] EWCA Civ 1604 (Ch), [2003] 3 EGLR 91.
5 McDougall v Easington DC [1989] 1 EGLR 93, CA at 95H per Mustill LJ.
6 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055, CA; Gibson Investments Ltd v Chesterton plc [2002] 2 P & CR 494,
Neuberger J.
7 Proudfoot v Hart (1890) 25 QBD 42: see HR A[7380.45].
8 Quick v Taff-Ely BC [1985] 3 All ER 321 per Dillon LJ at 325, [1986] QB 809 at 818.
HR A[7380.30]
It is plain, therefore, that an item is not in disrepair simply because it is old. Thus, if an item of plant reaches its
anticipated life-expectancy, this will not in itself mean that the item is in "disrepair"; likewise if the item is in working
order but obsolete it is not in disrepair1. As indicated in the previous paragraph, for "repair" to be needed there must
have been some deterioration from a previous condition which requires remedy.
HR A[7380.31]
1 Johnsey Estates v SSE (1999, unreported), Ch D, HHJ Hywel Moseley QC, and see too Fluor Daniel Ltd v Shortlands Investments Ltd
[2001] 2 EGLR 103.
HR A[7380.32]
"Repair" can be distinguished from "renewal". "Repair" will involve some work of renewal or replacement: it is
restoration by renewal or replacement of subsidiary parts of a whole. "Renewal", as distinguished from repair, is
reconstruction of the entirety, meaning not necessarily the whole but substantially the whole of the subject matter under
discussion1. The obligation to repair, however, cannot be considered in vacuo and while it is possible semantically to
distinguish "repair" from "renewal" or "improvement" or "alteration", to decide in any given case whether works go
beyond "repair" one has to look at the particular building, the state which it was in at the date of the lease and the
precise terms of the lease, and then come to the conclusion as to whether on a fair interpretation of those terms in
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relation to that state the requisite work can fairly be termed repair2. It has been held that three different tests may be
discerned for determining whether works go beyond repair in the strict sense. They may be applied separately or
concurrently as the circumstances of the individual case may demand, but all must be approached in the light of the
nature and age of the premises, their condition when the tenant went into occupation, and the other express terms of the
tenancy. The three tests are:
(i) whether the works go to the whole or substantially the whole of the structure or to only a subsidiary
part;
(ii) whether the effect of the works is to produce a building of a wholly different character from that
which had been let;
(iii) what is the cost of the works in relation to the previous value of the building, and what is their
effect on the value and lifespan of the building3.
It has also been held that the circumstances to be taken into account in deciding what constitutes "repair" in a particular
case will include some or all of the following: the nature of the building; the terms of the lease; the state of the building
at the date of the lease; the nature and extent of the defect sought to be remedied; the nature, extent and cost of the
proposed remedial works; at whose expense the proposed remedial works are to be done; the value of the building and
its expected lifespan; the effect of such works on such value and lifespan; current building practice; the likelihood of
recurrence if one remedy rather than another is adopted; the comparative cost of alternative remedial works and their
impact on the use and enjoyment of the building by the occupants. The weight to be attached to these circumstances will
vary from case to case and this list of circumstances is not intended to be comprehensive4.
HR A[7380.33]
1 Lurcott v Wakeley [1911] 1 KB 905 at 924. See HR A[7380.47] below for "renewal" and other concepts going beyond repair.
2 Brew Brothers Ltd v Snax (Ross) Ltd [1970] 1 QB 612 per Sachs LJ; see too Holding & Management Ltd v Property Holding &
Investment Trust plc [1990] 1 EGLR 65, CA at 68G.
3 McDougall v Easington DC [1989] 1 EGLR 93, CA at 95M-96A per Mustill LJ. While Mustill LJ uses the word "alterations" this
appears misleading in the context of a case which was concerned with whether works are or are not repairs.
4 Holding & Management Ltd v Property Holding & Investment Trust plc [1990] 1 EGLR 65, CA at 68G-H per Nicholls LJ.
HR A[7380.34]
It follows from the above that if a building is inherently defective but has suffered no deterioration in its condition, then
works to remedy the inherent defect will not amount to repair and will on the face of things be outside a covenant
simply "to repair"1. On the other hand, if premises are inherently defective and the defect causes deterioration in the
condition of the premises, then works to remedy the deterioration (and cure the inherent defect) may amount to
"repair"2. Whether or not works of this sort which cure an inherent defect go beyond repair strictly so-called, however,
will be judged according to the principles set out in the previous paragraphs.
HR A[7380.35]
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1 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055.
2 See Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12; Elmscroft Developments Ltd v Tankersley-Sawyer (1984) 270
EG 140, CA; Quick v Taff-Ely BC [1985] 3 All ER 321, [1986] QB 809, CA; Gibson Investments Ltd v Chesterton plc [2002] 2 P & CR 32.
Case law such as Collins v Flynn [1963] 2 All ER 1068 which indicates that a tenant cannot be liable to cure "inherent defects" is not to be
regarded as good law.
HR A[7380.36]
Despite the modern case law considering the limits of what constitutes repair (which has been discussed in the
preceding paragraphs), it has long been established that a covenant by a tenant without qualification to repair and keep
in repair buildings obliges the covenantor to rebuild the premises if they are destroyed whether the injury proceeds from
the act of the Queen's enemies1 or from a stranger or from accidental fire lightning or tempest2. In the absence of words
expressly or impliedly fixing a time for the performance of a covenant to rebuild, the tenant has what is a reasonable
time under all the circumstances of the case for its performance3.
HR A[7380.37]
1 But see Landlord and Tenant (War Damage) Act 1939, s 1 and HR A[7380.275].
2 See HR A[7380.135] and Paradine v Jane (1647) Aleyn 26; Green v Eales (1841) 2 QB 225; Walton v Waterhouse (1672) 2 Wms
Saund 415c; Clark v Glasgow Assurance Co (1854) 1 Mac1 668; Redmond v Dainton [1920] 2 KB 256; Matthey v Curling [1922] 2 AC 180.
Even if the tenant has covenanted to insure to a certain amount, his liability is not limited to that amount: Digby v Atkinson (1815) 4 Camp
275. The Fires Prevention (Metropolis) Act 1774, s 86 provides that a person is not to be liable for fires which begin accidentially as
opposed to negligently. This provision is expressed not to defeat or avoid any contract or agreement made between landlord and tenant. See
too HR A[7380.241] below for the limits of the landlord's liabilities under the Landlord and Tenant Act 1985, s 11 (in particular s 11(2)(b)).
3 Matthey v Curling [1922] 2 AC 180. It was said by Buckley J in Re King, Robinson v Gray [1962] 2 All ER 66 that a reasonable time
should be determined by the circumstances existing when the lease was made.
HR A[7380.38]
The following are examples of matters which have been held to come within the scope of a repairing covenant:
(a) inserting expansion joints1;

(b) work carried out on foundations of a restaurant in order to make walls and roof stable2;
(c) insertion of dampcourse by silicone injection in order to cure dampness in modern flat due to the
original damp course having been positioned below ground level3;
(d) replacing the roof of an industrial unit4;
(e) replacement of electrical wires5;
(f) substantial work on strengthening a roof, costing about 20% of the cost of rebuilding the whole
building6;
(g) installation of a new pitched roof and uPVC double-glazed windows where this was shown to be
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the cheapest option, taking account of both initial and future costs7;
(h) replacing existing steel framed single glazed windows with aluminium double glazed windows8;
and
(i) inserting a cathode system to prevent further rusting where the rusting and expansion of the steel
frame of a building (an inherent or latent defect) had caused cracking in the external walls9.
HR A[7380.39]
1 Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12.
2 Smedley v Chumley and Hawke Ltd (1981) 44 P & CR 50, [1982] 1 EGLR 47, CA (a case involving a covenant 'to keep...in good
structural repair and condition').
3 Elmcroft Developments v Tankersley-Sawyer (1984) 15 HLR 63, [1984] 1 EGLR 47, CA.
4 Elite Investments Ltd v TI Bainbridge Silencers Ltd [1986] 2 EGLR 43.
5 Roper v Prudential Assurance Co Ltd [1992] 1 EGLR 5.
6 New England Properties v Portsmouth New Shops Ltd (1993) 67 P & CR 141, [1993] 1 EGLR 84.
7 Wandsworth London Borough Council v Griffin [2000] 2 EGLR 105, LT.
8 Minja Properties Ltd v Cussins Property Group plc [1998] 2 EGLR 52.
9 Gibson Investments Ltd v Chesterton plc [2002] EWHC 19 (Ch), [2002] 2 P & CR 494.
HR A[7380.40]
The following are examples of works that have been held to constitute renewal going beyond the scope of repair:
(a) providing a damp course in an old back-to-back terraced house constructed without one1;
(b) rebuilding of a jerry-built structure including work in accordance with applicable building
byelaws2;
(c) replacement of defective old wooden-frame windows in flat with new doubled-glazed windows3;
(d) installation of space heaters where repairs to the existing underfloor heating system would be
expensive but not futile4;
(e) provision of insulation in order to prevent severe condensation and black mould growth was not a
repair but did come within the scope of a covenant to keep the dwelling in good condition5;
(f) replacement of an entire roof when this was not the only practicable way to perform the repairing
covenant6; and
(g) alterations producing a building of a wholly different character to that which had been let7.
HR A[7380.42]
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1 Wainwright v Leeds City Council (1984) 82 LGR 657, 13 HLR 117 CA; Eyre v McCracken (2000) 33 HLR 169, 80 P & CR 220, CA.
2 Halliard Property Co Ltd v Nicholas Clarke Investments Ltd [1984] 1 EGLR 45.
3 Mullaney v Maybourne Grange (Croydon) Management Co Ltd [1986] 1 EGLR 70.
4 Creska Ltd v Hammersmith and Fulham London Borough Council [1998] L & TR 207, [1998] 3 EGLR 35.
5 Welsh v Greenwich London Borough Council (2000) 33 HLR 438, (2000) 81 P & CR 144, [2000] 3 EGLR 41, CA.
6 Murray v Birmingham City Council [1987] 2 EGLR 53, CA.
7 McDougall v Easington DC (1989) 21 HLR 310, [1989] 1 EGLR 93.
HR A[7380.43]
The tenant's obligations will be construed in the light of the circumstances as they prevailed at the time of the demise.
So, where a tenant has undertaken to repair a road of one kind, he is not liable if the landlord converts it into a road
requiring repairs of a different nature1 and regard must always be had to the condition of the road in estimating the
tenant's liability2.
HR A[7380.44]
1 London Corpn v Barnes (1896) 12 TLR 135, CA; Barton v Alliance Economic Investment Co Ltd (1935) 179 LT Jo 256 (macadam road
made up as tarmac road); and a covenant to contribute to repairing a road does not extend to entire reconstruction (Scott v Brown (1904) 69
JP 89, CA).
2 Scott v Brown (1904) 69 JP 89, CA. In Crane Road Properties LLP v Hundalani [2006] EWHC 2066 (Ch), [2006] All ER (D) 393 (Jul)
it was held that as a matter of construction an obligation to contribute in respect of the 'maintenance and repair' of a shared accessway did not
require any contribution to be made towards the costs of a complete reconstruction of an upgraded road, not even by reference to the notional
cost of 'repairing and or maintaining' the road to the envisaged standard.
"Keep in repair"
HR A[7380.45]
A covenant by a tenant to keep premises in repair requires the tenant to put the premises into repair if they are out of
repair when the tenancy commences1. Likewise, if a lessor covenants to keep premises in repair, he must put the
premises in repair2. While covenants must be construed in the light of the circumstances surrounding the lease, whether
or not premises require to be "repaired" is to be judged by whether they are in a worse physical condition than when
they were constructed. While the obligation to "keep" in repair apparently presupposes that the subject matter of the
covenant is already in repair3, if the premises have not deteriorated since they were constructed, then no obligation to
Page 18
"repair" arises4. So, an obligation to keep premises in repair does not oblige a landlord to give the lessee premises of a
better type than those which were demised5.
HR A[7380.46]
1 Proudfoot v Hart (1890) 25 QBD 42, CA.
2 Saner v Bilton (1878) 7 Ch D 815.
3 Payne v Haine (1847) 16 M & W 541.
4 Proudfoot v Hart (1890) 25 QBD 42, CA.
5 Pembery v Lamdin [1940] 2 All ER 434; Wainwright v Leeds City Council (1984) 270 EG 1289, CA.
Works going beyond repair: "amend" "renew" "rebuild" "reconstruct" "replace"
HR A[7380.47]
It is possible to make provision for obligations to undertake works or for contributions to be made to works which go
beyond "repair" in the sense described in the previous paragraphs. As a matter of ordinary English, the words "amend",
"renew", "rebuild" and "reconstruct" all connote something slightly different from "repair". A covenant may be so
framed as to contain a separate legal obligation by the tenant to renew or replace the demised premises or part of the
premises.
Thus a tenant's covenant (in a 150-year lease), "to keep the demised premises in good and substantial repair and
condition and when necessary to rebuild, reconstruct or replace the same and in such repair and condition to yield up the
same at the expiration or sooner determination" of the lease was held to extend the tenant's liabilities beyond that
contemplated in a simple covenant to keep the premises in repair. Given the duration of the lease, it was not
inconceivable that the replacement of the entirety of the premises would become necessary and could fall within the
scope of the covenant1.
In another case2 it was similarly held that in a lease where a repairing covenant included the words "amend" and
"renew" and also the words "otherwise keep in good and tenantable condition", the covenant extended to works which
went beyond repairs strictly so-called. The entirety of the cladding of the building required replacement with a new and
redesigned system. The judge held that these works fell within the obligation. So, in a covenant which appears to go
beyond mere repair and which, in so doing, refers to renewal, "renewal" can be taken to embrace reconstruction even of
the entirety of the subject matter of the covenant. Further, it was held that it was not a necessary part of a renewal (in
contrast with a restoration) that the new should be exactly the same as the old, particularly where the old had proved
defective.
HR A[7380.48]
Page 19
1 Norwich Union Life Assurance Co Ltd v British Railways Board [1987] 2 EGLR 137, Hoffman J; see too New England Properties Ltd v
Portsmouth New Shops Ltd [1993] 1 EGLR 94.
2 Crédit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76, Lindsay J.
HR A[7380.49]
The extent of an obligation to amend or renew, however, will be determined by the construction of the covenant as a
whole in its particular context, so a more restrictive interpretation of these words is possible. Likewise, the word
"rebuild" may be narrowly construed and given no greater meaning than it will naturally bear given its context1. Indeed,
in general, clearer words than a simple obligation to "rebuild" or "renew" etc will be required if a tenant is to be obliged
to rebuild a property in a manner different from that which was demised. Thus where the tenant covenanted "well and
substantially to repair, amend renew uphold, support, maintain ... the demised premises", it was argued that the word
"renew" went beyond the ordinary meaning of "repair" and obliged the tenant to construct new foundations. This
contention was rejected on the basis that every repair involves a degree of renewal and repair was apt to cover the
renewal of part of the premises. The court held that if it had been intended to give a separate meaning to the word
"renew" so that it could extend to the rebuilding of the whole property demised, a stronger and more specific word
would have been used2.
In another case3 the Court of Appeal considered a covenant by a tenant "to put the premises ... in good and substantial
repair and condition [and to] well and substantially repair, maintain, cleanse, paint, amend and keep the said premises as
so intended to be put into such repair as aforesaid". The demised premises comprised a 150-year-old dwelling built
without a damp-proof course. The term of the lease was for seven years (but continued under the Rent Acts). The
county court judge had held that the tenant was obliged to provide a damp-proof course. The tenant's appeal was
allowed. One of the factors which led the Court of Appeal to allow the appeal was the conclusion that "to require the
tenant to insert the damp-proof course and ancillary work would be to require him to give back to the landlord some
different thing from that demised to him in 1976."
HR A[7380.50]
1 Gibson Investments Ltd v Chesterton plc [2002] 2 P & CR 494.
2 Collins v Flynn [1963] 2 All ER 1068. For the proposition that repair is apt to cover the renewal of part see Lurcott v Wakely [1911] 1
KB 905 and HR A[7380.32] above.
3 Eyre v McCracken (2000) 80 P & CR 220.
HR A[7380.51]
In the context of service charge provisions the words "amend" and "renew" (in conjunction with "keeping in tenantable
condition") have been held to presuppose that the item in question suffers from some defect (ie some physical damage
or deterioration or, in the case of plant, some malfunctioning) such that repair, amendment or renewal is reasonably
necessary. Further the condition of the item in question must be such as to be no longer reasonably acceptable, having
regard to the age, character and locality of the premises, to the reasonably minded tenant of the kind likely to take a
lease of the building. Whether, once those conditions are established, the item must be repaired or renewed is a question
of fact and degree having regard to the nature and extent of the defect and, not least, to the costs likely to be involved1.
Page 20
HR A[7380.52]
1 Fluor Daniel Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103. Accordingly in that case the landlord was not entitled to require the
tenants to contribute to the replacements of substantial items of plant which, although some years old, had been well maintained, were in
good repair and had no history of malfunctioning even though the plant was older than the lifespans recognised in industry tables.
"Maintaining and keeping in good and substantial condition"
HR A[7380.53]
A covenant to maintain and keep premises in good and substantial condition imports a different (and potentially more
extensive) obligation than a mere covenant to repair1.
In the context of an obligation to "maintain" a dwelling house in "good condition and repair", it has been held that the
reference to "good condition" is intended to mark a separate concept and to make a significant addition to what is
conveyed by the word "repair". The phrase "good condition" concentrates on the state of the dwelling, whereas 'repair'
is looking at the matter more from the perspective of the need to do particular repairing work2.
Similarly, a covenant to "uphold maintain repair amend renew cleanse and redecorate and otherwise keep in good and
substantial condition and as the case may be in working order and repair" was held to extend to the doing of works
going beyond repair strictly so-called. On the other hand, the court accepted that there were limits and the obligation
presupposed that the subject matter of the covenant suffered from some defect (ie some damage or deterioration, or in
the case of plant, some malfunctioning) and that repair, amendment or renewal was reasonably necessary; furthermore
the condition of the item in question has to be such as to be no longer reasonably acceptable, having regard to the age,
character and locality of the premises, to a reasonably minded tenant of the class likely to take a lease of the building3.
HR A[7380.54]
1 Crédit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803 . In very short leases, however, the obligation may be less extensively
construed and indicate nothing more than that the tenant is to use premises in a tenant-like manner: Firstcross Ltd v Teasdale [1983] 1
EGLR 87. See also Welsh v Greenwich London Borough Council (2000) 81 P & CR 144, [2000] 3 EGLR 41.
2 Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103; Mason v TotalFinaElf UK Ltd [2003] 3 EGLR 91. The
standards to which works within the various concepts considered in this section must be performed are considered below, HR A [7380.69]
ff.
3 Proudfoot v Hart (1890) 25 QBD 42.
"Keep in proper working order"
HR A[7380.55]
Page 21
An obligation in respect of plant, machinery or installation may extend beyond "repair" and may require to keeping such
items in "proper working order"1. The phrase relates to the physical or mechanical condition of the item and entails that
it should be capable of working properly2; thus, it may entail the remedying of defects in design if the defect prevents
the item from working properly since an obligation on a landlord to keep an installation in proper working order
requires him to ensure that the installation is so designed and constructed as to be capable of performing its function at
the commencement of the tenancy3. An installation will be in proper working order if it is able to function under
conditions of supply which, when the tenancy was granted, it was reasonable to anticipate would prevail4. In
appropriate circumstances the obligation might also require a landlord to make necessary modifications after a tenancy
has commenced in order to accommodate alterations in the quantity or character of the supply to the installations which
could not reasonably have been anticipated. Such an unanticipated change in the nature of the supply of a utility may
occur in a variety of circumstances. Sometimes the change is imposed deliberately because of some scientific or
technical advance--a change in the voltage of electrical supply, or the change from coal gas to natural gas are examples.
In such circumstances the change is likely to be introduced in a manner and subject to conditions under which it is
reasonable to expect customers to modify their installations in order to accommodate the change. Business efficacy
would suggest that the landlord's duty to keep installations in proper working order must involve the obligation to make
the modifications necessary to enable the installations in question to continue to function.
In other circumstances the change may be forced on the undertaker by some unforeseen event, eg the collapse of a
reservoir or a drought, resulting in a drop in water pressure. If the change is likely to be short-lived, the cost of
modifying installations in order to accommodate it may be disproportionate. Where the changed circumstances are
likely to persist for a lengthy period, it may seem wholly unreasonable for a landlord to leave his tenants deprived of
satisfactory supply for want of relatively modest expenditure on modifications5.
HR A[7380.56]
1 See HR A[20243]: Landlord and Tenant Act 1985, s 11.
2 Wycombe Health Authority v Barnett (1982) 5 HLR 84, CA.
3 O'Connor v Old Etonian Housing Association [2002] Ch 295, CA. See Liverpool City Council v Irwin [1977] AC 239 (lavatory cisterns
defective in design held not to be in proper working order). Contrast Long v Southwark London Borough Council [2002] 47 EG 150, CA.
4 O'Connor v Old Etonian Housing Association [2002] Ch 295, CA.
5 O'Connor v Old Etonian Housing Association [2002] Ch 295, CA at 30-31.
"Maintenance"
HR A[7380.57]
The word "maintenance" may in some contexts add nothing to the word repair1 but elsewhere it has been held to have
five characteristics2; first, that there is an element of repetition, because the object is to keep the building in the
condition in which it started; secondly, that the work is generally speaking foreseeable; thirdly, again generally
speaking, that the work is of a minor character and habitual, although naturally there are exceptions as in the case of
roof works; fourthly, that generally speaking in maintenance one does not add something substantial which is new; and
Page 22
lastly, that you do not in ordinary maintenance make a substantial improvement to that which you maintain.
HR A[7380.58]
1 Day v Harland & Wolff Ltd [1953] 1 WLR 906 in the context of the Shipbuilding Regulations 1931.
2 ACT Construction Ltd v Customs & Excise Commissioners [1981] 1 WLR 1542 (in the context of the word "maintenance" in Finance
Act 1972, Sch 4, group 8).
"Decorate"
HR A[7380.59]
While a covenant to repair will usually include an obligation to remedy deterioration in the decorative condition of the
premises, leases often contain express obligations to decorate the premises at periodic intervals and during the last years
of the term1. Such an obligation must be performed regardless of the extent of deterioration in the condition of the
premises2.
HR A[7380.60]
1 See Kirklington v Wood [1917] 1 KB 332.
2 See HR A[7380.85] below.
"Alterations" and "Improvements"
HR A[7380.61]
"Alteration" in the context of a covenant restricting alterations to a building means an alteration which affects the form
or structure of the building1. It is possible in the context of services provided by a landlord to which a tenant must
contribute through service charges that the word will be given a wider meaning and may extend to less substantial
alterations. In any event, it is possible expressly to refer to the sort of alteration which is meant: for instance a covenant
may be prohibit "alteration of the external appearance of a building"2. Similarly, a covenant may prohibit the cutting or
maiming of the principal walls or timbers3.
An alteration or addition to the premises can be an "improvement". "Improvement" of a thing connotes making its
subject matter better. How the word will be construed will depend upon the context. In the context, for instance, of the
Landlord and Tenant Act 1927 Part I whether an alteration constitutes an "improvement" is to be viewed from the point
of view of the tenant, the question being whether the alterations will render the tenant's occupation of the premises more
convenient and comfortable to him4. On the other hand, in the context of a service charge provision in which the
Page 23
landlord is entitled to recover the cost of "improvements" carried out by him, the cost of such work is likely only to be
recoverable if it can reasonably be considered as providing some benefit to existing tenants5. In one statutory context it
has been said that the test of whether work done is an improvement or repair is, on the one hand, if the work which is
done is the provision of something new for the benefit of the occupier that is properly speaking an improvement; but on
the other hand if it is only the replacement of something already there, which has become dilapidated or worn out then,
albeit that it is a replacement with a modern equivalent, it comes within the category of repairs6. The law relating to
covenants by tenants restricting alterations of the demised premises is considered at HR A[7380.144] below.
HR A[7380.62]
1 Bickmore v Dimmer [1903] 1 Ch 158 per Vaughan William and Cozens-Hardy LJJ.
2 Heard v Stuart (1907) 24 TLR 104 (the covenant has been held to be broken merely by letting a wall as a bill posting station). See also
Gresham Life Assurance Society v Ranger (1899) 15 TLR 454 (keeping down of shop blind, no breach); Hagee (London) Ltd v Co-operative
Insurance Ltd (1992) 63 P & CR 362 (air conditioning unit in context of a "hideous jumble of back of buildings", no breach).
3 See HR A[7380.146] below. London County Council v Hutter [1925] Ch 626; Lilley & Skinner Ltd v Crump (1929) 73 Sol Jo 366.
4 See HR A[7380.162] below and FW Woolworth & Co Ltd v Lambert [1937] Ch 37.
5 See eg Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103 for the restrictive approach to be taken when
construing what works are within the scope of those to which a tenant must contribute through the service charge provisions in a lease.
6 Morcom v Campbell-Johnson [1956] 1 QB 106, CA (Increase of Rent and Mortgage Interest (Restrictions) Act 1920, s 2(1)(a); Rent Act
1965, ss 17, 27). See too Wates v Rowland [1952] 2 QB 12 (raising foundations of a house suffering from damp and rotten floorboards by
adding a layer of concrete was held to be an improvement).
"Waste"
HR A[7380.63]
Many leases contain an express obligation on the part of the tenant not to commit "waste". Waste is also a tort. The
nature of waste and what it comprises is considered below1.
HR A[7380.64]
1 See HR A[7380.91].
Insurance
HR A[7380.65]
Page 24
It is common for provision to be made for the insurance of buildings either by the landlord or by the tenant1. In the case
of buildings in multiple occupation it is usual for provision to be made for recovery of the cost of insurance effected by
the landlord by insurance rent or as part of the service charges2.
HR A[7380.66]
1 See HR A[7380.283].
2 See HR A[7380.505], HR A[7380.538].
Other services
HR A[7380.67]
In addition to obligations which directly relate to the fabric of the demised premises or the building or estate in which
they are located, leases sometimes also make provision for the landlord or a management company to provide other
services to which the tenant is obliged to contribute. The precise nature of the services and the extent to which the
tenant must contribute to their cost is a matter of construction of the precise words used in the context. Examples of
such services may include:
(a) heating, lighting, hot water and lifts1

(b) provision of staff accommodation
(c) management expenses
(d) legal and professional fees
(e) costs of litigation.
HR A[7380.68]
1 See HR A[7380.68].
Page 25
condition and management of the demised premises/D The standard to which obligations requiring works to be carried
out must be performed
D
Page 26
condition and management of the demised premises/D The standard to which obligations requiring works to be carried
out must be performed/Generally
Generally
HR A[7380.69]
It is necessary to consider what standard of work is required for the performance of an obligation relating to the fabric
of premises. What that standard will be is a question of construction of the lease in each case either having regard to the
express words used or by standards which are implicit from the context.
So, where premises have deteriorated so that they may be "repaired"1 two interlinked questions arise: (1) whether the
premises have deteriorated below the standard required by the lease and (2) to what standard works are required to fulfil
the obligation "to repair". Likewise, where a landlord undertakes obligations which go beyond repair to which the tenant
must contribute all or part of the cost, the question of the standard to which the landlord must perform those obligations
and recover the cost from the tenant often arises2.
HR A[7380.70]
1 See HR A[7380.28] above.
2 See HR A[7380.51] above and HR A[7380.536] below.
Standard required by an unqualified covenant to repair: substantial repair
HR A[7380.71]
An unqualified covenant to repair will generally be construed as requiring only that the premises be kept in substantial
repair1. So, for instance, there was not a breach of a covenant to keep in repair a building which was more than 60 years
old where hairline cracks appeared in the brickwork2. Sometimes the covenant to repair is expressly qualified in this
way. A covenant "well and substantially to repair" does not require the tenant to put the property into perfect repair3 nor
into pristine condition4. The standard of repair is that which an intending occupier of the sort of building in question
would judge reasonable by reference to the intended use of the premises5. The test is an objective one and takes into
account what the reasonably minded incoming tenant taking a lease on the same terms as the actual lease and with
repairing obligations such as those contained in the actual lease would expect6.
HR A[7380.72]
Page 27
1 Harris v Jones (1832) 1 Moo & R 173; Perry v Chotzner (1893) 9 TLR 488; Commercial Union Life Assurance Co Ltd v Label Ink Ltd
[2001] L & TR 29; Riverside Property Investments Ltd v Blackhawk Automotive [2004] EWHC 3052 (TCC), [2005] 1 EGLR 114.
3 Proudfoot v Hart (1890) 25 QB 42.
4 Commercial Union Life Assurance Co Ltd v Label Ink Ltd [2001] L & TR 29.
5 Commercial Union Life Assurance Co Ltd v Label Ink Ltd [2001] L & TR 29.
6 Riverside Property Investments Ltd v Blackhawk Automotive [2004] EWHC 3052 (TCC), [2005] 1 EGLR 114. See further HR
A[7380.73] below.
Good, habitable or tenantable repair
HR A[7380.73]
It is also common to find a covenant to repair qualified by such words as "good", "habitable" or "tenantable". These
words probably mean similar things1 (though their precise effect will depend upon the context of the particular lease in
which they are found2). "Good tenantable repair" has been defined to mean such repair as, having regard to the age,
character and locality of the premises, would make it reasonably fit for occupation for a reasonably minded tenant of the
class who would be likely to take it3. It seems that the reasonably minded tenant is one who is assumed to take the
property on the same terms as to repairs as the actual tenant, and that the property will only be fit for him if he would
take it without lowering his rental bid for it4.
HR A[7380.74]
1 Proudfoot v Hart (1890) 25 QBD 42 per Lord Esher MR; Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716 per Scrutton LJ.
2 Firstcross v Teasdale (1983) 265 EG 305: covenant to keep in "good and tenantable condition" construed as being no more than an
obligation to use the premises in a tenant-like manner. See HR A[7380.113] below for the limited extent of this duty.
3 Proudfoot v Hart (1890) 25 QBD 42 per Lopes LJ; Jaquin v Holland [1960] 1 WLR 258, CA.
4 Riverside Property Investments Ltd v Blackhawk Automotive [2004] EWHC 3052 (TCC), [2005] 1 EGLR 114.
HR A[7380.75]
In making this assessment, however, the standard of repair is to be assessed by reference to the circumstances as the
parties can be taken to have contemplated them at the grant of the lease1. Accordingly, the class of "reasonably minded
tenant" must be assessed having regard to who the parties would have contemplated the reasonably minded tenant to be
when the lease commenced. Thus, in general the standard of repair will not decline (or increase) if for instance the
demand for the premises has altered during the course of the term (though this may have an impact on the damages
Page 28
which may be awarded for a failure to meet the standard required by the covenant). On the other hand, in some
circumstances it might be clear from the lease and the nature of the premises that the standard of repair is not fixed by
reference to circumstances as they prevailed at the date of the grant2.
HR A[7380.76]
1 Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716, CA; Ladbroke Hotels Ltd v Sandhu [1995] 2 EGLR 92, Robert Walker J;
Mason v TotalFinaElf UK Ltd [2003] EWHC 1604 (Ch), [2003] 3 EGLR 91, Blackburne J.
2 Gooderham & Worts Ltd v Canadian Broadcasting Corpn [1947] AC 66, PC (tenant's covenant "to keep the whole of the premises
modern and up to date and in good repair and operating condition").
Age of the building affecting standard contemplated
HR A[7380.77]
In determining the standard of repair contemplated by a covenant it is relevant to consider the age of the subject
matter1. The standard of good repair for an old building may differ from that of a new building2. Time must be taken
into account; repair does not require an old article to be made new but so far as repair can make good, or protect against
the ravages of time and the elements, it must be undertaken as part of the covenant to repair3. Thus, where a building
was more than 60 years old when the leases were granted, the covenant to repair did not require the remedying of some
hairline cracks in the bricks4. While the standard of repair must be considered having regard to the age of the building
at the commencement of the lease, the building will age during the term of the lease; accordingly (depending on the
nature of the building and the duration of the term) an obligation to keep premises in repair may vary with the age of the
building during the lifetime of the covenant5.
HR A[7380.78]
1 Payne v Haine (1847) 16 M & W 541; Proudfoot v Hart (1890) 25 QBD 42; Lurcott v Wakely [1911] 1 KB 905;
Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716, CA. See too Landlord and Tenant Act 1985, s 11(3) and HR A[7380.239] below.
2 Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716, CA per Atkins LJ.
5 Mason v TotalFinaElf UK Ltd [2004] EWHC 1604 (Ch), [2003] 3 EGLR 91.
Character and locality of premises affecting standard contemplated

Page 29
HR A[7380.79]
It has been held that the nature of the premises and the locality affect the standard of repair contemplated1. Thus, it was
said at the end of the nineteenth century that the same class of repairs as would be necessary to a palace would be
wholly unnecessary to a cottage; and the state of repair necessary for a house in Grosvenor Square would be wholly
different from the state of repair necessary for a house in Spitalfields2. Likewise, if premises comprise high class office
accommodation in a prime location, a commensurate standard of repair can be contemplated3. The character of the
premises includes the standard of their repair at the date of the demise: this may be relevant to determining what the
parties contemplated the standard of repair to be during the term4. The actual state of the premises, however, cannot be
conclusive because the parties may undertake obligations to put the premises into a better condition than they were at
the date of the demise: an obligation to keep premises in repair includes an obligation to put the premises into repair5.
Further, if the premises contain defects which would have been unknown at the date of the demise, then the standard of
works required by the lease will in principle be determined by the putative condition in which the premises would have
been assumed (objectively) to be, ie the condition in which the hypothetical tenant likely to take the building would
have assumed the premises to be6.
HR A[7380.80]
1 Proudfoot v Hart (1890) 25 QBD 42. See too Saner v Bilton (1878) 7 Ch D 815.
2 Proudfoot v Hart (1890) 25 QBD 42 per Lord Esher MR.
3 Gibson Investments Ltd v Chesterton plc [2002] 2 P & CR 32, Neuberger J.
4 Simmons v Dresden [2004] EWHC 993, TCC.
6 Crédit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803, Lindsay J; Ladbroke Hotels Ltd v Sandhu [1995] 2 EGLR 92, Robert Walker
J.
Functionality and standard
HR A[7380.81]
If parts of the premises have deteriorated so they no longer perform their function, then they will plainly require
"repair"1. Sometimes, however, repair as contemplated by the lease may still be required to remedy deterioration in the
subject matter of the covenant even where those parts of the premises perform their function. Thus it was held that
where the demise of an underground railway included columns and girders which supported premises above the demise
and the girders had begun to corrode, the tenant was held liable on its covenant to repair the girders even thought they
were still of sufficient strength to support the premises above the demise2.
HR A[7380.82]
Page 30
2 Re Mayor and Corpn of London [1910] 2 Ch 314.
Method of performance of works
HR A[7380.83]
In many cases there may be more than one way of performing an obligation in relation to the fabric of the premises. In
general, it will be for the covenantor to decide which method to perform1. Thus, where a roof is in disrepair and the
covenantor may either carry out a patch repair or carry out a replacement, it is for the covenantor to decide which
method of repair is appropriate2. On the other hand, where the landlord agrees to carry out works and the tenant is
obliged to contribute to them, there are limits on the standard of work to which the tenant may be expected to
contribute: these limits are considered in more detail below3.
HR A[7380.84]
1 Plough Investments Ltd v Manchester City Council [1989] 1 EGLR 244; Fluor Daniel Ltd v Shortlands Investments Ltd [2001] 2 EGLR
103.
2 Manor House Drive v Shahbazian (1965) 195 EG 283; Murray v Birmingham City Council [1987] 2 EGLR 53; Carmel Southend Ltd v
Strachan & Henshaw Ltd [2007] EWHC 1289 (TCC).
Standard of decorations
HR A[7380.85]
A covenant "to repair" may include within it some degree of decoration. Thus, a covenant to "substantially repair,
uphold and maintain" a house was held to oblige the tenant to paint the interior1. The obligation on a tenant under a
general repairing obligation, however, has been held to be limited to carrying out such decoration as is necessary for the
prevention of decay and does not extend to decoration for ornamentation2. A covenant by a tenant to keep a house in
"good tenantable repair", however, while not obliging the tenant to carry out repairs which were purely decorative, did
oblige the tenant to repaper, paint and whitewash the ceilings if this would have been required for a reasonably minded
tenant of the class likely to take the premises3.
In the absence of an express provision, an obligation to decorate will entitle the covenantor to decide upon the colour
scheme and materials used. In principle, the standard of decoration required (in the absence of express provision) will
be judged by reference to the same sort of factors as are relevant to other sorts of obligation concerning the fabric of the
Page 31
premises4. On the other hand, if a covenant makes express provision for the precise timing or nature of the decoration to
be carried out, it will be broken if these are not fulfilled: thus if a covenant requires painting in a given year of the lease,
the covenant will be breached if this is not carried out in that year whether or not decoration is required having regard to
the state of the premises5.
It should be noted also that even where a covenant extends only to works to the structure an element of decoration may
be included in performance of the covenant. Thus if a landlord covenants to carry out structural repairs and in
performing that obligation damages the tenant's decorations he is liable to make good that damage6.
HR A[7380.86]
1 Monk v Noyes (1824) 1 C & P 265.
2 Crawford v Newton (1886) 36 WR 54, CA.
3 Proudfoot v Hart (1890) 25 QBD 42.
4 See HR A[7380.77] - [7380.84] above.
5 See eg Simmons v Dresden [2004] EWHC 993 (TCC).
6 McGreal v Wake (1884) 13 HLR 109, CA; Bradley v Chorley BC (1985) LGR 623, CA; McDougall v Easington District Council [1989]
1 EGLR 93, CA.
Exceptions for wear and tear
HR A[7380.87]
Covenants to repair sometimes exclude from their scope damages caused by "fair" or "reasonable" "wear and tear". This
means that the covenantor is bound to keep the premises in good repair and condition but is not liable for damage
caused by the reasonable use of the premises and by the ordinary operation of natural forces1.
The application of this exception has excluded a covenantor from liability for exterior painting and repointing2. It has
also been held to exclude liability for dry rot3. The exception has been held to exclude a tenant's liability for damage to
the demised premises caused by the landlord's failure to repair premises retained by him after notice4 but does not
exclude liability for damage not contemplated by either party even if resulting from reasonable use of the premises5.
HR A[7380.88]
1 Haskell v Marlow [1928] 2 KB 45 at 58-59, Talbot J approved in Regis Property Co Ltd v Dudley [1959] AC 370, HL. See too
Gutteridge v Munyard (1834) 1 Moo & R 334 per Tindal CJ; Miller v Burt (1918) 63 Sol Jo 117; Brown v Davies [1958] 1 QB 117 at 127.
See also Warren v Keen [1954] 1 QB 15 at 20 per Denning LJ.
Page 32
2 Terrell v Murray (1901) 17 TLR 570.
3 Terrell v Murray (1901) 17 TLR 570--though if the cause of the dry rot was the tenant's use and inadequate maintenance of the premises
it is doubtful that the presence of dry rot could be described as flowing from the reasonable use of the premises or the ordinary operation of
natural forces.
4 Citron v Cohen (1920) 36 TLR 560 (burst pipe outside demise).
5 Manchester Bonded Warehouse Co v Carr (1880) 5 LR CPD 507.

Page 33
condition and management of the demised premises/E Obligations of tenants concerning the fabric of demised premises
E
Page 34
condition and management of the demised premises/E Obligations of tenants concerning the fabric of demised
premises/(1) Generally
(1) Generally
HR A[7380.89]
In the absence of express obligations, a tenant's duties are limited. Tenants have duties under the law of waste1; an
implied duty to use the premises in a tenant-like manner2; and in the case of a tenant from year to year, possibly also an
implied duty to keep the premises wind and watertight (though this may be no more than part of the duty to use the
premises in a tenant-like manner3). Apart from these duties, it is necessary to have regard to the express covenants
contained in the lease to see what duties the tenant may have in respect of the fabric and management of the demised
premises4.
HR A[7380.90]
1 See HR A[7380.91] ff.
2 See HR A[7380.113] ff.
3 See HR A[7380.119] ff.
4 See HR A[7380.121] ff.

Page 35
premises/(2) Waste
(2) Waste
Definitions of "waste"
HR A[7380.91]
"Waste" is an act which alters the nature of the land1. It has been defined as a spoil or destruction to houses, gardens,
trees, or other corporeal hereditaments, to the injury of the reversion2. There are two sorts or waste: (1) voluntary
waste3 and (2) permissive waste4. In addition, waste may be referred to as "ameliorating" where it improves the value
of the land5. "Equitable waste" consists of extreme acts of damage for which a tenant for life is liable even if his interest
was granted without impeachment for waste: it is an extreme form of voluntary waste committed by a tenant for life6.
HR A[7380.92]
1 Co. Litt. 53 a, b.
2 Mancetter Developments Ltd v Garmanson [1986] 1 All ER 449 CA.
3 See HR A[7380.95].
4 See HR A[7380.103].
5 See HR A[7380.99], HR A[7380.111].
6 See Turner v Wright (1860) 2 De GF & J 234 at 243; Vane v Barnard (Lord) (1716) 2 Vern 738; Law of Property Act 1925, s 135.
HR A[7380.93]
At common law an action for waste lay only against tenants by the curtesy, tenants in dower and guardians, whose
estates were created by act of law1. No action for waste lay against tenants for life or for years2. A statutory liability for
waste was imposed under the Statute of Marlborough 1287 and the Statute of Gloucester 1278 and now a common law
liability for voluntary waste is recognised. The question of whether permissive waste fell within these statutes has been
the subject of discussion in the case law3. It has now been held at first instance that a tenant for years can be liable for
permissive waste4. The obligation not to commit waste is an obligation in tort and is independent of contract or implied
covenant. Nowadays, it is common to find an express covenant by a lessee not to commit waste, although the tortious
obligation is not excluded on the ground that there is an express covenant dealing with the same matter5.
HR A[7380.94]
Page 36
1 Greene v Cole (1670) 2 Wms Saund 252.
2 Countess of Shrewsbury's Case (1600) 5 Co Rep 13b.
3 Dayani v Bromley London Borough Council [1999] 2 EGLR 144 (TCC) reviewing the historic case law. See HR A[7380.103] below.
4 Dayani v Bromley London Borough Council [1999] 2 EGLR 144 and see HR A[7380.103] below.
5 Kinlyside v Thornton (1776) 2 Wm Bl 1111; Marker v Kenrick (1853) 13 CB 188; Jones v Hill (1817) 7 Taunt 392.
Voluntary waste
HR A[7380.95]
Voluntary waste is sometimes also known as "commissive" waste. It consists of a deliberate or negligent commission of
an act which tends to the destruction of the demised premises1. It must alter the character of the thing demised but
unless the alteration has a substantial effect and is injurious to the reversion it will not be tortious2.
The injury may consist of diminishing the value of the reversion or increasing the burden on it or impairing the evidence
of title3. It has been suggested, however, that to regard a change in the identity of the premises as impairing the
evidence of title is no longer tenable in modern circumstances4.
Thus, pulling down houses (even where these are replaced by new buildings of greater value)5, felling timber6, opening
pits and mines7, partitioning a house8, the alteration of premises9, the sowing of pernicious crops10, digging and
carrying away soil11, the conversion of pasture to arable land12, the ploughing up of meadows for allotments13, the
enclosure of waste land14, may all constitute waste. Waste may be done in respect of animals by doing any act by
reason of which the stock is diminished15.
Waste may also consist of breaking windows or doors16, removing landlord's fixtures17, and removing tenant's fixtures
without making good the damage caused by the removal18. Removing fixtures without making good purely decorative
items, however, will not amount to waste19.
On the other hand, where property is let for a particular purpose and reasonable use of the premises consistently with
that purpose causes damage, this will not amount to waste20. Accordingly, it seems likely that damage caused when
trade fixtures are installed for a purpose reasonably contemplated by the lease will not constitute waste but a tenant will
commit waste if he does not make good the damage caused to the premises upon their removal.
HR A[7380.96]
1 Mancetter Developments Ltd v Garmanson [1986] 1 All ER 449, CA.
2 West Ham Central Charity Board v East London Waterworks Co [1900] 1 Ch 624; Hyman v Rose [1912] AC 623; Marsden v Edward
Page 37
Heyes Ltd [1927] 2 KB 1.
3 Doe d Grubb v Earl Burlington (1833) 5 B & Ad 507 at 517.
4 Jones v Chappell (1875) LR 20 Eq 539 at 542; Doherty v Allman (1873) 3 App Cas 709 at 735 per Lord Blackburn.
5 Bac. Abr. Tit. "Waste" (C.5); Co. Litt. 53; Cole v Green (1672) 1 Lev 309; sub nom Cole v Forth 1 Mod Rep 94; City of London v
Greyme (1607) Cro Jac 181; Manchester Bonded Warehouse Ltd v Carr (1880) 5 CPD 507.
6 Bac. Abr. Tit. "Waste" (C.2).
7 Bac. Abr. Tit. "Waste" (C.3).
8 North v Guinan (1829) Beat 342.
9 Lord Darcy v Askwith (1618) Hob 234; West Ham Central Charity Board v East London Waterworks Co [1900] 1 Ch 624 at 635.
10 Pratt v Brett (1817) 2 Madd 62.
11 Whitham v Kershaw (1886) 16 QBD 613.
12 Murphy v Daly (1860) 12 ICLR 239; Rush v Lucas [1910] 1 Ch 437.
13 Doe d Hopkinson v Ferrand (1851) 20 LJCP 202.
14 Queen's College Oxford (Provost etc) v Hallett (1811) 14 East 489.
15 Co. Litt. 53b.
16 Warren v Keen [1954] 1 QB 15 at 21 per Denning LJ.
19 Re De Falbe [1901] 1 Ch 523 at 542; Mancetter Developments Ltd v Garmanson [1986] 1 All ER 449, CA.
20 Mancetter Developments Ltd v Garmanson [1986] 1 All ER 449, CA per Kerr LJ; Manchester Bonded Warehouse Ltd v Carr (1880) 5
CPD 507; Saner v Bilton (1878) 7 Ch D 815. But see per Sir George Waller in Mancetter Developments Ltd v Garmanson [1986] 1 All ER
449.
HR A[7380.97]
Whether an alteration has such a substantial effect so as to amount to waste is a question of fact1. Substantial alteration
of a shop with residential accommodation above to create a shop with a store room has been held to amount to waste2.
Similarly, the dumping of hard and soft rubbish raising the level of the demised premises by some 10 feet in a manner
which would have impeded development of the land was held to amount to waste3. It has been held, however, that the
conversion of a chapel to a cinema by the removal of iron railings, the opening of a new door and various internal
Page 38
alterations did not constitute waste4. Further, to build a new house on demised land is not waste unless it destroys
evidence of the owner's title5.
HR A[7380.98]
1 Hyman v Rose [1912] AC 623. See too Jones v Chappell (1875) LR 20 Eq 539 at 541; Tucker v Linger (1882) 21 Ch D 18 at 29.
2 Marsden v Edward Heyes Ltd [1927] 2 KB 1.
3 West Ham Central Charity Board v East London Waterworks Co [1900] 1 Ch 624.
4 Hyman v Rose [1912] AC 623.
5 Jones v Chappell (1875) L.R. 20 Eq 539.
HR A[7380.99]
A substantial alteration in the character of premises may be waste even if the value of the demised premises is actually
increased1. The lessee is not entitled to pull down a house and build another which the lessor dislikes2 or change the
character of the premises such as by converting a dwelling into a shop3.
HR A[7380.100]
1 West Ham Central Charity Board v East London Waterworks Co [1900] 1 Ch 624; but see HR A[7380.111] for the limited
consequences for "ameliorating waste".
2 Smyth v Carter (1853) 18 Beav 78.
3 Marsden v Heyes [1927] 2 KB 1, CA.
HR A[7380.101]
A tenant at will is not liable for voluntary waste1. An act of voluntary waste, however will determine the tenancy at will
rendering the former tenant at will a trespasser2 and making him liable for damage to the premises causes by his own
wilful act. A tenant at sufferance is probably liable for voluntary waste3. Tenants under fixed terms and periodic
tenancies are liable for acts of voluntary waste whether committed by themselves or any other person, because it is the
duty of such tenants to prevent such waste and it is presumed to be able to do so4. In the event of waste being
committed by the removal of tenant's fixtures (ie where damage caused to the premises by the removal of fixtures is not
made good), the liability, in so far as it is a liability at common law and not under contract, is the liability of the person
who removes the fixtures and not of the person, if different, who originally installed the fixtures and left them there5.
HR A[7380.102]
Page 39
1 The reason being that the Stature of Marlborough only applies to "fermors during their term" and a tenant at will has no term (see HR
A[164]). See, in relation to permissive wate, Panton v Isham (1701) 3 Lev 359 and Harnett v Maitland (1847) 16 M & W 257 and HR
A[7380.103] below.
2 Countess of Shrewsbury's Case (1600) 5 Co Rep 13b.
3 Burchell v Hornsby (1808) 1 Camp 360.
4 Attersoll v Stevens (1808) 1 Taunt 183 at 196.
5 Mancetter Developments Ltd v Garmanson Ltd [1986] QB 1212, CA.
Permissive waste
HR A[7380.103]
Permissive waste may be defined as allowing damage which comes about otherwise than by the tenant's own acts1. It
includes allowing buildings to deteriorate by a failure to repair2. The obligation, however, does not involve putting the
premises into better repair than they were at the date of the demise3. Tenants at will4, weekly tenants5, and yearly
tenants6, are not liable for permissive waste. In principle, other periodic tenants ought also not be liable (there being no
practical distinction between such tenants and weekly and yearly tenants). Despite dicta to the contrary, it has been held
at first instance that tenants for years can be liable for permissive waste7.
HR A[7380.104]
1 See Davies v Davies (1888) 38 Ch D 499, Kekewich J.
2 Herne v Bembow (1813) 4 Taun. 764; Powys v Blagrave (1854) 4 De GM & G 448.
3 See Co. Litt. 53a; Bac Abr. Tit. "Waste" (C.5); Jones v Hill (1817) 2 Taun. 392; Dayani v Bromley London Borough Council [1999] 3
EGLR 144, TCC.
4 Countess of Shrewbury's Case (1600) 5 Co Rep 136; Panton v Isham (1701) 3 Lev 358; Gibson v Wells (1805) 1 Bos & PNR 290;
Harnett v Maitland (1847) 16 M & W 257; Blackmore v White [1899] 1 QB 293 per Lord Russell of Killown CJ at 299-300 summarising
previous cases.
5 Warren v Keen [1954] 1 QB 15.
6 Torriano v Young (1833) 6 C & P 8.
7 Davies v Davies (1888) 38 Ch D 499, Kekewich J; Dayani v Bromley London Borough Council [1999] 3 EGLR 144, TCC; but see
Warren v Keen [1954] 1 QB 15 per Denning LJ. It is open to argument whether it was correctly decided that tenants for years can be liable
for permissive waste: (1) the Statutes of Marlborough and Gloucester do not clearly point to this conclusion; (2) there seems no good reason
Page 40
why when parties enter into a contractual relationship under which they can expressly provide for repairing obligations if they choose to do
so, obligations over and above those that are necessarily implied (see HR A[7380.113] ff below) should be imported in the absence of clear
statutory words.
Remedies for waste
HR A[7380.105]
The obligation not to commit waste arises in the law of tort. The landlord's remedy for voluntary waste is not affected if
a lease contains an express obligation on the part of the tenant to repair the demised premises1. Because the obligation
arises in tort it may be committed by a person who is not a party to the lease2. It has, however, been held that a cause of
action cannot be assigned3.
HR A[7380.106]
3 Defries v Milne [1913] 1 Ch 98.
HR A[7380.107]
An action can be brought after the expiration of the term for waste done during the term1. Where a tenant holds over
after the expiration of notice to quit and commits waste, the landlord's reversionary estate is treated as continuing, so as
to entitle him to sue for waste2.
HR A[7380.108]
1 Kinlyside v Thornton (1776) 2 Wm Bl 1111.
2 Burchell v Hornsby (1808) 1 Camp 360. Alternatively, the tenant holding over might be considered liable for waste on the basis that he
is a tenant at sufferance.
HR A[7380.109]
Remedies are considered more fully below1. In principle the measure of damages for waste is the diminution in the
value of the reversion2. This will not necessarily be the equivalent to the cost of the works but if the cost of works is
taken as the measure and if the lease has some years unexpired, the landlord must give credit for early receipt of the cost
of repairs3. It has been held that 'vindictive' (in other words, exemplary or aggravated) damages may be awarded in
appropriate cases4. Since, in general no act or omission amounts to waste unless it causes damage to the reversion, a
Page 41
claim for nominal damages would not appear to lie5. In principle, an injunction may be awarded to restrain voluntary
waste6. It is settled that no injunction will be granted against a tenant for life to restrain permissive waste7. Since it is
not the usual practice to grant specific performance of a tenant's repairing obligations8, the courts are likely to be no
less reluctant to grant injunctive relief to restrain permissive waste.
HR A[7380.110]
1 See HR A[7380.304].
2 Witham v Kershaw (1886) 16 QBD 613, CA. See too Duke of Westminster v Swinton [1948] 1 KB 524.
3 Witham v Kershaw (1886) 16 QBD 613, CA.
4 Witham v Kershaw (1886) 16 QBD 613, CA.
5 Doherty v Allman (1878) 3 App Cas 709 per Lord Blackburn.
6 See, eg Onslow v Anon (1809) 16 Ves 173; Smyth v Carter (1853) 18 Beav 78; Lewis v Fothergill (1869) 5 LR Ch 103; Brocklesbury v
Munn [1870] WN 42. But see Doherty v Allman (1878) 3 App Cas 709 for a case where an injunction was refused where some 900 years of
the term were unexpired.
7 Powys v Blagrave (1854) 4 De GM & G 448.
HR A[7380.111]
In the case of acts which may technically be waste but which in fact improve the inheritance (ie 'ameliorating waste') the
court will not interfere to restrain them by injunction1; nor will such acts be a ground for forfeiture under a proviso for
re-entry on commission of waste2; nor, in general, can damages be recovered in respect of them since the reversioner
has suffered no loss3.
HR A[7380.112]
1 Jones v Chappell (1875) LR 20 Eq 539; Doherty v Allman (1878) 3 App Cas 709 at 722; Meux v Cobley [1892] 2 Ch 253.
2 Doe d Earl Darlington v Bond (1826) 5 B & C 855. See also Doe d Grubb v Earl Burlington (1833) 5 B & Ad 597, 516.
3 Jones v Chappell (1875) LR 20 Eq 539.

Page 42
premises/(3) Tenant's implied covenants
(3) Tenant's implied covenants
Tenant-like user
HR A[7380.113]
A duty on the part of the tenant to use the demised premises in a tenant-like manner is implied into all tenancies. This
means that the tenant must take proper care of the place. For instance, he must, if he is going away for the winter, turn
off the water and empty the boiler. He must clean the chimneys, where necessary, and also the windows. He must mend
the electric light when it fuses. He must unstop the sink when it is blocked by waste. In short, he must do the little jobs
about the place that a reasonable tenant would do. In addition, he must not damage the house wilfully or negligently;
and he must see that his family and guests do not damage it; and, if they do, he must repair it. But apart from such
things, if the house falls into disrepair through fair wear and tear or lapse of time, or for any reason not caused by him,
then the tenant is not liable to repair it1. What a tenant must do to comply with this obligation will depend upon what is
reasonable in all the circumstances2. The duty continues and the tenant is liable for a breach if he fails to deliver up the
premises without having remedied any breaches which have occurred during the term8.
HR A[7380.114]
1 Warren v Keen [1954] 1 QB 15. See too Regis Property Co Ltd v Dudley [1959] AC 370 at 407 per Lord Denning; Wycombe Health
Authority v Barnett [1982] 2 EGLR 35, CA; Firstcross Ltd v Teasdale [1982] 47 P & CR 228. See HR A[7380.87] above for meaning of
'fair wear and tear'.
2 Wycombe Health Authority v Barnett [1982] 2 EGLR 35, CA.
3 Marsden v Edward Heyes Ltd [1927] 2 KB 1 at 8, CA.
HR A[7380.115]
It has been held that no obligation of tenant-like user is implied where the tenant has expressly contracted to repair1.
This, however, has been doubted and it has been suggested that the duty to use premises in a tenant-like manner is a
separate and distinct obligation from the covenant to repair giving rise to separate and distinct remedies2. The extent to
which the implied duty is excluded or qualified ought in principle to turn upon the construction of the lease as a whole.
HR A[7380.116]
1 Standen v Chrismas (1847) 10 QB 135.

Page 43
2 Regis Property Co Ltd v Dudley [1959] AC 370 at 407 per Lord Denning (obiter).
Implied obligation not to commit voluntary waste
HR A[7380.117]
As explained above, there is a duty in tort upon a tenant not to commit voluntary waste1. It appears also that the duty
not to commit voluntary waste is part of the implied contractual obligations upon a tenant to use the premises in a
tenant-like manner2.
HR A[7380.118]
1 See HR A[7380.101].
2 Marsden v Edward Heyes Ltd [1927] 2 KB 1.
Implied obligation to keep the demised premises wind-tight and watertight?
HR A[7380.119]
There is some authority which suggests that a tenant from year to year is impliedly under an obligation to keep the
demised premises wind and watertight1. Such an obligation does not apply to a weekly tenant2. It appears that even in
the case of a tenant from year to year the obligation goes no further than the obligation to use the premises in a
tenant-like manner and will (in any event) be subject to the exception in respect of fair wear and tear3.
HR A[7380.120]
1 Auworth v Johnson (1832) 5 C & P 239; Leach v Thomas (1835) 7 C & P 327; Wedd v Porter [1916] 2 KB 91 at 100.
2 Warren v Keen [1954] 1 QB 15.
3 Warren v Keen [1954] 1 QB 15. See HR A[7380.87] above for meaning of 'fair wear and tear'.
Page 44
premises/(4) Tenant's express obligations in respect of the fabric of the premises: repairs etc
(4) Tenant's express obligations in respect of the fabric of the premises: repairs etc
Generally
HR A[7380.121]
The extent of a tenant's express obligations relating to the maintenance of the fabric of the demised premises will be a
matter of construction of the lease in question. The main concepts encountered in covenants in leases are considered
above: it is necessary to ascertain the parts of the premises in respect of which the tenant has agreed to perform
obligations1 and the nature of the activities which the tenant has agreed to undertake in respect of those parts2. In
principle, meaning and effect should be given to each word or phrase used3; but sometimes in reading a lease as a
whole a 'torrential style' of drafting may be discerned4 and it may be wrong to distinguish finely between the various
words listed in a covenant. Accordingly, the court will aim to give effect to the 'good sense of the agreement'5. While
each lease must be construed having regard to the particular words used, and the particular circumstances of each lease
in this way, the following general points may be noted about tenant's obligations to repair.
HR A[7380.122]
1 See HR A[7380.4] FF.
2 See HR A[7380.26] FF
3 Lurcott v Wakeley [1911] 1 KB 905 at 911 per Fletcher Moulton LJ.
4 Norwich Union Life Assurance Society v British Railways Board [1987] 2 EGLR 137.
5 See Brew Brothers Ltd v Snax (Ross) Ltd [1970] 1 QB 612 at 641 per Sachs LJ.
Keeping in repair includes putting in repair
HR A[7380.123]
As indicated above1, a covenant to keep in repair includes an obligation to put in repair.
HR A[7380.124]
Page 45
1 See HR A[7380.45].
Demolition and alteration as breach of covenant to repair
HR A[7380.125]
Leases often make express provision restricting alterations by the tenant1. In general, however, unless the tenant has
been given the right to carry out alterations or the landlord has consented to the tenant doing so2, then the demolition or
alteration of the premises may also constitute a breach of covenant. A covenant to repair, uphold and maintain or keep
in good repair generally raises a duty not to destroy the demised premises and as such the pulling down, wholly or
partly, of the premises is a breach of such covenant3. This, however, is not an absolute rule of law and (depending on
the context) a different construction of such a covenant is possible. For instance, in the case of a long lease where the
parties could not have contemplated that the buildings on the demised premises would remain in the same form for the
duration of the term and where alterations are not otherwise prohibited, then if alterations to the demised premises are
made it is unlikely that an obligation to repair would extend to the reinstatement of the premises to their unaltered
condition4.
HR A[7380.126]
1 See HR A[7380.144] FF.
2 See Doe d Dalton v Jones (1832) 4 B & Ad 126; Hyman v Rose [1912] AC 623.
3 Gange v Lockwood (1860) 2 F & F 115. See too Doe d Vickery v Jackson (1817) 2 Stark 293; Doe d Wetherell v Bird (1833) 6 C & P
195; see Borgnis v Edwards (1860) 2 F & F 111. (For special provisions relating to air-raid shelters see Civil Defence Act 1939, s 32; Civil
Defence (Suspension of Powers) Act 1945, s 2(1) and Schedule, para 3; Civil Defence Act 1948, s 6.)
4 British Glass Manufacturing Confederation v University of Sheffield [2004] 1 EGLR 40.
Work to surveyor's satisfaction etc
HR A[7380.127]
If the tenant covenants to do work, whether repair1, or building2, to the satisfaction of a surveyor to be appointed by the
landlord, then it is a question of construction whether such an appointment is a condition precedent to the tenant's
liability. Where the work cannot be done unless a surveyor is appointed, then this points to the conclusion that the
appointment is a condition precedent3. Where, however, the work is to be subject to the superintendence of specified
persons it has been held that such superintendence is not a condition precedent to the tenant's liability4. The role of the
surveyor will be determined by the covenant in question. For instance, in some instances, a covenant may be construed
so that the landlord's surveyor is entitled to prescribe the work to be done as well as the manner in which it is to be
done5. Where works are to be carried out to the satisfaction of a surveyor, the surveyor's judgment will be binding in
relation to the matters which are to be referred to him: there is no rule of public policy which prevents parties from
agreeing to refer matters of law to an expert but in the absence of clear words the parties will be taken to intend that the
Page 46
decision of the expert was intended to be binding only on matters within his expertise6. A covenant may expressly
provide that a surveyor is to act reasonably in relation to matters referred to him, so that if the surveyor acts
unreasonably (ie in a manner in which no reasonable surveyor could) then the tenant will not be in breach7. In the
absence of an express qualification that the surveyor is to act reasonably, it will be a matter of construction whether
such a qualification is to be implied: at the very least it is likely to be implied that the surveyor must exercise his own
judgment and come to an honest view of what is required8.
HR A[7380.128]
1 Coombe v Green (1843) 11 M & W 480.
2 Hunt v Bishop (1853) 8 Exch 675 at 679.
3 Coombe v Green (1843) 11 M & W 480.
4 Jones v Cannock (1850) 5 Ex Ch 713; affd (1852) 3 HL Cas 700. See also Dallman v King (1837) 4 Bing NC 105, where the tenant was
to retain out of rent the expenses of improvements executed to the approval of the landlord; this approval was not a condition precedent to
the retention of the expenses.
5 Mason v TotalFinaElf UK Ltd [2003] 3 EGLR 91, Blackburne J.
6 Nikko Hotels (UK) v MEPC [1991] 2 EGLR 103; see also para HR A[4306].
7 Doe d Baker v Jones (1848) 2 Car & Kir 743.
8 Mason v TotalFinaElf UK Ltd [2003] 3 EGLR 91, Blackburne J.
Conditional covenants to repair
HR A[7380.129]
The liability of the tenant to repair may be made conditional upon an event. Whether the condition amounts to a
condition precedent will be a question of construction1. For instance, the liability may be made conditional upon the
landlord first putting the premises in repair2, or upon his doing some other act, such as providing materials for repair3.
In the case of the former, the complete performance of the condition by the landlord has been held to be essential to
make the tenant liable for repair of any part of the premises4; in the case of the latter, it has been held to be sufficient if
the landlord is ready to supply the material when required5. If the putting of the premises in repair or the provision of
materials by the landlord is expressed in the lease in such a way as merely to qualify the tenant's liability to repair as a
condition precedent, the tenant will have no right of action against the landlord for failure, either to put the premises in
repair or to provide materials6.
HR A[7380.130]
Page 47
1 See CIN Properties Ltd v Barclays Bank plc [1986] 1 EGLR 59 at 61C-F per Oliver LJ, CA.
2 Slater v Stone (1633) Cro Jac 645; Neale v Ratcliff (1850) 15 QB 916; Henman v Berliner [1918] 2 KB 236; Howe v Botwood [1913] 2
KB 387.
3 Thomas v Cadwallader (1744) Willes 496; Mucklestone v Thomas (1739) Willes 146; Westacott v Hahn [1918] 1 KB 495, CA.
4 Neale v Ratcliff (1850) 15 QB 916; see Counter v Macpherson (1845) 5 Moo PCC 83; Cannock v Jones (1849) 3 Exch 233; Coward v
Gregory (1866) LR 2 CP 153; Henman v Berliner [1918] 2 KB 236; Westacott v Hahn [1918] 1 KB 495, CA.
5 Martyn v Clue (1852) 18 QB 661. But a covenant by the tenant to repair 'taking sufficient housebote etc without committing waste' did
not incorporate a condition that there should be a sufficient supply of timber on the land and the covenant was absolute: Dean and Chapter
of Bristol v Jones (1859) 1 E & E 484.
6 Westacott v Hahn [1918] 1 KB 495, CA; Cannock v Jones (1849) 3 Exch 233; Tucker v Linger (1882) 21 Ch D 18, CA. Of course, a
lease may be so expressed that the landlord covenants to provide materials etc, in which case the tenant can sue for breach of covenant for
the landlord's default: see Haldane v Newcomb (1863) 12 WR 135.
Covenants to repair after notice
HR A[7380.131]
Leases sometimes contain covenants to repair following notice. If so, notice is a precondition to the requirement to
perform the obligation. Where a lease contains such a covenant as well as a general covenant to repair, the covenants
are distinct covenants1: accordingly, the landlord may proceed on either covenant (though service of a notice may
amount to waiver of the right to forfeit for breaches of the general covenant occurring prior to the service of the
notice)2.
HR A[7380.132]
1 Baylis v Le Gros (1858) 4 CBNS 537; Roe d Goatly v Paine (1810) 2 Camp 520.
2 Doe d Morecraft v Meux (1825) 4 B & C 606. See HR A[7380.318] and HR A[8950] - HR A[8963] for waiver of forfeiture generally.
Covenants to repair by reference to a specified condition
HR A[7380.133]
Leases may provide that the premises are to be kept in a condition defined by reference to the date of the lease. What
that condition is will be a question of fact. If the parties are to qualify a tenant's obligations in this way, it is prudent to
agree a schedule of condition by reference to which the condition at the date of the lease can be judged.
Obligation to rebuild and the Fires Prevention (Metropolis) Act 1774, s 86

Page 48
HR A[7380.134]
As indicated above, a covenant to repair without qualification obliges the covenantor to rebuild in case of fire, etc1. The
Fires Prevention (Metropolis) Act 1774, s 86 provides that a tenant who is under no obligation to repair is not liable to
the landlord in the event of the destruction of the premises as a result of an accidental fire, but if the destruction is the
result of negligence he is liable to the landlord in damages2. The word 'accidentally' in the statue is opposed to
'negligently' and the statute does not apply where the fire is the result of negligence; nor does it apply where a fire is
lighted intentionally and the mischief results in damage to the demised premises or to buildings or other property on
adjoining premises3. The 1774 Act does not affect the operation of an express covenant to repair.
HR A[7380.135]
1 See HR A[7380.37].
2 This section is of general application: Richards v Easto (1846) 15 M & W 244 at 251; Filliter v Phippard (1847) 11 QB 347 at 354;
Sinnott v Bowden [1912] 2 Ch 414.
3 Filliter v Phippard (1847) 11 QB 347. See also Sturge v Hackett [1962] 3 All ER 166 (tenant may be liable for the escape of a fire
which gets out of control); Goldman v Hargraves [1967] 1 AC 645 (the Act does not protect an occupier where the damage is caused not by
the accidental beginning of a fire but by the occupier's subsequent negligence).
HR A[7380.136]
A covenant which expressly binds the lessee to rebuild is not satisfied by merely repairing: hence, where it extends to
several houses, it is not sufficient for the lessee to rebuild some and repair others1. But where the covenant was a
general covenant to repair and to rebuild within a specified time, it was held that it was enough if the lessee repaired so
as to make the houses substantially as good as new2. A covenant to pull down a house and build a new one does not
require the new one to be of a similar construction and elevation (in the absence of express provision)3.
HR A[7380.137]
1 City of London v Nash (1747) 3 Atk 512.
2 Evelyn v Raddish (1817) 7 Taunt 411.
3 Low v Innes (1864) 4 De GJ & Sm 286.
Buildings erected subsequent to demise
HR A[7380.138]
Page 49
The general principle is that a covenant to repair extends to buildings erected subsequently to the demise: such buildings
become part of the land1. Therefore, although it is possible to make express provision extending the covenant to all
buildings erected on the land at the date of the demise or subsequently2, a covenant simply to repair the demised
premises is effective to cover all things which are for the time being part of the premises included in the lease3 and so
extends the repairing obligation to additional buildings4 and fixtures5. Of course, the words used in the lease may show
a contrary intention so that a covenant to repair the demised premises will only extend to the buildings existing at the
time of the demise6. A covenant to repair and yield up in repair, if it extends to all fixtures, will deprive the tenant of his
ordinary right to remove tenant's fixtures, unless these are expressly excluded from the covenant7.
HR A[7380.139]
1 See HR A[1647].
2 Hudson v Williams (1878) 39 LT 632.
3 Pyot v Lady St John (1613) Cro Jac 329 (pavement of courtyard).
4 Cornish v Cleife (1864) 34 LJ Ex 19 at 22; see too Brown v Blunden (1683) Skin 121; Douse v Earle (1688) 3 Lev 263; Field v Curnick
[1926] 2 KB 374 (where it was held that the tenant was liable to repair six houses erected by him on the demised property when he had only
covenanted to erect two); Rose v Spicer, Rose v Hyman [1911] 2 KB 234 at 248, CA per Fletcher Moulton LJ, rvsd on other grounds [1912]
AC 623. The covenant has been held to extend to a farmhouse erected with the permission of the lessor, who is lord of the manor in
adjoining waste: White v Wakley (No 1) (1858) 26 Beav 17.
5 Openshaw v Evans (1884) 50 LT 156 (mill wheel); Penrys Administatrix v Brown (1818) 2 Staek 403 (verandah attached to posts fixed
in ground). See too Thresher v East London Water Works Co (1824) 2 B & C 608.
6 Doe d Worcester Trustees v Rowlands (1841) 9 C & P 734; Smith v Mills (1899) 16 TLR 59; Cornish v Cleife (1864) 3 H & C 446. In
some circumstances, the covenant to repair may apply only to after-erected buildings: Lant v Norris (1757) 1 Burr 287.
7 As to the meaning of 'erections and buildings' in a covenant to yield up in repair, see Naylor v Collinge (1807) 1 Taunt 19 (building
resting on soil); Borgnis v Edwards (1860) 2 F & F 111 (fence); Bidder v Trinidad Petroleum Co (1868) 17 WR 153 (trade fixtures); West v
Blakeway (1841) 2 Man & G 729 (unattached structures); Bowes v Law (1870) LR 9 Eq 636 (garden wall).
Covenant to yield up in repair
HR A[7380.140]
It is common to find as part of an express covenant to yield up an obligation on the tenant to yield up the premises in the
condition required by the lease. This is distinct from the covenant to keep in repair. A previous judgment in an action
for failure to repair during the term will not estop the landlord from bringing an action at the end of the term for a
breach of this covenant, though it may affect the damages awarded1.
HR A[7380.141]
Page 50
1 Ebbetts v Conquest (1900) 82 LT 560.
Effect of Landlord and Tenant Act 1985
HR A[7380.142]
In a lease to which s 11 of the Landlord and Tenant Act 1985 applies, terms of a lease which avoid the Act will be void
save to the extent that it is authorised by the county court1. A tenant, therefore, cannot have imposed upon him a
liability of which it is the duty of the landlord to perform under that Act.
HR A[7380.143]
1 See HR A[7380.237].
Page 51
premises/(5) Tenant's obligations not to make alterations
(5) Tenant's obligations not to make alterations
(i) Introduction
HR A[7380.144]
It is common to include in a lease a covenant that the tenant will not make any alterations to the demised premises.
Where the covenant is expressed in unqualified terms, without any reference to the giving of consent by the landlord to
the making of alterations, no implication can be made that consent is not to be unreasonably withheld. However, by
virtue of the Landlord and Tenant Act 1927, s 19(2), where a covenant requires the consent of the landlord to the
making of improvements, that consent is not to be unreasonably withheld. In leases it is rare to find a prohibition against
the making of improvements. Instead such covenants refer to the making of alterations. However, the term
'improvements' has long been in common use in statutes1 and in the case of business premises Part I of the Landlord
and Tenant Act 1927 makes provision for authorisation of and compensation for improvements (even where there is an
absolute prohibition against alterations)2.
HR A[7380.145]
1 See, eg the Landlord and Tenant Act 1927, s 19(2).
2 See HR B[321] FF.
(ii) Form of the express covenant against alterations
HR A[7380.146]
The usual purpose of a covenant against alterations is to ensure that the tenant does not alter the premises in a way
which would make them more difficult to re-let after the expiry of the term. It complements a covenant to repair and a
covenant to comply with the provisions of the Town and Country Planning legislation. The precise form of the covenant
will depend upon the length of the tenancy granted and the nature of the premises, and the precise scope of the
prohibition will, of course, depend on the exact language used, and will differ from one lease to another. The clause
against alterations in its shortest form is a covenant not to make any alteration to the demised buildings and not to cut or
maim the main walls and timbers of the premises1. Where the covenant is unqualified by any reference to alterations
being permitted it is described as an 'absolute' covenant against the making of alterations2. This covenant is often the
subject of considerable elaboration in both ordinary leases of residential property and still more in the case of
commercial property. Frequently the covenant will be in a hybrid form. It will prohibit absolutely the making of
alterations to structural or external elements of the building, but will then permit the making of non-structural alterations
to the interior either without further qualification, or, more usually, subject to landlord's consent not to be unreasonably
Page 52
withheld. Where the covenant contemplates the making of alterations it will often be subject to an express proviso that
the alterations be reinstated by the tenant at the end of the term if so required. In the case of industrial property the need
to make alterations for the proper carrying on of the trade or manufacture for which the premises are to be used is often
an essential requirement of the tenant. Of course, a tenant may covenant to effect alterations as well as to abstain from
effecting them3.
HR A[7380.147]
1 A covenant not to carry out alterations is not broken when the act, which would constitute a breach if carried out by the tenant, is carried
out by an independent contractor engaged by the tenant contrary to the instructions of and without the knowledge of the tenant: Hagee
(London) Ltd v Co-operative Insurance Society Ltd (1991) 63 P & CR 362, [1992] 1 EGLR 57. In such a case, the landlord may have a
direct action in tort against the independent contractor.
2 Woolworth & Co Ltd v Lambert [1936] 2 All ER 1523 at 1540, per Romer LJ.
3 In Ridley v Taylor [1965] 2 All ER 51, [1965] 1 WLR 611 a covenant was construed in such a way as not to impose on the tenant a duty
to effect alterations, but merely a duty to effect them in a certain way if he chose to effect them at all. Godbold v Martin (Newsagents)
[1983] 2 EGLR 128; Historic Houses Hotels v Cadogan Estates [1993] 2 EGLR 151.
(iii) Statutorily implied terms regarding alterations
(a) Landlord and Tenant Act 1927, s 19(2): the general position
HR A[7380.148]
Where the covenant is qualified by the addition of the words 'without the consent of the landlord', or words to similar
effect, it will, in the case of leases of most premises, be subject to the statutorily implied covenant that such consent is
not to be unreasonably withheld in the case of alterations which are improvements1. The term is not implied into leases
of agricultural holdings, farm business tenancies or mining leases2. In the case of protected statutory and secure
tenancies, there are separate statutory codes3. Where this term is statutorily implied by s 19(2) of the Landlord and
Tenant Act 1927, the landlord is not precluded from requiring, as a condition of the granting of licence or consent, the
payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any
neighbouring premises belonging to the landlord, and of any legal or other expenses properly incurred in connection
with the giving of such licence or consent. If the improvement does not add to the letting value of the holding, the
landlord may also require as a condition of such licence or consent, where it would be reasonable to do so, an obligation
to reinstate4.
HR A[7380.149]
1 Landlord and Tenant Act 1927, s 19(2). For a discussion of the principles applicable where the landlord may not withhold consent
unreasonably (whether pursuant to an express or an implied term), see HR A[7380.164] below. The burden of proving that the landlord
withheld consent unreasonably lies on the tenant. Woolworth & Co Ltd v Lambert [1937] Ch 37.
Page 53
2 LTA 1927, s 19(4).
3 For the position in relation to protected and statutory tenancies, see HR A[7380.150] below. For the position in relation to secure
tenancies, see HR A[7380.152] below.
4 In Lambert v FW Woolworth & Co [1938] Ch 883, CA, it was held by the majority that if the landlord wished to contend that there
would be damage or diminution of the kind referred to in s 19(2), he had to make that assertion when refusing consent. The landlord could
not demand a sum that was in fact unreasonable, but could request a sum subject to determination of the question of reasonableness by the
court. This could be done by asking for £X or such other sum as is found to be reasonable by the court: per MacKinnon LJ at 913.
(b) Protected and statutory tenancies
HR A[7380.150]
In place of s 19(2) of the Landlord and Tenant Act 1927, it is an implied term in protected and statutory tenancies that
the tenant will not make any improvement without the written consent of the landlord. Consent may not be
unreasonably withheld, and if it is unreasonably withheld it shall be treated as given1. In this case (unlike the Landlord
and Tenant Act 1927) the word 'improvement' is defined as meaning any alteration in, or addition to, a dwelling house,
and includes:
(a) any addition to, or alteration in, landlord's fixtures and fittings and any addition or alteration
connected with the provision of any services to a dwelling house;
(b) the erection of any wireless or television aerial; and
(c) the carrying out of external decoration (except where the landlord is under an obligation to carry
out external decoration or to keep the exterior of the dwelling house in repair)2.
HR A[7380.151]
1 HA 1980, s 81(3). The burden of proving that consent was withheld reasonably is on the landlord: HA 1980, s 82(1).
2 HA 1980, s 81(5).
(c) Secure tenancies
HR A[7380.152]
Similar provisions are made for secure tenancies as are made for protected and statutory tenancies1.
HR A[7380.153]
Page 54
1 Housing Act 1985, s 97. Again, the burden of proving that consent was reasonably withheld lies on the landlord: HA 1985, s 98(1).
(iv) Other statutory provisions relating to alterations
HR A[7380.154]
The Office Shops and Railway Premises Act 1963 imposes obligations on the occupier to make provision for the health
safety and convenience of its employees and others. Some of these obligations may fall on a landlord who retains
common parts in a building to which the Acts apply. Extensive obligations are now also imposed by the Disability
Discrimination Acts1.
HR A[7380.155]
1 See HR A[7321] ff below.
HR A[7380.156]
The county court may set aside or modify a covenant which prevents a lessee from making alterations necessary for
compliance with the Offices Shops and Railway Premises Act 19631. Where the execution of works necessary to
comply with the Act involves the landlord or other owner in expense which he alleges ought to be borne in whole or in
part by his tenant he may apply to the county court for an order giving directions as to the person by whom the expense
is to be borne and the proportions in which it is to be borne2. Similar powers are conferred in a range of similar
circumstances by other statutes3. A tenant to whom Part I of the Landlord and Tenant Act 1927 applies may avoid the
effect of an absolute covenant against alteration if he obtains the consent of the tribunal under the Act, or if the landlord
fails to respond within time to a notice served by the tenant proposing an improvement to which that part applies4.
HR A[7380.157]
1 Offices Shops and Railway Premises Act 1963, s 73(1).
2 OSRPA 1963, s 73(2).
3 Eg the Factories Act 1961, the Fire Precautions Act 1971, the Telecommunications Act 1984.
4 See HR B[321] ff.
(v) Alterations and other obligations
HR A[7380.158]
Page 55
Quite apart from the provisions of the lease, a lessee may be prevented from altering the premises or be liable for such
alteration by virtue of the doctrine of waste1, but this may be tempered where the alteration is ameliorating waste. An
alteration to the premises may be a breach of the covenant to repair, but this result may be qualified by the use of the
premises which is permitted by the lease or tenancy agreement2. An alteration may also amount to a breach of other
covenants in the lease. It may be a breach of a covenant not to carry on a trade or business or a breach of the covenant
not to cause annoyance to the landlord or the occupiers of adjoining premises3.
HR A[7380.159]
1 For waste see HR A[7380.91] FF.
2 See HR A[7380.125].
3 Barton v Reed [1932] 1 Ch 362.
(vi) Breach of covenant restricting alterations
HR A[7380.160]
The principle is that an alteration is effected only when the construction or fabric of the building is altered1, and the
mere installation of something new, such as a telephone or additional electric wiring would not ordinarily be a breach of
a covenant not to alter the demised premises. The conversion of a house into business premises is an alteration for it
completely changes the nature of the premises and the conversion of a house into flats is likewise an alteration2. Any
alteration which increases the risk of fire is within the covenant not to alter the premises3. It has been held that the
replacement of permitted air conditioning plant (condensers, pipes and wires and air dispensing units) by new items to
perform exactly the same functions was not an alteration or addition to the demised premises4.
HR A[7380.161]
1 Bickmore v Dimmer [1903] 1 Ch 158 (the installation of a clock on the outside of a shop is no breach); Taylor v Vectapike Ltd [1990] 2
EGLR 12, [1990] 44 EG 75.
2 Bonnett v Sadler (1808) 14 Ves 526; Duke of Westminster v Swinton [1948] 1 KB 524, [1948] 1 All ER 248.
3 British Empire Mutual Fire Life Insurance Co v Cooper (1888) 4 TLR 362.
4 Hagee (London) Ltd v Co-operative Insurance Society Ltd (1991) 63 P & CR 362, [1992] 1 EGLR 57.
(vii) 'Improvements'
Page 56
HR A[7380.162]
An improvement, a term not frequently used in leases, is not necessarily an addition or alteration which increases the
value of the demised property considered separately and by itself1. This proposition is also implicit in the Landlord and
Tenant Act 19272. Improvements include alterations by which the tenant can obtain the most beneficial use of the
demised premises including their use along with other premises3. In deciding whether or not an alteration is an
improvement, it must be viewed from the point of view of the tenant and not of the landlord4. Provided the tenant
undertakes to reinstate the premises, the removal of party walls so that two buildings, one of which is not included in
the demise, become one is an improvement5. The demolition of the existing building and erection of new buildings of
different character may be an improvement6. A loft conversion may be an improvement7.
HR A[7380.163]
1 Woolworth & Co Ltd v Lambert [1937] Ch 37, [1936] 2 All ER 1523.
2 Landlord and Tenant Act 1927 (s 3(1)(a), which speaks of an improvement of 'such a nature as to be calculated to add to the letting
value at the termination of the tenancy'. Slesser LJ in Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883 at 901, [1938] 2 All ER 664
at 671, said: '...the section contemplates that an alteration may be an improvement although it produces damage or diminution in the value of
the premises, or does not add to the letting value of the holding, so that the mere fact of damage or diminution in the value arising to the
premises from their alteration will not of itself prevent the alteration from being an improvement.' In Wates v Rowland [1952] 2 QB 12 it
was held that work could still be an improvement or structural alteration for the purposes of the Increase of Rent and Mortgage Interest
(Restrictions) Act 1920 as amended by the Rent and Mortgage Interest Restrictions Act 1939 even though it was work required in order to
make a house habitable (laying a new concrete and tiled floor).
4 Woolworth & Co Ltd v Lambert [1937] Ch 37, [1936] 2 All ER 1523 and Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883,
[1938] 2 All ER 664.
5 Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883, [1938] 2 All ER 664. But it would appear that the result of the alteration
must not prevent use of the premises in accordance with the covenant as to user: Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883
at 902, [1938] 2 All ER 664 at 672.
6 National Electric Theatres v Hudgell [1939] Ch 553, [1939] 1 All ER 567. This is a decision under the Landlord and Tenant Act 1927, s
3. Under that section the tribunal has to be satisfied that the improvement is reasonable and suitable to the character of the holding.
7 Davies v Yadegar [1990] 1 EGLR 71, CA; Haines v Florensa (1989) 59 P & CR 200, [1990] 09 EG 70, CA.
(viii) Qualified covenants restricting alterations: unreasonable withholding of consent
(a) General
HR A[7380.164]
Where the covenant states that the alterations are not to be made without the consent of the landlord, then by statute
consent is not to be unreasonably withheld to the making of improvements which are alterations1. The same result is
Page 57
often achieved by an express proviso in the covenant to the effect that consent will not be unreasonably withheld. The
onus of proving that consent is unreasonably withheld is upon the tenant2, but if the landlord gives no reason for his
refusal, the landlord must show that his refusal was reasonable3. If consent is unreasonably withheld, the tenant may
either proceed with the alteration or seek a declaration to that effect. However, the covenant will not be construed as an
obligation on the part of the landlord not to withhold consent unreasonably, so that an unreasonable withholding of
consent does not give rise to a cause of action for damages4. The statutory provision that such consent is not to be
unreasonably withheld does not preclude the right to require, as a condition of such licence or consent, the payment of a
reasonable sum of money in respect of any damage to, or diminution in, the value of the premises, or any neighbouring
premises belonging to the landlord, or of any legal or other expenses properly incurred in connection with such licence
or consent nor, in the case of an improvement which does not add to the letting value of the holding, does it preclude the
right to require, as a condition of such licence or consent, where such a requirement would be reasonable, an
undertaking on the part of the tenant to reinstate the premises in the condition in which they were before the
improvement was executed5.
HR A[7380.165]
1 Landlord and Tenant Act 1927, s 19(2), see para HR A[20141]. Balls Bros v Sinclair [1931] 2 Ch 325; Railway Comr v Avrom
Investments Pty Ltd [1959] 2 All ER 63, [1959] 1 WLR 389.
2 Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883, [1938] 2 All ER 664.
3 Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883, [1938] 2 All ER 664.
4 Treloar v Bigge (1874) LR 9 Exch 151.
5 Landlord and Tenant Act 1927, s 19(2).
(b) The principle
HR A[7380.166]
In considering whether a landlord's refusal of consent to a proposed alteration or improvement is reasonable or not, the
Court of Appeal has drawn on the principles laid down in cases relating to consent by a landlord to an assignment of a
lease1. In Ashworth Frazer Ltd v Gloucester City Council2, the House of Lords (in the context of assignment) identified
the three overriding principles as being:
(a) a landlord is not entitled to refuse consent on grounds that have nothing whatever to do with the
relationship of landlord and tenant;
(b) the question of whether a landlord's conduct was reasonable or unreasonable is a question of fact to
be decided by the tribunal of fact (and cases decided on particular facts were not to be elevated into
principles of law);
(c) the landlord's obligation is to show that its conduct was reasonable, not that it was right or justified.
Page 58
HR A[7380.167]
1 International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513, [1986] 1 EGLR 39.
2 [2001] 1 WLR 2180, [2002] 1 All ER 377.
HR A[7380.168]
In the context of a qualified covenant against the making of alterations, the following guidelines have been given by the
Court of Appeal1:
(a) The purpose of the covenant is to protect the landlord from the tenant effecting alterations and
additions that could damage the property interests of the landlord.
(b) A landlord is not entitled to refuse consent on grounds that have nothing to do with its property
interests.
(c) It is for the tenant to show that the landlord has unreasonably withheld its consent to the proposals
that the tenant has put forward. Implicit in that is the necessity for the tenant to make it sufficiently clear
what its proposals are, so that the landlord knows whether it should refuse or give consent to the
alterations or additions.
(d) It is not necessary for the landlord to prove that the conclusions that led it to refuse consent were
justified if they were conclusions that might have been reached by a reasonable landlord in the particular
circumstances.
(e) It might be reasonable for the landlord to refuse consent to an alteration or addition to be made for
the purpose of converting the premises for a proposed use even if not forbidden by the lease. But whether
such refusal would be reasonable will depend upon all the circumstances. For example, it might be
unreasonable if the proposed use was a permitted use and the intention of the tenant in acquiring the
premises to use them for that purpose was known to the freeholder when the freeholder acquired the
freehold.
(f) Although a landlord will usually need to consider only its own interests, there might be cases where
it would be disproportionate for a landlord to refuse consent, having regard to the effects upon it and
upon the tenant respectively.
(g) Consent cannot be refused on grounds of pecuniary loss alone. The proper course for the landlord
to adopt in such circumstances is to ask for a compensatory payment2.
(h) In each case it will be a question of fact, dependant upon all the circumstances, as to whether
the landlord, having regard to the actual reasons that impelled it to refuse consent, had acted reasonably.
HR A[7380.169]
1 Iqbal v Thakrar [2004] EWCA Civ 592, [2004] 3 EGLR 21 at 22E (drawing on International Drilling Fluids Ltd v Louisville
Investments (Uxbridge) Ltd [1986] Ch 513, [1986] 1 EGLR 39 and see HR A[2629]).
2 This principle does not feature in International Drilling Fluids v Louisville Investments (Uxbridge) Ltd (above).
Page 59
HR A[7380.170]
There is a two-stage enquiry: first, a subjective enquiry to find out what was in the mind of the landlord at the time of
the refusal of consent; and secondly, an objective enquiry as to whether the reason in the landlord's mind was reasonable
or unreasonable1. Iqbal v Thakrar contains a helpful discussion of the reasons relied on by the landlord as constituting
reasonable grounds for withholding consent, distinguishing between the good and the bad. In particular, it was held to
have been unreasonable for the landlord to object on the grounds that the premises were to be used as an Indian
restaurant. Although it was not sufficient for the tenant to say that such a use was not prohibited by the lease, it was, on
the facts, unreasonable for the landlord to object on that ground when the premises had been sold with Class A3 use,
when the planning authority had confirmed that use, and when the landlord had been aware at all times that that was the
proposed use that the tenant had intended2.
HR A[7380.171]
1 Iqbal v Thakrar [2004] EWCA Civ 592, [2004] 3 EGLR 21 at 23J (see HR A[6965.4], fn 1) and Tollbench Ltd v Plymouth City Council
[1988] 1 EGLR 79 at 81F.
2 Iqbal v Thakrar at 24M-25A (see HR A[7380.169], fn 1).
HR A[7380.172]
To these propositions may be added two more1 (again derived from a case dealing with assignment):
(a) it will normally be reasonable for a landlord to refuse consent or impose a condition if this is
necessary to prevent its contractual rights under the lease from being prejudiced by the proposed
assignment or sublease;
(b) it will not normally be reasonable for a landlord to seek to impose a condition which is designed to
increase or enhance the rights that it enjoys under the lease.
HR A[7380.173]
1 Mount Eden Land Ltd v Straudley Investments Ltd (1996) 74 P & CR 306.
HR A[7380.174]
It may be reasonable for a landlord to withhold consent to the making of alterations if it has a reasonable objection to
the use that the tenant proposes to make of the altered premises, whether that use is the same as or different from the use
carried on in the remainder of the premises. Ordinarily, if the landlord would be entitled to object to the carrying out of
alterations on a particular ground, the imposition of a term neutralising that concern would be reasonable. In Sargeant v
Macepark (Whittlebury) Ltd1, it was held that a landlord was entitled to have in mind the fact that the tenant might use
the premises as altered to compete with its own existing business as occupier of adjoining property (weddings and
Page 60
functions), but was, on the facts, unreasonable in seeking to impose a condition that would restrict the tenant to using
the extension that it proposed to build for 'management training conferences' only (as opposed to 'management training
and conferences'). The latter already formed part of the tenant's business and the landlord had not yet ventured into it. A
condition limited to protecting the tenant against competition to its existing weddings and functions business would not
have been unreasonable.
HR A[7380.175]
1 [2004] EWHC 1333 (Ch), [2004] 3 EGLR 26.
HR A[7380.176]
It was stressed that the landlord could not refuse consent to the making of alterations purely on the ground that they
would damage its trading interests as that would infringe the principle that consent cannot be refused on grounds that
have nothing to do with the landlord's property interests. However, that does not mean that the landlord's economic
interests as occupier of adjoining property must be ignored1. In some cases, the feared damage might justify a refusal of
consent altogether, while in others it will only justify the imposition of a condition to neutralise the concern.
HR A[7380.177]
1 Sargeant v Macepark (Whittlebury) Ltd [2004] EWHC 1333 (Ch), [2004] 3 EGLR 26 at 31C-L and Whiteminster Estates Ltd v Hodges
Menswear Ltd (1974) 232 EG 715; Sportoffer Ltd v Erewash Borough Council [1999] 3 EGLR 136.
HR A[7380.178]
It will never be reasonable for a landlord to refuse consent on the ground of pecuniary damage to its interest in the
leased property or neighbouring property that belongs to it. It may only ask for compensation as a condition of giving
consent1.
HR A[7380.179]
1 Sargeant v Macepark (Whittlebury) Ltd [2004] EWHC 1333 (Ch), [2004] 3 EGLR 26 at 30C-M.
(c) Requirement for compensation
HR A[7380.180]
Where the landlord requires the payment of a sum in respect of such damage to or diminution in the value of the
Page 61
premises which the tenant thinks unreasonable, then the tenant must adduce sufficient evidence to prove such
unreasonableness and, if he fails to do so, it must be taken that the landlord is acting reasonably1.
HR A[7380.181]
(d) Consents and implied terms
HR A[7380.182]
Where a landlord has given express consent to the making of alterations it may be possible and appropriate to imply
other terms in order to enable the tenant to implement the consent. This will, inevitably, depend upon the true
construction of the licence and the factual context. A lease demised the upper floors of a building in contemplation of
the tenant carrying out extensive works of alteration. The landlord gave licence permitting the tenant to carry out the
works. The licence made no express provision entitling the tenant to have access to premises retained by the landlord in
order to erect scaffolding to enable the work to be carried out. The Court of Appeal was willing to imply a term into the
licence that the tenant should have such access as was necessary to enable him to carry out the permitted works1.
HR A[7380.183]
1 Europa 2000 Ltd v Keles (Mustafa) [2005] EWCA Civ 1748, [2005] All ER (D) 93 (Dec). It was held on the facts that the tenant had not
established that the particular access it required (treading on a flat roof retained by the landlord in order to erect scaffolding) was necessary
where there were other unexplored means of carrying out the requisite work.
Page 62
premises/(6) Tenant's obligations at the end of the term regarding altered premises: repair and reinstatement
(6) Tenant's obligations at the end of the term regarding altered premises: repair and
reinstatement
HR A[7380.184]
In the absence of any obligation to reinstate the premises, if an alteration has been carried out lawfully then it has
become part of the demised premises. Accordingly, subject to any obligation to repair the demised premises, the tenant
will be obliged to deliver up the demised premises with the alterations (though he has a right to remove 'tenant's
fixtures' subject to making good)1.
HR A[7380.185]
1 See HR A[7380.195].
HR A[7380.186]
If alterations have been carried out by the tenant in breach of covenant, then the tenant will in principle be liable for
damages to the landlord if the premises are delivered up in that state at the end of the term. The quantification of
damages will be made on usual principles1.
HR A[7380.187]
HR A[7380.188]
Often tenants enter into agreements to reinstate premises either as a covenant in the lease itself or as a term of a licence
to carry out alterations. There are three common forms of covenant:
(a) unqualified covenants to reinstate;

(b) covenants to reinstate upon notice;
(c) covenants to reinstate unless notice to the contrary is given.
(i) Unqualified covenants to reinstate

Page 63
HR A[7380.189]
In principle, there is no difficulty in determining whether a tenant is in breach of an unqualified covenant to reinstate. If
the tenant has covenanted to reinstate premises which have been altered he must restore the premises and make good
any damage caused by the removal of any items.
(ii) Covenants to reinstate on notice
HR A[7380.190]
Covenants to reinstate upon notice by the landlord, however, often give rise to difficulties in practice. There are two
questions which arise: (1) the form of the notice, and (2) the timing of the notice. In general, there is no requirement
about the form of notice given and whether notice has been given will depend upon the construction of the obligation
and the documentation purporting to give notice. The question of whether a schedule of dilapidations gives sufficient
notice will depend on whether a reasonable recipient would have understood that one of the purposes of the schedule
was giving the notice necessary to invoke the obligation to reinstate1.
HR A[7380.191]
1 City of Westminster v HSBC Bank plc [2003] EWHC 393 (TCC), [2003] 1 EGLR 62: obligations to reinstate on notice contained in
licences; schedule of dilapidations requiring reinstatement sufficient despite no reference to licences.
HR A[7380.192]
In most cases there is no express requirement upon the landlord to give notice at any particular time. It is not uncommon
to find surveyors requiring reinstatement in notices served after the lease has expired. Whether this is sufficient will
depend upon the construction of the obligation and a prudent landlord will take a decision on reinstatement and serve
notice in good time before the end of the lease. First, there must be some implicit time limit on when the landlord can
give notice. Most naturally one would expect that the latest the notice could be served is the expiration of the lease after
which the relationship of landlord and tenant ends and the tenant has no right to possession. Secondly, it is necessarily
implicit to give business efficacy that the tenant should have sufficient time to carry out the works required. There are
two possible answers:
(1) it is necessarily implicit that the obligation requires notice to be given sufficiently before the
expiration of the lease to allow the tenant to carry out the reinstatement before he has to give up
possession; or
(2) it is necessarily implicit that if the landlord is to rely upon the notice, he must permit the tenant to
remain upon the premises to the extent that it is necessary for him to perform his obligation to reinstate.
In the absence of a clear indication the context might be considered to support the former interpretation: after the lease
ends the relationship of landlord and tenant ends and the landlord would be expected to retake possession and use the
Page 64
premises for its own purposes. If the tenant is to be required to do something to the premises one would expect this to
take place during the term in the absence of clear terms to the contrary. Case law, however, supports the latter
interpretation1.
HR A[7380.193]
1 See Scottish Mutual Assurance Society v British Telecommunications plc, unreported decision of Anthony Butcher QC sitting as
recorder hearing Official Referee's business, 18 March 1994, noted at Dowding & Reynolds, Dilapidations, 3rd edn, p 327. In that case a
licence to alter provided that the tenant 'should reinstate the property to its original design and layout at the expiring of the Lease at its own
cost should the Lessor reasonably so require'. The lease expired on 24 June 1992. The landlord served its schedule on 18 June 1992. The
judge held that the intention was, given a reasonable requirement by the landlord that the work should be carried out, to require the necessary
work to be put in hand at the time of, but not to be completed by, the expiry of the lease, the tenant being allowed a reasonable time after the
expiry of the lease to complete the works. In Matthey v Curling [1922] 2 AC 180 the House of Lords held in that particular case that a
covenant to lay out insurance moneys in reinstating damage by fire was capable of being breached after the end of the term. Lord Atkinson
said at 241 that in the case of an:
"ordinary covenant to reinstate, a covenantor shall in the absence of words expressly or impliedly
fixing a time for performance of his covenant, have what is a reasonable time under all the
circumstances of the case for performance, whether, in the case of a leasehold, that time extends
beyond the term or the contrary'.
(iii) Covenants to reinstate unless notice to the contrary
HR A[7380.194]
Covenants to reinstate unless notice to the contrary is given are not without potential complications. One problem might
be if the tenant reinstates before the landlord gives notice to the contrary. Until the landlord has given notice to the
contrary, it is difficult to see how (a) the works of the tenant are in breach of covenant and (b) a notice given after the
works have been carried out can render works already performed in breach of covenant. The issue, however, is
undecided and will turn on the precise form of covenant.
Page 65
premises/(7) Tenant's obligations to insure
(7) Tenant's obligations to insure
HR A[7380.195]
Insurance obligations and obligations to apply insurance moneys to reinstatement are dealt with at HR A[7380.283]
below.
Page 66
condition and management of the demised premises/F Covenants by landlords concerning the fabric of buildings and
provision of services
F
Page 67
provision of services/(1) Generally
(1) Generally
HR A[7380.196]
In the absence of any express contractual obligation or the intervention of statute, a landlord's obligations in relation to
the fabric of premises demised are very limited indeed. The general rule is that in the absence of express stipulation or
of a statutory duty, the landlord is under no liability to put the premises into repair at the commencement of the
tenancy1, nor normally is he under any such liability during the continuance of the tenancy, whether the letting is from
year to year2 or for a term of years3. Even if the tenant has covenanted to repair 'fair wear and tear excepted'4 or
'damage by fire and tempest excepted'5, there will not be an implied covenant that the landlord will make good damage
excepted from the tenant's obligations. Further, liability under the terms of the lease will not be implied for defects in
the premises which make them unfit for occupation nor even for personal injury caused to the tenant (even if the
landlord is aware of their existence)6. Likewise, in the past it was held that a landlord who lets a house in a dangerous
condition is not liable to the tenant, or to a subtenant, or the tenant's customers or guests7. There are, however,
exceptions to this general principle. These will arise either from the particular circumstances of the case or by reason of
statutory intervention. The following are the main exceptions.
HR A[7380.197]
1 Robbins v Jones (1863) 15 CBNS 221: 'fraud apart, there is no law against letting a tumble-down house'; Mint v Good [1951] 1 KB 517.
2 Gott v Gandy (1853) 2 E & B 845 at 847.
3 Arden v Pullen (1842) 10 M & W 321.
4 Arden v Pullen (1842) 10 M & W 321.
5 Weigall v Waters (1795) 6 Term Rep 488.
6 Lane v Cox [1897] 1 QB 415; Bottomley v Bannister [1932] 1 KB 458; Davis v Foot [1940] 1 KB 116; Travers v Gloucester Corpn
[1947] KB 71.
7 Norris v Catmur (1855) Cab & El 576; Robbins v Jones (1863) 15 CBNS 221; Cavalier v Pope [1906] AC 428; Boldack v East Lindsay
DC (1998) 31 HLR 41, CA. This principle, however, is limited: see Rimmer v Liverpool City Council [1985] QB 1, CA.
Page 68
provision of services/(2) Landlords' covenants implied at common law in particular circumstances
(2) Landlords' covenants implied at common law in particular circumstances
HR A[7380.198]
The main circumstances in which leases will be construed so that landlord undertakes liability for the condition of
premises are as follows.
(i) Furnished accommodation: landlord's implied covenant that fit for occupation at start of
tenancy
HR A[7380.199]
A landlord who lets a furnished house, flat or rooms will (in the absence of agreement to the contrary) by implication
covenant that the premises are fit for occupation at the start of the tenancy. This is a condition of the tenancy and, if it is
not fulfilled, the tenant may rescind the agreement and quit the premises1. If the landlord breaches the condition, the
tenant is entitled to rescind even if the landlord later renders the premises fit for occupation2. Further, it will be no
defence for the landlord to argue that he honestly believed the house to be habitable when he let it, if it was not3. Such
an implication will not be made in the case of unfurnished lettings4. It should be noted that the implied obligation is
only that the furnished accommodation is fit for habitation at the start of the term: and indeed there is no duty on the
landlord to inform the tenant of the fact that that the premises have become unfit for occupation5.
HR A[7380.200]
1 Wilson v Finch Hatton (1877) 2 Ex D 336; Collins v Hopkins [1923] 2 KB 617.
2 Wilson v Finch Hatton (1877) 2 Ex D 336; Bird v Greville (Lord) (1884) C & E 317.
3 Charsley v Jones (1889) 53 JP 280.
4 McNerny v Lambeth London Borough Council (1989) 21 HLR 188, CA.
5 Sarson v Roberts [1895] 2 QB 395.
HR A[7380.201]
Furnished houses have been held unfit for occupation where they have been infested by bugs1, where defective drains
have rendered them unsanitary2, or where there is an actual or appreciable risk to the tenant and other occupiers as a
Page 69
result of infectious disease3.
HR A[7380.202]
1 Smith v Marrable (1843) 11 M & W 5 (erroneously indicating that implied condition in every lease of a house that it is fit for
habitation).
2 Bird v Greville (Lord) (1884) C & E 317.
3 Wilson v Finch Hatton (1877) 2 Ex D 336 (measles); Collins v Hopkins [1923] 2 KB 617 (tuberculosis).
(ii) Dwelling house in course of construction: implied warranty that when completed, fit for
occupation
HR A[7380.203]
Where a dwelling which is still in the course of construction is let, there will be implied a warranty that the building will
be fit for human habitation when completed1. The obligation is not limited to work carried out after the agreement but
will include work carried out by the date of the lease2. Depending upon the terms of the lease, there may also be
implied warranties that the construction work will be carried out in a good and workmanlike manner and that good and
proper materials will be used3. Such terms will not be implied into a lease where the house is complete at the date of the
agreement4.
HR A[7380.204]
1 Perry v Sharon Development Co Ltd [1937] 4 All ER 390; Jennings v Tavener [1955] 2 All ER 769.
2 Perry v Sharon Development Co Ltd [1937] 4 All ER 390; Miller v Cannon Hill Estates Ltd [1931] 2 KB 113.
3 Lawrence v Cassel [1930 2 KB 83; Miller v Cannon Hill Estates Ltd [1931] 2 KB 113; Hancock v BW Brazier (Anerly) Ltd [1966] 1
WLR 1317, CA.
4 Hoskins v Woodham [1938] 1 All ER 692.
(iii) Ancillary property retained by landlord: obligations to take reasonable care
HR A[7380.205]
Where the landlord retains in his possession and control something ancillary to the premises demised, such as a roof or
staircase, the maintenance of which in proper repair is necessary for the protection of the demised premises or the safe
Page 70
enjoyment of them by the tenant, the landlord is under an obligation to take reasonable care that the premises retained in
his occupation are not in such a condition as to cause damage to the tenant or to the premises demised1. This duty arises
by implication under the terms of a lease2 but the duty overlaps with the duties in the law of nuisance where someone
with ownership and control of land owes duties of reasonable care to his neighbours and also with the law of
negligence. The landlord may be in breach of this duty even where the cause of the damage to the tenant's property is
partly the tenant's fault3. There are two particular aspects to the duty.
First, the duty extends to protecting the demised premises. Thus, if the landlord retains possession or control of a roof or
gutter he is under an obligation to use reasonable care to prevent the roof or gutter from falling into disrepair4. Similar
duties will arise in relation to drains5 and water tanks.
Secondly, where the landlord retains in his possession a path, approach or steps which form a common approach for the
tenant, he is under an obligation to use reasonable care to keep that approach reasonably safe6.
HR A[7380.206]
1 Westminster (Duke of) v Guild [1985] QB 688, CA.
2 Gordon v Selico Co Ltd [1985] 2 EGLR 79 per Goulding J (affd on appeal (1986) 18 HLR 219).
3 Tennant Radiant Heat Ltd v Warrington Development Corpn [1988] 1 EGLR 41.
4 Hargroves Aronson & Co v Hartopp [1905] 1 KB 472; Cockburn v Smith [1924] 2 KB 199, CA.
5 Westminster (Duke of) v Guild [1985] QB 688, CA.
6 Dunster v Hollis [1918] 2 KB 795; see too Dobson v Horley [1915] 1 KB 634 at 640.
(iv) Common law duties where the landlord is the builder
HR A[7380.207]
A landlord who is also the builder of premises may be liable for physical damage to property or personal injury
resulting from negligence1. The scope of this liability arises by reason of the landlord's role as builder rather than by
reason of his relationship of landlord and tenant and detailed consideration of this liability is outside the scope of this
work.
HR A[7380.208]
1 See generally Murphy v Brentwood DC [1991] 1 AC 398, HL; Targett v Torfaen BC [1992] 3 All ER 27, CA.
Page 71
(v) Implied obligations where interrelated obligations would be impossible to perform
HR A[7380.209]
In some circumstances, obligations may be imposed by necessary implication in order to make sense of a correlative
obligation on the part of the tenant. For instance, where the tenant undertakes an obligation to pay for or contribute to
the costs of works or services to be carried out by the landlord (depending on the precise form of the bargain and the
circumstances) it may be implied that the landlord is under obligation to carry out those works or perform those
services1. Similarly, where the tenant is under an obligation to carry out works but this obligation could not be
performed if the landlord did not repair, then again it may be implied that the landlord is under an obligation to repair2.
Such obligations, however, will only be implied where an implication is necessary to make the contract work3.
HR A[7380.210]
1 Barnes v City of London Real Property Co Ltd [1918] 2 Ch 18 (fixed contribution to cleaning services); Murphy v Hurly [1922] 1 AC
369 (rent fixed on basis that sea wall was in repair); Edmonton Corpn v Knowles [1962] 60 LGR 124 (obligation on tenant to pay for
redecoration in every third year; landlord obliged to redecorate). Contrast Russell v Laimond Properties Ltd [1984] 1 EGLR 37 (no
obligation on landlord to provide services; tenant only obliged to contribute where services provided); Westminster (Duke of) v Guild [1985]
QB 688 (scheme of lease did not make necessary implication that landlord would carry out works).
2 Churchward v R (1865) LR 1 QB 173; Barrett v Lounova (1982) Ltd [1990] 1 QB 348, CA (landlord's obligation to repair exterior
implied where tenant obliged to repair interior because given the nature of the premises and lease, sooner or later the tenant's covenant to
repair the interior could no longer be complied with unless the landlord performed repairs to the exterior): this case was probably decided on
its own special facts; see Adami v Lincoln Grange Management Ltd [1998] 1 EGLR 58.
3 Liverpool City Council v Irwin [1977] AC 239; see too Lee v Leeds City Council [2002] 1 WLR 1488.
Page 72
provision of services/(3) Landlords' covenants implied by statute
(3) Landlords' covenants implied by statute
(i) Defective Premises Act 1972
(a) As builder
HR A[7380.211]
On and after 1 January 1974, a person taking on work for or in connection with the provision of a dwelling (whether the
dwelling is provided by the erection or the conversion or enlargement of a building) owes a duty (a) if the dwelling is
provided to the order of any person, to that person and also (b) to every person who acquires an interest (whether legal
or equitable) in the dwelling, to see that the work which he undertakes on it is done in a workmanlike or, as the case
may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for
habitation when completed1. A person who takes on any such work for another on terms that he is to do it in accordance
with instructions given by or on behalf of that other shall, to the extent to which he does it properly in accordance with
those instructions, be treated as discharging this duty except where he owed a duty to that other to warn him of any
defects in the instructions and fails to discharge that duty2. A person is not to be treated for these purposes as having
given instructions for the doing of work merely because he has agreed to the work being done in a specified manner,
with specified materials or to a specified design3. A person who (a) in the course of a business which consists of or
includes providing or arranging for the provision of dwellings or installations in dwellings; or (b) in the exercise of a
power of making such provision or arrangements conferred by or by virtue of any enactment, arranges for another to
take on work for or in connection with the provision of a dwelling will be treated as included among the persons who
have undertaken the work4. Any cause of action in respect of a breach of this duty is deemed for the purposes of the
Limitation Acts to have accrued at the time when the dwelling was completed; but if after that time a person who has
done work for or in connection with the provision of the dwelling does further work to rectify the work he has already
done, any such cause of action in respect of that further work is deemed for those purposes to have accrued at the time
when the further work was finished5.
HR A[7380.212]
1 Defective Premises Act 1972, s 1(1). For the duty to be breached the premises must be unfit for habitation and not merely defective:
Thompson v Clive Alexander (1992) 59 BLR 81. See too Alexander v Mercouris [1979] 1 WLR 1270; Andrews v Schooling [1991] All ER
723, (1991) 23 HLR 317. Provision is made for exclusions from the remedy under s 1 in the case of approved schemes: see s 2. See HR
A[7380.207] above for common law duties in the tort of negligence.
2 DPA 1972, s 1(2).
3 DPA 1972, s 1(3).
4 DPA 1972, s 1(4).

Page 73
5 DPA 1972, s 1(5); Alderson v Beetham Organisation [2003] 1 WLR 1686, CA.
(b) No abatement of duty by disposal of interest
HR A[7380.213]
Where work of construction, repair, maintenance or demolition or any other work is done on or in relation to premises,
any duty of care owed, because of the doing of the work, to persons who might reasonably be expected to be affected by
defects in the state of the premises created by the doing of the work is not abated by the subsequent disposal of the
premises by the person who owed the duty1. This does not apply (a) in the case of premises which are let, where the
relevant tenancy of the premises commenced, or the relevant tenancy agreement of the premises was entered into before
1 January 1974; (b) in the case of premises disposed of in any other way, when the disposal of the premises was
completed, or a contract for their disposal was entered into, before 1 January 1974; and (c) in either case, where the
relevant transaction disposing of the premises is entered into in pursuance of an enforceable option by which the
consideration for the disposal was fixed before 1 January 19742.
HR A[7380.214]
1 DPA 1972, s 3(1).
2 DPA 1972, s 3(2); s 7(2).
(c) As landlord
HR A[7380.215]
Where premises are let under a tenancy which puts on the landlord an obligation to the tenant for the maintenance or
repair of premises, the landlord owes to all persons who might reasonably be expected to be affected by the defects in
the state of the premises a duty to take such care as is reasonable in all the circumstances to see that they are reasonably
safe from personal injury or from damage to their property caused by a "relevant defect"1. A "relevant defect" means a
defect in the state of the premises existing at or after the material time and arising from, or continuing because of, an act
or omission by the landlord which constitutes, or would if he had notice of the defect, have constituted a failure by him
to carry out his obligation to the tenant for the maintenance or repair of the premises2. For these purposes "the material
time" means (a) where the tenancy commenced before the Act, 1 January 1974; and (b) in all other cases, the earliest of
(i) the time when the tenancy commences; (ii) the time when the tenancy agreement is entered into; (iii) the time when
possession is taken of the premises in contemplation of the letting3. This statutory duty is owed if the landlord knows
(whether as the result of being notified by the tenant or otherwise) or if he ought in all the circumstances to have known
of the relevant defect: accordingly, the landlord may owe this duty where he ought to inspect the property or the
installations within it4.
Where premises are let under a tenancy which, expressly or impliedly, gives the landlord the right to enter the premises
to carry out any description of maintenance or repair of the premises, then, as from the time when he first is, or ought by
notice or otherwise can, put himself in a position to exercise the right and so long as he is or can put himself in that
Page 74
position, he shall be treated for the purposes of this statutory duty (but no other purpose) as if he were under an
obligation to the tenant for that description of maintenance or repair of the premises5.
For the purposes of these provisions, "repair" means repair strictly so-called6; since a duty to maintain or repair does
not equate with a duty to keep safe, this statutory duty extends no further than the covenant to repair and maintain owed
by the landlord in any particular case7. The obligations imposed or rights given by any enactment in virtue of a tenancy
are to be treated as imposed or given by the tenancy8.
Where the right to manage premises has been acquired by an RTM company, the duties are owed by the RTM company
in place of the landlord as from the acquisition date9.
HR A[7380.216]
1 Defective Premises Act 1972, s 1(1). "Premises" are the parcels of the demise and will include ancillary parts of the property: Smith v
Bradford MBC (1982) 44 P & CR 171, CA. See too Boldack v East Lindsey DC (1998) 31 HLR 41.
2 DPA 1972, s 1(3).
3 DPA 1972, s 1(3).
4 DPA 1972, s 1(2). See Sykes v Harry [2001] EWCA 167, [2001] QB 1014.
5 DPA 1972, s 1(4).
6 Lee v Leeds CC [1988] 1 WLR 1488, CA; Dunn v Bradford MBC [2002] EWCA Civ 1137, [2002] 3 EGLR 104, CA.
7 Alker v Collingwood Housing Association [2007] EWCA Civ 343, [2007] 1 WLR 2230; and McCauley v Bristol CC [1992] QB 134.
See HR A[7380.28] FF above for the meaning of repair.
8 DPA 1972, s 1(5).
9 Commonhold and Leasehold Reform Act 2002, Sch 7, para 2; see HR A[1670] - HR A[1680] below.
(ii) Statutory warranty: certain lettings of houses at low rents
HR A[7380.217]
In any contract made on or after 6 July 1957 for letting for human habitation a house1 at a rent2 not exceeding in
London £80, and elsewhere £52, there is, notwithstanding any stipulation to the contrary, implied a condition that the
house is, at the commencement of the tenancy, fit for human habitation. There is also implied an undertaking on the part
of the landlord that it will be kept by him fit for human habitation during the tenancy3. The effect of this provision is
that a duty is cast on the landlord throughout the tenancy to execute such repairs as are necessary to keep the premises
fit for human habitation. If there is a breach of this statutory provision the tenant can sue the landlord for damages as
well as abandon his tenancy4. The landlord's obligation under the statutory condition implied by the Landlord and
Tenant Act 1985, s 8(1) is restricted to cases where the house is capable of being rendered fit for human habitation at
Page 75
reasonable cost5. It seems reasonably clear that a statutory tenant can rely on the implied undertaking6. The same
condition and undertaking is implied in a similar contract made on or after 31 July 1923 and before 6 July 1957 where
the rent does not exceed £40 in London and £26 elsewhere, and in a similar contract made before 31 July 1923 where
the rent does not exceed £40 in London, £26 in a borough or urban district which according to the last published census
before the letting had a population of 50,000 or more, and £16 elsewhere7.
HR A[7380.218]
1 This includes a part of a house (Landlord and Tenant Act 1985, s 8(6)(a)), and any yard, garden, outhouses and appurtenances belonging
thereto or usually enjoyed therewith (LTA1985, s 8(6)(b)).
2 Rent for this purpose means the actual contractual rent paid by the tenant to his landlord irrespective of the liability of either part to pay
rates: Rousou v Photi [1940] 2 KB 379, [1940] 2 All ER 528, CA.
4 Walker v Hobbs & Co (1889) 23 QBD 458, decided on the corresponding provision in the Housing of the Working Classes Act 1885. In
McCarrick v Liverpool Corpn [1947] AC 219, [1946] 2 All ER 646 the House of Lords held that notice to the landlord of want of repair was
a condition precedent of liability under this section.
5 Buswell v Goodwin [1971] 1 All ER 418, [1971] 1 WLR 92, CA (decided under the preceding statutory provisions, namely the Housing
Act 1957, s 6(2)).
6 Morgan v Liverpool Corpn [1927] 2 KB 131.
7 Landlord and Tenant Act 1985, s 8(3), (4).
HR A[7380.219]
In all cases the condition and undertaking are excluded where the house is let for a term of three years or more, not
determinable by either party within three years, upon the terms that the lessee shall put it into a condition fit for human
habitation1.
HR A[7380.220]
HR A[7380.221]
Where such a condition and undertaking are implied, the landlord1 or any person authorised by him in writing may, at
reasonable times of the day, and on giving 24 hours' notice in writing, enter2 for the purpose of viewing the state and
condition of the house. If the landlord desires the inspection to be carried out on his behalf by his agent he must
authorise that agent in writing. A general authority given in writing to a person to act generally on behalf of a landlord
Page 76
would probably be deemed a sufficient authority within the meaning of this section. It is advisable, however, in giving
such general authority to have regard to the requirements of this section if the property is affected by it and to include a
specific authority to carry out such inspections as may be deemed advisable for the purpose of this section.
HR A[7380.222]
1 Under earlier legislation replaced by the Housing Act 1957, s 6 and now by the Landlord and Tenant Act 1985, s 8, it was held by a
Divisional Court that a house agent who lets a house is not the 'landlord' and is not therefore liable for a breach of the implied undertaking,
even where he declines to disclose the owner's name: Fosk v Trumble (15 January 1913, unreported). See also Bond v Busfield (1913) 48
LJCCR 54.
2 See Morgan v Liverpool Corpn [1927] 2 KB 131, per Atkin LJ. As to the enforcement of this right of entry, see Housing Act 1985, s 55.
Writing includes typewriting (see the Interpretation Act 1978, s 5, Sch 1).
HR A[7380.223]
A similar condition and undertaking is implied, notwithstanding any stipulation to the contrary, in the contract of
employment of a workman employed in agriculture, where the provision of a house for the employee forms part of his
remuneration, but this does not affect the liability to repair of any person other than the landlord or the enforcement of
such liability1.
HR A[7380.224]
1 Landlord and Tenant Act 1985, s 9.
HR A[7380.225]
In determining for the purposes of the implied condition and undertaking whether a house is unfit for human habitation,
regard is to be had to its condition in respect of the following matters:
(a) repair;
(b) stability;
(c) freedom from damp;
(d) internal arrangement;
(e) natural lighting;
(f) ventilation;
(g) water supply;
(h) drainage and sanitary conveniences; and
(i) facilities for preparation and cooking of food and for the disposal of waste water;
and the house is to be deemed to be unfit if, and only if, it is so far defective in one or more of these respects that it is
not reasonably suitable for occupation in that condition1. Whether the house is so far defective in any of the specified
Page 77
matters as not to be reasonably suitable for occupation is a question of fact.
HR A[7380.226]
HR A[7380.227]
The law in force prior to the enactment of the present standard only required that 'the place must be decently fit for a
human being to live in'1. The whole house need not be unfit for human habitation for a breach of this duty to occur. The
duty of the landlord is to keep the house fit for human habitation, and the unfitness of one room, particularly in a small
working-class house may be a most material detraction from the enjoyment of the tenant2. The local authority has a
statutory power to require repairs and to execute repairs in case of default by the owners3.
HR A[7380.228]
1 Jones v Geen [1925] 1 KB 659 at 668, per Salter J; though it was held that if the state of repair is such that injury may result from
ordinary use the premises cannot be regarded as fit for human habitation: Summers v Salford Corpn [1943] AC 283, [1943] 1 All ER 68. The
following cases as to particular breaches or alleged breaches under the former law may still be of importance, although where there was held
to be no breach, they might not necessarily be regarded as persuasive today: Stanton v Southwick [1920] 2 KB 642 (occasional incursions by
rats--no breach); Chester v Powell, Powell v Chester (1885) 52 LT 722 (vermin, defective drains, scarlet fever--breach); Smith v Marrable
(1843) 11 M & W 5 (vermin); Campbell v Lord Wenlock (1866) 4 F & F 716 (vermin); Summers v Salford Corpn [1943] AC 283, [1943] 1
All ER 68 (broken sash cord--breach); Daly v Elstree RDC [1948] 2 All ER 13, CA (hot water system out of order but means of heating
water in kettles). It was held that the undertaking as to fitness for human habitation did not impose on the lessor of part of a house an
obligation to keep a common flight of stairs in repair: Dunster v Hollis [1918] 2 KB 795.
2 Summers v Salford Corpn [1943] AC 283, [1943] 1 All ER 68.
3 Housing Act 1985, ss 189, 190 and 193.
(iii) Statutory implication of repairing obligations into short leases: Landlord and Tenant
Act 1985, ss 11-16
Application of Landlord and Tenant Act 1985, s 11
(A) GENERALLY
HR A[7380.229]
Terms relating to the repair of premises are implied by s 11 of the Landlord and Tenant Act 1985 into a lease of a
dwelling house granted on or after 24 October 1961 for a term of less than seven years1.
Page 78
HR A[7380.230]
1 LTA 1985, s 13(1). See HR A[7380.239] below for the terms which are implied. The statutory predecessor of these provisions is to be
found in the Housing Act 1961, s 32.
(B) APPLICATION OF
HR A[7380.231]
As indicated in the preceding paragraph, s 11 applies to leases where the term is for less than seven years. 'Lease' for
these purposes includes a sublease and an agreement for lease1. In determining this any part of the term which falls
before the grant is to be left out of account and the lease will be treated as a lease for a term commencing with the
grant2. It has been held that where an agreement for lease provides for the term of seven years to begin on or after the
date of the agreement, the term under the lease which is subsequently executed pursuant to the agreement is one for
seven years (notwithstanding that the term of the lease itself commences before the date the lease is executed)3.
Further, a lease which is determinable at the option of the lessor before the expiration of seven years from the
commencement of the term will be treated as a lease for a term of less than seven years4. On the other hand, a lease
(other than one which can be determined before the expiration of seven years from the commencement of the term) will
not be treated as a lease for a term of less than seven years if it confers on the lessee an option for renewal which,
together with the original term, amount to seven years or more5.
HR A[7380.232]
1 LTA 1985, s 36(2). 'Lease' does not include a mortgage term: s16(a).
2 LTA 1985, s 13(2)(a).
3 Brikom Investments Ltd v Seaford [1981] 2 All ER 783, CA.
4 LTA 1985, s 13(2)(b). In Parker v O'Connor [1974] 3 All ER 257, CA it was held that where a lease was terminable at the option of the
landlord by reason of the death of a party to the lease, this was not one determinable within Housing Act 1961, s 33(2) (the predecessor of
this provision) because the landlord had no unfettered right or option to determine the lease in less than seven years.
5 LTA 1985, s 13(2)(c).
(C) APPLICATION OF
HR A[7380.233]
Page 79
As indicated above, s 11 of the Landlord and Tenant Act 1985 only applies to a 'lease of a dwelling-house'1. A 'lease of
a dwelling-house' means a lease by which a building or part of a building is let wholly or mainly as a private residence,
and 'dwelling-house' means that building or part of a building2. Accordingly, the provisions of s 11 do not apply to
commercial lettings of a building which would otherwise appear to be a dwelling house. The question is for what
purpose the building or part of a building is let rather than whether the demised premises are constructed in the built
form of a dwelling house. It would follow that a lessee who took a lease of a building for the purpose, for example of
subletting in multiple occupation, would not have the benefit of s 11 since the building would not be let wholly or
mainly as a private residence3.
HR A[7380.234]
1 See HR A[7380.229].
2 LTA 1985, s 16(b).
3 See St Catherine's College v Dorling [1979] 3 All ER 250.
(D) APPLICATION OF
HR A[7380.235]
There are four exceptions to the application of s 11 to a lease of a dwelling house granted on or after 24 October 1961
for a term of less than seven years. Section 11 does not apply:
(1) to a new lease granted to an existing tenant, or to a former tenant still in possession, if the previous
lease was not a lease to which s 11 applies (and, in the case of a lease granted before 24 October 1961
would not have been if it had been granted on or after that date)1;
(2) to a lease of a dwelling house which is a tenancy of an agricultural holding or to a farm business
tenancy2;
(3) to a lease granted on or after 3 October 1980 to a local authority, a National Park authority, new
town corporation, urban development corporation, the Development Board for Rural Wales, a registered
social landlord, a co-operative housing association, or specified bodies making student lettings, or a
housing action trust established under Housing Act 1988, Part III3;
(4) to a lease granted on or after 3 October 1980 to (i) Her Majesty in right of the Crown (unless the
lease is under the management of the Crown Estate Commissioners) or (ii) a government department or a
person holding in trust for Her Majesty for the purposes of a government department4.
HR A[7380.236]
1 LTA 1985, s 14(1). For these purposes 'existing tenant' means a person who is when, or immediately before the new lease is granted, the
lessee under another lease of the dwelling house; 'former tenant still in possession' means a person who (a) was the lessee under another
lease of the dwelling house which terminated at some time before the new lease was granted and (b) between the termination of that other
Page 80
lease and the grant of the new lease was continually in possession of the dwelling house or of the rents and profits of the dwelling house: s
14(2). See Brikom Investments Ltd v Seaford [1981] 2 All ER 783.
2 LTA 1985, s 14(3). See Part F of this work for agricultural tenancies.
3 LTA 1985, s 14(4) as amended by Environment Act 1995, s 78, Sch 10, para 25(1), Housing Act 1996 (Consequential Provisions) Order
1996 (SI 1996/2325), Sch 2, para 16(2), Local Government and Housing Act 1989, Sch 11, para 89, and Housing Act 1988, s 116(3). For
bodies making student letting, see Rent Act 1977, s 8 and Housing Act 1988, Sch 1, para 8.
4 LTA 1985, s 14(5).
(E) CONTRACTING OUT AND ESTOPPEL
HR A[7380.237]
A county court may, with the consent of the parties, authorise the inclusion in a lease (or an agreement collateral to a
lease) of provisions excluding or modifying, in relation to the lease, the provisions of s 11 relating to repairing
obligations if it appears reasonable to do so1. Subject to that, however, a covenant or agreement, whether contained in a
lease to which s 11 applies or an agreement collateral to such a lease, is void in so far as it purports (a) to exclude or
limit the obligations of the lessor or the immunities of the lessee under that section or (b) to authorise any forfeiture or
impose on the lessee any penalty, disability or obligation in the event of his enforcing or relying upon those obligations
or immunities2.
While contracting out of these provisions is prohibited, it is possible for a landlord to be estopped from relying upon the
true length of the term and from denying that he is liable under s 113.
HR A[7380.238]
1 LTA 1985, s 12(2).
2 LTA 1985, s 12(1).
3 Brikom Investments Ltd v Seaford [1981] 2 All ER 783, CA.
The scope of the obligations under Landlord and Tenant Act 1985, s 11
(F) THE LESSOR'S REPAIRING COVENANT: GENERALLY
HR A[7380.239]
Where s 11 applies1 there is implied a covenant by the lessor2 to keep in repair3 the structure4 and exterior5 of the
dwelling house6 (including drains, gutters and external pipes);to keep in repair7 and proper working order8 the
installations9 in the dwelling house for the supply of water, gas10 and electricity and for sanitation (including basins,
Page 81
sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of
water, gas and electricity); and to keep in repair and proper working order the installations in the dwelling house for
space heating and heating water.
Consistently with the general approach to the construction of repairing obligations11, in determining the standard of
repair required by the lessor's repairing covenant, regard is to be had to the age, character and prospective life of the
dwelling house and the locality in which it is situated12. The requirement, however, to have regard to the prospective
life of the dwelling house may mean that the landlord will not be in breach of the obligation even though the dwelling is
unfit for human habitation13; however if the dwelling house has a limited prospective life the landlord's obligation may
still oblige it to carry out works14 albeit that these may be limited to running repairs to parts15. The standard required
of public authorities is no higher than that required of private landlords16.
HR A[7380.240]
2 LTA 1985, s 11(1).
3 For the meaning of 'repair' see HR A[7380.28] above.
4 See HR A[7380.13] above for the meaning of 'structure'.
5 See HR A[7380.15] above for the meaning of 'exterior'.
6 See HR A[7380.233] above concerning the dwelling houses to which the covenant relates.
7 See HR A[7380.28] above for the meaning of 'repair'.
8 See HR A[7380.55] for the meaning of 'proper working order'. See Long v Southwark London Borough Council [2002] EWCA Civ 403,
19 LS Gaz R 30, [2002] 7 EG 150, CA.
10 See HR A[7380.253] below for specific statutory requirements concerning gas fittings.
11 See HR A[7380.69] FF above.
12 LTA 1985, s 11(3).
13 Newham London Borough Council v Patel (1978) 13 HLR 77.
14 McLean v Liverpool City Council (1988) 20 HLR 25, CA.
15 Dame Margaret Hunderford Charity Trustee v Beazley [1993] 29 EG 100.
16 See Wainwright v Leeds City Council (1984) 270 EG 1289, CA. The duty of local authorities is unaffected by the Human Rights Act
Page 82
1998: Lee v Leeds City Council [2002] EWCA Civ 6, [2002] 1 WLR 1488, CA.
HR A[7380.241]
There are express limits, however, on this obligation.
(1) The lessor's repairing covenant which is implied is not to be construed as requiring the lessor to
carry out works or repairs for which the lessee is liable by virtue of his duty to use the premises in a
tenant-like manner, or would be so liable but for an express covenant on his part1.
(2) The obligation does not require the landlord to rebuild or reinstate the premises in the case of
destruction or damage by fire, or by tempest, flood or other inevitable accident2.
(3) The obligation does not oblige the landlord to keep in repair or maintain anything which the lessee
is entitled to remove from the dwelling house3, eg tenant's fixtures4.
On the other hand, save to the extent that the covenant by the lessee imposes requirements in relation to these three
matters, a covenant by the lessee for the repair of the premises is of no effect so far as it relates to matters within the
lessor's repairing covenant which is implied by s 11(1)5.
HR A[7380.242]
1 LTA 1985, s 11(2)(a). See HR A[7380.113] above for the extent of the tenant's duty to use the premises in a tenant-like manner.
2 LTA 1985, s 11(2)(b). See HR A[7380.36] above for the extent of the obligation to rebuild in these circumstances.
3 LTA 1985, s 11(2)(c).
4 See HR A[7380.185] and also HR A[7380.1681] FF above for tenant's fixtures.
5 LTA 1985, s 11(4). A covenant by a lessee for these purposes includes a covenant (a) to put in repair or deliver up in repair, (b) to paint,
point or render, (c) to pay money in lieu of repairs by the lessee, or (d) to pay money on account of repairs by the lessor: s 11(5).
(G) THE IMPLIED COVENANT: AFTER 15 JANUARY 1989
HR A[7380.243]
Where the tenancy was entered into on or after 15 January 1989 (unless entered into pursuant to a contract made before
that date) then the obligations under s 11 are extended where the tenancy relates to a dwelling house forming part only
of a building1. In such a case,
(i) the obligation on the lessor extends to any part of the building in which the lessor has an estate or
interest; and
Page 83
(ii) the installations in respect of which the lessor has an obligation include installations which, direct
or indirectly, serve the dwelling house and which either (i) form part of any part of a building in which
the lessor has an estate or interest; or (ii) are owned by the lessor or is under his control2.
These obligations, however, do not require the lessor to carry out any works or repairs unless3 the disrepair (or failure
to maintain in working order) is such as to affect the lessee's enjoyment of the dwelling house or of any common parts4
which the lessee, as such, is entitled to use.
HR A[7380.244]
1 LTA 1985, ss 11(1A),(1B) as inserted by Housing Act 1988, s 116(1).
2 LTA 1985, s 11(1A). Niazi Services Ltd v Van der Loo [2004] EWCA Civ 53, [2004] 1 WLR 1254.
3 LTA1985, s 11(1B).
4 The phrase "common parts" is defined by reference to Landlord and Tenant Act 1987, s 60(1): LTA 1985, s 11(1B).
(H)
HR A[7380.245]
In a lease in which the lessor's repairing covenant is implied by s 11 there is also implied a covenant by the lessee that
the lessor, or any person authorised by him in writing may at reasonable times of the day and on giving 24 hours' notice
in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state
of repair1. Further, it is necessarily implicit that the landlord has a right to enter the demised premises for the purpose of
carrying out work required by the covenant for such period as is necessary to carry out the work2.
HR A[7380.246]
1 LTA 1985, s 11(6).
2 McGreal v Wake (1984) 13 HLR 107. For the landlord's rights of entry to carry out repairs generally see HR A[7380.266] FF below.
HR A[7380.247]
The implied right of the landlord to enter to carry out repairs, however, applies only to the premises comprised in the
lease. Where the lessor's repairing covenant has the wider effect described above in the case of post-15 January 1989
leases1, and in order to comply with the covenant the lessor needs to carry out works or repairs otherwise than in, or to
any installation in, the dwelling house and the lessor does not have a sufficient right in the part of the building or the
Page 84
installation concerned to enable him to carry out the required repair, then he has a defence to a claim for breach of
covenant if he can prove that he has used all reasonable endeavours to obtain, but was unable to obtain, such rights as
would be adequate to enable him to carry out those works or repairs2.
HR A[7380.248]
2 LTA 1985, s 11(3A).
(iv) Agricultural tenancies
HR A[7380.249]
The landlord has obligations in relation to fixed equipment under the Agricultural Holdings Act 1986. These are dealt
with in Division F1.
HR A[7380.250]
1 See HR F[616]-[618].
(v) Offices Shops and Railway Premises Act 1963
HR A[7380.251]
The Offices Shops and Railway Premises Act 1963 imposes obligations upon landlords in respect of office, shop and
railway premises. In addition to obligations upon occupiers to comply with the duties imposed by the Act, special
provisions apply where a building to which the Act applies1 is in single ownership and part of it is held under a lease,
agreement for lease or licence2. In such cases "the owner" of the building has duties:
(1) to secure every common part of the building, and all furniture, furnishings and fitting in such part,
are kept in a clean state3;
(2) to secure and maintain suitable and sufficient lighting, whether artificial or natural, of common
parts4;
(3) to keep windows and skylights in common parts clean5;
(4) to keep properly maintained artificial lighting in common parts6;
(5) to ensure that floors, stairs, steps, passages and gangways comprised in or constituting a common
part of the building are of sound construction and are properly maintained and that the provisions of s 16
of the Act are complied with7;
Page 85
(6) to ensure that there is no contravention of s 9 of the Act (provision of suitable and sufficient
sanitary conveniences for employees); if there is a contravention the landlord will be responsible instead
of the occupier8;
(7) to ensure that there is no contravention of s 10 (washing facilities); the landlord is again
responsible instead of the occupier9.
The "owner" for these purposes means the person for the time being receiving the rack rent of the premises, building or
part of a building in connection with which the word is used, whether on his own account or as agent or trustee for
another person, or who would so receive the rack rent if the premises, building or part were let at a rack rent10. In the
case of buildings where different parts are owned by different persons and of which a part consists of shop premises or
office premises, responsibility is placed on the owner of the part or common part instead of the occupier, and if there are
more owners than one of a common part each is responsible11. Where the landlord as owner is responsible for a
contravention of these provisions, he is guilty of an offence and on summary conviction is liable to a fine not exceeding
level 5 on the standard scale or on indictment to a fine12. It is a defence for a person charged to prove that he used all
due diligence to secure compliance with the provision in question13.
HR A[7380.252]
1 See s 1(2), (3) for the premises to which the Act applies.
2 S 42.
3 S 42(2).
4 S 42(3).
5 S 42(3).
6 S 42(3).
7 S 42(4).
8 S 42(6) (other than a contravention consisting in a failure to keep clean conveniences provided in pursuance of s 9 not being
conveniences provided for use jointly by the persons employed to work in the premises and by other persons.
9 S 42(7).
10 See s 90(1); London Corpn v Cusack-Smith [1955] AC 337; Rawlance v Croydon Corpn [1952] 2 QB 803; Newman v Dorrington
Developments Ltd [1975] 1 WLR 1642; Pollway Nominees v Croydon London Borough Council [1987] AC 79.
11 S 43.
12 S 63. For the scale of fines see page xiv.
13 S 67.
Page 86
(vi) Gas appliances
HR A[7380.253]
Under the Gas Safety (Installation and Use) Regulations 19981, in the case of a lease for less than seven years, a
tenancy for a periodic term or a statutory tenancy arising out or a lease for less than seven years or a tenancy for a
periodic term, there are duties upon the landlord to ensure that there is maintained in a safe condition (a) any relevant
gas fitting2 and (b) any flue which serves any relevant gas fitting, so as to prevent the risk of injury to any person in
lawful occupation of the relevant premises3. It is the duty of the landlord to ensure that each appliance and flue is
checked for safety within twelve months of being installed and annually thereafter: in the case of a lease which begins
after the Gas Safety (Installation and Use) Regulations 1998 came into force, the landlord is under a duty to ensure that
each appliance is checked for safety within a period of twelve months before the lease begins and annually thereafter,
and to ensure that a record of each safety check is kept for two years4. There is a specific requirement that the landlord
must ensure that in any room occupied or to be occupied as sleeping accommodation by a tenant in relevant premises
there is not a relevant gas fitting which would contravene specific regulations5. Safety checks must be carried out by an
approved gas fitter6.
HR A[7380.254]
1 SI 1998/2451. In determining the length of the term, the regulations contain provisions similar to those found in LTA 1985, s 13: see reg
36(1).
2 See reg 36(1). A relevant gas fitting is a gas appliance (except one which the tenant is entitled to remove) or any installation pipework
installed in any relevant premises, including gas appliances and installation pipework which serves the relevant premises and are installed in
premises in which the landlord owns an interest or is owned by the landlord or under his control.
3 Reg 36(2).
4 Reg 36(3).
5 See reg 36(11). Reg 30(2) and (3) require gas fires and other appliances to be room-sealed and to incorporate safety controls.
6 Reg 36(4).
(vii) Supply of Beer (Tied Estates) Order 1989 (SI 1989/2390), art 6
HR A[7380.255]
In lettings of licensed premises there are specific provisions which regulate landlords' repairing obligations.
Page 87
provision of services/(4) Landlord's express obligations
(4) Landlord's express obligations
(i) Generally
HR A[7380.256]
As is the case with tenants' obligations1, the extent of a tenant's express obligations relating to the maintenance of the
fabric of the demised premises will be a matter of construction of the lease in question. Again, it is necessary to
ascertain the parts of the premises in respect of which the tenant has agreed to perform obligations2 and the nature of
the activities which the landlord has agreed to undertake in respect of those parts3 and also to consider the extent to
which words are precisely used by the draftsman, or whether a "torrential" style of drafting has been used4.
HR A[7380.257]
(ii) Keeping in repair includes putting in repair
HR A[7380.258]
As indicated above1, a covenant to keep in repair includes an obligation to put in repair.
HR A[7380.259]
(iii) Notice
Page 88
HR A[7380.260]
At common law, the general rule is that a covenant to keep premises in repair obliges the covenantor to keep them in
repair at all times, so that he is in breach immediately a defect occurred. There is an exception, however, where the
obligation is the landlord's and the defect occurs in the demised premises themselves, in which case there was a breach
only when the landlord had information about the existence of the defect and had failed to carry out remedial works
with reasonable expedition1. Where a landlord covenants to repair property which is demised to the tenant, the
obligation to carry out the repair is subject to an implied term that his liability does not arise until he has notice of the
defect2. The implication of such a term is plainly necessary in cases where the defect arises during the term and the
landlord has no means of knowing of the defect because the tenant is in possession and where the defect is latent and
unobservable3. The implication, however, is still made where the defect was present when the premises were let4 and
even where the landlord has reserved a right to enter and to inspect the premises5. Where such implication is made, the
landlord's obligation is to carry out the work with reasonable expedition after receiving such notice6.
On the other hand, there is no such implication where the subject matter of the covenant remains within the possession
of the landlord7. In such a case the landlord is liable for disrepair as soon as it occurs, the landlord's obligation being not
to allow the premises to fall into disrepair8. If, however, damage is caused by something wholly outside the control of
the landlord and unforeseen, it is possible that the landlord may not be liable until a reasonable time has elapsed from
the time of the damage eg if a tree outside the landlord's premises fell onto the property9. On the other hand, where
damage can be foreseen and precautions taken, the landlord will be liable10.
HR A[7380.261]
1 British Telecommunications plc v Sun Life Assurance Society plc [1996] Ch 69, CA. See also HR A[7380.215] above for the effect of
Defective Premises Act 1972, s 4.
2 Makin v Watkinson (1870) LR 6 Ex 25; Torrens v Walker [1906] 2 Ch 166. Note however that the landlord may be held to have waived
the benefit of such a term if he advises the tenant that he intends to carry out repair works, thus communicating to the tenant that he does not
intend to rely upon the need for notice - see Princes House Ltd v Distinctive Clubs Ltd [2007] EWCA Civ 374, [2007] 27 EG 304.
3 O'Brien v Robinson [1973] AC 912. See too Hugall v McKean (1885) 53 LT 94, CA.
4 Uniproducts (Manchester) Ltd v Rose Furnishers Ltd [1956] 1 WLR 45.
5 Morgan v Liverpool Corpn [1927] 2 KB 131, approved in McCarrick v Liverpool Corpn [1947] AC 219.
6 O'Brien v Robinson [1973] AC 912 per Lord Diplock; see too Calabar Properties Ltd v Stitcher [1984] 1 WLR 287, CA; Morris v
Liverpool City Council [1988] 1 EGLR 47, CA.
7 Murphy v Hurley [1922] 1 AC 369. See too Melles & Co v Holme [1918] 2 KB 100; Bishop v Consolidated London Properties Ltd
(1933) 102 LJKB 257.
8 Loria v Hammer [1989] 2 EGLR 249; British Telecommunications plc v Sun Life Assurance Society plc [1996] Ch 69, CA. See too
Ladsky v TSB Bank plc (1997) 74 P & CR 372 at 375, CA.
9 British Telecommunications plc v Sun Life Assurance Society plc [1996] Ch 69 at 79, CA.
Page 89
10 Passley v Wandsworth London Borough Council (1996) 30 HLR 165, CA.
HR A[7380.262]
Where notice is required for the landlord to be liable to repair the premises, it is not necessary that the notice come
expressly or directly from the tenant: it is sufficient that it comes from some responsible source1. Further, the notice
need only provide the landlord with sufficient information about the existence of defects as would put a reasonable
landlord on inquiry as to whether repairs were needed: it is therefore not necessary for the landlord to be given notice
identifying the extent of the disrepair2. This is so whether the defect is latent or patent3.
HR A[7380.263]
1 Dinefwr BC v Jones (1987) 19 HLR 445, CA; Hall v Howard (1988) 57 P & CR 226, CA. See too Griffin v Pillett [1926] 1 KB 17.
2 Griffin v Pillett [1926] 1 KB 17; Dinefwr BC v Jones (1987) 19 HLR 445, CA; Hall v Howard (1988) 57 P & CR 226, CA; O'Brien v
Robinson [1973] AC 912 at 926B per Lord Morris. Contrast Al Hassani v Merrigan (1987) 20 HLR 238, CA: letter from tenant indicating
that the tenant would ascertain what work was necessarily insufficient to constitute notice and counterclaim by tenant in proceedings also
insufficient to constitute notice and impose liability upon the counterclaim itself (but cf Staves v Leeds City Council (1990) 23 HLR 107
where a counterclaim was considered sufficient notice).
3 Morgan v Liverpool Corpn [1927] 2 KB 131: see HR A[7380.260] above.
HR A[7380.264]
It has been decided at first instance that where a landlord assigns his reversion, a fresh notice to the assignee of the
reversion is required for the assignee to be liable1. This is doubtful2.
HR A[7380.265]
1 See Birkin v Guardweald Ltd (1997) 29 HLR 908, CA refusing to allow the point to be taken on procedural grounds.
2 See generally HR A[1949] FF for the liabilities of assignees of the reversion.
(iv) Entry to carry out works to perform landlord's obligation on the demised premises
(a) Common law
HR A[7380.266]
Where a landlord is obliged to carry out works to premises demised to the tenant, it is implicit (if not expressly
provided) that he is allowed to enter the premises and occupy them for such time as is reasonable for carrying out those
Page 90
works1 but must make good any damage to decorations caused by works2. The landlord, however, ought to give notice
of his intention to come in and do the work but need not give the tenant a detailed specification; and if the tenant
prevents the landlord from carrying out the works, the landlord is not in breach of his obligations3.
HR A[7380.267]
1 Edmonton Corpn v WM Knowles & Son (1962) 60 LGR 124 (distinguished in Duke of Westminster v Guild [1985] QB 688, CA); Saner
v Bilton (1878) 7 Ch D 815; McGreal v Wake (1984) 269 EG 1254, CA.
2 McGreal v Wake (1984) 269 EG 1254, CA; McDougall v Easington DC (1989) 21 HLR 310, CA. See HR A[7380.28] above for the
obligation to make good.
3 Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 1 WLR 570.
(b) Statutory rights of entry
HR A[7380.268]
In addition to rights of entry which may be agreed in the lease expressly or by implication, rights of entry are found
under a number of statutes which may have application to leasehold property. The principal statutes are:
Agricultural Holdings Act 1986, s 231

Rent Act 1977, ss 3(2)2 and 1483
Housing Act 1988, s 164
Landlord and Tenant Act 1985, s 11(6)5
Party Walls etc Act 1996, s 86
In addition to these, a court of summary jurisdiction may order an occupier to permit the execution of work by the
owner where the owner is liable under the Building Act 1984 to carry out the works and a county court has power to
modify the terms of any agreement or lease where its terms7 and conditions prevent the carrying out of works required
by the Fire Precautions Act 19718.
HR A[7380.269]
1 See HR F[762].
2 See HR C[332].
3 See HR C[1422].
4 See HR C[2120].
Page 91
5 See HR A[7380.245].
6 This section contains rights of entry for the purposes of works under this legislation.
7 Building Act 1984, s 98.
8 Fire Precautions Act 1971, s 28.
(I) PERFORMANCE OF LANDLORD'S OBLIGATIONS AND TENANT'S POSSESSION
HR A[7380.270]
Where the performance of a landlord's repairing obligation impinges on the tenant's quiet enjoyment, neither covenant
simply trumps the other. The two covenants must be construed and applied so far as possible so as to co-exist on a basis
of parity, not of priority, respecting the terms of both. The landlord must take all reasonable precautions but is not
obliged to take all possible precautions to minimise disturbance to the tenant's occupation1.
HR A[7380.271]
1 Goldmile Properties Ltd v Speiro Lechouritis [2003] EWCA Civ 49, [2003] 15 EG 143, [2003] 2 P & CR 1, CA.
(II) EXPRESS WARRANTIES AS TO FITNESS FOR PURPOSE
HR A[7380.272]
A warranty, at or before the making of a lease, that a house is in a fit state for habitation, whether as regards repair or
drainage, may be given as an express provision in a contract, or may be implied from a representation as to the state of
the house. A representation by the landlord will cease to be a mere representation and will constitute a warranty if it is
intended to be the basis of the contractual relation between the parties1. Hence, if the intending tenant declines to take
the lease unless the landlord gives an assurance that the drains are in order, and the landlord gives this assurance in
consideration of his taking the lease, the landlord is bound by the warranty2. The warranty is both a warranty and a
condition; hence a breach gives the tenant a claim for damages, and also entitles him to repudiate the lease within a
reasonable time. The right to repudiate is not lost because the representation has become a term of the lease or because
the lease has been executed3. Such a warranty is collateral to the lease, and it is no objection that it is not contained in
the lease, or was made orally, unless the lease also deals with the same matter, in which case the contract contained in
the lease cannot be varied by an oral agreement4.
HR A[7380.273]
1 De Lassalle v Guildford [1901] 2 KB 215 at 222, CA; Heilbut, Symons & Co v Buckleton [1913] AC 30; Best v Edwards (1895) 60 JP 9.
Page 92
Statements as to the conditions of the house were held to be mere representations in Kennard v Ashman (1894) 10 TLR 213, and Green v
Symons (1897) 13 TLR 301, CA; and see Terrene Ltd v Nelson [1937] 3 All ER 739, where the difficulty of proving a warranty is clearly
stated. But in Otto v Bolton and Norris [1936] 2 KB 46, [1936] 1 All ER 960, an assurance that a house was well built was held in the
circumstances to amount to a warranty. De Lassalle v Guildford [1901] 2 KB 215 at 222, CA was applied in Brikom Investments Ltd v Carr
[1979] QB 467, [1979] 2 All ER 753, in which the landlord was held to its earlier promise that roof repairs would be carried out free of
charge. The case was also decided on the basis of a waiver by the landlord of its right to claim the cost of repairs under the lease.
2 De Lassalle v Guildford [1901] 2 KB 215, CA; and see Otto v Bolton and Norris [1936] 2 KB 46, [1936] 1 All ER 960.
3 Bunn v Harrison (1886) 3 TLR 146, CA. Prior to 1967 the right to repudiate may have been lost if the misrepresentation became a term
of the contract (Pennsylvania Shipping Co v Compagnie Nationale de Navigation (1936) 155 LT 294), and was lost if the contract was
executed (Seddon v North Eastern Salt Co Ltd [1905] 1 Ch 326). Both these rules have been abrogated as regards misrepresentations made
after 22 April 1967 by the Misrepresentation Act 1967, s 1.
4 De Lassalle v Guildford [1901] 2 KB 215. Previously, it had been considered that the tenant could not sue on the warranty unless it was
contained in the lease: Burtsal v Bianchi (1891) 65 LT 678 at 679; Longman v Blount (1896) 12 TLR 520. The collateral contract must
precede the lease, otherwise it can form no part of the consideration for taking the lease: Bristol Tramways etc Carriage Co Ltd v Fiat
Motors Ltd [1910] 2 KB 831 at 838, CA.
(c) Miscellaneous matters relating to the fabric of the demise
(i) Disability discrimination
HR A[7380.274]
The Disability Discrimination Act 1995 may affect the parties' duties in relation to the fabric of the building. Detailed
consideration of these provisions is found at para HR A[7321] ff. in particular HR A[7342] ff.
(ii) War damage and requisitioned land
HR A[7380.275]
Both landlord and tenant are relieved by the Landlord and Tenant (War Damage) Acts 1939 and 1941 from any express
or implied obligation to repair war damage whether contained in the lease or in some collateral agreement1, but an
obligation to repair contained in a lease may, in certain circumstances where a cost of works payment is made under the
War Damage Act 1943, be converted into an obligation to reinstate2. Liability to do ordinary repairs rendered
impracticable by war damage is suspended until the war damage is made good3. A tenant who is under an obligation to
repair, whether express or implied, must give the landlord notice of the occurrence of war damage and permit him to
enter for the purpose of inspection and making good4. Contracting out of the Acts, which, though passed to meet
conditions arising during the 1939-45 war, are not of limited duration, is forbidden5.
HR A[7380.276]
1 Landlord and Tenant (War Damage) Act 1939, s 1.

Page 93
2 Landlord and Tenant (War Damage) (Amendment) Act 1941, s 5(4).
3 LT(WD)A 1939, s 1. As to the recovery of the cost of repair of damage other than war damage, see LT(WD)(A)A 1941, s 15.
4 LT(WD)A 1939, s 2.
5 LT(WD)A 1939, s 21; LT(WD)(A)A 1941, s 11.
HR A[7380.277]
Where damage which would give rise to a claim under a covenant to repair occurs during the requisition of leaseholds
and the landlord is entitled to recover compensation in respect thereof, the covenant is unenforceable against the
tenant1. If the tenant has made good such damage and the landlord has received compensation, the tenant may recover
his expenditure or the amount received in compensation whichever is the less2. Where the tenancy ends during the
requisition the liability of the tenant is assessed with respect to the state of the premises at the date of the requisition, the
tenant being liable for dilapidations which then existed3.
HR A[7380.278]
1 Landlord and Tenant (Requisitioned Land) Act 1944, s 1.
2 LT(RL)A 1944, s 2.
3 Smiley v Townshend [1949] 2 All ER 817. Damage within the above sections means physical damage and dilapidation and not a breach
of covenant resulting in damages and there is excluded only actual damage to the property or dilapidations during requisition and not the
tenant's breach of covenant to repair or deliver up in a good state of repair.
(iii) Statutory restrictions
HR A[7380.279]
The fact that planning permission has been refused for works within the scope of an obligation to repair will not
frustrate the covenant and the covenantor will still be liable for damages for breach1. Similarly, the fact that by statute
or regulation the maximum sum which may be expended without licence on the repair of any property is limited affords
no defence to an action for damages for breach of covenant2. Illegality as to the performance of one clause of a contract,
which does not amount to frustration, does not generally carry with it the necessary consequence that the party charged
is absolved from paying damages3.
HR A[7380.280]
1 Sturcke v SW Edwards Ltd (1971) 23 P & CR 185.

Page 94
2 Maud v Sandars [1943] 2 All ER 783.
3 Eyre v Johnson [1946] KB 481, [1946] 1 All ER 719. Cf John Lewis Properties v Viscount Chelsea [1993] 2 EGLR 77.
(iv) Covenants in subleases
HR A[7380.281]
The above principles are applicable to covenants in subleases as to any other lease. How the covenants will be construed
will depend upon the context. Particular points to note are as follows.
(1) Covenants may be imposed on the underlessor or the underlessee to perform the obligations
contained in the headlease. Such obligations are considered above1.
(2) A covenant may be imposed in different terms to those contained in the head lease. In such a case
the covenant will be construed as a separate provision. In other cases, the covenant may be in precisely
the same terms as that contained in the headlease. Whether or not the words have the same effect in both
sublease and headlease will be a matter of construction in each case2.
(3) There is generally no privity of contract between head landlord and subtenant. In some instances
direct covenants may be entered into which may be enforceable upon contractual principles. In some
instances, covenants restrictive of user (which may, for instance, include a covenant restricting
alterations) may be enforceable in equity3. A covenant to repair or carry out other works would not be
such a covenant.
HR A[7380.282]
1 See HR A[322] - [323]. See in particular Hornby v Cardwell (1881) 8 QBD 329.
2 See Walker v Hatton (1842) 10 M & W 249; Logan v Hall (1847) 4 CB 598; Williams v Williams (1874) LR 9 CP 659; Clare v Doson
[1911] 1 KB 35.
3 See HR A[2241] FF.

Page 95
condition and management of the demised premises/G Obligations to insure and to reinstate the premises
HR A[7380.283]
Bound up with the parties' obligations in respect of the fabric and management of the building are their obligations to
insure the premises and apply the moneys received from insurance to the premises. Statutory provisions regulate the
insurance of dwellings1. This section deals with the general law.
HR A[7380.284]
1 See Chapter 11 below.

Page 96
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(1) Covenants
to insure
(1) Covenants to insure
HR A[7380.285]
In short leases, especially of residential premises, it is not usual to insert a covenant to insure either on the part of the
landlord or the tenant, but in practice the insurance is effected by the landlord at his own expense. In longer leases of
residential premises and in all other types of property the liability for insurance is usually expressly defined by the lease,
and a covenant to insure is entered into either by the lessor or the lessee. If the covenant is by the lessor, the insurance
will in the first instance be at his own expense1, but provision is now almost always made for transferring the expense
to the tenant. This is commonly achieved by reserving the amount of the insurance as an additional rent2. But where the
lease incorporates a service charge the recovery of the landlord's expenditure on insurance may be effected through the
service charge3. There will not generally be implied a term that the landlord will place the insurance so as not to place
an unnecessarily high burden on the tenant. The reason is that the covenant works sensibly without the need for any
implication4. Where the insurance required by the lease is against the full cost of reinstatement, the lessor is entitled to
have regard to the effect of inflation and the lessee can be required to pay the higher premium5. If the covenant is by the
lessee, the insurance will be at his expense. Breach of the covenant is usually a cause of forfeiture, but this may not be
so if the lessor is entitled to insure on default, and if the amount of the premium is reserved as additional rent so that he
can distrain for it6. Formerly, there was no relief against forfeiture for non-insurance, but relief is now allowed7. By
statute any obligation, other than a statutory one, to insure against war damage is void, and is deemed always to have
been so, and an obligation to insure against fire or other risks is construed as not including and as never to have
included an obligation to insure against war damage8.
HR A[7380.286]
1 Apparently, the lessor cannot deduct the premium for the purpose of income tax: Turner v Carlton [1909] 1 KB 932.
2 Although described as an additional rent, such amounts may not be strictly rent: see Marquis of Breadalbane v Robertson 1914 51 SLR
156.
3 But see the Schedule to the Landlord and Tenant Act 1985 (as amended by the Housing Act 1996, s 83(2)) in relation to leases of
residential premises, which contains provisions relating to the rights of a tenant of a dwelling relating to insurance: see HR A[20346].
4 Bandar Property Holdings Ltd v JS Darwen (Successors) Ltd [1968] 2 All ER 305; Havenridge Ltd v Boston Dyers Ltd [1994] 2 EGLR
73, CA, where the landlord was entitled to recover a premium as 'properly paid' where the sum had been paid to an insurer of repute at the
going rate for them in the ordinary course and had been negotiated at arms' length. However, it was also said that the landlord would not
have been entitled to recover a premium which was exorbitant. This approach was followed in Berrycroft Management Co Ltd v Sinclair
Gardens Investments (Kensington) Ltd [1997] 1 EGLR 47, CA in which it was held that a term could not be implied that the sum charged by
a nominated insurer should not be reasonable, or that a tenant should not be required to pay a substantially higher sum than he could himself
arrange with an insurance office of repute. In the case of a premium recoverable as part of a service charge in a residential lease, the sum will
not be recoverable unless it is reasonable in amount: Landlord and Tenant Act 1985, s 19.
5 Gleniffer Finance Corpn v Bamar Wood and Products Ltd (1978) 37 P & CR 208.
Page 97
6 Doe d Pittman v Sutton (1841) 9 C & P 706. If the lessor pays the premium this will be a waiver of the forfeiture: Mills v Griffiths
(1876) 45 LJQB 771.
7 Green v Bridges (1830) 4 Sim 96. For relief generally, see HR A[7089] ff. For mode of proof of non-insurance, see Chaplin v Reid
(1858) 1 F & F 315. Undisturbed possession by the lessee is evidence that there has been no breach: Montresor v Williams (1823) 1 LJOS
Ch 151.
8 Landlord and Tenant (War Damage) (Amendment) Act 1941, s 11. As to the position apart from this statute, see Moorgate Estates Ltd v
Trower [1940] Ch 206, [1940] 1 All ER 195. The 1941 Act is not an emergency Act, but remains law until specifically repealed.
Page 98
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(2) Mode of
insurance
(2) Mode of insurance
HR A[7380.287]
A covenant by the lessee to insure may require that the insurance shall be effected in an office or with insurers either
specified or to be approved by the lessor1, and in particular names; but it is not necessary that the office or insurers
should be specified2, and in the absence of such special requirements the covenant is performed by an insurance for a
proper sum by the lessee in his own name with an office or insurers selected by him. If the covenant is to insure in a
specified office or other office approved by the lessor, the lessor is entitled unreasonably or without giving any reasons
to refuse his approval of insurance with any office other than that specified (save for statutory intervention in the case of
certain residential leases)3. If, under such a covenant, the lessee insuring with the specified office obtains a policy
excepting certain risks, the lessor cannot complain of a breach of covenant through failure to insure against those risks,
if it be shown that such is the usual policy issued by the specified office, for the covenant will not in such a case be to
insure against loss or damage however occasioned, but such loss or damage as is covered by the normal policy issued
by the office4. Where the landlord takes the advice of the insurance company as to the amount for which such insurance
should be effected, he fulfils an obligation to insure adequately although the amount proves insufficient for
reinstatement5. Where the insurance required by the lease is against the full cost of reinstatement, the lessor is entitled
to have regard to the effects of inflation and the lessee can be required to pay the higher premium6. A covenant to insure
in the joint names of the lessor and lessee is broken by an insurance in the name of the lessee only7; and a covenant to
insure in the name of the lessor is broken if the lessee adds his own name8; but an insurance in the name of the lessor
only, when it should be in the joint names of the lessor and lessee, is a substantial performance of the covenant by a
lessee, since the addition of the lessee's name is only for his own benefit9.
HR A[7380.288]
1 Where the office or insurers are to be named by the lessor, there is probably no breach of covenant by non-insurance unless the lessor
has named an office: Lillie v Legh (1858) 3 De G & J 204. Often, the particular office is named in the lease: Doe d Flower v Peck (1830) 1 B
& Ad 428; Chaplin v Reid (1858) 1 F & F 315. On a letting by a local authority, the authority may as an act of general management of its
property make arrangements for the issue of group insurances of the tenants, personal and household effects and for premiums to be
collected with the rents: A-G v Crayford UDC [1962] Ch 575, [1962] 2 All ER 147.
2 Doe d Pitt v Shewin (1811) 3 Camp 134.
3 Viscount Tredegar v Harwood [1929] AC 72; Upjohn v Hitchens, Upjohn v Ford [1918] 2 KB 48 at 55, CA, per Warrington LJ; and
John Lyon School Governors v Haysport Properties [1995] EGCS 171, and Berrycroft Management Co Ltd v Sinclair Gardens Investments
(Kensington) Ltd [1997] 1 EGLR 47, CA. For the statutory protection given to some residential lessees, see the Landlord and Tenant Act
1985, Schedule; John Lyon School Governors v Haysport Properties [1995] EGCS 171 (where the 1985 Act was held not to apply to a
letting of six flats by a single lease).
4 Upjohn v Hitchens, Upjohn v Ford [1918] 1 KB 48 at 55, CA, where it was held that evidence was admissible to show the nature of
policies issued by insurance companies. The same rule does not apply where the covenant is only to insure in some office of repute: Enlayde
Ltd v Roberts [1917] 1 Ch 109.
Page 99
5 Mumford Hotels Ltd v Wheler [1964] Ch 117, [1963] 3 All ER 250.
6 Gleniffer Finance Corpn Ltd v Bamar Wood and Products Ltd (1978) 37 P & CR 208.
7 Doe d Knight v Rowe (1826) Ry & M 343; Doe d Muston v Gladwin (1854) 6 QB 953. If the insurance is to be in the name of the lessor
and his assignee, there can be no breach after assignment of the reversion until notice to the lessee: Crane v Batten (1854) 23 LTOS 220.
8 Penniall v Harborne (1848) 11 QB 368.
9 Havens v Middleton (1853) 10 Hare 641; and where the insurance is in the lessee's name only, the lessor may have debarred himself by
his conduct from forfeiting the lease; where, for instance, he has induced the lessee to believe that such insurance would be accepted as a
compliance with the covenant (Doe d Knight v Rowe (1826) Ry & M 343); but this may be only a waiver as to past breaches (see Doe d
Muston v Gladwin (1845) 6 QB 953). As to the rights of the lessee where the insurance is in joint names, see Hamer v Drummond (1939)
187 LT Jo 156.
HR A[7380.289]
There may be a covenant by the lessee not to do anything whereby the premium for insurance may be increased, and if
he uses the premises in such a way that the premium will be increased, or the policy not renewed, he will be guilty of a
breach of covenant, which may be restrained by injunction1.
HR A[7380.290]
1 Chapman v Mason and Liniline Co (1910) 103 LT 390.
HR A[7380.291]
But the fact that such a covenant is made by a lessee who pays the insurance premium casts no obligation upon the
landlord not to let adjoining premises for purposes which may result in the lessee having to pay an increased premium,
and if an increase in premium results from the landlord letting adjoining premises for particular purposes, the lessee and
not the landlord will be liable for the increase1.
HR A[7380.292]
1 O'Cedar Ltd v Slough Trading Co [1927] 2 KB 123.

Page 100
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(3) Breach of
covenant to insure
(3) Breach of covenant to insure
HR A[7380.293]
A covenant by the lessee to insure and keep insured the demised premises requires that the lessee shall effect the
insurance within a reasonable time. If the effecting of the insurance is delayed, the onus of showing that the delay is
reasonable is on the lessee1. If the delay is short, and the lessor has led the lessee to believe that there was already an
existing insurance on the premises, he cannot treat the breach of covenant as a cause of forfeiture2. It is a breach of
covenant if any part of the premises is uninsured3, and if the insurance is not subsisting at any time during the term4.
The covenant is broken by non-insurance, although no actual loss may be occasioned to the lessor5. So long as there is a
failure to keep the premises insured in accordance with the terms of the covenant, there is a continuing breach, and
receipt of rent by the lessor only operates as a waiver of the right to forfeit until the date of receipt6. Although no fire
has occurred during the period that the premises were uninsured, it is possible that the lessor is entitled to recover more
than nominal damages by reason of the risk which he has run7; but the lessee, on remedying the breach, can obtain
relief against the forfeiture, and relief may be given without requiring payment by the lessee of any sum by way of
compensation8. Where the premises are destroyed or damaged, the measure of damages for breach of the covenant to
insure is the cost of their reinstatement9.
HR A[7380.294]
1 Doe d Darlington v Ulph (1849) 13 QB 204.
2 Doe d Pittman v Sutton (1841) 9 C & P 706.
3 Penniall v Harborne (1848) 11 QB 368.
4 Doe d Flower v Peck (1830) 1 B & Ad 428 at 438; Heckman v Isaac (1862) 6 LT 383.
5 Doe d Pitt v Shewin (1811) 3 Camp 134 at 137, where a premium not paid within the days of grace was subsequently accepted by the
office. See Wilson v Wilson (1854) 14 CB 616; Price v Worwood (1859) 4 H & N 512; and cf Doe d Pitt v Laming (1814) 4 Camp 73 (where
an indorsement after the death of the lessee in favour of his executors was sufficient, though not made within the stipulated time). The tenant
can be sued for breach of a covenant to insure or keep insured after the end of the term even where he retains possession by virtue of the
Landlord and Tenant Act 1954, s 6: see the proviso to s 10(1).
6 Doe d Muston v Gladwin (1845) 6 QB 953.
7 Hey v Wyche (1842) 12 LJQB 83 at 85.
8 Law of Property Act 1925, s 146, see para HR A [20121]. Where a lease is forfeited for failure of a lessee to insure, the lessee cannot
recover the value of his reversionary interest from sublessees who also have not insured: see Logan v Hall (1847) 4 CB 598 at 614, 623.
Page 101
9 Burt v British Transport Commission (1955) 166 Estates Gazette 4.

Page 102
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(4)
Application of insurance money
(4) Application of insurance money
HR A[7380.295]
An express covenant to insure, whether by the lessor or the lessee, usually provides that the insurance moneys shall be
applied in reinstating the premises1. Where the lessor insures on his own account, without being under liability to do so,
and receives the insurance moneys, he is not bound to apply them in rebuilding2. Equally, a tenant who voluntarily
insures on his own account, without being under liability to do so, should not be obliged to apply insurance moneys in
rebuilding. When the tenant is bound by the lease to pay and in fact pays the premium, the landlord is bound to apply
the moneys in reinstatement3. Possibly, where the landlord is obliged to insure at his own expense, it would similarly be
held that the obligation was to enure for the benefit of both parties so that the landlord would be bound to apply the
moneys in the same way. A landlord may insure in respect of the whole value of the property even though he has only a
limited interest in the property. Also it may be agreed that the measure of the insurer's liability shall be the cost of
reinstating the property following damage by the insured perils. There is no contradiction between these principles and
the principle that contracts of insurance on property are prima facie to be construed as contracts of indemnity. The
reason is that a person with a limited interest in property will hold any part of the insurance moneys left over after
accounting for his own loss for the benefit of others with interests in the property4. In the case of the cost of
reinstatement a landlord who covenants to employ the insurance moneys in reinstating the property receives no more
than an indemnity against the obligation to reinstate5. If the lessee has insured in accordance with his covenant, and the
lessor effects a separate insurance, the loss will be apportioned by the insurers between the two policies. But the lessor
cannot in this way deprive the lessee of the benefit of his performance of the covenant, and he must account to the
lessee for the moneys received under the policy effected by himself6. Where the insurance was to be in the joint names
of the landlord and the tenant and the moneys when paid were invested in their joint names because immediate
reinstatement was impossible in war-time and ultimately became entirely impossible, the moneys belonged to the tenant
because he had paid all the premiums7. Where the lease required the landlord to insure in joint names and to reinstate in
case of damage, and the tenant covenanted to reimburse the premiums as additional rent, and the landlord insured 'for
their respective rights and interests', but the sum was insufficient to rebuild the property, it was held that the lease
contemplated that in default of reinstatement the parties were entitled to regard the insurance payment as representing
the building so that each was entitled to a share in it in proportion to the value of their interest in the building8.
HR A[7380.296]
1 As to the respective rights of the lessor and lessee where the insurance is in their joint names, see Hamer v Drummond (1939) 187 LT Jo
156.
2 Leeds v Cheetham (1827) 1 Sim 146; Lofft v Dennis (1859) 1 E & E 474.
3 Mumford Hotels Ltd v Wheler [1964] Ch 117, [1963] 3 All ER 250.
4 Examples of the principle are: (a) a trustee who insures in respect of loss which will be suffered by the beneficiaries; (b) a bailee who
insures for the full value of the property: see Waters and Steel v Monarch Fire and Life Assurance Co (1856) 5 E & B 870; Hepburn v A
Page 103
Tomlinson (Hauliers) Ltd [1966] AC 451, [1966] 1 All ER 418, HL; (c) a trade union which insures the property of its members against
burglary: Prudential Staff Union v Hall [1947] KB 685.
5 Lonsdale and Thompson Ltd v Black Arrow Group plc [1993] Ch 361. There is nothing in Castellain v Preston (1883) 11 QBD 380, CA,
which is contrary to this principle.
6 Reynard v Arnold (1875) 10 Ch App 386, but in Portavon Cinema Co Ltd v Price and Century Insurance Co Ltd [1939] 4 All ER 601, it
seems to have been decided that this applies only where the second policy is taken out by the authority of the lessee or he has subsequently
ratified the action of the lessor. In every case where the property is of any value, the lessor, whether or not he is going to take out a policy,
should covenant to apply the proceeds of any policy in reinstatement of the damage to the property.
7 Re King, Robinson v Gray [1963] Ch 459, [1966] 1 All ER 781.
8 Beacon Carpets Ltd v Kirby [1985] QB 755.

Page 104
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(5)
Reinstatement in case of fire
(5) Reinstatement in case of fire
HR A[7380.297]
There is special statutory provision if the damage is by fire. A 'person interested' (who may be either the landlord or the
tenant where the other has insured) is entitled, at any time before the insurers have paid the moneys to the insured1, to
require that the moneys shall be spent in restoring the premises2. This does not extend to trade fixtures affixed by the
tenant3. The work is to be done by the insurers unless, within 60 days after the adjustment of the claim, the assured
gives sufficient security that he will expend the insurance money in reinstatement or the insurance money has been
settled and disposed of amongst the contending parties to the satisfaction and approbation of the insurers4.
HR A[7380.298]
1 Simpson v Scottish Union Insurance Co [1863] 1 Hem & M 618.
2 Fires Prevention (Metropolis) Act 1774, s 83, which appears to be of general, as opposed to local application in England, but not in
Scotland: Re Barker, ex p Gorely (1864) 4 De GJ & Sm 477; Sinnott v Bowden [1912] 2 Ch 414; Westminster Fire Office v Glasgow
Provident Investment Society (1888) 13 App Cas 699. The Act does not apply to risks other than fire: Vural Ltd v Security Archives Ltd
(1989) 60 P & CR 258.
3 Re Barker, ex p Gorely (1864) 4 De GJ & Sm 477.
4 Fires Prevention (Metropolis) Act 1774, s 83, and see Wimbledon Park Golf Club v Imperial Insurance Co Ltd (1902) 18 TLR 815; Sun
Insurance Office v Galinsky [1914] 2 KB 545.
HR A[7380.299]
The statute does not make the lessee a person insured, nor does it apply if the insurance is obtained, not in an insurance
office but with underwriters1. A bare covenant by the landlord to effect and pay for fire insurance does not raise a
conclusive presumption that any insurance taken out pursuant to the covenant enures for the tenant as well as himself2.
HR A[7380.300]
1 Portavon Cinema Co Ltd v Price and Century Insurance Co Ltd [1939] 4 All ER 601.
2 Lambert v Keymood Ltd [1997] 43 EG 131, considering Rowlands (Mark) Ltd v Berni Inns [1986] QB 211, [1985] 3 All ER 473, CA.
Page 105
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(6) Covenant
for reinstatement
(6) Covenant for reinstatement
HR A[7380.300.1]
A lease which contains a covenant to insure usually provides that the insurance money shall be applied in reinstatement
of the demised premises, but apart from such a provision the insurers are in cases of damage by fire required by statute
to reinstate upon the request of any person interested in the premises1 but they cannot be called upon to expend more
than the sum for which the property was insured2. An express covenant by the person receiving the insurance moneys to
reinstate often extends to complete reinstatement even though those moneys should prove to be insufficient for the
purpose. The covenant to reinstate is not a continuing covenant and the obligation is to reinstate within a reasonable
time and such reasonable time must be determined in the light of the circumstances existing at the date of the lease3.
Formerly, a landlord who had assigned his reversion could not sue for a breach of this covenant occurring prior to the
date of assignment4.
HR A[7380.301]
1 See HR A[7380.297] - HR A[7380.298]. See also Lonsdale and Thompson Ltd v Black Arrow Group plc [1993] Ch 361.
2 Fires Prevention (Metropolis) Act 1774, s 83.
3 Re King, Robinson v Gray [1962] 2 All ER 66, [1962] 1 WLR 632. This case went to appeal [1963] Ch 459, [1963] All ER 781, but it
was there unnecessary to consider these points.
4 Law of Property Act 1925, s 141; see Re King, Robinson v Gray [1963] Ch 459, [1963] 1 All ER 781. This will no longer be the case for
leases to which the Landlord and Tenant (Covenants) Act 1995 applies unless the right to sue is expressly assigned to the assignee (see s 23
of that Act).
Page 106
condition and management of the demised premises/G Obligations to insure and to reinstate the premises/(7) Policy of
insurance as a contract of indemnity
(7) Policy of insurance as a contract of indemnity
HR A[7380.302]
An insurance policy is a contract of indemnity, and so will normally only entitle the insured to be indemnified to the
extent of his own loss. But this does not mean that a claim is necessarily limited to the value of the insured's own
interest in the property where his covenant was to insure and to lay out insurance moneys in reinstatement1. Where a
landlord, who had covenanted with his tenant to reinstate, contracted to sell the property, and where damage was
suffered between contract and completion, it was held that the landlord was entitled to recover the cost of
reinstatement2. It follows from the nature of the contract of insurance as a contract of indemnity that upon making a
payment under the policy the insurer can be subrogated to the rights of the insured. There will be no right of subrogation
against either landlord or tenant if both landlord and tenant are jointly insured under the tenancy. If the landlord would
have no claim under the lease against the tenant (for example, for a fire started by the negligence of the tenant because
liability for insured risks is excluded) there will be no claim to which the insurer could be subrogated3.
HR A[7380.303]
1 Castellain v Preston (1883) 11 QBD 380.
2 Lonsdale and Thompson Ltd v Black Arrow Group plc [1993] Ch 361.
3 Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211 (but see Sadler v Clements [1995] EGCS 197, where there was no exception from
liability in the case of fire, an insured risk, caused negligently by the tenant).
Page 107
condition and management of the demised premises/H Landlord's remedies for breaches of covenant by tenants
concerning the fabric of the demised premises
H
Page 108
concerning the fabric of the demised premises/(1) Generally
(1) Generally
HR A[7380.304]
During the term of the lease the landlord potentially has four different ways of enforcing the tenant's obligations relating
to the fabric of the demised premises:
(1) where there is a proviso for re-entry, by effecting forfeiture1;

(2) where he has a right to do so under the terms of the lease or under statute, by carrying out the
repairs himself and recovering the cost of doing so2;
(3) in some circumstances, by obtaining an order for specific performance of the tenant's obligations3;
and
(4) by claiming damages4.
Following determination of the term the landlord's only remedy is in damages5.
HR A[7380.305]
1 See HR A[7380.307] ff.
2 See HR A[7380.222] - [7380.342].
3 See HR A[7380.343] - [7380.344].
4 See HR A[7380.345] - [7380.371].
5 See HR A[7380.345] - [7380.356] and HR A[7380.372] ff.
HR A[7380.306]
Landlords' claims for forfeiture and for damages, however, are subject to procedural restrictions imposed by the
Landlord and Tenant Act 1927, s 18(2) and the Leasehold Property (Repairs) Act 19381.
HR A[7380.306]
Page 109
1 HR A[7380.307] ff.
Page 110
concerning the fabric of the demised premises/(2) Forfeiture
(2) Forfeiture
HR A[7380.307]
For the landlord to be able to forfeit a lease for failure to repair: (1) there must be a proviso for re-entry or a forfeiture
clause in the lease entitling the landlord to end the lease if the tenant breaches his obligations; (2) there must be a breach
of the tenant's obligations; (3) the landlord must not have waived his entitlement to forfeit; and (4) the landlord must
follow the statutory preconditions to forfeiture imposed by the Law of Property Act 1925, s 146 and the Leasehold
Property (Repairs) Act 1938.
The law relating to forfeiture generally is dealt with at HR A[8530] ff. The specific statutory restrictions upon a
landlord's right to forfeit for breach of a tenant's repairing obligations contained in the Landlord and Tenant Act 19271
and the Leasehold Property (Repairs) Act 1938 are considered at HR A[8841] ff and more extensively at HR
A[7380.311] and HR A[7380.421] ff below. There are some particular points to note in the context of actions to forfeit
leases for failure to repair.
HR A[7380.308]
1 S 18(2).
(i) Section 146 notices
HR A[7380.309]
Under s 146 of the Law of Property Act 19251, in all cases the landlord must serve2 a notice specifying the nature of
the breach of covenant to repair on the tenant3 and he must allow a reasonable time for the execution of the repairs
before he can enforce any right of re-entry or forfeiture for the breach. As with other cases of forfeiture of leases,
tenants and subtenants may apply for relief from forfeiture under that section.
In the context of breaches of tenants' repairing obligations it is important to note that what must be specified is the
breach alleged and not what the tenant is required to do to remedy it3 (though there is nothing objectionable in the
common practice of the landlord's surveyor in a schedule of dilapidations also suggesting what remedial works he
considers are required). It is necessary for the notice to specify the breaches with sufficient particularity to enable the
tenant to know what he needs to do to remedy his breach4. It has been said, therefore, that the landlord need not point
out every defect but his notice ought to be so distinct as to direct the attention of the tenant to the particular things of
which the landlord complains so that the tenant may have an opportunity of remedying them5. While in principle there
is nothing to prevent a notice identifying a defect and indicating that the tenant should examine that defect6, a notice
which fails to identify the defect but merely requires the tenant to survey the premises and repair any defects he finds is
Page 111
likely to be invalid. Further, there is nothing to prevent a s 146 notice specifying breaches and reserving the landlord's
position in the event that further repairs are found to be necessary7.
HR A[7380.310]
1 Law of Property Act 1925, s 146(1) replaces the repealed Conveyancing Act 1881, s 14 which was to the same effect.
2 The notice may be served by affixing it to the premises - Law of Property Act 1925, s 196(3); Cusack-Smith v Gold [1958] 1 WLR 611,
[1958] 2 All ER 361.
3 Fox v Jolly [1916] AC 1; Adagio Properties Ltd v Ansari [1998] 2 EGLR 69. See too Gregory v Serle [1898] 1 Ch 652 (notice stating no
more than that covenants had been broken was held to be bad). See generally HR A[8665] ff.
4 Fletcher v Nokes [1897] 1 Ch 271.
5 Fletcher v Nokes [1897] 1 Ch 271.
6 Fox v Jolly [1916] AC 1 (notice stating tenant should "examine repair and reinstate all broken or loose tiles to main and w.c. roofs" held
valid).
7 Fox v Jolly [1916] AC 1; Greenwich London Borough Council v Discreet Selling Estates Ltd [1990] 2 EGLR 65.
HR A[7380.311]
In the case of forfeiture for breach of a covenant to keep or put premises in repair, the provisions of the Law of Property
Act 1925, s 146 must be read together with the provisions of the Landlord and Tenant Act 1927, s 18(2) which provides
that a right of forfeiture shall not be enforceable whether by action or otherwise, unless the landlord proves:
(i) that the fact that a s 146 notice has been served on the tenant was known to (a) the tenant or (b) an
undertenant holding under an underlease which reserved a nominal reversion only to the tenant or (c) the
person who last paid the rent due under the lease either on his own behalf or as agent for the tenant or
undertenant; and
(ii) that a time reasonably sufficient to enable the repairs to be executed has elapsed since the time
when the fact of the service of the notice came to the knowledge of any of the above.
Where the notice has been served by registered post or recorded delivery addressed to a person at his last known place
of abode in the United Kingdom, then for the purposes of s 18(2) that person is deemed unless the contrary is proved to
have had knowledge of the fact that the notice has been served as from the time at which the letter would have been
delivered in the ordinary course of post.
HR A[7380.312]
In the case of a lease for seven years or more of any property other than an agricultural holding where at the date of
Page 112
service of the notice not less than three years of the term is unexpired the notice must contain a statement under the
Leasehold Property (Repairs) Act 1938, s 1(4)1.
HR A[7380.313]
(ii) Decorations
HR A[7380.314]
If the notice relates to internal decorative repairs to a house or other building, the tenant may apply to the court for relief
under the special provisions of the Law of Property Act 1925, s 147, a right which is separate from the general right to
apply for relief against forfeiture under s 146(2). The court, if satisfied that the notice is unreasonable, having regard to
all the circumstances of the case, including the length of the tenant's term remaining unexpired, may relieve the tenant
wholly or partially from liability for such repairs1. However, if the notice relates to repairs required under an express
covenant or agreement to put the property in a decorative state of repair and the covenant or agreement has never been
performed, or if it relates to any matter necessary or proper to put or keep the property in a sanitary condition, or for the
maintenance or preservation of the structure, or to any statutory liability to keep a house fit for habitation, or to any
covenant to yield up the house or other building in a specified state of repair at the end of the term, the court has no
power under the above provision to grant relief to the tenant2.
HR A[7380.315]
1 Law of Property Act 1925, s 147(1). This provision applies notwithstanding any stipulation to the contrary: s 147(4). The county court
has jurisdiction where the net annual value for rating does not exceed £1,000: County Court Act 1984, s 21(1) and Administration of Justice
Act 1973, s 6 and Sch.2.
2 Law of Property Act 1925, s 147(2).
(iii) Dwellings let on long leases
HR A[7380.316]
In the case of dwellings, a landlord may not serve a s 146 notice or take any other steps to forfeit a long lease for breach
of repairing obligations unless the Leasehold Valuation Tribunal, court or arbitral tribunal has on application finally
determined that the breach has occurred or the tenant has admitted the breach1.
HR A[7380.317]
Page 113
1 Commonhold and Leasehold Reform Act 2002, s 168 which can into force on 28 February 2005. See HR A[8895] - HR A[8898]. A s
146 notice may not be served until after the period of 14 days beginning with the day after that on which the final determination is made.
(iv) Waiver
HR A[7380.318]
The law relating to waiver of forfeiture is considered at HR A[8905] ff. It should be noted that breach of a covenant to
keep in repair is a "continuing" breach for which a forfeiture may be effected after an act waiving the landlord's
entitlement to forfeit (assuming the breach continues). On the other hand, the breach of a covenant not to alter the
premises or a covenant to put premises in repair gives rise to a single breach and if the right to forfeit is waived it will
be waived for all time1.
HR A[7380.319]
1 See HR A[8950]-[8963].
HR A[7380.320]
If a landlord seeks to rely upon a term of the lease entitling him to carry out works and recover the cost from the tenant1
or if he seeks specific performance of the tenant's obligations2 he will waive his entitlement to forfeit for pre-existing
breaches because he will have recognised the continuing subsistence of the lease.
HR A[7380.321]
1 See HR A[7380.322] ff.
2 See HR A[7380.343] - HR A[7380.344].

Page 114
concerning the fabric of the demised premises/(3) Rights of entry to carry out works and recover costs
(3) Rights of entry to carry out works and recover costs
HR A[7380.322]
The landlord has an implied right to enter in order to comply with his own repairing obligations. Unless there is a
statutory right of entry, however, the landlord has no general right to enter the tenant's premises to remedy the tenant's
disrepair in the absence of an express clause in the lease permitting him to do so1 - even if he is himself a tenant whose
own lease is liable to forfeiture. If he enters and carries out works himself with no right to do so he will commit a
trespass and the tenant may obtain an injunction to restrain him2.
HR A[7380.323]
1 Barker v Barker (1829) 3 C & P 557; Neale v Wyllie (1824) 3 B & C 533.
2 Stocker v Planet Building Society (1879) 27 WR 877, CA; Regional Properties v City of London Real Property Co (1980) 257 EG 65;
Hamilton v Martell Securities Ltd [1984] Ch 266. Cf Colley v Streeton (1823) 2 B & C 273 in which it was held by Abbott CJ and Holroyd J
that the trespass was no defence to a tenant's claim against a subtenant for the reimbursement of the cost.
(i) Rights of landlord expressly granted
HR A[7380.324]
It is common for modern leases to confer on the landlord an entitlement to enter the demised premises in order to view
their state and condition, to give notice to the tenant requiring repairs to be carried out, and to enter in order to effect
such repairs if the tenant does not do so himself.
HR A[7380.325]
Clauses which expressly reserve rights of entry to the landlord for particular purposes will be strictly construed and the
court will be reluctant to imply additional rights in the landlord's favour. Thus a covenant allowing the landlord to enter
demised premises to carry out works was held not to confer a right to enter to carry out works of improvement1.
HR A[7380.326]
Page 115
1 Yeomans Row Management Ltd v Boentien-Meyrick [2002] EWCA Civ 860, [2002] 34 EG 84, [2003] L & TR 10. In construing the
covenant together with the landlord's covenant for quiet enjoyment it was held that clear words would be required to deprive the tenant of
quiet enjoyment to the extent contended for by the landlord.
HR A[7380.327]
In the exercise of his right of entry the landlord should take all reasonable precautions to minimise disturbance to the
tenant otherwise he may be in breach of the covenant for quiet enjoyment1.
HR A[7380.328]
1 Goldmile Properties v Lechouritis [2003] 15 EG 143 (CA); and see Yeomans Row Management Ltd v Boentien-Meyrick [2002] EWCA
Civ 860, [2002] 34 EG 84, [2003] L & TR 10.
HR A[7380.329]
Consistently with this, in the exercise of a right of entry to inspect, the landlord is probably restricted to inspecting only
that which is observable and does not have the right to investigate by lifting floorboards or digging holes in a manner
which interferes with the tenant's possession of the premises.
HR A[7380.330]
A right of entry to repair is often made expressly conditional on the landlord making good damage caused. This may
apply not only to the structure of the property but also to the tenant's possessions1. He may also be liable to make good
damage to decorations2.
HR A[7380.331]
1 Greg v Planque [1936] 1 KB 669.
2 McGreal v Wake (1984) 13 HLR 107, CA; McDougall v Easington DC [1989] 1 EGLR 93, CA.
HR A[7380.331.1]
The landlord should also take care to ensure that the cost of work is reasonable since the court may, where appropriate,
imply such a provision into the lease1. The work should also be carried out to a reasonable standard2. The court may
also imply a term that the landlord's right of entry is only for such period as is reasonable in all the circumstances, so
that if he remains for an unreasonably long time he may be liable for damages3. It is doubtful whether a term will be
implied that the landlord may only exercise his right bona fide for the purpose of protecting his interests4.
HR A[7380.332]
Page 116
1 Such a term will not be implied however as a matter of course: see the cases on insurance summarised in Berrycroft Management Co Ltd
v Sinclair Gardens Investments (Kensington) Ltd (1998) 75 P & CR 210.
2 Finchbourne v Rodrigues [1976] 3 All ER 581, CA; Morgan v Stainer [1993] 2 EGLR 73.
3 Goldmile Properties v Lechouritis [2003] EWCA Civ 49.
4 Compare Quennell v Maltby [1979] 1 WLR 318.
(ii) Enforcement of express right of entry and recovery of cost
HR A[7380.333]
A claim for the cost of repairs incurred by the landlord under such a provision enabling the landlord to carry out the
works and recover the costs incurred in doing so is a claim in debt and not in damages1. As the claim is in debt and not
damages it is not one to which the restrictions in the Leasehold Property (Repairs) Act 19382 or the Landlord and
Tenant Act 1927, s 183 will apply.
HR A[7380.334]
1 Jervis v Harris [1996] Ch 195, CA. The court also held that the sums claimed did not amount to a penalty.
2 See HR A[7380.351] ff below and HR A[8843].
HR A[7380.335]
Where there is no provision entitling the landlord to recover the cost of work carried out pursuant to a right of entry, the
landlord is in principle entitled to damages. Where the Leasehold Property (Repairs) Act 1938 applies1, however, a
notice under the Law of Property Act 1925, s 146 in the form prescribed must be served before a claim to damages can
be made2. It has been held that a s 146 notice cannot validly be served after the work has been done because the breach
has by then been remedied and the court therefore has no power to give the landlord leave to bring a claim for
damages3. In any event, damages will be limited by the provisions of the Landlord and Tenant Act 1927, s 18(1)4.
HR A[7380.336]

Page 117
3 SEDAC Investments Ltd v Tanner [1982] 1 WLR 1342; see HR A[7380.421] - HR A[7380.442] below.
4 See HR A[7380.351] ff below; see Williams v Williams (1874) LR 9 CP 659.
HR A[7380.337]
If the landlord, however, seeks to enforce his right of entry by injunction (where a tenant refuses access) then the court
may refuse to grant the remedy in the exercise of its discretion if to do so would be oppressive and disproportionate1. In
most cases, however, leases are worded in such a way that the landlord must finance the cost of repairs before he is able
to recover them from the tenant: this is a disincentive to abuse by the landlord2.
HR A[7380.338]
1 Hammersmith and Fulham London Borough Council v Creska Ltd (No 2) (1999) 78 P & CR D 46.
2 Hamilton v Martell [1984] Ch 266; Jervis v Harris [1996] Ch 195, CA.
(iii) Rights of landlords under periodic tenancies of dwelling houses to enter to carry out
work to prevent personal injury
HR A[7380.339]
It has been held that there is to be implied into a weekly tenancy of a dwelling house a term that a landlord has a right to
enter and repair defects which are liable to cause personal injury1. The rationale for such implication is that it is
necessary to give business efficacy to the agreement because a reasonable tenant could not sensibly object to the
landlord having such a right2. In the case of tenancies granted by local authorities such a term will be implied having
regard to the statutory duties of the local authority3.
HR A[7380.340]
1 See Mint v Good [1951] 1 KB 517 and Smith v Bradford MBC (1982) 44 P & CR 171 per Donaldson LJ as explained in McAuley v
Bristol City Council [1992] QB 134.
2 McAuley v Bristol City Council [1992] QB 134 per Ralph Gibson LJ.
3 Lee v Leeds City Council [2002] 1 WLR 1488 per Chadwick LJ.
(iv) Landlord's right of entry under statute

Page 118
HR A[7380.341]
Landlords also have rights of entry under various statutes1.
HR A[7380.342]
1 See HR A[20243]; s 148 and s 3(2), Rent Act 1977, see HR C[332] ff and C[1422] ff; s 16, HA 1988, see HR C[2120] - [2121]. See
also the Access to Neighbouring Land Act 1992; London Buildings Acts (Amendment) Act 1939; Fire Precautions Act 1971; Building Act
1984; Housing Act 1985.
Page 119
concerning the fabric of the demised premises/(4) Specific perfomance
(4) Specific perfomance
HR A[7380.343]
Historically, it had been considered that in the absence of a proviso for re-entry or a term of the lease permitting the
landlord to carry out the work himself, his only remedy was in damages1. It has now been held, however, that in
appropriate circumstances and subject to the overriding need to avoid injustice and oppression, specific performance
may be granted where damages are considered to be an inadequate remedy2. It may, for instance, be appropriate to
grant specific performance of the tenant's repairing obligations where there is a substantial obstacle preventing the
landlord effecting repairs (for instance, the landlord may not have reserved a right of access to the property for this
purpose) and the condition of the property will decline unless the repairs are effected3.
Specific performance is a discretionary remedy and the discretion is to be exercised judicially and in accordance with
settled principles. The repair works required to be carried out must be sufficiently particularised for the tenant to know
what he has to do and for the court to be able to oversee compliance with its order.
HR A[7380.344]
1 It had been considered that this was established by Hill v Barclay (1810) 16 Ves Jun 402: see eg Jeune v Queens Cross Properties Ltd
[1974] Ch 97 in which it was also held that the court would order the landlord to carry out specified repair work (see also LTA 1985, s 17):
see HR A[7380.491] ff (tenant's remedies). In Maud v Sanders [1943] 2 All ER 783 Lewis J said that he did not know how an action for
specific performance could be framed.
2 Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch 64, [1998] 2 All ER 860.
3 Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch 64, [1998] 2 All ER 860 where the view was expressed that it will be a rare case in
which the remedy is appropriate since the landlord will normally have the right to forfeit or to enter and carry out repairs at the expense of
the tenant.
Page 120
concerning the fabric of the demised premises/(5) Damages
(5) Damages
(i) Introduction: damages at common law
HR A[7380.345]
The purpose of the landlord's remedy of damages for breach of a tenant's obligations is to provide monetary
compensation to the landlord for the loss which he has sustained. The rule is that where a party sustains a loss by reason
of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages as if
the contract had been performed1.
Accordingly, at common law, where during the currency of the lease a tenant is in breach of covenant to repair, the
measure of damages will on the face of things be the amount by which the value of the landlord's reversion has been
diminished by the breach2.
Likewise, in principle, damages at the end of term should be awarded by reference to the true loss which the landlord
has sustained. Accordingly, if the landlord reasonably intends to carry out repairs himself, then he may recover these
costs as damages; alternatively, if the landlord does not intend to carry out repairs or it would be unreasonable for him
to do so, then the true measure of his loss should on the face of things be the amount by which the value of his reversion
has been diminished3.
HR A[7380.346]
1 See generally Ruxley Electronics Ltd v Forsyth [1996] AC 344.
2 Doe d Worcester School Trustees v Rowlands (1841) 9 C & P 734; Turner v Lamb (1845) 14 M & W 412; Smith v Peat (1853) 9 Ex
161; Atkinson v Beard (1861) 11 CP 245; Coward v Gregory (1866) LR 2 CP 153; Mills v East London Union (1872) LR 8 CP 79; Ebbetts v
Conquest [1895] 2 Ch 377, affd [1896] AC 490; Gooderham and Worts v Canadian Broadcasting Co [1947] AC 66; Crewe Services &
Investment Corpn v Silk [1998] 2 EGLR 1.
3 See generally Ruxley Electronics Ltd v Forsyth [1996] AC 344 for the principles by reference to which damages for breach of contract
are awarded.
HR A[7380.347]
In the nineteenth century, however, it was established that where a tenant was in breach of a covenant to repair the
demised premises at the end of the term then the proper cost of remedial work was the measure of damage even if it did
not represent the landlord's loss1. Applying this approach it had been held that the landlord was entitled to damages for
breach of a tenant's covenant to repair calculated by reference to the cost of repair even if he had made up his mind to
demolish the building and redevelop the site before the lease expired and proceeded to do so after commencing
Page 121
proceedings2.
The "common law" measure of damages for breach of a tenant's repairing covenant has thus been considered to be the
reasonable and proper amount necessary for putting the premises into the state in which they ought to have been left by
the tenant3. To this must be added Value Added Tax which the landlord must pay and cannot recover4 and loss of rent
during the period reasonably necessary for the carrying out of the repairs5. The authorities indicate that where the
covenant to repair cannot be performed without some degree of improvement, then no deduction would be made for
"betterment"6 (though such an allowance may be made where the tenant is liable to reinstate after fire or other
disaster7). On the other hand, the cost of drawing up a schedule of dilapidations in order to ascertain how much the
landlord is entitled to claim for breach of a covenant is not itself recoverable by way of damages for breach of the
covenant to repair8.
HR A[7380.348]
1 See Joyner v Weeks [1891] 2 QB 31; Morgan v Hardy (1886) 17 QBD 770; Ebbetts v Conquest [1895] 2 Ch 377 (affirmed [1896] AC
490).
2 Inderwick v Leech (1884) 1 TLR 484. See also Rawlings v Morgan (1865) 18 CBNS 776.
3 See Joyner v Weeks [1891] 2 QB 31 at 43.
4 Drummond v S & U Stores Ltd (1980) 58 Estates Gazette 1293.
5 Woods v Pope (1835) 6 C & P 782; Drummond v S & U Stores Ltd [1981] 1 EGLR 42. Note that loss of rent will only be awarded if the
landlord can show that the need to carry out the repairs has in fact prevented or will prevent him from re-letting the premises. If it appears
that he would not be able to re-let even if the premises were in repair then he will not recover under this head.
6 Harbutt's "Plasticene" Ltd v Wayne Tank & Pump Co Ltd [1970] 1 QB 447.
7 Yates v Dunster (1855) 11 Exch 15.
8 Skinner's Co v Knight [1891] 2 QB 542; Maud v Sanders [1943] 2 All ER 783; Lloyds Bank Ltd v Lake [1961] 1 WLR 884, [1961] 2 All
ER 30. Nor are such costs claimable as "compensation" under Law of Property Act 1925, s 146 although such reasonable costs and expenses
can by s 146(3) be recovered if the tenant is relieved from the breach. However the lease will usually contain an express covenant to pay all
costs and expenses incurred by the landlord in or in contemplation of any proceedings under s 146. Note also that the cost of work will
include necessary ancillary expenses including professional fees.
HR A[7380.349]
It is doubtful whether this common law approach to the measure of damages for breaches of a tenant's covenant to
repair would be followed today as it does not coincide with established modern principle1 and indeed may allow the
landlord a windfall beyond any loss he has sustained. If it would be unreasonable for the landlord to carry out repairs or
the cost of repair exceeds the actual harm to the value of the landlord's interest, it is difficult to see how the landlord can
recover that cost as damages. Nevertheless, to remedy the position set out in earlier case law, a statutory "cap" to the
measure of damages was provided by the Landlord and Tenant Act 19272.
HR A[7380.350]
Page 122
1 See Ruxley Electronics Ltd v Forsyth [1996] AC 344.
2 See HR A[7380.351] ff above.
(ii) Landlord and Tenant Act 1927
HR A[7380.351]
Under the "first limb" of the Landlord and Tenant Act 1927, s 18(1) damages for breach of a covenant or agreement
(whether express or implied) to keep or put premises in repair during the currency of a lease, or to leave or put premises
in repair at the termination of a lease, are in no case to exceed the amount (if any) by which the value of the reversion
(whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement.
HR A[7380.352]
Under the "second limb" of the Landlord and Tenant Act 1927, s 18(1) no damages are recoverable for a breach of any
covenant or agreement to leave or put premises in repair at the termination of a lease if it is shown that the premises in
whatever state of repair they may be would at or shortly after the termination of the tenancy have been or be pulled
down or such structural alterations made therein as would make the repairs covered by the covenant or agreement
valueless. Where only part of the repairs will be rendered useless by subsequent alterations the landlord can probably
recover damages in respect of those repairs which will not be rendered useless.
HR A[7380.353]
The Landlord and Tenant Act 1927, s 18(1) only applies to damages for breach of covenant to repair and does not apply
to covenants against alterations or as to user1: damages for breaches of such covenants will be assessed in accordance
with the general principle discussed above2. On the other hand, for these purposes a failure to perform a covenant for
periodic redecoration is a breach of a covenant to repair3.
HR A[7380.354]
1 Eyre v Rea [1947] KB 567.
2 Ruxley Electronics Ltd v Forsyth [1996] AC 344 and HR A [7380.345] - [7380.346].
3 Latimer v Carney [2006] EWCA Civ 1417, [2006] 50 EG 86, [2007] L & TR 5.
HR A[7380.355]
Page 123
Where the tenant is in breach of a covenant to spend a stated sum on repairs in each year the sum is recoverable as a
debt and not as damages for failure to repair and is not, therefore, subject to any rule governing the damages recoverable
for breach of a covenant to repair1. Such a covenant runs with the land and binds assignees of the lease and since the
sum is payable whether or not there is a breach of the covenant to repair it is not a penalty.
HR A[7380.356]
1 Moss's Empires Ltd v Olympia (Liverpool) Ltd [1939] AC 544, [1939] 3 All ER 460.
(iii) Damages during term for breach of covenant to repair
HR A[7380.357]
As indicated above, at common law, the measure of damages recoverable by the landlord in a claim for breach of
covenant to repair during the currency of the term is the diminution of the value of the reversion which results from the
breach1. In practical terms damages are assessed as the amount by which the saleable value of the premises is injured by
the non-repair and this depends on the length of the unexpired term. In some cases, however, it has been suggested that
the appropriate measure of damages may be the cost of repairs2 but it seems likely that this suggestion merely reflected
the view that the cost of works might be an indication of the harm to the reversion3.
HR A[7380.358]
1 See HR A[7380.345] above. In particular, Gooderham & Worts Ltd v Canadian Broadcasting Corpn [1947] AC 66; Crewe Services &
Investment Corpn v Silk [1998] 2 EGLR 1. See also next footnote.
2 See per Lord Herschell in Ebbetts v Conquest [1896] AC 490 - although it is not generally fair to assess damages on the basis of the cost
of repair, since the landlord is not bound to spend the money putting the premises in repair, nor could he do so without the tenant's
permission to enter on the premises (per Coleridge J in Doe d Worcester Trustees v Rowlands (1841) 9 C & P 734). See also Turner v Lamb
(1845) 14 M & W 412; Smith v Peat (1853) 9 Exch 161; Mills v East London Union (1872) LR 8 CP 79; Henderson v Thorn [1893] 2 QB
164.
3 See per Robert Walker LJ in Crewe Services & Investment Corpn v Silk [1998] 2 EGLR 1.
HR A[7380.359]
The general rule is that damages are assessed as at the date of the breach, but the correct approach in most cases is to
value the reversion as at the date of the hearing1. Where the action is begun during the term but the lease has expired by
the date of the trial, damages are likely to be assessed as at the date of expiry since that is the last date on which the
tenant was liable to repair2.
HR A[7380.360]
Page 124
1 Crewe Services & Investment Corpn v Silk [1998] 2 EGLR 1.
2 Drummond v S & U Stores [1981] 1 EGLR 42.
HR A[7380.361]
In an action for damages during the currency of the lease it is often difficult to show damage to the reversion. The
landlord must also comply with the terms of the Leasehold Property (Repairs) Act 19381.
HR A[7380.361.1]
1 See HR A[7380.421] ff.
HR A[7380.362]
The first limb of the Landlord and Tenant Act 1927, s 18(1) reflects the common law measure of damage for breach of a
covenant to repair during the term and provides that in no case will the damages exceed the amount if any by which the
value of the landlord's reversion has been diminished due to the breach1. The diminution in the value of the reversion
during the term is usually calculated by comparing the value of the landlord's reversion on the assumption that the
premises are in the state in which they ought to be and its value on the assumption that the premises are in their actual
state2. In each case the reversion must be valued subject to the lease and any right of action which a purchaser would
have had against the tenant for non-repair.
HR A[7380.363]
1 See HR A[7380.345] ff above and Crewe Services & Investment Corpn v Silk [1998] 2 EGLR 1.
2 Re King [1962] 1 WLR 632 (rvsd on different grounds at [1963] Ch 459).
HR A[7380.364]
Detailed valuation evidence is not always required and if no such evidence is before the court the landlord may still
prove damage to the reversion1. However, the more time there is left to run on the lease the harder it will be to show a
difference in the value of the reversion whether the premises are currently in repair or not. Towards the end of the term
the tenant should produce evidence that the diminution in value is less than the cost of repairs - otherwise he risks the
court finding that the cost is the best evidence of the diminution2. If the disrepair is such that the landlord may be liable
to third parties under the Defective Premises Act 1972, there may be no difficulty in establishing a substantial
diminution in the value of the reversion, even where the lease has some time to run. If there is security of tenure this
must be taken into account3; thus, where the tenant is entitled to a new tenancy under Pt II of the Landlord and Tenant
Page 125
Act 1954 it will be difficult to show any diminution in value since the new lease will be subject to the same repairing
covenant and the tenant will not be able to rely on his own disrepair to secure a reduction in the rent4. If the landlord is
himself a tenant with repairing liability this can be taken into account in deciding whether or not there has been damage
to the reversion5.
HR A[7380.365]
1 Crewe Services & Investment Corpn v Silk [1998] 2 EGLR 1. See also Latimer v Carney [2006] EWCA Civ 1417, [2006] 50 EG 86,
[2007] L & TR 5 and HR A[7380.384] ff below as to the method of assessment and evidence required under the first limb.
2 Latimer v Carney [2006] EWCA Civ 1417, [2006] 50 EG 86, [2007] L & TR 5, in particular at 4L to 6C; see Ebbetts v Conquest [1896]
AC 490, affirming [1895] 2 Ch 377. In appropriate cases the landlord may show that it is important to him that the building be in a proper
state of repair.
3 Family Management Ltd v Gray [1980] 1 EGLR 46 (Landlord and Tenant Act 1954, Pt II); Crown Estate Commissioners v Town
Investments Ltd [1992] 1 EGLR 61 (LTA 1954, Pt II); Crewe Services & Investment Corpn v Silk [1998] 2 EGLR 1 (Agricultural Holdings
Act 1986).
4 Family Management Ltd v Gray [1980] 1 EGLR 46, CA and HR B[555] - [560] below .
5 Ebbetts v Conquest [1896] AC 490, affirming [1895] 2 Ch 377.
HR A[7380.366]
The second limb of s 18(1) does not apply to an action for damages for breach of a covenant to keep or put in repair
during the term1. However, if it can be shown that the premises are likely to be pulled down or structurally altered after
the end of the term this is likely to be highly relevant to the question whether there has been any diminution in the value
of the reversion during the currency of the term under the first limb.
HR A[7380.367]
1 Re King [1962] 1 WLR 632.
HR A[7380.368]
Where damages are awarded for a breach of covenant to repair and the breach continues, the landlord must give credit
for the damages received in any claim for the same disrepair1.
HR A[7380.369]
1 Henderson v Thorn [1893] 2 QB 164; Ebbetts v Conquest (1900) 82 LT 560 (Bingham J).
Page 126
HR A[7380.370]
An order for damages for breach of a repairing covenant cannot be made during the last seven months of a long tenancy
to which Part I of the Landlord and Tenant Act 1954 applies. Where such an order is made more than seven months
before the end of the term the tenant may obtain relief on surrendering all but a further seven months of the term1.
HR A[7380.371]
1 Landlord and Tenant Act 1954, s 16 (see HR E[326] ff).
(iv) Damages at end of term for breach of covenant to repair
HR A[7380.372]
After the lease has terminated, a claim for damages is the landlord's only remedy for disrepair. The action may be
brought both on the tenant' s obligations during the term1 and upon any express covenant to yield up the premises in a
specific condition2.
HR A[7380.373]
1 See HR A[7380.121] ff above.
2 See HR A[7380.140] - [141] above.
HR A[7380.374]
Damages for breach of a covenant to repair cannot be obtained after the termination of the lease where the tenant retains
possession by virtue of the Landlord and Tenant Act 1954, s 61.
HR A[7380.375]
1 HR E[284].
HR A[7380.376]
As explained above, it was established at common law that unless the landlord had already recovered damages during
Page 127
the term1 the measure of damages was the actual cost of the repairs necessary to put the premises into the state of repair
required by the covenant2 together with loss of rent during the carrying out of the works but possibly subject to some
allowance for betterment. The tenant was liable to pay the cost of such repairs even though the premises were to be
demolished3 or were to be reconstructed in such a way that the repairs would be valueless4.
HR A[7380.377]
1 See Henderson v Thorn [1893] 2 QB 164. The proper course is to assess both the cost of repairs and the depreciation which would have
accrued to repairs if they had been done when damages were recovered during the term, and to deduct from the sum of these amounts the
sum received by the landlord as damages during the term. Since the Landlord and Tenant Act 1927 the resulting sum, if it exceeds the
diminution in value of the reversion, must be further reduced to the amount of such diminution.
2 Joyner v Weeks [1891] 2 QB 31. Changes in the character of the neighbourhood do not affect the measure of damages: Morgan v Hardy
(1886) 17 QBD 770; affd. (1887) 18 QBD 6476; affd. sub nom Hardy v Fothergill (1888) 13 App Cas 351; Anstruther-Gough-Calthorpe v
McOscar [1924] 1 KB 716.
3 Rawlings v Morgan (1865) 18 CBNS 776; Inderwick v Leech (1884) 1 TLR 484.
4 Joyner v Weeks [1891] 2 QB 31.
HR A[7380.378]
Now, however, the Landlord and Tenant Act 1927, s 18(1) applies to impose a statutory cap on the damages
recoverable. Subject to the removal of liability where the premises have been or are to be demolished or structurally
altered1, the common law rule as to the measure of damages still appears to define the primary liability of the tenant2.
The method of assessment is therefore the same but a limit is imposed by the 1927 Act on the amount of damages
recoverable3.
HR A[7380.379]
1 See HR A[7380.412] ff for the application of the "second limb" of s 18(1).
2 Jaquin v Holland [1960] 1 WLR 258, [1960] 1 All ER 402, CA, a case where the fact that owing to the housing shortage the landlord
had been able to re-let immediately after the expenditure of a small sum on the more urgent repairs was irrelevant to the level of damages
awarded.
3 Hanson v Newman [1934] Ch 298.
HR A[7380.380]
It is necessary, first, to consider what would be recoverable at common law1 and then to establish the amount of the
diminution in value of the reversion. If common law damages exceed the diminution in value, the former are reduced
accordingly. In practice, if it is clear that the statutory limit will operate to reduce the amount of damages recoverable,
or where there is no doubt that the landlord will not incur the actual cost of repair or has no intention of carrying out the
Page 128
repairs2 then the first stage is omitted and the court is concerned only with assessing the damage to the reversion.
HR A[7380.381]
1 See HR A[7380.345] - [7380.346] above.
2 See Craven (Builders) Ltd v Secretary of State for Health [2007] 1 P & CR 13.
(v) Burden of proof
HR A[7380.382]
The burden of proof is on the landlord who is seeking damages1. Until the tenant formally concedes that the cost of
repairs is bound to exceed the diminution in value of the reversion the landlord has to prove both the diminution in
value and the cost of repairs, and is entitled to his costs of doing so. Even if it is conceded that the cost of repairs is
bound to exceed the diminution in value, it will usually be necessary for the valuers to consider the precise breaches and
the cost of remedying them in assessing the impact that such breaches have upon the landlord's interest because some
defects (and their remedy) may have an impact on value and others not.
HR A[7380.383]
1 Crown Estate Commissioners v Town Investments Ltd [1992] 1 EGLR 61.
(vi) Application of "first limb" of s 18(1)
(a) Method of assessment
HR A[7380.384]
The first step is to identify what works the tenant should have done and then to establish the breaches and what remedial
work is necessary to remedy them. The landlord's interest is then valued as at the date of termination of the lease on two
bases: first, on the assumption that the premises are in the state they should have been in if the tenant had performed his
covenant; and secondly on the basis that the premises are in their actual state and condition. The difference between the
two valuations is the damage to the reversion. Damages cannot exceed this amount.
HR A[7380.385]
It may be sufficient if the landlord proves facts from which it can be inferred that the value of the reversion must have
Page 129
been diminished1. If the landlord has himself already carried out or intends to carry out the repairs, or if they are to be
carried out by an incoming tenant at the landlord's expense, the reasonable cost of the works is evidence of, and a guide
to, the damage to the reversion2. In the absence of any evidence to the contrary the court may infer from an estimate of
the costs of the necessary repairs that the value of the reversion is diminished by the same amount3. Professional fees
reasonably incurred in connection with the works will ordinarily be taken into account4, as will the loss of rent during
the time the repairs are being effected, although not necessarily the full amount of the rent for the time taken to effect
the repairs5.
Where the landlord has done the repairs or can establish that he really intends to do them then in practice the burden of
proving that the damage to the reversion is less than the cost of the works may shift to the tenant6.
HR A[7380.386]
1 Jones v Herxheimer [1950] 2 KB 106, [1950] 1 All ER 323.
2 See Latimer v Carney [2006] EWCA Civ 1417, [2006] 50 EG 86, [2007] 1 P & CR 13, CA; Jones v Herxheimer [1950] 2 KB 106,
[1950] 1 All ER 323; Smiley v Townshend [1949] 2 All ER 817, affd. [1950] 2 KB 311, [1950] 1 All ER 530; Drummond v S & U Stores Ltd
[1981] 1 EGLR 42; Culworth Estates Ltd v Society of Licensed Victuallers (1991) 62 P & CR 211, [1991] 2 EGLR 54, CA.
3 See Latimer v Carney [2006] EWCA Civ 1417, [2006] 50 EG 86, [2007] 1 P & CR 13, CA. Note however that in Latimer the landlord
had already carried out the works. The court penalised the landlord for failure to produce evidence of diminution in value and reduced the
estimated costs of repair by 60% to take account of the uncertainty.
4 The landlord is also entitled to recover damages equivalent to the VAT chargeable in respect of the repairs if the landlord is not
registered for VAT and is unlikely to deal with the premises in such a way as to be able to recover the VAT by way of input tax. Drummond
v S & U Stores Ltd [1981] 1 EGLR 42; Elite Investments Ltd v TI Bainbridge Silencers Ltd [1986] 2 EGLR 43.
5 Woods v Pope (1835) 6 C&P 782; Birch v Clifford (1891) 8 TLR 103; Culworth Estates Ltd v Society of Licensed Victuallers (1991) 62
P & CR 211, [1991] 2 EGLR 54, CA.
6 To show for example that the landlord has done unnecessary works not adding to the reversion - see Mather v Barclays Bank plc [1987]
2 EGLR 254.
HR A[7380.387]
If the landlord has not done, and does not intend to do the works the landlord may still establish that he has suffered a
diminution in the value of the reversion and damages will not necessarily be nominal. Whether or not the landlord says
it intends to carry out the works of repair, care must be taken in inferring any relationship between the cost of works
needed to remedy the tenant's breaches and the harm which the landlord has really sustained. Indeed, if judges were to
make such an inference as a matter of course, they would be in danger of resurrecting the very mischief which the
Landlord and Tenant Act 1927, s 18(1) sought to remedy.
The reality is that in very many cases (depending on the state of the market and the nature of the premises in question)
the cost of repair bears little or no relation to the harm which the disrepair causes to the value of the landlord's property.
For instance, fully repairing an aged and outdated office block or industrial building unsuited to the demands of the
modern market to the standard required by an historic lease may have little impact on the value of the building in the
modern market because the sort of tenant willing to occupy an outdated building may not be concerned about its state of
repair.
Page 130
HR A[7380.388]
Conversely, at a time when the cost of repairs is high and the scarcity of premises of all kinds makes property readily
saleable at about the same figure whether or not in repair, the diminution in value of the reversion may be small and less
than the cost of repair1. So in determining the diminution in value of the reversion it is necessary to take into account
the present demand for accommodation and the possibility that a purchaser will accept a measure of disrepair without
reduction of the sale price2.
HR A[7380.389]
1 Landeau v Marchbank [1949] 2 All ER 172.
2 Jaquin v Holland [1960] 1 WLR 258, [1960] 1 All ER 402, CA.
HR A[7380.390]
As indicated above, the cost of repair may in some instances be used by the court to provide a guide to the diminution in
value1. Where a large residential property in the West End of London could never again be let as a private residence,
the court made the best estimate it could of the diminution in the value of the reversion at roughly two-thirds the cost of
repair2.
HR A[7380.391]
1 Jones v Herxheimer [1950] 2 KB 106, [1950] 1 All ER 323.
2 Portman v Latta [1942] WN 97, 86 Sol Jo 119.
HR A[7380.392]
On the other hand, the investment value of premises can be so much in excess of its rental value in its unrepaired and
unimproved state that the landlord suffers no further loss as a result of the disrepair: for instance, any repairs would
have no impact on the value of the premises because any incoming tenant would carry out a modern refurbishment
rendering nugatory the repairs required under the lease1. In other instances, the state of repair may have an impact on
value because incoming tenants would use the condition of the premises as a bargaining tool even if they would
themselves carry out their own refurbishment2.
HR A[7380.393]
1 Mather v Barclays Bank plc [1987] 2 EGLR 254. In Ultraworth Ltd v General Accident Fire & Life Assurance Corpn plc [2000] 2
Page 131
EGLR 115 it was held that, though the replacement of a heating and air conditioning system could constitute a repair, there was no
obligation on a tenant to do more than put the obsolete system into repair so that it worked substantially as well as the original system.
However, the tenant was not liable even for the cost of such repairs where it could not be shown that any higher price would have been
obtained for property with the system in repair.
2 Shortlands Investments Ltd v Cargill plc [1995] 1 EGLR 51. In that case the reversion had in any event a negative value; the premises
were delivered up in disrepair and it was reasonably foreseeable that if they were to be re-let the incoming tenant would use any disrepair of
those premises as a bargaining counter, ie as part of a reverse premium. The diminution in value of the reversion was prima facie the
difference in value between the premises in and out of repair, being the cost of repairs.
HR A[7380.394]
Difficulties of assessment also arise in the case of compulsory purchase of the property where, since the proposal to
make such an order is generally known long beforehand, the property is practically unsaleable to an ordinary purchaser.
It was held in London County Freeholds v Wallis-Whiddett1 that the compensation paid showed no diminution in the
value of the reversion.
HR A[7380.395]
1 [1950] WN 180; compare with Richard Parsons Ltd v Bristol City Council [2007] EW Lands ACQ_190_2006 (LT).
HR A[7380.396]
If the landlord beats a payment into court he will not be deprived of his costs merely because the level of damages
awarded is considerably less than the level of damages claimed1.
HR A[7380.397]
1 Johnsey Estates (1990) Ltd v Secretary of the State for the Environment, Transport and the Regions [2001] EWCA Civ 535, [2001] 2
EGLR 128, CA; but see now CPR Pt 36.
(b) Date of assessment
HR A[7380.398]
The diminution in value of the reversion is to be assessed as at the date of termination of the lease when the covenant to
yield up in repair takes effect. In the case of forfeiture the relevant date is the date of forfeiture and not the date on
which the landlord actually recovers physical possession of the property. The date of forfeiture is the date of service of
the claim form and damages are assessed as at the date of service of the claim form, not the date of issue of the claim
form or the date of recovery of possession1.
Page 132
HR A[7380.399]
1 Associated Deliveries Ltd v Harrison (1985) 50 P & CR 91.
HR A[7380.400]
Where the falling in of the reversion is accelerated by the forfeiture of the lease some years before its normal
termination, the value of the reversion, repaired and unrepaired, is taken at the date of forfeiture and re-entry and there
is no set off against such amount by reason of the fact that the landlord has regained possession before he would
normally have done1. Where the reversion is postponed, eg by requisitioning which continues beyond the contractual
term date, the diminution in value of the reversion must be assessed at the time when the lease expires and the tenant is
entitled to the benefit of any repairs done by the requisitioning authority and damage done during the requisition is to be
ignored2.
HR A[7380.401]
1 Hanson v Newman [1934] Ch 298, CA.
2 Smiley v Townshend [1949] 2 All ER 817, affd. [1950] 2 KB 311, [1950] 1 All ER 530.
HR A[7380.402]
Applying the same principles it has been held that in assessing the loss in value to the reversion regard must be had to
the fact that a new lease was to be granted under which the rent would be fixed on the assumption that the premises
were in proper repair. Consequently there was no substantial diminution in the value of the reversion1.
HR A[7380.403]
1 Family Management v Gray [1980] 1 EGLR 46, CA.
HR A[7380.404]
Where a mesne landlord's lease expired and a subtenant is left in possession with the protection of Part II of the
Landlord and Tenant Act 1954, LTA 1927, s 18(1) applies to extinguish the mesne landlord's liability to the head
landlord save to the extent that the head landlord can show (i) some difference in the scope of the repairing obligations
between the lease and the underlease or (ii) breaches of the repairing obligations in parts of the premises not subject to
the underlease1.
HR A[7380.405]
Page 133
1 Crown Estate Commissioners v Town Investments Ltd [1992] 1 EGLR 61.
HR A[7380.406]
Where there is merely a nominal reversion only nominal damages are recoverable1. Where there was only a notional
and momentary reversion on a sublease, however, it was held that substantial damages were recoverable by the
sublessor from the sublessee as a result of the premises being out of repair because the momentary reversion had a
negative value on account of the sublessor's liability to the head lessor: this negative value (the amount the tenant would
have to pay someone to take over his reversion) was the diminution of the value of the reversion2.
HR A[7380.407]
1 Espir v Basil Street Hotel Ltd [1936] 3 All ER 91.
2 Lloyds Bank Ltd v Lake [1961] 2 All ER 30.
HR A[7380.408]
In cases where the amount recoverable during the term at common law was in question it has been held that the liability
of the head tenant to his landlord must be taken into account in assessing the damage to the reversion by failure to repair
by the subtenant1. Where the head tenant's reversion was of no value because he had not paid his rent and the lease was
thus liable to forfeiture, it was held that as against his subtenant he could recover the cost of repairs in an action for
breach of covenant to repair brought during the term2. For his own protection the sublessor could in a sublease of this
nature insert an express covenant that the sublessee shall indemnify him against all liability under his covenants to
repair in the head lease so far as they relate to the property comprised in the underlease.
HR A[7380.409]
1 Conquest v Ebbetts [1896] AC 490; Williams v Williams (1874) LR 9 CP 659; Colley v Streeton (1823) 2 B & C 273; Doe d Worcester
Trustees v Rowlands (1841) 9 C & P 734; Turner v Lamb (1845) 14 M & W 412; Smith v Peat (1853) 9 Exch 161; Mills v East London
Union (1872) LR 89 CP 79; Henderson v Thorn [1893] 2 QB 164.
2 Davies v Underwood (1857) 2 H & N 570.
HR A[7380.410]
Relief against an action for damages for breach of a covenant to repair so long as the property is requisitioned in the
exercise of emergency powers is given by the Landlord and Tenant (Requisitioned Land) Act 1944. If on
derequisitioning, compensation becomes payable to the landlord for damage to the land which occurred while it was
Page 134
requisitioned, then no remedy for breach of the covenant may at any time be enforced in respect of that damage1.
HR A[7380.411]
1 See Landlord and Tenant (Requisitioned Land) Act 1944, s 1 and see Jordan v May [1947] KB 427, [1947] 1 All ER 231, CA; Smiley v
Townshend [1950] 2 KB 311, [1950] 1 All ER 530.
(vii) Application of the "second limb" of s 18(1)
HR A[7380.412]
The "second limb" of s 18(1) operates so that no damages are recoverable for a breach of any covenant or agreement to
leave or put premises in repair at the termination of a lease if it is shown that the premises in whatever state of repair
they may be would at or shortly after the termination of the tenancy have been or be pulled down or such structural
alterations made therein as would make the repairs covered by the covenant or agreement valueless1.
HR A[7380.413]
1 Landlord and Tenant Act 1927, s 18(1). See Landeau v Marchbank [1949] 2 All ER 172, where the premises were to be converted into
flats or maisonettes and the price obtained for the property negatived any diminution in the value of the reversion. In Shane v Runwell [1967]
EGD 88 it was said that there would be no damages where the property is to be developed and the development value exceeds the current
rental value (or investment value). The mere fact that the claimant landlord carries out more extensive and expensive remedial works
following the termination of the lease does not necessarily trigger the second limb of s 18(1) - see Carmel Southend Ltd v Strachan &
Henshaw Ltd [2007] EWHC 1289 (TCC), [2007] 35 EG 136, where it was held that subsequent overcladding had not superseded the patch
repairs carried out by the tenant and did not amount to a structural alteration.
HR A[7380.414]
If it can be shown that at the determination of the lease the landlord intends to demolish the premises then the tenant is
not liable in damages--even though the landlord may subsequently have to change his mind for some good reason1. The
landlord's intention may be revocable but must not be provisional2. If the intention to demolish is directly linked to the
tenant's breach of covenant, the tenant will not be allowed to profit from his own wrong3.
HR A[7380.415]
1 Salisbury v Gilmore [1942] 2 KB 38, [1942] 1 All ER 457; Keats v Graham [1959] 3 All ER 919, [1960] 1 WLR 30, CA (a case where
the local planning authority in exercise of its powers under the Town and Country Planning Act 1947 did not, contrary to expectation, insist
on the immediate removal of the premises).
2 Cunliffe v Goodman [1950] 2 KB 237, [1950] 1 All ER 720, CA (decision subject to availability of materials and cost making the
venture a reasonable one was not a definite intention and in such case the landlord was not barred from his remedy by s 18(1)).
Page 135
3 In Hibernian Property Co Ltd v Liverpool Corpn [1973] 2 All ER 1117, [1973] 1 WLR 751, the property was allowed by the tenant (the
Corporation) to fall into such a state of disrepair that when it was acquired compulsorily by the Corporation as a housing authority under Part
III of the Housing Act 1957 compensation was payable for the site value only since the property was unfit for human habitation as statutorily
defined. The Corporation alleged that by virtue of the Landlord and Tenant Act 1927, s 18 no damages were recoverable since it was
intended to demolish the premises. It was held that the Corporation could not profit from its own wrong and that damages were payable to
take account of the reduced compensation received by the landlords because of the defective state of the premises.
HR A[7380.416]
The second limb operates to extinguish the right to damages altogether. It contains a subjective element requiring an
assessment of the state of mind of the actual landlord1 (or a relevant third party such as the local authority acting under
statutory powers). The burden of proving that the second limb applies is on the tenant2. The relevant date for the
application of the second limb is the date of expiry of the lease, ie the term date where the lease expires by effluxion of
time, or the date of forfeiture. If there is security of tenure under the LTA 1954 the relevant date is that on which the
lease ends under the provisions of that Act. Events occurring after the expiry of the lease are generally irrelevant3.
HR A[7380.417]
1 See Cunliffe v Goodman [1950] 2 KB 237 for the classic statement of what is meant by "intention" - it is more than "mere
contemplation" and does not exist if the landlord is reserving his decision until he is in possession of financial data sufficient to enable him
to determine whether the project will be commercially worthwhile. The project must have "moved out of the zone of contemplation - out of
the sphere of the tentative, the provisional and the exploratory - into the valley of decision". There must also be a reasonable prospect of the
landlord being able to implement his decision without overcoming too many hurdles.
2 P&O Property Holdings Ltd v Secretary of State for the Environment [2000] 1 PLSCS 37.
3 Keats v Graham [1960] 1 WLR 30.
HR A[7380.418]
The question is whether as at the term date having regard to all the circumstances the relevant demolition or alterations
are likely to be carried out within a short time. The landlord's intention must exist at the term date but his intention may
be to pull down or carry out structural alterations shortly thereafter. There is no definition of "structural alterations" in
the legislation.
HR A[7380.419]
The wording of the second limb indicates that it only applies where either the whole of the premises is to be demolished
or the effect of the structural alterations will be to render valueless the entirety of the repairs for which the landlord
claims. Thus in one case1 it was held that the second limb could not be relied on because repair works to the value of
£15,242 would have survived the intended refurbishment.
HR A[7380.420]
Page 136
1 Firle Investments v Datapoint International Ltd [2000] EWHC 105 (TCC).

Page 137
concerning the fabric of the demised premises/(6) The Leasehold Property (Repairs) Act 1938
(6) The Leasehold Property (Repairs) Act 1938
HR A[7380.421]
Where it applies the Leasehold Property (Repairs) Act 1938 operates to restrict forfeiture and claims for damages for
breach of repairing covenant until certain conditions have been fulfilled and the leave of the court has been obtained.
Relief is given under the 1938 Act (as extended by the Landlord and Tenant Act 1954) in the case of any lease
(including subleases and agreements for a lease or sublease where the tenant or subtenant has become entitled to have
the lease or sublease granted: s 7(1)) of any property other than an agricultural holding within the meaning of the
Agricultural Holdings Act 1986 held on a lease for a term certain of seven years or more (from the date of grant not the
date from which the term is expressed to run) of which three years or more remain unexpired1.
HR A[7380.422]
1 S 1(1) and (2) of the 1938 Act.
HR A[7380.423]
The landlord must first serve on the tenant a notice under s 146 of the Law of Property Act 1925 containing the
information prescribed by the 1938 Act. The tenant then has the right within 28 days of service to serve on the landlord
a counter-notice claiming the benefit of the 1938 Act. If the tenant does not serve a counter-notice within the 28-day
period the 1938 Act ceases to apply in relation to the breaches specified in the notice and the landlord is free to forfeit or
sue for damages (but only one month after service of the s 146 notice1). If the tenant serves a counter-notice the
landlord cannot forfeit or begin an action for damages without leave of the court2. This prohibition ceases to apply as
soon as there is less than three years of the term left to run or where the lease is surrendered3 even if the tenant served
counter-notice at a time when the 1938 Act did apply and the landlord did not apply for leave or leave was refused.
HR A[7380.424]
1 S 1(2) of the 1938 Act.
2 S 1(3) of the 1938 Act. The court is the county court except where the action for which leave is sought would have to be commenced in
the High Court (s 6 of the 1938 Act); County Courts Act 1984, s 21 and Administration of Justice Act 1973, s 6, Sch 2. Leave may be
granted on terms (s 1(6) of the 1938 Act). See Pascall v Galinski [1970] 1 QB 38, [1969] 3 All ER 1090.
3 Baker v Sims (Alsen Properties Ltd, Third Party) [1959] 1 QB 114, [1958] 3 All ER 326, CA.
Page 138
HR A[7380.425]
The court will only grant leave if the landlord proves one or more of the grounds in s 1(5) of the 1938 Act and the court
is satisfied in the exercise of its discretion that leave ought to be granted. The court has power to grant leave subject to
conditions1. The landlord is not entitled to the benefit of s 146(3) in relation to his solicitor's and surveyor's costs unless
he applies for leave and the court so directs.
HR A[7380.426]
1 S 1(6) of the 1938 Act.
HR A[7380.427]
A counter-notice served on the person to whom rent has been paid will be deemed to be duly served on the landlord of
the holding unless or until the tenant receives notice that the person to whom he has been paying rent has ceased to be
entitled to the rents and profits and of the name and address of the person who has become entitled thereto1.
HR A[7380.428]
1 Landlord and Tenant Act 1927, s 23(2), applied for the purposes of the Leasehold Property (Repairs) Act 1938, by the Landlord and
Tenant Act 1954, s 51(4).
HR A[7380.429]
A claim for damages (when the 1938 Act may apply) and a claim for a debt due under the lease (when it will not apply)
must be distinguished1. A claim under a covenant to spend a fixed sum per annum on repairs and decoration, or in
default to pay to the landlord the difference between that sum and what has been spent, is not a damages claim2. Nor is
a claim under a covenant to pay costs and expenses incurred by the landlord in connection with the preparation and
service of a s146 notice.
HR A[7380.430]
1 See Middlegate Properties v Gidlow-Jackson (1977) 34 P & CR 4, CA approving Bader Properties Ltd v Linley Property Investments
Ltd (1967) 19 P & CR 620.
2 Moss Empires Ltd v Olympia (Liverpool) Ltd [1939] AC 544.
HR A[7380.431]
Page 139
Where the tenant fails to comply with a repairing covenant in a lease which expressly confers on the landlord the right
to enter on the demised premises, carry out the repairs and recover the cost from the tenant, an action by the landlord to
recover the cost of the repairs is a claim for a debt due under the lease rather than a claim for damages for breach of the
covenant and accordingly the landlord does not require leave to bring the action again the tenant1.
HR A[7380.432]
1 See HR A[7380.333] ff above; Jervis v Harris [1996] 1 EGLR 78, CA approving Hamilton v Martell Securities Ltd [1984] Ch 266,
[1984] 1 All ER 665; Colchester Estates (Cardiff) v Carlton Industries plc [1986] Ch 80, [1984] 2 All ER 601; and Elite Investments Ltd v
TI Bainbridge Silencers Ltd [1986] 2 EGLR 43 and overruling Swallow Securities v Brand (1983) 45 P & CR 328.
HR A[7380.433]
The 1938 Act applies to covenants to keep or put in repair during the currency of the lease all or any of the property
comprised in the lease. Not every obligation contained in the same clause as an obligation to repair constitutes an
agreement to keep or put in repair within the meaning of the Act. Each obligation must be given its natural and ordinary
meaning1. The Act would not apply to an obligation to clean or paint unless cleaning or painting is required to be done
as part of an obligation to repair2.
HR A[7380.434]
1 Starrokate v Burry [1983] 1 EGLR 56, CA.
2 Starrokate v Burry [1983] 1 EGLR 56, CA; Greg v Planque [1936] 1 KB 669, CA - cleaning a flue; Farimani v Gates [1984] 2 EGLR
66.
HR A[7380.435]
A breach of an obligation to lay out insurance moneys in rebuilding or repairing the demised premises is not a breach of
a repairing covenant and accordingly a notice in relation to such a breach is not rendered invalid by a failure to include
the statements required by the 1938 Act1.
HR A[7380.436]
1 Farimani v Gates [1984] 2 EGLR 66.
HR A[7380.437]
The 1938 Act does not apply to a covenant to put the premises in repair upon the lessee taking possession or within a
reasonable time thereafter1.
Page 140
HR A[7380.438]
1 S 3 of the 1938 Act.
HR A[7380.439]
The 'lessee' who has the right to serve the counter-notice is the lessee in possession or who had a subsisting lease at the
time when proceedings are taken1. In the case of assignment of the lease the assignee is the "lessee"2. A mortgagee
(whether in possession or not) is not a "lessee" and is not entitled to serve a counter-notice3. Nor is a subtenant. It
follows that no leave is required to bring an action for damages against a former tenant who has ceased to have any
interest in the premises4. No leave is required to bring a claim against an original tenant or intermediate assignee after
the lease has been assigned.
HR A[7380.440]
1 See the Law of Property Act 1925, s 146(1) and Cusack-Smith v Gold [1958] 2 All ER 361, [1958] 1 WLR 611, but also see Baker v
Sims (Alsen Properties Ltd, Third Party) [1959] 1 QB 114, [1958] 3 All ER 326 at 335, CA, per Lord Evershed MR. A lessee who has failed
to give a counter-notice cannot rely on one given by his mortgagee who had no right to receive notice from the landlord but was in fact given
notice for the purpose of information by courtesy or by mistake: Church Comrs for England v Ve-ri Best Manufacturing Co Ltd [1957] 1 QB
238, [1956] 3 All ER 777.
2 Old Grovebury Manor Farm Ltd v W Seymour Plant Sales and Hire Ltd (No 2) [1979] 3 All ER 504, [1979] 1 WLR 1397.
3 Smith v Spaul [2002] EWCA Civ 1830, [2003] QB 983, [2003] 1 All ER 509.
4 Cusack-Smith v Gold [1958] 2 All ER 361, [1958] 1 WLR 611, but see Baker v Sims (Alsen Properties Ltd, Third Party) [1959] 1 QB
114, [1958] 3 All ER 326.
HR A[7380.441]
The court has no jurisdiction under s 1 of the 1938 Act to give the landlord leave to commence proceedings against a
tenant for damages for breach of a covenant to repair if at the date of the application the landlord has already entered the
demised premises and remedied the want of repair but did not do so pursuant to any provision in the lease and did not
seek to recover his costs as a debt owed to him1.
HR A[7380.442]
1 See SEDAC Investments Ltd v Tanner [1982] 1 WLR 1342, [1982] 3 All ER 646 - as explained and distinguished in Hamilton v Martell
Securities Ltd [1984] Ch 266, [1984] 1 All ER 665. A valid notice under the Act can only be served in relation to a breach which subsists at
the date of the notice. It was held in SEDAC Investments Ltd v Tanner that no notice can be served once the remedial work has been carried
out, even if this is done by the landlord. This decision may be criticised on the basis (1) that carrying out remedial work will not always
Page 141
remedy the effects of the breach - eg if the disrepair has resulted in the landlord becoming liable to pay damages to third parties, or the rental
value of adjoining premises has been diminished and (2) that in any event work done by the landlord cannot remedy the tenant's breach of
his own obligation as this is not part of the parties' bargain. The landlord has not remedied the breach but the state of disrepair which the
breach has brought into existence.
HR A[7380.443]
Where there is an interest in the premises belonging to the Crown or a government department or held on behalf of the
Crown for the purposes of a government department the 1938 Act applies as if that interest were not so held1.
HR A[7380.444]
1 S 51(3) of the Landlord and Tenant Act 1954.
(i) Prescribed Information: contents of s 146 notice
HR A[7380.445]
The notice required under the 1938 Act is a notice under s 146 of the Law of Property Act 1925. It must indicate in
characters no less conspicuous than any others in the notice that the tenant is entitled to serve a counter-notice under the
1938 Act as extended by the Landlord and Tenant Act 1954, and contain a statement in like characters specifying the
time within which and the manner in which such counter-notice may be served under the 1938 Act and the name and
address for service on the landlord1.
HR A[7380.446]
1 S 1(4) of the 1938 Act.
HR A[7380.447]
The notice may be addressed to "the lessee" without any name1. There is no requirement to serve notice on mortgagees
or subtenants2. Once notice has been served on the person who is the tenant at the time the notice is given, no further
notice need be served if the lease is subsequently assigned3. If a notice is bad, a subsequent letter which refers to the
notice and makes good the deficiency may be a valid notice4.
HR A[7380.448]
1 S 7(2) of the 1938 Act applying s 196(2) of the Law of Property Act 1925.
Page 142
2 See HR A[7380.439] - [7380.440] above.
3 Kanda v Church Commissioners for England [1958] 1 QB 332; [1957] 1 WLR 353.
4 Sidnell v Wilson [1966] 1 QB 67; [1966] 2 WLR 560.
HR A[7380.449]
The wording of the notice need not follow precisely the language of the 1938 Act, which must be interpreted in a
reasonable way1. The requirement of a statement "in characters not less conspicuous than those used in any other part of
the notice"2 must not be too literally construed.
HR A[7380.450]
1 In Middlegate Properties Ltd v Messimeris [1973] 1 WLR 168, [1973] 1 All ER 645, CA: certain details in the notice were typed in a
typeface slightly bigger and blacker in tone than the statement. It was held that the notice was valid and that "not less conspicuous" should
be construed to mean "equally readable" or "equally sufficient" to tell the tenant of his right to give a counter-notice; see also BL Holdings v
Marcolt Investments Ltd [1979] 1 EGLR 97, CA (which also gives general guidance for practitioners on the drafting of such notices).
2 S 1(4) of the 1938 Act and see previous footnote.
HR A[7380.451]
The provisions of s 196 of the Law of Property Act 1925 apply to the service of the landlord's notice1. The provisions
of s 18(2) of the Landlord and Tenant Act 19272 do not apply to notices under the 1938 Act which are served as a
prerequisite only to proceedings for damages and not in relation to the enforcement of a right of re-entry or forfeiture.
HR A[7380.452]
1 S 7(2) of the 1938 Act.
2 These provisions prevent enforcement of a right of re-entry or forfeiture for breach of repairing covenant unless the landlord proves that
the fact that a s 146 notice has been served on the tenant was known to the tenant, undertenant or agent, and that a reasonably sufficient time
to enable the repairs to be executed has elapsed from the time when the fact of service came to the knowledge of the relevant person. Under s
18(2) if a notice is sent by registered post addressed to a person at his last known place of abode he is deemed to have had knowledge of it
from the time of delivery in the ordinary course of post. See HR A[7380.311] above.
HR A[7380.453]
The requirement that the statement in the notice shall specify the manner of service of a counter-notice may be satisfied
if one method of service is specified1. A notice which fails to specify any method of service will be invalid2. A notice
does sufficiently specify the name and address for service of the landlord if it specifies the landlord's solicitors and their
address (provided they are authorised to accept service)3.
Page 143
HR A[7380.454]
1 Middlegate Properties Ltd v Messimeris [1973] 1 WLR 168, [1973] 1 All ER 645, CA; but see BL Holdings v Marcolt Investments Ltd
[1979] 1 EGLR 97, CA.
2 BL Holdings v Marcolt Investments Ltd [1979] 1 EGLR 97, CA.
3 Middlegate Properties Ltd v Messimeris [1973] 1 WLR 168, [1973] 1 All ER 645, CA.
HR A[7380.455]
A defective notice is capable of being waived by the tenant1. In order to constitute a waiver something in the nature of
an express or implied promise not to rely on the invalidity of the landlord's notice at any future date will usually be
required. The service of an unqualified counter-notice under the 1938 Act will not normally prevent the tenant from
subsequently contending that the landlord's notice is invalid2. It has also been suggested that a notice which is valid
only in part may be capable of being severed3.
HR A[7380.456]
1 BL Holdings v Marcolt Investments Ltd [1979] 1 EGLR 97, CA.
2 BL Holdings v Marcolt Investments Ltd [1979] 1 EGLR 97, CA, but cf Sidnell v Wilson [1966] 1 QB 67; [1966] 2 WLR 560.
3 Starrokate Ltd v Burry [1983] 1 EGLR 56 at 57, per May LJ.
(ii) Contents of counter-notice
HR A[7380.457]
An application for leave to commence proceedings for forfeiture is a "pending land action" within s 17(1) of the Land
Charges Act 1972, even if the application is also one for leave to commence proceedings for damages for breach of
covenant1. Accordingly a caution can be registered in respect of such proceedings.
HR A[7380.458]
1 Selim Ltd v Bickenhall Engineering Ltd [1981] 1 WLR 1318, [1981] 3 All ER 210.
(iii) Leave of court to bring action

Page 144
HR A[7380.459]
Leave is not to be given unless the landlord proves1:
(a) that the immediate remedying of the breach is requisite to prevent a substantial diminution in value of
the reversion or that the value thereof has been substantially diminished;
(b) that in relation to the premises the immediate remedying is required for giving effect to the purposes
of any enactment or byelaw or other provision having effect under any enactment relating to the safety,
repair, maintenance or sanitary condition of houses, or for giving effect to any order of a court or
requirement of any authority under any such enactment, byelaw or provision;
(c) that the immediate remedying of the breach is required in the interests of the occupier of the premises
or of any part thereof;
(d) that the breach can be repaired at an expense relatively small compared with that which would be
occasioned by postponement; or
(e) that there are special circumstances which render it just and equitable that relief should be given.
HR A[7380.460]
1 S 1(5) of the 1938 Act as amended by s 51(2) of the Landlord and Tenant Act 1954.
HR A[7380.461]
These conditions are alternative and relief may be given on proof of any one of them1. The landlord must prove the
breaches of covenant relied upon and the ground on which he relies to obtain leave on the balance of probabilities2. The
relevant date upon which the landlord must prove one or more of the grounds is the date of the hearing of his
application for leave to bring forfeiture proceedings3.
HR A[7380.462]
1 Phillips v Price [1959] Ch 181, [1958] 3 All ER 386.
2 Associated British Ports v CH Bailey plc [1990] 2 AC 703, [1990] 1 All ER 929. This decision of the House of Lords overrules Sidnell v
Wilson [1966] 2 QB 67, [1966] 1 All ER 681 in which it was held that the landlord need only show a prima facie or arguable case in order to
obtain leave. To establish his case, the landlord must adduce admissible evidence in the ordinary way: Jackson v Charles A Pilgrim Ltd
(1975) 29 P & CR 328.
3 Landmaster Properties Ltd v Thackeray Property Services [2003] EWHC 959 (QB), [2003] 35 EG 83. In that case the demised premises
were destroyed by fire after the issue of proceedings seeking leave to forfeit the lease. Since there was no evidence to support the contention
that there had been a causative substantial diminution in the value of the reversion, the ground in s 1(5)(a) was not established but the
landlord was given leave under s 1(5)(e) on the basis that there were special circumstances and that it was just and equitable to grant leave. If
the tenant does sufficient but incomplete works between the service of notice and issue of proceedings on the one hand and the hearing on
the other to prevent reliance by the landlord upon one or more of the other s 1(5) grounds, the court is still able in appropriate circumstances
to grant leave under ground (e).
Page 145
HR A[7380.463]
Even if the landlord proves any of the conditions the court has a discretion whether or not to give leave. This discretion
is not to be used to exclude the landlord from his rights which are subject to the wide discretion exercisable under s 146
of the Law of Property Act 19251. The court must be clearly convinced that despite compliance with the conditions,
leave to bring an action ought not to be granted2 and this means that the 1938 Act issue must be fought out when the
landlord seeks leave to pursue his remedies for breach of covenant. In practice, in many cases if the landlord establishes
one or more of the grounds then it will be up to the tenant to put forward reasons why the court should nonetheless
refuse leave; but the exercise of the discretion should probably be approached free from any presumption either way.
HR A[7380.464]
1 Re Metropolitan Film Studios Ltd v Twickenham Film Studios Ltd [1962] 1 WLR 1315, [1962] 3 All ER 508; but see Land Securities
plc v Metropolitan Police District Reviewer [1983] 1 WLR 439, [1983] 2 All ER 254 where the court expressed the view that the discretion
is unfettered.
2 The House of Lords' decision in Associated British Ports v CH Bailey plc [1990] 2 AC 703, [1990] 1 All ER 929 has reversed all
previous thinking on these provisions (see, for example, Land Securities plc v Metropolitan Police District Reviewer [1983] 1 WLR 439,
[1983] 2 All ER 254 where leave was refused although two of the conditions were made out).
HR A[7380.465]
The court may impose such terms and conditions on the landlord or the tenant as it thinks fit1. It may for instance grant
leave in respect of some only of the work specified in the schedule of dilapidations, if some of the work does not fall
within any of the grounds in s 1(5); adjourn or dismiss the landlord's application on condition that specified repairs are
carried out2; or grant leave on terms that proceedings are not issued for a specified period so as to give the tenant the
opportunity to do the work.
HR A[7380.466]
1 S 1(6) of the 1938 Act.
2 See Associated British Ports v CH Bailey plc [1990] 2 AC 703, [1990] 1 All ER 929.
(iv) Fees and costs
HR A[7380.467]
The landlord cannot take the benefit of s 146(3) of the Law of Property Act 1925 which provides for the recovery of his
reasonable costs of a solicitor and surveyor where the breach is waived or relief is granted by the court, unless he
applies for leave1. On such an application the court has power to direct whether and to what extent the landlord is to be
Page 146
so entitled. The contractual provisions in the lease relating to fees and costs are not affected by the 1938 Act. The
subsection does not cover the case where the tenant avoids forfeiture by compliance with the notice and, unless special
provision is made in the lease2, such costs are not recoverable in that case.
HR A[7380.468]
1 S 2 of the 1938 Act; Phillips v Price [1959] Ch 181, [1958] 3 All ER 386; Re Metropolitan Film Studios Ltd v Twickenham Film Studios
Ltd [1962] 1 WLR 1315, [1962] 3 All ER 508.
2 For a case where there was such special provision in the lease, relied on by the landlord, see Middlegate Properties v Gidlow-Jackson
(1977) 34 P & CR 4, CA.
Page 147
condition and management of the demised premises/I Tenant's remedies for landlord's failure to maintain fabric and/or
provide services
I
Page 148
provide services/(1) Generally
(1) Generally
HR A[7380.469]
A number of remedies may be available to the tenant if the landlord breaches his repairing covenant and/or fails to
provide services under the terms of the lease, depending on the facts of the case. The court may in some circumstances
order specific performance or a mandatory injunction requiring the landlord to carry out the necessary work1. The more
usual remedy is damages or a claim for set-off in the landlord's claim for rent2. As an alternative the tenant may himself
choose to carry out the remedial work to the demised premises then recover the costs of doing so from the landlord3.
The court also has power to order the appointment of a receiver4 and many residential tenants now also have the option
of applying for the appointment of a receiver or manager under Part II of the Landlord and Tenant Act 1987 to carry out
the necessary repair works in place of the landlord5.
Claims for remedies may be combined; for example a claim for specific performance may be made together with a
damages claim for past disrepair. Remedies may also be sought in the alternative; for example for the appointment of a
manager or alternatively an order for specific performance requiring the landlord to carry out the necessary repair work.
After the expiry of the term the only remedy for past disrepair is a claim or counterclaim for damages or set off against
past arrears of rent.
HR A[7380.470]
1 See HR A[7380.491] - [7380.498] below.
3 Green v Eales (1841) 2 QB 225; Calabar Property Ltd v Stitcher [1984] 1 WLR 287, CA; Loria v Hammer [1989] 2 EGLR 249; see
also Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] Ch 592, CA. Note that where the breach relates to property
retained by the landlord rather than to a part of the demised premises the tenant's rights to carry out the works are said to arise by reason of
an implied licence. For a case in which the court refused to imply such a licence see Metropolitan Properties Co Ltd v Wilson [2002] EWHC
1853 (Ch), [2003] L & TR 15. Local authority tenants have a right to carry out repairs and recover the cost from the landlord under the
Secure Tenancies (Right to Repair) Scheme Regulations 1985, SI 1985/1493.
4 Supreme Court Act 1981, s 37 (see HR A[7380.501] ff below).
5 See HR A[7380.499] - [500] and HR A[7380.701.19] ff. There are further statutory remedies available under housing, environmental
and health and safety law.
Page 149
provide services/(2) Damages
(2) Damages
HR A[7380.471]
Where a landlord is in breach of his obligations to maintain the fabric of premises he will be liable to the tenant for the
amount which would, so far as possible, put the tenant in the position he would have been in had the obligation to repair
been fulfilled by the landlord. This exercise requires a comparison of the condition of the property during the period in
which the landlord failed to fulfil his obligations and the condition the property would have been in had the obligations
been performed1.
There is no statutory cap on the tenant's claim for damages for breach of the landlord's repairing obligations. The
measure of damages is the common law one. The damages may in an appropriate case include a sum for discomfort,
loss of enjoyment and consequential ill health resulting from living in a property that was not in the required state of
repair2. The tenant may also claim for damage to his personal property.
HR A[7380.472]
1 Wallace v Manchester City Council [1998] 3 EGLR 38, CA. Problems of assessment are highlighted in Crédit Suisse v Beegas
Nominees Ltd [1994] 1 EGLR 76 (where the court awarded a limited company general damages for inconvenience caused by water
penetration into office premises by reference to the inconvenience suffered by staff and customers).
2 Calabar Properties Ltd v Stitcher [1984] 1 WLR 287; Chiodi v De Marney [1988] 2 EGLR 64; Televantos v McCulloch [1991] 1 EGLR
123, CA; Newham London Borough Council v Patel (1978) 13 HLR 77; McCoy & Co v Clark (1982) 13 HLR 87, CA.
HR A[7380.473]
While the landlord is liable to pay damages as from the date of breach, where the subject matter of the covenant is part
of the demised premises there may be implied a precondition that no breach occurs until the landlord has had notice of
the defect and has failed to carry out repairs within a reasonable time1. The tenant will not in those circumstances be
able to recover damages for loss suffered during the period before the landlord is notified or for the period between
notice and the date when the landlord carries out repairs, unless he has delayed unreasonably2.
HR A[7380.474]
1 McCarrick v Liverpool Corpn [1947] AC 219; O'Brien v Robinson [1973] AC 912. See HR A[7380.260] ff above.
2 Green v Eales (1841) 2 QB 225; Calabar Properties Ltd v Stitcher [1984] 1 WLR 287; Morris v Liverpool City Council (1988) 20 HLR
Page 150
498. Note however that the landlord may be held to have waived the requirement for notice if he advises the tenant that he intends to carry
out repair works - see Princes House Ltd v Distinctive Clubs Ltd [2007] EWCA Civ 374, [2007] 27 EG 304.
HR A[7380.475]
If the tenant remains in occupation the measure of damages is the difference between the value to the tenant of the
premises in their defective condition and the premises in the condition in which they would have been had the landlord
fulfilled his repairing obligations1. Where the breach has resulted in damage to the demised premises which the
landlord is not liable to repair under the terms of the lease, the tenant will in principle be able to recover as damages the
reasonable cost of making good the damage2. The cost of carrying out repair work falling within the landlord's repairing
obligation is also recoverable as damages3 together with an award for any discomfort, inconvenience, ill-health and/or
damage to personal property4.
HR A[7380.476]
1 Calabar Properties Ltd v Stitcher [1984] 1 WLR 287.
2 Green v Eales (1841) 2 QB 225. See also Calabar Properties Ltd v Stitcher [1984] 1 WLR 287.
3 Calabar Properties Ltd v Stitcher [1984] 1 WLR 287. Where the tenant carries out work the cost of which the landlord would have been
able to recover under a service charge provision if he had carried it out himself, damages may be reduced by the amount the tenant would
have had to pay anyway had the landlord done the work - see Marenco v Jacramel Co Ltd [1964] EGD 319.
4 Calabar Properties Ltd v Stitcher [1984] 1 WLR 287, where the court did not award a sum representing loss of rental value during the
period that the premises were uninhabitable, although damages may in appropriate cases be assessed by reference to a notional reduction in
rent (see Shine v English Churches Housing Group [2004] EWCA Civ 434, [2004] HLR 727; Niazi Services Ltd v Van Der Loo [2004]
EWCA Civ 53, [2004] 1 WLR 1254 and HR A[7380.477] below).
HR A[7380.477]
It will rarely be appropriate to award damages for stress and inconvenience in excess of the level of the rent payable1,
although in an exceptional case the conduct of the landlord may warrant such an award2. The award of damages is an
award for breach of contract and not for a tort committed by the landlord. Accordingly the calculation of the award of
damages for discomfort and inconvenience should be related to the fact that the tenant is not getting proper value for the
rent which he is paying for defective premises3. Evidence of the rent payable under the lease is admissible but not
conclusive as to the value to the tenant of its occupation of the premises had there been no breach; expert evidence may
be relevant and admissible as to such value following such breaches as may be found4.
HR A[7380.478]
1 Shine v English Churches Housing Group [2004] EWCA Civ 434, [2004] HLR 727, [2005] L & TR 7, CA (damages for breach of
covenant implied by s 11 of the LTA 1985).
2 Such damages were awarded in Chiodi v De Marney (1988) 21 HLR 6. In Earle v Charalambous [2006] EWCA Civ 1090, it was held
Page 151
that a notional judgment of the resulting reduction in rental value is likely to be the most appropriate starting point in assessing damages in
respect of interference with the lessee's enjoyment of the lease even where the property is not sub-let but is occupied as a home by the lessee.
Distress and inconvenience are not freestanding heads of claim, but rather are symptomatic of interference with the lessee's enjoyment of
that asset. Further, the Court of Appeal rejected the submission that there was a general "tariff" applicable in all housing disrepair cases
regardless of the nature and value of the property.
3 Shine v English Churches Housing Group [2004] EWCA Civ 434, [2004] HLR 727, [2005] L & TR 7, CA. See also Crédit Suisse v
Beegas Nominees Ltd [1994] 1 EGLR 76 where the court awarded a limited company general damages for inconvenience caused by water
penetration into office premises by reference to the inconvenience suffered by staff and customers.
4 Electricity Supply Nominees Ltd v National Magazine Co Ltd [1999] 1 EGLR 130.
HR A[7380.479]
If the tenant has to vacate the premises while repair works are being carried out he should be entitled to the reasonable
cost of alternative accommodation, consequential redecoration of the demised premises and an award for discomfort
and inconvenience1. He may only claim such damages, however, if he would not have been required to move out had
the landlord performed his obligations when he should have done. Removal and other associated costs may be
recoverable2.
If the tenant does not remain in occupation but is forced by the failure to repair to sell or sublet the property he may
recover for the diminution of the price or recoverable rent occasioned by the breach3. If the tenant could have sold or
sublet but was prevented from doing so by the disrepair the damages may (subject to questions of remoteness) include
outgoings payable in respect of the premises after the date on which the lease could have been assigned or sublet and a
sum to reflect the fact that the tenant will continue to be liable under the lease in the future4.
HR A[7380.480]
1 Calabar Properties Ltd v Stitcher [1984] 1 WLR 287. Note however that if the landlord's liability is dependent upon his receiving notice
and he carried out repairs reasonably promptly the tenant may not claim the cost of alternative accommodation if he must vacate during the
work.
2 McGreal v Wake (1984) 13 HLR 107.
3 Calabar Properties Ltd v Stitcher [1984] 1 WLR 287.
4 Crédit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76.
HR A[7380.481]
When the landlord at the request of the tenant sends in workmen to do repairs and the tenant suffers loss through the
negligence of the workmen, the extent of the obligation incurred by the landlord had been said to be a question of fact1
but the true principle appears to be that his liability is the same as that of any other person called in by the tenant to
carry out operations on the premises2. Where licensees only enjoyed restricted use of business premises because the
licensors had negligently maintained the immediately adjoining premises, the licensees recovered the difference
between actual profits and expected profits if the whole of the building had been usable3.
Page 152
HR A[7380.482]
1 Mills v Holton (1857) 2 H&N 14; Greg v Planque [1936] 1 KB 669, CA.
2 Ball v LCC [1949] 2 KB 159, [1949] 1 All ER 1056, CA.
3 Ben Stansfield (Carlisle) Ltd v Carlisle City Council [1983] 1 EGLR 24, CA.
HR A[7380.483]
Where the performance of a landlord's repairing obligation impinges on the tenant's quiet enjoyment neither covenant
simply trumps the other. The two covenants must be construed and applied so far as possible so as to co-exist on a basis
of parity, not of priority, respecting the terms of both. The landlord must take all reasonable precautions but is not
obliged to take all possible precautions to minimise disturbance to the tenant's occupation1.
HR A[7380.484]
1 Goldmile Properties Ltd v Speiro Lechouritis [2003] EWCA Civ 49, [2003] 15 EG 143, [2003] 2 P & CR 1, CA. Note that damages
may be awarded for inconvenience and discomfort caused during the carrying out of remedial works but only to the extent that the works
would not have been necessary if the landlord had performed his obligations when he should have done: Televantos v McCulloch (1991) 23
HLR 412.
Page 153
provide services/(3) Set-off
(3) Set-off
HR A[7380.485]
If the tenant's claim for damages amounts to a set-off against rent or other sums due to the landlord it operates to
extinguish the tenant's liability for those sums. It is a useful remedy where the landlord is insolvent and a claim for
damages may not be satisfied.
If the tenant carries out the repairs himself he has an ancient common law right to set off against rent sums which he has
actually expended in doing so1. His equitable right of set-off extends further to unliquidated damages for breach of the
landlord's repairing covenant and arises even if the tenant has not carried out the works himself2.
HR A[7380.486]
1 Taylor v Beal (1591) Cro Elix 222; Lee-Parker v Izzet [1971] 1 WLR 1688. See HR A[3384] - [3385] (rent).
2 British Anzani (Felixstowe) v International Marine Management (UK) Ltd [1980] QB 137; Melville v Grapelodge Developments Ltd
(1978) 39 P & CR 179. See HR A[3384] - [3385] (rent).
HR A[7380.487]
It has been held that following an assignment of the reversion the tenant could set off against the landlord's claim for
arrears of rent falling due before the assignment any of damages due to him for the assignor's breach of repairing
obligations because the accrued debt vested in the current landlord as assignee, subject to all equities that were available
to the tenant against the assignor1.
HR A[7380.488]
1 Muscat v Smith [2003] EWCA Civ 962, [2003] 1 WLR 2853, [2004] HLR 88. See HR A[3384] ff].
HR A[7380.489]
In some instances the tenant might be precluded from relying on the doctrine of equitable set-off. While the court has no
jurisdiction to dismiss a contractual claim to damages it may deny the right to set off, which is an equitable remedy, by
virtue of the tenant's inequitable conduct1. In one case2 the Court of Appeal went further and dismissed the tenant's
counterclaim altogether. It was held that the tenant's own failure to pay the service charges (as part of a pattern of
Page 154
deliberate obstruction of the freeholder's attempts to manage the property) had caused foreseeable loss to the freeholder
in terms of its own liability to that tenant. The freeholder was entitled to set off the damages it would be entitled to
claim from the tenant against its liability to the tenant and on the basis that its liability on the tenant's counterclaim was
thereby reduced to nil; the counterclaim was dismissed.
HR A[7380.490]
1 See also HR A[3394] and the cases there cited in relation to exclusion of the right to set off by clear words in the lease.
2 Bluestorm Ltd v Portvale Holdings Ltd [2004] EWCA Civ 289, [2004] 2 EGLR 38.
Page 155
provide services/(4) Specific performance
(4) Specific performance
HR A[7380.491]
The court has jurisdiction in an appropriate case to grant specific performance of the landlord's repairing covenant1. The
remedy is discretionary and the jurisdiction should be carefully exercised, but there is no reason in principle why in an
appropriate case an order should not be made, particularly where there has been a plain breach of covenant and there is
no doubt what is required to be done to remedy it2.
HR A[7380.492]
1 Jeune v Queen's Cross Properties Ltd [1974] Ch 97.
2 Jeune v Queens Cross Properties Ltd [1974] Ch 97. See also Francis v Cowcliffe Ltd (1976) 33 P & CR 368 (specific performance of a
landlord's obligation to repair a lift); Peninsular Maritime Ltd v Padseal Ltd [1981] 2 EGLR 43, CA.
HR A[7380.493]
The court also has statutory power to grant specific performance in proceedings in which the tenant of a dwelling
alleges a breach on the part of the landlord of a repairing covenant relating to any part of the premises in which the
dwelling is comprised, notwithstanding any equitable rule restricting the scope of the remedy1.
HR A[7380.494]
1 Landlord and Tenant Act 1985, s 17. See HR A[20249].
HR A[7380.495]
The conditions which must be established before the court will consider making an order for specific performance are
dealt with above at HR A[7380.343] - [344] in the context of landlord's remedies. The court should usually be
convinced that there is a real practical reason why the work must be done and damages must not be an adequate remedy.
However, as the tenant will usually be in occupation of the premises and should be able to establish that the disrepair is
causing continuing loss of enjoyment this may provide justification for the making of the order.
The court should be provided with a fully particularised schedule of works so that the landlord may know precisely
what he is required to do. If this is impossible, perhaps because the tenant is unable to obtain access to adjoining
Page 156
premises which are the source of the disrepair, or if it is obvious what the landlord must do, then the court may be
persuaded to make an order in more general terms - for example, requiring the landlord to carry out such works as may
be necessary to perform his covenants or to prevent the particular damage occurring to the tenant's premises, together
with permission to apply for the detailed working out of the order and settlement of a schedule of necessary works1.
HR A[7380.496]
1 See for example Gordon v Selico Co Ltd [1985] 2 EGLR 97, affd. [1986] 1 EGLR 71. Under s 33 of the Supreme Court Act 1981, s
52(i) of the County Court Act 1984 and CPR Parts 25.1 and 25.5 the court has the power to order the landlord to permit the tenant's expert to
inspect and report on the works required. See also Parker v Camden London Borough Council [1986] Ch 162.
HR A[7380.497]
A landlord will not necessarily avoid liability for specific performance of its contractual obligations by offering the
tenant alternative accommodation. Thus, in one case1 the tenant obtained an order for the carrying out of necessary
works and damages for the whole period of disrepair and for the additional cost of living elsewhere even though he had
refused the local authority landlord's offer of alternative accommodation, since it was held to be reasonable for him so
to refuse on the facts.
Financial inability to perform the covenant is not generally a defence to a claim for specific performance2.
The fact that the tenant is in breach of his obligations to pay service charges under the terms of the lease will not operate
as a bar to specific performance, at least where the service charges are withheld on account of the landlord's own breach
of covenant3.
HR A[7380.498]
1 Alexander v Lambeth London Borough Council [2000] CLR 3931.
2 Francis v Cowlcliffe (1977) 33 P & CR 368; Patel v Ali [1984] Ch 283. See also Hallisey v Petmoor Developments Ltd [2000] EGCS
124 where specific performance was ordered under CPR Part 24.
3 Gordon v Selico Co Ltd [1985] 2 EGLR 79, affirmed on appeal.

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provide services/(5) Receivers and managers
(5) Receivers and managers
HR A[7380.499]
Part II of the Landlord and Tenant Act 1987 as amended by the Housing Act 1996 provides for applications by tenants
to the Leasehold Valuation Tribunal for the appointment of a manager to carry out such functions in connection with the
management of premises as the Tribunal thinks fit1. A tenant who is eligible to apply for an order under Part II of the
1987 Act is not permitted to apply to the court to exercise its general jurisdiction to appoint a receiver or manager2. The
1987 Act does not apply to business tenants within the meaning of the Landlord and Tenant Act 1954, Part II3.
HR A[7380.500]
1 See HR A[7380.701.19] ff below. This is in addition to the collective right of certain tenants with long leases to take over the
management under Part II of the Commonhold and Leasehold Reform Act 2002, referred to as the Right to Manage: see HR E[235.1]-[257].
2 See LTA 1987, s 21(6) and see below at HR A[7380.501] ff for the court's general jurisdiction.
3 LTA 1987, s 21(7). Note that where premises are occupied for mixed business and residential purposes the tenancy is likely to be one to
which LTA 1954, Part II applies: see Cheryl Investments v Saldanha [1978] 1 WLR 1329.
HR A[7380.501]
The High Court has a general jurisdiction to appoint a receiver whenever it appears to be just and convenient to do so1.
The jurisdiction is discretionary but is likely to be exercised if the landlord cannot be found in order to require him to
perform his obligations to repair2 or where there are many years left to run on the lease and the landlord has little
incentive to carry out repairs3. The power extends to remedying breaches by a management company rather than the
landlord4.
HR A[7380.502]
1 Supreme Court Act 1981, s 37. The power may be exercised on an interim basis.
2 Hart v Emelkirk [1983] 1 WLR 1289.
3 Blawdziewicz v Diadon Establishment [1988] 2 EGLR 52. The court has also appointed a receiver where the landlord was performing
some of his duties but neglecting major repairs-Daiches v Bluelake Investments Ltd [1985] 2 EGLR 67.
Page 158
4 Hafton Properties Ltd v Camp [1994] 1 EGLR 76. Note however that the power will not be exercised where the landlord is a local
authority charged by Parliament with the duty of maintaining housing accommodation - Parker v Camden London Borough Council [1986]
Ch 62.
HR A[7380.503]
The receiver is the agent of the court, not the tenant1. He will require funds from which to pay for the necessary repairs
and these may be collected in by him under advance service charge provisions in the lease or he may seek an indemnity
from the tenant. The court has no power to order the landlord to pay the receiver2.
HR A[7380.504]
1 Evans v Clayhope Properties Ltd [1988] 1 WLR 358.
2 Evans v Clayhope Properties Ltd [1988] 1 WLR 358.

Page 159
provide services/(6) Management audit
(6) Management audit
HR A[7380.504.1]
Under the Leasehold Reform, Housing and Urban Development Act 1993 "qualifying tenants" are entitled to have a
management audit carried out. This is dealt with at HR A[7380.1.1] - [7380.1.18] below.
Page 160
provide services/(7) Acquisition orders
(7) Acquisition orders
HR A[7380.504.2]
Under Part III of the Landlord and Tenant Act 1987 as amended tenants of flats may in certain specified circumstances
apply to the court for an acquisition order enabling a person nominated by them to acquire compulsorily their landlord's
interest in the premises. This is dealt with at HR A[7380.702]-[7380.733] below.
Page 161
condition and management of the demised premises/J The recovery of service charges
J
Page 162
condition and management of the demised premises/J The recovery of service charges/(1) Service charges: common law
(1) Service charges: common law
(i) What are "services charges"?
HR A[7380.505]
There is no general definition of "service charge"1. In normal usage, a service charge is simply a charge paid by a tenant
for services provided. Where a landlord and a tenant agree that the tenant should contribute to the cost of works and
services carried out and provided by the landlord, the scope of the parties' obligations will be determined by the words
of the lease in question in its particular context. Often a service charge is reserved as rent or it is provided that the rent
will be recoverable as rent in arrears2. The effect of such a provision is that the service charge once ascertained or
agreed3 is treated as rent for the purposes of distress and forfeiture4: such forfeiture is subject to the usual principles
upon which relief for non-payment of rent can be obtained.
HR A[7380.506]
1 Contrast LTA 1985, s 18 in the context of residential leases. For a fuller account of the law relating to service charges in relation to
residential leases see HR A[7380.551] below.
2 See eg 23 Encyclopaedia of Forms and Precedents (5th edn) Form 731. In Filross Securities Ltd v Midgeley [1998] 3 EGLR 43, CA the
landlord was held entitled to an equitable set-off in respect of service charges (some of which were otherwise statute barred) where the
tenant was claiming damages for breach of the landlord's repairing obligation. In P & O Property Holdings Ltd v International Computers
Ltd [2000] 2 All ER 1015, CA it was held that a rent suspension clause did not, on a true construction of the lease, apply to service charges
reserved as 'additional rents'.
3 Concorde Graphics Ltd v Andromeda Investments SA [1983] 1 EGLR 53 (service charge not due and distress not possible where bona
fide dispute concerning service charge).
4 Escalus Properties Ltd v Robinson [1996] QB 231, [1995] 2 EGLR 23.
HR A[7380.507]
(ii) The purpose and construction of service charge provisions: generally
The purpose of the service charge provisions is relevant to their meaning and effect. So far as the scheme, context and
language of those provisions allow, the service charge provisions should be given an effect that fulfils rather than
defeats their evident purpose1. In general service charge provisions have the purpose of ensuring that a landlord who
reasonably incurs liability for expenditure for the benefit of all its tenants should be entitled to recover the full cost of
doing so from those tenants and each tenant should reimburse the landlord a proper proportion of those service
charges2. In the absence of clear words, service charge provisions will not in general be construed as allowing the
landlord to recover for the cost of items which are of no benefit to the tenants.
Page 163
HR A[7380.508]
1 Universities Superannuation Scheme Ltd v Marks & Spencer Ltd [1999] 1 EGLR 13. Cf Leonora Investment Co Ltd v Mott Macdonald
Ltd [2008] EWHC 136, [2008] All ER (D) 137 (Feb) (limits on purposive construction in face of clear words).
2 Universities Superannuation Scheme Ltd v Marks & Spencer Ltd [1999] 1 EGLR 13.
HR A[7380.509]
In the absence of an express term in a service charge provision that its amount should be fair and reasonable, the court
may be prepared to imply a term to this effect1. The implication will only be made in accordance with the usual
principles for implying terms and the courts have been reluctant to imply such terms in relation to tenants' contributions
to insurance cover effected by the landlord2. If the service charge provisions of a lease are clearly drafted so as to
enable the landlord to be reimbursed for expenditure which he has incurred, the scope for implying general terms as to
reasonableness is reduced. Rather than to seek to imply general terms as to reasonableness, the court may protect
tenants by scrutinising closely whether the services and works for which the landlord seeks reimbursement are properly
within the scope of the items for which service charge has been agreed to be payable3.
HR A[7380.510]
1 Finchbourne v Rodrigues [1976] 3 All ER 581.
2 Bandar Property Holdings Ltd v JS Darwen (Successors) Ltd [1968] 2 All ER 305; Havenridge v Boston Dyers Ltd [1994] 2 EGLR 73;
Berrycroft Management Co Ltd v Sinclair Gardens Investments (Kensington) Ltd (1996) 75 P & CR 210, [1997] 1 EGLR 47.
3 See eg Fluor Daniel Ltd v Shortlands Ltd [2001] EGCS 8.
HR A[7380.511]
In cases of difficulty or ambiguity, the court will construe the lease in such a way that the clause is effective to achieve
its clear commercial purpose1.Where circumstances have completely changed to the extent that the scheme originally
envisaged has broken down, the court may even, in a suitable case, in effect re-write the original obligation to accord
with the perceived intention of the original parties2.
HR A[7380.512]
1 Adelphi (Estates) Ltd v Christie (1983) 47 P & CR 650.
2 Pole Properties Ltd v Feinberg (1981) 43 P & CR 121.

Page 164
HR A[7380.513]
When considering whether service charges are recoverable under the terms of the lease, it is important to consider:
(1) whether the landlord is properly applying the mechanism for ascertaining the service charge
payable;
(2) whether the works and services for which the landlord seeks a contribution are properly matters for
which a contribution may be sought.
In addition to these considerations, in the context of service charges payable in respect of residential premises, one must
consider the limitations on recovery imposed by statute.
Page 165
condition and management of the demised premises/J The recovery of service charges/(2) Mechanism for ascertaining
service charges and requiring payment
(2) Mechanism for ascertaining service charges and requiring payment
(i) Generally
HR A[7380.514]
As indicated above1, in general service charge provisions have the purposes of ensuring that a landlord who reasonably
incurs liability for expenditure for the benefit of all its tenants should be entitled to recover the full cost of doing so
from those tenants and each tenant should reimburse the landlord a proper proportion of those service charges2.
Following this approach, in the absence of clear words, service charge provisions will not in general be construed as
allowing the landlord to recover for the cost of items which are of no benefit to the tenants3.
HR A[7380.515]
1 See HR A[7380.507].
(ii) Ascertaining the proportions payable
HR A[7380.516]
Where premises are in multiple occupation the proportion of cost which each tenant must pay will either be specified in
the lease or left to the determination of a third party or the landlord's surveyor. The proportion is most often calculated
by reference to the proportion which the floor area under each demise bears to the whole. The calculation of a service
charge by reference to an economic indicator, such as the Retail Prices Index, is possible though it may lead to
dissatisfaction or dispute when the basket of items included in the Index changes1. Nevertheless, this has been held to
be a valid approach2.
HR A[7380.517]
1 Pole Properties Ltd v Feinberg (1981) 43 P & CR 121 (an example where the formula could not longer be sensibly applied).
Page 166
2 Cumshaw Ltd v Bowen [1987] 1 EGLR 30.
(iii) Ascertaining periods in respect of which the cost is payable
HR A[7380.518]
Most modern leases make provision for service charges to be asertained by reference to accounting periods, often with
payment of advance service charges with provision for late adjustments in case of over- or under-payment. In the
absence of any contractual provision in a lease for a service charge to be levied in respect of a specified accounting
period and/or at any particular time after the service has been provided the landlord would probably be able only to
recoup the charge after making payment for the particular services1.
HR A[7380.519]
1 Capital & Counties Freehold Equity Trust Ltd v BL plc [1987] 2 EGLR 49; see also Barrington v Sloane [2007] 3 EGLR 91, LT.
HR A[7380.520]
Thus, where landlords who placed a contract for works before the end of the term were held unable to recover the costs
from the tenants once their term had expired; however, it has to be noted that the tenants' covenant in that case was to
contribute a proportion of the costs and expenses 'which may from time to time during the said term be expended or
incurred or become payable' by the landlord. The court was reluctant to imply a provision as to periodical payment
before the lessor had incurred the costs2.
1 Capital & Counties Freehold Equity Trust Ltd v BL plc [1987] 2 EGLR 49.
2 cf Daiches v Bluelake Investments Ltd [1985] 2 EGLR 67 at 69.
(iv) Certification
HR A[7380.521]
A lease can provide for the amount payable by the tenant to be certifiable (whether by a surveyor or accountant) and for
any such determination to be final and binding. It has been held that, because of the essentially arbitral function of
certification, the procedure could be a sham where the certifier is not a legally distinct person from the landlord1.
Whether the certification can be made conclusive on matters of law has been the subject of debate2. In the absence of
clear words to the contrary it is likely that a court would construe as final and binding only such a certificate as was
clearly within the certifier's expertise. On the other hand, there is no rule of public policy which prevents parties from
agreeing to refer to expert decisions which involve questions of construction or other questions of law3.
Page 167
A certificate will not be conclusive even as to a matter of fact in the absence of express words to that effect. That being
the case, it was held by the Court of Appeal4 that the landlord was entitled, years after the event, to re-open the question
of the quantum of an incorrectly calculated service charge.
Where a certificate is required to ascertain the service charge payable, its issue is likely (in the absence of clear words to
the contrary), as a matter of construction of the lease, to be a condition precedent to the tenant's liability to pay.
HR A[7380.522]
1 Finchbourne v Rodrigues [1976] 3 All ER 581; Concorde Graphics Ltd v Andromeda Investments SA [1983] 1 EGLR 53; Skilleter v
Charles (1992) 24 HLR 421, [1992] 1 EGLR 73. A residents' association that appointed six of their number to manage the block and
exercise their own independent judgment in relation to the management was held to be validly appointed: New Pinehurst Residents'
Association (Cambridge) v Silow [1988] 1 EGLR 227.
2 Re Davstone Estate's Ltd Leases [1969] 2 Ch 378; Rapid Results College Ltd v Angell [1986] 1 EGLR 53; cf Nikko Hotels (UK) Ltd v
MEPC plc [1991] 2 EGLR 103.
3 See Mercury Communications Ltd v Director General of Telecommunications [1996] 1 WLR 48; British Shipbuilders v VSEL
Consortium [1997] 1 Lloyd's Rep 106. cf Nikko Hotels (UK) Ltd v MEPC plc [1991] 2 EGLR 103.
4 Universities Superannuation Scheme Ltd v Marks & Spencer plc [1999] 1 EGLR 13.
(v) Other conditions precedent to payment
HR A[7380.523]
It may be a precondition to liability that the landlord must obtain estimates. It is important that where preconditions to
liability are provided, these are strictly fulfilled1.
HR A[7380.524]
1 For instance, in CIN Properties Ltd v Barclays Bank plc [1986] 1 EGLR 59 the landlord was not entitled to recover the cost of works
where it failed to obtain estimates or tenders and to submit them to the tenant for approval where such approval was required under the terms
of the lease (such approval not to be unreasonably withheld or delayed).
Page 168
condition and management of the demised premises/J The recovery of service charges/(3) To what must the tenant
contribute?
(3) To what must the tenant contribute?
(i) Generally
HR A[7380.525] - A[7380.526]
A service charge provision may require contributions not only to services which the landlord under its covenants must
provide but also to services which the landlord may provide.
(ii) Physical works
HR A[7380.527]
Where the landlord seeks a contribution to the cost of physical works, similar questions arise as to those in
"dilapidations" cases. It is through contributions to the cost of such works that landlords will generally seek to recover
the costs of refurbishment - either directly or indirectly through contributions to "sinking funds" on account of such
works.
(a) The premises to which the works relate
HR A[7380.528]
The first matter to consider is in respect of what premises the landlord is entitled to recover costs. This is considered
above1.
HR A[7380.529]
1 See HR A[7380.4] above; Rapid Results College Ltd v Angell [1986] 1 EGLR 53, CA.
(b) The nature of the works
HR A[7380.530]
The second matter to consider is what sort of works are within the scope of the tenant's contributions.
Page 169
"
HR A[7380.531]
See HR A[7380.28] ff above.
AMEND, RENEW ETC
HR A[7380.532]
See HR A[7380.47] above.
MAINTENANCE AND KEEPING IN GOOD AND SUBSTANTIAL CONDITION
HR A[7380.533]
See HR A[7380.53] and A[7580.49] above.
"
HR A[7380.534]
"
HR A[7380.535]
(c) Standard of work
HR A[7380.536]
The next matter to consider in considering whether works, to which a contribution is sought, fall within the tenant's
obligation to make a contribution to their cost, is whether the works have been performed to the standard of works
which the parties contemplated.
(i) Unless there is a clear indication otherwise, where a landlord is entitled to recover the cost of repair
Page 170
etc, the landlord is not constrained to adopt the minimum standard or cheapest method of repair1.
(ii) Unless there is a clear indication otherwise, the landlord may carry out works to a standard such as
an owner who had to bear the cost himself might reasonably decide upon2.
(iii) On the other hand, the context of the particular lease and the respective interests of the landlord
and tenant will be material in determining what standard the reasonable owner would in the
circumstances adopt. Thus in one case3 the Court of Appeal, rejecting a particular scheme of works as
going beyond what was sensible as needed to cure certain physical defects in the demised premises,
stated that a prudent building owner bearing the costs himself might well have decided to adopt such a
scheme despite the expense. But what was in question was whether owners of leases in the building with
58 years left to expire could be fairly expected to pay for such a scheme under an obligation to 'repair'. In
another case4, the court applied this approach indicating that the works - that is, the standard to be
adopted - must be such as the tenants, given the length of their leases, could fairly be expected to pay for.
The landlord cannot, because he has an interest in the matter, overlook the limited interest of the tenants
who have to pay by carrying out works which are calculated to serve an interest extending beyond that of
the tenants. If the landlord wishes to carry out repairs which go beyond those for which the tenants, given
their more limited interest, can be fairly be expected to pay, then, subject always to the terms of the lease
or leases, the landlord must bear the additional cost himself.
HR A[7380.537]
3 Holdings & Management Ltd v Property Holding & Management Trust plc [1990] 1 EGLR 65.
4 Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103. In Fluor Daniel, the landlord was not entitled to the cost
of substantially replacing the M & E services to the building, notwithstanding that some of the leases only had short terms remaining.
Likewise where the landlord, towards the end of a three-year lease, sought to saddle the tenant with the cost of long-term roofing works, it
was held that those works went outside the landlord's obligation and therefore he was only able to recover the equivalent cost of short-term
repairs: Scottish Mutual Insurance plc v Jardine Public Relations Ltd [1999] EGCS 43.
(iii) Other expenditure
HR A[7380.538]
In addition to the cost of works to the fabric of the building, a service charge provision may expressly require
contributions to other expenditure relating to the building. Such expenditure might include:
(1) the cost of providing heating, hot water and lifts1;

(2) the cost of insurance (see above)2;
(3) the fees of managing agents (see above3, although a landlord will not normally be able to recover
the cost of employing managing agents in the absence of express provision to that effect4). If such a
charge is allowable, the management company may be one owned by the landlord unless the
arrangement is a sham5);
Page 171
(4) notional rent where resident staff are employed may be recoverable if the lease is widely enough
drawn6;
(5) interest on money borrowed to fund the provision of service charges7;
(6) the recovery of the costs of proceeding against defaulting tenants8. (Whether the landlord can
recover the costs of proceedings against a particular tenant is a matter of construction9. Even if the
landlord is so entitled, the entitlement,will not be assessed on an indemnity basis unless the charging
provision is unambiguous in this respect10.)
HR A[7380.539]
1 HR A[7380.67].
2 HR A[7380.283] ff. Bandar Property Holdings Ltd v JS Darwen (Successors) Ltd [1968] 2 All ER 305; Havenridge v Boston Dyers Ltd
[1994] 2 EGLR 73; Berrycroft Management Co Ltd v Sinclair Gardens Investments (Kensington) Ltd (1996) 75 P & CR 210, [1997] 1
EGLR 47. In Williams v Southwark London Borough Council [2000] EGCS 44, it was held that the landlord had to pass on to the tenants the
benefit of any discounts or loyalty bonuses which reduced the cost of the insurance premium but did not have to account for reductions in the
premium given in consideration for the landlord's taking responsibility for the administration of claims handling.
3 Lloyds Bank plc v Bowker Orford [1992] 2 EGLR 44.
4 However in Embassy Court Residents' Association v Lipman [1984] 2 EGLR 60, where the residents' association held the reversion, the
court was prepared to imply a term that the lessor association could incur proper expenditure (including the cost of managing agents) to carry
out its obligations and recover contributions from the lessees.
5 Skilleter v Charles Ltd (1992) 24 HLR 421, [1992] 1 EGLR 73. The agent may be the holding company of the landlord: Parkside
Knightsbridge Ltd v Horwitz [1983] 2 EGLR 42.
6 Lloyds Bank plc v Bowker Orford [1992] 2 EGLR 44.
7 Boldmark v Cohen (1985) 19 HLR 136, [1986] 1 EGLR 47; Skilleter v Charles (1992) 24 HLR 421, [1992] EGLR 73. Such a provision
will not be implied: Frobisher (Second Investments) Ltd v Kiloran Trust Co Ltd [1980] 1 WLR 425.
8 Sella House Ltd v Mears [1989] 1 EGLR 65 (costs not recoverable); Morgan v Stainer (1992) 25 HLR 467, [1993] 2 EGLR 73. But see
Iperion Investments Corpn v Broadwalk House Residents Ltd [1995] 2 EGLR 47.
9 Morgan v Stainer (1992) 25 HLR 467, [1993] 2 EGLR 73; Reston Ltd v Hudson [1990] 2 EGLR 51. The court will be unsympathetic to
a claim which the landlord has pursued adversarially and where the court has refused to make an order for costs: Holding & Management
Ltd v Property Holding & Investment Trust plc [1990] 1 All ER 938, [1989] 1 WLR 1313.
10 The parties are free to contract for costs to be paid on an indemnity basis: Church Comrs v Ibrahim [1997] 1 EGLR 13 citing Gomba
Holdings (UK) v Minories Finance (No 2) [1993] Ch 171. In Primeridge v Jean Muir [1992] 1 EGLR 273 the provision was construed to
allow the recovery of costs on the standard basis only. See HR A[7380.671].
(iv) Profit to the landlord?
HR A[7380.540]
Page 172
On the other hand, consistently with the general principle stated above1, in the absence of clear provision the landlord
will not be able to profit from the services for which he seeks reimbursement2.
HR A[7380.541]
1 See HR A[7380.507] and Universities Superannuation Scheme Ltd v Marks & Spencer Ltd [1999] 1 EGLR 13.
2 Jollybird Ltd v Fairzone Ltd [1990] 2 EGLR 55.
(v) "Sweeping up" provisions
HR A[7380.542]
Service charge provisions may often be widely drawn. In one case1 an underlessee covenanted to pay a reasonable
proportion attributable to the demised premises of the charges for rebuilding and repairing 'all walls ... drains, ways and
other conveniences...'. It was held that the word "conveniences" had been used to cover any essential item not
specifically listed and, thus, there was no reason why he should not pay a reasonable proportion of the cost of
re-waterproofing, which was an essential repair, of an underground garage. On the other hand, "sweeping up"
provisions will usually be narrowly construed2. For instance, the court in one case3 refused to construe a term whereby
the service charge was to include the cost of "any other beneficial services which may properly be provided by the
lessors" as extending to matters dealt with specifically in provisions elsewhere in leases and allowing more extensive
provision in respect of those specific items.
HR A[7380.543]
1 In Daejan Properties Ltd v Bloom [2000] EGCS 85, CA.
2 See eg Jacob Isbicki & Co Ltd v Goulding & Bird Ltd [1989] 1 EGLR 236; Lloyds Bank plc v Bowker Orford [1992] 2 EGLR 44;
Mullaney v Maybourne Grange (Croydon) Management Co Ltd [1986] 1 EGLR 70; Holding & Management Ltd v Property Holding &
Investment Trust plc [1990] 1 All ER 938, [1989] 1 WLR 1313; Gilje v Charlegrove Securities Ltd [2000] 3 EGLR 89; Fluor Daniel
Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103; St Mary's Mansions Ltd v Limegate Investment Co Ltd [2002] EWCA Civ
1491, [2003] 1 EGLR 41. For the other perspective, see Sun Alliance & London Assurance Co v British Railways Board [1989] 2 EGLR
237.
3 Lloyds Bank Ltd v Bowker Orford [1992] 2 EGLR 44 (Mr David Neuberger QC sitting as a Deputy Judge of the Chancery Division). In
Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103 a similar approach was taken to the "sweeping up" provisions
considered in that case.
Page 173
condition and management of the demised premises/J The recovery of service charges/(4) Is the service charge fund
subject to a trust?
(4) Is the service charge fund subject to a trust?
HR A[7380.544]
It will be a matter of construction whether a service charge fund will be the subject of a trust. So, while in some cases
the court will find a trust1, this is not invariably so2. A trust will be imposed by statute in some instances3.
HR A[7380.545]
1 Re Chelsea Cloisters (in liquidation) (1980) 41 P & CR 98.
2 Frobisher (Second Investments) Ltd v Kiloran Trust Co Ltd [1980] 1 All ER 488, [1980] 1 WLR 425. In Secretary of State for the
Environment v Possfund (North West) Ltd [1997] 2 EGLR 56 the tenant of business premises was obliged to pay a depreciation allowance to
the landlord in respect of the cost of maintaining and replacing fixtures and fittings. The sums had not been expended as at the expiry of the
lease. They were irrecoverable by the tenant; the payments, once made, became the absolute property of the landlord. See also St Mary's
Mansions Ltd v Limegate Investment Co Ltd [2002] EWCA Civ 1491.
3 See LTA 1987, s 42 at HR A[20776] below. See also HR A[7380.645] ff.

Page 174
condition and management of the demised premises/J The recovery of service charges/(5) Advance service charges and
sinking funds
(5) Advance service charges and sinking funds
HR A[7380.546]
The landlord will not be able to demand advance payments for a sinking or reserve fund (sometimes described as an
'expenditure equalisation fund') unless the lease so provides.
Again, it is a question of construction whether a landlord will be able to collect sums on account of a sinking fund or
reserve fund on account of any individual item. For instance, if a landlord is entitled to collect sums on account of the
cost of performing its obligations under the lease, it may not be entitled to collect sums to take account of the possibility
that works will be required after the lease has expired1. Even if the tenant's use of the premises has contributed to the
wear and tear which may ultimately necessitate the carrying out of works, the landlord's covenants to the tenant are
most unlikely to extend to a period beyond the end of the lease itself.
Where a sinking fund is collected, as with service charge funds generally, the beneficial ownership of the money in the
fund will be determined on the construction of the lease.
HR A[7380.547]
1 Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103.
Page 175
condition and management of the demised premises/J The recovery of service charges/(6) Payment of service charge as
a condition precedent to liability to provide services?
(6) Payment of service charge as a condition precedent to liability to provide services?
HR A[7380.548]
Clear words will be needed if payment of service charges is to be construed as a condition precedent to obligations
undertaken by the landlord to provide services. Where the landlord's obligations were preceded by the words "subject to
the lessee paying the maintenance charge...", it was held that payment of the maintenance charge was not a condition
precedent to the landlord's obligation to provide services1.
HR A[7380.549]
1 Yorkbrook Investments v Batten [1985] 2 EGLR 100; see too Gordon v Selico Co [1986] 1 EGLR 71.
Page 176
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 11 Statutory regulation in respect of
service charges, administration charges and the management of residential premises
Chapter 11 Statutory regulation in respect of service charges, administration

charges and the management of residential premises
Editor
Camilla Lamont
Page 177
service charges, administration charges and the management of residential premises/A Overview
HR A[7380.550]
The position in relation to residential service charges is now heavily regulated by statute1, although the underlying
liability to pay a service charge is still governed by the contract embodied in the lease or tenancy agreement2.
HR A[7380.551]
1 LTA 1985, LTA 1987, Housing Act 1996 and Commonhold and Leasehold Reform Act 2002. The earlier legislation was substantially
amended by Ch 5 of Part 2 of the CLRA 2002 which is only partially in force.
2 See generally HR A[7380.505] - [7380.542].
HR A[7380.552]
The legislation affords a variety of protection to residential tenants in respect of both service1 and administration2
charges. A service charge is only recoverable to the extent that the landlord's expenditure has been reasonably incurred
and is reasonable in amount3. In respect of service charge demands there are prescribed requirements and statutory time
limits apply4. Similar provisions apply to an administration charge5. Landlords are under a duty to consult tenants in
respect of particular types of expenditure6 and to provide information to them7. Further there are statutory provisions
imposing a trust over service charge funds8.
HR A[7380.553]
1 For definition of service charge to which the legislation applies see LTA 1985, s 18.
2 For definition of administration charge see CLRA 2002, s 158, Sch 11, para 1.
3 See HR A[7380.562].
4 See HR A[7380.566] - HR A[7380.569].
5 See HR A[7380.679] - HR A[7380.686].
6 See HR A[7380.582] - HR A[7380.635].

Page 178
7 See HR A[7380.570] - HR A[7380.581].
8 See HR A[7380.645] - HR A[7380.654].
HR A[7380.554]
Special rules apply to the enforcement of a tenant's liability to pay service charges in respect of dwellings. Disputes are
in the main heard by the Leasehold Valuation Tribunal which now has a wide jurisdiction in relation to residential
service and administration charges amongst other things1. The ability of a landlord to forfeit a lease for arrears of
service or administration charge is restricted2 as is a landlord's contractual right (if any) to recover the cost of legal
proceedings by way of a service charge3.
HR A[7380.555]
1 See HR A[7380.655] - HR A[7380.678].
2 By the HA 1996, ss 81, 82 (as amended by CLRA 2002). See HR A[7380.686.1] - HR A[7380.686.6].
3 See HR A[7380.637] - HR A[7380.644].
HR A[7380.556]
The legislation also confers various rights on tenants relating to the management of dwellings. Where there is a
recognised tenants' association, there are certain enhanced rights given to the tenants with respect to the appointment by
the landlord of managing agents1. They may also appoint their own surveyor to act as watchdog2. Even if there is no
tenants' association, qualifying tenants are entitled to insist upon a management audit3. They also have power to apply
to the county court for the appointment of a manager to carry out such functions in respect of the management of the
premises as the court thinks fit4. In some cases the court can make an acquisition order in respect of the landlord's
interest in premises in favour of the tenants5. The parties to a lease can apply to the Leasehold Valuation Tribunal for a
variation of the lease if it fails, amongst other things, to make satisfactory provision for the maintenance and
management of the building6. Finally, tenants are given the right to query the reasonableness of any insurance cover
effect by the landlord7.
HR A[7380.557]
1 See HR A[7380.687] - HR A[7380.694].
2 See HR A[7380.695] - HR A[7380.701].
3 See HR A[7380.701.1] - HR A[7380.701.18].
4 See HR A[7380.701.19] - HR A[7380.701.30]. This in addition to the collective right of certain tenants with long leases to take over the
management under Part II of the CLRA 2002, referred to as the Right to Manage: see HR E[235.1] - HR E[257].
Page 179
5 See HR A[7380.702] - HR A[7380.733].
6 See HR A[7380.734] - HR A[7380.751].
7 See HR A[7380.752] - HR A[7380.763].

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service charges, administration charges and the management of residential premises/B When the statutory service
charge regime applies
HR A[7380.558]
The statutory regime applies to a service charge1 payable by a tenant2 of a dwelling3. A service charge is defined4 as
an amount payable as part of or in addition to the rent: (a) which is payable, directly or indirectly, for services, repairs,
maintenance, improvements5 or insurance or the landlord's6 costs of management, and (b) the whole or part of which
varies or may vary7 according to the relevant costs8.
HR A[7380.559]
1 LTA 1985, s 18. For exclusions see HR A[7380.560] below.
2 "Tenant" includes a statutory tenant or a subtenant. It may even, depending on the facts, include a former tenant: see Re Sarum
Properties Ltd [1999] 2 EGLR 132. It also includes a tenant who holds more than one flat under a superior tenancy: see Oakfern Properties
Ltd v Ruddy [2006] EWCA Civ 1389. In Heron Maple House Ltd v Central Estates Ltd [2002] 1 EGLR 35 it was held that the phrase "tenant
of a dwelling" does not mean "a tenant of a dwelling and nothing else" and that therefore where a mesne landlord has a superior tenancy of
more than one flat, sums levied against it are service charges within the meaning of LTA 1985, s 18.
3 "Dwelling" means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard,
garden, outhouses and appurtenances belonging to it or usually enjoyed with it: see LTA 1985, s 38; LTA 1987, s 60(1). It has been held that
bungalows (whose use was restricted to providing holiday accommodation) were not "dwellings" within s 18 which imports a requirement
that the dwelling should be occupied as a home: King v Udlaw Ltd (unreported, 20 March 2008), LT.
4 LTA 1985, s 18(1).
5 The definition of service charge was extended so as to include amounts payable for improvements in relation to costs incurred on or
after 30 September 2003: see CLRA 2002, s 150, Sch 9, para 7 and SI 2003/1986. It should be noted that the effect of an item that is
recoverable under the lease as a service charge not being covered by one of the items of expenditure identified in s 18 is that it is recoverable
free from the constraints laid down by the legislation: see Sutton (Hastoe) Housing Association v Williams [1988] 1 EGLR 56, CA.
6 By LTA 1985, s 30 "landlord" includes any person who has a right to enforce payment of a service charge. A management company
which is capable of enforcing service charges which vary according to the costs incurred by it is a "landlord" within the meaning of LTA
1985, s 18: see Cinnamon Ltd v Morgan [2001] EWCA Civ 1616, [2002] 2 P & CR 139.
7 A management fee recoverable under a lease as a percentage of a variable service charge expenditure is itself a "service charge" within
LTA 1985, s 18: see Longmint Ltd v Marcus [2004] 3 EGLR 171, LT. It has been held that sums payable by a tenant in respect of the
landlord's costs of preparing and serving a notice under s 146 of the Law of Property Act 1925 as a preliminary to forfeiture are within the
statutory definition of a service charge in s 18, even if those costs are only recoverable from the particular tenant on whom the notice was
served: see Re Forcelux Ltd (Lands Tribunal, 20 January 2004), not following an earlier decision in Forcelux v Sweetman [2001] 2 EGLR
173.
8 Relevant costs are defined in LTA 1985, s 18(2) as the costs or estimated costs incurred or to be incurred by or on behalf of the landlord
Page 181
or a superior landlord, in connection with the matters for which the service charge is payable. For these purposes costs include overheads and
are relevant costs regardless of when they are incurred: see LTA 1985, s 18(3). The costs of a management company which is responsible for
enforcing the service charges provisions are included for these purposes see Cinnamon Ltd v Morgan [2001] EWCA Civ 1616, [2002] 2 P &
CR 139.
HR A[7380.560]
There are a number of exclusions1, notably that, otherwise in the case of a long tenancy, many of the provisions do not
apply to service charges payable by the tenant of a local authority2. Similarly, the provisions do not apply to dwellings
where the rent is registered under the Rent Act 1977 (unless it is a variable rent)3.
HR A[7380.561]
1 LTA 1985, ss 26, 38.
2 This exception also applies to tenants of a new town corporation or a National Park authority.
3 LTA 1985, s 27.

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service charges, administration charges and the management of residential premises/C Reasonableness of service
charges
HR A[7380.562]
The legislation imposes a general requirement of reasonableness in respect of service charge expenditure. Relevant
costs1 are taken into account in determining the amount of a service charge payable for a period (a) only to the extent
that they are reasonably incurred, and (b) where they are incurred on the provision of services or the carrying out of
works, only if the services or works are of a reasonable standard. In either case the amount payable is limited
accordingly2. The reasonableness requirement also applies to advance service charges levied prior to any expenditure
being incurred3. In those cases, any necessary adjustment is to be made after the relevant costs have been incurred4.
Contracting out of the provisions is not permitted5.
HR A[7380.563]
1 See LTA 1985, s 18(2),(3) for definition of relevant costs; and see HR A[7380.558] - HR A[7380.559]. Administration charges are also
only recoverable to the extent that they are reasonable: see HR A[7380.683].
2 LTA 1985, s 19(1).
3 LTA 1985, s 19(2).
4 LTA 1985, s 19(3).
5 LTA 1985, s 27A(6).
HR A[7380.564]
Reasonableness should be given a broad common-sense meaning1. The determination of the question as to whether
costs have been reasonably incurred involves two considerations: whether the landlord's actions were reasonable2 and
whether the amounts charged to the landlord were reasonable. A landlord is not required to accept the lowest quotation
although he should take steps to test the market3. Where the services are not provided (or works carried out) to a
reasonable standard the charge may be reduced to reflect the deficiency4. Further the landlord would be bound to give
the tenant credit for any grant receivable in respect of the works5 and it is unlikely to be reasonable for a landlord to
charge for works that it could have required under a guarantee or in respect of costs covered by insurance.
HR A[7380.565]
Page 183
1 Veena SA v Cheong [2003] 1 EGLR 175, LT.
2 The reasonableness of costs resulting from the need to remedy disrepair does not depend on how that need arose. Therefore, if the cost
of repair is increased by the landlord's inaction, the increased costs will still be treated as having been reasonably incurred. In such cases, the
proper analysis is that the tenant has a claim for damages for breach of repairing obligation which operates as a defence by way of equitable
set-off: see Continental Ventures Inc v White [2006] 1 EGLR 85, LT.
3 Forcelux Ltd v Sweetman [2001] 2 EGLR 173, LT. In Wandsworth London Borough Council v Griffin [2000] 2 EGLR 105 it was held
that the landlord's decision to replace flat roofs with pitched roofs and windows with PVC double glazed units was reasonable. In that case
the increased initial costs were balanced by the projected future savings. Likewise in Berrycroft Management Co Ltd v Sinclair Gardens
Investments (Kensington) Ltd [1996] EGCS 143, CA insurance premiums were held reasonable even though cheaper insurance could have
been effected.
4 Compare Yorkbrook Investments Ltd v Batten (1985) 52 P & CR 51, [1985] 2 EGLR 100. The fact that the works have not been carried
out to a reasonable standard does not enable the tenant to avoid liability altogether despite the apparent wording of LTA 1985, s 19(1)(b).
However in such cases only a reasonable proportion of such expenditure will be recoverable.
5 The sums which must be deducted include grants payable under Part XV of the Housing Act 1985 and/or Part VIII of the Local
Government and Housing Act 1989.
Page 184
service charges, administration charges and the management of residential premises/D Service charge demands
D
Page 185
service charges, administration charges and the management of residential premises/D Service charge demands/(1)
Time limits for making demand
(1) Time limits for making demand
HR A[7380.566]
A tenant is not liable to contribute by way of service charge to any cost incurred more than 18 months before a service
charge demand is served on him unless, within the period of 18 months beginning with the date when the relevant costs
in question were incurred, the tenant was notified in writing that those costs had been incurred and that he would
subsequently be required to contribute to them by payment of a service charge1. This provision does not however apply
where payments on account are made in respect of service charges and the actual service charge expenditure does not
exceed the payments on account2.
HR A[7380.567]
1 LTA 1985, s 20B.
2 Gilje v Charlegrove Securities Ltd (No 2) [2003] EWHC 1284 (Ch), [2004] HLR 1, [2003] 36 EG 110.
Page 186
service charges, administration charges and the management of residential premises/D Service charge demands/(2)
Summary to accompany service charge demand
(2) Summary to accompany service charge demand
HR A[7380.568]
A service charge demand must be accompanied by a summary of the rights and obligations of tenants of dwellings in
relation to service charges1. The form and content of such summaries is prescribed by regulations2. A tenant may
withhold payment of sums demanded if the requirement is not complied with in relation to the demand3. A landlord's
failure to comply with the requirements of LTA 1985, s 21B without reasonable excuse constitutes a summary offence4.
HR A[7380.569]
1 LTA 1985, s 21B, as inserted by CLRA 2002 with effect from 1 October 2007: see SI 2007/1256 for commencement.
2 LTA 1985, s 21B(2),(5),(6). For the regulations prescribing the form and content of summaries to be served on or after 1 October 2007
and for transitional provisions relating to further demands served on or after that date see the Service Charges (Summary of Rights and
Obligations and Transitional Provision)(England) Regulations 2007, SI 2007/1257.
3 LTA 1985, s 21B (3),(4). Where a service charge is withheld under this section any provisions of the lease relating to non-payment or
late payment of service charges do not have effect in relation to the period in which the service charge is withheld.
4 LTA 1985, s 25. A person committing such an offence is liable on conviction to a fine not exceeding level 4 on the standard scale.
Page 187
service charges, administration charges and the management of residential premises/E Provision of information about
relevant costs
HR A[7380.570]
Under s 21 of the Landlord and Tenant Act 1985 a tenant may require the landlord in writing to supply him with a
written summary of the costs incurred over the previous twelve months1 or, if the accounts are made up annually, for
the previous period of twelve months ending not later than the date of the request. The landlord has six months to
comply with the request in the latter case, but only one month to comply in all other cases2. If the tenant is represented
by a recognised tenants' association, and he consents, the request may be made by the secretary of the association to
whom the landlord may supply the information3. The section sets out the requirements of a summary of costs to be
supplied under s 214. If the relevant costs are payable by the tenants of more than four dwellings, the summary must be
certified by a qualified accountant5.
HR A[7380.571]
1 LTA 1985, s 21(1). Failure to comply with s 21 (or s 22) without reasonable excuse is a criminal offence. As to what constitutes a
reasonable excuse in these circumstances see Taber v MacDonald (1999) 31 HLR 73. Under the Magistrates' Court Act 1980, s 111 any
person who was a party to any proceedings before a magistrates' court may appeal to the Divisional Court by way of case stated.
Alternatively, a party can apply for judicial review of a decision where the magistrates have acted in excess of jurisdiction. However, the
former route is preferable because it enables the facts, as found by the magistrates, to be placed clearly before the Divisional Court: R v
Marylebone Magistrates Court, ex p Westminster City Council (1999) 32 HLR 266.
2 LTA 1985, s 21(4).
3 See HR A[7380.586] - HR A[7380.587].
4 LTA 1985, s 21(5).
5 LTA 1985, s 21(6).
HR A[7380.572]
Where a tenant or the secretary of a recognised tenants' association has obtained a summary of relevant costs, whether
in pursuance of that section or otherwise, the tenant or the secretary with the consent of the tenant, may within six
months of the obtaining of the summary require the landlord in writing to afford him reasonable facilities for inspection
and taking copies of the accounts, receipts and other documents supporting the summary1. The landlord must make
facilities available to the tenant or secretary for a period of two months beginning no later than one month after the
request is made2. Facilities for inspection must be made available free of charge but the landlord is entitled to demand a
reasonable charge for copying3.
Page 188
HR A[7380.573]
1 LTA 1985, s 22(1),(2).
2 LTA 1985, s 22(4).
3 LTA 1985, s 22(5). The subsection does not preclude the landlord from treating the cost of making the facilities available as
management costs: see LTA 1985, s 22(6).
HR A[7380.574]
When the Commonhold and Leasehold Reform Act 2002, s 1521 is brought into force it will introduce a new s 21 of the
Landlord and Tenant Act 1985. Under the new provisions to be introduced the landlord will be under an obligation to
supply2 each tenant with a regular written statement of account3 not later than six months after the end of each
accounting period4. The obligation will no longer be dependent on a request being made by the tenant. The statement of
account must be accompanied by the certificate of a qualified accountant5 and a summary of the rights and obligations
of tenants of dwellings in relation to service charges. The Secretary of State will have power to make regulations
prescribing requirements as to the form and content of statements of account, accountants' certificates and summaries of
rights and may also prescribe exceptions to the requirement to supply an accountant's certificate6. A landlord's failure to
comply with the requirements of s 21 without reasonable excuse will constitute a summary offence7.
HR A[7380.575]
1 Note that CLRA 2002, ss 152-154 have not yet been brought into force save in so far as they confer power to make regulations: see SI
2002/1912.
2 LTA 1985, s 21(5) and (6) (as will be substituted by CLRA 2002, s 152) provide that if the landlord has been notified by the tenant of an
address in England and Wales at which he wishes to have supplied to him documents required to be so supplied under s 21, the landlord
must supply them to that address. The landlord is to be taken to have been so notified if notification has been given to (a) an agent of the
landlord named as such in the rent book or similar document, or (b) the person who receives rent on behalf of the landlord; and where
notification is given to such an agent or person he must forward it as soon as may be to the landlord.
3 LTA 1985, s 21(1) (as will be substituted by CLRA 2002, s 152). The statement of account must deal with (a) service charges of the
tenant and the tenants of dwellings associated with his dwelling; (b) relevant costs relating to those service charges; (c) the aggregate amount
standing to the credit of the tenant and the tenants of those dwellings at the beginning and end of the accounting period; and (d) related
matters. A dwelling is associated with another dwelling if the obligations of the tenants of the dwellings under the terms of their leases as
regards contributing to relevant costs relate to the same costs: see LTA 1985, s 21(8) (as will be substituted by CLRA 2002, s 152).
4 LTA 1985, s 21(2) (as will be substituted by CLRA 2002, s 152). The accounting period is defined as such period beginning with the
relevant date and ending with such date, not later than twelve months after the relevant date as the landlord determines: see new s 21(9). For
the first accounting period the relevant date is the later of the date on which service charges are first payable under a lease of any of them
and the date on which CLRA 2002, s 152 comes into force. For subsequent accounting periods the relevant date is the date immediately
following the end of the previous accounting period: see new s 21(10). For subsisting tenancies, therefore, the first accounting period will
commence on the date on which CLRA 2002, s 152 comes into force.
5 LTA 1985, s 21(3)(a) (as will be substituted by CLRA 2002, s 152). The qualified accountant must certify that, in his opinion, the
Page 189
statement of account deals fairly with the matters with which it is required to deal and is sufficiently supported by accounts, receipts and
other documents which have been produced to him. The definition of 'qualified accountant' in LTA 1985, s 28 will be amended by CLRA
2002 to include reference to a statement of account: CLRA 2002, s 157, Sch 10, para 6.
6 LTA 1985, s 21(4)-(5) (as will be substituted by CLRA 2002, s 152).
7 LTA 1985, s 25 (as will be amended by CLRA 2002, s 157, Sch 10, para 4). A person committing such an offence is liable on
conviction to a fine not exceeding level 4 on the standard scale.
HR A[7380.576]
Section 152 of the Commonhold and Leasehold Reform Act 2002 will also introduce a new s 21A of the Landlord and
Tenant Act 1985 which will give the tenant power to enforce the landlord's obligations under the new s 21. Section 21A
will enable a tenant to withhold payment of a service charge if the landlord fails to serve a statement of account,
accountant's certificate or summary of rights and obligations by the time he is required to supply it under the new s 21
or if the form and content of any such document which has been supplied does not conform exactly or substantially with
the requirements prescribed by regulations1. The amount of service charge that the tenant will be entitled to withhold is
limited2. The tenant may not continue to withhold payment after the document has been supplied to him by the
landlord, or, in cases where the original document does not conform with the regulations, after a document which does
conform has been supplied by way of replacement of the one previously supplied3. The landlord may apply to the
Leasehold Valuation Tribunal for a determination that he has a reasonable excuse for a failure which gives the tenant
the right to withhold an amount and if the Tribunal so determines, the tenant may not withhold payment after such
determination4. Where a tenant withholds a service charge under the new s 21A any provisions relating to non-payment
or late payment of service charges do not have effect in relation to the period for which he withholds it5.
HR A[7380.577]
1 Landlord and Tenant Act 1985, s 21A (as will be substituted by the Commonhold and Leasehold Reform Act 2002, s 152).
2 The amount which may be withheld under s 21A is limited to an amount equal to aggregate of (a) the service charges paid by him in the
accounting period to which the document concerned would or does relate, and (b) so much of the amount required to be dealt with in the
statement of account for that accounting period by the new s 21(1)(c) as stood to his credit: see LTA 1985, s 21A(2) (as will be substituted
by CLRA 2002, s 152).
3 LTA 1985, s 21A(3) (as will be substituted by CLRA 2002, s 152).
4 LTA 1985, s 21A(4) (as will be substituted by CLRA 2002, s 152). The tenant will need to be careful to ensure that he does not withhold
payment after the landlord has supplied the relevant document or obtained dispensation by the LVT. The protection against common law
enforcement given by sub-s (5) will not continue beyond the date of eventual compliance or dispensation under sub-s (4).
5 LTA 1985, s 21A(5) (as will be substituted by CLRA 2002, s 152).
HR A[7380.578]
In relation to inspection of documents, s 154 of the Commonhold and Leasehold Reform Act 2002 will, when brought
into force, substitute a new s 22 of the Landlord and Tenant Act 1985. A tenant or the secretary of a recognised tenants'
Page 190
association, with the tenant's consent, may, within the period of six months from the date by which the tenant is required
to be supplied with the statement of account under the new s 211, give the landlord a notice in writing requiring the
landlord to either afford him reasonable facilities for the inspection and copying of accounts, receipts or other
documents relevant to matters which must be dealt with in a statement of account, or to provide him with copies2. This
right will be exercisable whether or not the tenant is in possession of a statement of account. The landlord is given 21
days beginning with the day on which he receives the notice to comply with it3. A landlord's failure to comply with the
requirements of s 22 without reasonable excuse will constitute a summary offence4.
HR A[7380.579]
1 Landlord and Tenant Act 1985, s 22(3) (as will be substituted by the Commonhold and Leasehold Reform Act 2002, s 154). But the
six-month period is extended if the statement of account is not served in time or does not conform with the requirements of regulations made
under the new s 21. In such cases the six-month period commences on the day on which the statement of account conforming with the
regulations is supplied: see LTA 1985, s 22(4) (as will be substituted by CLRA 2002, s 154).
2 LTA 1985, s 22(1) (as will be substituted by CLRA 2002, s 154).
3 LTA 1985, s 22(6) (as will be substituted by CLRA 2002, s 154). As is the current position the landlord may not charge for the
provision of facilities for inspection but may treat such costs as management costs. The landlord may make a reasonable charge for doing
anything else in compliance with the requirements of a notice under the section: see LTA 1985, s 22(7),(8) (as will be substituted by CLRA
2002, s 154).
4 LTA 1985, s 25 (as will be amended by CLRA 2002, s 157, Sch 10, para 4). A person committing such an offence is liable on
conviction to a fine not exceeding level 4 on the standard scale.
HR A[7380.580]
Consequential amendments will be made to ss 23-27 of the Landlord and Tenant Act 1985 to reflect the substantive
changes to ss 21 and 22 made by the Commonhold and Leasehold Reform Act 20021. If a statement of account relates
to matters concerning a superior landlord and the landlord is not in possession of the relevant information, the
substituted s 23 will enable a landlord to serve a notice on a superior landlord who is in possession of the relevant
information. The superior landlord must then comply with the requirement within a reasonable time2. A new s 23A will
be inserted to make provision where the landlord or superior landlord disposes of the whole or part of his interest at a
time when a duty imposed by virtue of ss 21-23 remains undischarged. In essence, the party who is in the position to
discharge the duty will be responsible to that extent3. By s 24 the assignment of a tenancy does not affect any duty
imposed by or by virtue of any of ss 21 to 23A; but a person is not required to comply with more than a reasonable
number of requirements imposed by any one person4. It will be a summary offence for a person to fail, without
reasonable excuse, to perform a duty imposed on him by or by virtue of any of ss 21 to 23A5.
HR A[7380.581]
1 Landlord and Tenant Act 1985, s 23-27 (as will be substituted by the Commonhold and Leasehold Reform Act 2002, s 157, Sch 10,
paras 1-5).
2 LTA 1985, s 23 (as will be substituted by CLRA 2002, s 157, Sch 10, para 1).
Page 191
3 LTA 1985, s 23A (as will be inserted by CLRA 2002, s 157, Sch 10, para 2).
Page 192
service charges, administration charges and the management of residential premises/F Estimates and consultation
HR A[7380.582]
The provisions requiring a landlord to consult with tenants prior to incurring certain types and levels of expenditure
were substantially amended by the Commonhold and Leasehold Reform Act 2002. Consultation now undertaken should
comply with the new regime1. However, the old regime is still relevant in determining a tenant's liability to pay historic
service charges in respect of major works carried out when the old rules applied2. At the outset consideration should be
given to whether the old or new regime applied to any particular set of works.
HR A[7380.583]
1 See HR A[7380.588] - HR A[7380.636] below.
2 See HR A[7380.584] - HR A[7380.587.1] below.

Page 193
service charges, administration charges and the management of residential premises/F Estimates and consultation/(1)
Old regime: Consultation prior to 31 October 2003
(1) Old regime: Consultation prior to 31 October 2003
HR A[7380.584]
The new consultation provisions, which came into force on 31 October 20031, do not apply to qualifying works (a)
begun before 31 October 2003, or (b) in relation to which the landlord has given or displayed a notice under the old
regime before that date, or (c) carried out at any time in the period starting with 31 October 2003 and ending two
months after that date under an agreement entered into by, or on behalf of, the landlord or a superior landlord before 31
October 20032. In these cases, the old regime applies.
HR A[7380.585]
1 SI 2003/1987. The relevant commencement date in Wales was 31 March 2004: see WSI 2004/669.
2 The new regime also does not apply where, in relation to qualifying works carried out under a contract which is to be entered into on or
after 31 October 2003 and is for a period of twelve months or less, the landlord has given notice in the Official Journal of the European
Union in accordance with certain regulations before 31 October 2003. In all such cases, the Service Charge (Estimates and Consultation)
Order 1988 continues to apply: see SI 2003/1986, art 3 for these transitional provisions.
HR A[7380.586]
Under the old regime1 the cost of any works above a prescribed amount2 would not be recoverable by a landlord unless
the specific provisions in respect of the obtaining and provision of estimates3 and the inviting of observations thereon
from the tenants had been complied with. The exact content of the consultation requirements under the old regime
depended on whether or not there was a recognised tenants' association4. The landlord was directed to "have regard to"
any observations received in responses to his consultation notice but the obligation did not go further5.
HR A[7380.587]
1 LTA 1985, s 20 (unamended by the CLRA 2002) and the Service Charge (Estimates and Consultation) Order 1988, SI 1988/1285.
2 The greater of (a) £50 multiplied by the number of dwellings, or (b) £1,000: see Service Charge (Estimates and Consultation) Order
1988, SI 1988/1285. The obligation to consult in respect of repairs costing over a certain amount involves an obligation to re-consult where
additional works are found to be necessary: see Martin v Maryland Estates Ltd [1999] 2 EGLR 53, CA. A landlord is required to consult its
immediate tenant, even if that tenant holds a head lessee of several flats in the building and sublets flats and in such cases the "section 20
relationship" applies between each of the parties down the chain: see Heron Maple House Ltd v Central Estate [2002] 1 EGLR 35. This was
held to be equally applicable to the new consultation requirements in Oakfern Properties Ltd v Ruddy [2006] EWCA Civ 1389.
Page 194
3 The requirement for estimates is not satisfied merely by an inclusion of the overall figure of each estimate in the notice. The provision of
copies of written estimates is required: see Richmond Housing Partnership v Smith & Rickman (13 January 2006, unreported), LT.
4 For recognition of tenants' associations, see LTA 1985, s 29. For the requirements where there is such an association see LTA 1985, s
20(5); and for those that apply where there is none see LTA 1985, s 20(4).
5 Compare Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 at 784 per Lord Hoffmann in respect of
consultation by public bodies.
HR A[7380.587.1]
Although the landlord cannot recover a sum over the statutory limit if it fails to comply, the court has power to dispense
with the requirements of the legislation where it is satisfied that the landlord has acted reasonably1.
1 LTA 1985, s 20(9). For cases on dispensation under the old regime see Broadwater Court Management Co Ltd v Jackson-Mann [1997]
EGCS 145; Wilson v Stone [1998] 2 EGLR 155; Martin v Maryland Estates Ltd [1999] 2 EGLR 53.
Page 195
The current regime
(2) The current regime
HR A[7380.588]
The new consultation requirements1 that apply as of 31 October 20032 are both more extensive and complicated than
the old regime. The requirement to consult extends to both qualifying works3 and, for the first time, qualifying
long-term agreements4. The additional cost of qualifying works and long-term agreements over an appropriate amount5
is not recoverable through service charge contributions unless the consultation requirements have either been complied
or dispensed with6. The detail of the consultation requirements in relation to both qualifying long-term agreements and
qualifying works is prescribed by regulations7.
HR A[7380.589]
1 LTA 1985, ss 20, 20ZA (as substituted by CLRA 2002).
2 For commencement and transitional provisions see SI 2003/1987, WSI 2004/684, reg 3..
3 "Qualifying works" means works on a building or other premises: LTA 1985, s 20ZA(2). Consultation requirements are imposed in
respect of qualifying works exceeding the prescribed limits: LTA 1985, s 20(3).
4 "Qualifying long term agreement" means an agreement entered into by or on behalf of the landlord or a superior landlord for a term of
more than twelve months: LTA 1985, s 20ZA(2). The application of the consultation requirements to long-term agreements is dependent on
their inclusion by regulations: LTA 1985, s 20(4). Regulations may provide that an agreement is not a qualifying long-term agreement: LTA
1985, s 20ZA(3); and for regulations see SI 2003/1987, reg 3. The inclusion of qualifying long-term agreements means that a management
contract for a term of more than twelve months will be subject to the consultation requirements. It will also cover other fixed-term contracts
of more than twelve months, such as lift maintenance agreements.
5 The appropriate amount is prescribed by regulations: LTA 1985, s 20(5)-(7); and for regulations see SI 2003/1987, reg 4(1).
6 LTA 1985, s 20(1). The power of dispensation can only be exercised by or on appeal from the Leasehold Valuation Tribunal and only if
it is reasonable to do so: LTA 1985, s 20ZA(1). Under the old regime, only the court and not the LVT had power to dispense under LTA
1985, s 20(9). However, the position has now been reversed so that the court no longer has such dispensing power. The principles as to when
such dispensation should be granted should be the same as those that applied under the old regime: see Broadwater Court Management Co
Ltd v Jackson-Mann [1997] EGCS 145; Wilson v Stone [1998] 2 EGLR 155; Martin v Maryland Estates Ltd [1999] 2 EGLR 53.
7 LTA 1985, s 20ZA(4),(5). The statute does set out particular provisions which may be included in the regulations but those provisions
are neither binding nor exhaustive. For the detail of the consultation requirements see the Service Charges (Consultation
Requirements)(England) Regulations 2003, SI 2003/1987 and for the parallel regulations that apply in relation to Wales see WSI 2004/684.
HR A[7380.590]
Page 196
The detail of the consultation requirements in relation to both qualifying long-term agreements and qualifying works is
set out in the Service Charge (Consultation Requirements)(England) Regulations 20031.
HR A[7380.591]
1 SI 2003/1987 and for Wales see WSI 2004/684.
HR A[7380.592]
There are in essence three different sets of consultation requirements prescribed by the regulations, one in relation to
qualifying long-term agreements, another in relation to qualifying works which are either the subject of a qualifying
long-term agreement or fall into a transitional category of works and finally, a third set in relation to all other qualifying
works. Additionally, in relation to both qualifying works and qualifying long-term agreements, a further distinction is
drawn between those which involve public notice and those which do not. Care must be taken to correctly identify
which particular set of requirements applies in each case.
HR A[7380.593]
LTA 1985, s 20ZA(5)1 specifies that regulations may prescribe different consultation requirements where there is a
recognised tenants' association. However, the regulations2 do not do so. In general, all notices and statements required
to be served must be served not only on any tenant but also on any recognised tenants' association where that
association represents some or all of the tenants. Both the tenants and the association are then entitled to make
observations and nominations (depending on the different consultation requirements) in the same way.
HR A[7380.594]
1 As substituted by CLRA 2002, s 155(1)).
2 SI 2003/1987.
Page 197
Consultation requirements: qualifying long-term agreements
(3) Consultation requirements: qualifying long-term agreements
HR A[7380.595]
A qualifying long-term agreement is an agreement entered into by or on behalf of the landlord or a superior landlord, for
a term of more than twelve months1. Certain agreements are specified in the new regulations as not being qualifying
long-term agreements2.
HR A[7380.596]
1 LTA 1985, s 20ZA(2) (as substituted by CLRA 2002).
2 These are: (a) a contract of employment; (b) a management agreement made by a local housing authority and (i) a tenant management
organisation or (ii) a body established under s 2 of the Local Government Act 2000; (c) where the parties to the agreement are a holding
company and one or more of its subsidiaries or two or more subsidiaries of the same holding company; (d) agreements for a term not
exceeding five years if, when the agreement is entered into, there are no tenants of the building or other premises to which the agreement
relates. Additionally, an agreement entered into, by or on behalf of the landlord or a superior landlord before 31 October 2003 and for a term
of more than twelve months is not a qualifying long-term agreement, notwithstanding that more than twelve months of the term remain
unexpired on 31 October 2003 and neither is an agreement for a term of more than twelve months entered into, by or on behalf of the
landlord or superior landlord, which provides for the carrying out of qualifying works for which public notice has been given before 31
October 2003: see SI 2003/1987, reg 3. For Wales the date of 31 October 2003 set out above should be read as 31 March 2004: see WSI
2004/684, reg 3.
HR A[7380.597]
The consultation requirements apply to qualifying long-term agreements if the costs incurred under the agreement in
any accounting period1 will result in the relevant contribution of any tenant, in respect of that period, being more than
£1002.
HR A[7380.598]
1 For calculation of the accounting period see SI 2003/1987, reg 4 (as amended by SI 2004/2939). Accounting periods are for the period
of twelve months from the 'relevant date'. If relevant accounts are made up for periods of twelve months, the first relevant date is the date on
which the period which includes 31 October 2003 ends, or if they are not so made up, 31 October 2003. Where a landlord intends to enter
into a qualifying long-term agreement on or after 12 November 2004 and he has not at any time between 31 October and 12 November 2004
made up accounts relating to service charges referable to a qualifying long-term agreement and payable in respect of the dwellings to which
the intended agreement is to relate, the relevant date is the date on which begins the first period for which the service charges referable to
that intended agreement are payable under the terms of the leases of those dwellings. For subsequent accounting periods the relevant date is
the date immediately following the end of the previous accounting period. For Wales the date of 31 October 2003 set out above should be
read as 31 March 2004: see WSI 2004/684, reg 4.
Page 198
2 SI 2003/1987, reg 4(1). For an anomaly which a threshold figure per tenant (as opposed to per dwelling) creates where the superior
landlord carries out the works and the mesne landlord is the tenant of several dwellings, see: Oakfern Properties Ltd v Ruddy [2006] EWCA
Civ 1389, [2007] 1 All ER 337; Heron Maple House Ltd v Central Estates Ltd [2002] 1 EGLR 35:see HR A[7380.587].
HR A[7380.599]
Where a person becomes a tenant as the result of exercising the right to be granted a long lease under s 138 of the HA
1985 (right to buy) (including that section as applied in relation to the preserved right to buy under s 171A of that Act or
the right to acquire under s 16 of the Housing Act 1996) the landlord is only required to comply with such of the
consultation requirements applicable to the agreement as remain to be complied with after the thirtieth day of that
person's tenancy1.
HR A[7380.600]
1 SI 2003/1987, reg 5(3).
(i) Where public notice is not required
HR A[7380.601]
If the landlord intends to enter into any qualifying long-term agreement he must notify each tenant or a recognised
tenants' association in writing1. The regulations specify the requirements of such a notice2. The notice must, amongst
other things, describe the relevant matters or specify when and where a description of the relevant matters may be
inspected3, state the landlord's reasons for considering it necessary to enter into the agreement, invite observations and
specify the time within which and address at which such observations should be made. The notice must also invite each
tenant and any association to nominate other persons from whom the landlord should try to obtain estimates.
HR A[7380.602]
1 SI 2003/1987, Sch 1, reg 8.
2 SI 2003/1987, Sch 1, reg 8(2).
3 The place and time of inspection should be reasonable and the inspection must take place in accordance with the notice and be free of
charge. The landlord must provide copies on request free of charge if facilities to enable copies to be taken are not made available at the time
of inspection: SI 2003/1987, Sch 1, reg 9.
HR A[7380.603]
If observations are made within the relevant period the landlord must have regard to those observations1. If any
nominations are made the landlord must try to obtain an estimate from the nominated person2.
Page 199
HR A[7380.604]
1 SI 2003/1987, Sch 1, reg 10.
2 Detailed rules apply as to the landlord's obligations in this respect where more than one nomination is made: see SI 2003/1987, Sch 1,
reg 11.
HR A[7380.605]
The landlord must then prepare at least two proposals1 in respect of the relevant matters, at least one of which must
propose that goods or service are provided or works carried out (as the case may be) by a person wholly unconnected2
with the landlord. Where an estimate has been obtained from a nominated person the landlord must prepare a proposal
based on that estimate. Detailed requirements as to the contents of the proposals are specified in the regulations to
which reference should be made3.
HR A[7380.606]
1 SI 2003/1987, Sch 1, reg 12.
2 For when a party is connected see SI 2003/1987, Sch 1, reg 12(6).
3 See SI 2003/1987, Sch 1, regs 12(2), (4), (5) and (7)-(13). In particular, the proposal will generally require some estimation of costs,
preferably broken down to the amount of each tenant's estimated contribution, but otherwise to the total expenditure and failing that to the
current unit cost or hourly or daily rate. Each proposal should also specify the provisions for variation of any amount specified in or
determined under the proposed agreement and should contain a statement of the intended duration of the proposed agreement. Special
statements are required in relation to the proposed appointment of managing agents as to whether or not that agent is a member of a
professional body or trade association (in which case the body or association must be named) and as to whether or not he subscribes to any
code of practice or voluntary accreditation scheme. The landlord is also required to summarise any observations made and his response to
them.
HR A[7380.607]
The landlord must then give written notice to each tenant and to any recognised tenant's association of the proposals1.
The notice must be accompanied by a copy of each proposal (or specify a place and time for inspection)2. The notice
must invite the making of written observations and specify an address and time for the making of such observations3. If
observations are made the landlord is under a duty to have regard to them4.
HR A[7380.608]
1 SI 2003/1987, Sch 1, reg 13(1).

Page 200
2 SI 2003/1987, Sch 1, reg 13(2)(a).
3 SI 2003/1987, Sch 1, reg 13(2)(b), (c).
4 SI 2003/1987, Sch 1, reg 14.
HR A[7380.609]
Where the landlord then enters into an agreement relating to the relevant matters, he must, within 21 days of entering
into the agreement, by notice in writing to each tenant and to any recognised tenants' association, state his reasons for
making that agreement1 and where he has received observations to which he is required to have regard the landlord
must, unless the person with whom the agreement is made is a nominated person or submitted the lowest estimate,
summarise the observations and respond to them2.
HR A[7380.610]
1 Or specify the place and hours at which a statement of those reasons may be inspected: see SI 2003/1987, Sch 1, reg 15(1)(a).
2 Or specify the place and hours at which that summary and response may be inspected: see SI 2003/1987, Sch 1, reg 15(1)(b).
(ii) Where public notice is required
HR A[7380.611]
Similar consultation requirements are set out in Sch 2 to the regulations where public notice is required in relation to
any qualifying long-term agreement. In these cases, however, tenants and recognised tenants' associations are not
entitled to nominate persons from whom the landlord should try to obtain an estimate1 and consequently the landlord is
only required to make one proposal. The landlord's initial notice must state that the reason why the landlord is not
inviting nominations is that public notice of the relevant matters is to be given2. The landlord's proposal must declare
any connection between the landlord and any other party to the proposed agreement3. The tenants and any recognised
tenants' association are entitled to make observations following the initial notice and subsequent proposal to which the
landlord is under a duty to have regard and respond to4.
HR A[7380.612]
1 SI 2003/1987, reg 5(2) and Sch 2.
2 SI 2003/1987, Sch 2, reg 16(2)(d).
3 SI 2003/1987, Sch 2, reg 19(2).

Page 201
4 SI 2003/1987, Sch 2, regs 18-22.

Page 202
Consultation requirements: qualifying works
(4) Consultation requirements: qualifying works
HR A[7380.613]
Qualifying works means works on a building or other premises1. The section automatically imposes consultation
requirements on qualifying works exceeding the prescribed limits2. Under the regulations the consultation requirements
will apply if the costs result in the relevant contribution of any tenant being more than £2503.
HR A[7380.614]
1 LTA 1985, s 20ZA(2) (as substituted by CLRA 2002, s 151).
2 LTA 1985, s 20(3) (as substituted by CLRA 2002, s 151).
3 SI 2003/1987, reg 6. Rather anomalously, this £250 limit would appear to apply even where the tenant is the owner of several flats under
a head lease which are in turn sub-let: see Oakfern Properties Ltd v Ruddy [2006] EWCA Civ 1389, [2007] 1 All ER 337; Heron Maple
House Ltd v Central Estates Ltd [2002] 1 EGLR 35 (see HR A[7380.587] and HR A[7380.598]).
(i) Qualifying works under long-term agreements and certain other works
HR A[7380.615]
The consultation requirements in relation to (a) qualifying works under qualifying long-term agreements (whether alone
or with other matters) and (b) qualifying works under reg 7(3)1 are contained in Sch 3 to the regulations2.
HR A[7380.616]
1 Namely, (a) where under an agreement entered into, by or on behalf of the landlord or a superior landlord, before 31 October 2003,
qualifying works are carried out at any time on or after the date that falls two months after 31 October 2003 and (b) under an agreement for a
term of more than twelve months entered into, by or on behalf of the landlord or a superior landlord, qualifying works for which public
notice has been given before 31 October 2003 are carried out at any time on or after 31 October 2003: SI 2003/1987, reg 7(2), (3). For Wales
the date of 31 October 2003 set out above should be read as 31 March 2004: see WSI 2004/684, reg 7(2),(3).
2 SI 2003/1987, reg 7, Sch 3. Note that the application of Sch 3 in both cases is subject to the exception in SI 2003/1987, reg 7(5), namely
that it does not require the landlord in relation to a right to buy tenant to comply with any of the consultation requirements applicable to that
agreement that arise before the thirty-first day of that right to buy tenancy.
Page 203
HR A[7380.617]
In relation to such works set out above, the landlord must give notice in writing of his intention to carry out qualifying
works to each tenant and to any recognised tenants' association1. As with standard qualifying long-term agreements the
notice must contain certain information and must invite the making of written observations2. The landlord is under a
duty to have regard to any observations made in relation to the proposed works or the estimated expenditure3 and is also
under a duty to respond to any such observations within 21 days of their receipt4.
HR A[7380.618]
1 SI 2003/1987, Sch 3, reg 24(1).
2 SI 2003/1987, Sch 3, reg 24(2).
3 SI 2003/1987, Sch 3, reg 26.
4 SI 2003/1987, Sch 3, reg 27.
(ii) All other qualifying works
HR A[7380.619]
The consultation requirements in relation to all other1 qualifying works are set out in Sch 42 to the regulations3.
Differing requirements apply depending on whether or not public notice is required in respect of the works.
HR A[7380.620]
1 Namely other than those which are the subject of a qualifying long-term agreement or those to which reg 7(3) applies.
2 SI 2003/1987, reg 7(4). Note that Pt 1 of Sch 4 applies where public notice of those works is required. Pt 2 of Sch 4 applies in any other
case.
3 Note that the application of Sch 4 is subject to the exception in SI 2003/1987, reg 7(5), namely that it does not require the landlords in
relation to a right to buy tenant and particular qualifying works to comply with any of the consultation requirements applicable to that
agreement that arise before the thirty-first day of that right to buy tenancy.
(a) Where public notice is not required
HR A[7380.621]
Page 204
Where public notice is not required in relation to qualifying works the landlord must give notice in writing of his
intention to carry out qualifying works to each tenant and to any recognised tenants' association1. The notice must
comply with the requirements set out in the regulations2. The notice must, amongst other things, describe the proposed
works or specify when and where a description of them may be inspected3, state the landlord's reasons for considering it
necessary to carry out the proposed works, invite observations and specify the time within which and address at which
such observations should be made. The notice must also invite each tenant and any association to nominate other
persons from whom the landlord should try to obtain estimates.
HR A[7380.622]
1 SI 2003/1987, Sch 4, reg 35(1).
2 SI 2003/1987, Sch 4, reg 35(2), (3).
3 The place and time of inspection should be reasonable and the inspection must take place in accordance with the notice and free of
charge. The landlord must provide copies on request free of charge if facilities to enable copies to be taken are not made available at the time
of inspection: SI 2003/1987, Sch 4, reg 36.
HR A[7380.623]
If observations in relation to the proposed works are made within the relevant period the landlord must have regard to
those observations1. If any nominations are made the landlord must try to obtain an estimate from the nominated
person2.
HR A[7380.624]
1 SI 2003/1987, Sch 4, reg 37.
2 Detailed rules apply where more than one nomination is made: see SI 2003/1987, Sch 4, reg 38.
HR A[7380.625]
The landlord, following this initial consultation process, must obtain estimates for the carrying out of the proposed
works and supply, free of charge, a statement setting out (i) as regards at least two of the estimates the amount specified
in the estimate as the estimated cost of the proposed works and (ii) where the landlord has received observations to
which he is required to have regard, a summary of the observations and his response to them1. The landlord must make
all of the estimates available for inspection and at least one of the estimates must be that of a person wholly
unconnected with the landlord2. Where the landlord has obtained an estimate from a nominated person, that estimate
must be dealt with in the statement3. The statement must be supplied to (and the estimates made available for inspection
by) each tenant and the secretary of any recognised tenant's association4.
HR A[7380.626]
Page 205
1 SI 2003/1987, Sch 4, reg 38(5).
2 SI 2003/1987, Sch 4, reg 38(6). Note that reg 38(7) sets out the circumstances in which it shall be assumed that there is a connection
between the person and the landlord.
3 SI 2003/ 1987, Sch 4, reg 38(8).
4 SI 2003/1987, Sch 4, reg 38(9).
HR A[7380.627]
The landlord is also required to give a notice to each tenant and the secretary of any recognised tenants' association
specifying the place and hours at which the estimates may be inspected and invite written observations in relation to
them1. In this regard the landlord must specify an address and time limit for the delivery of such observations2. The
landlord is under a duty to have regard to any observations made in accordance with the regulations3.
HR A[7380.628]
1 SI 2003/1987 Sch 4, reg 38(10).
2 SI 2003/1987, Sch 4, reg 38(10)(c).
3 SI 2003/1987, Sch 4, reg 39.
HR A[7380.629]
Where the landlord enters into a contract with a person for the qualifying works (other than a nominated person or the
person who submitted the lowest estimate) he must, within 21 days of entering into the contract, by notice in writing to
each tenant and any recognised tenants' association, (a) state his reasons for awarding the contract (or specify the place
and hours at which a statement of those reasons may be inspected) and (b) summarise any observations made and set
out his response to them1.
HR A[7380.630]
1 SI 2003/1987, Sch 4, reg 40.
(b) Where public notice is required

Page 206
HR A[7380.631]
Where qualifying works require the giving of public notice, the consultation requirements are set out in Pt I of Sch 4 to
the regulations1. The landlord's initial notice differs from other qualifying works in that it must state that the reason why
the landlord is not inviting recipients of the notice to nominate persons from whom he should try to obtain an estimate
for the carrying out of the works is that public notice of the works is to be given2. Neither the tenants nor any
recognised tenants' association has the power to make nominations as to persons from whom estimates should be
obtained, although they are entitled to make any other observations in relation to the proposed works to which the
landlord is under a duty to have regard3.
HR A[7380.632]
1 SI 2003/1987, Sch 4, Part I.
2 SI 2003/1987, Sch 4, reg 28(2)(c). In general the requirements as to the contents of the notice are very similar to those required under Pt
II; see reg 28.
3 SI 2003/1987, Sch 4, regs 28(2)(d), 29 and 30.
HR A[7380.633]
The landlord must then prepare a contract statement in respect of the proposed contract under which the proposed works
are to be carried out1. The regulations specify various matters which must be set out in the statement2. In particular, the
statement must give particulars of any connection between the landlord and the proposed other contracting party3.
Additionally, the contract statement must generally contain some estimation of costs, preferably broken down to the
amount of each tenant's estimated contribution, but otherwise to the total expenditure and failing that to the current unit
cost or hourly or daily rate4. If no estimation of costs can be given the landlord must give reasons and state the date by
which he expects to be able to give such an estimate5. The landlord is also required to summarise any observations that
have been made and set out his response to them6.
HR A[7380.634]
1 SI 2003/1987, Sch 4, reg 31(1).
2 SI 2003/1987, Sch 4, reg 31(2).
3 SI 2003/1987, Sch 4, reg 31(2)(b). For circumstances such a connection shall be assumed: see para 31(3).
4 SI 2003/1987, Sch 4, reg 31(4)-(6).
5 SI 2003/1987, Sch 4, reg 31(7). Note that if the statement sets out the landlord's reasons for non compliance, the landlord must, within
21 days of receiving sufficient information to enable him to estimate the costs in accordance with reg 31(4)-(6), give written notice of the
estimated amount, cost or rate (as the case may be) to each tenant and to any recognised tenants' association: see SI 2003/1987, reg 34.
Page 207
6 SI 2003/1987, Sch 4, reg 31(8).
HR A[7380.635]
The landlord must then give written notice of his intention to enter into the proposed contract to each tenant and to any
recognised tenants' association1. The notice must be accompanied by the landlord's contract statement (or specify the
place and hours at which that statement may be inspected)2. The notice must also invite the making of written
observations and specify the address and time limit for such delivery3. Where the landlord receives observations within
the relevant period he must, within 21 days of their receipt, state his response to the observations by notice in writing to
the person by whom the observations were made4.
HR A[7380.636]
1 SI 2003/1987, Sch 4, reg 32(1).
2 SI 2003/1987, Sch 4, reg 32(2).
3 SI 2003/1987, Sch 4, reg 32(2)(b)(c).
4 SI 2003/1987, Sch 4, reg 33.

Page 208
service charges, administration charges and the management of residential premises/G Restriction on the recovery of the
costs of proceedings by way of service charge
HR A[7380.637]
Whilst the Leasehold Valuation Tribunal has only a very limited power to award costs in favour of a party, the service
charge provisions in leases are often drafted in wide terms which enable the landlord to recover the costs of taking or
defending legal proceedings against one or more tenants through the service charge. In general, clear words are needed
to that effect, although the courts have in some cases shown a willingness to treat such legal costs as recoverable as part
of the general costs of "management" where they have been incurred collecting in service charges1. The terms of the
particular service charge provisions must be carefully considered in each case.
HR A[7380.638]
1 Sella House Ltd v Mears [1989] 1 EGLR 65; Reston Ltd v Hudson [1990] 2 EGLR 51; Iperion Investments Corpn v Broadwalk House
Residents Ltd [1995] 2 EGLR 47; St Mary's Mansions v Limegate Investment Co Ltd [2003] 1 EGLR 41; Staghold Ltd v Takeda [2005] 3
EGLR 45; Canary Riverside v Schilling (unreported, 28 April 2006), LT.
HR A[7380.639]
However a tenant of a dwelling may apply to the court or Leasehold Valuation Tribunal for an order that all or any of
the costs incurred, or to be incurred by the landlord in connection with any proceedings (whether or not the proceedings
are service charge proceedings and whether or not the tenant is a party to them) are not to be regarded as relevant costs
to be taken into account in determining the amount of any service charge payable by the tenant1. Such applications are
frequently made by tenants in conjunction with applications for determination of service charge liability under s 27A2.
HR A[7380.640]
1 LTA 1985, s 20C.
2 For jurisdiction under s 27A see HR A[7380.655]. For the power of the LVT to make costs orders see HR A[7380.669] below.
HR A[7380.641]
The power under the Landlord and Tenant Act 1985, s 20C is only effective where the landlord would otherwise be able
to recover the costs. If costs of legal proceedings were unreasonably incurred, they may be irrecoverable in any event1.
Page 209
HR A[7380.642]
1 Either under LTA 1985, s 19 or by reason of an express or implied term as to reasonableness: see HR A[7380. 562] above and
Finchbourne v Rodrigues [1976] 3 All ER 581.
HR A[7380.643]
The court or Leasehold Valuation Tribunal may make such order as it considers just and equitable in the
circumstances1. Success alone is not the relevant criterion and all circumstances must be considered, including the
conduct and circumstances of the parties2. If a landlord has behaved improperly or unreasonably, he cannot normally
expect to recover his costs of defending such conduct3. The discretion can be exercised by disregarding only a
percentage of the landlord's costs so as to give weight to the degree of success and the proportionality of the complaint4.
There is no automatic expectation of an order in favour of a successful tenant and unusual circumstances are required to
justify an order being made in favour of an unsuccessful tenant.
HR A[7380.644]
1 Iperion Investments Corpn v Broadwalk House Residents Ltd (1994) 71 P & CR 34; Pattrick Marley Estates Management [2007]
EWCA 1176
2 Veena SA v Cheong [2003] 1 EGLR 175, LT.
3 Schilling v Canary Riverside Development Pte Ltd (unreported, 10 April 2006), LT.
4 Schilling v Canary Riverside Development Pte Ltd (unreported, 10 April 2006), LT.
Page 210
service charges, administration charges and the management of residential premises/H Statutory trust of service charge
funds
HR A[7380.645]
At common law, the beneficial ownership of a service charge fund is determined by construction of the lease1.
However, in respect of dwellings a statutory trust is imposed2. The statutory trust prevails over the terms of any
inconsistent express or implied trust created by the lease3.
HR A[7380.646]
1 See para HR A[7380.544].
2 LTA 1987, s 42.
3 LTA 1987, s 42(9) with two exceptions. First, the provisions of sub-ss (4),(6) and (7) of s 42 have effect subject to any express terms of
the lease (whenever it was granted) which relate to the distribution, either before or (as the case may be) at the termination of the lease, of
amounts attributable to relevant service charges paid under its terms (whether the lease was granted before or after the commencement of the
section). Secondly, the rule in s 42(9) does not apply to an express trust so created, in the case of a lease of any of the contributing tenants,
before the commencement of s 42 or (in the case of the lease of a sole contributing tenant) before the commencement of para 15 of Sch 10 to
the CLRA 2002.
HR A[7380.647]
The statutory trust applies where contributing tenants are required under the terms of their leases to contribute to the
same costs by the payment of service charges1. It applies to contributions made by a sole contributing tenant2. The
requirements do not apply to contributions made by tenants of exempt landlords3.
HR A[7380.648]
1 As defined in LTA 1985, s 18 with one exception: see LTA 1987, s 42(1).
2 The application of the statutory trust was extended to include contributions made by a sole tenant by CLRA 2002, s 157, Sch 10, para
15.
3 LTA 1987, ss 42(2), 58(1).
HR A[7380.649]
Page 211
Any sums paid by the contributing tenants or sole contributing tenant and any investments representing those sums or
income accruing thereon are held by the payee on trust to defray costs incurred in connection with service charge
expenditure and, subject to such payment, on trust for the contributing tenants or sole contributing tenant for the time
being1. The statutory trust only applies to sums which have actually been paid2. The sums received for a relevant
service charge must be used to defray the cost of that service charge so that a surplus in any particular year cannot be
applied to defray future costs unless the lease so provides and the reserve fund is collected in the manner prescribed
therein3. The trust can only be dissolved when there are no longer any contributing tenants4. Otherwise, a contributing
tenant is not entitled to the return of any part of the trust fund on the termination of his lease5. The Secretary of State
may provide by order for the manner in which service charge funds may be invested6.
HR A[7380.650]
1 LTA 1987, s 47(2),(3).
2 Maunder Taylor v Blaquiere [2002] EWCA Civ 1633; [2003] 1 WLR 379 at 386.
4 St Mary's Mansions Ltd v Limegate Investment Co Ltd [2002] EWCA Civ 1491; [2003] HLR 319.
4 LTA 1987, s 42(7).
5 LTA 1987, s 42(6).
6 See the Service Charge Contributions (Authorised Investments) Order 1988, SI 1988/1284.
HR A[7380.651]
Section 156(1) of the Commonhold and Leasehold Reform Act 2002, which is not yet in force save insofar as it confers
a power to make regulations, inserts new ss 42A and 42B of the Landlord and Tenant Act 1987 relating to the statutory
trust of service charge funds in s 421. The payee will be required to hold any sums standing to the credit of the trust
fund in a designated account2 at a relevant financial institution3. A tenant is given the right, exercisable by notice in
writing, to require the payee either to provide facilities for him to inspect and take copies of documents evidencing that
the requirements have been complied with, or to send copies of such documents or afford him reasonable facilities to
collect such documents4. The payee must comply with the notice within the period of 21 days beginning with the day
on which he receives it5. Where the payee is required to provide facilities for inspecting documents he must do so free
of charge but may treat such costs as his costs of management. The payee may make a reasonable charge for doing
anything else in compliance with a requirement imposed by notice under s 42A6.
HR A[7380.652]
1 Landlord and Tenant Act 1987, ss 42 to 42B will apply to a tenancy from the Crown if there has ceased to be a Crown interest in the
land subject to it. Where there exists a Crown interest in any land subject to a tenancy from the Crown and the person holding that tenancy is
himself the landlord under any other tenancy whose subject-matter comprises the whole or part of that land, ss 42 to 42B, shall apply to that
other tenancy, and to any derivative sub-tenancy, notwithstanding the existence of that interest: LTA 1987, s 56(1), (3) (as will be amended
by CLRA 2002, s 172(6)).
Page 212
2 LTA 1987, s 42A(1). An account is a designated account in relation to sums standing to the credit of a trust fund if the relevant financial
institution has been notified in writing that sums standing to the credit of the trust fund are to be (or are) held in it and no other funds are
held in the account and the account is an account of a description specified in regulations made by the Secretary of State: see LTA 1987, s
42A(2) (as will be inserted by CLRA 2000, s 156).
3 'Relevant financial institution' has the meaning given by regulations made by the Secretary of State: LTA 1987, 42A(11) (as will be
inserted by CLRA 2000, s 156).
4 LTA 1987, s 42A(3) (as will be inserted by CLRA 2002, s 156). Such rights can be exercised by the secretary of a recognised tenants'
association with the consent of the tenant: LTA 1987, s 42A(4) (as will be inserted by CLRA 2002, s 156). A notice under the section can be
served on an agent of the payee named as such in the rent book or other similar document or the person who receives the rent on behalf of
the payee. Such a person must forward the notice to the payee as soon as possible: LTA 1987, s 42A(5) (as will be inserted by CLRA 2002, s
156). The notice may be served by post: LTA 1987, s 54.
5 LTA 1987, s 42A(6) (as will be inserted by CLRA 2002, s 156).
6 LTA 1987, S 42A(7), (8) (as will be inserted by CLRA 2002, s 156).
HR A[7380.653]
A tenant will be able to withhold payment of a service charge if he has reasonable grounds for believing that the
landlord has failed to comply with the duty to hold any sums standing to the credit of the trust fund in a designated
account at a relevant financial institution and any provisions of his tenancy relating to non payment or late payment of
service charges do not have effect in relation to the period for which he so withholds it1. The Secretary of State may by
regulations relieve the payee's duty to comply with the requirements of s 42A if the circumstances are such as are
specified in regulations2. A person who fails, without reasonable excuse, to comply with a duty imposed by s 42A,
including the duty to keep funds in a designated account and to furnish the tenant with information, will commit a
summary offence3.
HR A[7380.654]
3 LTA 1987, s 42B(1) (as will be inserted by CLRA 2002, s 156). The offence is punishable by a fine not exceeding level 4 on the
standard scale. Where a body corporate has committed an offence under s 42B its officers or persons purporting to act in such a capacity
personally commit an offence where the offence of the body corporate has been committed with their consent or connivance or is due to their
neglect: see LTA 1987, s 42B(3) (as will be inserted by CLRA 2002, s 156). This also applies to a member who is involved in the
management of the body corporate: see LTA 1987, s 42B(4) (as will be inserted by CLRA 2002, s 156). Proceedings for an offence under s
42B may be brought by a local housing authority: see LTA 1987, s 42B(5) (as will be inserted by CLRA 2002, s 156).
Page 213
service charges, administration charges and the management of residential premises/I Determination of service charge
disputes
I
Page 214
disputes/(1) Jurisdiction of the Leasehold Valuation Tribunal
(1) Jurisdiction of the Leasehold Valuation Tribunal
HR A[7380.655]
In the main, residential service charge disputes are heard by the Leasehold Valuation Tribunal whose jurisdiction in
relation to service charges has been progressively extended. The Tribunal's jurisdiction is in addition that that of the
court1. The Tribunal now has jurisdiction to determine whether a service charge is or will be payable, the amount
payable, to whom and by whom payment should be made, as well as the timing and method of such payment2. The
jurisdiction can be exercised whether or not the service charge in question has already been paid3. An application under
s 27A can be made by either the tenant or the landlord4. Any decision of the Tribunal may, with the permission of the
county court, be enforced in the same way as a court order5.
HR A[7380.656]
1 LTA 1985, s 27A(7). For choice of forum see HR A[7380.661] below.
2 LTA 1985, s 27A (as inserted by CLRA 2002). For commencement and transitional provisions see SI 2003/1986; WSI 2004/669. The
jurisdiction of the LVT was previously under LTA 1985, s 19(2A)-(3), now repealed.
3 LTA 1985, s 27A(2). Previously the LVT had no jurisdiction to consider the reasonableness of service charges that had been paid: see
Daejan Properties Ltd v London Leasehold Valuation Tribunal [2001] EWCA Civ 1095, [2002] 1 P & CR D1, [2002] L & TR 5; [2001] 35
LS Gaz R 35. The enlargement of the jurisdiction of the LVT so as to include service charges that have been paid operates retrospectively
and therefore includes service charges paid before the jurisdiction was expanded: see Sinclair Gardens Investments (Kensington) Ltd v Wang
(unreported, LRX/89/2005, 23 May 2006), LT.
4 An application under s 27A can be made by an under lessee against a head lessor in respect of service charges levied against the head
lessee but ultimately recoverable from him: Oakfern Properties Ltd v Ruddy [2006] EWCA Civ 1389, [2007] Ch 335.
5 CLRA 2002, Sch 12, para 11; SI 2003/2099, reg 19.
HR A[7380.657]
However the enlarged jurisdiction does not on its proper construction extend to ordering restitution of service charges
paid under mistake or legal compulsion subsequently claimed not to have been due. In addition the Tribunal still has no
jurisdiction to determine claims for damages for breach of quiet enjoyment or repairing obligations or nuisance claims
which might arise in wider "service charge disputes", save insofar as they constitute a defence by way of set-off1.
Although the Tribunal is entitled to decide whether or not a term is binding under the Unfair Terms in Consumer
Contract Regulations 1999, it has no jurisdiction to make a determination as to whether or not the lease should continue
in existence without the alleged unfair term2. Further it has no power under s 27A of the Landlord and Tenant Act 1985
to alter the contractual relationship between the parties3.
Page 215
HR A[7380.658]
1 Continental Property Ventures Inc v White [2006] 1 EGLR 85, LT. The LVT should exercise restraint in cases where a court procedure
would be more appropriate.
2 Canary Riverside PTE Ltd v Schilling (unreported, LRX/65/2005), LT, where it was held that a term allowing a landlord to recover costs
incurred by it in resisting an application under LTA 1987, s 24 was not unfair.
3 For example, the LVT may not set down a new timetable for payment which differs from that prescribed in the lease: see
Southend-on-Sea BC v Skiggs [2006] 21 EG 132, LT.
HR A[7380.659]
No jurisdiction is conferred in respect of any matter which has been agreed or admitted by the tenant1, has been or is to
be referred to arbitration under a post-dispute arbitration agreement to which the tenant is party, or has been the subject
of determination by the court or arbitral tribunal2. Any agreement by a tenant which purports to provide for
determination in a particular manner or on particular evidence of any issue in relation to which the Tribunal has
jurisdiction is void3.
HR A[7380.660]
1 The tenant is not to be taken to have agreed or admitted to any matter by reason only of payment of alleged service charges in whole or
in part: see LTA 1985, s 27A(5).
2 The determination by an arbitral tribunal must be pursuant to a post-dispute arbitration agreement: see LTA 1985, s 27A(4)(d).
3 This does not preclude a post-dispute arbitration agreement: see LTA 1985, s 27A(6) but would render void any clause in a tenancy
agreement which provided for a dispute to be determined by an expert.
Page 216
disputes/(2) Choice of forum
(2) Choice of forum
HR A[7380.661]
Given its extended jurisdiction1, most residential service charge disputes are best dealt with entirely before the Tribunal
as opposed to by court proceedings. Given that the power of dispensing with the consultation requirements is now
solely vested in the Tribunal2, any claim which involves a claim for dispensation will have to be heard there in any
event.
HR A[7380.662]
1 LTA 1985, s 27A.
2 LTA 1985, s 20(1)(b).
HR A[7380.663]
Whilst a landlord may wish to commence proceedings in the county court so as to take advantage of the court's more
extensive powers in respect of costs, the court is more likely than not to transfer any such proceedings to the Tribunal.
Where in any proceedings before a court there falls for determination a question falling within the jurisdiction of the
Tribunal, the court may by order transfer to the tribunal so much of the proceedings as relate to the determination of that
issue and may then dispose of or adjourn the remaining proceedings as it thinks fit1. When the Tribunal has determined
any question referred to it, the court may give effect to that determination in the order2.
HR A[7380.664]
1 CLRA 2002, Sch 12, para 3.
2 CLRA 2002, Sch 12, para 3.
HR A[7380.665]
Whilst it is now rare for straightforward residential service charge disputes to be dealt with by way of court
proceedings, there will be instances where matters are best dealt with by the court, for example, if a dispute involves
separate but related causes of action in respect of which the Tribunal has no jurisdiction1. Even if the Tribunal has
Page 217
jurisdiction, there may be circumstances which render court procedures more appropriate, for example where a tenant
seeks to set off a claim for personal injury caused by breach of repairing obligation2.
HR A[7380.666]
1 Aylesford Estates Ltd v MacMillan (1998) 32 HLR 1, CA. It will usually only be appropriate to transfer part of proceedings and thereby
divide determination of different issues between two tribunals where substantially all the matters in dispute, apart from formal matters, fall
within the jurisdiction of the LVT: see Wandsworth London Borough Council v Manuel [2002] 2 EGLR 128.
2 Continental Property Ventures Inc v White [2006] 1 EGLR 85, LT where it was said that the LVT should exercise restraint in cases
where a court procedure would be more appropriate.
Page 218
disputes/(3) Procedure
(3) Procedure
HR A[7380.667]
The procedure before the Tribunal is governed by Sch 12 to the Commonhold and Leasehold Reform Act 2002 and the
Leasehold Valuation Tribunals (Procedure) Regulations 20031. The rules prescribe certain particulars to be included
with any application to the Tribunal2 and additional requirements are prescribed for service charge disputes. Where an
application is made under s 27A of the Landlord and Tenant Act 1985, the application form must include the name and
address of the secretary of any recognised tenants' association3. The Tribunal can give notice of the application to any
other person if it considers appropriate.
HR A[7380.668]
1 SI 2003/2099 as amended by SI 2004/3098. For fees see SI 2003/2098 and SI 2003/2270. For Wales see WSI 2004/681 (procedure),
WSI 2004/683 and WSI 2004/680 (fees).
2 SI 2003/2099, reg 3. These include the names and addresses of the applicant, respondent, and any landlord or tenant of the premises to
which the application relates, the address of the relevant premises and a statement of truth.
3 SI 2003/2099, reg 3(3).

Page 219
disputes/(4) Costs
(4) Costs
HR A[7380.669]
The Tribunal has only a very limited jurisdiction to make costs orders. A costs order may only be made against an
applicant whose application has been dismissed and who has, in the opinion of the Tribunal, acted frivolously,
vexatiously, abusively, disruptively or otherwise unreasonably in connection with the proceedings1. Even then, the
Tribunal may not award costs exceeding £5002.
HR A[7380.670]
1 CLRA 2002, Sch 12, para 10(1),(2).
2 CLRA 2002, Sch 12, para 10(3).
HR A[7380.671]
Further, a tenant may also apply to the court or Tribunal for an order preventing its landlord from exercising any
contractual right it may have to recover its costs of proceedings by way of a service charge1. It is common for tenants to
make an application under s 20C at the same time as an application under s 27A of the 1985 Act in relation to costs
incurred by the landlord in respect of that application.
HR A[7380.672]
1 LTA 1985, s 20C and see HR A[7380.637] - HR A[7380.643].

Page 220
disputes/(5) Appeals from the Leasehold Valuation Tribunal
(5) Appeals from the Leasehold Valuation Tribunal
HR A[7380.673]
An appeal from the Leasehold Valuation Tribunal lies to the Lands Tribunal. An appeal may only be made with the
permission of the Leasehold Valuation Tribunal or the Lands Tribunal1. Any application to the Leasehold Valuation
Tribunal for permission to appeal to the Lands Tribunal must be made within the period of 21 days starting with the
date on which the document which records the reasons for the decision was sent to that party2.
HR A[7380.674]
1 CLRA 2002, s 175; SI 2003/2099, reg 20.
2 SI 2003/2099, reg 20.
HR A[7380.675]
It is not possible to appeal to the Court of Appeal against a decision of the Lands Tribunal granting or refusing
permission to appeal1. Whilst the Administrative Court has power judicially to review a decision of the Lands Tribunal
to refuse or grant permission to appeal, very exceptional circumstances must exist before the decision will be interfered
with2.
HR A[7380.676]
1 R (on the application of Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2004] EWHC 1910 (Admin), [2004] 47 EG
166, upheld on appeal [2005] EWCA Civ 305.
2 R (on the application of Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal. For exceptional circumstances see R (on the
application of Sivasubramaniam) v Wandsworth County Court [2002] EWHC Civ 1738, [2003] 2 All ER 160, [2003] 1 WLR 475.
HR A[7380.677]
On an appeal from the decision of the Leasehold Valuation Tribunal, the Lands Tribunal1 may treat the proceedings as
a rehearing or a review, depending on the circumstances, but in either case, the legal burden of proof is on the appellant
to show that the decision was wrong2. The power of the Lands Tribunal to award costs on an appeal is limited3.
Page 221
HR A[7380.678]
1 For procedure in the Lands Tribunal see the Lands Tribunal Rules 1996, SI 1996/1022 (as amended by SI 1997/1965, SI 2003/2945 and
SI 2006/880).
2 Veena SA v Cheong [2003] 1 EGLR 175.
3 Costs can only be awarded against a party who as acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably in
connection with the appeal and in any event the costs awarded may not exceed £500: see CLRA 2002, s 175(6),(7).
Page 222
service charges, administration charges and the management of residential premises/J Administration charges
HR A[7380.679]
Statutory regulation with regard to administration charges was introduced by the Commonhold and Leasehold Reform
Act 20021. An administration charge is a fixed or variable2 amount payable by a tenant of a dwelling as part of, or in
addition to, the rent which is payable, directly or indirectly (a) for or in connection with the grant of approvals under his
lease, or applications for such approvals; (b) for or in connection with the provision of information or documents by or
on behalf of the landlord or a third party; (c) in respect of a failure by the tenant to make a payment by the due date to
the landlord or a third party; or (d) in connection with a breach (or alleged breach) of a covenant or condition in his
lease3. Examples of an administration charge include the landlord's charges for costs incurred in the preparation and
service of a notice under s 146 of the Law of Property Act 1925 and in execution of a licence for alterations or
assignment.
HR A[7380.680]
1 CLRA 2002, s 158, Sch 11. For commencement see SI 2003/1986, Sch 2, para 8. Note that LTA 1987, ss 46-48 relating to information
to be provided to tenants have been amended so as to include reference to administration charges: CLRA 2002, Sch 11, paras 10, 11.
2 A variable administration charge is one which is neither specified in the lease or calculated in accordance with a formula specified in the
lease: CLRA 2002, Sch 11, para 1(3).
3 CLRA 2002, Sch 11, para 1. Note that an amount payable by the tenant of a dwelling the rent of which is registered under Part IV of the
Rent Act 1977 is not an administration charge unless the amount registered is entered as a variable amount under s 71(4).
HR A[7380.681]
A demand for the payment of an administration charge must be accompanied by a summary of the rights and
obligations of tenants of dwellings in relation to administration charges1. Failure to comply with this requirement
entitles the tenant to withhold payment of an administration charge2.
HR A[7380.682]
1 CLRA 2002, Sch 11, para 4. For regulations prescribing the form and content of summaries which must accompany any demand made
on or after 1 October 2007, see the Administration Charges (Summary of Rights and Obligations)(England) Regulations 2007, SI 2007/1258.
In particular, the summary must be legible in a typewritten or printed form of at least 10 point, and must contain a prescribed title and
prescribed statement.
2 CLRA 2002, Sch 11, para 4(3),(4). Any provisions of the lease relating to non-payment or late payment of an administration charge do
Page 223
not have effect for the period for which the charge is withheld.
HR A[7380.683]
The recoverability of administration charges payable on or after 30 September 2003 is limited by the legislation.
Variable administration charges are only payable to the extent that they are reasonable1. The Leasehold Valuation
Tribunal has jurisdiction to determine whether an administration charge is payable and if it is, as to the amount which is
payable and by whom, to whom, when, and how payment should be made2. The Leasehold Valuation Tribunal's
jurisdiction applies whether or not any payment has been made and is exercisable in addition to any jurisdiction of the
court in respect of the matter3. Contracting out of the statutory regime is not permitted4.
HR A[7380.684]
1 CLRA 2002, Sch 11, para 2. For the requirement of reasonableness in connection with service charges see HR A[7380.562].
2 CLRA 2002, Sch 11, para 5. For procedure see the Leasehold Valuation Tribunals (Procedure) Regulations 2003, SI 2003/2099 and for
Wales see WSI 2004/669.
3 CLRA 2002, Sch 11, para 5(3). However no application may be made in respect of a matter which has been agreed or admitted by the
tenant, has been or is to be referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party, has been the
subject matter of determination by the court or has been the subject of determination by an arbitral tribunal pursuant to a post-dispute
arbitration agreement. A party is not taken to have agreed or admitted any matter by reason only of having made any payment.
4 CLRA 2002, Sch 11, para 5(6).
HR A[7380.685]
The Leasehold Valuation Tribunal also has power, on the application1 of any party to a lease of a dwelling, to vary the
lease on the grounds that (a) any administration charge specified in the lease is unreasonable, or (b) any formula
specified in the lease in accordance with which any administration charge is calculated is unreasonable2. A landlord is
also able to apply for a variation if a fixed administration charge is rendered unreasonable by the effects of inflation.
The Tribunal may, instead of making an order varying the lease, make an order directing the parties to the lease to vary
it3. Any such variation will be binding on third parties, whether or not they are parties to the proceedings4.
HR A[7380.686]
1 For procedure see SI 2003/2009. An application must include a draft of the proposed variation: SI 2003/2009, reg 3(3). For Wales see
WSI 2004/669.
2 CLRA 2002, Sch 11, para 3. Paras 2-5 of Sch 11 do not apply to an administration charge that was payable before 30 September 2003
(England) or 31 March 2004 (Wales). It is unclear whether a variation can be made with retrospective effect.
3 CLRA 2002, Sch 11, para 3(4).

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4 CLRA 2002, Sch 11, para 3(5),(6). The LVT can make an order directing that a memorandum of any variation is endorsed on such
documents as are specified in the order.
Page 225
service charges, administration charges and the management of residential premises/K Restrictions on forfeiture for
arrears of service and administration charges
HR A[7380.686.1]
Since 24 September 1996, in respect of tenancies of premises let as a dwelling (other than business premises,
agricultural holdings, or a farm building premises), a landlord has not been able to exercise a right of re-entry or
forfeiture for failure to pay a service charge demand unless certain requirements have been complied with. Prior to 28
February 2005, the requirements were as follows: the amount of the service charge must have been agreed by the tenant
or determined by the court or by an arbitral tribunal in proceedings pursuant to an arbitration agreement1. A right of
forfeiture or re-entry following determination could not be exercised until the period of 14 days beginning with the date
of determination had expired. A determination included a default judgment but a mere failure to file a defence or to set
aside a default judgment did not amount to an agreement or admission under s 812. The tenant could even so apply for
relief3 which save in exceptional cases would be granted upon the payment by the tenant of the relevant sums found due
and costs. Section 81 of the Housing Act 1996 did not prevent the landlord from serving a notice under s 146(1) of the
Law of Property Act 1925 but s 82 of the Housing Act 1996 prescribed certain information that had to be set out in any
such s 146 notice in order for it to be effective4. For the position on and after 28 February 2005 see the following
paragraph.
HR A[7380.686.2]
1 Housing Act 1996, ss 81, 82 (as unamended). Note the amendments to these provisions effected by the Commonhold and Leasehold
Reform Act 2002, s 170 and s 180, Sch 14 with effect from 28 February 2005 which are dealt with in the following paragraph.
2 Southwark London Borough Council v Tornaritis [1999] CLY 3744.
3 Khar v Delmounty Ltd (1996) 75 P & CR 232. The tenant is entitled to rely on s 81 of the Housing Act 1988 in order to limit the terms
on which relief is granted. For example, where a landlord purported to forfeit for non-payment of ground rent and service charges prior to an
agreement or determination as to the level of the service charge arrears, the court held relief was governed solely under s 138 of the County
Courts Act 1984 such that relief would be granted on payment of the 'all the rent in arrear' which did not include the service charge arrears
which were not expressly reserved as rent by the lease: Mohammadi v Anston Investments Ltd [2003] EWCA Civ 981, [2004] HLR 88.
4 The notice must state that HA 1996, s 81 applies and set out the effect of sub-s (1). The prescribed information must be set out in
characters which are no less conspicuous than those in the notice which are used to specify the breach and to indicate that the tenancy may
be forfeited (whichever is the most conspicuous: see HA 1996, s 82(4). The Secretary of State has power to prescribe a form of words which
must be used but no regulations have been made.
HR A[7380.686.3]
The Commonhold and Leasehold Reform Act 2002 has effected significant changes to the provisions in the Housing
Act 1996 which imposed restrictions on the right to forfeit a lease for arrears of service charge1. The restrictions have
been extended to apply to arrears of administration charges2. It is no longer possible for the landlord to serve a notice
Page 226
under s 146 of the Law of Property Act 1925 in relation to arrears of service charges prior to a determination, admission
or agreement3. The reference to determination has been amended to read 'final determination' and has been extended so
as to allow time for an appeal4. Where the service charge or administration charge is subject to a final determination,
the landlord may not exercise a right of re-entry or forfeiture until after the end of the period of 14 days beginning with
the day after that on which the final determination is made5. An agreement by the tenant is no longer sufficient: what is
required under s 81(1) is a final determination or an admission by the tenant6. The Leasehold Valuation Tribunal is
included within the list of bodies that can make an effective final determination for the purposes of the section7. As the
service of a s 146 notice is no longer permitted prior to determination or admission, s 82 of the Housing Act 1996 has
been repealed8.
HR A[7380.686.4]
1 Section 81 of the Housing Act 1996 as amended by the Commonhold and Leasehold Reform Act 2002, s 170 which came into force in
England on 28 February 2005 (see SI 2004/3056). HA 1996, s 82 was repealed by CLRA 2002, s 180, Sch 14 on the same date. Note that the
restrictions upon service of a s 146 notice for breach of covenant or condition set out in s 168 of the Commonhold and Leasehold Reform
Act 2002 do not apply if the breach is a failure to pay service charges or administration charges: CLRA 2002, s 169(7).
2 HA 1996, s 81(1) (as substituted by CLRA 2002, s 170). For the definition of administration charge, see HA 1996, s 81(5)(a) (as
3 HA 1996, s 81(4A) (as inserted by CLRA 2002, s 170).
4 HA 1996, s 81(1), (3), (3A) (as substituted by CLRA 2002, s 170). Additionally, an order of a court to give effect to a determination of a
Leasehold Valuation Tribunal shall be treated as a determination of the court for the purposes of the section: see HA 1996, s 81(5A) (as
5 HA 1996, s 81(2) (as substituted by CLRA 2002, s 170).
6 HA 1996, s 81(1)(b) (as substituted by CLRA 2002, s 170).
7 HA 1996, s 81(1)(a) (as substituted by CLRA 2002, s 170).
8 CLRA 2002, s 180, Sch 14.
HR A[7380.686.5]
The changes effected by the Commonhold and Leasehold Reform Act 2002, which came into force on 28 February
2005, have introduced new restrictions on forfeiture for failures to pay small amounts of rent, service charges or
administration charges for short periods of time1. A landlord under a long lease2 of a dwelling3 may not exercise a
right of re-entry or forfeiture for non payment of rent, service charges4 or administration charges5 (or a combination of
them) unless the unpaid amount exceeds the prescribed sum6, or consists of or includes an amount which has been
payable for more than a prescribed period7. The current prescribed sum is £350 and the current prescribed period is
three years.
HR A[7380.686.6]
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1 Commonhold and Leasehold Reform Act 2002, s 167(1). For commencement see SI 2004/3056.
2 CLRA 2002, ss 76, 77.
3 Landlord and Tenant Act 1985, s 38. For the purposes of CLRA 2002, s 167, 'long lease of a dwelling' does not includes (a) a tenancy to
which Part II of the Landlord and Tenant Act 1954 applies, (b) a tenancy of an agricultural holding within the meaning of the Agricultural
Holdings Act 1986 in relation to which that Act applies, or (c) a farm business tenancy within the meaning of the Agricultural Tenancies Act
1995: see CLRA 2002, s 167(4).
4 For definition of service charge see LTA 1985, s 18(1) (as amended by CLRA 2002, s 150, Sch 9, para 7).
5 For definition of administration charge see CLRA 2002, Sch 11.
6 The prescribed sum will be prescribed by regulations but must not exceed £500: CLRA 2002, s 167(2), (5). Under the new regulations
the prescribed sum is £350: see the Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004 (SI
2004/3086) and the Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (Wales) Regulations 2005 (WSI 2005/1352). In
calculating the unpaid amount any part of it which is a default charge, ie an administration charge payable upon failure to pay any part of the
unpaid amount, will be discounted: see CLRA 2002, s 167(3).
7 The prescribed period will be prescribed by regulations: CLRA 2002, s 167(5). Under the new regulations the prescribed period is three
years: see SI 2004/3086.
Page 228
service charges, administration charges and the management of residential premises/L Other statutory provisions
relating to management
L
Page 229
relating to management/(1) Consultation in respect of appointment of managing agents
(1) Consultation in respect of appointment of managing agents
HR A[7380.687]
Under s 30B of the Landlord and Tenant Act 1985 certain tenants are entitled to request that they be consulted in
respect of the appointment of managing agents by a landlord. The consultation rules apply only to premises where one
or more of the tenants are represented by a 'recognised tenants' association'1. Requests in respect of consultation may be
made at any time in writing by the tenants' association2. The duties of a landlord following such a request then depend
upon whether or not the landlord is already employing managing agents at the date the request is made.
HR A[7380.688]
1 As governed by LTA 1985, s 29.
2 LTA 1985, s 30B(1).
HR A[7380.689]
If no managing agents are employed at the time of request the landlord must, before appointing any agents, serve notice
on the tenants' association giving details of the proposed appointees and the duties of the landlord which it is proposed
to instruct the managing agents to carry out1. The notice must also invite observations from the tenants' association
upon those matters within a specified period of at least one month from the date of service of the landlord's notice and
state the name and address of the person to whom such observations are to be sent2. Should the tenants' association
respond within the defined period it is provided that the landlord shall have regard to the observations made3.
HR A[7380.690]
1 LTA 1985, s 30B(2).
2 LTA 1985, s 30B(7).
3 There is no statutory guidance on what this means.
HR A[7380.691]
Page 230
If managing agents are already employed at the date of request the landlord must, within one month of the date of
service of the request, serve a written notice upon the tenants' association specifying the duties of the landlord which the
managing agents have been instructed to carry out1. The notice must also invite observations, within a reasonable
period, on the performance of the managing agents and on whether or not it is considered that they should continue to
perform the relevant duties. The name and address of the person to whom the observations should be sent must be
contained in the notice2 and, once more, it is provided that the landlord shall have regard to all observations made.
HR A[7380.692]
1 LTA 1985, s 30B(3).
2 LTA 1985, s 30B(7).
HR A[7380.693]
In either of the above cases the landlord has additional obligations to keep the tenants' association informed of the
continued involvement of managing agents in the discharge of the landlord's duties1. To that end notices must be served
at least once every five years detailing any changes in the duties which the managing agents have been instructed to
carry out and inviting observations upon the alterations. Any proposed change of managing agents must also be
preceded by service of a written notice equivalent to that served upon receipt of a request at a time when no managing
agents have yet been appointed2.
HR A[7380.694]
1 LTA 1985, s 30B(4).
2 LTA 1985, s 30B(4)(b).

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relating to management/(2) Appointment of a surveyor
(2) Appointment of a surveyor
HR A[7380.695]
Under s 84 of the Housing Act 1996 a recognised tenants' association1 may appoint a surveyor to advise on matters
relating to, or which may give rise to, service charges payable to a landlord by any of the members of the association.
Such an appointment can only be made of a surveyor who is a 'qualified surveyor', ie qualified to carry out a
management audit2. The appointment is made by the tenants' association giving to the landlord notice in writing of the
name and address of the surveyor, the duration of his appointment and the matters in respect of which he is appointed3.
Similarly, an appointment ceases to have effect upon notice in writing being given to the landlord or upon the tenants'
association ceasing to exist4.
HR A[7380.696]
1 As governed by LTA 1985, s 29: see HA 1996, s 84(1),(6).
2 By HA 1996, s 84(2) a 'qualified surveyor' is given the same meaning as in Leasehold Reform, Housing and Urban Development Act
1993, s 78(4)(a).
3 HA 1996, s 84(3).
4 HA 1996, s 84(4).
HR A[7380.697]
The rights exercisable by a surveyor appointed by a tenants' association are detailed in Sch 4 to the Housing Act 1996.
The surveyor is entitled to appoint persons to assist him in carrying out the functions in respect of which he was
appointed1. The surveyor also has the right to make certain demands to facilitate the discharge of those functions. First,
he may require the landlord or 'any other relevant person' to afford him reasonable facilities to inspect and take copies of
those documents reasonably required by him for the purposes of carrying out the functions in respect of which he was
appointed2. Where documents are held by a superior landlord the landlord must supply to the surveyor the name and
address of that landlord3. Secondly, the surveyor also has the right to inspect common parts comprised in relevant
premises or any appurtenant property and may require the landlord to afford him reasonable access to do so4.
HR A[7380.698]
1 HA 1996, Sch 4, para 2.

Page 232
2 HA 1996, Sch 4, para 3.
3 HA 1996, Sch 4, para 6.
4 HA 1996, Sch 4, para 4. Note that the definition of 'management functions' for the purposes of HA 1996, Sch 4, para 4(2) has been
extended to include functions in respect of the improvement of property: see CLRA 2002, s 150, Sch 9, para 12 which came into force on 30
September 2003 in England (see SI 2003/1986) and 30 March 2004 in Wales (see WSI 2004/669).
HR A[7380.699]
The right to obtain inspection of documents is exercisable only upon written notice to the landlord or other person
concerned1. There is no stipulation that a request for access to common parts be in writing. Should a landlord fail to
comply with a request, within one month in the case of access to documents or within a reasonable time where access to
common parts is requested, the surveyor is thereafter entitled to apply to court for an order that he do so within a
specified time2. Schedule 4 also makes provision for circumstances in which a landlord disposes of his interest
following a surveyor's request3.
HR A[7380.700]
1 HA 1996, Sch 4, para 3(3)
2 HA 1996, Sch 4, para 5.
3 HA 1996, Sch 7.
HR A[7380.700.1]
A landlord is obliged to provide facilities for inspection of documents and reasonable access free of charge. It should,
however, be noted that nothing in Sch 4 to the Housing Act 1996 prohibits a landlord from treating as part of his costs
of management any costs incurred by him in providing such inspection or access1.
HR A[7380.701]
1 HA 1996, Sch 4, paras 3(5) and 4(4).

Page 233
relating to management/(3) Management audit
(3) Management audit
HR A[7380.701.1]
Chapter V of the Leasehold Reform, Housing and Urban Development Act 1993 makes provision for management
audits. 'Qualifying tenants' are entitled to have a management audit carried out1 by a qualified accountant or qualified
surveyor, who is not a tenant of any premises that are to be the subject of the audit2. The audit is carried out in respect
of 'relevant premises and appurtenant property'3, ie those parts of any building containing the dwellings let to the
qualifying tenants in respect of which they pay common service, together with those parts of any other buildings
(including outbuildings etc) for which the qualifying tenants similarly pay. The right to carry out a management audit is
designed to establish the extent to which the landlord's obligations to them in respect of discharge of management
functions4 and application of service charge monies are being properly discharged5. There is, however, no statutory
provision for sanctions against a landlord in the event that such an audit establishes that those functions are not being
satisfactorily carried out, although it would be open to a dissatisfied tenant to apply for the appointment of a manager6.
HR A[7380.701.2]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 76.
2 LRHUDA 1993, s 78. A 'qualified accountant' is a person with the necessary qualification within the meaning of the LTA 1985, s 28(1).
A 'qualified surveyor' is a fellow or professional associate of the RICS or of the ISVA or otherwise satisfies such other requirement(s) as
may be prescribed by regulations made by the Secretary of State.
3 LRHUDA 1993, s 76(3), (6).
4 Note that by the Commonhold and Leasehold Reform Act 2002, the definition of 'management functions' in LRHUDA 1993, ss 84,
87(8) has been extended to include improvements: see CLRA 2002, s 150, Sch 9, paras 10, 11 which were brought into force on 30
September 2003, but note that the amendments made by CLRA 2002, Sch 9, para 10 do not apply to an application made under LRHUDA
1993, s 80 before 30 September 2003 in England and before 31 March 2004 in Wales.
5 LRHUDA 1993, s 78(1).
6 See LTA 1987, Pt II and HR A[7380.701.19] - [7380.701.30].
HR A[7380.701.3]
A 'qualifying tenant' is a tenant under a long lease, not being a business lease, under which service charge is payable and
which is not itself superior to a tenancy of the same dwelling which qualifies under these provisions for the right to
carry out an audit. Two or more joint tenants of a tenancy satisfying the qualifying conditions will together constitute
the qualifying tenant but either may initiate an audit in the manner set out below1. Where premises comprise of more
Page 234
than two such dwellings the audit must be required by at least two-thirds of the qualifying tenants in order to exercise
the right2. Where premises comprise of a single dwelling or two dwellings one qualifying tenant may require that an
audit be carried out3.
HR A[7380.701.4]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 77.
2 LRHUDA 1993, s 76(2).
3 LRHUDA 1993, s 76(4), (5).
HR A[7380.701.5]
An audit is initiated by the appointment of an auditor by the qualifying tenants. The auditor must then serve a written
notice upon the landlord, and so far as is practicable upon any other person who carries out the management functions,
identifying himself and specifying his requirements. The notice must also identify the tenants on whose behalf it is
given and be signed by each of them1.
HR A[7380.701.6]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 80. A new LRHUDA 1993, s 80(3)(c) will be substituted by CLRA
2002, s 157, Sch 10, para 17 to reflect the changes to the rights exercisable by the auditor in the new LRHUDA 1993, s 79(2), (2A) (which
will be substituted by CLRA 2002, s 157, Sch 10, para 16).
HR A[7380.701.7]
In order to facilitate the execution of the audit, the auditor may stipulate in the notice that the landlord afford him access
to certain information1. First, he may require that the landlord supply him with the service charge costs summaries
which the tenants are entitled to require under s 21 of the LTA 1985 and that the landlord (or any other relevant
person2) provide reasonable facilities for inspecting and copying supporting documentation or any other documents
reasonably required for the purpose of carrying out the audit3. Secondly, the auditor may require that the landlord allow
him access to common parts in the dwellings that he is concerned with or any appurtenant property on a proposed date
between one and two months from the date of the auditor's notice4.
HR A[7380.701.8]
1 The rights exercisable by the auditor in connection with the audit and the means of exercise of such rights are set out at Leasehold
Reform, Housing and Urban Development Act 1993, s 79. Note that LRHUDA 1993, s 79(2) which sets out the rights exercisable by the
auditor in connection with a management audit will be substituted with a new s 79(2) and (2A) by Commonhold and Leasehold Reform Act
2002, s 157, Sch 10, para 16.
Page 235
2 Defined at s 79(7) as a person, other than the landlord, who is responsible for discharging management functions in relation to the
relevant premises or any appurtenant property, or for the application of service charges, or has a right to enforce payment of such service
charges.
3 LRHUDA 1993, s 79(2). Note that LRHUDA 1993, s 79(2) which sets out the rights exercisable by the auditor in connection with a
management audit will be substituted with a new s 79(2) and (2A) by CLRA 2002, s 157, Sch 10, para 16.
4 LRHUDA 1993, ss 79(4), 80(3)(d), 80(4).
HR A[7380.701.9]
The landlord (or where appropriate the relevant person) is obliged to comply with the auditor's notice within a specified
period beginning with the date of the giving of the notice. Service charge summaries and supporting documentation
must be supplied within one month1. Other documents must also be produced for inspection or copying within one
month unless the landlord serves notice upon the auditor objecting to production of the specified documents and stating
the grounds of objection2. Where access to premises is requested the landlord must within one month approve the date
proposed by the auditor or propose another date not more than two months from the date of the auditor's notice3.
HR A[7380.701.10]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 81(1)(a). Note that LRHUDA 1993, s 81 will be amended by the
Commonhold and Leasehold Reform Act 2002, s 157, Sch 10, para 18 so as to impose requirements on the landlord and any relevant person
in respect of documents required to be supplied under the new s 79(2) and (2A).
2 LRHUDA 1993, s 81(1)(b).
3 LRHUDA 1993, s 81(1)(c), (2).
HR A[7380.701.11]
Express provision is made for cases in which information sought is held by a superior landlord1. Where a superior
landlord is in possession of service charge costs summaries the immediate landlord must himself make a written request
of his landlord for the information. That process is repeated if necessary (such as where there are a chain of sublettings)
until the person in receipt of the request is the superior landlord concerned. The superior landlord must respond to the
request within one month of the date of the auditor's notice2. Where the auditor requires to inspect or copy any other
documents which are in the custody or control of a superior landlord, the immediate landlord must inform the auditor as
soon as possible of the address of the superior landlord. The auditor may then serve notice directly upon the superior
landlord3, following which the procedure set out at HR A[7380.701.9] will apply4.
HR A[7380.701.12]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 82. Note that LRHUDA 1993, s 82 will be amended by the
Commonhold and Leasehold Reform Act 2002, s 157, Sch 10, para 19.
Page 236
2 LRHUDA 1993, s 82(1).
3 LRHUDA 1993, s 82(2).
4 LRHUDA 1993, s 82(3).
HR A[7380.701.13]
Should the landlord fail to comply with the prescribed time limits the court may, on the application of the auditor, make
an order requiring the landlord (or the relevant person) to comply with the request(s) within a specified period. An
application for an order for the production of documents or inspection of premises may be made not less than two and
not more than four months from the date of his notice1. The making of an order is within the discretion of the court,
although an order for production of documents may not be made unless the court is satisfied that the documents
specified are documents the sight of which is reasonably required for the purpose of carrying out the audit2.
HR A[7380.701.14]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 81(4), (6), (7). LRHUDA 1993, s 82(3) applies those provisions,
where relevant, in respect of a notice given to a superior landlord.
2 LRHUDA 1993, s 81(5).
HR A[7380.701.15]
The landlord is forbidden from charging the auditor for the provision of facilities for inspection of documents, although
such costs may be recovered from the tenants as management costs if the service charge provisions of the lease so
allow. The landlord is, however, entitled to make reasonable charges to the auditor for supplying documents and
providing copying facilities1.
HR A[7380.701.16]
1 Leasehold Reform, Housing and Urban Development Act 1993, s 79(5), (6). These subsections will be substituted by the Commonhold
and Leasehold Reform Act 2002, s 157, Sch 10, para 16.
HR A[7380.701.17]
The Commonhold and Leasehold Reform Act 2002, when brought into force, will effect changes to the provisions of
the Leasehold Reform, Housing and Urban Development Act 1993 relating to management audits1. In particular, the
rights exercisable by the auditor will be changed so that the auditor will have the right to require the landlord either (a)
to afford him reasonable facilities for inspecting and copying documents relevant to matters which should be shown in a
statement of account required to be supplied under the new s 21 of the Landlord and Tenant Act 1985 or (b) to take
copies and send them to him or afford him reasonable facilities for collecting them (as he specifies)2. The auditor will
Page 237
also have the power to require the landlord or any relevant person to afford him reasonable facilities for (a) inspecting
or copying any other documents sight of which is reasonably required for the purpose of carrying out the audit or (b) to
take copies and send them or afford him reasonable facilities for collecting them (as the auditor specifies)3. Facilities
for inspection must be provided free of charge, although the landlord may treat costs thereby incurred as part of his
costs of management. A reasonable charge may be made for doing anything else in compliance with the auditor's
request4. Where the landlord is given notice under s 80 imposing on him a requirement relating to any documents which
are held by a superior landlord, he must inform the auditor as soon as may be of that fact and of the name and address of
the superior landlord. The auditor may then give the superior landlord a notice requiring him to comply with the
requirement5. The provisions as to management audits set out by the Leasehold Reform, Housing and Urban
Development Act 1993 will apply to Crown land6.
HR A[7380.701.18]
1 Commonhold and Leasehold Reform Act 2002, s 157, Sch 10, paras 16-19 which are not yet in force.
2 Leasehold Reform, Housing and Urban Development Act 1993, s 79(2) (as substituted by CLRA 2002, Sch 10, para 16). The new s 21
of the Landlord and Tenant Act 1985 will be substituted by CLRA 2002, s 152.
3 LRHUDA 1993, s 79(2A) (as substituted by CLRA 2002, Sch 10, para 16).
4 LRHUDA 1993, s 79(5), (6) (as substituted by CLRA 2002, Sch 10, para 16).
5 LRHUDA 1993, s 82(1),(2) (as substituted by CLRA 2002, Sch 10, para 19).
6 CLRA 2002, s 172.

Page 238
relating to management/(4) Appointment of a manager
(4) Appointment of a manager
HR A[7380.701.19]
Part II of the Landlord and Tenant Act 1987 as amended by the Housing Act 1996 provides for applications by tenants
to the LVT1 for the appointment of a manager2 to carry out such functions in connection with the management3 of
premises4 as the tribunal thinks fit. A tenant who is eligible to apply for an order under Pt II of LTA 1987 is not
permitted to apply to the court to exercise its general jurisdiction to appoint a receiver or manager5. The provisions
apply to all tenants of flats6 save where the interest of the landlord is held by an exempt landlord7 or a resident
landlord8 or the premises in which the flat is situated are included within the functional land9 of any charity10. Nor
does the Act apply to business tenants within the meaning of LTA 1954, Pt II11.
HR A[7380.701.20]
1 In other words, a rent assessment committee constituted in accordance with the Rent Act 1977, Sch 10 (see LTA 1987, s 24A(1)).
2 Landlord and Tenant Act 1987, s 21. In the absence of any specific limitation of the Receiver's powers, the court will construe the
appointment generously: see Sparkle Properties Ltd v Residential Developments Ltd Firstdown Finance Ltd Cavendish Geared II plc [1998]
EGCS 68 [1998] NPC 73. The Receiver is entitled to his fee for letting flats within a block he is managing.
3 Note that the meaning of management in LTA 1987, s 24(11) has been amended by the Commonhold and Leasehold Reform Act 2002,
s 150, Sch 9, para 8, which came into force on 30 September 2003 (see SI 2003/1986), so as to include improvement of premises. This
amendment does not apply to an application made under LTA 1987, s 29 before 30 September 2003.
4 The manager's functions are not confined to the buildings and their curtilages defined in s 21(1). An order appointing a manager to carry
out functions in relation to such premises can extend to other amenity land over which the tenants enjoy rights: see Cawsand Ford
Management Co Ltd v Stafford [2007] EWCA Civ 1187, [2008] 1 WLR 371.
5 See LTA 1987, s 21(6). For an example of the exercise of the general jurisdiction under the Supreme Court Act 1981, s 37(1) see
Daiches v Bluelake Investments [1985] 2 EGLR 67.
6 LTA 1987, s 21(2). Premises to which Pt II applies must contain at least two flats.
7 For a list of exempt landlords see LTA 1987, s 58(1). In Wales the enhanced jurisdiction of the LVT came into force on 31 March 2004
and not 30 September 2003: see WSI 2004/669 and for LVT procedure in Wales see the Leasehold Valuation Tribunals (Procedure) (Wales)
Regulations 2004 (WSI 2004/681).
8 A resident landlord is one who has occupied one of the flats contained in the premises (not being a purpose-built block of flats) as his
only or principal residence for a period of at least twelve months (see LTA 1987, s 58(2)). Note that the Commonhold and Leasehold
Reform Act 2002, s 161, which came into force on 26 July 2002 (SI 2002/1912) in relation to applications made on or after that date, makes
amendments restricting the resident landlord exemption. The resident landlord exemption will not apply if at least one half of the flats
contained in the premises are held on long leases which are not tenancies to which Part II of the Landlord and Tenant Act 1954 applies. In
Wales the enhanced jurisdiction of the LVT came into force on 31 March 2004 and for fees in Wales see the Leasehold Valuation Tribunals
Page 239
(Fees) (Wales) Regulations 2004 (WSI 2004/683), the Leasehold Valuation Tribunals (Fees) (Revocation and Saving) (Wales) Order 2004
(WSI 2004/680).
9 In other words, land occupied by a charity or its trustees and wholly or mainly for charitable purposes (see LTA 1987, s 60(1)).
10 LTA 1987, s 21(3).
11 LTA 1987, s 21(7). It should be noted that, where premises are occupied for mixed business and residential purposes, the tenancy is
likely to be one to which the LTA 1954, Pt II applies: see Cheryl Investments v Saldanha [1978] 1 WLR 1329.
HR A[7380.701.21]
The 1996 amendments1 removed from the ground of application at s 24(2)(a) the requirement that the landlord's breach
of his obligations to the tenants should be likely to continue. Further applications may now be made on two additional
grounds. First, an application may be made where the landlord is making or proposing to make unreasonable service
charges, including service charges made before 24 September 19962. Second, an application may be made where the
landlord has failed to comply with any relevant provision of a code of practice approved by the Secretary of State under
s 87 of the Leasehold Reform, Housing and Urban Development Act 19933. The tribunal also has a broad jurisdiction to
appoint a manager if satisfied that 'other circumstances' exist which make it just and convenient for an order to be
made4. The Commonhold and Leasehold Reform Act 2002 inserts a further two grounds5 for the appointment of a
manager, namely (1) that unreasonable variable administration charges6 have been made, or are proposed or likely to be
made, and it is just and convenient to make the order in all the circumstances of the case; and (2) that there has been a
failure to comply with a duty imposed by or by virtue of ss 42 and 42A of the Landlord and Tenant Act 19877 and it is
just and convenient to make the order in all the circumstances.
HR A[7380.701.22]
1 By amendments made by HA 1996, ss 85(1)-(5), 227, Sch 19, Pt III.
2 LTA 1987, s 24(2)(ab). 24 September 1996 was the date the 1996 amendments came into force (see HA 1996, s 232(2)). The criteria to
be applied in deciding whether a service charge is unreasonable are set out in LTA 1987, s 24(2A). The LVT has no jurisdiction to consider
the recoverability of service charges under the terms of the lease: see Gilje v Charlgrove Securities Ltd [2002] 1 EGLR 41, [2002] L & TR
33.
3 LTA 1987, s 24(2)(ac).
4 LTA 1987, s 24(2)(b).
5 LTA 1987, ss 24(2)(aba) and (abb) (as will be inserted by CLRA 2002, s 158, Sch 11, para 8 (which is now in force by virtue of SI
2003/1986) and s 157, Sch 10, para 14 (which is not yet in force)).
6 For meaning of 'administration charge' see CLRA 2002, Sch 11, para 1. Note that this new ground is now operational as CLRA 2002,
Sch 11, para 8 was brought into force on 30 September 2003 but this amendment does not apply to any application made under LTA 1987, s
24 before 30 September 2003: see SI 2003/1986.
7 For duties under LTA 1987, s 42 and 42A see HR A[7380.651] - HR A[7380.654]. Note that this second new ground under LTA 1987,
s 24(2) (abb) is not yet in force.
Page 240
HR A[7380.701.23]
Before an application may be made for the appointment of a manager1 the tenant must serve on the landlord2 a notice
containing specified information, in particular the matters forming the basis of the application3. The purpose of the
notice is to give the landlord the opportunity to remedy his defaults. Accordingly, if the matters to be relied upon are
capable of remedy4, the notice must specify a reasonable period within which the landlord may remedy those matters. If
the landlord fails to comply with the tenants' notice within the period specified therein, or if the matters complained of
are incapable of remedy, the tenant may then apply to the leasehold valuation tribunal for an order5. The contents of an
application for the appointment of a manager are set out in the Leasehold Valuation Tribunals (Procedure) (England)
Regulations 20036. Regulations also provide for fees to be paid by applicants to the LVT7..
HR A[7380.701.24]
1 There may be circumstances where the LVT will be willing to appoint a manager without professional qualifications: see Howard v
Midrome Ltd [1991] 1 EGLR 58.
2 Note that the Commonhold and Leasehold Reform Act 2002, s 160(2), which came into force on 26 July 2002, makes amendments to
LTA 1987, s 22 requiring the tenant to also serve a notice on any other person by whom obligations relating to the management of the
premises or any of part of them are owed to the tenant under his tenancy. Consequential amendments will also be made to ss 23 and 24: see
CLRA 2002, s 160(3), (4). None of these amendments have any effect in relation to an application made under Part II of the LTA 1987
before 26 July 2002.
3 LTA 1987, s 22(1), (2). The preliminary notice may be served by post (see LTA 1987, s 54(1)). Where there is a mortgagee of the
premises the landlord must serve a copy of the preliminary notice on the mortgagee as soon as reasonably practicable (see LTA 1987, s
22(4)).
4 For the distinction between remediable and irremediable breaches reference should be made to the considerable case law on notices
served pursuant to LPA 1925, s 146 (eg Savva v Houssain (1996) 73 P & CR 150).
5 LTA 1987, s 23(1).
6 SI 2003/2099, reg 3. In particular, an application under LTA 1987, s 24 must contain a copy of the notice served under LTA 1987, s 22
(unless the application is made under 22(3)). Where an application is made under s 24(9), a copy of the management order must be included
in the application. In relation to applications made before 30 September 2003, see the former procedure as set out in Pt II of Sch 2 to the
Leasehold Valuation Tribunals (Service Charges, Insurance or Appointment of Managers Applications) Order 1997, SI 1997/1853 and the
Rent Assessment Committee (England and Wales) (Leasehold Valuation Tribunal) Regulations 1993 (SI 1993/2408 as amended), regs 4A
and 4F, both of which have been repealed but not in relation to applications made or transferred to the LVT before 30 September 2003.
7 In relation to applications made or transferred to the LVT before 30 September 2003 see Leasehold Valuation Tribunals (Fees) Order
1997, SI 1997/1852 which has been repealed in relation to applications made on or after 30 September 2003: see SI 2003/2270. For fees
applicable on or after 30 September 2003 see Leasehold Valuation Tribunals (Fees) (England) Regulations 2003 (SI 2003/2098).
HR A[7380.701.25]
The tribunal may dispense with the requirement to serve a preliminary notice where it is satisfied that it would not be
reasonably practicable to serve such a notice on the landlord. In such circumstances, the tribunal has the power to direct
any other steps (such as the service of alternative forms of notice) which it thinks fit1. Furthermore, the tribunal has the
Page 241
power to appoint a manager, even in cases where the period specified in the preliminary notice is found not to have been
a reasonable period or where some other requirement of LTA 1987, s 22(2) has not been complied with2.
HR A[7380.701.26]
1 LTA 1987, s 22(3).
2 LTA 1987, s 24(7). For an example of the exercise of this power, see Howard v Midrome Ltd [1991] 1 EGLR 58.
HR A[7380.701.27]
Any order made by the LVT pursuant to an application may be made in respect of premises more or less extensive than
the premises specified in the application1. The order may be final or interlocutory2, suspended upon terms, or otherwise
granted subject to such terms and conditions as the tribunal thinks fit3. The tribunal may also provide within the order
for the rights and liabilities of the manager appointed4, including entitlement to prosecute claims in respect of causes of
action accruing before or after the date of his appointment5, and for his remuneration6. Where an order makes provision
with respect to matters relating to the exercise by the manager of his functions thereunder, the tribunal may entertain
subsequent applications by the manager for the purpose of giving further directions in those matters7. An order in
relation to unregistered land may be registered in the register of Writs and Orders affecting land under the Land Charges
Act 1972. An order in relation to registered land may be registered by restriction only8. An order may be varied or
discharged by the LVT on the application of any person interested9, although amendments made by the Housing Act
1996 now require such a variation or discharge to be granted only if the tribunal is satisfied that the matters leading to
the making of the order will not recur and that it is just and convenient to do so10. The costs of proceedings before the
LVT under the LTA 1987, Pt II are only recoverable in very limited circumstances and no more than £500 may be
awarded11. A right of appeal lies from a decision of the LVT to the Lands Tribunal with the leave of either the LVT or
the Lands Tribunal12.
HR A[7380.701.28]
1 LTA 1987, s 24(3). Further servient property over which the tenants merely enjoy easements can itself properly be included as part of
the subject of a management order as appropriate: see Cawsand Fort Management Co Ltd v Stafford [2007] EWCA Civ 1187, [2008] 1
WLR 371.
2 LTA 1987, s 24(5)(d).
3 LTA 1987, s 24(6).
4 LTA 1987, s 24(5)(a).
5 LTA 1987, s 24(5)(b). Where the order appointing the manager is silent in relation to the power to bring an action for possession, that
power is retained by the landlord: see Boissevain v Lindhagen (27 July 2000, unreported), CA.
6 LTA 1987, s 24(5)(c). In Sparkle Properties Ltd v Residential Developments Ltd Firstdown Finance Ltd Cavendish Geared II plc [1998]
EGCS 68, [1998] NPC 73 it was stated that the court has wider powers than those conferred by LTA 1987, s 24 when considering
Page 242
remunerations: see CPR Part 69 relating to receivers which contains similar provisions to those in RSC Ord 30 (which were preserved in Sch
1 to the CPR). Ian Hunter also rejected the view that only the leasehold valuation tribunal has power to approve lettings of property under
management and held that the manager had power to let, such power being implicit in his being appointed to receive rents and other monies
payable by the tenants and to remedy breaches of repairing and other covenants. The decision gives very wide effect to the powers of
managers (and receivers) appointed under the provisions of the LTA 1987.
7 LTA 1987, s 24(4).
8 See LTA 1987, s 24(8); LCA 1972, s 6; LRA 2002, s 87 and Land Registration Rules 2003, Pt 8.
9 LTA 1987, s 24(9). Rules governing the contents of such an application are to be found in SI 2003/2099 in relation to applications made
on or after 30 September 2003. For Wales the relevant date is 31 March 2004 and not 30 September 2003: see WSI 2004/669 and WSI
2004/681.
10 LTA 1987, s 24(9A) as inserted by HA 1996, s 85(1), (6). The fact that premises become held by an exempt or resident landlord or
become part of the functional land of a charity is not a ground for the discharge or variation of an order (see LTA 1987, s 24(10)). Where an
application for variation of an order is made under s 24(9), the court is not required to consider whether one of the circumstances in sub-s
24(2) of the Act had been or remains satisfied as the test laid down in sub-s 24(9) is quite distinct and under that subsection the court is only
required to consider whether the variation would be 'just and convenient': see Orchard Road Residents' Association v St Anthony's Homes
Ltd [2003] EWCA Civ 1049 (Admin), [2003] 33 EG 64 (CA refusing permission to appeal).
11 CLRA 2002, Sch 12, para 11 LTA 1987. Similar provisions apply to the costs of any appeal: see CLRA 2002, s 175(6),(7). Note that in
relation to applications made before 30 September 2003 (or 31 March 2004 in Wales), the LVT had no power to award any costs: LTA 1987,
ss 24A and 24B, were repealed by the Commonhold and Leasehold Reform Act 2002, s 180, Sch 14). See also CLRA 2002, ss 173-176.
12 CLRA 2002, s 175.
HR A[7380.701.29]
In Maunder Taylor v Blaquiere1 the Court of Appeal clarified the status of a manager appointed under LTA 1987. At
first instance2, it was held that the manager did not owe an equivalent duty of care to that owed by the landlord and that
the effect of the manager's appointment did not create any privity of estate of contract between the manager and the
tenants3. In the Court of Appeal the tenant contended that he was nonetheless entitled to set off against the manager's
claim for unpaid service charges a claim for damages resulting from the landlord's breach of covenant. The Court of
Appeal rejected the tenant's claim to set off such sums on the ground that there was no mutuality between the claims.
The manager, who is a court appointed expert, acts in a capacity independent of the landlord even where his duties and
liabilities set out in the order authorising his appointment are defined by reference to the lease.
HR A[7380.701.30]
1 Maunder Taylor v Blaquiere [2002] EWCA Civ 1633, [2003] 1 WLR 379.
2 [2002] 2 EGLR 35.
3 This part of the decision was not appealed. At first instance both parties had agreed that LTA 1987, s 24(5) relates not to rights and
liabilities contained in the lease, but those contained in supply contracts with third parties.
Page 243
relating to management/(5) Acquisition orders
(5) Acquisition orders
HR A[7380.702]
The Landlord and Tenant Act 1987, Pt III (as amended by the Housing Act 1988, the Leasehold Reform, Housing and
Urban Development Act 1983 and the Housing Act 1996) enables tenants of flats, in certain specified circumstances, to
apply to the court for an acquisition order enabling a person nominated by them to acquire compulsorily their landlord's
interest in the premises of which their flats form part. The grounds for such an application (which are considered in
more detail below) are either that the landlord is in breach of his obligations in relation to the repair, maintenance,
insurance or management of the premises1 or that for a period of at least two years prior to the application an order
under the Landlord and Tenant Act 1987, Pt II (ie for the appointment of a manager of the premises2) has been in
place3. A further condition is that the court must consider it appropriate to make the order in the circumstances of the
case4.
HR A[7380.703]
2 See HR A[7380.701.19] - HR A[7380.701.30] above.
3 LTA 1987, s 29(3).
4 LTA 1987, s 29(1)(c).
HR A[7380.704]
The provisions of Pt III of the 1987 Act apply to premises which consist of the whole or part of a building and which
contain two or more flats (not being less than two-thirds of the total number of flats contained in the premises) which
are held by tenants who are qualifying tenants1. The provisions do not apply in circumstances where more than 50% of
the internal floor area of the premises (disregarding any common parts2) is occupied or intended to be occupied for
non-residential purposes3. The provisions are also excluded where the landlord is either an exempt4 or resident5
landlord or where the premises are included within the functional land of a charity6.
HR A[7380.705]
1 LTA 1987, s 25(2). It appears that Pt III may apply to premises consisting of a mixture of flats and houses (see Kay-Green v Twinsectra
Ltd [1997] 1 EGLR 219, a case concerned with the similar provisions in LTA 1987, s 1 (2)).
Page 244
2 In other words, the structure, exterior and any common facilities (see LTA 1987, s 60(1)).
3 LTA 1987, s 25(4).
4 For a list of exempt landlords, see LTA 1987, s 58(1).
5 A resident landlord is one who has occupied one of the flats contained in the premises (not being a purpose-built block of flats) as his
only or principal residence for a period of at least twelve months (see LTA 1987, s 58(2)).
6 In other words, land occupied by a charity or its trustees and wholly or mainly for charitable purposes (see LTA 1987, s 60(1)).
HR A[7380.706]
Qualifying tenants, for the purposes of Pt III, are tenants of flats under long leases (ie leases which have either been
granted for a term certain of more than 21 years or which were granted under the right to buy legislation contained in
the Housing Act 1985, Pt V)1, provided that the leases are not ones to which the Landlord and Tenant Act 1954, Pt II
applies2. A tenant will not be regarded as a qualifying tenant, however, where he is also the tenant of at least two other
flats in the premises under the terms of one or more long leases3. Furthermore, a tenant whose landlord is a qualifying
tenant will not be regarded as a qualifying tenant (except in the case of joint tenants there will therefore be only one
qualifying tenant per flat)4.
HR A[7380.707]
1 LTA 1987, ss 26(1) and 59(3). The term 'long lease' also includes some leases containing a covenant or obligation for perpetual renewal
(see LTA 1987, s 59(3)(b)).
2 In other words, business tenancies: it should be noted that where premises are occupied for mixed business and residential purposes the
tenancy is likely to be one to which the Landlord and Tenant Act 1954, Pt II applies (see Cheryl Investments v Saldanha [1978] 1 WLR
1329).
3 Unless the 'other' flats are held under business tenancies (see LTA 1987, s 26 (2)).
4 LTA 1987, s 26(3).
HR A[7380.708]
Before qualifying tenants can make an application for an acquisition order they must first serve a preliminary notice on
their landlord1. Such a notice must be served by qualifying tenants of at least two-thirds of the flats in the premises
which are occupied by qualifying tenants2. This should not be confused with the requirement that qualifying tenants
must occupy at least two-thirds of the flats contained in premises to which Pt III applies. Thus a building to which Pt III
applies may contain ten flats but only seven qualifying tenants. In those circumstances the preliminary notice would
have to be served by at least five of the qualifying tenants.
HR A[7380.709]
Page 245
1 See LTA 1987, s 54 for provisions as to service of notices. Proceedings are governed by Pt 56 of the CPR and the Practice Direction
supplementing Pt 56, particularly paras 2.1-2.6 of the Practice Direction (which provide, amongst other matters, that 'only exceptional
circumstances' will justify starting a claim in the High Court) and paras 8.1-8.6 of the Practice Direction (which make specific provision in
relation to applications for an acquisition order). Rules for the service of documents are set out in paras 10.1 and 10.2 of the Practice
Direction supplementing Pt 56.
2 LTA 1987, s 27 (1),(4).
HR A[7380.710]
The preliminary notice must:
(a) specify the names of the tenants serving the notice, the addresses of their flats and an address at which notices can
be served on them1;
(b) state that the tenants intend to apply to the court for an acquisition order but they will not do so until a reasonable
period (which must be specified in the notice) for remedying any matters complained of which are capable of remedy by
the landlord has expired2; and
(c) specify the grounds on which the court would be asked to make an acquisition order and the matters relied on to
establish those grounds3.
HR A[7380.711]
1 LTA 1987, ss 27(2)(a) and 54(2): failure to comply with this requirement will render the notice defective (see Elnaschie v Pitt Place
(Epsom) Ltd (1998) 78 P & CR 44) but note that the court has the power under LTA 1987, s 29(6) to make an acquisition order in spite of
technical defects in the preliminary notice.
2 LTA 1987, s 27(2)(a) and (d). For the distinction between remediable and irremediable breaches reference should be made to the
considerable case law on notices served pursuant to the Law of Property Act 1925, s 146 (eg Savva v Houssain (1996) 73 P & CR 150).
3 LTA 1987, s 27 (2)(c).
HR A[7380.712]
The court may dispense with the requirement to serve a preliminary notice where it is satisfied that it would not be
reasonably practicable to serve such a notice on the landlord. In such circumstances the court has the power to direct
any other steps (such as the service of alternative forms of notice) which it thinks fit1. Furthermore, the court has the
power to make an acquisition order even in cases where the period specified in the preliminary notice is found not to
have been a reasonable period or where some other requirement of LTA 1987, s 27(2) has not been complied with2.
HR A[7380.713]
Page 246
1 LTA 1987, s 27 (3).
2 LTA 1987, s 29 (6).
HR A[7380.714]
An application for an acquisition order must be made to the court1 by at least two-thirds of the qualifying tenants living
in the premises to which the application relates2. The application cannot be made until the reasonable period specified
in the preliminary notice has expired or (where a preliminary notice has been dispensed with) any other steps ordered by
the court have been performed3. The application must be brought by way of a Part 8 claim form4. The matters to be
contained in any application are set out in para 8.2 of the Practice Direction supplementing CPR Pt 56. The claim form
must identify the property to which the claim relates and the claimants giving details showing that s 25 of the LTA 1987
applies and that the claimants constitute a two-thirds majority of the qualifying tenants residing in the property. The
claim form must also give the names and addresses of the claimants, the landlord, the person nominated by the
claimants to acquire the landlord's interest and any other persons likely to be affected by the application (eg other
tenants, mortgagees, a superior landlord or a tenants' association). Finally, the claim form must state the grounds of the
claim.
HR A[7380.715]
1 In other words, the High Court or a county court (see the definition of court in LTA 1987, s 60(1)). Paragraph 2.2 of the Practice
Direction supplementing CPR 56 provides that 'only exceptional circumstances' will justify starting a claim in the High Court and any claim
form issued in the High Court must be accompanied by a certificate stating the reasons for bringing the claim in the High Court (CPR
56.2(2)).
2 LTA 1987, s 28 (1).
3 LTA 1987, s 28 (2).
4 See para 2.2 of the Practice Direction supplementing CPR 56.
HR A[7380.716]
Any preliminary notice which has been served must be attached to the application. The appropriate defendants to the
application are the landlord and the person nominated to acquire the landlord's interest (unless the person nominated is
one of the applicants). The claim form must also be served on any other persons likely to be affected by the application
together with a notice informing them of their right to apply to be made a party to the proceedings1.
HR A[7380.717]
1 See paras 8.3-8.5 of the Practice Direction supplementing CPR 56.

Page 247
HR A[7380.718]
An application may be registered under the Land Charges Act 1972, s 5 or, in the case of registered land, as a pending
land action by an agreed or unilateral notice under the Land Registration Act 20021.
HR A[7380.719]
1 LTA 1987, s 28(5).
HR A[7380.720]
Where the court is satisfied that the premises were at the date of service of the preliminary notice (if any) and have been
continuously1 from the date the application was issued to the date of the hearing premises to which Pt III of the Act
applies, the court may make an acquisition order provided one of the following conditions is satisfied2:
(a) either the landlord is in breach of obligations owed to the tenants relating to the repair, maintenance, insurance or
management of the premises or any part of them and that the circumstances by virtue of which he is in breach are likely
to continue3; or
(b) throughout the period of two years prior to the application being made there was in force an order for the
appointment of a manager under Pt II of the Act which was made by reason of an act or omission on the part of a
landlord4 (see HR A[7380.701.19] above ).
In addition the court can only grant an acquisition order where it considers it appropriate to make the order in the
circumstances of the case5.
HR A[7380.721]
1 Note that premises will continue to be treated as premises to which LTA 1987, Pt III applies where, after the application for an
acquisition order is made, the interest of the landlord becomes held by an exempt or resident landlord or becomes included within the
functional land of a charity (s 29(7)): for the meaning of these terms see HR A[7380.704] and HR A[7380.705] above.
2 LTA 1987, s 29(1).
3 LTA 1987, s 29(2). Note that the Commonhold and Leasehold Reform Act 2002, which was brought into force on 30 September 2003
(SI 2003/1986), amends this sub-paragraph so as to include improvements within the definition of management: CLRA 2002, s 150, Sch 9,
para 9. This amendment only applies to applications made under s 29 of the LTA 1987 on or after 30 September 2003. In relation to Wales
the amendment only applies to applications made on or after 31 March 2004: see WSI 2004/669.
4 LTA 1987, s 29(3). Note that the Commonhold and Leasehold Reform Act 2002 inserts the words 'which was made by reason of an act
or omission on the part of the landlord' at the end of sub-para (3), thereby restricting the circumstances in which an acquisition order may be
made: see CLRA 2002, s 160(5) which came into force on 26 July 2002.
5 LTA 1987, s 29(1)(c): for a case where the court did consider it appropriate to make an acquisition order see Gray v Standard Home &
Counties Properties Ltd [1994] 1 EGLR 119.
Page 248
HR A[7380.722]
An acquisition order may include any yard, garden or appurtenance belonging or usually enjoyed with the premises to
which the application relates1. Conversely, the order may specifically exclude any part of the premises to which the
application relates2. Where the application relates to part only of more extensive premises an acquisition order will not
be made where the landlord's interest is not reasonably capable of being severed3.
HR A[7380.723]
1 LTA 1987, s 29 (4)(a).
2 LTA 1987, s 29 (4)(b).
3 LTA 1987, s 29(5).
HR A[7380.724]
An acquisition order must provide for the person nominated by the applicants to acquire the landlord's interest (referred
to as 'the nominated person') to be entitled to acquire that interest on such terms as may be either agreed between the
landlord and the applicants or, where no such agreement is reached, by a rent assessment committee sitting as a
Leasehold Valuation Tribunal1. Furthermore, an acquisition order may either be granted conditionally or be suspended
on terms fixed by the court2. Where a landlord is prevented by some covenant, condition or obligation from disposing
of his interest in the premises without the consent of some other person (eg a superior landlord) he is obliged to use his
best endeavours to obtain that consent (including instituting proceedings for a declaration that the other person is
unlawfully withholding his consent where such proceedings appear to be appropriate). Where, despite the landlord's
best endeavours, it is not possible to obtain the other person's consent or a declaration that consent has been unlawfully
withheld, the acquisition order ceases to have effect3. An acquisition order in relation to unregistered land may be
registered in the register of units and orders affecting land under the Land Charges Act 1972. An acquisition order in
relation to registered land may be registered by an agreed or unilateral notice4.
HR A[7380.725]
1 LTA 1987, ss 30(1) and 52A.
2 LTA 1987, s 30(2).
3 LTA 1987, s 30(5).
4 See LTA 1987, s 30(6); Land Charges Act 1972; s 6; LRA 2002, s 34.
HR A[7380.726]
Page 249
The Leasehold Valuation Tribunal1 has jurisdiction to determine the terms on which the nominated person is to acquire
the landlord's interest where those terms have not been agreed between the landlord and either the qualifying tenants or
the nominated person2. Such terms are to be determined in accordance with what the Tribunal considers to be fair and
reasonable3. Where the Tribunal is required to determine the consideration payable for the landlord's interest it is to
determine 'an amount equal to the amount which, in their (sic) opinion, that interest might be expected to realise if sold
on the open market[4] by a willing seller... and on the assumption that none of the tenants of the landlord of any
premises comprised in those premises was buying or seeking to buy that interest'5. The effect of this formula is to
eliminate any element of 'marriage value' from the calculation of the consideration payable. The interests of the
qualifying tenants in favour of whom the acquisition order was made are represented in any application to the Tribunal
for the determination of the terms of the acquisition by the nominated person. None of the qualifying tenants (except the
nominated person where he is one of the qualifying tenants) should be joined as party to the proceedings6.
HR A[7380.727]
1 In other words, a rent assessment committee constituted in accordance with the Rent Act 1977, Sch 10 (see LTA 1987, ss 30. 31). For
procedure see Leasehold Valuation Tribunals (Procedure) (England) Regulations 2003 (SI 2003/2099). For procedure in Wales see WSI
2004/681.
2 LTA 1987, s 31(1): the failure to refer to the possibility of agreement between the landlord and the nominated person in LTA 1987, s
30(1)(a) appears to be a drafting error; the LVT will not have jurisdiction to reconsider matters decided in the proceedings in which the
acquisition order was obtained (cf Saga Properties Ltd v Palmeira Square Nos 2-6 Ltd [1995] 1 EGLR 1999).
3 LTA 1987, s 31(1).
4 See paras HR A[3666] and HR A[3681] for cases on the meaning of the words 'open market' in the context of rent reviews.
5 LTA 1987, s 31(2): see 139 Finborough Road Management Ltd v Mansoor [1990] 2 EGLR 225 for an example of one LVT's approach
to this formula. The LVT also expressed the opinion that the appropriate valuation date was the date of the hearing rather than the date of the
acquisition order, although this made no difference to the calculation in that case. Such an approach has the unfortunate effect, in the context
of a rising market, of giving the landlord an incentive to delay any hearing before the LVT.
6 LTA 1987, s 31(4).
HR A[7380.728]
In general where premises are acquired pursuant to an acquisition order the effect is to discharge the premises from any
charge or mortgage1. The general rule will not apply, however, where there is an agreement to the contrary between the
landlord and either the nominated person or the qualifying tenants or where the court is satisfied that, in the exceptional
circumstances of the case, it is fair and reasonable that the charge or mortgage should not be discharged2.
HR A[7380.729]
1 LTA 1987, s 32(1): for detailed provisions as to the discharge of charges and mortgages see LTA 1987, Pt II, Sch 1.
2 LTA 1987, s 32(2).

Page 250
HR A[7380.730]
Where the landlord cannot be found or his identity cannot be ascertained the court (as opposed to the Leasehold
Valuation Tribunal) shall determine the terms on which the premises are to be acquired1. Terms as to payment must
require the payment into court of an amount certified by a surveyor appointed by the President of the Lands Tribunal as
the amount which would have been payable to the landlord using the formula in s 31(2) of the 1987 Act2 plus any
amounts or estimated amounts due to the landlord from any tenants under leases of premises comprised in the premises
to which the order relates3.
HR A[7380.731]
1 LTA 1987, s 33(1).
2 In other words, the open market value excluding any marriage value, see HR A[7380.726] above.
3 LTA 1987, s 33(2).
HR A[7380.732]
Where the nominated person fails, within a reasonable time, to effect an acquisition pursuant to an acquisition order or
the number of qualifying tenants wishing to proceed with the purchase falls below two-thirds of the total number of
qualifying tenants living in the premises or the premises cease to be premises to which LTA 1987, Pt III applies1, the
landlord may apply to the court to discharge the acquisition order2. The nominated person or the qualifying tenants may
serve a notice on the landlord indicating that they no longer intend to proceed with the acquisition3. The nominated
person is obliged to serve such a notice where the number of qualifying tenants wishing to proceed with the purchase
falls below two-thirds of the total number of qualifying tenants living in the premises or the premises cease to be
premises to which Pt III of the 1987 Act applies4. Service of such a notice will result in any acquisition order which has
been made ceasing to have effect5. The landlord will also be entitled to recover any costs incurred by him in relation to
the proposed acquisition (other than the costs of proceedings before the LVT6) from the qualifying tenants unless there
are proceedings pending before the court or the Lands Tribunal or an acquisition order has been discharged by the court
in which case the court or Lands Tribunal will determine the level of costs which may be recovered7. In the latter case
the qualifying tenants and the nominated person will be jointly liable for the landlord's costs.
HR A[7380.733]
1 Note that premises will continue to be treated as premises to which Pt III of the 1987 Act applies where, after the application for an
acquisition order is made, the interest of the landlord becomes held by an exempt or resident landlord or becomes included within the
functional land of a charity (see LTA 1987, s 29(7)): for the meaning of these terms see HR A[7380.704] and HR A[7380.705] above.
2 LTA 1987, s 34(1): such an order cannot be made once the landlord's interest has been acquired pursuant to the acquisition order (LTA
1987, s 34(8)).
3 The notice may be served by post and must specify the names and addresses of the qualifying tenants (LTA 1987, s 54(1) and (2)); such
Page 251
a notice may be served at any time until there is binding contract for the purchase of the premises. It appears that a tenant cannot contract out
of his right to withdraw from the acquisition (cf Mainwaring v Henry Smith's Charity Trustees (No 2) (1996) 29 HLR 572, a decision in
relation to LTA 1987, Pt I).
4 LTA 1987, s 34(3).
5 LTA 1987, s 34(2).
6 LTA 1987, s 34(5).
7 LTA 1987, s 34(4).

Page 252
relating to management/(6) Variation of leases
(6) Variation of leases
HR A[7380.734]
The Landlord and Tenant Act 1987, Pt IV (as amended by the Housing Act 1988 and the Leasehold Reform, Housing
and Urban Development Act 1993) bestows on both landlords and tenants of long leases1 of flats the right to apply to
the Leasehold Valuation Tribunal2 for an order varying the lease. The grounds3 for such an application are that the
lease in question fails to make satisfactory provision4 for the following matters:
(a) repair and maintenance;
(b) building insurance5;
(c) repair and maintenance of installations (such as heating, lighting, the supply of water and refuse disposal)
reasonably necessary to ensure a reasonable standard of accommodation6 for the occupiers;
(d) the provision and maintenance of services which are reasonably necessary to ensure a reasonable standard of
accommodation for the occupiers;
(e) the recovery of expenditure incurred by one party to the lease for the benefit of another party;
(f) the computation of a service charge7; and
(g) for an amount to be payable (by way of interest or otherwise) in respect of a failure to pay the service charges by
the due date.
HR A[7380.735]
1 In other words, leases which have either been granted for a term certain of more than 21 years or which were granted under the right to
buy legislation contained in the Housing Act 1985, Pt V. Certain leases containing covenants for perpetual renewal are also included in the
definition (see LTA 1987, s 59(3)): LTA 1987, Pt IV will not apply, however, to leases where the demised premises comprise three or more
flats in the same building or to business tenancies within the meaning of the Landlord and Tenant Act 1954 (see LTA, s 35(6)).
2 Note that the Commonhold and Leasehold Reform Act 2002, s 163, which came into force on 30 September 2003, transfers the court's
jurisdiction to vary the terms of a lease under Pt IV of the Landlord and Tenant Act 1987 to the Leasehold Valuation Tribunal and various
consequential amendments are made as a result. For LVT procedure see Leasehold Reform Tribunal (Procedure)(England) Regulations 2003
(SI 2003/2099) (as amended with effect from 28 February 2005 by SI 2004/3098). In Wales the transfer of jurisdiction to the LVT only
applies in respect of applications made on or after 31 March 2004: see WSI 2004/699 and for procedure in Wales see WSI 2004/681.
3 Note that the Commonhold and Leasehold Reform Act 2002, s 162 amends the grounds set out in s 35 of the Landlord and Tenant Act
1987. In particular, the Secretary of State has power to introduce new matters in relation to which the lease may fail to make satisfactory
provision by regulations: see LTA 1987, s 35(2)(g) (as inserted by CLRA 2002, s 162 (3)). The newly inserted s 35(3A) provides that the
factors for determining whether the lease makes satisfactory provision in relation to service charges include whether it makes provision for
Page 253
an amount to be payable (by way of interest or otherwise) in respect of a failure to pay the service charges by the due date: LTA 1987, s
35(3A) (as amended by CLRA 2002, s 162(4)).
4 Whether the lease fails to make satisfactory provision is a question for the tribunal to judge in all the circumstances. A lease does not fail
to make satisfactory provision simply because it could have been better or more explicitly drafted. It would normally be wrong to base a
decision on the expression of willingness on the part of the landlord or tenant to act in a particular way since the person in question could
change his attitude or be replaced as landlord or tenant by a person differently disposed: see Gianfrancesco v Haughton (unreported, 6
March 2008), LT.
5 Note that LTA 1987, s 38(7) limits the LVT's power to vary terms dealing with the specification of insurers. LTA 1987, s 35(2)(b) (as
amended by CLRA 2002, s 162(2)) will read 'the insurance of the building containing the flat or of any such land or building as is mentioned
in paragraph (a)(iii)'.
6 Factors to be considered in relation to determining a 'reasonable standard of accommodation' include the safety and security of the flat
and its occupiers and the condition of any common parts (see LTA 1987, s 35(3)). The 'common parts' include the structure, exterior and any
common facilities (see LTA 1987, s 60(1)).
7 A lease fails to make satisfactory provision for the computation of a service charge where the aggregate of the specified proportions of
the landlord's expenditure to be paid by the tenants of premises either exceeds or is less than the whole of that expenditure (LTA 1987, s
35(4)).
HR A[7380.736]
The Commonhold and Leasehold Reform Act 2002 transferred the court's previous jurisdiction to entertain an
application for a variation of a lease under Pt IV of the Landlord and Tenant Act 1987 to the Leasehold Valuation
Tribunal and therefore an application made on or after 30 September 2003 (or 31 March 2004 in the case of Wales)
must be brought in the Tribunal1. An application must contain a copy of the lease and include the following particulars,
namely the names and addresses of the applicant, respondent and any landlord or tenant of the relevant premises, the
address of the relevant premises and a draft of the variation sought2. In addition, the names and addresses of any person
served with a notice in accordance with reg 4. The application must contain a statement of truth.
HR A[7380.737]
1 CLRA 2002, s 163.
2 SI 2003/2099, reg 3.
HR A[7380.738]
The applicant is required to give notice of an application to the respondent and to any person who the applicant knows,
or has reason to believe, is likely to be affected by any variation specified in the application. On receipt of the
application the respondent must give notice of the application to any person not already notified who the respondent
knows, or has reason to believe, is likely to be affected by any variation specified in the application1.
HR A[7380.739]
Page 254
1 SI 2003/2099, reg 4.
HR A[7380.740]
Where an application for an order varying the terms of a lease is made pursuant to s 35 of the Landlord and Tenant Act
1987 any of the parties to the lease may make a further application to vary the terms of other specified leases held by the
same landlord on the grounds that the other leases fail to make satisfactory provision in relation to the matters specified
in the original application and that it is in the interest of the person making the application or of the parties to the
specified leases that the leases be varied1. The specified leases need not relate to premises in the same building as the
premises demised under the lease to which the original application related, nor do the leases need to be in identical
terms to that lease2. Such an application should also be made to the Leasehold Valuation Tribunal.
HR A[7380.741]
1 LTA 1987, s 36(3).
2 LTA 1987, s 36(2)(b).
HR A[7380.742]
An application may be made for the variation of the terms of two or more long leases held by a common landlord in
circumstances where the object to be achieved by the variation cannot be satisfactorily achieved unless all the leases are
varied to the same effect1. Such an application can only be made (in the case of applications relating to between two
and eight leases) where all, or all but one of the parties to the leases, consent to the application. In the case of
applications relating to more than eight leases the application can only be made with the consent of at least 75% of the
parties to the leases and only provided that no more than 10% of the parties to the leases object to the application2. The
landlord constitutes, for these purposes, one of the parties concerned3.
HR A[7380.743]
1 LTA 1987, s 37.
2 LTA 1987, s 37(5).
3 LTA 1987, s 37(6)(b).
HR A[7380.744]
Where the Leasehold Valuation Tribunal is satisfied that the grounds of any application under ss 35-37 of the Landlord
and Tenant Act 1987 are made out then it may make an order varying the terms of some or all of the specified leases
either in the manner set out in the application or (in the case of applications under ss 35 and 36) in such manner as the
Tribunal thinks fit1. The Tribunal will refuse to make an order where it considers that any person will be substantially
Page 255
prejudiced by such an order (and that any award under s 38(10)2 would not provide adequate compensation to that
person) or where it considers for any other reason that it would not be reasonable for the variation to be effected3.
HR A[7380.745]
1 LTA 1987, s 38(1)-(5): it appears that, in the case of an application made under s 37 (eg by the majority of parties to a number of leases)
the Tribunal only has the power to order the variation specified in the application.
2 Section 38(10) gives the Tribunal the power to order compensation to be paid by any party to the lease to any person in respect of any
loss or disadvantage resulting from the variation.
3 LTA 1987, s 38(6).
HR A[7380.746]
Where an order varying the terms of a lease is made the variation so ordered is binding not only on the parties to the
lease but on all other persons (including sureties and predecessors in title of the current parties to the lease) whether or
not they were parties to the application or were given due notice of the application1. Where a person should have been
given notice of an application but was not notified of it he may either bring an action for damages for breach of
statutory duty against the person who should have served the notice or apply to the Tribunal for the cancellation or
modification of any variation to the lease in question2. Alternatively the Tribunal may order the payment of
compensation pursuant to s 38(10) if it thinks fit3.
HR A[7380.747]
1 LTA 1987, s 39(1)-(2): the usual rule that a variation in the terms of a lease made without a surety's consent discharges the surety from
his obligations (see Selous Street Properties Ltd v Oronel Fabrics Ltd [1984] 1 EGLR 50) will therefore not apply. Previously a variation of
the tenancy under s 38 of the LTA 1987 did not bind the Crown under s 39: see LTA 1987, s 56(2) but this subsection has been repealed by
the Commonhold and Leasehold Reform Act 2002, s 180, Sch 14 so that such a variation made on or after 30 September 2003 will bind the
Crown. Part IV of the Landlord and Tenant Act 1987 has applied to Crown land (as in relation to other land) since the CLRA 2002, s 172
came into force on 30 September 2003. Note that for Wales, 30 September 2003 should be read as 31 March 2004: see WSI 2004/669.
2 LTA 1987, s 39(3).
3 LTA 1987, s 39(4).
HR A[7380.748]
Section 40 of the Landlord and Tenant Act 1987 extends the right to apply for a variation of leases to parties to long
leases of any dwelling other than a flat but only on the ground that the lease fails to make satisfactory provision with
respect to matters relating to insurance (including the recovery of the costs of insurance)1. Such an application cannot
be made by a tenant who is a business tenant or who is also the tenant of at least two other dwellings from the same
landlord2.
Page 256
HR A[7380.749]
1 LTA 1987, s 40(1): a lease of six flats will fall outside the section (see John Lyon School Governors v Haysport Properties Ltd [1995]
EGCS 171).
2 LTA 1987, s 40(4A).
HR A[7380.750]
In relation to the provision made in respect of administration charges, the Leasehold Valuation Tribunal has power, on
application of any party to a lease of a dwelling, to vary the lease on the grounds that (a) any administration charge
specified in the lease is unreasonable, or (b) any formula specified in the lease in accordance with which any
administration charge is calculated is unreasonable1. The Tribunal may, instead of making an order varying the lease,
make an order directing the parties to the lease to vary it2. Any variation of a lease effected under Sch 11 will be
binding on third parties, whether or not they are parties to the proceedings3.
HR A[7380.751]
1 Commonhold and Leasehold Reform Act 2002, s 158, Sch 11, para 3. A landlord will be able to apply for a variation if a fixed
administration charge is rendered unreasonable by the effects of inflation. It is unclear whether a variation can be made with retrospective
effect. Note that paras 2-5 of Sch 11 do not apply to an administration charge that was payable before 30 September 2003 (or 31 March 2004
in the case of Wales). For LVT procedure on such an application under CLRA 2003, Sch 11, para 3 see SI 2003/2099 and WSI 2004/681.
Note that under reg 3(3), such an application must include a draft of the proposed variation.
2 CLRA 2002, s 158, Sch 11, para 3(4).
3 CLRA 2002, s 158, Sch 11, para 3(6). The LVT can make an order directing that a memorandum of any variation is endorsed on such
documents as are specified in the order: see CLRA 2002, s 158, Sch 11, para 3(5).
Page 257
relating to management/(7) Rights of tenants of dwellings with respect to insurance
(7) Rights of tenants of dwellings with respect to insurance
HR A[7380.752]
The Schedule to the Landlord and Tenant Act 19851 confers upon a tenant of a dwelling rights with respect to insurance
where the service charge payable by the tenant includes a sum payable for insurance. In such circumstances a tenant
may, by notice in writing, require the landlord to supply him with a written summary of the insurance effected in
relation to the tenant's dwelling2. The request can be made either by the tenant or a recognised tenants' association3.
The landlord must within 21 days of receipt of the notice supply a summary showing the insured amount(s) under any
relevant policy, the name of the insurer under each such policy and the risks insured4. Alternatively, the landlord may
supply a copy of all relevant policies5. Where two or more buildings are insured under any relevant policy the
obligation is to supply a summary or copy of those parts of the policy as relate to the dwelling in respect of which the
request is made or, in the case of a flat, to the building containing it6.
HR A[7380.753]
1 As amended by the Commonhold and Leasehold Reform Act 2002, s 157, Sch 10.
2 LTA 1985, Schedule, para 2(1). For these purposes a notice is duly served upon a landlord if served upon an agent in receipt of rent on
behalf of the landlord: LTA 1985, Schedule, para 2(3).
3 LTA 1985, Schedule, para 2(2).
HR A[7380.754]
Such a tenant1 also has the right to require the landlord by notice in writing either to afford him reasonable facilities for
inspecting and copying any relevant policy2 or associated documents3 or to take copies of or extracts from such policy
or documents and either send them to him or afford him reasonable facilities for collecting them (as he specifies)4.
Similarly, the landlord is given 21 days from receipt of any such notice to comply5. The landlord must provide facilities
for inspection free of charge but may treat such expenses as management costs. The landlord may make a reasonable
charge for complying with the notice in any other respect6.
Page 258
HR A[7380.755]
1 Or the secretary of a recognised tenants' association on his behalf: LTA 1985, Schedule, para 3(2).
2 "Relevant policy" includes a policy of insurance under which the dwelling was insured for the period of insurance immediately
preceding that current period when the notice is served (being, in the case of a flat, a policy covering the building containing it): see LTA
1985, Schedule, para 3(7).
3 "Associated documents" means accounts, receipts or other documents which provide evidence of payment of any premiums due under a
relevant policy in respect of the period of insurance which is current when the notice is served or the period of insurance immediately
preceding that period: LTA 1985, Schedule, para 3(7).
6 LTA 1985, Schedule, para 3(5),(6).
HR A[7380.756]
The Schedule also makes provision for the circumstances in which insurance is effected by a superior landlord, obliging
the immediate landlord of whom a request is made to require his landlord to provide the information and thereafter to
provide the information received to the tenant1.
HR A[7380.757]
1 LTA 1985, Schedule, para 4. A request to a superior landlord will similarly be made by notice in writing.
HR A[7380.758]
Paragraph 4A of the Schedule to the Landlord and Tenant Act 1985 makes provision for the effect of a change in
landlord or superior landlord where a duty under the Schedule remains to be discharged. The assignment of a tenancy
does not affect any duty imposed under paras 2-4A of the Schedule but a person is not required to comply with more
than a reasonable number of requirements imposed by any one person1. It is a summary offence for a person to fail,
without reasonable excuse, to perform a duty under the Schedule2.
HR A[7380.759]
1 LTA 1985, Schedule, para 5.
2 LTA 1985, Schedule, para 6. A person committing such an offence is liable on conviction to a fine not exceeding level 4 on the standard
Page 259
scale.
HR A[7380.760]
In addition to rights of access to information in respect of insurance policies, tenants who are obliged to pay service
charges in respect of insurance are entitled to notify an insurer of potential claims under an insurance policy effected by
a landlord in respect of damage to a tenant's dwelling1. Further, tenants obliged by the terms of their lease to insure the
dwelling with an insurer nominated by the landlord are also afforded the right to exercise some control over the choice
of insurance or insurer. With effect from 1 September 19972 any such tenant (or landlord under such a lease) may apply
to either the county court or Leasehold Valuation Tribunal for a determination of whether the insurance available from
the nominated insurer for insuring the tenant's dwelling is unsatisfactory or the premiums payable in respect of such
insurance excessive3. If the court or the Tribunal is satisfied that the insurer is unsatisfactory or the premium excessive
it may make an order requiring him to nominate another insurer4.
HR A[7380.761]
1 LTA 1985, Schedule, para 7.
2 By amendments introduced by HA 1996, s 83(2), Housing Act (Commencement No 11 and Savings) Order 1997, SI 1997/1851.
3 LTA 1985, Schedule, para 8. Note that this paragraph was amended by the Commonhold and Leasehold Reform Act 2002, s 165 (with
effect from 28 February 2005 (SI 2004/3056)) so that it applies to an insurer approved by a landlord in addition to an insurer nominated by
the landlord.
4 For procedure before 30 September 2003 (in England) or 31 March 2004 (in Wales) see the Leasehold Valuation Tribunals (Service
Charges, Insurance or Appointment of Managers Applications) Order 1997, SI 1997/1853 and for procedure for applications made on or
after those dates see the Leasehold Valuation Tribunals (Procedure) (England) Regulations 2003 (SI 2003/2099) and the Leasehold
Valuation Tribunals (Procedure)(Wales) Regulations 2004 (WSI 2004/681).
HR A[7380.762]
Section 164 of the Commonhold and Leasehold Reform Act 2002, which came into force in England on 28 February
2005, introduces new provisions in relation to the insurance of leases of houses. The section limits the landlord's ability
to extract commission for the effecting of insurance with an approved or nominated insurer under the terms of the lease.
Where a long lease1 of a house2 requires the tenant to insure the house with an insurer nominated or approved by the
landlord3 the tenant is not required to effect the insurance with the landlord's insurer if he has effected insurance which
complies with certain conditions4 and has given the landlord notice of cover5 within 14 days from the taking effect or
renewal of the policy6. Additionally the tenant must give notice of cover within 14 days of a subsequent request by a
new landlord7.
HR A[7380.763]
1 For definition of long lease see Commonhold and Leasehold Reform Act 2002, ss 74, 75.
Page 260
2 For meaning of 'house' see Pt 1 of the Leasehold Reform Act 1967.
3 CLRA 2002, s 164(1). For commencement see SI 2004/3056.
4 CLRA 2002, s 164(2). The conditions are that (a) the house is insured under a policy of insurance issued by an authorised insurer (as
defined by sub-s (10), (b) the policy covers the interests of both the landlord and the tenant, (c) the policy covers all the risks which the lease
requires be covered by insurance provided by the landlord's insurer, (d) the amount of the cover is not less than that which the lease requires
to be provided by such insurance, and (e) the tenant satisfies sub-s (3).
5 CLRA 2002, s 164(5)-(9). A notice of cover is a notice specifying (a) the name of the insurer, (b) the risks covered by the policy, (c) the
amount and period of the cover, and (d) such further information as may be prescribed by regulations. A notice of cover must be in
prescribed form and may be sent by post. For the appropriate address see sub-ss (7)-(9). For regulations under s 164 see the Leasehold
Homes (Notice of Insurance Cover) Regulations 2004 (SI 2004/3097). Those regulations require a notice of cover to be in prescribed form or
in a form substantially to the same effect and list the additional contents required in the notice of cover.
6 CLRA 2002, s 164(3),(4).
7 CLRA 2002, s 164(3)(b).

Page 261
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 12 Effect of insolvency or
receivership
Chapter 12 Effect of insolvency or receivership
Editor
James Ayliffe
Page 262
receivership/A The effect of insolvency procedures
HR A[7381]
The purpose of this chapter is to describe the effect of the various procedures connected with insolvency on the landlord
and tenant relationship. Individual and corporate insolvency procedures are different, but there are three basic levels at
which they operate:
(a) voluntary arrangements by the debtor: these may be individual (IVA) or corporate (CVA);
(b) the administration of a debtor's assets by a third party, where the debtor is not (yet) bankrupt or in
liquidation: these include administrative receivership, Law of Property Act receivership, and
'administration' under Pt I of the Insolvency Act 1986 or Pt VI of the County Courts Act 1984;
(c) bankruptcy (for an individual) or liquidation (for a company).
HR A[7382]
These procedures have different effects on various aspects of the relation of landlord and tenant, including:
(a) liability for rent and other covenants under the lease;
(b) procedures short of court action, for example, distress, forfeiture by peaceable re-entry;
(c) court action as such;
(d) enforcement of judgments;
(e) vesting of leases and reversions;
(f) sureties under the lease;
(g) assignors and assignees of lease or reversion;
(h) subtenant (including the use and effect of notices requiring payment of rent to head landlords).
HR A[7383]
Each of the procedures will be described in turn by reference to their effect upon these various aspects. Procedures
dealing with companies will be dealt with first1, and then procedures relating to individuals2. The rules relating to the
disclaimer of leases and other 'onerous property', which apply both to liquidators of companies and trustees in
bankruptcy of individuals, are dealt with in a separate section at the end of the chapter3.
HR A[7384]
1 Paras HR A[7385]-[7449].
Page 263
2 Paras HR A[7461]-[7503].
3 Paras HR A[7505]-[7543].
Page 264
receivership/B Corporate procedures
B
Page 265
receivership/B Corporate procedures/1 Voluntary arrangements
1 Voluntary arrangements
HR A[7385]
A corporate voluntary arrangement (CVA) can be either a composition in satisfaction of the company's debts, or a
scheme of arrangement of its affairs1. The former involves a discharge of those debtors included in the arrangement.
The latter usually involves less than a discharge of all debts, for example, a moratorium on recovery and enforcement2,
but there is nothing in the statute to prevent its extending to, say, a compulsory surrender of a lease or a permanent
reduction of future rent to a nominal sum. If it does so extend, the effect on third parties is unclear3. A CVA comes into
effect when approved by three quarters in value of creditors voting, and a simple majority (in value) of members voting,
at separate meetings convened for the purpose4. A landlord owed rent at the date of the meeting can vote in respect of
the arrears, and if the arrangement may affect future rent his vote can be weighted in that respect5. Where there is a
dispute over the value of the landlord's claim (for example, because of the possibility of forfeiture and reletting) the
claim should be marked as objected to but the landlord permitted to vote for the whole amount6. But if the claim is for
an unliquidated amount the chairman may either estimate a minimum or exclude it altogether7. The creditors' meeting
cannot approve an arrangement affecting the rights of a secured creditor to enforce his security without his consent, nor
must it prejudice the priority of preferential creditors without theirs8. Subject to that, it will bind every person who had
notice of and was entitled to vote at the creditors' meeting9. 'Secured creditor' for this purpose includes a person who
has had goods seized under a writ of fieri facias10. There is, however, a right for creditors to apply to court to challenge
a CVA following approval on the grounds (among others) that it unfairly prejudices their interests11. Unlike the case
with an individual voluntary arrangement12, a proposal for a corporate voluntary arrangement has no effect on legal
rights and remedies until it is actually approved. This is, however, subject to a new procedure introduced by the
Insolvency Act 2000, which enables the directors of companies satisfying the qualifying conditions of small companies
under the Companies Act 1985 to obtain (by lodging certain documents at court) a moratorium temporarily suspending
the rights of creditors until the meeting of creditors to consider whether to approve the CVA13.
HR A[7386]
1 Insolvency Act 1986, s 1.
2 March Estates plc v Gunmark Ltd [1996] 2 BCLC 1.
3 Cf disclaimer, para HR A[7521].
4 IA 1986, s 4; Insolvency Rules 1986, rr 1.19, 1.20.
5 Re Cancol Ltd [1996] 1 All ER 37; Doorbar v Alltime Securities Ltd [1996] 2 All ER 948, [1996] 1 WLR 456.
6 Re Sweatfield Ltd [1997] BCC 744.
7 Re Sweatfield Ltd [1997] BCC 744. Re Newlands (Seaford) Educational Trust [2006] EWHC 1511 (Ch), [2006] 33 EG 100.
Page 266
8 IA 1986, s 4(3), (4).
9 IA 1986, s 5(2); Re Cancol Ltd [1996] 1 All ER 37.
10 Peck v Craighead [1995] 1 BCLC 337.
11 IA 1986, s 6; Prudential Assurance Co Ltd v PRG Powerhouse Ltd [2007] EWHC 1002 (Ch) (where landlords successfully challenged
a CVA which deprived them of recourse to a guarantee of the insolvent tenant's liabilities).
12 See para HR A[7463].
13 IA 1986, s 1A and Sch A1 (inserted by the Insolvency Act 2000, ss 1-2 and Sch 1 with effect from 1 January 2003).
HR A[7387]
The effect on liability for rent and other covenants in a lease will depend upon the terms of the CVA. If the CVA does
not expressly affect such liabilities, then they remain just as they were. Originally the CVA would only cover sums due
at its date1, but nowadays it is common to draft it so as to cover future rent as well. In the case of companies which do
not satisfy the qualifying conditions for small companies under the Companies Act 1985, procedures short of court
action such as distress2 and forfeiture by peaceable re-entry3 are unaffected, except to the extent that the CVA has
reduced or removed the liability to which they are attached4, or (perhaps) to the extent that the CVA has purported to
restrict these remedies (for example, removing a forfeiture clause from a lease). Similarly unaffected are court action as
such5, and the enforcement of judgments6. The position is, however, more complicated in the case of companies which
satisfy the qualifying conditions for small companies under the Companies Act 1985 because the directors of such
companies can obtain an initial moratorium where there is a proposal for a CVA7. If the directors do obtain a
moratorium, this will prevent action against the company (whether in or out of court) until the meeting of creditors to
consider the CVA8. Unless the CVA otherwise provides, it has no effect on the ownership of the lease or reversion,
which remain vested in their owner. Any reduction in liability of the corporate debtor is personal and leaves the original
tenant liable in full9. But if the original tenant is not a party to the arrangement he has a claim for indemnity against the
debtor/assignee10. There is no authority11, but on principle the position of a surety must depend on whether he is
guaranteeing the debt of the principal debtor (which has been reduced as a result of the CVA) or indemnifying the
creditor against loss12. In the former case he cannot be liable for more than the principal debtor; in the latter he can.
However, modern surety agreements are often drafted so as to constitute both guarantee and indemnity13, or to provide
that the surety is liable whatever happens to the principal debtor14. The position of a subtenant is not directly affected
by the approval of a CVA for the tenant, though, of course, it may lead to the subtenant paying rent to the head landlord
direct to avoid the forfeiture of the headlease15, or pursuant to notice served under the Law of Distress (Amendment)
Act 190816. There is nothing to prevent a corporate debtor the subject of a CVA from being put into administration or
liquidation.
HR A[7388]
1 Burford Midland Properties Ltd v Marley Extrusions Ltd [1995] 2 EGLR 15, [1995] 1 BCLC 102.
2 Cf McMullen & Sons Ltd v Cerrone (1993) 66 P & CR 351.
3 Cf Re a Debtor (No 13A 10 of 1995) [1995] 1 WLR 1127; March Estates plc v Gunmark Ltd [1996] 2 BCLC 1; Razzaq v Pala [1997]
Page 267
38 EG 157.
4 Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 1 EG 94; Re Naeem (a bankrupt) (No 18 of 1988) [1990] 1 WLR 48; cf
March Estates plc v Gunmark Ltd [1996] 2 BCLC 1.
5 Re a Debtor (No 64 of 1992) [1994] 2 All ER 177.
6 Cf Peck v Craighead [1995] 1 BCLC 337.
8 IA 1986, Sch A1, para 12(1).
9 RA Securities Ltd v Mercantile Credit Co Ltd [1995] 3 All ER 581; March Estates plc v Gunmark Ltd [1996] 2 BCLC 1; subject now to
the operation of the Landlord and Tenant (Covenants) Act 1995; see para [21033].
10 Mytre Investments Ltd v Reynolds [1995] 3 All ER 588.
11 Cf Johnson v Davies of [1998] 49 EG 153.
12 See eg Holme v Brunskill (1878) 3 QBD 495; Metropolitan Properties Co (Regis) Ltd v Bartholomew [1996] 1 EGLR 82, CA.
13 Eg General Produce Co v United Bank Ltd [1979] 2 Lloyd's Rep 255.
14 Eg Selous Street Properties Ltd v Oronel Fabrics Ltd (1984) 270 Estates Gazette 643, 743; cf West Horndon Industrial Park Ltd v
Phoenix Timber Group plc [1995] 1 EGLR 77.
15 See para HR A[310], n 7.
16 Section 6. See para HR A[310], n 5.

Page 268
receivership/B Corporate procedures/2 Receivership
2 Receivership
HR A[7389]
There are three distinct kinds of receivership. If a lease (or for that matter a reversion) has been specifically mortgaged
the mortgagee may in the circumstances stipulated by the terms of the mortgage and the Law of Property Act 1925
appoint a receiver of the lease or reversion, sometimes termed an 'LPA receiver', or (increasingly frequently) a
'non-administrative receiver'. This kind of receivership applies equally to individual as to corporate debtors. The second
is applicable only to corporate debtors which have executed a debenture charging the whole or most of their assets to
secure indebtedness. In stipulated circumstances the creditor is able to appoint an 'administrative receiver' to enforce the
charge. The position of such a receiver is governed by the terms of the debenture and by the Insolvency Act 1986.
Generally speaking, either by virtue of the terms of the relevant instrument or by statute1, a receiver of either of the first
two kinds is the agent of the debtor, not of the creditor. But this will not apply if the company is already in liquidation2
or once it subsequently goes into liquidation3. Administrative receiverships are likely to become less common in the
future now that the Enterprise Act 2002 has removed the right to appoint administrative receivers under floating charges
created after 15 September 2004, unless they fall within certain excepted classes4. The third kind of receiver is that
appointed by the court on an ad hoc basis pursuant to statute5. Such a receiver is an officer of the court, not the agent of
the parties, and is appointed usually as a short-term expedient. For example, a landlord may seek the appointment of a
receiver of a lease of licensed premises in order to carry on the business and so preserve the licence - and the value - of
the premises, where the tenant has in breach of covenant failed to do so6. Or tenants may seek the appointment of a
receiver of the landlord's reversion to obtain performance of the landlord's repairing obligations7.
HR A[7390]-[7400]
1 LPA 1925, s 109; IA 1986, s 44.
2 Re Northern Garage Ltd [1946] Ch 188.
3 Gosling v Gaskell [1897] AC 575; Thomas v Todd [1926] 2 KB 511.
4 Insolvency Act 1986, s 72A-72H (inserted by the Enterprise Act 2002, s 250 with effect from 15 September 2003).
5 Supreme Court Act 1981, s 37.
6 Charrington & Co Ltd v Camp [1902] 1 Ch 386; Leney & Sons Ltd v Callingham [1908] 1 KB 79.
7 Hart v Emelkirk Ltd [1983] 3 All ER 15; Daiches v Bluelake Investments Ltd (1985) 51 P & CR 51, [1985] 2 EGLR 67; See also
Landlord and Tenant Act 1987, Pt II, as amended (appointment of manager): see para [20620].
HR A[7401]
Page 269
The tenant's liability for rent and other covenants under the lease is not affected by receivership as such, any more than
any other contractual obligation of the tenant is released or reduced1. Thus, the landlord may distrain2 or forfeit the
lease3 as before. He may sue for unpaid rent or for damages for other breaches of covenant. No leave is required to
commence any such court action. In principle, once a debenture charge has crystallised over goods (even if already
taken in execution) the chargee has priority over an execution creditor4, unless (probably) the sheriff having executed
judgment has already sold the goods and is merely holding the proceeds5. But a landlord may rely on the doctrine of
reputed ownership6 to distrain on goods of the tenant in respect of which a charge has crystallised, if the chargee has
allowed the tenant to remain in possession7. The appointment of a receiver does not affect the vesting of the lease itself
(or for that matter its reversion)8. The appointment of a receiver will not of itself affect sureties under the lease, or the
liability of original tenants as such9. A mortgagee of the lease who does not go into possession, but merely appoints an
LPA receiver, will not normally be treated as being in the position of an assignee from the tenant10. Similarly, if there
is a mortgage of the landlord's reversion11. Assignees are generally bound to observe the obligations in the lease
through operation of privity of estate12, though subtenants are not. But both may be in practice required to do so in
order to avoid a forfeiture by the head landlord13. Subtenants are also liable to be required by notice to pay their rent
direct to the head landlord14. The mere appointment by a debenture holder and mortgagee of a lease of a receiver to
receive the subrents, where the debenture did not amount to an equitable assignment of the right to future rents, the
mortgagee had not gone into possession, and the receiver was acting as the company's agent, does not affect the
position15. The situation where there is an equitable assignment of future rent unaccompanied by an assignment of the
reversion, is not covered by authority16.
HR A[7402]
1 George Barker (Transport) Ltd v Eynon [1974] 1 All ER 900, [1974] 1 WLR 462; AMEC Properties Ltd v Planning Research and
Systems plc [1992] BCLC 1149.
2 Re Roundwood Colliery Co [1897] 1 Ch 373. But if the receiver is appointed by the court, it seems that leave is needed: Re Sutton's
Estate Sutton v Rees (1863) 9 Jur NS 456: Searle v Choate (1884) 25 Ch D 723.
3 As to relief from forfeiture, see Transag Haulage Ltd v Leyland DAF Finance plc [1994] 2 BCLC 88.
4 Re Standard Manufacturing Co [1891] 1 Ch 627; Re Opera Ltd [1891] 3 Ch 260; Re London Pressed Hinge Co Ltd [1905] 1 Ch 576; Re
ELS Ltd [1994] 1 BCLC 743.
5 Robson v Smith [1895] 2 Ch 118; Taunton v Sheriff of Warwickshire [1895] 2 Ch 319.
6 Law of Distress Amendment Act 1908, s 4(1).
7 Cunliffe Engineering Ltd v English Industrial Estates Corporation [1994] BCC 972.
8 Though in relation to an application for a new tenancy against a landlord in receivership, see HR B[764]-[791].
9 Subject to the Landlord and Tenant (Covenants) Act 1995; see para HR A[2125] .
10 For post-1995 leases, if the mortgagee goes into possession, see the Landlord and Tenant (Covenants) Act 1995, s 15.
11 See n 8 above.
Page 270
12 For pre-1996 leases, if they 'touch and concern the land': see para HR A[2041].
14 Law of Distress Amendment Act 1908, s 6. See para HR A[310] n 5, and also Air Ecosse Ltd v Civil Aviation Authority (1987) 3 BCC
492.
15 Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161.
16 Rhodes v Allied Dunbar Pension Services Ltd [1989] 1 All ER 1161 at 1168.
HR A[7403]
The personal liability of the receiver and of his appointor needs to be addressed. Generally the receiver is the agent of
the debtor1. Hence, he is in principle not personally liable: (a) for obligations undertaken by the debtor before the
receivership2; nor (b) for fresh obligations undertaken by him within the scope of his agency3. A fortiori, neither is the
mortgagee or debenture-holder liable4. However, in the case of (b) statute now imposes personal liability on the
receiver of the property of a company unless the contract in question otherwise provides5. Special rules apply to
contracts of employment adopted by administrative receivers6. If for any reason the receiver is not the debtor's agent,
that does not of itself mean that he must be the agent of the mortgagee or debenture holder who appointed him7. It is a
question of fact: if he is acting on the continual instructions of his appointor, for example, that may suffice8. Liability to
rates does not depend on the principal/agent distinction, but on rateable occupation. A receiver as agent of the debtor
may be in rateable occupation and thus liable9, but the burden will be on the council to show that the agent has
dispossessed his principal10. This may be easier to do if the agency terminates, for example, on liquidation
supervening11. A receiver may be personally liable in tort, for example, for wrongful interference with the goods of
another12, or jointly liable with his principal, the tenant, for waste in damaging the demised premises13. The receiver of
a tenant's property is not liable for rent under a lease merely because he is using the tenant's premises for receivership
purposes and to carry on the tenant's business14. An administrative receiver may be made liable by statute for
misapplication of the company's property or for misfeasance or breach of statute15, or in some cases for fraudulent
trading16.
HR A[7404]
2 Lathia v Dronsfield Bros Limited [1987] BCLC 321.
3 Montgomerie v United Kingdom Mutual SS Association [1891] 1 QB 370.
4 Cully v Parsons [1923] 2 Ch 512.
5 IA 1986, ss 37(1)(a), 44(1)(b); Hill Samuel & Co Ltd v Laing (1988) 4 BCC 9.
6 IA 1986, s 44 (2A)-(2C) inserted by IA 1994. Cf Powdrill v Watson [1995] 2 AC 394, dealing with contracts adopted before 15 March
1994.
Page 271
7 Gosling v Gaskell [1897] AC 575.
8 American Express International Banking Corpn v Hurley (1985) 2 BCC 98 at 993.
9 Banister v Islington LBC (1972) 71 LGR 239.
10 Ratford v Northavon District Council [1987] QB 357; Re Sobam NV [1996] 1 BCLC 446.
11 See Re Leigh Estates (UK) Ltd [1994] BCC 292.
12 Clough Mill Ltd v Martin [1984] 3 All ER 982, [1985] 1 WLR 111, mitigated for liquidators, provisional liquidators, administrative
receivers and administrators by IA 1986, s 234(3), (4).
13 Mancetter Developments Ltd v Garmanson Ltd [1986] QB 1212.
14 Re Atlantic Computer Systems plc [1992] Ch 505.
15 IA 1986, s 212.
16 IA 1986, s 213; cf Re Sobam NV [1996] 1 BCLC 446.

Page 272
receivership/B Corporate procedures/3 Administration
3 Administration
HR A[7405]
Administration (in relation to companies) is a procedure similar to receivership. It was introduced in 1985 as an
alternative to liquidation in cases where it was considered that the company might be turned round and liquidation
avoided, but where there was no debenture holder to appoint a receiver. In fact administration is possible even if there is
such a debenture holder. Substantial changes were made to the administration procedures under the Enterprise Act 2002
with effect from 15 September 20031. Whereas there was previously only one route into administration (namely by
application to court), there are now three routes. The first is by application to court2. An application may be made by
the company, its directors or one or more of its creditors3. The court may grant the application if it is satisfied that the
company is or is likely to become unable to pay its debts and an administration order is reasonably likely to achieve the
purpose of administration4 (which is defined in terms of rescuing the company as a going concern, achieving a better
result for the company's creditors as a whole than would be likely if the company were wound up or realising property
in order to make a distribution to one or more secured or preferential creditors5). If a lease is an important asset of the
company, its preservation may be sufficient reason to make an order on this ground6. The second route is appointment
of an administrator out of court by the holder of a qualifying floating charge7. The third route is appointment of an
administrator out of court by the company or its directors8. Following the making of an application to court or, in the
case of appointment of an administrator out of court, the filing at court of a notice of appointment or intention to appoint
an administrator, an initial moratorium on insolvency proceedings or other legal process comes into effect as explained
further below9. Generally, an administrator cannot be appointed if there is an administrative receiver already in
office10.
HR A[7406]
1 Insolvency Act 1986, Sch B1 now contains the detailed provisions governing administration.
2 IA 1986, Sch B1, paras 2(a) and 10.
3 IA 1986, Sch B1, para 12.
4 IA 1986, Sch B1, para 11.
5 IA 1986, Sch B1, para 3.
6 Re Dallhold Estates (UK) Pty Ltd [1992] BCLC 621.
7 IA 1986, Sch B1, paras 2(b) and 14.
8 IA 1986, paras 2(c) and 22.

Page 273
8 IA 1986, paras 2(c) and 22.
10 IA 1986, Sch B1, paras 17(b), 25(c) and 39.
HR A[7407]
The position of the administrator is similar in many respects to that of an administrative receiver. He is an agent of the
company1 and hence in principle not personally liable for the company's obligations, past, present or future2. The
company's liability for rent and other covenants as such under the lease is not affected. There is no rule that the
administrator should pay the current rent from the company's resources as 'administration expenses' in priority to other
debts3. But the administrator is an officer of the court and must act accordingly, making speedy decisions and stating
reasons for refusal to pay4. A creditor or member of the company may apply to court claiming that the administrator is
acting or has acted so as unfairly to harm the interests of the applicant alone or in common with some or all other
members or creditors or proposes so to act and, on such an application, the court may grant such relief as it thinks fit5
(in an appropriate case this could include ordering the administrator to pay rent). Once an application for administration
has been made or, in a case where an administrator is being appointed out of court, a notice of appointment or intention
to appoint an administrator has been filed at court, an interim moratorium comes into effect under which no resolution
may be passed or order made for the winding up of the company and a landlord may not exercise a right of forfeiture by
peaceable re-entry or institute or continue any legal process (including legal proceedings, execution or distress) against
the company or its property without the consent of the administrator or the permission of the court6. The moratorium
then continues following the commencement of the administration7. In addition, the following further restrictions come
into force following the commencement of the administration: any petition for the winding up of the company is
dismissed where the court makes an order for administration and suspended where the company has been put into
administration out of court by the holder of a floating charge8 and any administrative receiver and, if required by the
administrator, any receiver of part of the company's property must vacate office9. In considering the question of
whether permission should be given for the landlord to take action otherwise prohibited by the initial or subsequent
moratorium, there are a number of factors for the court to take into account10. If the administrator has unreasonably
refused to pay rent, the court may give leave to distrain or may refuse leave on terms that rent is paid, and may order the
administrator to pay the landlord's costs11. The application for, and appointment of, an administrator does not effect the
vesting of the lease (or its reversion, for that matter). The position of sureties, original tenants, assignees and subtenants
is the same as stated in relation to receivers12. It is unclear whether serving notice on a subtenant requiring payment of
rent direct to a head landlord would be regarded as distress, and hence requiring permission of the court13. In practice,
this is considered to fall within the 'contractual notice' exception14, and hence to avoid the need for leave. Where an
administration order is made in relation to a company, rent or service charges already paid may become subject to the
provisions relating to voidable preferences15, and hence by order of the court become repayable to the administrator16.
HR A[7408]
1 Insolvency Act 1986, Sch B1, para 69.
3 Re Atlantic Computer Systems plc [1992] Ch 505. The position is different, however, in relation to rates which will qualify as an
expense of the administration: Exeter City Council v Bairstow [2007] EWHC 400 (Ch), [2007] 4 All ER 437.
Page 274
5 IA 1986, Sch B1, para 74.
6 IA 1986, Sch B1, paras 44(1), (2) and (4) applying paras 42 and 43. Note, however, that the Financial Collateral Arrangements (No 2)
Regulations 2003 (SI 2003/3226) exempt 'financial collateral arrangements' (which are likely to include most rent deposits and similar
arrangements) from the initial moratorium.
7 IA 1986, Sch B1, paras 42 and 43. In spelling out precisely what is prohibited under the moratorium, these statutory provisions resolve a
number of issues which had previously been the subject of extensive case law. Note, however, that the Financial Collateral Arrangements
(No 2) Regulations 2003 (SI 2003/3226) exempt 'financial collateral arrangements' (which are likely to include most rent deposits and
similar arrangements) from the initial moratorium.
8 IA 1986, Sch B1, para 40.
9 IA 1986, Sch B1, para 41.
10 Re Atlantic Computer Systems plc [1992] Ch 505 at 542ff. See also Metro Nominees (Wandsworth) Ltd v K Rayment, unreported,
Judge Norris QC, 16th October 2006, where the court was not convinced that a landlord seeking permission to exercise its right to forfeit had
to demonstrate that it had a good arguable case to forfeit.
13 Law of Distress Amendment Act 1908, s 6.
14 See n 11.
15 IA 1986, ss 239-242.
16 Cf Re Beacon Leisure Ltd [1991] BCC 213 (directors not in fact influenced by desire to prefer); Countrywide Banking Corpn Ltd v
Dean [1998] 1 BCLC 306, PC (New Zealand statute).
HR A[7409]
The personal liability of the administrator is similar to that of the receiver1, with the following differences. First, he is
an officer of the court, not a private appointee, and he must behave accordingly2. Second, there is no statutory
imposition of personal liability for contracts entered into in case the contract concerned fails to exclude it3, though there
are special rules for contracts of employment4. Third, an administrator guilty of some default in managing the company
may be relieved of liability by the court pursuant to s 727 of the Companies Act 1985, as an 'officer' of the company5. If
the administration order is discharged, that does not of itself release the administrator from his obligations6.
HR A[7410]-[7420]
1 As to which see para HR A[7403].

Page 275
3 Cf Insolvency Act 1986, ss 37(1)(a), 44(1)(b).
4 IA 1986, s 19(5) (as amended); cf Powdrill v Watson [1995] 2 AC 394, dealing with contracts adopted before 15 March 1994.
5 Re Home Treat Ltd [1991] BCLC 705.
6 Barclays Mercantile Business Finance Ltd v Sibec Developments Ltd [1993] 2 All ER 195.
Page 276
receivership/B Corporate procedures/4 Liquidation
4 Liquidation
HR A[7421]
There are three kinds of liquidation: (a) members' voluntary; (b) creditors' voluntary; (c) compulsory. The first can only
be undertaken where the company is declared to be solvent, and its members resolve to wind it up. The liquidation
remains in the control of the members1. The second occurs where there is no solvency declaration and the creditors
resolve the company should be wound up, or the liquidator of a members' voluntary winding up considers that the
company is insolvent2. The third occurs when the court so orders on the petition of the company, its directors or
shareholders, or (most commonly) a creditor3. There are a number of grounds for a compulsory winding-up order4, of
which the most relevant for present purposes is that the company 'is unable to pay its debts'5. In addition to the general
meaning of those words, there are four circumstances in which (in England and Wales) they are deemed satisfied6: (i)
failure to pay a debt exceeding £750 within three weeks of a statutory demand; (ii) execution on a judgment not
completely satisfied; (iii) insolvency on a 'cash flow' basis; (iv) insolvency on a 'balance sheet' basis. The court may
order the compulsory winding up of a company already in voluntary liquidation7. In the voluntary cases the meeting of
members or creditors appoints the liquidator8. In the compulsory cases the Official Receiver automatically becomes
liquidator, and remains in office until another liquidator is appointed9. This may occur at or following meetings of
creditors and contributories10. After a petition for compulsory winding up is presented, but before it is heard, the court
may appoint a provisional liquidator to preserve the assets of the company11. The making of a winding-up order brings
the directors' powers to an end12 subject to special provision to the contrary13. If a winding-up order is made, the
winding up is normally deemed to have begun retrospectively at the date of presentation of the petition14.
HR A[7422]
1 See Insolvency Act 1986, Pt IV, Chap III.
2 IA 1986, ss 90, 95, 96, 98.
3 IA 1986, s 117.
4 IA 1986, s 122(1).
5 IA 1986, s 122(1)(f).
6 IA 1986, s 123(1), (2).
7 Re Gordon & Breach Science Publishers Ltd [1995] BCC 261.
8 IA 1986, ss 91, 100.
9 IA 1986, s 136.
Page 277
10 IA 1986, s 139.
11 IA 1986, s 135.
12 Fowler v Broad's Patent Night Light Co [1893] 1 Ch 724.
13 Re Mawcon Ltd [1969] 1 All ER 188.
14 IA 1986, s 129.
HR A[7423]
Liquidation as such has no effect on the tenant company's obligations to pay rent and comply with covenants under the
lease. Recoverability of rent or damages is another matter. Rent accruing due1 before winding up is a debt due from the
tenant company and may be proved for in the liquidation2. Subject to the statutory restrictions to be mentioned, the
landlord has his ordinary remedies for its recovery. Rent accruing due after commencement of winding up may qualify
as an expense of the liquidation 'in preserving, realising or getting in' assets of the company, such expenses having
priority over other creditors' claims and even liquidator's remuneration3. This will be the case if the liquidator does not
disclaim the lease but retains it, actively seeking to dispose of it, or pays rent to avoid forfeiture and thus preserve it4. It
will probably not be the case if the lease is retained at the landlord's request and for his benefit5. If the rent does not
qualify under that head, it may still be a 'necessary disbursement' in the liquidation, ranking twelfth in priority (still in
front of liquidator's remuneration)6. However, it is unlikely to be so if, although the company is in liquidation, the
property concerned is not available to the liquidator, for example, because a receiver is in possession7. Rent accruing
due after commencement of winding up which does not qualify as either an expense or a disbursement cannot be proved
for in the liquidation. The position with regard to sums payable in respect of service charges appears to be the same8,
but claims for damages will be provable, if at all, only as an unsecured claim9, the value of which can be estimated by
the liquidator10, subject to application to the court11. If the lease is disclaimed12 the landlord can claim nothing in the
liquidation in respect of liabilities that would have subsequently accrued, although he can prove for loss in consequence
of the disclaimer13, which will cover much of the same ground. Liability for rates is similar to that for rent in that it
depends for its treatment on when it accrued due; but there is no discretion over post-liquidation rates which will qualify
as an expense of the liquidation14. Where a company goes into liquidation15, rent or service charges already paid may
become subject to the provisions relating to voidable preferences16, and hence by order of the court become repayable
to the liquidator17.
HR A[7424]
1 Including rent payable in arrears but apportioned to the date of commencement of winding up: IR 1986, r 4.92(2); Re South Kensington
Co-Operative Stores (1881) 17 Ch D 161.
2 IR 1986, r 4.92(1).
3 IR 1986, r 4.218. The order of priority is subject to the discretion of the court: Insolvency Act 1986, s 156.
4 Re Linda Marie Ltd [1989] BCLC 46; see also Re Lundy Granite Co, ex p Heaven (1871) 6 Ch App 462; Re Oak Pitts Colliery Co
(1882) 21 Ch D 322.
Page 278
5 Cf Re Bridgewater Engineering Co (1879) 12 Ch D 181; the liquidator may be under pressure to elect whether to disclaim: see para HR
A[7505], n 15.
6 IR 1986, r 4.218, subject to the court's discretion; Re Linda Marie Ltd [1989] BCLC 46.
7 Cf Re House and Land Investment Trust, ex p Smith (1894) 42 WR 572.
8 Re Linda Marie Ltd [1989] BCLC 46.
9 IR 1986, r 12.3(1); Re ABC Coupler Engineering Co Ltd (No 3) [1970] 1 All ER 650.
10 IR 1986, r 4.86.
11 IA 1986, s 168(5).
12 As to which, see para HR A[7505].
14 Re Toshoku Finance UK Plc [2002] UKHL 6, [2002] 1 WLR 671.
15 As to which see IA 1986, s 247(2).
16 IA 1986, ss 239-242.
17 Cf Re Beacon Leisure Ltd [1991] BCC 213 (directors not in fact influenced by desire to prefer); Countrywide Banking Corpn Ltd v
Dean [1998] 1 BCLC 306, PC (New Zealand statute).
HR A[7425]
The landlord's right to distrain is affected by the supervening liquidation as follows. A voluntary liquidation does not
itself prevent distress being levied1. But the liquidator, any contributory or any creditor may apply to the court to
determine any question2, and the court may stay any distress3. It will probably do so if distress was begun after the
commencement of liquidation4, unless the distress is in respect of sums falling due whilst the liquidator is in possession.
It will generally not stay a distress commenced before voluntary liquidation in the absence of 'some circumstances
outside the levying, such as fraud, or unfair dealing'5. The position in cases of compulsory liquidation is more
complicated. A distress begun before a petition for winding up is presented is not itself affected by such presentation,
though it appears that the company, any contributory or any creditor may thereafter apply to the court to stay the
distress6. Once a winding-up order is made, it also seems that the landlord will need to apply to the court for leave to
sell the distrained goods7. Normally, in the case of distress begun prior to the commencement of winding up , the court
allows it to be completed8. On the other hand, a distress begun after the commencement of winding up is prima facie
void9. However, the court may give leave for any 'action or proceeding' against the company or its property10, and it
seems that this is to be interpreted as permitting the court to give leave for distress to be levied11. Leave will not
normally be given in respect of rent accrued due before commencement of winding up 12, but it usually will for rent
falling due during the liquidation, at any rate if the liquidator is using or retaining the property for the purposes of the
liquidation13. Leave may be refused if the use of the property by the liquidator benefits the landlord14. Leave will
generally not be given to distrain for rent due in advance15. Finally, it should be noted that these rules only apply to
distress on the tenant's goods. Distress on goods belonging to third parties but which happen to be on the demised
Page 279
premises are free from these restrictions. This also applies to goods charged to third parties where the debt exceeds their
value16. It is irrelevant that the third party is itself in liquidation17.
HR A[7426]
1 Westbury v Twigg & Co [1892] 1 QB 77.
2 IA 1986 s 112.
3 Re Higginshaw Mills and Spinning Co [1896] 2 Ch 544; Herbert Berry Associates Ltd v IRC [1978] 1 All ER 161.
4 Re Margot Bywaters Ltd [1942] Ch 121.
5 Venner's Electrical Cooking and Heating Appliances Ltd v Thorpe [1915] 2 Ch 404 at 408.
6 IA 1986 s 126, as interpreted in Re Memco Engineering Ltd [1986] Ch 86.
7 IA 1986, s 130, as similarly interpreted.
8 Re Roundwood Colliery Co [1897] 1 Ch 373; Re Bellaglade Ltd [1977] 1 All ER 319.
9 IA 1986 s 128.
10 IA 1986, s 130(2).
11 Re Coal Consumers Association (1876) 4 Ch D 625.
12 Re Traders' North Staffordshire Carrying Co (1874) LR 19 Eq 60; Re Coal Consumers Association (1876) 4 Ch D 625; Re North
Yorkshire Iron Co (1878) 7 Ch 661; Re Bridgewater Engineering Co (1879) 12 Ch D 181.
13 Re Lundy Granite Co, ex p Heaven (1871) 6 Ch App 462; Re Silkstone and Dodworth Coal and Iron Co (1881) 17 Ch D 158.
14 Re Bridgewater Engineering Co (1879) 12 Ch D 181.
15 Shackell & Co Chorlton & Sons [1895] 1 Ch 378.
16 Re New City Constitutional Club (1887) 34 Ch D 646.
17 Re Lundy Granite Co, ex p Heaven (1871) 6 Ch App 462; Re Carriage Co-Operative Supply Association, ex p Clemence (1883) 23 Ch
D 154.
HR A[7427]
A voluntary winding up does not itself affect the landlord's right to forfeit a lease by peaceable reentry, though the
liquidator, any contributory or any creditor may apply to the court to determine any question, and it may then be that the
Page 280
court can restrain a threatened forfeiture, or grant relief against an actual one1. In a compulsory winding-up leave is
needed for any 'action or proceeding' against the company or its property2. A possession order can be made against the
liquidator in the winding up proceedings themselves3. Whether forfeiture by peaceable re-entry requires leave is
unclear4. If it does then it would seem that forfeiture without such leave is a nullity5. But landlords often none the less
do purport to forfeit peaceably; it is rare for it to matter very much in practice to liquidators. By contrast, it seems that
no leave is required for the mortgagee of a lease to enforce his security out of court6. If a lease is forfeited, the
liquidator may apply for relief within the first year after liquidation7, unless the lease is of certain kinds and the
forfeiture was on grounds of insolvency8. Application for relief can be made by summons in the liquidation9. In the
case of an insolvent liquidation, relief is unlikely to be granted unless an appropriate assignee is found10.
HR A[7428]
1 Insolvency Act 1986, s 126, as interpreted in Re Memco Engineering Ltd [1986] Ch 86 (distress is 'action or proceeding' within the
Companies Act 1948, s 231); cf Re a Debtor (No 13A 10 of 1994) [1995] 41 EG 142 (forfeiture by peaceable re-entry is not 'a proceeding' or
'other legal process' within IA 1986 s 252).
2 IA 1986, ss 126, 130.
3 Re Blue Jeans Sales Ltd [1979] 1 All ER 641.
4 See the cases cited in n 1 above, and also Razzaq v Pala [1997] 37 EG 157.
5 Re National Employers' Mutual General Insurance Association [1995] 1 BCLC 232; cf Re Saunders and Bearman (bankrupts) [1997]
Ch 60, [1996] 3 WLR 473.
6 Cf Lloyd v David Lloyd & Co Ltd (1877) 6 Ch D 339.
7 LPA 1925, s 146(10); Official Custodian for Charities v Parway Estates Developments Ltd [1985] Ch 151.
8 LPA 1925, s 146(9).
9 Re Brompton Securities Ltd (No 2) [1988] 3 All ER 677.
10 Pakwood Transport Ltd v 15 Beauchamp Place Ltd (1977) 36 P & CR 112.
HR A[7429]
No leave is required to commence court proceedings (whether for rent, damages or for forfeiture of the lease) against a
company in voluntary liquidation. But the liquidator, any contributory or any creditor may thereafter apply to the court
to determine any question, and the court has power to stay or restrain the proceedings1. The position is similar between
the presentation of a winding-up petition and the making of a compulsory winding-up order2: no leave is required to
commence proceedings, but the company, any contributory or any creditor may apply to stay them3. But once a
winding-up order has been made (or a provisional liquidator appointed) leave of the court is required before
commencing or proceeding with any court proceedings against the company4. If leave is not obtained beforehand the
proceedings are a nullity, and cannot be authorised retrospectively5. If the landlord applies for leave to begin forfeiture
proceedings, the court is likely to grant it if the company has no defence6, and indeed customarily makes a possession
Page 281
order without the need for separate possession proceedings7. Any order made is, of course, subject to any subsequent
application for relief8. Leave will also normally be given to a mortgagee of the lease to bring proceedings against the
tenant-mortgagor to enforce the security9.
HR A[7430]-[7440]
1 Insolvency Act 1986, ss 112(1), 126.
2 Or the appointment of a provisional liquidator, if this occurs.
3 IA 1986, ss 112(1), 126.
4 IA 1986, s 130(3).
5 Re National Employers' Mutual General Insurance Association Ltd [1995] 1 BCLC 232; the position in bankruptcy is different: see para
HR A[7487].
6 General Share and Trust Co v Wetley Brick & Pottery Co (1882) 20 Ch D 260.
7 Re Blue Jeans Sales Ltd [1979] 1 All ER 641; Re Brompton Securities Ltd (in Liquidation) (1988) 4 BCC 189.
8 Re National Jazz Centre Ltd [1988] 2 EGLR 57.
9 Lloyd v David Lloyd & Co Ltd (1877) 6 Ch D 339.
HR A[7441]
An execution of judgment 'put in force' after commencement of a compulsory winding up is void1. An execution begun
before commencement, but not completed until afterwards, is not void. However, subject to the discretion of the court,
the creditor cannot retain the benefit of it as against the liquidator2. For this purpose execution is complete only once
the sheriff has seized the goods and sold them3, and it is not complete even if the failure to sell is through the fault of a
third party4. If the execution is not complete the sheriff must hand over the goods seized (and any money paid in part
satisfaction) to the liquidator on being required to do so, though subject to deducting the costs of the execution which
are a first charge on the goods or money5. However, a purchaser in good faith from the sheriff is protected6. An
execution which is complete before commencement of a compulsory winding up is valid, but to the extent that it
exceeds the prescribed sum7, the sheriff must pay over the proceeds to the liquidator if within 14 days of the completion
of the execution he is notified of the presentation of the winding-up petition8. As mentioned above, the court has a
discretion to permit a creditor to retain the benefit of his execution even though it infringes these rules, but it will not
ordinarily do so9. It may be sufficient that the insolvent tenant improperly induces the creditor to delay execution until
it is too late10.
HR A[7442]
Page 282
1 IA 1986, s 128.
2 IA 1986, s 183.
3 Re Dickinson (1888) 22 QBD 187.
4 George v Tompson's Trustee [1949] Ch 322.
5 IA 1986, s 184(1), (2).
6 IA 1986, s 183(2)(b).
7 Currently £500: SI 1986/1996.
8 IA 1986, s 184(3), (4).
9 Re Caribbean Products (Yam Importers) Ltd [1966] Ch 331.
10 Re Grosvenor Metal Co Ltd [1950] Ch 63; cf Re Redman (Builders) Ltd [1964] 1 All ER 851.
HR A[7443]
The rule forbidding the execution of a judgment during a compulsory winding up 1 does not apply to a voluntary
winding up2. However, the liquidator, any contributory or any creditor may apply to the court to determine any
question3, and the court may stay any execution4. And in any event, subject to the court's discretion5, an execution
creditor cannot retain the benefit of his execution against the liquidator unless it is complete before the commencement
of the winding up6, or (in the case of a voluntary winding up) the day on which he has notice of the meeting at which
voluntary winding up is to be proposed7. But a purchaser in good faith from the liquidator is protected8. If the
execution is not complete before notice of the appointment of a provisional liquidator, of the making of a winding-up
order, or of the passing of a resolution to wind up is served on the sheriff, he must hand over the goods seized (and any
money seized or received in part satisfaction) to the liquidator on being required to do so, subject to deducting the costs
of the execution9. Even if the execution is complete before winding up supervenes, the creditor may still lose the
benefit of it, if the judgment was for a sum exceeding the prescribed sum10. In such a case the sheriff must retain the
proceeds of sale or money paid for 14 days11. Then, if notice is given to the sheriff within the 14 days of a petition for
winding up having been presented, or of a meeting having been called at which will be proposed a resolution for
winding up, and an order is thereafter made or a resolution passed, the sheriff is obliged to pay the balance, net of his
costs, to the liquidator, who can retain it as against the execution creditor12. It appears that no distinction is to be drawn
between execution of judgment on goods which are sold and executing it on cash13. The court has power to set aside
the rights conferred on the liquidator in favour of the creditor,14 though 'weighty reasons' are needed for it to do so.15
HR A[7444]
1 IA 1986, s 128; see para HR A[7441].
2 Westbury v Twigg & Co [1892] 1 QB 77.

Page 283
3 IA 1986, s 112.
4 Herbert Berry Associates Ltd v IRC [1978] 1 All ER 161.
5 IA 1986, s 183(2)(c).
6 IA 1986 s 183(1).
7 IA 1986 s 183(1), (2)(a), (c).
8 IA 1986, s 183(2)(b).
9 IA 1986, s 184(1), (2).
10 Currently £500: SI 1986/1996.
11 IA 1986, s 184(3).
12 IA 1986, s 184(4).
13 See IA 1986, s 184(2) ('and any money seized').
14 IA 1986, s 184(5).
15 Re Carribean Products (Yam Importers) Ltd [1966] Ch 331.
HR A[7445]
The property of a company does not vest in the liquidator on the passing of a resolution or the making of a winding-up
order. He may apply to the court to have it, or any part of it, vested in him1, but this is normally unnecessary in view of
the width of his powers to act in the company's name2. The company as tenant under a lease remains bound by any
covenants, for example, against assignment, and hence the liquidator must take care to avoid liability for procuring a
breach of contract3. The liquidator may disclaim a lease or other 'onerous property'; this is discussed in detail later4.
Any disposition of the company's property after the commencement of the winding up (ie presentation of the petition5)
is void unless the court otherwise orders6. This will include assignment of a lease7, a charge8, and probably a
surrender. But a disposition by a mortgagee of mortgaged property is not caught9, nor completion by the company of a
specifically enforceable contract of sale made before winding up 10. There is also an exemption for dispositions made
under 'financial collateral arrangements' (which are likely to include most rent deposits and similar arrangements)11. If
the prohibition applies, there is no protection for a purchaser in good faith. It seems that legal title passes to the
transferee, who holds upon trust for the company12. The court's discretion to validate dispositions that would otherwise
be void is not fettered by statutory criteria. It should not be exercised so as to permit an unauthorised disposition to
reduce the assets available for unsecured creditors, but otherwise should do equity between unsecured creditors on the
one hand and claimants under the unauthorised disposition on the other13. On the dissolution of a company14 all
property vested in it immediately before dissolution, including leaseholds, vests in the Crown, the Duchy of Lancaster
or the Duchy of Cornwall (as the case may be) as bona vacantia15. It commonly happens that application is made to the
court for an order avoiding the dissolution16 or for restoration of a company to the register17 in order for dealings to be
carried out with the company's leasehold property18, or (more rarely) claims against the company to be satisfied out of
its assets19.
Page 284
HR A[7446]
1 Insolvency Act 1986 s 145(1).
2 IA 1986, ss 167, 168, Sch 4.
3 Cf para HR A[7449].
5 See para HR A[7421], n 14.
6 IA 1986 s 127.
7 Re AI Levy (Holdings) Ltd [1964] Ch 19.
8 Re Park Ward & Co Ltd [1926] Ch 828.
9 Cf Re Margart Pty Ltd [1985] BCLC 314.
10 Re French's (Wine Bar) Ltd [1987] BCLC 499; the same reasoning would apply if the company in liquidation were the purchaser rather
than the vendor.
11 Financial Collateral Arrangements (No 2) Regulations 2003 (SI 2003/3226), reg 10(1).
12 Re French's (Wine Bar) Ltd [1987] BCLC 499.
13 Re Tramway Building & Construction Co Ltd [1998] Ch 293, [1987] BCLC 632.
14 See IA 1986, ss 201-205.
15 Companies Act 1985, s 654. Note that the Companies Act 2006, s 1012 (which is not yet in force) contains a similar provision.
16 CA 1985, s 651. Note that CA 2006, ss 1029-1031 and 1033-1034 (which are not yet in force) contain new provisions governing
restoration to the register following dissolution.
17 CA 1985, s 653. Note that CA 2006, ss 1024-1028 and 1033-1034 (which are not yet in force) provide for a new procedure of
'administrative restoration to the register'.
18 See eg Stanhope Pension Trust Ltd v Registrar of Companies (1993) 69 P & CR 238, [1994] 1 BCLC 628; Re Oakleague Ltd [1995] 2
BCLC 624; Shire Court Residents Ltd v Registrar of Companies [1995] BCC 821.
19 Eg Stanhope Pension Trust Ltd v Registrar of Companies [1994] 1 BCLC 628; Steans Fashions Ltd v Legal and General Assurance
Society Ltd [1995] BCC 510.
HR A[7447]
Page 285
Just as liquidation does not in itself affect the tenant-company's liabilities under a lease, neither does it automatically
affect the liability of any surety for the tenant1, unless (unusually) the terms of the surety agreement so provide2. The
same applies in relation to the liability of the original tenant who has assigned to the present tenant, now in liquidation3.
The effect on a surety (or an original tenant) where the lease is disclaimed is considered later4. Where a lease has been
assigned and the assignor goes into liquidation this does not affect the assignee's obligations toward the landlord.
However, the landlord has effectively lost a source of indemnity if the assignee as tenant in possession fails to perform
the covenants under the lease. Accordingly the landlord may prove in the liquidation of the original tenant5 for the
difference between the value of the lease with and the value of the lease without the right of indemnity against the
original tenant6. The financial strength of the assignee will be a consideration7. The failure to prove will discharge the
contingent liability8. The same argument can be made if the assignee goes into liquidation: the assignor has an original
liability to the landlord in respect of which he has a right of indemnity against the assignee, and he must prove for that
right in the assignee's liquidation or lose it9. Where a tenant is in liquidation and a surety or original tenant has been
called upon by the landlord to pay rent or perform a covenant, he is subrogated to the landlord's rights against the
(insolvent) tenant10. This will give a higher priority in the liquidation than merely proving for the right of indemnity as
an unsecured creditor11. A former tenant or his surety who pays in full (plus any interest) sums owed by the current
lease has the right to an overriding lease from the landlord12. The position of subtenants is the same as stated in relation
to receivers13, except that arguably the landlord requires the leave of the court to serve the statutory notice requiring
payment of rent direct to himself14.
HR A[7448]
1 Boyd v Robins (1859) 5 CBNS 597.
2 Cf Kennewell v Dye [1949] Ch 517.
3 Subject, of course, to the Landlord and Tenant (Covenants) Act 1995: see para HR A[2801].
5 James Smith & Sons (Norwood) Ltd v Goodman [1936] Ch 216.
6 Re House Property & Investment Co [1954] Ch 576.
7 Cohen v Popular Restaurants Ltd [1917] 1 KB 480.
8 Hardy v Fothergill (1888) 13 App Cas 351; James Smith & Sons (Norwood) Ltd v Goodman [1936] Ch 216.
9 Hardy v Fothergill (1888) 13 App Cas 351.
10 Duncan Fox & Co v North and South Wales Bank (1880) 6 App Cas 1.
11 Re Downer Enterprises Ltd [1974] 2 All ER 1074.
12 Landlord and Tenant (Covenants) Act 1995, s 17; see para HR A[2167].
13 Paragraph HR A[7401].
Page 286
14 Cf Re Memco Engineering Ltd [1986] Ch 86.
HR A[7449]
A liquidator in a voluntary winding up is an agent of the company, but not an officer of the court1. A liquidator in a
compulsory winding up is both. In the former capacity he owes fiduciary duties to the company, such as the obligation
to avoid conflict of duty and interest, and the duty not to profit from his position over and above his stipulated
remuneration2. If he misapplies the company's property or is guilty of any breach of duty the court can order him to
make restitution3. But a former liquidator ordered to make a contribution to assets has no standing to challenge the new
liquidator's decision to admit to proof a creditor's claim in a greater sum than he himself accepted4. As an officer of the
court, he must display high standards of conduct5 and must not act in a wasteful or vexatious manner6. If he receives
money paid under mistake of law he must refund it, even though an ordinary person might not be so obliged7. Since
property of the company does not automatically vest in the liquidator, he is not personally liable on the covenants in a
lease belonging to the company, even if he fails to disclaim the lease8. It is arguable that he does not become so liable
even if an order is made9 vesting the lease in him10. But the liquidator could become a joint tortfeasor with the
company, for example, for waste11, or liable for procuring the company to commit a breach of contract, for example,
assigning without landlord's consent12. He is not liable personally for rates on premises occupied by the company13.
HR A[7450]-[7460]
1 Re John Bateson & Co [1985] BCLC 259.
2 Silkestone and Haigh Moor Coal Co v Edey [1900] 1 Ch 167.
3 IA 1986 s 212.
4 Re AMF International Ltd (No 2) [1996] 2 BCLC 9.
5 Re Wyvern Developments Ltd [1974] 2 All ER 535.
6 Re Smith, ex p Brown (1886) 17 QBD 488.
7 Re Condon, ex p James (1874) 9 Ch App 609.
8 Stead Hazel & Co v Cooper [1933] 1 KB 840.
10 Graham v Edge (1888) 20 QBD 683, decided under the Companies Act 1862 (but it was regarded as significant that the liquidator had
at that date no power to disclaim).
11 Cf Mancetter Developments Ltd v Garmanson Ltd [1986] QB 1212.
12 Esso Petroleum Co Ltd v Kingswood Motors (Addlestone) Ltd [1974] QB 142; Law Debenture Trust Corpn plc v Ural Caspian Oil
Corpn Ltd [1993] 2 All ER 355.
Page 287
13 Re Wearmouth Crown Glass Ltd (1882) 19 Ch D 640; Re Nolton Business Centres Ltd [1996] 1 BCLC 400.
Page 288
receivership/C Individual procedures
C
Page 289
receivership/C Individual procedures/1 Voluntary arrangements
1 Voluntary arrangements
HR A[7461]
An individual voluntary arrangement (IVA) is either a composition between debtor and some or all creditors under
which the latter accept less in satisfaction of debts than they are entitled to, or a scheme of arrangement by which the
debtor's property is transferred to a third party for sale and distribution to creditors. Following amendments to Pt VIII of
the Insolvency Act 1986, introduced by s 3 and Sch 3 of the Insolvency Act 2000 with effect from 1 January 2003, there
are now two routes into an IVA. Under the first route, a debtor wishing to propose an IVA applies to the court for an
interim order nominating a trustee or supervisor (the 'nominee') of the arrangement1. The making of that application has
a limited protective effect, discussed below2. The court may only make an interim order if certain conditions are
satisfied3. If an order is made, this has further protective effects, discussed below4, which last for 14 days unless
extended5. During this period the nominee obtains information from the debtor and prepares a report on the proposals6.
Under the second route there is no application for an interim order or accompanying moratorium. Instead, the debtor
simply submits his proposals to a nominee who then proceeds to prepare his report7. Under each route, if the nominee
so recommends, a meeting of creditors is held to consider whether to approve the proposed IVA8. All creditors who are
aware of the meeting9 are entitled to attend and vote, and are bound by the arrangement if approved10. There is,
however, a right for creditors to apply to court to challenge an IVA following approval on the grounds (among others)
that it unfairly prejudices their interests11. A creditor who was not aware is not bound and may present a bankruptcy
petition12. Creditors vote by value of debt owed (in the case of a person not yet bankrupt) at the date of the meeting13,
though a landlord's vote can be weighted in respect of future rents14. However, a claim for an unliquidated or
unascertained sum (including one for unascertained service charges or in respect of defective works15) only entitles the
claimant to vote where the chairman estimates a minimum value for voting purposes16. The chairman may act
unilaterally, but must make a proper attempt to value the claim17. It is incumbent on a creditor who wishes to vote to
state the amount arising and, if any part of the debt is not ascertained, to supply the chairman with all available
information to enable a minimum value to be put on it18. However, this rule does not apply to a claimant who is absent
from the meeting, who is hence to be treated as entitled to vote, and therefore bound19. The proposal needs at least
three quarters in value of unsecured creditors voting to be approved20. However, if the value of all votes (including
secured) against the proposal exceeds one half in value of all creditors (excluding secured) with notice of the meeting,
then the approval is of no effect21. The meeting cannot approve an arrangement affecting the rights of a secured
creditor22 to enforce his security without his consent, nor must it prejudice the priority of preferential creditors without
theirs23. An IVA releasing a debtor from an obligation does not affect any co-debtors for the same obligation even
though the creditor votes for it, unless it so provides24.
HR A[7462]
1 Insolvency Act 1986, s 253(1).
3 IA 1986, s 255(1).
Page 290
5 IA 1986, s 255(6).
6 IA 1986, s 256(1), (2).
7 IA 1986, s 256A.
8 IA 1986, s 256(5).
9 Even by accident (Beverley Group plc v McClue [1995] BCC 751) or by independent inquiry (Re Debtors (Nos 400 and 401 of 1996)
(1997) Times, 27 February).
10 IA 1986, s 260(2)(b).
11 IA 1986, s 262; see also Prudential Assurance Co Ltd v PRG Powerhouse Ltd [2007] EWHC 1002 (Ch) (a case under the analogous
provision in relation to corporate voluntary arrangements where landlords successfully challenged a corporate voluntary arrangement which
deprived them of recourse to a guarantee of the insolvent tenant's liabilities).
13 IR 1986, r 5.17(2).
15 Re Cranley Mansions Ltd [1994] 1 WLR 1610.
16 IR 1986, r 5.17(3).
18 Re a Debtor (No 47 of 1996) (1997) Times, 20 March.
19 Beverley Group plc v McClue [1995] BCC 751.
20 IR 1986, r 5.18(1).
21 IR 1986, r 5.18(4).
22 Including an execution creditor: Peck v Craighead [1995] 1 BCLC 337.
23 IA 1986, s 258(4), (5).
24 Johnson v Davies ([1998] 49 EG 153, CA.
HR A[7463]
Once approved, the effect of an IVA on liability for rent and other covenants in a lease will depend upon the terms of
Page 291
the IVA1. Procedure short of court action, such as distress2 and forfeiture by peaceable re-entry3 will be unaffected,
except to the extent that the IVA has reduced or removed the liability to which they are attached4. The position pending
approval of an IVA is more complex and depends upon which procedure has been adopted. If the debtor does not apply
for an interim order (ie adopts the second route into IVA), the proposed IVA has no effect on the rights of creditors
unless and until it is approved. If, however, the debtor applies for an interim order (ie adopts the first route into IVA),
pending the hearing, no landlord may exercise any right of forfeiture by peaceable re-entry without the leave of the
court and the debtor may apply to the court to stay any court action, execution or other legal process taken by creditors
against him or his property or to forbid the levying of any distress on the debtor's property or its subsequent sale5.
Furthermore, if an interim order is made, a wider a moratorium then comes into effect, for 14 days unless extended6.
During this time no bankruptcy petition may be presented or proceeded with against the debtor, no landlord may
exercise any right of forfeiture by peaceable re-entry without the leave of the court and no other court proceedings,
execution or other legal process, and no distress may be commenced or continued against the debtor or his property
without the leave of the court7. Once the moratorium comes to an end, the IVA will either have been approved or not. If
approved, the protection of the debtor depends on the terms of the IVA. If not approved, he has no protection as such.
But an approved IVA only binds those creditors who knew of the meeting. A creditor who did not know is not bound
and consequently is free to proceed as he wishes, including to bankrupt the debtor8.
HR A[7464]
1 See also Johnson v Davies [1998] 49 EG 153: whether co-sureties are released when another surety enters an IVA is a question of
construction on contractual principles..
2 McMullen & Sons Ltd v Cerrone (1993) 66 P & CR 351.
3 Re a Debtor (No 13A 10 of 1995) [1995] 1 All ER 961, [1995] 1 WLR 1127.
4 Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 1 EG 94; Re Naeem (a bankrupt) (No 18 of 1988) [1990] 1 WLR 48. Cf
March Estates plc v Gunmark Ltd [1996] 2 BCLC 1.
5 Insolvency Act 1986, s 254.
6 IA 1986, s 255(6).
7 IA 1986, s 252(2).
HR A[7465]
Unless the IVA otherwise provides, it has no effect on the legal ownership of the lease or reversion, which remain
vested in their owner. However, the assets the subject of the arrangement are held on trust to implement it, and hence
normally do not pass to the debtor's trustee in bankruptcy if he subsequently becomes bankrupt1. But if the subsequent
bankruptcy is based on a petition presented by the supervisor2, on grounds of failure by the debtor to comply with its
terms or the supervisor's requirements, or of supply by the debtor of false or misleading information3, the IVA comes to
an end on the bankruptcy order being made, and the assets form part of the debtor's estate in bankruptcy4. The effect of
a tenant's IVA on a surety, an original tenant, an assignee or a subtenant is the same as with a corporate voluntary
Page 292
arrangement5.
HR A[7466]
1 Re Bradley-Hole, (a bankrupt) [1995] 1 WLR 1097.
2 IA 1986, s 264(1)(c).
3 IA 1986, s 276(1).
4 Davis v Martin-Sklan [1995] 2 BCLC 483.
5 See para HR A[7387], and also Johnson v Davies [1998] 49 EG 153.

Page 293
receivership/C Individual procedures/2 Receivership and administration
2 Receivership and administration
HR A[7467]
Of the three kinds of receivership potentially applicable to a corporate body1, only two can apply to an individual: LPA
receivership of a mortgaged legal estate, and court receivership under s 37 of the Supreme Court Act 19812.
'Administrative receivership' is not available. The rules for the first two kinds in relation to an individual are the same as
in relation to a corporate body, which have already been set out3. There is however jurisdiction for the county courts to
make what is called an 'administration order' or an 'order restricting enforcement' in respect of an individual debtor4, to
give him a breathing space5. The order may last up to three years6. Where an administration order is in force, a creditor
may not present a bankruptcy petition without the leave of the court or unless certain conditions are satisfied7, or have
any remedy against the person or property of the debtor in respect of debts notified to the court or included in the court
order, without the leave of the court8. But if at any time the debtor has property (other than protected property9)
exceeding the 'minimum amount'10 the court must at the request of any creditor levy execution without fee and
distribute the proceeds among all the creditors11. And a landlord or other person to whom rent is due may still distrain
on the debtor's goods for such rent, with certain limitations12. Instead of making an administration order, the court may
make an order restricting enforcement13. If so made, no creditor specified in the order has any remedy against the
person or property of the debtor without the leave of the court14.
HR A[7468]
2 Or the analogous procedures under the Landlord and Tenant Act 1987, Pt II.
3 See paras HR A[7389]-[7403].
4 County Courts Act 1984, Part VI, as amended by Insolvency Act 1985, s 220, and Courts and Legal Services Act 1990, s 13.
5 Cf administration for companies, para HR A[7405].
6 CCA 1984, s 112(9).
7 CCA 1984, s 112(4).
8 CCA 1984, s 114(1).
9 CCA 1984, s 89(1), applied by s 115(2).
10 Defined by CCA 1984, s 115(1A).

Page 294
11 CCA 1984, s 115(1).
12 CCA 1984, s 116.
13 CCA 1984, s 112A(1).
14 CCA 1984, s 112A(2).

Page 295
receivership/C Individual procedures/3 Bankruptcy
3 Bankruptcy
HR A[7469]
Bankruptcy as a procedure relating to an insolvent individual has some similarities with liquidation of a company, but
there are also important differences. A bankruptcy order is made on a petition presented by (a) an unsecured creditor
owed at least £750 liquidated debt which the debtor cannot pay; (b) the supervisor of, or any person bound by, an IVA;
(c) the debtor himself1. Inability to pay is demonstrated by a creditor by failure to satisfy a 'statutory demand' or by an
unsatisfied execution of judgment2. A bankruptcy petition cannot be withdrawn without leave3. The presentation of the
petition has a limited protective effect, described later4. If necessary the Official Receiver may be appointed as interim
receiver5. Once a bankruptcy order is made, the debtor must deliver up all his estate to the Official Receiver6. His duty
is to preserve the estate, not to wind it up7. He will act as receiver or manager until the appointment (generally by the
creditors) of a trustee in bankruptcy8. The making of the bankruptcy order confers certain protection on the debtor9.
Subject to exceptions, the property of a bankrupt will vest automatically in the trustee once appointed, though
after-acquired property is subject to a different regime10. Unlike the directors of a company in liquidation, a bankrupt
does not lose all power to deal with others11, though he is subject to severe limitations12.
HR A[7470]-[7480]
1 Insolvency Act 1986, ss 264(1), 267(1), (2), 269(1).
2 IA 1986, s 268(1).
3 IA 1986, s 266(2).
4 Para HR A[7487].
5 IA 1986, s 286(1).
6 IA 1986, s 291(1).
7 IA 1986, s 287(2).
8 IA 1986, ss 293, 294.
11 See eg Dyster v Randall & Sons [1926] Ch 932.

Page 296
12 Eg in obtaining credit: IA 1986, s 360.
HR A[7481]
A bankruptcy order does not by itself have any effect on the individual tenant's obligations to pay rent and comply with
covenants under the lease. The appointment of a trustee in bankruptcy will generally vest the lease in him1, but the
bankrupt (if original tenant) remains liable, even beyond his subsequent discharge from bankruptcy2. Only disclaimer
of the lease3 releases the bankrupt from liability. The landlord can prove in the bankruptcy for sums accrued due up to
the bankruptcy order4, not the date of the petition. If rent is payable in arrears it may be apportioned5. It seems the
landlord cannot set off statutory compensation due to the tenant against sums due from the tenant and prove only for the
balance6. But he can prove for an unliquidated sum7, for example, a claim for breach of covenant to repair. The trustee
in bankruptcy can estimate the value of the claim8, subject to application to the court9. Where an individual has been
adjudged bankrupt, rent or service charges already paid may become subject to the provisions relating to voidable
preferences10, and hence by order of the court become repayable to the trustee in bankruptcy11. But there are old
authorities holding that payment of rent after an act of bankruptcy is unimpeachable if made under threat of distress12
even though there are no goods on the premises at the time13.
HR A[7482]
2 Metropolis Estates Co Ltd v Wilde [1940] 2 KB 536; here the Landlord and Tenant (Covenants) Act 1995 will not assist the bankrupt, as
the vesting in the trustee is an assignment by operation of law: see LT(C)A 1995, s 11.
4 IR 1986, r 6.112(1).
5 IR 1986, r 6.112(2); Re South Kensington Co-Operative Stores (1881) 17 Ch D 161.
6 Alloway v Steere (1882) 10 QBD 22; Re Wilson, ex p Hastings (1893) 62 LJQB 628.
7 IR 1986, r 12.3(1).
8 IA 1986, s 322(3).
9 IA 1986, s 303(1).
10 IA 1986, ss 340-342.
11 Cf Re Beacon Leisure Ltd [1991] BCC 213 (directors not in fact influenced by desire to prefer).
12 Stevenson v Wood (1805) 5 Esp 200.
13 Mavor v Croome (1823) 1 Bing 261.

Page 297
HR A[7483]
Rent and other obligations accruing due after the date of the bankruptcy order are differently treated. First, although the
tenant himself remains liable for them1, they cannot be proved for in the bankruptcy2. Secondly, once the trustee in
bankruptcy is appointed, the lease vests in him and he becomes liable on the covenants as assignee by operation of
law3, unless he disclaims4. In theory the trustee may remain tenant, and hence liable, even after the bankrupt has
obtained his discharge from bankruptcy5. Of course, the trustee has an indemnity out of the bankrupt's estate for any
liabilities which he properly incurs6. It may also be possible to treat rent and other payments in respect of the lease as
an expense of the bankruptcy7, with the priority that that implies8.
HR A[7484]
2 Cf IR 1986, r 6.112.
3 Re Solomon, ex p Dressler (1878) 9 Ch D 252; Re Mercer and Moore (1880) 14 Ch D 287; Wilson v Wallani (1880) 5 Ex D 155, 163;
Titterton v Cooper (1882) 9 QBD 473; Eyre v Hall [1986] 2 EGLR 95.
4 See para HR A[7253] below.
5 Metropolis Estates Co Ltd v Wilde [1940] 2 KB 536.
6 Lowrey v Barker (1880) 5 Ex D 170; Re Witton, ex p Arnol (1883) 24 Ch D 26.
7 IR 1986, r 6.224. Cf para HR A[7423], nn 3-7.
8 See IA 1986, s 328.
HR A[7485]
It is no bar to distress for rent that a bankruptcy petition has been presented, a bankruptcy order has been made1, or that
a trustee in bankruptcy has been appointed and the lease has vested in him2. But the landlord is limited to a maximum
of six months' rent accrued due before the bankruptcy commenced3, any sum recovered in excess being held for the
bankrupt or his estate4. This limit does not apply to distraint on the goods of third parties found on the premises5, and
this will cover goods mortgaged by the tenant to another, who will accordingly lose his security unless he manages to
remove the goods in time6. There is no limit on distraint for rent accruing due after the commencement of the
bankruptcy7, except that the right to distrain on the debtor's goods will cease on his discharge from bankruptcy8.
Similarly, there is nothing to prevent a landlord forfeiting a lease by peaceful re-entry, merely because the tenant has
been adjudicated bankrupt9. But, of course, the trustee in bankruptcy may apply for relief from forfeiture, provided he
does so within one year of the bankruptcy10, and provided it is not a forfeiture of certain types of lease on the ground of
insolvency11. As long as no court proceedings are involved12, no leave is required by a mortgagee to enforce his
mortgage13, for example, of a lease. If a secured creditor has more than one debt he can allocate the security and its
proceeds to a debt with low priority leaving unsatisfied the one with higher priority14. Discharge from bankruptcy
Page 298
releases all provable debts, but does not affect the secured creditor's power to realise the security for his debt (and
interest)15.
HR A[7486]
1 Re Fanshaw and Yorston, ex p Birmingham and Staffordshire Gaslight Co (1871) LR 11 Eq 615; cf Smith (a bankrupt) v Braintree
District Council [1990] 2 AC 215.
2 Re Binns, ex p Hale (1875) 1 Ch D 285; IA 1986 s 347(9).
3 IA 1986, s 347(1).
4 IA 1986, s 347(2).
5 Brocklehurst v Lawe (1857) 7 E & B 176; Railton v Wood (1890) 15 App Cas 363.
6 Tomlinson v Consolidated Credit and Mortgage Corpn (1889) 24 QBD 135.
7 Re Binns, ex p Hale (1875) 1 Ch D 285; Re Wells [1929] 2 Ch 269.
8 IA 1986, s 347(5). As to distraint on the goods of strangers, see Newton v Scott (1842) 10 M & W 471.
9 Ezekiel v Orakpo [1977] QB 260; Razzaq v Pala [1997] 38 EG 157.
10 LPA 1925, s 146(10); Official Custodian for Charities v Parway Estates Developments Ltd [1985] Ch 151.
11 LPA 1925, s 146(9).
12 As to which, see para HR A[7487].
13 IA 1986, s 285(4).
14 Re William Hall (Contractors) Ltd [1967] 2 All ER 1150.
15 IA 1986, s 281(2).
HR A[7487]
The presentation of a bankruptcy petition does not of itself prevent a landlord or other creditor from commencing legal
proceedings against the tenant-debtor. But the court has jurisdiction in such circumstances to stay any action against the
debtor's property or person1. Once a bankruptcy order has been made, the leave of the court is needed to commence any
action2, and in particular no one is thereby to obtain any remedy 'in respect of a debt provable in the bankruptcy'3. Of
course, rent or other obligations accruing due after the date of the bankruptcy order are not provable in the bankruptcy4.
But an action begun without leave is not a nullity, and leave may be applied for and given retrospectively5. In the same
way, the presentation of a bankruptcy petition does not bar execution of a judgment, but the court has power to stay
Page 299
such execution6. If the execution is not complete7 before the date of the order, the creditor cannot retain the benefit as
against the trustee in bankruptcy8, and must on being required to do so hand over the goods seized or the proceeds to
the official receiver or the trustee in bankruptcy9. Even if it is so complete, proceeds of sale exceeding the prescribed
sum10 (but less sale expenses) must be paid over if within 14 days of sale or payment the sheriff is given notice that a
bankruptcy petition has been presented (and an order is thereafter made)11. As with companies in liquidation, the court
has discretion to allow a creditor to retain the benefit of his execution12.
HR A[7488]
1 IA 1986, s 285(1).
2 This includes proceedings for forfeiture: Razzaq v Pala [1997] 38 EG 157.
3 IA 1986, s 285(3). Cf s 130(2), referring to action being 'proceeded with or commenced'.
5 Re Saunders (a bankrupt) [1997] Ch 60.
6 IA 1986, s 285(1).
7 As to which see para HR A[7441], n 3.
8 IA 1986, s 346(1).
9 IA 1986, s 346(2).
10 Currently £500: SI 1986/1996.
11 IA 1986, s 346(3).
12 IA 1986, s 346(6); see para HR A[7441], nn 9-10.
HR A[7489]
The property of a bankrupt does not immediately leave him on a bankruptcy order being made. Until the appointment of
a trustee in bankruptcy the bankrupt's duty is to deliver possession to the Official Receiver1. Any disposition made by
the bankrupt without the leave of the court is void2. The Official Receiver's duty is to preserve the estate, not wind it up,
and for this purpose has all the powers of a receiver appointed by the court3. Once a trustee in bankruptcy is appointed
the bankrupt's estate (subject to exceptions) vests in him automatically, without the need for any act of transfer4. But
certain property (including items needed (a) for personal use in his business or employment; and (b) for domestic family
use) are excluded5. Also excluded are certain residential landlord and tenant rights: a Rent Act statutory tenancy6, a
periodic secure tenancy or one granted after 4 November 19827, protected tenancies in respect of which no premium for
assignment can be lawfully demanded and assured tenancies, assured agricultural occupancies and protected
occupancies under the Rent (Agriculture) Act 1976 where there are restrictions on assigning or underletting8. Finally,
Page 300
any property held by the bankrupt on trust for others is excluded9, even though the bankrupt is also beneficially
entitled10. By operation of statute, this will cover any case where the bankrupt and one or more others jointly hold a
lease or reversion11. Whether it vests in the trustee or not, the bankrupt and his spouse have certain rights of occupation
of a dwelling house, which can only be overridden with the leave of the court12. If the bankrupt acquires property
subsequently, he is obliged to inform the trustee13, who can (but need not) claim the property for the estate14. If the
bankrupt disposes of the after-acquired property without notifying the trustee or allowing him time to make up his mind,
the trustee may follow the property and recover it15, though probably not into the hands of a bona fide purchaser for
value without notice of the bankruptcy16. Where a lease or other 'onerous property' has vested in a trustee, he may
disclaim it. This is discussed in detail later17. To the extent that the bankrupt's property vests in the trustee, the latter
holds it on statutory trusts to realise, turn into money, and pay out in a certain order of priority18.
HR A[7490]-[7500]
1 IA 1986, s 291(1).
2 IA 1986, s 284.
3 IA 1986, s 287(2).
4 IA 1986, s 306.
5 IA 1986, s 283(2).
6 Sutton v Dorf [1932] 2 KB 304.
7 IA 1986, s 283(3A); as to tenancies before that date, see City of London Corpn v Bown (1990) 60 P & CR 42.
8 IA 1986, s 283(3A), However, the trustee may by notice to the bankrupt vest such tenancies in himself retrospectively: IA 1986, s 308A.
9 IA 1986, s 283(3)(a).
10 See Re A Solicitor [1952] Ch 328; cf Governors of St Thomas's Hospital v Richardson [1910] 1 KB 271.
11 LPA 1925, ss 34, 36 (as amended by the Trusts of Land and Appointment of Trustees Act 1996).
12 IA 1986, s 337.
13 IA 1986, s 333(2).
14 IA 1986, s 307.
15 IR 1986, 6.200, 6.201.
16 IA 1986, s 307(4). A purchaser will need to make a bankruptcy search against the name of the vendor: LPA 1925, s 198.

Page 301
18 See IA 1986, ss 305(2), 328.
HR A[7501]
The position of sureties, original tenants, assignees and subtenants where a tenant becomes bankrupt is the same as
where the tenant is a company that goes into liquidation, and reference can be made to the discussion on that subject
above1.
HR A[7502]
HR A[7503]
Before a trustee in bankruptcy is appointed, the Official Receiver acts as receiver and manager of the bankrupt's estate,
with the same powers as if appointed a receiver and manager by the court1. The Official Receiver's position is both one
of agent for the bankrupt, and of officer of the court2. Once the trustee is appointed, the bankrupt's property (subject to
exceptions) vests in him3 and in relation to that he acts as principal rather than agent4. However, the trustee may still
have a residuary role as agent for the bankrupt in certain respects. In addition to this, the trustee is an officer of the court
and is expected to display high standards of conduct5. He must not act in a wasteful or vexatious manner6. If he
receives money paid under mistake of law he must refund it even though an ordinary person might not be so obliged7. If
he misapplies the bankrupt's estate or is guilty of any breach of duty, the court can order him to make restitution8.
Although the benefit of a pre-existing contract vests in him, he is not contractually liable for the debt9, and the other
party must prove in the bankruptcy, if he can. (Of course, the trustee may be liable under a lease by privity of estate10.)
The court has power to discharge obligations under a contract on terms11. The official receiver or the trustee will be
personally liable for torts which he commits12, except for inadvertent and non-negligent conversion of a third party's
property13. The trustee who goes into rateable occupation of premises is personally liable14, and this liability is not
relieved by disclaimer15.
HR A[7504]
1 Insolvency Act 1986, s 287(1), (2).
2 Burr v Smith [1909] 2 KB 306.
4 Re Solomon, ex p Dressler (1878) 9 Ch D 252.
5 Cf Re Wyvern Developments Ltd [1974] 2 All ER 535.
6 Re Smith, ex p Brown (1886) 17 QBD 488.

Page 302
7 Re Condon, ex p James (1874) 9 Ch App 609.
8 IA 1986 s 304.
9 Hopkinson v Lovering (1883) 11 QBD 92; Metropolis Estates Co Ltd v Wilde [1940] 2 KB 536.
11 IA 1986, s 345.
12 Re Roberts, ex p Brook (1878) 10 Ch D 100 (waste).
13 IA 1986, ss 287(4), 304(3).
14 Re Lister [1926] Ch 149.

Page 303
receivership/D Disclaimer
D
Page 304
receivership/D Disclaimer/1 General
1 General
HR A[7505]
Disclaimer is a procedure by which liquidators and trustees in bankruptcy, in winding up an insolvent estate, can divest
the estate of certain continuing obligations1. It is not available to receivers or administrators. It applies to 'onerous
property', that is, any unprofitable contract and any other property which is unsaleable or not readily saleable or which
may give rise to liability to pay money or do onerous acts2. This will include most leases3, including a periodic
tenancy4, a continuation tenancy under Part I of the Landlord and Tenant Act 19545 and an agreement for lease6, as
well as at least some licences7, but not an agreement to sell a lease, unless (perhaps) the lease itself is disclaimed at the
same time8. But it extends beyond the life of a lease, to any onerous contractual obligations on expiry, such as terminal
repair9. It can also apply to a freehold interest, for example, where burdened by mortgages10 or by dangerous structure
notice works expenses11. In bankruptcy cases, disclaimer can only be made by a trustee in bankruptcy of an interest
which vests in him12. If for any reason it does not vest in him13, he cannot disclaim it. A disclaimer must be of the
whole of an interest, and not of part only14. Under the present insolvency regime leave of the court is not normally
necessary for a disclaimer, though it is needed where the trustee wishes to disclaim after-acquired property which he
required the bankruptcy notice to vest in him15. If leave is needed, a disclaimer without it is void16. Nor is there
nowadays a time limit on disclaimer, except where the liquidator/trustee is put to election by written notice from any
person interested in the property requiring him to disclaim within 28 days or not at all17. The decision to disclaim
cannot be interfered with by the court in the absence of bad faith or perversity18.
HR A[7506]
1 IA 1986 ss 178-182 (liquidation), 315-321 (trustees in bankruptcy).
2 IA 1986, ss 178(2), (3), 315(1), (2).
3 Eyre v Hall (1986) 18 HLR 509.
4 Alloway v Steere (1882) 10 QBD 22.
5 Rothschild v Bell [1999] EGCS 27, CA.
6 Re Maughan, ex p Monkhouse (1885) 14 QBD 956.
7 Environment Agency v Stout (30 April 1998, unreported).
8 Re Bastable, ex p Trustee [1901] 2 KB 518; Pearce v Bastable's Trustee in Bankruptcy [1901] 2 Ch 122. See also Capital Prime
Properties plc v Worthgate Ltd [1999] EGCS 112.
9 Re Throckmorton, ex p Paterson (1879) 11 Ch D 908; Re Morrish, ex p Sir W Hart Dyke (1882) 22 Ch D 410.
Page 305
10 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793.
11 Hackney London Borough Council v Crown Estate Comrs [1996] 1 EGLR 151.
12 This is implied by IA 1986, s 315, especially s 315(4).
14 Re Fussell, ex p Allen (1882) 20 Ch D 341.
15 See para HR A[7489], n 13.
16 Metropolitan Estates Co Ltd v Wilde [1940] 2 KB 536.
17 IA 1986, ss 178(5), 316(1). The court may extend the period under the former provision, but not under the latter.
18 Re Hans Place Ltd in liquidation [1993] BCLC 768.

Page 306
receivership/D Disclaimer/2 Procedure
2 Procedure
HR A[7507]
The liquidator/trustee files a prescribed notice of disclaimer in court1. So long as it is clear what is being disclaimed,
inaccuracies do not make the notice void2. Within seven days of its return to him by the court he must serve a copy on
so many of the following as he is aware of:
(a) any subtenant or mortgagee;

(b) any person claiming an interest in the property, for example, the landlord3;
(c) any person under a liability in respect of the property which is not discharged by the disclaimer, for
example, a surety or original tenant4.
HR A[7508]
1 IR 1986, rr 4.187(2), 6.178(2).
2 MEPC plc v Scottish Amicable Life Assurance Society (1993) 67 P & CR 314.
3 Re Morgan, ex p Morgan (1889) 22 QBD 592.
4 IR 1986, rr 4.188, 6.179.
HR A[7509]
It seems that the failure to serve persons whom the liquidator/trustee is unaware of does not prevent the disclaimer from
being effective, even as against them, for there is a procedure for giving notice to those persons subsequently1. If the
liquidator/trustee fails to give notice to persons that he is aware of then it appears that the disclaimer is ineffective2.
Where it appears that there may be some other person interested the liquidator/ trustee may by notice require him to
state within 14 days whether he claims any interest; if he does not respond affirmatively the liquidator/trustee is entitled
to proceed on the basis that such person has no interest which would prevent a disclaimer3. Moreover, in a bankruptcy
case where the property concerned is a dwelling house the disclaimer will not take effect until a copy has been served
on every person occupying or claiming the right to occupy the dwelling house, so far as the trustee is aware of them4.
Where the property disclaimed is a lease registered or noted at the Land Registry, application will need to be made to
deal both with the tenant's and the landlord's titles accordingly5. If any interested person applies to the court for a
vesting order6 (ie an order vesting the lease in that person) within 14 days of service of the last copy of the disclaimer,
then the disclaimer will not take effect until the application is heard7.
HR A[7510]-[7520]
Page 307
1 Insolvency Rules 1986, rr 4.188(5), 4.193.
2 IR 1986, r 4.193.
3 IR 1986, rr 4.192, 6.184.
4 IA 1986, s 318.
5 See Land Registration Act 1925, s 42(2); Land Registration Rules 1925, r 184; as to land registration, see generally, paras HR
A[1310]-[1340].
7 IA 1986, ss 179(1), 317(1).

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receivership/D Disclaimer/3 Effects of disclaimer
3 Effects of disclaimer
HR A[7521]
A disclaimer terminates the rights, interests and liabilities of the debtor in relation to the property disclaimed, as from
the date of disclaimer1. Thus, as between landlord and tenant, a disclaimer by the tenant's liquidator/trustee means that
neither party owes any future obligation under or in respect of the lease to the other, in particular covenants having
effect at the determination of the lease2. Disclaimer of all interest in a licence to assign a lease to a person now
insolvent operates also as a disclaimer of the lease itself3. Where a freehold interest is disclaimed, it escheats to the
Crown4, though subject to any derivative interests granted thereout (for example, leases)5. Obligations accrued due
before disclaimer are not affected by disclaimer, though, of course, debts due to a creditor (for example, a landlord)
before the commencement of the winding up or the bankruptcy order will have to be proved for in the usual way6.
However, any person sustaining loss in consequence of the disclaimer may prove for such loss7. In principle, the loss is
the value of the total income stream under the lease (discounted for payment at the date of disclaimer) on the
assumption of no winding up, less the value of the income derived from any reletting which the landlord can achieve on
the open market for the remainder of the term, plus the rates and the cost of any repairs needed to achieve that letting8.
Hence, the landlord will in effect be able to prove for the loss of the future rents, though any reletting is taken into
account in calculating that loss9, and if the tenant had an option to terminate so must that10. In an appropriate case the
loss can also include a void period for reletting and compensation for breach of repairing covenants11. If a vesting order
is made12, this must also be taken into account13. But others may also suffer loss through the disclaimer, and hence
prove, including original tenants14, sureties15, and subtenants16. Disclaimer of a lease destroys the tenant's right to
remain in the premises thereafter17, and the landlord may demand possession18, though, of course, he does not have to.
In particular, a landlord has no duty to retake possession by way of mitigation of loss19. If the landlord does demand
possession, this may affect his rights as against others, for example, the original tenant20 or sureties for the tenant. It is
not clear what effect disclaimer has on the tenant's right to remove tenant's fixtures. On principle, if they are removed
before disclaimer they should belong to the tenant's estate; if after, to the landlord21. On this basis, the tenant has time
to remove his fixtures before disclaimer.
HR A[7522]
1 Insolvency Act 1986, ss 178(4), 315(3).
2 Re Morrish, ex p Sir W Hart Dyke (1882) 22 Ch D 410.
3 MEPC plc v Scottish Amicable Life Assurance Society (1993) 67 P & CR 314.
4 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793; Hackney London Borough Council v Crown Estate Comrs [1996]
1 EGLR 151.
5 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793.
Page 309
6 See paras HR A[7423], [7481].
7 IA 1986 ss 178(6), 315(5).
8 Christopher Moran Holdings v Bairstow [1999] 2 WLR 396.
9 Re Hide, ex p Llynvi Coal and Iron Co (1871) 7 Ch App 28.
10 Re McEwan, ex p Blake (1879) 11 Ch D 572.
11 Re Carruthers, ex p Tobit (1895) 2 Mans 172.
13 IA 1986, ss 181(5), 320(5).
14 Warnford Investments Ltd v Duckworth [1979] Ch 127.
15 Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70.
16 Re Levy, ex p Walton (1881) 17 Ch D 746.
17 Smalley v Quarrier [1975] 2 All ER 688.
18 Re Hyams, ex p Lindsay v Hyams (1923) 93 LJ Ch 184.
19 Bhogal v Cheema [1998] 29 EG 117.
20 Cromwell Developments Ltd v Godfrey [1998] 33 EG 72.
21 Cf Re Latham, ex p Glegg (1881) 19 Ch D 7, decided under the old law that the lease was deemed surrendered on the trustee's
appointment.
HR A[7523]
Disclaimer will have no effect as such on a liquidator1. But because the bankrupt's property vests in the trustee
personally, and he will be liable, for example, on covenants in a lease2, disclaimer has important effects on him. It will
discharge him from all personal liability in respect of the property retrospectively to the commencement of his
trusteeship3, such as arrears of rent arising between his appointment and the disclaimer4. It seems that the court will not
order the trustee in such a case to pay anything for use and occupation of the premises5, at all events unless the trustee
needs leave to disclaim6, or perhaps if he keeps the property for the purposes of the bankruptcy7. On the other hand, the
trustee cannot thereafter seek a vesting order in his own favour8.
HR A[7524]
Page 310
1 IA 1986, s 178(4)(b).
3 IA 1986, s 315(3)(b).
4 Titterton v Cooper (1882) 9 QBD 473; cf Schofield v Hincks (1888) 58 LJQB 147.
5 Metropolis Estates Co Ltd v Wilde [1940] 2 KB 536; cf Re Atlantic Computer Systems plc [1992] Ch 505.
6 Re Page, ex p MacKay (1884) 14 QBD 401.
7 Re Witton, ex p Arnal (1883) 24 Ch D 26.
8 Re Lee (a bankrupt) (1998) Times, 24 February.
HR A[7525]
The effect of a disclaimer on other parties, such as an original tenant who has assigned, any surety for him or the
insolvent tenant, and any subtenant, is quite different. Although the disclaimer terminates the 'rights, interests and
liabilities' of the debtor in relation to the property disclaimed1, it does not 'affect the rights or liabilities of any other
person', except to the extent that this is necessary to release the debtor from liability2. So although the lease seems to
disappear as between landlord and tenant, it may still be in existence so far as other parties are concerned. Hence, an
original tenant, a first assignee who has directly covenanted with the landlord, and a surety for the latter, are still liable
to the landlord as if no disclaimer had taken place3. So too is a surety for the original tenant, now insolvent4. Any of
these persons still liable may apply for a vesting order5. As they have lost their right of indemnity against the insolvent
tenant, they also have the right to prove for any loss they can demonstrate to have been suffered6. A person having an
interest in the property being disclaimed (for example, a subtenant7 or mortgagee8) continues to hold that interest on
the same terms and subject to the same rights and obligations as if the disclaimer had not happened. If he performs the
tenant's part in the disclaimed lease he cannot be ejected; if he does not the landlord can distrain or forfeit9. In the latter
case the subtenant may be able to obtain relief from forfeiture10. A subtenant or mortgagee may be put to an election
either to apply for a vesting order or to accept exclusion from the premises11. A statutory tenant is not a subtenant for
this purpose12. If the person put to election does not make application within the time stipulated by the court, he will
lose the opportunity to apply13. In practice someone is likely to apply for a vesting order. A subtenant or an original
tenant may be prompted to do so by the fact that as such subtenant or original tenant it may be required to pay rent14
and VAT on it, but (arguably) cannot recover the VAT element15.
HR A[7526]
2 IA 1986, ss 178(4)(b), 315(4). See Capital Prime Properties plc v Worthgate Ltd [1999] EGCS 112.
3 Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70 [1996] 1 All ER 737, HL; Re ITM Corpn Ltd [1997] 2 BCLC 389;
Beegas Nominees Ltd v BHP Petroleum Ltd (1998) 77 P & CR 14, [1998] 2 EGLR 57, CA; Cromwell Developments Ltd v Godfrey (1998)
78 P & CR 197, [1998] 2 EGLR 62, CA; Basch v Stekel (2000) 81 P & CR DI, CA.
Page 311
4 Hindcastle, overruling Stacey v Hill [1901] 1 KB 660.
6 See para HR A[7521], n 4; Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70, [1996] 1 All ER 737, HL.
7 Re A E Realisations (1985) Ltd [1987] 3 All ER 83; Shire Court Residents Ltd v Registrar of Companies [1995] BCC 821; Hindcastle
Ltd v Barbara Attenborough Associates Ltd [1997] AC 70, [1996] 1 All ER 737, HL; cf Re ITM Corpn Ltd [1997] 2 BCLC 389.
8 Re Wilson (1871) LR 13 Eq 186.
9 Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70; Pellicano v MEPC plc [1994] 1 EGLR 104.
10 LPA 1925, s 146(4); Hill v Griffin [1987] 1 EGLR 81.
11 IA 1986, ss 182(4), 321(4); Re A E Realisations (1985) Ltd [1987] 3 All ER 83; Re ITM Corpn Ltd [1997] 2 BCLC 389.
12 Re Vedmay Ltd (1993) 69 P & CR 247.
13 Re Baker, ex p Lupton [1901] 2 KB 628.
14 Ie under the covenant in the original lease (original tenant) or under the Law of Distress Amendment Act 1908, s 6 (subtenant).
15 But whether this is so in all cases is open to doubt.

Page 312
receivership/D Disclaimer/4 Vesting orders
4 Vesting orders
HR A[7527]
As already mentioned1, the effect of applying to the court for a vesting order within 14 days of the service of the last
copy of the disclaimer is to postpone the effect of the disclaimer until the application is heard. Application can be made
by any person claiming an interest in, or being under an ongoing liability in respect of, the disclaimed property2. This
includes sureties, original tenants, mortgagees and subtenants, the landlord himself3, a mere 'statutory' subtenant4, and a
local authority seeking to recover the costs expended on a dangerous structure5. But the trustee in bankruptcy, having
disclaimed, may not apply6. Nor may a contracting purchaser of the lease7. In a bankruptcy case where the disclaimed
property is property in a dwelling house, application can also be made by a person in occupation of or entitled to occupy
the dwelling house8. The procedure for the application is laid down by the rules, which prescribe a time limit of three
months from first becoming aware of the disclaimer for the application to be made9. The application may be to have the
lease vested in the applicant, or in some other person10. But the court may only make a vesting order in favour of a
person (or a trustee for a person) entitled to the property, or subject to a liability in respect of it not discharged by the
disclaimer, or (in the case of bankruptcy where the property is a dwelling house) in occupation of or entitled to occupy
the dwelling house11. So, for example, a landlord cannot obtain a vesting order in his own favour unless the prior
interests of all others have been cleared away12. It seems that a subtenant or mortgagee will be preferred, and then a
surety or former tenant13, and finally the landlord14. The court will normally make a vesting order if asked15, though it
may refuse if the applicant is a person bound to take a new lease under the terms of the old16.
HR A[7528]
1 Para HR A[7509], n 7.
2 IA 1986, ss 181(2), 320(2).
3 Re Cock, ex p Shilson (1887) 20 QBD 343.
4 Re Vedmay Ltd (1993) 69 P & CR 247.
5 Hackney London Borough Council v Crown Estate Comrs [1996] 1 EGLR 151.
6 Re Lee, (1998) Times, 24 February.
7 Lloyds Bank SF Nominees v Aladdin [1996] 1 BCLC 720 CA, although see Test Valley Borough Council v Minilec Engineering Ltd
[2005] 2 EGLR 113 (equitable assignees of lease held to have sufficient proprietary interest to apply for vesting order).
8 IA 1986, s 320(2)(c).
9 IR 1986, rr 4.194, 6.186.

Page 313
10 Re Finley, ex p Clothworkers' Co (1888) 21 QBD 475; Re Baker, ex p Lupton [1901] 2 KB 628.
11 IA 1986, ss 181(3), 320(3).
12 Re ITM Corp Ltd [1997] 2 BCLC 389.
13 Re AE Realisations (1985) Ltd [1987] 3 All ER 83.
14 Re Cock, ex p Shilson (1887) 20 QBD 343.
15 Re Britton (1889) 37 WR 621.
16 Re AE Realisations (1985) Ltd [1987] 3 All ER 83.
HR A[7529]
In considering the terms of the vesting order, it is necessary to distinguish liquidation and bankruptcy cases. In
bankruptcy cases the rule is that an order (no matter in whom it vests the lease) has normally to be made on terms either
that the new tenant is subject to the same liabilities as the insolvent tenant was at the date of presentation of the petition,
or as the new tenant would have been in taking an assignment on that day1. The difference is that in the former case the
new tenant will be liable for accrued breaches2; in the latter he will not. The use of the latter form seems to be rare3. If
no one will accept an order in these terms the court may vest the lease in any person liable to perform the tenant's
covenants (for example, original tenant, surety) freed from all estates, incumbrances and interests created by the
bankrupt4. In liquidation cases the rule is that where an order vests the lease in a subtenant or mortgagee it has normally
to be made in terms of either of the two forms mentioned above, ie that the new tenant is subject to the same liabilities
as the insolvent tenant was at the date of presentation of the petition, or as the new tenant would have been in taking an
assignment at the commencement of the winding up5. Where the order vests the lease in a person not a subtenant or
mortgagee the court has a discretion as to the form of order, and can vest the lease in him freed and discharged from all
estates, encumbrances and interests created by the company6. In both liquidation and bankruptcy cases the court may
make a vesting order as to only part of the premises concerned7. This will be a vesting of part of the disclaimed lease,
and hence at an apportioned part of the rent of that lease. The duty of the court in making a vesting order is to ensure
that the disclaimer has effect with as little disturbance as possible of the rights and liabilities of third parties8. So the
court may attach conditions to an order vesting the lease in a mortgagee to ensure that any surplus on sale enures for the
benefit of the bankrupt's creditors9.
HR A[7530]-[7540]
1 IA 1986, s 321(1).
2 Re Walker, ex p Mills (1895) 64 LJQB 783.
3 Re Walker, ex p Mills (1895) 64 LJQB 783; cf Re Carter and Ellis, ex p Savill Bros [1905] 1 KB 735.
4 IA 1986, s 321(3).
5 IA 1986, s 182(1).
Page 314
6 IA 1986, s 182(3).
7 IA 1986, s 182(2), 321(2).
8 Re Carter and Ellis, ex p Savill Bros [1905] 1 KB 735; Re Lee (a bankrupt) (1998) Times, 24 February; cf Beegas Nominees Ltd v BHP
Petroleum Ltd [1998] 31 EG 96.
9 Re Lee (a bankrupt) (1998) Times, 24 February.
HR A[7541]
The effect of the order is to vest the lease in the person concerned without the need for further conveyance1, though if
the lease is registered the order will direct the alteration of the register by the registrar2. The order must also contain a
direction giving effect to the disclaimer3. The court has a discretion to make such order as it thinks fit in respect of any
fixtures or tenant's improvements4.
HR A[7542]
1 IA 1986, ss 181(6), 320(6).
2 Pursuant to LPA 1925, s 42(2).
3 IR 1986, r 6.186(7), 4.194(7).
4 IA 1986, ss 179(2), 317(2).

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receivership/D Disclaimer/5 Disclaimer by the Crown
5 Disclaimer by the Crown
HR A[7543]
In a liquidation, if a lease is not disclaimed and the company is dissolved, the lease will vest in the Crown (or Duchy of
Lancaster or Cornwall, as appropriate) as bona vacantia1. The Crown or Duchy has 12 months from the date of
knowledge of the vesting coming to the Treasury Solicitor's knowledge, or three months from receipt of notice from a
person interested in the property, to decide whether or not to disclaim the lease2. If the Crown or Duchy does disclaim,
the lease is deemed never to have vested in it3, and certain statutory provisions4 apply as if the liquidator had
disclaimed the lease immediately before dissolution5. If the company is subsequently restored to the register6, it is
deemed to have continued in existence as though never struck off7. Hence, the restoration also restores any lease
previously held by the company, assuming it has not been forfeited in the interim8.
HR A[7544]-[7640]
1 Companies Act 1985, s 654.
2 Companies Act 1985, s 656.
3 Companies Act 1985, s 657(1).
4 IA 1986, ss 178(4), 179-182.
8 Allied Dunbar Assurance plc v Fowle [1994] BCC 422; Shire Court Residents Ltd v Registrar of Companies [1995] BCC 821.
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 13 Options
Chapter 13 Options
Editor
John Furber
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 13 Options/A Option to purchase
A
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 13 Options/A Option to purchase/1
Nature of option to purchase lessor's interest
1 Nature of option to purchase lessor's interest
HR A[7641]
A lease may confer upon the lessee an option to purchase the lessor's interest in the demised premises1. Such an option
is collateral to the lease2 and creates a property right which is in principle capable of assignment by the lessee3.
However, it does not directly affect or concern the land, as the subject matter of the lease, and does not run with the land
and the reversion4. It must, therefore, be registered as an estate contract in order to be enforceable against a purchaser of
the reversion5 although, in the case of registered land, the option may be enforceable against a purchaser of the
reversion even if not registered, provided that the lessee is in actual occupation of the land6. However, the lessee owes
no duty to the lessor to register the option, and the lessor does not cease to be bound by the option on the sale of the
reversion, so that he may be liable in damages if, by virtue of the sale, he puts it out of his power to perform the option
contract7.
HR A[7642]
1 This usually takes the form of a covenant by the lessor to convey his interest in the premises to the lessee upon the lessee giving notice
of a specified length at a specified time. The price to be paid by the lessee should also be specified: see para HR A[7667]. The exercise of
the option is often subject to conditions precedent: see para HR A[7663]. Although an option agreed between a lessor and a lessee, whereby
one party may acquire the other's interest, is part of the contractual relationship between landlord and tenant, it is in principle possible for the
agreement to be set aside on the grounds of undue influence: Macklin v Dowsett [2004] EWCA Civ 904, [2004] 34 EG 68.
2 Griffith v Pelton [1958] Ch 205 at 225 [1957] 3 All ER 75 at 84, CA, where it was said that, although collateral to the lease, the option is
in itself a distinct contract possessing all the essential characteristics of an 'option in gross'.
3 Re Button's Lease [1964] Ch 263, [1963] 3 All ER 708. The grant of an option has sometimes been described as an 'irrevocable offer'
and sometimes as a 'conditional contract'. In Spiro v Glencrown Properties Ltd [1991] Ch 537, at 544 [1991] 1 All ER 600, at 605, 606,
Hoffmann J said that an option does not have all the incidents of the standard form of either of these concepts, but there are ways in which it
resembles each of them. In the construction of s 2 of the Law of Property (Miscellaneous Provisions) Act 1989, the judge held that the grant
of the option was the contract for the sale of land within the meaning of that section, and that it complied with the statutory requirements.
For further consideration of the assignment of the benefit of an option, see para HR A[7664].
4 Woodall v Clifton [1905] 2 Ch 257, CA.
5 Beesly v Hallwood Estates [1960] 2 All ER 314, [1960] 1 WLR 549 (which now should be read together with the observations of
Hoffmann J in Spiro v Glencrown Properties Ltd [1991] Ch 537 at 544, [1991] 1 All ER 600 at 606). The registration is pursuant to s 2 of
the Land Charges Act 1972 (class C(iv)) in the case of an unregistered reversion or, in the case of a registered reversion, by a notice,
restriction or caution under the Land Registration Act 1925.
6 Webb v Pollmount [1966] Ch 584, [1966] 1 All ER 481. The option in such a case is an overriding interest within the Land Registration
Act 1925, s 70(1)(g); consequently, by virtue of s 20(1)(b), it binds the purchaser for valuable consideration of a legal estate in the land
where the freehold is registered with absolute title. Actual occupation of part of the land which is subject to the option may suffice for this
purpose: Ferrishurst Ltd v Wallcite Ltd [1999] Ch 355, [1999] 1 All ER 977, CA.
Page 319
7 Wright v Dean [1948] Ch 686, [1948] 2 All ER 415.
HR A[7643]
As an option to purchase the lessor's interest is not strictly a term of the lease, it will not be incorporated into the terms
of a yearly tenancy created by the tenant holding over after the expiration of the lease1, and when the parties agree that
a lease shall be extended for a further term of years the option will not be deemed to be one of the terms of the extended
lease2. There is no jurisdiction to include an option to purchase as one of the terms of a new tenancy of business
premises ordered by the court pursuant to Pt II of the Landlord and Tenant Act 19543.
HR A[7644]
1 Re Leeds and Batley Breweries Ltd and Bradbury's Lease [1920] 2 Ch 548. Similarly, an option to purchase 'at any time' may be
construed to mean 'at any time during the currency of the original tenancy' and thus not exercisable after the expiry of the contractual
tenancy during a statutory tenancy created by the Rent Act 1977 or similar legislation: Longmuir v Kew [1960] 3 All ER 26, [1960] 1 WLR
862. However, it is possible, as a matter of law, for the continuance of the lease and the option to be separate and, in such a case, the option
may be exercised even though the lease has been forfeited: see Raffety v Schofield [1897] 1 Ch 937.
2 Sherwood v Tucker [1924] 2 Ch 440, CA. However, where it is expressly stated that the new lease will contain all the terms, covenants
and conditions of the old lease then this statement will be construed as referring to the contents of a document, rather than to the relationship
of landlord and tenant, and an option to purchase contained in the old lease will be included in the new lease: see Batchelor v Murphy [1925]
1 Ch 220, CA; affd [1926] AC 63; Hill v Hill [1947] Ch 231, [1947] 1 All ER 54, CA.
3 Kirkwood v Johnson (1979) 38 P & CR 392, CA.
HR A[7645]
In principle, the rule against perpetuities applies to an option to purchase the lessor's interest1. However, the rule does
not apply to options to purchase for valuable consideration provided that (i) the option is exercisable only by the lessee
or his successors in the title and (ii) it ceases to be exercisable at or before the expiration of one year following the
determination of the lease2.
HR A[7646]
1 This is because it does not run with the land: see Woodall v Clifton [1905] 2 Ch 257, CA and para HR A[7641].
2 Perpetuities and Accumulations Act 1964, s 9(1) applicable only to instruments taking effect after the commencement of the Act (16
July 1964): s 15(5). In practice, in most cases, the option will satisfy the two conditions referred to in the text. In cases where the two
conditions are not satisfied, the perpetuity period does apply and the period is 21 years: s 9(2). However, the 'wait and see' rule applies (s 3),
so that an option granted without a time limit will still be valid if it is actually exercised within 21 years of its creation. If the rule against
perpetuities is infringed, the option will be unenforceable not only against successors in title of the lessor, but also against the grantor: see s
10, changing the law as described in eg Hutton v Watling [1948] Ch 26, [1947] 2 All ER 641.
HR A[7647]
Page 320
In some cases, Parliament has in effect conferred upon a lessee an option to purchase his lessor's interest. Under the
provisions of the Leasehold Reform Act 1967 (as amended) a lessee of a house under a long tenancy at a low rent may
be able to compel the lessor to convey his interest, and the Leasehold Reform, Housing and Urban Development Act
1993 may confer similar rights upon a lessee of a flat holding on similar terms1.
HR A[7648]
1 For the rights of enfranchisement conferred by the 1967 and 1993 Acts, see Division E.
Page 321
Assignment of option to purchase
2 Assignment of option to purchase
HR A[7649]
The benefit of an option to purchase is in principle assignable1. If the option is stated to be given to the lessee and his
assigns, then the benefit passes on an assignment of the lessee's interest even though no reference is made to it in the
assignment2. It has not yet been conclusively determined whether, in the absence of such wording, the benefit of the
option will pass merely by virtue of an assignment of the lessee's interest, and therefore it is prudent to make express
reference to the option in the deed of assignment3.
HR A[7650]-HR A[7660]
1 See para HR A[7641], n 3. However, the terms of the option may show that it is personal only or may impose restrictions upon the
ability to assign it: see Griffith v Pelton [1958] Ch 205 at 225, [1957] 3 All ER 75 at 83, CA.
2 Griffith v Pelton [1958] Ch 205, [1957] 3 All ER 75, CA. It seems that an option expressed in such terms can only be assigned to a
person who is an assignee of the lessee's interest: see Re Button's Lease [1964] Ch 263 at 273, [1963] 3 All ER 708 at 714.
3 See Re Button's Lease [1964] Ch 263, [1963] 3 All ER 708, in which Plowman J did not decide whether the benefit of the option had
passed on the assignment of the lease or on a later express assignment of the option.
HR A[7661]
Where the option is given to the lessee and his assigns, it is not exercisable by an equitable assignee1.
HR A[7662]
1 Friary Holroyd and Healey's Breweries Ltd v Singleton [1899] 1 Ch 86 (reversed on the facts of the case by the Court of Appeal ([1899]
2 Ch 261)).
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Conditions precedent to exercise of option to purchase
3 Conditions precedent to exercise of option to purchase
HR A[7663]
Any matters which by the terms of the option are made conditions precedent to its exercise must be strictly observed1.
Thus, the notice must be given within the specified period2, and if payment of the purchase-money at the expiration of
the notice is made a condition precedent, the payment must be duly made3. However, it is not essential that the lessee
shall have performed all the stipulations of the lease, unless such performance is made a condition precedent4, and in
any event, strict compliance with the terms of the option may be waived5. Where the option does require performance
of the covenants as a condition precedent to its exercise, it will usually be sufficient if there are no subsisting breaches
of covenant on the operative date6.
HR A[7664]
1 This rule is applicable to the exercise of options of all sorts, including options to renew and determine leases (see paras HR A[7701] and
[7725]): see Finch v Underwood (1876) 2 Ch D 310, Hare v Nicoll [1966] 2 QB 130, [1966] 1 All ER 285, CA, West Country Cleaners
(Falmouth) Ltd v Saly [1966] 3 All ER 210, [1966] 1 WLR 1485, CA. However, see also the consideration of Mannai Investment Co Ltd v
Eagle Star Life Assurance Co Ltd [1997] AC 749, [1997] 3 All ER 352, at paras HR A[7727]-[7728].
2 In the case of an option, 'time is of the essence': see the observations of the House of Lords in United Scientific Holdings Ltd v Burnley
Borough Council [1978] AC 904, [1977] 2 All ER 62, HL (distinguishing between rent review clauses and options), and see also Lord
Ranelagh v Melton (1864) 2 Drew & Sm 278 and Riddell v Durnford (1893) 37 Sol Jo 267. However, the lessor may, by his conduct, waive
any delay: see Pegg v Wisden (1852) 16 Beav 239, and n 5 below. For examples of judicial construction of requirements as to the exercise of
options, see also Wheatley v Burrell Enterprises Ltd (1963) 186 Estates Gazette 259; Dyet Investments v Moore (1972) 223 Estates Gazette
945; Page v Mallow Investments Ltd (1974) 29 P & CR 168; Ganton Home Investments Ltd v Corbin [1988] 2 EGLR 69; Afford v Till
[1990] 2 EGLR 44, CA.
3 Lord Ranelagh v Melton (1864) 2 Drew & Sm 278; Weston v Collins (1865) 34 LJCh 353: see Dawson v Dawson (1837) 8 Sim 346;
Brooke v Garrod (1857) 3 K & J 608; affd 2 De G & J 62; (an option of purchase in a will); Afford v Till [1990] 2 EGLR 44, CA. It is
otherwise if the payment is not a condition precedent: Mills v Haywood (1877) 6 Ch D 196; Cockwell v Romford Sanitary Steam Laundry
Ltd [1939] 4 All ER 370, CA.
4 Thus, the option may be exercised notwithstanding that there has been a breach by the lessee of a convenant to insure: Green v Low
(1856) 22 Beav 625.
5 Friary Holroyd and Healey's Breweries Ltd v Singleton [1899] 2 Ch 261.
6 This approach to construction is applicable to the exercise of options of all sorts, including options to renew and determine leases: see eg
Simons v Associated Furnishers Ltd [1931] 1 Ch 379. The option can be exercised notwithstanding past breaches of covenant, if these are
spent before the option is exercised, whether those breaches were of positive or negative covenants: Bass Holdings Ltd v Morton Music Ltd
[1988] Ch 493, [1987] 2 All ER 1001, CA; cf Starkey v Barton [1909] 1 Ch 284. But if a breach is subsisting, a condition precedent that
there be no breaches is not satisfied and the option cannot be exercised, even if the breaches are insubstantial and only nominal damages
could be recovered: see n 1 above and Bairstow Eves (Securities) Ltd v Ripley (1992) 65 P & CR 220, [1992] 2 EGLR 47, CA.
Page 323
How and by whom exercisable
4 How and by whom exercisable
HR A[7665]
The terms of the option usually require that it shall be exercised in writing and the option may be exercised by service
of a notice signed only by the lessee notwithstanding the statutory requirement that a contract for the sale of other
disposition of an interest in land can only be made in writing and must be signed by each party to the contract1. On the
death of the lessee the benefit of the option passes with the lease to his personal representatives2. Where the lease is
granted by trustees notice must be given to all the trustees or the survivors of them3. Where, as is usual, it is provided
that the option must be exercised by notice in writing to the lessor, the notice must be delivered to the lessor and proof
only of posting a notice is not sufficient4. When determining whether a notice is valid, for example by reference to the
length of notice required by the lease, it is necessary to consider whether the notice is sufficiently clear and
unambiguous so as to leave a reasonable recipient, with knowledge of the lease, in no doubt as to how it is intended to
operate5.
HR A[7666]
1 Spiro v Glencrown Properties Ltd [1991] Ch 537, [1991] 1 All ER 600, in which the provisions of the Law of Property (Miscellaneous
Provisions) Act 1989, s 2 were considered, and it was held that it was sufficient if the grant of the option complied with the necessary
statutory formalities.
2 Re Adams and Kensington Vestry (1884) 27 Ch D 394, CA.
3 Sutcliffe v Wardle (1890) 63 LT 329.
4 Holwell Securities Ltd v Hughes [1974] 1 All ER 161, [1974] 1 WLR 155, CA; cf Bruner v Moore [1904] 1 Ch 305; Morell v Studd and
Millington [1913] 2 Ch 648.
5 This is a principle of general application described in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749,
[1997] 3 All ER 352 (see further HR A[7727]). In Peaceform Ltd v Cussens [2006] EWHC 2657 (Ch), [2006] 47 EG 1182, it was held that a
notice was insufficiently clear and unambiguous, as it was not clear when it was intended to expire. In that case, not less than three months'
notice was required by the terms of the option, but less than three months' notice was given. By contrast, in Taylor v Crotty [2006] EWCA
Civ 1364, three months' notice was required and a notice referring to the relevant clause in the lease was held to be effective, even though no
expiry date was stated.
Page 324
Determination of the price
5 Determination of the price
HR A[7667]
The lease should provide how and by whom the price for the purchase of the lessor's interest should be determined. In
the absence of specific directions, the price to be paid is prima facie the open market value of the reversion subject to
the existing lease1, but where the lease provided that the price should be the fair market value for the demised premises,
it was held that these instructions only made sense if it was inferred that the valuation should be of the premises with
vacant possession2.
HR A[7668]
1 A P Grimes Ltd v Grayshott Motor Co Ltd (1967) 201 Estates Gazette 586. Similarly, it was held in Oliver v RSN Ltd [2007] EWHC
320 (Ch), [2007] 10 EG 182 (CS), in a case of a right of pre-emption in favour of a lessor, that it would normally be expected that the price
payable would be the current market value of the lease.
2 Re Nagel's Lease [1974] 3 All ER 34, [1974] 1 WLR 1077.
HR A[7669]-[7678]
If the machinery provided in the lease for the determination of the price breaks down (for example, if it is envisaged that
each party will appoint a valuer but one fails to do so) then the court may substitute its own machinery in order to assess
the price on whatever basis is contemplated by the lease1. This is justified where the machinery for the determination of
the price is a subsidiary and non-essential part of the contract created by the exercise of the option; however,
intervention by the court may not be justified where the price provided for is not to be fixed by unidentified valuers
applying objective standards, but by a named individual applying such subjective standards as he thinks fit. In such a
case, if the individual, without being instigated by either party, refuses to fix the price or is unable through death or
disability to do so, the contract created by the exercise of the option may be frustrated2. Similarly, it seems that the
court would not intervene if it is wholly uncertain what basis of valuation is to be adopted, but the court is generally
reluctant to hold provisions intended to have legal effect to be void for uncertainty, and will endeavour to determine the
true construction of the words used by the parties3.
HR A[7679]-HR A[7680]
1 Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, [1982] 3 All ER 1, in which the House of Lords overruled a line of
authorities beginning with Milnes v Gery (1807) 14 Ves 400. The House's reasoning was as follows: (i) on the true construction of the
relevant clause, the price to be fixed was one which was fair and reasonable as between lessor and lessee; (ii) once the option had been
exercised there was a complete contract for the sale and purchase of the reversion, as the price was capable of being ascertained and was
therefore certain; (iii) the lessor was in breach of contract in refusing to appoint a valuer; (iv) the machinery for establishing the price was a
Page 325
non-essential part of the contract, subsidiary to its main purpose, which was the sale and purchase of the property at a fair and reasonable
value and (v) when machinery breaks down for any reason, the court will substitute its own machinery. The House ordered an inquiry as to
the fair valuation of the reversion.
2 Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 at 479, 483-484, [1982] 3 All ER 1 at 6, 10, per Lord Diplock and per Lord
Fraser, respectively.
3 Cf King's Motors (Oxford) Ltd v Lax [1969] 3 All ER 665, [1970] 1 WLR 426 and Brown v Gould [1972] Ch 53, [1971] 2 All ER 1505
(cases concerning options to renew leases, considered further at para HR A[7705]).
Page 326
Effect of exercise of option
6 Effect of exercise of option
HR A[7681]
When an option to purchase is duly exercised, the parties are usually in the relationship of vendor and purchaser1, but
whether the exercise of the option also operates to determine the tenancy will depend upon the intention of the parties as
it appears from the agreement2. In particular, a provision for the payment of interest on the purchase money from the
date of the expiry of the notice exercising the option shows an intention that the relationship of landlord and tenant shall
cease on that date3.
HR A[7682]
1 Cockwell v Romford Sanitary Steam Laundry Ltd [1939] 4 All ER 370, CA.
2 Nightingale v Courtney [1954] 1 QB 399, [1954] 1 All ER 362, CA; cf Watny v Boardly [1975] 2 All ER 644, [1975] 1 WLR 857;
Dockerill v Fitzpatrick [1989] 1 EGLR 1, CA.
3 Cockwell v Romford Sanitary Steam Laundry Ltd [1939] 4 All ER 370, CA.
HR A[7683]
The exercise of the option does not relate back to the commencement of the lease, so that in the event of the premises
being destroyed by fire before the exercise of the option, the lessee is not entitled to the insurance money in respect of
the premises paid under a policy taken out by the lessor1. The exercise of an option to purchase all the estate, interest,
and title vested in the lessor at the date of the lease does not entitle the lessee to demand that the lessor should redeem a
mortgage made before the granting of the option; but it will generally require him to remove any incumbrance created
after the grant of the option2. Where a lease containing an option to purchase is mortgaged and the mortgagee exercises
the option, the mortgagor on redemption is entitled upon making proper payment to the conveyance of the freehold3.
HR A[7684]
1 Edwards v West (1878) 7 Ch D 858; cf Reynard v Arnold (1875) 10 Ch App 386. However, in London Holeproof Hosiery Co v Padmore
(1928) 44 TLR 499 CA, an option to purchase was exercised by the lessee after a factory had been destroyed by fire on the understanding
that the lessor would rebuild the factory; the lessor failed to rebuild and was held not to be entitled to specific performance of the agreement
to purchase.
2 Fowler v Willis [1922] 2 Ch 514; Re Crosby's Contract [1949] 1 All ER 830.

Page 327
3 Nelson v Hannam [1943] Ch 9, [1942] 2 All ER 680.

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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 13 Options/B Option to renew lease
B
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 13 Options/B Option to renew lease/1
Nature of option to renew a lease
1 Nature of option to renew a lease
HR A[7685]
A lease may contain a provision giving the lessee an option to take a lease for a further period of time1, and it is also
possible for the lessor to be given an option to require the lessee to take a new lease2. Options of this sort are frequently
subject to conditions precedent3, and have been described as constituting an offer which cannot be withdrawn so long
as the option remains exercisable4. The option may be so phrased that the lessee is entitled to a new lease containing all
the terms contained in the original lease, including the option to renew, and in such a case the lease may be perpetually
renewable5. However, a well-drafted option will usually exclude the option to renew from the new lease. Once the
option has been validly exercised, a new tenancy in equity arises, so that if the lessor refuses to complete the new lease,
damages for this breach of obligation may only be nominal6.
HR A[7686]
1 See eg Moss v Barton (1866) LR 1 Eq 474; Austin v Newham [1906] 2 KB 167, DC. The option is usually to take a new fixed term after
the expiry of a fixed term, but can be to take a periodic tenancy after a fixed term or vice versa: see Hersey v Giblett (1854) 18 Beav 174;
Brown v Trumper (1858) 26 Beav 11; Jones v Nixon (1862) 1 H & C 48. If the lease does not state by whom the option is to be exercisable,
it will be exercisable by the lessee only; Lewis v Stephenson (1898) 67 LJQB 296. The option sometimes takes the form of a covenant by the
lessor to renew. The grant of an option to renew by a local authority is not the exercise of a power to let, and thus the grant may be invalid:
Stretch v West Dorset District Council [1998] 48 EG 183, CA. However, the statutory powers of a local authority have changed since the
lease considered in this case was granted (see Stretch v United Kingdom [2004] 03 EG 100, para 26). The European Court of Human Rights
found that the claimant had been denied the right to peaceful enjoyment of his possessions by being deprived of the benefit of the option to
renew, in breach of art 1 of the First Protocol of the European Convention of Human Rights, and compensation was awarded.
2 Such options are sometimes called 'put' options.
4 Beesley v Hallwood Estates [1960] 2 All ER 314, [1960] 1 WLR 549. However, this case must now be read with Spiro v Glencrown
Properties Ltd [1991] Ch 537, [1991] 1 All ER 600, when the operation of s 2 of the Law of Property (Miscellaneous Provisions) Act 1989
needs to be considered: see para [7642], notes 3 and 5.
5 For example, where the covenant to renew contains the words 'including this clause': see Hare v Burges (1857) 4 K & J 45; Parkus v
Greenwood [1950] Ch 644, [1950] 1 All ER 436, CA; Re Hopkin's Lease [1972] 1 All ER 248, [1972] 1 WLR 372, CA. However, the court
leans against perpetual renewals: see Majorie Burnett Ltd v Barclay (1980) 258 Estates Gazette 642, where the covenant for renewal was
construed so as to allow two renewals only. For the effect of covenants for perpetual renewal, see paras HR A[270]-[280].
6 Plummer v TIBSCO Ltd [2002] EWCA Civ 102, [2002] 12 EG 137.
HR A[7687]
Page 330
An option to renew differs from an option to purchase1 in that it is not affected by the rule against perpetuities2 and
runs with the land and with the reversion, so that both the lessor's and lessee's successors in title are bound3. None the
less, an option to renew, like an option to purchase, is registrable as an 'estate contract' under the Land Charges Act
19724. It creates an interest in land capable of assignment5, and upon bankruptcy of the lessee the option vests in the
trustee in bankruptcy6. However, a proviso for payment of a stipulated sum if the lessee does not elect to renew does
not run with the land and therefore cannot be enforced against an assignee of the reversion7.
HR A[7688]
2 Hare v Burges (1857) 4 K & J 45 at 57; Muller v Trafford [1901] 1 Ch 54 at 61; Woodall v Clifton [1905] 2 Ch 257 at 263, CA; Rider v
Ford [1923] 1 Ch 541: Weg Motors Ltd v Hales [1962] Ch 49, [1961] 3 All ER 181, CA. However, a contract for the renewal of a lease for a
term exceeding 60 years from the termination of the lease is void: Law of Property Act 1922, Sch XV, para 7(2).
3 Isteed v Stoneley (1580) 1 And 82; Hyde v Skinner (1723) 2 P Wms 196; Earl Brook v Bulkeley (1754) 2 Ves Sen 498; Roe d Bamford v
Hayley (1810) 1 East 464; Lewis v Stephenson (1898) 67 LJQB 296; Weg Motors Ltd v Hales [1962] Ch 49, [1961] 3 All ER 181, CA. As to
covenants running with the land and to covenants running with the reversion, see para HR A[1903].
4 Thus, the option may be void against a purchaser for want of registration: Beesley v Hallwood Estates [1960] 2 All ER 314, [1960] 1
WLR 549, approved in Phillips v Mobil Oil Co Ltd [1989] 3 All ER 97, [1989] 1 WLR 888, CA; Markfaith Investment Ltd v Chiap Hua
Flashlights Ltd [1991] 2 AC 43, [1990] 2 WLR 1451, PC. However, a landlord may be estopped from relying on the failure to register:
Taylor's Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133n, [1981] 1 All ER 897. Despite non-registration, a claim for
damages may still lie against the lessor who has parted with his reversion: see Wright v Dean [1948] Ch 686, [1948] 2 All ER 415 and para
HR A[7641]. See also, in the case of registered land, Webb v Polmount [1966] Ch 584, [1966] 1 All ER 481, and para HR A[7641].
5 Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414, 423, HL.
6 Buckland v Papillon (1866) 2 Ch App 67.
7 Re Hunter's Lease [1942] Ch 124, [1942] 1 All ER 27.
HR A[7689]
In some cases, Parliament has in effect conferred upon a leasee an option to renew his lease. Under the provisions of the
Leasehold Reform Act 1967 (as amended) a lessee of a house under a long tenancy at a low rent may be able to compel
the lessor to extend the lease and the Leasehold Reform, Housing and Urban Development Act 1993 may confer similar
rights upon a lessee of a flat holding on similar terms1. Leases of business premises may be renewable pursuant to Pt II
of the Landlord and Tenant Act 19542.
HR A[7690]-HR A[7700]
1 For the rights to extended leases conferred by the 1967 and 1993 Acts, see Division E.
2 See Division B.
Page 331
Exercise of option
2 Exercise of option
HR A[7701]
A lessee who wishes to exercise an option to renew must conform with the conditions in the lease as to its exercise1,
and those conditions must be strictly observed2. Usually, the option must be exercised by notice given within a
specified period3, but if no time is stated within which the option is to be exercised, the right to do so will continue so
long as the relationship of landlord and tenant exists, even though the original term has expired4. However, a lessor who
has power to determine the tenancy at the end of some period prior to that at which the exercise of the option takes
effect, may lawfully do so at that time notwithstanding that the lessee has given notice of his intention to exercise the
option5. Once a lessee has validly exercised an option to renew, he becomes tenant in equity for the term to be granted
pursuant to the option, even if the lessee declines to grant the new lease. If the lessee then surrenders that tenancy (for
example by taking another tenancy for a longer term) he will have no claim in damages against the lessor for the failure
to grant the tenancy pursuant to the option6.
HR A[7702]
1 Thus, an option to take a lease at a specified rent is not validly exercised by a notice demanding a lease at some lower rent: Mauray v
Durley Chine (Investments) Ltd [1953] 2 QB 433, [1953] 2 All ER 458, CA; cf Newman v Dorrington Developments Ltd [1975] 3 All ER
928, [1975] 1 WLR 1642, in which it was held that an option to renew a lease at the appropriate 'commercial yearly rack rent' was not
rendered unenforceable by the fact that the rent registered under the Rent Act 1968 (and thus the maximum rent lawfully recoverable) was
less than what would have been the commercial yearly rack rent had the Rent Act 1968 not existed.
2 Thus, if the option is only exercisable on condition that the lessee is not in breach of convenant, the condition is not satisfied if there are
any breaches of convenant of the operative date, even if they are insubstantial: see the cases cited in para [7664], nn 1,6; cf Bassett v
Whiteley (1982) 45 P & CR 87, CA, where conditions that the lessee should have reasonably performed the stipulations in the lease were
considered; and Little v Courage Ltd (1994) 70 P & CR 469, CA, where it was held that a requirement that the lessor and lessee should agree
a new 'business plan' did not have to be fulfilled if the lessor did not present any new plan to the lessee. See also BJ Aviation Ltd v Pool
Aviation Ltd [2002] EWCA Civ 163, [2002] All ER (D) 117 (Jan) in which it was held that an option to renew 'subject to renegotiation of the
rent' was subject to a condition precedent which was not satisfied if renegotiations for a new rent had not been successful. For a
consideration of the relationship between an option to renew a lease of a public house conditional upon the purchase of a minimum amount
of drink from the landlord, and the Supply of Beer (Tied Estate) Order, SI 1989/2390, see Plummer v Tibsco Ltd [1999] 47 LS Gaz R 32.
3 If the option must be exercised before a specified date, it can only be exercised at a reasonable time before that date: Biondi v
Kirklington and Piccadilly Estates Ltd [1947] 2 All ER 59; Multon v Cordell [1986] 1 EGLR 44.
4 Moss v Barton (1866) LR 1 Eq 474; Rider v Ford [1923] 1 Ch 541. It was held in Hart Investments plc v Burton Hotel Ltd [2002] L &
TR 93 that an option for a tenant to renew on giving not less than six months' notice at any time after a specified date did not have to be
given not less than six months prior to the expiry of the contractual term.
5 Stewart v Massett (1924) 132 LT 301.
6 Plummer v Tibsco Ltd [2002] 12 EG 137, CA.

Page 332
HR A[7703]
If the option does not state the terms of renewal, the new lease will be for the same period and on the same terms as the
original lease, so far as those terms arise out of the relationship of landlord and tenant1; however a well-drafted option
will specify the terms of the new lease and will provide for the determination of the rent to be paid2. Covenants to
renew will not be incorporated in the new lease unless it is clearly shown that this was the intention of the parties3.
HR A[7704]
1 Lewis v Stephenson (1898) 67 LJQB 296; but see Austin v Newham [1906] 2 KB 167, where the lessee had a tenancy for 12 months and
an option for a lease and it was held that he was entitled to a lease for a further period of at least 12 months, if not for his life.
2 See further para HR A[7705].
3 See para HR A[7686], n 5. See also Lewis v Stephenson (1896) LJQB 296; Plumrose Ltd v Real and Leasehold Estates Investment
Society Ltd [1969] 3 All ER 1441, [1970] 1 WLR 52.
Page 333
Determination of rent payable under the renewed lease
3 Determination of rent payable under the renewed lease
HR A[7705]
An option to renew must state with sufficient certainty the terms of the new lease1, although the court leans in favour of
upholding an option and will, for example, determine the rent payable under the new lease where it is able to do so2. An
option to renew a lease for a further term 'at the then prevailing market rent' or at a 'full and fair market rent', to be
determined by arbitration in default of agreement, does not empower the arbitrator to determine a rent subject to
periodic review; he must determine a single rent payable throughout the term of the new lease3.
HR A[7706]
1 In King's Motors (Oxford) Ltd v Lax [1969] 3 All ER 665, [1970] 1 WLR 426, an option to renew 'at such rental as may be agreed' was
held to be void for uncertainty, but this decision was doubted in Corson v Rhuddlan Borough Council (1989) 59 P & CR 185, CA. Cf
Rothwell v Wakeling (1974) 29 P & CR 234, when the option to renew was construed as meaning that the lessee was entitled to a new lease
at the same rent as the previous lease (and on all the same terms as the old lease, except for the option to renew).
2 See Brown v Gould [1972] Ch 53, [1971] 2 All ER 1505, where an option to renew at a rent to be fixed having regard to the market
value of the premises was held not to be void for uncertainty, as the court could apply the specified formula. Megarry J distinguished
between: (i) an option where no formula or machinery to decide the rent was stipulated (see n 1 above); (ii) an option where there was a
formula but no effective machinery for determination (as in this case); (iii) an option providing both formula and machinery (as in a
well-drafted lease). See also Lear v Blizzard [1983] 3 All ER 662; ARC Ltd v Schofield [1990] 2 EGLR 52. For consideration of the position
where the specified machinery breaks down, see Sudbrook Trading Estate v Eggleton [1983] 1 AC 444, [1982] 3 All ER 1, HL (concerning
an option to purchase the reversion) and para HR A[7669].
3 National Westminster Bank Ltd v BSC Footwear Ltd (1980) 42 P & CR 90, 257 Estates Gazette 277, CA; Bracknell Development Corpn
v Greenlees Lennards Ltd (1981) 260 Estates Gazette 500.
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 13 Options/C Option to determine
lease
C
Page 335
lease/1 By whom option exercisable
1 By whom option exercisable
HR A[7707]
A lease for a term of years may contain an option for the parties1 or one of them to determine the lease at a stated time
or times before the expiration of the term2 or upon the happening of a specified event3. Such an option is commonly
called a 'break clause'. Often, the option is expressly made exercisable by the lessee only, and if the lease is silent as to
the person who is to exercise it, it can be exercised only by the lessee4. Where the clause is ambiguous as to whether the
lessee only or both parties can determine the lease, it will be construed as conferring the right only upon the lessee, on
the general principle that a lease is to be construed against the lessor5. A lessee's break clause is often related to the
provisions for rent review in the lease6.
HR A[7708]
1 A lease which is determinable 'if the parties think fit' can be determined only by the consent of both parties: Fowell v Tranter (1864) 3 H
& C 458; and see Colton v Lingham (1815) 1 Stark 39.
2 Eg a lease for 15 years, determinable at the end of the fifth or tenth year of the term. If the option is exercisable by the lessor, and the
lessee sells and assigns the lease with a stipulation that the purchase money is to be returned if the lessor determines the lease and the
assignee 'leaves the house,' the money is returnable if the tenancy is legally determined, notwithstanding that the assignee in fact remains in
the house as a member of the family of the new tenant (Lucas v Rideout (1868) LR 3 HL 153).
3 Eg if the premises become unfit for occupation or if they cannot lawfully be used for a specified purpose, or if the lessor requires the
premises for redevelopment.
4 Dann v Spurrier (1803) 3 Bos & P 399, overruling on this point Goodright d Hall v Richardson (1789) 3 Term Rep 462: see Dann v
Spurrier (1802) 7 Ves 231 at 236; Doe d Webb v Dixon (1807) 9 East 15; Price v Dyer (1810) 17 Ves 356 at 363; Fallon v Robins (1865) 16
I Ch R 422; cf Powell v Smith (1872) LR 14 Eq 85.
5 Wingfield v Clapton Construction Co [1967] EGD 111.
6 See para HR A[4163]: as the time limits for the exercise of the break clause must be strictly observed (see para HR A[7725]) this may
lead to the conclusion that the time limits relating to the rent review procedure must be construed in the same way. The wording of such a
break clause needs to be carefully considered: in Johnsons of London Ltd v Protec Trust Management [2000] EGCS 114, where the lessee
was able to determine the lease 'at any time before a date being 56 days after the final determination of the rent review', it was held that it
could not exercise this right if the lessor chose not to implement the rent review.
HR A[7709]
If the lease has been assigned, the option is exercisable by the person in whom the term is for the time being legally
vested1; it cannot, therefore, be exercised by an equitable assignee2, or by a beneficiary of the person in whom the term
is legally vested3, unless the beneficiary was duly authorised for that purpose4. Where the lease provides that only the
Page 336
original lessee may determine the lease, it may be held that he can no longer exercise that right following an assignment
by him and a reassignment back to him, but the question must be determined as a matter of construction of the option
and other relevant provisions in the lease5.
HR A[7710]-HR A[7720]
1 Provided that the option is not wholly personal, its benefit will pass on an assignment pursuant to s 63 of the Law of Property Act 1925:
Harbour Estates Ltd v HSBC Bank plc [2004] EWHC 1714 (Ch), [2004] 3 All ER 1057. However, a valid notice cannot be served by an
assignee of a registrable leasehold interest who has not at that time become the legal owner of that interest because he has not been registered
as the legal proprietor: Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd [2001] Ch 733. If the assignee in whom
the lease is vested cannot be found, then neither the original lessee nor the previous assignee can determine the lease: Seaward v Drew
(1898) 67 LJQB 322.
2 Seaward v Drew (1898) 67 LJQB 322.
3 Stait v Fenner [1912] 2 Ch 504.
4 Jones v Phipps (1868) LR 3 QB 567; and see Brown v Peto [1900] 1 QB 346, as reported in 16 TLR 131 at 132, per Bigham J; Re
Knight and Hubbard's Underlease, Hubbard v Highton [1923] 1 Ch 130.
5 In Max Factor Ltd v Wesleyan Assurance Society [1996] 2 EGLR 210, CA, it was held that, on the true construction of the lease under
consideration, the original lessee could not exercise the right of determination on reassignment to him. Compare Olympia & York Canary
Wharf Ltd v Oil Property Investments Ltd [1994], EGLR 48, CA, where it was common ground that the right of determination could be
exercised following a reassignment, although this was doubted by Sir Donald Nicholls VC at p.50m. A different conclusion was reached in
BP Oil UK Ltd v Lloyds TSB Bank Ltd [2004] EWCA Civ 1710, [2005] 10 EG 156, where it was held that a 'put option', enabling an
assignee of a lease to require the assignor to take an assignment back, could be exercised by the assignee following a further assignment and
reassignment back to the assignee. The Court of Appeal emphasised that this was a question of construction.
HR A[7721]
In a case where the lease containing a lessee's option to determine is held by joint tenants a notice exercising the option
must be given by all of the joint tenants or with the authority of all of them, so that a notice given by one only will not
be a valid notice1. The same principle applies to a notice given by one joint lessor. A notice to determine may be validly
given or served upon an agent of lessor or lessee if they have expressly or by implication each respectively consigned
the whole conduct and management of the reversion and the tenancy to agents2.
HR A[7722]
1 Re Viola's Lease [1909] 1 Ch 244; Hounslow London Borough Council v Pilling [1993] 2 EGLR 59, CA. Note that the law as to notices
to quit is different: see para HR A[8386].
2 Townsends Couriers Ltd v Pfizer Ltd (1977) 33 P & CR 361.
HR A[7723]
Page 337
Where an option to determine is exercised either by a lessor or a lessee, it brings to an end not only the lease itself but
also any subleases created out of it (subject to any statutory rights enjoyed by the subtenants). This is a matter of law
and the parties cannot by agreement avoid this consequence1.
HR A[7724]
1 P W & Co v Milton Gate Investments Ltd [2003] EWHC 1994 (Ch), [2004] Ch 142, [2004] 2 WLR 443, following Pennell v Payne
[1995] QB 192, [1995] 2 All ER 592, CA, and Barrett v Morgan [2000] 2 AC 264, [2000] 1 All ER 481, HL.
Page 338
lease/2 Conditions of option
2 Conditions of option
HR A[7725]
Since the exercise of the option by the lessee relieves him from the obligation to pay rent during the residue of the term
and may relieve him against liability under repairing covenants also1, the requirements of the proviso conferring the
option must be strictly observed2. If the notice determining the tenancy is to be in writing, oral notice is not sufficient3.
A notice to determine the lease under such a proviso must apply to all the premises, and not to part only4, unless the
option provides that the notice may refer to part of the premises only5. A provision that, if any parts of the demised
premises became 'surplus to requirements', then the lessee might give notice to surrender the lease insofar as it related to
those 'surplus' parts, enables the tenant to surrender the lease as a whole if all the premises are 'surplus to
requirements'6. Where the option is to determine the lease for building and other purposes, there is no right to determine
the lease if the lessor has no intention of using the land for such purposes7. A lessee's option to determine 'upon
yielding up of the entirety of the demised premises' is effective if the lessor is able to occupy and deal with the premises
as it wishes without any hindrance, even though the lessee continues to make provision for the security of the
premises8. Obvious errors in the drafting of the conditions attached to the option may be corrected by the court as a
matter of construction9.
HR A[7726]
1 Eg where there is a covenant to repair in the last quarter of a term originally granted for seven years, and, by reason of the lessee
exercising his option to determine at the end of the fifth year, that quarter of the term is never reached: Dickinson v St Aubyn [1944] KB 454,
[1944] 1 All ER 370, CA. The result would probably have been different if the word 'tenancy' have been used instead of 'term'.
2 This rule is applicable to options of all sorts: see para HR A[7663] and the cases cited in nn 1 and 6 thereto: see further para HR
A[7727].
3 Legg d Scot v Benion (1738) Willes 43, but the notice may be in the form of a notice to quit referring to the determinable nature of the
lease: Giddens v Dod (1856) 3 Drew 485.
4 Doe d Rodd v Archer (1811) 14 East 245 at 248.
5 Liddy v Kennedy (1871) LR 5 HL 134.
6 Royal Bank of Canada v Secretary of State for Defence [2003] EWHC 1479 (Ch), [2004] 1 P & CR 448.
7 IRC v Southend-on-Sea Estates Co Ltd [1915] AC 248, HL affd sub nom Southend-on-Sea Estates Co Ltd v IRC [1914] 1 KB 515, CA;
Johnson v Edgware etc Rly Co (1866) 35 Beav 480 (building, planting, accommodation or otherwise); but as a rule the court had no concern
with the motive which underlies the exercise of the option to determine: Batty v Vincent and City London Real Property Co Ltd (1921) 90 LJ
Ch 302; Re Knight and Hubbard's Underlease, Hubbard v Highton [1923] 1 Ch 130 at 139. In Parkinson v Barclays Bank Ltd [1951] 1 KB
368, [1950] 2 All ER 936, CA, it was held, in a case where the lessor had power to determine the lease after 14 years of a 21 -year term if it
required the premises for the purposes of its business, that it was sufficient for it to prove that it needed part of the premises at some
uncertain time in the seven-year period after expiry of the fourteenth year. Cf cases where the landlord seeks possession under Pt II of the
Page 339
Landlord and Tenant Act 1954, s 30(1)(f) and (g): see Division B.
8 John Laing Construction Ltd v Amber Pass Ltd [2004] 2 EGLR 128. Compare Legal & General Assurance Society Ltd v Expeditors
International (UK) Ltd [2007] EWCA Civ 7, [2007] 2 P & CR 10; there the lessee did not yield up vacant possession as required by the
conditions of the option, but was able to rely on a settlement agreement previously made with the lessor.
9 Littman v Aspen Oil Broking Ltd [2005] EWCA Civ 1579, [2006] 2 P & CR 2 (where it was provided in the lease, absurdly, that in the
case of a landlord's notice the tenant must have paid the rent and observed the tenant's covenants if the lease was to determine at the break
date; this condition was construed as referring to a tenant's notice). In KPMG LLP v Network Rail Infrastructure Ltd [2007] EWCA Civ 363,
[2007] L & TR 32, it was also found to be possible to correct a mistake in the drafting of a break clause as a matter of construction of the
lease, having regard to a prior agreement for the lease.
HR A[7727]
A notice to determine may be effective notwithstanding that it contains a minor misdescription (such as a wrong date),
provided that, when it is construed objectively in its context, it would unambiguously inform a reasonable recipient how
and when it is to operate1. Thus, a notice expressed to expire one day before the correct contractual date for termination
may be effective to determine the lease on the correct date2. However, strict compliance with the conditions under
which a notice may be served is still required3. If the terms of the option require that the lessee should have paid all
arrears of rent and performed his covenants, such payment and performance are a condition precedent to the exercise of
the option4, which must be strictly observed5. Generally, the covenants must be fulfilled at the date of the
determination of the term if the exercise of the option is to be effective6. An effective notice to determine cannot be
given by or to a person who is not the lessor or the lessee, but it may be possible to construe a notice as being given by
the right person, notwithstanding a misdescription of the name7. However, in a case where a reasonable recipient of a
notice might be misled by a notice given in the wrong name (for example, where the lease has been assigned), the notice
will be held to be invalid8.
HR A[7728]
1 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, [1997] 3 All ER 352, applying the test suggested in
Carradine Properties Ltd v Aslam [1976] 1 All ER 573, [1976] 1 WLR 442, and followed in Garston v Scottish Widows Fund and Life
Assurance Society [1998] 3 All ER 596, [1998] 1 WLR 1583, CA and York v Casey [1998] 2 EGLR 25, CA (statutory notices); cf Keepers
and Governors of John Lyon Grammar School v Secchi [1999] 49 EG 100, CA. Thus, where a notice to determine clearly stated the exact
expiry date, giving more notice than contractually required, it was held to be effective, even though a reference to '17 days' notice' was
contended to create uncertainty: Trafford Metropolitan Borough Council v Total Fitness UK Ltd [2003] 2 P & CR 8. Similarly where, in a
lease for a term of six years from 7 November 2001 there was a tenant's right to determine at the end of the third year of the term, a notice by
the tenant to determine 'at the end of third year of the term on 22 August 2004' was held to be effective: Peer Freeholds Ltd v Clean Wash
International Ltd [2005] EWHC 179 (Ch), [2005] 17 EG 124. A reasonable landlord would have known that the tenant intended to exercise
the right to determine given by the lease and that the reference to 22 August 2004 was a mistake.
2 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, [1997] 3 All ER 352. The period when the lease may be
determined is usually to be calculated from the commencement of the term, not the date of the lease: Bird v Baker (1858) 1 E & E 12;
Bradshaw v Pawley [1979] 3 All ER 273, [1980] 1 WLR 10; Trane (UK) Ltd v Provident Mutual Life Assurance [1995] 1 EGLR 33.
3 This rule is not affected by Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, [1997] 3 All ER 352; see the
speech of Lord Hoffman at 776, 376-377.
4 Grey v Friar (1854) 4 HL Cas 565; Simons v Associated Furnishers Ltd [1931] 1 Ch 379.
5 This rule is applicable to options of all sorts: see para HR A[7663] and the cases cited in nn 1 and 6 thereto. It is still possible that the
Page 340
lessor may elect to waive the right to require strict observance of the covenants, but it must be shown that he knew he had a right to choose,
both as a matter of law and on the facts; see H B Property Developments Ltd v Secretary of State for the Environment (1998) 78 P & CR
108, CA. Strict observance by a lessee of all its covenants may be difficult or even virtually impossible (for example, in relation to repair).
Thus, the requirement for observance is often qualified by reference to what is 'reasonable' or 'material': see Gardner v Blaxhill [1960] 2 All
ER 457, [1960] 1 WLR 752. The meaning of a requirement that the lessee had materially complied with all its obligations under the lease
was considered in Fitzroy House Epworth Street (No 1) Ltd v The Financial Times Ltd [2006] EWCA Civ 329, [2006] 19 EG 174. It was
held that the issue of material compliance had to be determined on an objective basis and materiality had to be assessed by reference to the
lessor's ability to re-let or sell the demised premises without either delay or additional expenditure. The test of reasonable observance would
appear to be different and more flexible.
6 Simons v Associated Furnishers Ltd [1931] 1 Ch 379; Trane (UK) Ltd v Provident Mutual Life Assurance [1995] 1 EGLR 33. However,
the requirements imposed by the option are a matter of the construction of the option in each case.
7 See Havant International Holdings Ltd v Lionsgate (H) Investment Co Ltd [1999] EGCS 144, applying the test formulated in Mannai
Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, [1997] 3 All ER 352.
8 Lemmerbell Ltd v Britannia LAS Direct Ltd [1998] 3 EGLR 67, CA; followed in Proctor & Gamble Technical Centres Ltd v Brixton
Estates plc [2003] 31 EG 69.
Page 341
lease/3 Release of option
3 Release of option
HR A[7729]
If the option is contained in a lease under seal, it can only be released at law by an instrument under seal1, but in equity
the form of release is immaterial if it is made for value2. Under a power to surrender and deliver up the premises at
stated periods a formal surrender is not required3, and although the notice of surrender is required to be in writing, the
surrender may be proved by oral admission of the tenant4.
HR A[7730]-HR A[7840]
1 Goodnight d Nicholls v Mark (1815) 4 M & S 30.
2 See Taylor v Manners (1865) 1 Ch App 48; even writing is not essential Steeds v Steeds (1989) 22 QBD 537; Yeomans v Williams
(1865) LR 1 Eq 184.
3 Carleton v Herbert (1866) 14 WR 772.
4 Slatterie v Pooley (1840) 6 M & W 664; Martin v Doherty (1880) 6 LR Ir 194.

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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy
Chapter 14 Determination of the tenancy
Editor
Nicholas Taggart
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/A
Introduction
A
Page 344
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/A
Introduction/1 The modes of determination
1 The modes of determination
HR A[7841]
A tenancy can end in any one of a number of ways:
(a) by effluxion of time1;

(b) by exercise of a power or option2;
(c) by operation of a condition subsequent3;
(d) by merger with a superior interest4;
(e) by surrender5;
(f) by disclaimer6;
(g) by notice to quit7;
(h) by forfeiture8;
(i) by frustration9;
(j) by repudiation10;
(k) by compulsory purchase11;
(l) by exercise of the county court's power to determine tenancies of derelict land12; and
(m) certain tenancies end on an unequivocal demand for possession13.
HR A[7842]
1 See paras HR A[7849]-[7863].
2 See paras HR A[7864]-[7865].
3 See paras HR A[7866]-[7880].
4 See paras HR A[7881]-[7909].
5 See paras HR A[7910]-[8122].
6 See paras HR A[8123]-[8126].
7 See paras HR A[8127]-[8529].
8 See paras HR A[8530]-[9389].
9 See paras HR A[9390]-[9420].

Page 345
10 See paras HR A[9421]-[9428].
11 See paras HR A[9429]-[9469].
12 See paras HR A[9470]-[9580].
13 See paras HR A[7843]-[7848].

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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/B
Fragile estates
B
Page 347
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/B
Fragile estates/1 Determining fragile estates
1 Determining fragile estates
HR A[7843]
A 'fragile estate' may be a tenancy at sufferance, a tenancy at will or a tenancy by estoppel1.
HR A[7844]
1 For a full consideration of these forms of tenancy, see: paras HR A[150]-[163] (tenancy at sufferance); paras HR A[164]-[185] (tenancy
at will); and paras HR A[86]-[149] (tenancy by estoppel).
(a) Tenancies at sufferance
HR A[7845]
A tenancy at sufferance is determined simply by either party communicating his wish, expressly or impliedly, that the
tenancy should end. Thus, a landlord can lawfully terminate a tenancy at sufferance by a simple demand for
possession1, or even by retaking possession without prior notice to the tenant2. A tenant at sufferance can equally
lawfully terminate such a tenancy by vacating the premises without the necessity of giving any prior notice3.
HR A[7846]
1 Javad v Aqil [1991] 1 All ER 243, [1991] 1 WLR 1007, CA.
2 Doe d Bennett v Turner (1840) 7 M & W 226 at 235; see Doe d Godsell v Inglis (1810) 3 Taunt 54; Doe d Moore v Lawder (1816) Stark
308; Doe d Rogers v Pullen (1836) 2 Bing NC 749; Randall v Stevens (1853) 2 E & B 641. The contrary view was expressed in Doe d
Harrison v Murrell (1837) 8 C & P 134, by Lord Abinger CB, who considered a landlord must give notice before resuming possession, but
this view is out of line with the other authorities.
3 Doe d Bennett v Turner (1840) 7 M & W 226 at 235; Doe d Godsell v Inglis (1810) 3 Taunt 54; Doe d Moore v Lawder (1816) Stark
308; Doe d Rogers v Pullen (1836) 2 Bing NC 749; Randall v Stevens (1853) 2 E & B 641.
(b) Tenancies at will
HR A[7847]
Page 348
A tenancy at will can be determined by any unequivocal demand for possession1, including a demand for the key2, a
letter before action3, or the service of proceedings4. Actual re-entry without the tenant's consent is, obviously, sufficient
to determine5. A tenant at will can also determine such a tenancy by any unequivocal manifestation of his intention to
no longer hold the tenancy6. A tenancy at will is also determined by implication of either party acting in a way which is
inconsistent with the continued existence of the tenancy7. So, the re-letting of the demised premises by the landlord to a
third party8, agreeing to sell the reversion to the tenant9, or (if it be inconsistent with the terms of the tenancy at will)
the sub-letting of the premises by the tenant10. Such determinations by implication do not take effect until they come to
the attention of the party not acting inconsistently with the continued existence of the tenancy11. A tenancy at will is
also determined by the death of either party12, but not one of two joint tenants13, or by either party transferring its
estate in the demised premises14.
HR A[7848]
1 Doe d Nicholl v M'Kaeg (1830) 10 B & C 721. A contingent demand will also suffice: Fox v Hunter-Paterson [1948] 2 All ER 813.
2 Pollen v Brewer (1859) 7 CBNS 371.
3 Fox v Hunter-Paterson [1948] 2 All ER 813.
4 Martinali v Ramuz [1953] 2 All ER 892, [1953] 1 WLR 1196, CA.
5 Turner v Doe d Bennett (1842) 9 M & W 643, ExCh; Allen v England (1862) 3 F & F 49. It is not clear if the tenant may simply give up
possession without more: it is likely that the tenant has to inform the landlord of his vacation before the tenancy can be ended, but that no
period of prior notice is necessary.
6 Carpenter v Collins (1605) 1 Brownl 88; Co Litt 55a.
7 Hinchman v Iles (1674) 1 Vent 247; Pollen v Brewer (1869) 7 CBNS 371; Wallis v Delmar (1860) 29 LJ Ex 276.
8 Disdale v Ives (1673) 2 Lev 88.
9 Daniels v Davison (1809) 16 Ves 249 (although not effective unless and until a binding contract for sale entered into).
10 Birch v Wright (1786) 1 Term Rep 378; Pinhorn v Souster (1853) 8 Exch 763; Melling v Leak (1855) 16 CB 652; Day v Day (1871)
LR 3 PC 751.
11 Pinhorn v Souster (1853) 8 Exch 763; Doe d Davies v Thomas (1851) 6 Exch 854.
12 Doe d Stanway v Rock (1842) Car & M 549; James v Dean (1805) 11 Ves 383; A-G v Lord Foley (1753) 1 Dick 363; Turner v Barnes
(1862) 2 B & S 435; Scobie v Collins [1895] 1 QB 375.
13 Henstead's Case (1594) 5 Co Rep 10a.
14 Co Lit 55b; Disdale v Iles (1673) 2 Lev 88; Doe d Goody v Carter (1847) 9 QB 863; Doe d Davies v Thomas (1851) 6 Exch 854.
(c) Tenancies by estoppel

Page 349
HR A[7848.1]
Although it is not altogether clear, it would seem that a tenancy by estoppel is determined, as between the parties, in
accordance with whatever principles, and statutes, would have governed the tenancy but for whatever defect in title
made it a tenancy by estoppel1. The ending of the tenancy by estoppel by effluxion of time does not release the
estoppel, thereby enabling a landlord to seek a remedy of any terminal dilapidations2. However, the estoppel does not
bind third parties, so it can be ended by the true owner without any notice3.
HR A[7848.2]
1 By analogy with Bell v General Accident Fire & Life Assurance Corpn [1998] 1 EGLR 69, [1998] 17 EG 144, CA.
2 Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580, [1977] 2 All ER 293, CA.
3 Newsome v Graham (1829) 10 B & C 234. It was further held that the tenant was entitled to recover from the landlord by estoppel the
rent paid to him prior to the eviction and that the tenant might also be entitled to damages from him for breach of the covenant for quiet
enjoyment.
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/C
Effluxion
C
Page 351
Effluxion/1 Expiration of the term at common law
1 Expiration of the term at common law
HR A[7849]
At common law, when a lease is granted for a term of years or other fixed period, upon the expiration of the last day or
the term, the tenancy simply ends without more. There is no requirement for a notice to quit or any other formality1.
Where a tenancy ends by effluxion, the tenant need not deliver up possession until midnight on the last day of the
term2.
HR A[7850]-[7860]
1 Cobb v Stokes (1807) 8 East 358; Ackland v Lutley (1839) 9 Ad & El 879.
2 Re Crowhurst Park [1974] 1 WLR 583.
HR A[7861]
It is possible for a tenancy to provide for the different parts of the demised premises to be delivered up on different
dates1. All underleases granted by the lessee determine at common law in the same way2. Normally, of course, an
underlease granted for a fixed term will itself have expired prior to the expiration of the head lease. This rule will
operate so as to bring about the determination of, for example, a continuing periodic underlease.
HR A[7862]
1 Doe d Waters v Houghton (1827) 1 Man & Ry KB 208; Dodson Bull Carpet Co v City of London Corpn [1975] 1 WLR 781.
2 Weller v Spiers (1872) 20 WR 772.

Page 352
Effluxion/2 Statutory interventions
2 Statutory interventions
HR A[7863]
However, there are a number of types of tenancy enjoying statutory protection where this common law rule is rendered
nugatory by statute. Reference should be made to Divisions B-F of this work for the following forms of tenancy:
(a) tenancies of business premises (Division B);

(b) tenancies of residential premises within the Rent Acts and Housing Acts (Division C);
(c) residential tenancies of agricultural premises (Division C);
(d) tenancies of mobile homes (Division C);
(e) residential tenancies granted by the public sector (Division D);
(f) residential tenancies of long leases at low rents (Division E); and
(g) tenancies of agricultural premises (Division F).
Page 353
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/D
Under a Power or Option
D
Page 354
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/D
Under a Power or Option/1 Overview
1 Overview
HR A[7864]
Where a tenancy contains a power or option to determine it, often called a 'break-clause', the proper exercise of that
power or option will cause the tenancy to determine in accordance with the terms of the option.
HR A[7865]
This topic is considered in greater depth at paras HR A[7707]-[7840]

Page 355
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/E
Operation of a Condition Subsequent
E
Page 356
Operation of a Condition Subsequent/1 Conditions
1 Conditions
HR A[7866]
Like any other interest in land a lease may be created or determined by a condition. Conditions may be divided into
three categories:
(a) conditions precedent, that is a condition on the occurrence of which an interest, such as a tenancy,
arises;
(b) conditions subsequent, that is a condition on the occurrence of which an interest determines; and
(c) conditions which are a term of the transaction in question but do not fall into one of the above two
categories.
Page 357
Operation of a Condition Subsequent/2 Conditions subsequent
2 Conditions subsequent
HR A[7867]
A tenancy determines by operation of subsequent, when it is expressed to determine on the occurrence of an event, and
that event occurs. There is a theoretical distinction between interests subject to a condition subsequent, such as 'to X, but
the interest shall end if he ceases to reside in England', and a determinable interest, such as 'to X as long as he lives in
England'. The distinction has certain practical consequences. However, it is in some part a verbal distinction only, and
both types of interest are dealt with in this section1.
HR A[7868]
1 For a discussion of the distinction between a condition subsequent and a determinable interest, and the effect of the distinction, see
Cheshire and Burn's Modern Law of Real Property (15th edn, 1994) pp 339-351.
HR A[7869]
Any event may be stipulated, such as the tenant's interest shall determine when he ceases to be employed by the
landlord, or upon the death or marriage of some person. However, the event stipulated must be certain1.
HR A[7870]-[7880]
1 Sifton v Sifton [1938] AC 656, [1938] 3 All ER 435, PC.

Page 358
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/F
Merger
F
Page 359
Merger/1 Overview
1 Overview
HR A[7881]
A lease determines by merger when the reversion and the lease become vested in the same person, and there is no
evidence that the parties did not intend a merger. Surrender and merger are similar concepts in that, in both cases, the
reversion and the term become vested in the same person. The most useful practical distinction is that under a surrender
the term is surrendered up to the reversioner, whereas under a merger the reversion and the term generally become
vested in the tenant or some third party.
Page 360
Merger/2 Merger in law
2 Merger in law
HR A[7882]
At common law, where a term of years becomes vested in the owner for the time being of the reversion immediately
expectant on the term, the term is merged in the reversion1. The term and the reversion are concurrent estates and
cannot exist together vested in the same person, so that a man cannot at law be reversioner to himself2. Of course, a
lessee can grant a sublease to his lessor who will then have the interest both of head landlord and subtenant in the
property. A contract to acquire the reversion does not effect a merger3. It is because a man cannot be reversioner to
himself that an assignment of the residue of the term by the lessee to the lessor, even though only by way of mortgage,
is equivalent to a surrender4. Also a surrender is a re-demise by the lessee to the lessor for the whole term5. In these
circumstances, if rent is reserved, this is only recoverable as a sum in gross6. Nor does a merger take place where the
conveyance of the freehold was procured by fraud7. There is also no merger where the same man has successive estates,
the one following immediately on the other, so that if the lessee grants to his sublessee the residue of the term from the
determination of the sublease, the subterm is not merged in the residue of the head term8.
HR A[7883]
1 'Whenever a greater estate and a less coincide and meet in one and the same person, without any intermediate estate, the less is
immediately annihilated; or in the law phrase, is said to be merged, that is, sunk or drowned, in the greater': 2 Bl Comm 177; Bac Abr tit
'Leases'; Burton v Barclay (1831) 7 Bing 745 at 746; Rye v Rye [1962] AC 496, [1962] 1 All ER 146.
2 Doe d Rawlings v Walker (1826) 5 B & C 111 at 121; Rye v Rye [1962] AC 496; [1962] 1 All ER 146.
3 Ellis v Wright (1897) 76 LT 522.
4 Cottee v Richardson (1851) 7 Ex Ch 143.
5 Loyd v Langford (1676) 2 Mod Rep 174; Smith v Mapleback (1786) 1 Term Rep 441.
6 Smith v Mapleback (1786) 1 Term Rep 441.
7 Danby v Danby (1675) Cas temp Finch 220.
8 Hyde v Warden (1877) 3 Ex D 72 at 84, CA.
HR A[7884]
Thus, the essentials of a merger at law may be stated thus:

Page 361
(a) that the estates shall unite in the same person without any intervening estate, however short1;
(b) that the person in whom they unite shall hold them both in the same right or capacity2.
HR A[7885]
1 Burton v Barclay (1831) 7 Bing 745.
2 Chambers v Kingham (1878) 10 Ch D 743; Lady Platt v Sleap (1611) Cro Jac 275; Jones v Davies (1860) 5 H & N 766; affd (1861) 7 H
& N 507, Ex Ch.
HR A[7886]
For the purposes of the law of merger, the reversion is deemed to be the greater estate, notwithstanding that it is in fact
shorter than the term; hence a term of 1,000 years can be merged in a reversionary term of 500 years1. Where the term
merges into the reversion, the covenants attached to it are extinguished2. An express declaration that a particular
covenant is to remain in force is effective, and accordingly the covenant is not extinguished by merger3. However, the
merger may by its terms operate to increase the restrictions previously imposed on the lessee4.
HR A[7887]
1 Bac Abr, tit 'Leases and Terms for Years' (S) 1 (2), p 876, Stephens v Bridges (1821) 6 Madd 66.
2 Lord Dynevor v Tennant (1888) 13 App Cas 279; Golden Lion Hotel (Hunstanton) Ltd v Carter [1965] 3 All ER 506, [1965] 1 WLR
1189.
3 Birmingham Joint Stock Co v Lea (1877) 36 LT 843, distinguished in Golden Lion Hotel (Hunstanton) Ltd v Carter[1965] 3 All ER 506,
[1965] 1 WLR 1189.
4 Frost v King Edward VII Welsh National Memorial Association for the Prevention Treatment and Abolition of Tubercolosis [1918] 2 Ch
180.
Page 362
Merger/3 Merger law and equity after the Judicature Act 1873
3 Merger law and equity after the Judicature Act 1873
HR A[7888]
By the Supreme Court of Judicature Act 1873, s 25(4), as re-enacted by the Law of Property Act 19251, s 185, the
equitable rule as to merger applies: there is no merger by operation of law where there would be none in equity2.
HR A[7889]
1 See para HR A[20129.1].
2 This is illustrated well by Snow v Boycott [1892] 3 Ch 110. In that case, land was limited to A for life, remainder to B for life. A
conveyed the land to B for the rest of her life to the use that B should pay her £400 a year out of the profits. The effect of this was that an
estate pur autre vie and an estate for his own life vested in B, so that at common law the estate pur autre vie was destroyed by the merger. B
died in the lifetime of A, and the question arose whether A's life estate was destroyed so as to let in the estates which were limited to take
effect after B's life estate. It was held that there was no merger in equity, and therefore no such destruction, because the parties must have
intended to keep the two estates separate.
Page 363
Merger/4 Merger in equity
4 Merger in equity
HR A[7890]-[7900]
Equity takes a different view of mergers and does not favour or allow them except for special reason1. Thus, even when
the reversion and the term are held by the same person in the same right, the question of merger is governed in equity by
the intention of the parties, and there is no merger if it is intended that the term should be kept alive2. In the absence of
any direct evidence of intention, it will be presumed that merger is not intended if it is to the interest of the party, or
only consistent with his duty, that merger should not take place2. In the absence of not only any evidence of intention or
any indication of where a party's interest or duty lies, the common law doctrines will operate3. Merger is sometimes
avoided by taking a conveyance of the term to a trustee, but the insertion in the conveyance to the lessor of a declaration
against merger is equally effective4.
HR A[7901]
1 Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631, CA.
2 Golden Lion Hotel (Hunstanton) Ltd v Carter [1965] 3 All ER 506, [1965] 1 WLR 1189.
3 Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631, CA; Forbes v Moffatt (1811) 18 Ves 384 at 390; Thellusson v Liddard [1900]
2 Ch 635; Re Fletcher, Reading v Fletcher [1917] 1 Ch 339, CA. See also Ingle v Vaughan Jenkins [1900] 2 Ch 368, in which it was held
that if a tenant for life in remainder takes a beneficial lease and subsequently becomes tenant for life in possession, equity will prevent the
merger from taking place if it is for his benefit that the lease should remain on foot.
4 Belaney v Belaney (1867) 2 Ch App 138, which expressly considers only the efficacy of a conveyance to a trustee.
HR A[7902]
As with merger in law, the merger of a term in equity destroys the leasehold covenants, unless the contrary intention is
expressed1. The merger of a term does not in equity destroy restrictive covenants which are attached to it2, nor does it
destroy any easements, the benefit of which is annexed to the land demised: the benefit is annexed to the 'dominant
tenement', not any particular estate therein3. It is possible that the merger extinguishes those provisions inserted in the
lease for the benefit of the lessor4.
HR A[7903]
1 Lord Dynevor v Tennant (1888) 13 App Cas 279; Golden Lion Hotel (Hunstanton) Ltd v Carter [1965] 3 All ER 506, [1965] 1 WLR
1189; Birmingham Joint Stock Co v Lea (1877) 36 LT 843, distinguished in Golden Lion Hotel (Hunstanton) Ltd v Carter [1965] 3 All ER
506, [1965] 1 WLR 1189.
Page 364
2 Birmingham Joint Stock Co v Lea (1877) 36 LT 843; Piggott v Stratton (1859) 1 De GF & J 33; Jay v Richardson (1862) 30 Beav 563;
Craig v Greer [1899] 1 IR 258; CA.
3 Wall v Collins [2007] EWCA Civ 444; [2007] Ch 390, [2008] 1 All ER 122, CA.
4 Lord Dynevor v Tennant (1888) 13 App Cas 279 at 292.

Page 365
Merger/5 Merger in equity after the Judicature Act 1873
5 Merger in equity after the Judicature Act 1873
HR A[7904]
It was provided by the Supreme Court of Judicature Act 1873, s 25(4), that after the commencement of that Act there
should not be any merger by operation of law only of any estate, the beneficial interest in which would not be deemed
to be merged or extinguished in equity. This is re-enacted by the Law of Property Act 1925, s 185. The result is that
there is now no merger, contrary to the rules which formerly applied in the courts of equity alone1.
HR A[7905]
1 LPA 1925, s 185 at para HR A[20129.1]. See the explanation in Snow v Boycott [1892] 3 Ch 110, referred to in para HR A[7889].
Page 366
Merger/6 Effect of merger on underleases
6 Effect of merger on underleases
HR A[7906]
The merger of a term in the reversion formerly destroyed the covenants in a sublease1, although the estate created by
the sublease remained in being and bound the superior interest2. Now the head lessor becomes the immediate
reversioner on the sublease, and is entitled to the benefit of the covenants3. The head lessor will probably have the same
rights against an underlessee on merger as on a surrender4. As a surrender can be made only subject to rights already
created or accrued, so it seems a merger can take effect only subject to such rights, such as those of an incumbrancer of
the leasehold interest which is said to be merged. The assignment of the residue of a term which has in fact been merged
may operate to create a new term for the same length as such residue5.
HR A[7907]
1 Webb v Russell (1789) 3 Term Rep 393; Thorn v Woollcombe (1832) 3 B & Ad 586.
2 Webb v Russell (1789) 3 Term Rep 393; Electricity Supply Nominees v Thorn EMI Retail [1991] 1 EGLR 46.
3 Law of Property Act 1925, s 139 at para HR A[200114] (re-enacting Real Property Act 1845, s 9), which applies equally to surrender
and to merger. This rule now applies to mergers occurring after 1 October 1845.
4 The question was raised but not decided in Electricity Supply Nominees v Thorn EMI Retail [1991] 1 EGLR 46.
5 Cottee v Richardson (1851) 7 Ex Ch 143.

Page 367
Merger/7 Effect of merger on mortgages of the lease
7 Effect of merger on mortgages of the lease
HR A[7908]
It would seem that where a lessee who has mortgaged the term acquires the reversion in fee, the term is in every case
kept alive for the benefit of the mortgagee1. This is shown, inter alia, by Re Chesters, Whittington v Chesters2, in which
case a tenant for life in remainder paid off a mortgage on the property, the mortgage was, in the absence of evidence of
a contrary intention in accordance with the equity rule, kept alive for his benefit. However, by the Law of Property Act
1925, s 116, a mortgage term shall, when the money secured by the mortgage has been discharged, become a satisfied
term and shall cease3. It is submitted that any declaration of merger inserted in the conveyance of the reversion is
inoperative and does not give the mortgagee a right to a charge upon the freehold interest.
HR A[7909]
1 Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631, CA; and Cottee v Richardson (1851) 7 Ex Ch 143.
2 [1935] Ch 77.
3 LPA 1925, s 185 at para HR A[20129.1]. This is without prejudice to the right of a tenant for life or other person having only a limited
interest in the equity of redemption to require a mortgage to be kept alive by transfer or otherwise.
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Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/G
Surrender
G
Page 369
Surrender/1 Overview
1 Overview
HR A[7910]-[7920]
A lease is determined by surrender where the tenant yields up the term to his immediate reversioner. A surrender may
be express or by operation of law1. An express surrender must be by deed or, in certain cases, in writing. A surrender by
operation of law occurs when the parties act in a way that is inconsistent with the continuation of the tenancy. The most
usual instance of such inconsistent acts are delivery of possession to the landlord, or the grant of a new tenancy to the
tenant. A surrender does not destroy or affect the right of undertenants or affect liability for breaches committed prior to
it.
HR A[7921]
1 As to express surrenders, see below; as to surrenders by operation of the general law, see paras HR A[7985]-[8086], and as to surrenders
effected by disclaimer under the Landlord and Tenant (War Damage) Acts 1939 and 1941, or the Landlord and Tenant (Requisitioned Land)
Act 1942, see para HR A[8122].
(a) Surrender and merger distinguished
HR A[7922]
Surrender and merger are similar concepts in that both cases the reversion and the term become vested in the same
person. The most useful practical distinction is that under a surrender the term is surrendered up to the reversioner,
whereas under a merger the reversion and the term generally both become vested in the tenant or some third party.
Page 370
Surrender/2 Parties to the surrender
2 Parties to the surrender
HR A[7923]
A surrender of a tenancy consists of yielding up the term to the immediate reversioner1. The parties to the surrender
must be the owner of the term2 and the owner of the immediate reversion3. Accordingly, a subtenant cannot surrender
to the head landlord. However, a surrender by the subtenant and tenant to the superior landlord will operate as a
surrender by the subtenant to the tenant, followed by a surrender by the latter to the superior landlord4. A surrender may
also be effected by surrender to a mesne landlord, even if his estate is shorter than that of the surrendering tenant5.
Where a concurrent lease is granted so as to pass the reversion on the prior lease, the later tenant can accept a surrender
of the earlier lease.
HR A[7924]
1 Co Litt 337 b; Bac Abr tit 'Leases and Terms for Years' (S) 1, p 873. Previously, it had been held that a term could not be 'drowned' in a
term (Porry v Allen (1590) Cro Eliz 173).
2 Seaward v Drew (1898) 67 LJQB 322 at 323; cf Stait v Fenner [1912] 2 Ch 504.
3 Hence, a surrender to a sequestrator is ineffectual: Cornish v Searell (1828) 8 B & C 471, 476.
4 Paramounr v Yardley (1579) 2 Plowd 539, 541).
5 Hughes v Robotham (1593) Cro Eliz 302 at 303; Bac Abr tit 'Leases and Terms for Years' (S) 1, p 875.
HR A[7925]
The assignee of the reversion can accept a surrender and put an end to the rent, notwithstanding an agreement on the
assignment that the rent shall continue to be received by the assignor1.
HR A[7926]
1 Southwell v Scotter (1880) 49 LJQB 356, CA; but see Wood v Marquis of Londonderry (1847) 10 Beav 465.
HR A[7927]
Where the lease is vested in two or more tenants jointly a surrender is only effective if all the tenants join in it. This
Page 371
applies to surrenders of tenancies for a term certain and of periodic tenancies1. There may be an express provision in the
lease that the tenancy can be effectively surrendered by one of the joint tenants. The same principle should apply to the
landlord's interest, so that if this is held jointly a valid surrender should be made to all of the co-owners. The rule must
be distinguished from that governing the giving of a notice to quit in respect of a periodic tenancy vested in joint tenants
where the notice is valid if given by only one of the tenants2.
HR A[7928]
1 Leek and Moorlands Building Society v Clark [1952] 2 QB 788, [1952] 2 All ER 492.
2 Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478, [1992] 1 All ER 1, HL. See paras HR A[8386]-[8405].
(a) Special categories of party to a surrender
HR A[7929]
An infant cannot accept a surrender1.
HR A[7930]-[7940]
1 Thompson v Leach (1690) 3 Mod Rep 301; but see the Settled Land Act 1925, s 102(2)(g).
HR A[7941]
A tenant for life can accept a surrender under the Settled Land Act 19251. A legal tenant for life might retain for his
own use as a casual profit any sum paid to him in consideration of his accepting a surrender2.
HR A[7942]
1 Settled Land Act 1925, ss 52, 90(1)(iv).
2 Re Hunlocke's Settled Estates, Fitzroy v Hunlocke [1902] 1 Ch 941; Re Penryhn's Settlement, Lord Penrhyn v Pennant [1922] 1 Ch 500.
HR A[7943]
A surrender to a mortgagor was formerly ineffectual, notwithstanding that the lease was granted by him under the
Conveyancing Act 1881, s 18, now replaced by the Law of Property Act 1925, s 99. Now, under the Law of Property
Page 372
Act 1925, s 100(1), unless a contrary intention is expressed by the mortgagor or mortgagee in the mortgage deed or
otherwise in writing1, a mortgagor or mortgagee in possession may, where the mortgage was made since 31 December
1911, or an agreement has been made since that date2, accept a surrender of any lease of the whole or any part of the
mortgaged land, if it be for the purpose of enabling the grant by a mortgagor or mortgagee of a lease authorised by the
Law of Property Act 1925, s 99, or by an agreement made under that section, or by the mortgage deed3.
HR A[7944]
2 LPA 1925, s 100(8).
3 LPA 1925, s 100(1), (2).
HR A[7945]
Where a receiver of the income of the mortgaged property has been appointed by the mortgagee, this power is
exercisable by the mortgagee instead of by the mortgagor, and the mortgagee may delegate by writing the exercise of
the power to the receiver1. Presumably, a surrender of a lease granted before the mortgage otherwise than for the
purpose of the grant of an authorised lease is void unless the surrender is made to both mortgagor and mortgagee.
HR A[7946]
HR A[7947]
A tenant who has been dispossessed under the Limitation Act 1980, can surrender his term because the freeholder's
interest is in reversion until such time as the term is determined1. However, where the land is registered, the registration
of a squatter's title under the Land Registration Act 1925, s 75 has the effect that such rights cannot be defeated by a
subsequent surrender of the lease between the documentary tenant and the freeholder2.
HR A[7948]
1 Fairweather v St Marylebone Property Co Ltd [1963] AC 510, [1962] 2 All ER 288 overruling Walter v Yalden [1902] 2 KB 304 and
approving Taylor v Twinberrow [1930] 2 KB 16.
2 Spectrum Investment Co v Holmes [1981] 1 All ER 6, [1981] 1 WLR 221.

Page 373
HR A[7949]
Before 1926 a tenant who had not entered onto the premises had only an interessi termini and could not effect a
surrender. The doctrine of the interessi termini has now been abolished and a lease can be surrendered at any time1.
HR A[7950]-[7960]

Page 374
Surrender/3 Surrenders of part of the demise or part of the term
3 Surrenders of part of the demise or part of the term
HR A[7961]
A part only of the premises may be surrendered1. However, the whole of the term demised must be surrendered2.
HR A[7962]
1 Baynton v Morgan (1888) 22 QBD 74, CA; Allen v Rochdale Borough Council [2000] Ch 221, [2000] 3 All ER 443, CA.
2 Burton v Barclay (1831) 7 Bing 745 at 757.

Page 375
Surrender/4 Conditional surrenders
4 Conditional surrenders
HR A[7963]
An express surrender may be subject to a condition precedent or a condition subsequent1. If the condition is a condition
precedent and is not performed, the surrender will not take effect2. If it is a condition subsequent and is not performed,
the estate of the tenant will revert3 and he will remain liable under the stipulations of the lease4.
HR A[7964]
1 Shep Touch 307. There is no modern authority on this subject.
2 Shep Touch 308; Co Litt 2186.
3 Shep Touch 308; Co Litt 2186.
4 Coupland v Maynard (1810) 12 East 134.

Page 376
Surrender/5 Surrender of future interests
5 Surrender of future interests
HR A[7965]
It remains doubtful whether there can be a surrender of a term to commence at a future day until the tenant is entitled to
and has obtained possession1. It is said that a future lease cannot be surrendered expressly, though it can be surrendered
by operation of law2. The reason for the difficulty is that there must be privity of estate between the surrenderor and the
surrenderee. Thus, the tenant or the assignee of the term may surrender to the landlord or the assignee of the reversion
because of the privity of estate, but not to a receiver appointed by the court who takes no estate in the property3.
HR A[7966]
1 Weddall v Capes (1836) 1 M & W 50 at 52; Doe d Murrell v Milward (1838) 3 M & W 328 at 332, per Parke B; cf Badeley v Vigurs
(1854) 4 E & B 71 at 79. But see 37 Sol Jo 452, where it is stated that in Parker v Briggs (1893) cited in 37 Sol Jo at 452, CA, this opinion
was not followed; and an agreement for a surrender entered into for valuable consideration is enforceable; cf Wallace v Patton (1846) 12 Cl
& Fin 491, HL.
2 Bac Abr, tit 'Leases and Terms for Years' (S) (2) 2, p 880.
3 There must be privity of estate between surrenderor and surrenderee: Cornish v Searell (1828) 8 B & C 471, but under the Law of
Property Act 1925, s 100(13) a mortgagee may by writing delegate his powers of accepting surrenders under the section to a receiver
appointed by him under his statutory power.
Page 377
Surrender/6 Express surrender
6 Express surrender
HR A[7967]
Every express surrender must be either by deed or in writing1. Leases for a term not exceeding three years at the best
rent that can be reasonably obtained without taking a fine may be surrendered by writing signed either by the
surrenderor or his agent thereunto lawfully authorised in writing2; but surrenders of all other terms must be made by
deed3, save where the surrender is by operation of law4.
HR A[7968]
1 Express surrender must be by deed or in writing: Law of Property Act 1925, ss 52, 53.
2 Law of Property Act 1925, ss 53(1), 54(2). Such leases may be created by parol (s 54(2)); but their surrender, if express, must be by
writing (s 53(1); Matthews v Sawell (1818) 8 Taunt 270; Taylor v Chapman (1795) Peake Add Cas 19). For a form of surrender under seal
which may readily be adapted for use under hand only, see 12 Forms & Precedents (4th edn) p 1354. Prior to the Statute of Frauds 1677, s 3,
now replaced by the Law of Property Act 1925, s 53, oral surrenders were valid (Sleigh v Bateman (1596) Cro Eliz 487; Farmer d Earl v
Rogers (1755) 2 Wils 26 at 27) but since then all oral surrenders, and oral agreements for the determination of a tenancy which are
equivalent to a surrender (Thomson v Wilson (1818) 2 Stark 379), are void (Matthews v Sawell (1818) 8 Taunt 270; Taylor v Chapman
(1795) Peake Add Cas 19; Mollett v Brayne (1809) 2 Camp 103).
3 In other cases by deed: Law of Property Act 1925, s 52.
4 Except where surrender is by operation of law: surrenders by operation of law, including surrenders which may, by law, be effected
without writing, are excepted from the effect of this section by the Law of Property Act 1925, s 52(2)(c).
HR A[7969]
No technical words are necessary to effect a surrender, and any form of words which indicate the intention will be
sufficient. But there must be a writing which purports to re-vest the estate in the reversioner1. Any agreement between
the landlord and tenant that the landlord shall have immediate possession operates as a surrender, as long as it has this
effect2. The terms of an agreement to purchase the reversion may be enough to show that parties' intention to surrender
an existing tenancy3. The statutory requirement of a written instrument is not satisfied by the mere cancellation of the
lease4, nor by a recital in a second lease that it was granted in part consideration of the surrender of a prior lease5. The
second lease may effect a surrender by operation of law.
HR A[7970]-[7980]
1 Bac Abr, tit 'Leases and Terms for Years' (S) 1, p 873; Challoner v Davies (1698) 1 Ld Raym 400; see Smith v Mapleback (1786) 1
Page 378
Term Rep 441; Doe d Wyatt v Stagg (1839) 5 Bing NC 564.
2 Williams v Sawyer (1821) 3 Brod & Bing 70.
3 Turner v Watts (1927) 97 LJKB 92; affd (1928) 97 LJKB 403, CA. In that case, the intention was deduced from a provision that interest
on the purchase money shall be payable from the date of the contract.
4 Roe d Earl Berkeley v Archbishop of York (1805) 6 East 86.
5 Roe d Earl Berkeley v Archbishop of York (1805) 6 East 86; Wootley v Gregory (1828) 2 Y & J 536 at 542; Lord Ward v Lumley (1860)
5 H & N 87; nor is cancelling prima facie evidence of a formal surrender (Doe d Courtail v Thomas (1829) 9 B & C 288).
HR A[7981]
Where the title to the lease is registered under the Land Registration Act 1925, the surrender should be produced at the
Land Registry in order that the determination may be notified on the register1; where the lease is not registered but is
noted as an incumbrance against the superior title both the lease and the surrender should be produced and where there
has been transmission of the lease they must be accompanied by evidence of the applicant's title2.
HR A[7982]
1 Land Registration Rules 1925, r 200.
2 LRR 1925, rr 201, 202.
HR A[7983]
An express surrender by deed expressed to be made in consideration of the grant of a new lease will not be avoided
(though it may be voidable up the date when the original lease would have expired) because the new lease subsequently
granted is itself void1.
HR A[7984]
1 Rhyl UDC v Rhyl Amusements Ltd [1959] 1 All ER 257, [1959] 1 WLR 465, dist Doe d Earl Egremont v Courtenay (1848) 11 QB 702;
Doe d Biddulph v Poole (1848) 11 QB 713; Canterbury Corpn v Cooper (1908) 99 LT 612; affd (1909) 100 LT 597, CA.
Page 379
Surrender/7 Surrender by operation of law
7 Surrender by operation of law
(a) Actual delivery of possession
HR A[7985]
A surrender by operation of law, or implied surrender, occurs where1:
(a) the tenant redelivers possession of the demised premises; and

(b) the landlord accepts that redelivery of possession2.
HR A[7986]
1 Cannon v Hartley (1850) 9 CB 634n (a).
2 Edward H Lewis & Son Ltd v Morelli [1948] 1 All ER 433; reversed on other grounds [1948] 2 All ER 1021, CA.
HR A[7987]
The surrender in this case depends upon the agreement by the landlord and tenant that an end shall be put to the term,
and upon the change of possession in pursuance of such agreement1. The agreement is to be evidenced by the parties'
unequivocal acts2. These facts must be assessed objectively3. However, where the surrender is said to arise out of a
grant of a tenancy to a third party, whether those parties intended there to be a contract is a separate question, to
answered by reference to the objective intentions of the parties to the alleged contract4.
HR A[7988]
1 Phene v Popplewell (1862) 12 CBNS 334 at 342; Easton v Penny (1892) 67 LT 290 at 292.
2 Lyon v Reed (1884) 13 M & W 285; Tarjomani v Panther Securities (1983) 46 P & CR 32, CA.
3 R v London Borough of Croydon, ex p Toth (1988) 20 HLR 576, CA; Zionmor v Islington London Borough Council (1997) 30 HLR 822.
4 Mattey Securities Ltd v Ervin (1998) 77 P & CR 160, [1998] 2 EGLR 66, CA; Andre v Robinson [2007] EWCA Civ 1449, [2007]
PLSCS 266.
Page 380
HR A[7989]
The implication of a surrender in such circumstances is founded on the principle of estoppel, in that the parties have
acted towards each other in a way which is inconsistent with the continuation of the tenancy and they cannot
subsequently go back to asserting the continued existence of that tenancy1. Thus, a surrender is effectual although the
landlord accepts possession under a mistake induced by the tenant, provided that the tenant's conduct is not fraudulent2.
HR A[7990]-[8000]
1 Nixon v Robinson (1844) 2 Jo & Lat 4.
2 Gray v Owen [1910] 1 KB 622.
HR A[8001]
In order to effect a good surrender, there has to be either an effective redelivery of possession, or some act which
virtually amounts to a redelivery of possesion1. Thus, there cannot be a surrender by a conditional agreement which is
not followed by the tenant giving up possession2; or by a mere agreement to give up and accept possession in the
future3. By contrast, where the parties to a periodic tenancy agreed orally that the tenant could quit as soon as he liked
and the tenant did then quit, the change of possession amounted to a surrender by operation of law4.
HR A[8002]
1 Oastler v Henderson (1877) 2 QBD 575, 579, CA per Brett LJ; Whitehead v Clifford (1814) 5 Taunt 518.
2 Coupland v Maynard (1810) 12 East 134 at 140.
3 Brown v Burtinshaw (1826) 7 Dow & Ry KB 603; Weddall v Capes (1836) 1 M & W 50.
4 Grimman v Legge (1828) 8 B & C 324 at 325.
HR A[8002.1]
There are cases where something less than an actual redelivery of possession has nevertheless constituted a good
surrender. So, there can be a surrender by operation of law where the tenant was not actually in occupation, therefore
unable to deliver up possession, at least where the tenant's actions clearly evidence an intention to effect surrender1.
Equally, if a tenant cannot deliver up possession because the premises are occupied by the tenant's spouse, who asserts a
statutory right to occupy under the Family Law Act 1996, s 30 (formerly the Matrimonial Homes Act 1983, s 1), there
may be a good surrender if the landlord accepts that the tenant has done everything possible to deliver up possession2.
HR A[8002.2]
Page 381
1 Allen v Rochdale Borough Council [2000] Ch 221, [2000] 3 All ER 443, CA. In that case, the landlord and the tenant were the same
person, holding the interests in different capacities.
2 London Borough of Brent v Sharma and Vyas (1992) 25 HLR 257, CA; Sanctuary Housing Association v Campbell [1999] 1 WLR
1279, CA; Ealing Family Housing Ltd v McKenzie [2003] EWCA Civ 1602, [2004] HLR 21, [2004] L & TR 15, CA.
HR A[8002.3]
Where a tenant gives a defective notice to quit, it may take effect as a surrender if either the tenant delivers up
possession, with the landlord's consent, or there is sufficient acceptance by the landlord that the tenant has done
sufficient to deliver up possession1. However, an insufficient notice to quit, although accepted by the landlord, is not
effective as a surrender if the tenant retains possession after the notice has expired2. However, it is not altogether clear
whether cases involving defective notice to quit are really cases of surrender by operation of law, or whether they can be
analysed as cases on the ability of any recipient of a defective notice to quit to waive the defect and treat the notice as
valid3.
HR A[8002.4]
1 London Borough of Brent v Sharma and Vyas (1992) 25 HLR 257, CA; Sanctuary Housing Association v Campbell [1999] 1 WLR
1279, CA; Ealing Family Housing Ltd v McKenzie [2003] EWCA Civ 1602, [2004] HLR 21; [2004] L & TR 15, CA.
2 Johnstone v Hudlestone (1825) 4 B & C 922; Doe d Murrell v Milward (1838) 3 M & W 328.
3 Hounslow London Borough Council v Pilling [1994] 1 All ER 432, [1993] 2 EGLR 59, CA; Hackney London Borough Council v
Snowden [2001] L & TR 6, (2001) 33 HLR 49, CA; see also the problematic decision in Lewisham London Borough Council v Lasisi-Agiri
[2003] EWHC 2392 (Ch), [2003] 45 EG 175 (CS), as further discussed in paragraph HR A[8341.1].
(b) Returning the keys to the landlord
HR A[8003]
There is a delivery of possession sufficient to effect a surrender when the tenant returns the keys of the premises, and
the landlord accepts them with the intention of changing the possession1. But the consent of the landlord to the delivery
of the keys is essential: so, if the tenant gives the landlord the keys, the tenant is making an offer to surrender the
tenancy which must be accepted by the landlord in order to effect the surrender2. Equally, it is not sufficient that they
are delivered to his servant who does not return them3. If there is no consent at the time, the surrender is not complete
until the landlord takes possession in such a manner as to estop him from denying that the tenancy is at an end4.
HR A[8004]
Page 382
1 Dodd v Acklom (1843) 6 Man & G 672; Natchbolt v Porter (1689) 2 Vern 112; cf Mines Royal Societies v Magnay (1854) 10 Ex Ch 489
at 493.
2 Cannan v Hartley (1850) 9 CB 634n at 648; Furnivall v Grove (1860) 8 CBNS 496; Laine v Cadwallader (2001) 33 HLR 397, [2001] L
& TR 8, CA.
3 Cannan v Hartley (1850) 9 CB 634n at 648; Furnivall v Grove (1860) 8 CBNS 496
4 Oastler v Henderson (1877) 2 QBD 575, CA. In Relvok Properties Ltd v Dixon (1972) 25 P & CR 1, CA the landlord changed the locks
to protect the security of premises abandoned by the tenant. It was held that the landlord's acts did not amount to a taking of possession. The
case was one of alleged forfeiture, but the relevant principles are the same. In McDougalls Catering Foods Ltd v BSE Trading Ltd (1997) 76
P & CR 312, the Court of Appeal, applying the principles in the aforementioned cases, held that a landlord had not accepted a surrender,
even where he had taken summary possession proceedings to evict squatters from the demised premises. It is not altogether easy to see how
this result can have been achieved, given that the landlord had no right to possession unless the tenancy was at an end.
(c) By lease to third person with tenant's consent
HR A[8005]
The grant by the landlord of a new lease to a third person, with the consent of the tenant, operates as a surrender of the
old lease, provided that the old tenant gives up possession to the new tenant at or about the time of the grant of the new
lease1. It seems that if the tenant was not in occupation prior to the surrender, a surrender can be effected without there
being any physical relinquishing of occupation. The same effect is produced when the landlord, with the consent of the
tenant, accepts another person as tenant2, and such other person takes possession3, unless the landlord reserves his
rights against the original tenant4. Receipt of rent from a person in possession may be evidence of the landlord's
acceptance of him as tenant, whether he is a stranger5, or whether he was already in possession as under-tenant6. For a
fuller consideration of the question of whether an acceptance of rent amounts to the creation of a tenancy, see paras HR
A[8505]-[8520].
HR A[8006]
1 Lyon v Reed (1844) 13 M & W 285 at 309; Creagh v Blood (1845) 2 Jo & Lat 133 at 160; Davison v Gent (1857) 1 H & N 744; Wallis v
Hands [1893] 2 Ch 75.
2 Woodcock v Nuth (1832) 8 Bing 170; Doe d Hull v Wood (1845) 14 M & W 682; Doran v Kenny (1869) IR 3 Eq 148; and cf Matthews v
Sawell (1818) 2 Moore CP 262.
3 Thomas v Cook (1818) 2 B & Ald 119; Reeve v Bird (1834) 1 Cr M & R 31; see Taylor v Chapman (1795) Peake Add Cas 19; Doe d
Hull v Wood (1845) 14 M & W 682; Glynn v Coghlan [1918] 1 IR 482.
4 Dawson v Lamb (1853) 3 Car & Kir 269.
5 Copeland v Watts (1815) 1 Stark 95, applied Mattey Securities Ltd v Ervin (1998) 77 P & CR 160, [1998] 2 EGLR 66, CA; cf Laurence
v Faux (1861) 2 F & F 435.
6 Harding v Crethorn (1793) 1 Esp 56, per Lord Kenyon.

Page 383
HR A[8007]
The consent of the tenant is essential1. If the consent of the tenant to the new lease has not been obtained the tenancy is
not, of course, surrendered and the new tenancy will take effect as a lease of the reversion2. Equally, there will be no
surrender if it is the intention of the parties that the lease shall continue to exist3.
HR A[8008]
1 Edward H Lewis & Son Ltd v Morelli [1948] 1 All ER 433; reversed on other grounds, [1948] 2 All ER 1021, CA.
2 See paras HR A[286]-[300].
3 Clifford v Reilly (1869) LR 4 CL 218.
HR A[8009]
An exchange between two tenants who hold under different landlords, made with the consent of the landlords, operates
as a surrender of the old tenancies and the creation of a new tenancy as to each holding1.
HR A[8010]-[8020]
1 Bees v Williams (1835) 2 Cr M & R 581.
HR A[8021]
Where the landlords are executors, acceptance of the new tenant by one only will not suffice1. It would seem that this
case applies to any situation where the reversion is in joint ownership.
HR A[8022]
1 Turner v Hardey (1842) 9 M & W 770.
(d) By grant of new lease to tenant
HR A[8023]
Page 384
A surrender by operation of law also takes place when the tenant takes a new lease from the landlord to commence
during the term of the old lease, even though the new lease is for a shorter term than the residue of the old term1. There
can, of course, be no implied surrender by an agreement to which the tenant is not a party. The new lease must be to the
same person who was the tenant under the old lease. The grant of a new lease to a different person may be a fact from
which the inference of a surrender can be drawn if accompanied by some other material, for example the assent of the
previous tenant or his having quit the premises for some considerable period of time. These matters are discussed in the
previous paragraph.
HR A[8024]
1 Dodd v Acklom (1843) 6 Man & G 672 at 679.
HR A[8025]
As with other forms of surrender by operation of law, the surrender here is founded upon estoppel, and takes place
without regard to the intention of the parties. The estoppel aries because the landlord has no power to grant the new
lease, except upon the footing that the old lease is surrendered1. As the tenant is a party to the grant of the new lease, he
is equally estopped from denying the surrender2. Consequently, the acceptance of the new lease operates as a surrender
of the old one3. There is also a surrender if the new lease is a future lease4. Equally, there is a surrender if the new lease
is by parol and the old lease was by deed5.
HR A[8026]
1 President and Scholars of Corpus Christi College, Oxford v Rogers (1879) 49 LJQB 4.
2 Porry v Allen (1590) Cro Eliz 173; cf Easton v Penny (1892) 67 LT 290 at 292.
3 Lyon v Reed (1844) 13 M & W 285 at 306; Joseph v Joseph [1967] Ch 78, [1966] 3 All ER 486. The decision of the Divisional Court in
Fenner v Blake [1900] 1 QB 426; in so far as based on the implication of the grant and acceptance of a new tenancy arising from an oral
agreement to surrender, is probably to be regarded as erroneous: see Take Harvest Ltd v Liu [1993] AC 552 at 556-557, per Sir Christopher
Slade.
4 Ive's Case (1597) 5 Co Rep 11a.
5 Dodd v Acklom (1843) 6 Man & G 672; cf Foquet v Moor (1852) 7 Ex Ch 870.
HR A[8027]
But it is essential to such a surrender that the new lease should be valid and should take effect at once as a lease; hence,
there is no implied surrender by the acceptance by the tenant of a new lease which is void1, or which is voidable and is
in fact avoided2. The effect is the same where the new lease is expressed to be made in consideration of the surrender of
the old lease3.
Page 385
HR A[8028]
1 Doe d Earl Egremont v Courtenay (1848) 11 QB 702; Doe d Biddulph v Poole (1848) 11 QB 713; see Zouch d Abbot and Hallet v
Parsons (1765) 3 Burr 1794 at 1807; Wilson v Sewell (1766) 4 Burr 1975 at 1980; Davison d Bromley v Stanley (1768) 4 Burr 2210 at 2213;
Barclays Bank Ltd v Stasek [1957] Ch 28, [1956] 3 All ER 439 (where the new lease was ineffective for want of the consent of the landlord's
mortgagee). It is otherwise where there is an express surrender by deed: Rhyl UDC v Rhyl Amusements Ltd [1959] 1 All ER 257, [1959] 1
WLR 465.
2 Roe d Earl Berkeley v Archbishop of York (1805) 6 East 86 at 102; Doe d Earl Egremont v Courtenay (1848) 11 QB 702 at 712; Easton
v Penny (1892) 67 LT 290; Zick v London United Tramways Ltd [1908] 2 KB 126 at 132, CA; Canterbury Corpn v Cooper (1908) 99 LT
612; affd (1909) 100 LT 597, CA.
3 Knight v Williams [1901] 1 Ch 256.
(e) Agreement to grant the tenant a new lease
HR A[8029]
A mere agreement for a new lease is probably ineffectual to effect a surrender by operation of law1. It may be effectual,
perhaps, it is one which is capable of being specifically enforced2. Of course, the grant of the new lease pursuant to the
agreement may effect a surrender. The question whether such an agreement operates as a surrender is one of intention of
the parties to be discovered from the terms of the contract into which they have entered3. So, where the terms of the
agreement to purchase are such as to render its performance incompatible with a continuance of the tenancy, the
agreement will be held to operate as either an express surrender or surrender by operation of law of the existing
tenancy4. It seems doubtful on the cases whether an option to purchase which contains a condition that the tenant shall
accept the landlord's title operates on a notice becoming effective as a surrender in law. Perhaps, if the contract of
purchase can still be rescinded, there is no surrender5.
HR A[8030]-[8040]
1 Foquet v Moor (1852) 7 Ex Ch 870; see Hamerton v Stead (1824) 3 B & C 478 at 482.
2 See Walsh v Londsdale (1882) 21 Ch D 9, CA. An agreement for a new lease which is acted on is a surrender of the old lease: Re Young,
ex p Vitale (1882) 47 LT 480.
3 Doe d Gray v Stanion (1836) 1 M & W 695 at 701; Tarte v Darby (1846) 15 M & W 601; Ellis v Wright (1897) 76 LT 522, CA; Leek
and Moorlands Building Society v Clark [1952] 2 QB 788, [1952] 2 All ER 492; Nightingale v Courtney [1954] 1 QB 399, [1954] 1 All ER
362.
4 Turner v Watts (1928) 97 LJKB 403, CA; Cockwell v Romford Sanitary Steam Laundry Ltd [1939] 4 All ER 370.
5 Cockwell v Romford Sanitary Steam Laundry Ltd [1939] 4 All ER 370 at 377, citing a statement by Romer J in Raffety v Schofield
[1897] 1 Ch 937 at 942.
Page 386
HR A[8041]
However, there is one case which brings the requirement that a tenancy is surrendered by another tenancy, or agreement
for a tenancy is required. In Foster v Robinson1, it was held that a surrender by operation of law occurred where the
former tenant is allowed to occupy the premises rent free. However, the better analysis is that the rent-free occupation
amounted to a tenancy at will, which displaced the previous tenancy2.
HR A[8042]
1 [1951] 1 KB 149, [1950] 2 All ER 342, CA.
2 Foster v Robinson [1951] 1 KB 149, [1950] 2 All ER 342 and see paras HR A[164]-[185]. Rent free occupation has in some
circumstances been held to be a tenancy at will: Buck v Howarth [1947] 1 All ER 342.
(f) Surrender and variations in terms of tenancies
HR A[8043]
The difference in the terms of the tenancy may be such as to create a surrender and regrant1. However, in general a
variation of the terms of an existing tenancy made by consent between the parties will not amount to a surrender and
re-grant by implication of law unless the term is extended or new premises are added to the demise2.
HR A[8044]
1 Holme v Brunskill (1878) 3 QBD 495, CA.
2 Jones v Bridgman (1878) 39 LT 500; Re Savile Settled Estates [1931] 2 Ch 210 at 216.
HR A[8045]
The uncertainty which had existed with regard to the precise effect of an alteration by agreement of important terms of a
tenancy, namely whether a new tenancy is created by operation of law, was much reduced following the decision of the
Court of Appeal in Jenkin R Lewis & Son Ltd v Kerman1. The effect of that decision can be summarised as follows.
(a) When the parties increase the rent by agreement it is a matter of intention whether a new tenancy is
created. There is no rule of law that an increase in rent necessarily involves the creation of a new tenancy
by surrender and regrant. It would appear that even if no new tenancy is created, the obligation to pay the
increased rent is one which attaches to the lease and will be enforceable by virtue of privity of estate as
against a subsequent assignee.
Page 387
(b) Second, if the parties wish to extend the term of the lease they can only do so by the surrender of
the existing term and the grant of a new extended term2.
(c) Third, if the parties wish to add a fresh piece of land to the demise (whether increasing the rent or
not) it may well be that the transaction will in law operate as a surrender and regrant3.
HR A[8046]
1 [1971] Ch 477, [1970] 3 All ER 414, CA.
2 See also Smirk v Lyndale Developments Ltd [1975] Ch 317, [1975] 1 All ER 690, CA.
3 Compare Fredco Estates Ltd v Bryant [1961] 1 All ER 34, [1961] 1 WLR 76, CA.
HR A[8047]
Consequently, a surrender does not follow from a mere agreement made during the tenancy for the reduction1, or
increase of rent2, or other variation of its terms, unless there is some special reason to infer a new tenancy, where, for
instance, the parties make the change in the rent in the belief that the old tenancy is at an end3.
HR A[8048]
1 Crowley v Vitty (1852) 7 Ex Ch 319; see Clarke v Moore (1844) 1 Jo & Lat 723 at 729; and cf Foquet v Moor, (1852) 7 Ex Ch 870 at
877.
2 Lord Inchiquin v Lyons (1887) 20 LR Ir 474 at 479, CA; see Doe d Monk v Geeckie sub nom Geekie v Monck (1844) 1 Car & Kir 307;
especially where the additional sum to be paid is a percentage on improvements made by the landlord, and is not strictly payable as rent:
Donellan v Read (1832) 3 B & Ad 899 at 905. In Gable Construction Co Ltd v IRC [1968] 2 All ER 968, [1968] 1 WLR 1426 it was held
that a deed of variation whereby the premium payable under a lease was reduced and the rent increased was not a surrender and regrant.
3 Hodges v Lawrance (1854) 18 JP 347. See per Russell LJ in Joseph v Joseph [1966] 3 All ER 486 at 492. An agreement to alter a term
of a tenancy may not amount to the grant of a new tenancy and in that case there will be no surrender by operation of law. See paras HR
A[8045], HR A[8046], especially Smirk v Lyndale Developments Ltd [1975] Ch 317, [1975] 1 All ER 690, CA.
HR A[8049]
An alteration of an existing lease so that it will operate for a term extending beyond the existing term can only take
effect in law as a surrender and regrant1. An alteration of the grant of an option to extend the original term operates as a
surrender and regrant at the date thereof and not at the date of the exercise of the option2.
HR A[8050]-[8060]
Page 388
1 Re Savile Settled Estates, Savile v Savile [1931] 2 Ch 210; Jenkin R Lewis & Son Ltd v Kerman [1971] Ch 477, [1970] 3 All ER 414,
CA.
2 Baker v Merckel [1960] 1 QB 657, [1960] 1 All ER 668, CA.
HR A[8061]
The distribution to the tenant of a new rent book containing common form terms will not raise the inference that a fresh
tenancy is created1. However, where a tenant asked the landlord to transfer the rent book to his wife's name, a surrender
did take place, for the reasons discussed above in relation to reletting to a third party2.
HR A[8062]
1 Smirk v Lyndale Developments Ltd [1975] Ch 317, [1975] 1 All ER 690, CA.
2 Collins v Claughton [1959] 1 All ER 95, [1959] 1 WLR 145, CA.
HR A[8063]
Where a tenancy is vested in a sole tenant the addition of another person as a joint tenant does not necessarily create a
surrender and regrant by implication of law1.
HR A[8064]
1 Saunders' Trustees v Ralph (1993) 66 P & CR 335, 2 EGLR 1, [1993] 2 EGLR 1.
HR A[8065]
In the last analysis the question of whether there is a surrender and regrant seems to be a matter of the intention of the
parties1. It follows that there is no surrender by implication of law unless the substantial result contemplated b y the
parties is that the tenant should take a new tenancy on substantially different terms from the existing tenancy2.
Accordingly, an oral agreement to surrender at a future date a term granted for one year does not operate as a surrender
of the existing term and its replacement by a new term up to the date agreed for the surrender, since that result was not
contemplated by the parties3.
HR A[8066]
1 Jenkin R Lewis & Son Ltd v Ferman [1971] Ch 487, [1970] 3 All ER 414. CA.
Page 389
2 Take Harvest Ltd v Liu [1993] AC 552, PC.
3 Take Harvest Ltd v Liu [1993] AC 552, PC. Fenner v Blake [1900] 1 QB 426 is probably to be regarded as erroneous on this point: see
Take Harvest Ltd v Liu [1993] AC 552 at 556-557, per Sir Christopher Slade.
HR A[8067]
The above principle as applied to leases may be regarded as an aspect of the general law of contract which is that the
parties to a contract may vary that contract as they please provided that the variation is not inconsistent with or does not
go to the root of the existing contract, in which case it will take effect as a rescission of the existing contract and its
replacement by a new contract1.
HR A[8068]
1 Morris v Baron & Co [1918] AC 1, HL; British and Beningtons Ltd v North West-Cachar Tea Co Ltd [1923] AC 48, HL; Saunders'
Trustees v Ralph (1993) 66 P & CR 335, [1993] 2 EGLR 1.
(g) By change in position of tenant
HR A[8069]
A surrender is also implied when the tenant remains in occupation of the premises in a capacity inconsistent with his
being tenant, where, for instance, he becomes servant or caretaker of the landlord and so is no longer occupying the
premises as a tenant1. This change in status involves delivery of possession to the landlord, since a servant's possession
is the possession of the master2. A tenant who arranges to surrender his tenancy to his landlord, and whose employee
agrees to accept a new tenancy from the landlord, will be estopped from denying, since he has had the advantage of his
employer being substituted for him as tenant, that in fact a surrender had taken place by operation of law3.
HR A[8070]-[8080]
1 Peter v Kendal (1827) 6 B & C 703 at 710; Lambert v M'Donnell (1864) 15 ICLR 136; Gybson v Searl (1607) Cro Jac 84, 176; Mellows
v May (1601) Cro Eliz 874; but see Gie v Rider (1662) 1 Sid 75.
2 See paras HR A[782], HR A[783].
3 Metcalfe v Boyce [1927] 1 KB 758.
(h) Surrender of part only of premises
HR A[8081]
Page 390
Premises can be surrendered in part only. Thus, the delivery up of part of the premises will be a surrender as to that
part1. An acceptance of a new lease of part of the demised premises is a surrender only of that part2. A sale of with
vacant possession of a part of the demised premises subject to the lease, at least with the active consent of the tenant
effects a surrender of that part of the demise only3. Where a subtenant of one room took over three additional rooms but
paid no additional rent, it was held that there had been no surrender of the original subtenancy4.
HR A[8082]
1 Holme v Brunskill (1878) 3 QBD 495, CA.
2 Earl Carnarvon v Villebois (1844) 13 M & W 313 at 342, followed in Allen v Rochdale Borough Council [2000] Ch 221, [2000] 3 All
ER 443, CA.
3 Allen v Rochdale Borough Council [2000] Ch 221, [2000] 3 All ER 443, CA.
4 Fredco Estates Ltd v Bryant [1961] 1 All ER 34, [1961] 1 WLR 76, CA.
(i) Sale with vacant possession
HR A[8082.1]
Where the landlord, at least with the express knowledge and consent of the tenant sells the freehold of the demised
premises to a third party, expressly covenanting to give vacant possession, the lease (or any part of it subject to the sale)
is surrendered1.
HR A[8082.2]
1 Allen v Rochdale Borough Council [2000] Ch 221, [2000] 3 All ER 443, CA. In that case, the landlord and the tenant were the same
person, holding the interests in different capacities.
(j) Miscellaneous acts
HR A[8083]
The following acts are commonly asserted as acts of surrender:
(a) a landlord does not take possession by attempting to relet the premises1;
(b) but if the landlord puts up a notice to let and paints out the tenant's name, this may amount to a
resumption of possession2;
Page 391
(c) a landlord does not take possession by entering to do necessary repairs3;

(d) however, the mode of doing the repairs may imply that the landlord regards the house as in his own
occupation, so as to complete the surrender4;
(e) a landlord does not take possession by entering to secure the premises against trespassers5;
(f) a landlord does not take possession by making occasional use of a part of the premises6;
(g) it is sufficient to redeliver possession for the tenant directing the occupier to attorn to the landlord,
provided that the landlord knowingly accepts such attornment7;
(h) the acceptance by the tenant of an invalid notice to quit does not effect a surrender8.
HR A[8084]
1 Dawson v Lamb (1853) 3 Car & Kir 269; Redpath v Roberts (1800) 3 Esp 225; Oastler v Henderson (1877) 2 QBD 575, CA; Smith v
Blackmore (1885) 1 TLR 267.
2 Phene v Popplewell (1862) 12 CBNS 334.
3 Smith v Blackmore (1885) 1 TLR 267.
4 Smith v Roberts (1892) 9 TLR 77, CA.
5 Relvok Properties Ltd v Dixon (1972) 25 P & CR 1: the case was one of alleged forfeiture, but the relevant principles are the same.
6 Oastler v Henderson (1877) 2 QBD 575, CA.
7 Gray v Balls, Field v Merrison (1861) 5 LT 395.
8 Bessell v Landsberg (1845) 7 QB 638.
(k) Surrender and statutory tenancies
HR A[8085]
Where a tenancy would have been surrendered by operation of law the fact that it is a statutory tenancy will not prevent
a surrender from taking place on the grant of a new tenancy. A person in possession as statutory tenant may thus be
turned by agreement into a contractual tenant1. However, the statutory tenancy must be replaced by an agreed
contractual tenancy. It seems it cannot be merely surrendered, because a statutory tenant under the Rent Act or Housing
Act, has no interest capable of existing as an estate, but merely has a statutory right of occupation which could not be
the subject of a surrender at common law2.
HR A[8086]
1 The Bungalows (Maidenhead) Ltd v Mason [1954] 1 All ER 1002, CA; Collins v Claughton [1959] 1 All ER 95, CA.
Page 392
2 Solomon v Orwell [1954] 1 All ER 874, CA.

Page 393
Surrender/8 Effect of surrender
8 Effect of surrender
(a) Effect of surrender as between landlord and tenant
HR A[8087]
The effect of an express surrender is to vest the estate immediately in the surrenderee without express acceptance, but it
is made void by his dissent1. The surrender of the lease stops the accrual of rent2, and where the lease is by deed with a
covenant for payment of rent, rent accrued before the surrender can be recovered on the covenant3; otherwise it is
recoverable in an action for use and occupation4.
HR A[8088]
1 Thompson v Leach (1698) 2 Salk 618.
2 Southwell v Scotter (1880) 49 LJQB 356.
3 Torminster Properties Ltd v Green [1983] 2 All ER 457, [1983] 1 WLR 676, CA; Walker's Case (1587) Co Rep 22a. A-G v Cox, Pearce
v A-G (1850) 3 HL Cas 240.
4 Shaw v Lomas (1888) 59 LT 477; see paras HR A[9610]-[9645].
HR A[8089]
The surrender of the lease does not affect the liability of the tenant, for breaches of covenant committed prior thereto1.
Nor does it affect the liability of the landlord for such breaches2. The proposition, said to be derived from cases under
the bankruptcy legislation, that the surrender of a lease prevents the landlord from further enforcing against the tenant
any of his obligations under the lease, whether these obligations had already accrued before the date of the surrender or
had not, is incorrect3.
HR A[8090]-[8100]
1 Torminster Properties Ltd v Green [1983] 2 All ER 457, [1983] 1 WLR 676, CA. Dalton v Pickard [1926] 2 KB 545n, CA (liability for
dilapidations); Richmond v Savill [1926] 2 KB 530, CA.
2 Brown v Blake (1912) 47 L Jo 495 (damages in breach of collateral agreement to fit up premises for specified purposes).
3 Richmond v Savill [1926] 2 KB 530, CA; Torminster Properties Ltd v Green [1983] 2 All ER 457, [1983] 1 WLR 676, CA.
Page 394
HR A[8101]
In practice, an express surrender usually includes an express release from liability on the covenants, and a covenant to
renew or an option to purchase should generally be specially referred to by recital and separately released if it is at all
doubtful whether it will cease to exist after the surrender of the term. If any serious breach is known to the landlord, it
will affect the consideration paid for the surrender and be the subject of adjustment.
HR A[8102]
Upon accepting a surrender from an assignee of the lease, the landlord cannot reserve his rights against the tenant1.
Unless there is an express agreement to that effect rent payable in advance cannot be apportioned on a surrender2.
HR A[8103]
1 Clements v Richardson (1888) 22 LR Ir 535.
2 William Hill (Football) Ltd v Willen Key & Hardware Ltd (1964) 108 Sol Jo 482.
HR A[8104]
Where a lease is subject to a rent review, and the lease is surrendered after the review date but before the amount of the
rent has been determined by arbitration, the tenant is bound to pay the amount of the increased rent as determined by the
arbitrator, from the review date until the date of the surrender1.
HR A[8105]
1 Torminster Properties Ltd v Green [1983] 2 All ER 457, [1983] 1 WLR 676, CA.
(b) Effect of surrender on underleases
HR A[8106]
Surrender of the term does not destroy the rights of undertenants, because:
'It is a general and salutary principle of law that a person cannot be adversely affected by an agreement or arrangement to which he
is not a party. So far as he is concerned, it is res inter alios acta. It would conflict with this principle if the destruction of a tenancy
by surrender carried with it the destruction of the interest of a subtenant under a subtenancy previously granted'1.
Page 395
As regards sub-tenants, and also as regards third parties generally, the surrender operates only as a grant subject to their
rights, and the term is treated as continuing so far as is required for the preservation of such rights2. The opposite result
occurs where the mesne landlord operates a break-option: then, not only does the sub-tenancy end, but it is not possible
to agree that the sub-tenancy will not end3.
HR A[8107]
1 Per Lord Millett in Barrett v Morgan [2000] 2 AC 264, 271, HL.
2 Pleasant (Lessee of Hayton) v Benson (1811) 14 East 234 at 238; Doe d Beadon v Pyke (1816) 5 M & S 146 at 154; Pike v Eyre (1829)
9 B & C 909 at 914; Mellor v Watkins (1874) LR 9 QB 400; see Co Litt 338 b; Saint v Pilley (1875) LR 10 Ex Ch 137; Clements v Matthews
(1883) 11 QBD 808 at 815, CA; Phipos v Callegari (1910) 54 Sol Jo 635; Wilkes v Spooner [1911] 2 KB 473 at 479, 487, CA; Wilson v
Nevile, Reid & Co Ltd (1916) 32 TLR 542; and cf Re Thompson and Cottrell's Contract [1943] Ch 97, [1943] 1 All ER 169.
3 PW & Co v Milton Gate Investments Ltd [2003] EWHC 1994 (Ch), [2004] Ch 142. Although it is not possible to contract thus, may be
possible for the parties to estop themselves from denying the sub-tenancies continue, notwithstanding the determination of the mesne lease:
PW & Co, above.
HR A[8108]
This principle makes it necessary to provide for the substitution of a new reversion for the leasehold reversion which
has been surrendered, and also, in the case of surrender and renewal, for the validity of the renewed lease as against the
undertenants. Under the Law of Property Act 1925, the estate of the head landlord is deemed to be the reversion on the
underlease to the extent and for the purpose of preserving such incidents to and obligations on the surrendered leasehold
reversion as, but for the surrender thereof, would have subsisted1. Further, where a lease is duly surrendered in order to
be renewed, and a new lease is granted, the new lease is as valid as if all the underleases had been likewise surrendered;
and the respective rights and liabilities of the tenant and the undertenants are regulated as though the original lease still
continued2, the new tenant being in the position of assignee of the reversion to the underlease3; and the effect is to
place all parties, as to every matter, in the same position as if no surrender had taken place4, but subject, as between the
head landlord and the tenant, to the terms of the new lease. In accordance with the principles stated above, when an
equitable lease subject to an equitable charge is surrendered the surrender does not destroy the right of the chargee5. But
nothing stated in this paragraph as to the effect of a surrender on subtenants is applicable where what is surrendered is
not an estate but a mere right of occupation as a statutory tenant6.
HR A[8109]
1 Law of Property Act 1925, s 139, see para HR A[20114]. This refers to 'the estate or interest which as against the tenant for the time
being confers the next vested right to the land'; this is the reversion in which the surrendered lease has merged. A tenant to whom a landlord
has granted a fresh lease, subject to the unexpired portion of a subtenant's term after the surrender of the original lease by the former tenant,
is entitled to sue for the rent due from the subtenant for the unexpired portion of his term and also for possession on the expiry of the notice
to quit given by the original tenant: Plummer and John v David [1920] 1 KB 326.
2 Law of Property Act 1925, s 150, which applies both to express and implied surrenders, see para HR A[20125]. The court could not
compel a surrender of an underlease for the purpose of a renewal of the head lease: Colchester v Arnott (1700) 2 Vern 383.
Page 396
3 Re Grosvenor Settled Estates, Duke of Westminster v McKenna [1932] 1 Ch 232 at 241, where it was held that a tenant for life under the
Settled Land Act 1925, acting under s 42(1) of that Act, could take advantage of the Law of Property Act 1925, s 150, without getting in the
subleases; and see Ecclesiastical Comrs for England v Treemer [1893] 1 Ch 166.
4 Doe d Palk v Marchetti (1831) 1 B & Ad 715 at 721; Cousins v Phillips (1865) 3 H & C 892 at 901. The doubt expressed in Doe d Palk
v Marchetti (1831) 1 B & Ad 715 as to the enforceability by the landlord of covenants in the new lease coextensive with those in the old
lease against the undertenant has been removed by the Law of Property Act 1925, s 150(5), see para HR A[20125]. The new tenant retains
the rights held by his predecessor against the subtenant (Plummer and John v David [1920] 1 KB 326).
5 In ES Schwab & Co Ltd v McCarthy (1975) 31 P & CR 196, CA, a lease for 99 years was granted and the leasehold interest was
charged. Since the lease was not registered as required under the Land Registration Act 1925 the charge over it took effect in equity only.
The lease was surrendered. It was held that on general principles the surrender did not destroy the rights of the chargees.
6 Solomon v Orwell [1954] 1 All ER 874, [1954] 1 WLR 629, CA. A statutory tenant has a mere right of occupation which is not an estate
which can be surrendered.
HR A[8110]-[8120]
Though a forfeiture destroys the rights of undertenants1, if the landlord accepts a surrender after a cause of forfeiture
has accrued, the above rule prevails and the rights of undertenants are preserved2. Apparently it is the same when the
landlord has no notice of the forfeiture at the date of the surrender3.
HR A[8121]
2 Great Western Rly Co v Smith (1876) 2 Ch D 235, CA; affd (1877) 3 App Cas 165, HL.
3 Parker v Jones [1910] 2 KB 32.
HR A[8122]
The disclaimer of a lease under the Landlord and Tenant (War Damage) Acts 1939 and 1941, which operates as a
surrender by operation of law of the lease, operates also as a surrender of all subleases except a sublease by virtue
whereof a person is entitled to the actual occupation of the land comprised in the disclaimed lease; see s 8 of the 1939
Act and s 2 of the 1941 Act. Disclaimer under the Landlord and Tenant (Requisitioned Land) Act 1942, effects not only
a surrender by operation of law of the lease, but the extinguishment of all interests in or derived out of the term created
by the lease except as stated above.
Page 397
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/H
Disclaimer
H
Page 398
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/H
Disclaimer/1 Overview
1 Overview
HR A[8123]
Where a tenant becomes insolvent, the tenancy may become vested in his trustee in bankruptcy, or, if the tenant is a
company, in its liquidator. Both the trustee and liquidator have a statutory right to disclaim the tenancy.
HR A[8124]
This topic is considered in greater depth at Chapter 12.
HR A[8125]
Where a company tenant is struck off from the register without there being a liquidation arising from insolvency, the
tenancy vests in the Crown as bons vacantia. The Crown also has a power to disclaim the tenancy.
HR A[8126]
This topic is considered in greater depth at paras HR A[7525]-[7526].

Page 399
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/I
Notice to quit
I
Page 400
Notice to quit/1 Overview
1 Overview
HR A[8127]
Any periodic tenancy may be determined by notice to quit given by the landlord or the tenant. The appropriate period
for a notice to quit is determined by any express stipulation in the lease or principles of law which apply in the absence
of express stipulation. The above principles of law are that:
(a) a yearly tenancy may be determined by at least a half-year's notice, expiring at the end of a year of
the tenancy;
(b) any other periodic tenancy may be determined by a notice equal to at least a period of the tenancy
and expiring at the end of a period of the tenancy.
Page 401
Notice to quit/2 What is a notice to quit?
2 What is a notice to quit?
HR A[8128]
A notice to quit is notification by a landlord or a tenant to the other that the person, giving reasonable notice to
unilaterally determine a periodic tenancy, including a tenancy from year to year, half-yearly, quarterly, monthly, or
weekly tenancies1. The expression notice to quit is equally applicable to a notice served by a landlord or a tenant
requiring him to quit the premises and to a notice served on a landlord by a tenant stating that the latter person will quit
the premises. The exact period of notice is that which law, custom, contract or statute deems to be reasonable in respect
of any given tenancy.
HR A[8129]
1 A notice to quit may be given by the landlord or the tenant, or their assignees or assigns: Ahearn v Bellman (1879) 4 Ex D 201. The
position where the tenancy or the reversion are vested in joint tenants will be considered separately at paras HR A[8386]-[8405].
(a) Contrast between a notice to quit and a contractual break-notice
HR A[8130]-[8140]
A notice to quit must be distinguished from a notice operating a contractual break clause in a lease. A notice to quit is
appropriate only to a periodic tenancy and the duration and expiry date necessary for such a notice are, in the absence of
a contractual variation, imposed by law. A notice operating a break clause is dependent wholly on the terms of the
lease1.
HR A[8141]
1 A reference to a notice to determine a tenancy may include either type of notice: see eg Landlord and Tenant Act 1954, s 44(1)(b), see
HR B[644]-[650]. Break clauses are often phrased so as to permit the service of a notice to determine a tenancy after a given date. This often
leaves it unclear whether it is only the time of expiry which has to be after the given date or whether the notice itself cannot be served until
after that date. The resolution of such questions is, of course, a matter of the construction of the relevant clause in the lease.
Page 402
Notice to quit/3 The right to give a notice to quit
3 The right to give a notice to quit
HR A[8142]
The right to determine a periodic tenancy by notice to quit is an inseparable incident of such a tenancy. Accordingly,
there are limits on the extent to which the parties may, by express stipulation, restrict or alter the principles laid down
by the law for the service of notices to quit. The rules which have been developed appear to be as follows:
HR A[8143]
A provision that neither party to a periodic tenancy can give notice to quit is void since it is essential to the nature of
such a tenancy that both the landlord and the tenant shall be entitled to give notice determining the tenancy1.
HR A[8144]
1 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 All ER 504, HL.
HR A[8145]
A provision that one party to a periodic tenancy cannot give notice to quit is void for the same reason1.
HR A[8146]
1 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 All ER 504, HL. In Centaploy Ltd v Matlodge Ltd
[1974] Ch 1, [1973] 2 All ER 720 the court had to consider a weekly tenancy which was to continue until determined by the tenant. It was
held that the tenancy could be determined by the landlord upon giving proper notice because a provision that the landlord had no right to
determine the tenancy was repugnant to the nature of the tenancy granted.
HR A[8147]
An agreement or undertaking which restricts the service of a notice to quit until the occurrence of some uncertain event,
for example that the landlord requires the premises for some specified purpose, is void. The reason is said to be that
principle and precedent dictate that it is beyond the power of the parties to create a term which is uncertain1.
HR A[8148]
Page 403
1 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 All ER 504, HL. In this case, the House of Lords
rejected the possibility that an annual tenancy could exist with the landlords being unable to serve a notice to quit until they required the land
for the purposes of road widening. The decisions of the Court of Appeal in Re Midland Railway Co's Agreement [1971] Ch 725, sub nom
Charles Clay and Sons v British Railways Board [1971] 1 All ER 1007 and Ashburn Anstalt v Arnold [1989] Ch 1 were overruled. In Doe d
Warner v Browne (1807) 8 East 165, the landlord agreed not to turn out the tenant as long as the rent was duly paid and as long as the tenant
did not expose or sell any article injurious to the landlord in his business. It was held that this did not prevent the landlord from serving
notice to quit in the ordinary way. In Cheshire Lines Committee v Lewis & Co (1880) 50 LJQB 121, an undertaking by the landlord under a
weekly tenancy not to give notice to quit until he required to pull down the demised premises was held to be invalid. The fact that a lessee
receives public money which it is authorised by statute to spend in a particular way does not limit the right to serve a notice to quit: Peabody
Housing Association Ltd v Green (1978) 38 P & CR 644, 122 Sol Jo 862, CA.
HR A[8149]
The parties may enter into special stipulations as to the type of notice to quit required and the date on which it may
expire1. The service of a notice to quit may also be restricted until a specified period has expired2. The service of a
notice to quit may be restricted until a specified period has expired unless an uncertain event occurs during that period3.
HR A[8150]
1 This is considered in paras HR A[8165]-[8180].
2 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 All ER 504, HL. This does not offend against the
principle that the term must be certain.
3 Prudential Assurance Co Ltd v London Residuary Body Body [1992] 2 AC 386; [1992] 3 All ER 504, HL. An example given is that a
lease can be made from year to year subject to a fetter on the right of the landlord to determine the lease before the expiry of five years
unless the war ends.
HR A[8151]
Save for the exceptions next mentioned, the motives behind serving a notice to quit are irrelevant: the person serving it
can have a good reason, a bad reason or no reason for so doing1. Equally, the motives of the recipient of the notice are
completely immaterial2. A notice may, however, be vitiated if it is served fraudulently3. It is presently unclear whether
a notice to quit is vitiated by having been served by a statutory body (or a body discharging a statutory function) acting
in excess of its powers or acting unreasonably4. A notice to quit is invalidated if its service would constitute unlawful
discrimination under the Disability Discrimination Act 1995, provided there was some nexus between the disability and
the service of the notice to quit5.
HR A[8152]-[8160]
1 Chapman v Honig [1963] 2 QB 502, per Pearson LJ, CA, upholding the validity of a notice to quit served maliciously, in that the
landlord's motivation for serving it was to exact revenge on a tenant who had given evidence against him.
Page 404
2 Fletcher v Brent London Borough Council [2006] EWCA Civ 960, [2006] PLSCS 161, CA. This case still represents the law where the
recipient is not a statutory body, not subject to Art 8 of the European Convention on Human Rights. Its correctness in respect of statutory
bodies is presently less clear, for the reasons discussed in fn 4, below.
3 Rous v Mitchell [1991] 1 WLR 469, CA.
4 Bristol District Council v Clark [1975] 1 WLR 1443, CA. It has, however, been said that the service of a notice to quit might be an
exercise of a local authority's right in private law, rather than a power in public law: R v Bexley London Borough Council, ex p Barnhurst
Golf Club [1992] EGCS 39. In light of the decision in Sheffield City Council v Smart [2002] EWCA Civ 4, CA, it would now seem
established that the decision to serve a notice to quit may be attacked in public law, but it is less clear whether this vitiates the notice itself.
The decision of the European Court of Human Rights in McCann v United Kingdom [2008] All ER (D) 146 reinforces this view, although on
the present state of the authorities, this decision has not been incorporated into domestic law. It would seem that a Registered Social
Landlord is subject to the same obligation to act reasonably as a local authority landlord: R (on the application of Weaver) v London and
Quadrant Housing Trust [2008] EWHC 1377 (Admin), (2008) The Times, 8 July, QBDC.
5 Lewisham London Borough Council v Malcolm [2007] EWCA Civ 763, [2008] Ch 129, CA. It is respectfully suggested that the court's
reasoning for holding the notice to quit ineffective is suspect. The court held that the council could not rely on its own unlawful act, and so
could not recover possession: this raises the interesting question of whether the tenant was still bound by his covenants, given that he had
done nothing unlawful. The better view may be that the effect of notice is vitiated by s 21 of the 1995 Act, although this is stretching the
words used therein significantly.
HR A[8161]
A notice to quit cannot be given before the commencement of the tenancy1.
HR A[8162]
1 Lower v Sorrell [1963] 1 QB 959, [1962] 3 All ER 1074. In other words, a notice to quit must be given by an existing landlord to an
existing tenant. It is only in exceptional circumstances that this principle is of any importance. Such exceptional circumstances arose in
Lower v Sorrell, where the landlord served a valid notice to quit, but, apparently thinking it invalid, served a further notice two days before
the expiry of the first notice. Since the first notice was valid it terminated the then existing term, two days after the service of the second
notice. The tenant stayed on after the expiry of the first notice and paid rent in circumstances in which a new tenancy commenced, two days
after the service of the second notice. That notice was served therefore before the commencement of the new tenancy and was incapable of
determining it.
Page 405
Notice to quit/4 The length of notice required
4 The length of notice required
(a) Overview
HR A[8163]
Unless, on the construction of the tenancy agreement, the tenancy is not a yearly tenancy and in the absence of any
special stipulation, a notice to quit must be given so as to expire at the end of any complete period of the tenancy1, and
be equal to at least the length of the period of the tenancy2.
HR A[8164]
1 Kemp v Derrett (1814) 3 Camp 510; Doe d King v Grafton (1852) 18 QB 496; Savory v Bayley (1922) 38 TLR 619.
2 Doe d Parry v Hazell (1794) 1 Esp 94; Queen's Club Gardens Estates Ltd v Bignell [1924] 1 KB 117. This principle applies to periodic
tenancies of any length less than a year: Queen's Club Gardens Estates Ltd v Bignell [1924] 1 KB 117 at 125.
(b) Express contractual terms
HR A[8165]
Subject to the limitations just explained, the parties may enter into special stipulations both as to the length of the notice
and the time when the tenancy may be determined under it1. So, the parties to a tenancy may choose any notice period2.
The parties may even agree a different notice period for notice served by the landlord from the period for a notice
served by the tenant3. There seem to be only two caveats to this freedom to choose a notice period. First, the notice
period agreed cannot, of course, be longer than the tenancy contemplated by the parties4. Secondly, the period cannot
contravene a statutory requirement5.
HR A[8166]
1 Bridges v Potts (1864) 17 CBNS 314 at 333; Re Threlfall, ex p Queen's Benefit Building Society (1880) 16 Ch D 274 at 281, CA;
Herron v Martin (1911) 27 TLR 431; Mitchell v Turner (1919) 63 Sol Jo 776.
2 Re Threlfall ex p Queen's Benefit Building Society (1880) 16 Ch D 274.
3 In Wallis v Semark [1951] 2 TLR 222 the tenant had to give only one month's notice, but the landlord had to give two years by landlord.
Page 406
4 Tooker v Smith (1857) 1 H & N 732; Wallis v Semark [1951] 2 TLR 222.
5 The right to serve a notice to quit has been constrained in respect of tenancies to which the Landlord and Tenant Act 1954 applies (see
Division B); tenancies of agricultural holdings and Farm business tenancies (see Division F) and almost all residential tenancies (see
Divisions C and D);
HR A[8167]
The parties may also agree on what day the notice is to expire, even if that day is not a rent day, a quarter day or an
anniversary of the tenancy1. However, the common law presumption that the notice must expire on a rent day needs
clear words to be rebutted1. The parties are also free to expressly agree other stipulations on the service of a notice to
quit, such as that a quarter's notice to quit must be confirmed by the half-quarter day2. Alternatively, the agreement of
such a stipulation may be implied, say where a tenant is holding on terms as to notice etc of void lease3.
HR A[8168]
1 Harler v Calder (1989) 21 HLR 214, [1989] 1 EGLR 88.
2 Artizans, Labourers and General Dwellings Co v Whitaker [1919] 2 KB 301; H & G Simonds Ltd v Heywood [1948] 1 All ER 260.
3 Rhyl UDC v Rhyl Amusements Ltd [1959] 1 All ER 257.
HR A[8169]
If the parties agree a notice period which is either shorter or longer than that which the law usually requires, compliance
with the agreed notice period will validly determine the tenancy1. However, if the agreed notice period is longer than
that the law would otherwise require, compliance with the notice period at common law will not determine the tenancy:
the contractual requirement must always be strictly complied with2.
HR A[8170]-[8180]
1 Doe d Green v Baker (1818) 8 Taunt 241; Doe d Robinson v Dobell (1841) 1 QB 806.
2 Doe d Peacock v Raffan (1806) 6 Esp 4.
(c) The common law rule on the notice period
HR A[8181]
Generally, a periodic tenancy is determinable by a notice to quit given for one period of the tenancy, to end on either the
first or last period of the tenancy. This general proposition must be examined in respect of tenancies of different
Page 407
duration.
(d) Day on which notice must expire
HR A[8182]
In any periodic tenancy, whether it be yearly, quarterly, monthly or weekly, the notice to quit must expire either at the
end of the current period or on the first day of any subsequent period. This gives rise to the question of when the
tenancy began, and how does one compute the beginning and end of the periods of a tenancy.
HR A[8183]
So, in the case of a weekly tenancy beginning on a Saturday, the notice will be good if it expires either on a Friday or on
a Saturday1. Equally, where a tenancy is monthly, a month's notice expiring at the end of a month of the tenancy is
required2. In the case of a yearly tenancy, where the tenancy commenced on the 29th of a month, a notice to expire on
the 28th was valid3. There is no reason why a notice to quit should not give more than the minimum period required by
law.
HR A[8184]
1 Crate v Miller [1947] KB 946.
2 Precious v Reedie [1924] 2 KB 149; Queen's Club Gardens Estates Ltd v Bignell [1924] 1 KB 117; Lemon v Lardeur [1946] KB 613.
3 Yeandle v Reigate and Banstead Borough Council [1996] 1 EGLR 20.
(e) Ascertaining the date of commencement of the tenancy
HR A[8185]
To ascertain the effect of a notice to quit, it is necessary to know the day of the commencement of the tenancy. The
material day is usually the day of original entry of the tenant. So, where the tenant holds over after the expiration of the
lease and assigns to another who comes in at a different date to the original commencement of the tenancy, the notice
must expire on the last day of some year of tenancy computed from the original entry1. For example, where a tenant
held a lease for one year and two months commencing on 11 November, the first payment to be for the half-quarter
ending 25 December, but then held over without any further agreement, the tenant held from year to year under an
implied tenancy commencing on 25 December and a notice given by him before the June quarter day to quit on
Christmas day was valid2. Again, where a new tenant is substituted on a date other than the end of the year, but the
tenancy is in continuation of the old tenancy, the notice must expire on the last day of a period of the tenancy, computed
from original entry3.
Page 408
HR A[8186]
1 Doe d Castleton v Samuel (1804) 5 Esp 173.
2 Croft v William F Blay Ltd [1919] 2 Ch 343, CA.
3 Humphreys v Franks (1856) 18 CB 323. The method of computation from date of original entry applies too where a tenant for life
executes a lease, which determines on his death, and the remainderman receives the rent, thereby affirming the tenancy: Roe d Jordan v
Ward (1789) 1 Hy Bl 97.
HR A[8187]
Where the agreement expressly specifies the day of commencement, the words of the agreement will prevail over any
contrary indication afforded by the dates for payment of rent1.
HR A[8188]
1 Sidebotham v Holland [1895] 1 QB 378 at 382.
(f) Entry onto the premises in mid-period
HR A[8189]
Where no day is expressly specified, and the tenant enters as yearly tenant in the middle of a quarter, the
commencement of the year depends on the manner in which rent is paid or agreed to be paid. If he pays rent up to the
next quarter day, and then pays quarterly1, or if the agreement specified a quarter day as the day for first payment2, the
broken part of the quarter is neglected, and the year is taken to begin from the first quarter day; but otherwise the year
runs from the date of the agreement3. Where the tenant enters upon different parts of the premises at different times, it
must be ascertained which is the principal part of the premises in value and importance, and which is accessory4. It is
sufficient if the notice to quit is given with reference to the entry on the principal part5.
HR A[8190]-[8200]
1 Doe d Holcomb v Johnson (1806) 6 Esp 10; Doe d Savage v Stapleton (1828) 3 C & P 275; Simmons v Underwood (1897) 76 LT 777.
2 Sandill v Franklin (1875) LR 10 CP 377.
3 Doe d Cornwall v Matthews (1851) 11 CB 675 at 676; Bishop v Wraith (1853) 2 CLR 287; Sandill v Franklin (1875) LR 10 CP 377. If
the agreement is verbal or undated the tenancy apparently commences from actual entry; see Doe d Cornwall v Matthews (1851) 11 CB 675
at 676.
Page 409
4 Doe d Heapy v Howard (1809) 11 East 498, 501.
5 Doe d Dagget v Snowdon (1775) 2 Wm Bl 1224; Doe d Strickland v Spence (1805) 6 East 120 at 123; Doe d Lord Bradford v Watkins
(1806) 7 East 551; Doe d Kindersley v Hughes (1840) 7 M & W 139; Doe d Davenport v Rhodes (1843) 11 M & W 600.
(g) Entry pursuant to an agreement for lease or a void lease
HR A[8201]
When a tenant enters under a void lease, or under an agreement for lease, and becomes a yearly tenant, he holds on the
terms of the lease as to quitting. His holding determines without notice to quit at the end of the specified term, and if
there is any further provision as to the date of quitting it applies to the yearly tenancy. Subject to this, the current year
dates from the time of entry, and notice to determine it must be given accordingly2.
HR A[8202]
1 Doe d Rigge v Bell (1793) 5 Term Rep 471.
2 Berrey v Lindley (1841) 3 Man & G 498, 513, discussed in Croft v William F Blay Ltd [1919] 2 Ch 343, CA.
(h) Proof of the date of commencement
HR A[8203]
If there is any doubt as to the day of the commencement of the tenancy, this is a matter of fact to be proved by
evidence1. It is for the party seeking to rely on the effectiveness of the notice to quit to prove the day of the
commencement of the tenancy2. The burden of proof must be properly discharged: the mere specifying of a particular
date for quitting in a notice given by the landlord is not evidence that such was the date of commencement, nor does it
throw upon the tenant the onus of proving that the tenancy commenced on a different date3. However, if the date is a
day on which rent has been paid, and the contents of the notice are brought to the attention of the tenant when he is
served with it, and he makes no objection to the date, this is prima facie evidence that the specified date is correct4.
Such prima facie evidence does not preclude the tenant from afterwards proving the specified date to be wrong5. If the
tenant is asked as to the commencement of the tenancy, and specifies a particular day, and notice to quit on that day is
given accordingly, he cannot afterwards allege that the tenancy began on a different day; the result is the same whether
he gave erroneous information by mistake or by design6. But if a tenant, in giving notice to quit, gives it for a day
previous to the end of the year, this does not bind him, notwithstanding that it is accepted by the landlord7.
HR A[8204]
1 Walker v Gode (1861) 6 H & N 594.

Page 410
2 Lemon v Lardeur [1946] KB 613; [1946] 2 All ER 329, CA.
3 Doe d Ash v Calvert (1810) 2 Camp 387, 388; Doe d Clarges v Forster (1811) 13 East 405. At one time the onus of disproving the date
mentioned in the notice was held to be on the tenant: Doe d Puddicombe v Harris (1784) cited 1 Term Rep 161. The allocation of the burden
of proof on the tenant is no longer good law: Doe d Matthewson v Wrightman (1801) 4 Esp 5.
4 Doe d Leicester v Biggs (1809) 2 Taunt 109; Doe d Clarges v Forster (1811) 13 East 405; Doe d Baker v Woombwell (1811) 2 Camp
559; Thomas d Jones v Thomas (1811) 2 Camp 647; White v Mitchell [1962] IR 348.
5 Oakapple d Green v Copous (1791) 4 Term Rep 361.
6 Doe d Eyre v Lambly (1798) 2 Esp 635.
7 Doe d Murrell v Milward (1838) 3 M & W 328.
HR A[8205]
Where a lease is for a certain number of years and a part of another year, and the tenant holds over and becomes yearly
tenant by payment of rent, notice must be given for the anniversary of the commencement of the yearly tenancy, that is,
the date when the term certain expired1. There may, however, be cases where the terms of holding over after a fixed
term are such as to imply that the yearly tenancy is to date from the beginning and not the end of the fixed term2.
HR A[8206]
1 Doe d Buddle v Lines (1848) 11 QB 402; Croft v William F Blay Ltd [1919] 2 Ch 343, CA; Addis v Burrows [1948] 1 KB 444, [1948] 1
All ER 177, CA.
2 Kelly v Patterrson (1874) LR 9 CP 681, 687.
(i) Quarterly, monthly or weekly tenancy
HR A[8207]
Where the period of the tenancy is less than yearly, the general rule at common law is that the length of notice
corresponds to the period of the tenancy1. Thus, a weekly tenancy a week's notice, given on the day corresponding to
that on which the tenancy began. In the absence of a express or implied term to the contrary, it is not necessary that
there should be seven clear days' notice: it is possible to include the day upon which the notice is served and expires into
the period2. If, however, a week's notice is required by an express term of the tenancy, a clear seven days' notice, must
be given3.
HR A[8208]
Page 411
1 Doe d Peacock v Raffan (1806) 6 Esp 4.
2 Queen's Club Gardens Estates Ltd v Bignell [1924] 1 KB 117; Newman v Slade [1926] 2 KB 328. In the former case, A weekly tenancy
ran from Saturday to Saturday each week. The landlords served on a Friday a notice to quit, was expressed to be 'the requisite week's notice
for the termination of your tenancy one week from Monday next'. It was held that the notice to quit was invalid, inasmuch as it was not a
notice expiring at the end of the weekly term.
3 Weston v Fidler (1903) 88 LT 769. This case was distinguished in Newman v Slade [1926] 2 KB 328, but followed in Portmadoc UDC v
Antoninzzi (1973) 226 Estates Gazette 2155.
(j) Yearly tenancies
HR A[8209]
A yearly tenancy does not require a full 12 months' notice to quit. A yearly tenancy may generally be determined by
half a year's notice expiring at the end of the first or any subsequent year of the term1.
HR A[8210]-[8220]
1 Doe d Clarke v Smaridge (1845) 7 QB 957; Doe d Plumer v Mainby (1847) 10 QB 473. The caveat 'generally' is added as the parties
may agree otherwise, or because statute may have intervened as in the case of business premises.
HR A[8221]
The reckoning of the period of half a year varies according as to whether the tenancy commences on one of the usual
quarter days, or on some intermediate day. Where the tenancy commences on a quarter day, the period of the notice is a
customary half-year, that is, the interval between one quarter day and the next quarter day but one. Two quarter's notice
is required, irrespective of whether the difference between the quarter-days is more or less than an actual period of half
a year1. Thus, notice may be given on 29 September to quit on 25 March, though the interval is only 177 days2. A
notice to quit on 29 September must be given not later than 25 March, though the interval is only 187 days3.
HR A[8222]
1 182 days.
2 Roe d Durant v Doe (1830) 6 Bing 574; Doe d Harrop v Green (1802) 4 Esp 198; Howard v Wemsley (1806) 6 Esp 53.
3 Right d Flower v Darby (1786) 1 Term Rep 159; Morgan v Davies (1878) 3 CPD 260; Papillon v Brunton (1860) 5 H & N 518.
HR A[8223]
Page 412
Where the tenancy commences on an intermediate day, the length of the notice must be 182 days at least, the days being
reckoned by including the one extreme and excluding the other1. But if there is an express stipulation for determination
on six months' notice, this will be construed literally, whether the tenancy commences on a quarter day or between two
quarter days, and unless the context otherwise requires, a notice of six calendar months is sufficient2.
HR A[8224]
1 Wms Saund (Edn 1871), 386, n; Sidebotham v Holland [1895] 1 QB 378 at 384, CA (notice given on 17 November to quit on 19 May,
the anniversary of the commencement of the tenancy, thus allowing the sufficient interval of 183 days).
2 By the Law of Property Act 1925, s 61, the expression 'month' shall mean a calendar month, in all deeds, contracts, and other
instruments made or coming into operation after 31 December 1925 (LPA 1925, s 209(2)), unless the context otherwise requires. Prior to this
Act, if the expression 'calendar month' was not used (Travers v Mason (1896) 45 WR 77; Quartermaine v Selby (1889) 5 TLR 223, CA),
notice of six lunar months was sufficient (Rogers v Kingston-upon-Hull Dock Co (1864) 13 WR 217; Johnstone v Hudlestone (1825) 4 B &
C 922, 932.
(k) Tenancies from year to year
HR A[8225]
Equally, a tenancy from year to year do not require a full 12 months' notice to quit. Where a tenancy from year to year is
created by express agreement, the general rule at common law is that half a year's notice must be given expiring at the
end of a full year of the tenancy1. The same rule applies where a tenancy from year to year is implied by law from the
payment and acceptance of rent, or from other circumstances2. Where a tenant for a term of years holds over and
continues to rent at a yearly rate, there will be assumed to be a tenancy from year to year, determinable as aforesaid3.
However, where a tenant holds over and pays rent at a weekly rate only a weekly tenancy will result4.
HR A[8226]
1 Parker d Walker v Constable (1769) 3 Wils 25; Right d Flower v Darby (1786) 1 Term Rep 159; Doe d Shore v Porter (1789) 3 Term
Rep 13; Doe d Martin v Watts (1797) 7 Term Rep 83.
2 Doe d Wawn v Horn (1838) 3 M & W 333; Doe d Cates v Somerville (1826) 6 B & C 126.
3 Hyatt v Griffiths (1851) 17 QB 505.
4 Adler v Blackman [1953] 1 QB 146, CA, disapproving Covered Markets Ltd v Green [1947] 2 All ER 140.
(l) Tenancies for a fixed term and thereafter for a period
HR A[8227]
Page 413
Where a tenancy is for a year or years certain and thereafter from year to year1, notice to quit cannot be given so as to
determine the tenancy at the end of the fixed term, unless there is a stipulation to that effect. So, for example, the actual
words of the demise or clause providing for determination by notice to quit may show that the notice may be given for
the end of the fixed term2. Notice can, however, be given before the end of the fixed term to expire after the end of that
term3. Where, however, a tenancy is determinable by notice after the expiration of a stated number of years or after a
given date, the term cannot be determined except by a notice given after the expiration of the stated number of years or
after the given date as the case may be, unless the lease expressly provides for giving notice to expire at that date4.
HR A[8228]
1 In this phrase, the word 'year' may be replaced by any other period in either limb of the phrase: eg the rules apply to a tenancy for one
quarter certain and thereafter from quarter to quarter or thereafter on a quarterly tenancy. The rules also apply to a tenancy for a number of
years certain and thereafter on a quarterly tenancy.
2 Jones v Nixon (1862) 1 H & C 48: demise for a term of three years and, unless terminated by a six months' previous notice to quit, to
continue from year to year. See also Cannon Brewery v Nash (1898) 77 LT 648, CA; Herron v Martin (1911) 27 TLR 431; Re Searle,
Brooke v Searle [1912] 1 Ch 610. The decision in Thompson v Maberly (1811) 2 Camp 573, to the contrary effect would seem not now to be
good law. For a form of words suggested as being effective to permit service of a notice to quit at the end of the fixed term, see Associated
London Properties Ltd v Sheridan [1946] 1 All ER 20 at 22, per Wrottesley J.
3 Herron v Martin (1911) 27 TLR 431; British Iron and Steel Corpn Ltd v Malpern [1946] KB 171, sub nom British Iron and Steel Corpn
v Halpern [1946] 1 All ER 408.
4 Gardner v Ingram (1889) 61 LT 729; Re Lancashire and Yorkshire Bank's Lease W Davis & Son v Lancashire and Yorkshire Bank
[1914] 1 Ch 522, CA; Associated London Properties Ltd v Sheridan [1946] 1 All ER 20.
HR A[8229]
If a notice can only be given to expire a certain number of days 'from' a particular date, it is worth nothing that this
normally means that the date in question should be excluded in the computation of time1. Unless the notice is delivered
by hand there is an obvious trap for the sloppy draftsman of such a notice.
HR A[8230]-[8240]
1 Howard's Case (1699) 2 Salk 625; South Staffordshire Tramways Co Ltd v Sickness and Accident Assurance Association [1891] 1 QB
402; Goldsmith's Co v West Metropolitan Rly Co [1904] 1 KB 1; Cartwright v MacCormack [1963] 1 All ER 11, [1963] 1 WLR 18; Mannai
Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
(m) Local customary rules
HR A[8241]
It is possible, but in modern times most unlikely, for local custom to control the period required for a valid notice to
Page 414
quit, which period is at variance with the general law1. There must be the clearest possible evidence of such custom, as
the courts may treat the suggestion of a local rule with no little scepticism2.
HR A[8242]
1 Doe d Dagget v Snowden (1775) 2 Wm Bl 1224 at 1225.
2 Roe d Henderson v Charnock (1790) 5 Co Litt 270b, note 228; Tyley v Seed (1696) Skin 649; Vint v Constable (1871) 25 LT 324; and cf
Brown v Burtinshaw (1826) 7 Dow & Ry KB 603.
Page 415
Notice to quit/5 Express contractual stipulation that no notice is required
5 Express contractual stipulation that no notice is required
HR A[8243]
Although the parties may not agree a method of determination which is repugnant to the nature of the periodic tenancy,
the parties may expressly agree that a periodic tenancy may determine without a notice to quit, but simply on the tenant
quitting: the tenancy then determines without notice1. Alternatively, the parties may agree that the tenant may quit on
payment of an agreed sum by way of rent in advance2. More normally, the determination of a periodic tenancy without
notice is linked to a specified event3. It may be linked to a date following a specified event4. There are a number of
situations where a tenancy may commonly be agreed to determine without a notice to quit:
(a) a tenancy may be expressed to continue during the duration of a partnership, provided the duration
of the partnership is fixed5;
(b) during the continuation of a contract of employment, so that the tenancy ends with the contract of
employment6;
(c) where an intending purchaser has been let into occupation until a given day, on terms which
preclude a notice to quit before that day7.
HR A[8244]
1 Bethell v Blencowe (1841) 3 Man & G 119.
2 Florence v Robinson (1871) 24 LT 705.
3 Bethell v Blencowe (1841) 3 Man & G 119.
4 Allison v Scargall [1920] 3 KB 443 (where the trigger event was the sale of a farm).
5 Doe d Waithman v Miles (1816) 1 Stark 181; Doe d Colnaghi v Bluck (1838) 8 C & P 464.
6 Doe d Hughes v Derry (1840) 9 C & P 494; Norris v Checksfield [1991] 1 WLR 1241, 63 P & CR 38, CA. The lawfulness of the
dismissal from employment is irrelevant: Ivory v Palmer [1975] ICR 340, CA.
7 Doe d Moore v Lawder (1816) 1 Stark 308; Lewis v Beard (1811) 13 East 210.
Page 416
Notice to quit/6 Express contractual power to serve notice at any time
6 Express contractual power to serve notice at any time
HR A[8245]
The effect of a term that the tenancy shall be terminable 'at any time' by notice of a certain length, is that such notice
may be given for any date, notwithstanding that the date is not an anniversary of the commencement of the tenancy or a
quarter day1. In the case of a yearly tenancy it may even be given for a date prior to the expiration of the first year2.
HR A[8246]
1 Bridges v Potts (1864) 17 CBNS 314 at 333; Soames v Nicholson [1902] 1 KB 157; cf King v Eversfield [1897] 2 QB 475, CA; Land
Settlement Association Ltd v Carr [1944] KB 657, [1944] 2 All ER 126, CA.
2 H & G Simonds Ltd v Heywood [1948] 1 All ER 260, distinguishing Mayo v Joyce [1920] 1 KB 824.
Page 417
Notice to quit/7 Statutory intervention into the period
7 Statutory intervention into the period
HR A[8247]
The right to give a notice to quit is in certain cases regulated by statute. In particular:
(a) a notice to determine a business tenancy must be given not more than 12 and not less than six
months before the date of termination specified therein1;
(b) there are also special provisions as to notices to quit agricultural holdings2 and farm business
tenancies3;
(c) a notice to quit any premises let as a dwelling is not valid unless it is given not less than four weeks
before the date on which it is to take effect and is in writing containing certain prescribed information4;
(d) the statutory requirements apply as much to a notice to quit given by a tenant as to such a notice
given by a landlord;
(e) where a notice to quit is given in relation to premises falling within a housing action area declared
under the Housing Act 1985, the lessor is required to notify the local authority that the notice has been
served5;
(f) there is also a statutorily imposed minimum length of notice in the case of certain occupiers of
caravans6.
HR A[8248]
1 Landlord and Tenant Act 1954, s 25(2) at HR B[462]. See also the restriction on notice to quit served by tenants in the Landlord and
Tenant Act 1954, s 24(2) at HR B[442]. It has been held that a statutory restriction can apply to notices given before the Act in question is
brought into force. See Orman Bros Ltd v Greenbaum [1955] 1 All ER 610, CA (Act brought into force on 1 October 1954, affected notice
given on 31 August 1954, there being a prescribed form under a statutory instrument made on 19 August 1954 and brought into operation on
27 August 1954. The Act was passed on 30 July 1954). See the explanation of this case in Brown v Jamieson [1959] 1 QB 338, [1959] 1 All
ER 144, CA.
2 Agricultural Holdings Act 1986, ss 25-33 at HR F[768]-[837].
3 Agricultural Tenancies Act 1995, ss 5-7 at HR F[1615]-[1637].
4 See the Protection from Eviction Act 1977, s 5 at HR C[1831]-[1834]. Where the letting is a protected tenancy or a restricted contract,
the notice to quit must comply with the Notice to Quit etc (Prescribed Information) Regulations 1988, SI 1988/2201, at HR C[3251]-[3254].
This provision does not affect tenancies at will: Crane v Morris [1965] 3 All ER 77, [1965] 1 WLR 1104. It may be that a notice to quit
which fails to comply with the statutory requirement can be rendered valid if both parties have agreed to treat it as valid: cf Elsden v Pick
[1980] 3 All ER 235, [1980] 1 WLR 898, CA (on s 23 of the Agricultural Holdings Act 1948).
5 Housing Act 1985, s 247(1)-(3). The duty applies even though the notice to quit may be invalid: Fawcett v Newcastle-upon-Tyne City
Council [1978] JPL 307.
Page 418
6 Caravan Sites Act 1968, s 2 at HR C[183.1]-[183.2].

Page 419
Notice to quit/8 Form and construction of a notice to quit
8 Form and construction of a notice to quit
(a) Overview
HR A[8249]
A notice to quit must be reasonably clear and certain, but will not be invalidated by minor factual inaccuracies; it must
not be expressed to take effect on a contingency and must relate to the whole of the demised premises.
(b) Form of a notice to quit
HR A[8250]-[8260]
At common law, subject to the express terms of the tenancy agreement, there is no 'prescribed form' for a notice to quit.
The form of notice is immaterial, provided that it indicates, in substance and with reasonable clearness and certainty, an
intention on the part of the person giving it to determine the existing tenancy at a certain time1. Thus, the use of
language which is ambiguous and lame is immaterial, provided that the party to whom it is given could not be misled as
to the intention of the giver2.
HR A[8261]
1 Ahearn v Bellman, Sedgwick v Ahearn (1879) 4 Ex D 201; Easton v Penny (1892) 67 LT 290; Gardner v Ingram (1889) 61 LT 729 at
730, per Lord Coleridge CJ. For forms of notice to quit, see Encyclopaedia of Forms & Precedents (5th edn) vol 23 LANDLORD AND
TENANT para 277 [549].
2 Doe d Williams v Smith (1836) 5 Ad & El 350; Doe d Lord Huntingtower v Culliford (1824) 4 Dow & Ry KB 248. Presumably, the
recipient is now taken to be 'the reasonable recipient', who is taken to know the terms of the tenancy agreement, by parity of reasoning with
the break notice case of Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, HL.
HR A[8262]
If the tenancy was created orally, the notice may be given orally1. Otherwise, it should be in writing2. If the notice to
quit is in writing, the signature of the party giving notice is apparently not essential3. Nor will and signature by an agent
in the principal's name without indication that the signature has been appended by an agent invalidate the notice4.
HR A[8263]
Page 420
1 Doe d Lord Macartney v Crick (1805) 5 Esp 196; Roe d Dean and Chapter of Rochester v Pierce (1809) 2 Camp 96; Bird v Defonvielle
(1846) 2 Car & Kir 415 at 420.
2 A notice to quit of residential premises must be in writing, where the Protection From Eviction Act 1977, s 5 applies. See HR
C[1831]-[1834].
3 Carleton v Herbert (1866) 14 WR 772.
4 LCC v Vitamins Ltd, LCC v Agricultural Food Products Ltd [1955] 2 QB 218, [1955] 2 All ER 229; Harler v Calder (1988) 21 HLR
214, [1989] 1 EGLR 88, CA.
HR A[8264]
There have been a number of statutory interventions which require notices to quit of certain types of tenancy to contain
certain information, or even be in a prescribed form. These interventions are listed here, but treated in depth elsewhere
in this work1.
HR A[8265]
1 Business premises: Landlord and Tenant Act 1954, s 66 and Landlord and Tenant Act 1954, Pt II (Notices) Regulations 1983, SI
1983/133, as considered particularly in Orman Bros Ltd v Greenbaum [1955] 1 All ER 610 at 613, CA; see HR B[761], [762]. Agricultural
holdings, see Agricultural Holdings Act 1986, ss 25-33 at HR F[768]-[837]. For farm business tenancies, see Agricultural Tenancies Act
1995, ss 5-7 at HR F[1615]-[1637]. For notices to quit in respect of residential premises see Protection from Eviction Act 1977, s 5(1) at HR
C[1831] and Notices to Quit etc (Prescribed Information) Regulations 1988, SI 1988/2201, at HR C[3251]-[3254].
(c) Errors and inaccuracies
HR A[8266]
A notice to quit must be unequivocal and be such as the recipient can properly act upon it1. 'Such a notice only can be
good as, on a reasonable construction of it, denotes an intention to give up the premises at the lawful time'2. 'There must
be plain, unambiguous words claiming to determine the existing tenancy at a certain time'3. However, human frailty
being what it is, the courts have evolved a considerable jurisprudence as to what errors and inaccuracies will invalidate
a notice to quit, and which will not.
HR A[8267]
1 Goode v Howells (1838) 4 M & W 198 at 201, per Parke B.
2 Re Bebington's Tenancy, Bebington v Wildman [1921] 1 Ch 559 at 563, per Peterson J.
3 Lord Coleridge CJ in Gardner v Ingram (1889) 61 LT 729 at 730, quoted with approval in P Phipps & Co v Rogers [1925] 1 KB 14 at
27, CA, per Atkin LJ; and in Dagger v Shepherd [1946] KB 215, [1946] 1 All ER 133 at 135, CA, by Evershed J.
Page 421
(d) Misnomer
HR A[8268]
The notice need not be addressed to the intended recipient (be that landlord or tenant) by name, provided it is properly
served on him1. An error as to the given name of the tenant will not invalidate the notice, again providing that the tenant
is not misled2. A notice addressed to the directors of a limited company may be a good notice to the company3. The
notice need not state to whom the premises are be given up4. If the notice does state to whom the premises must be
delivered up, it must do so with certainty5.
HR A[8269]
1 Doe d Matthewson v Wrightman (1801) 4 Esp 5.
2 Doe v Spiller (1806) 6 Esp 70: there was no other tenant of the landlord with the same surname. See also Harmond Properties Ltd v
Gajdzis [1968] 3 All ER 263, [1968] 1 WLR 1858, CA.
3 Hawtrey v Beaufront Ltd [1946] KB 280, [1946] 1 All ER 296.
4 Doe d Bailey v Foster (1846) 3 CB 215 at 225.
5 Doe d Brooks v Fairclough (1817) 6 M & S 40: a notice to give up possession to 'the rector and churchwardens for the time being' was
insufficient, as these persons do not constitute a corporation.
(e) Misdescription of the premises
HR A[8270]-[8280]
A notice will not be invalidated by an error in the description of the premises, provided that the tenant is not misled1.
So, a notice which specified 'The Waterman's Arms' instead of 'The Bricklayer's Arms', was good, as there was only one
public house held by the tenant under the landlord2.
HR A[8281]
1 Doe d Cox v Roe (1802) 4 Esp 185; Doe d Armstrong v Wilkinson (1840) 12 Ad & El 743.
2 Doe d Cox v Roe (1802) 4 Esp 185.

Page 422
(f) Notice to quit part only of the premises demised
HR A[8282]
A notice to quit a part only is prima facie void1. Such a notice may only be valid if the is an express contractual or
statutory power to quit or resume possession of part only of the premises2.
HR A[8283]
1 Doe d Morgan v Church (1811) 3 Camp 71; Doe d Rodd v Archer (1811) 14 East 245; Prince v Evans (1874) 29 LT 835; Woodward v
Earl Dudley [1954] Ch 283, [1954] 1 All ER 559.
2 Eg under the Agricultural Holdings Act 1986, s 31 (see HR F[822]-[826]).
HR A[8284]
The above-mentioned rule can be inconvenient where ownership of the reversion upon the tenancy is in different
ownership. This eventuality is expressly catered for by statute. Under the Law of Property Act 1925, s 140, where the
reversion is severed, a person entitled to a severed part of the reversion may give notice to quit that part, and, on receipt
of such notice, the tenant may, within one month, determine the lease in regard to the rest of the demised land by giving
to the owner of the reversionary estate therein a counter-notice expiring at the same time as the notice served upon
him1. Inconveniently enough, s 140 does not apply to the right to give a notice under the Landlord and Tenant Act
1954, s 252.
HR A[8285]
1 See Persey v Bazley (1983) 47 P & CR 37, CA; Jelley v Buckman [1974] QB 488, [1973] 3 All ER 853, CA. Formerly, the purchaser of
the reversion of part of an estate had no power to give a tenant of the whole property notice to quit that part of which he held the reversion:
Prince v Evans, (1874) 29 LT 835. The Law of Property Act 1925, s 140 is at para HR A[20115].
2 Dodson Bull Carpet Co Ltd v City of London Corpn [1975] 2 All ER 497, [1975] 1 WLR 781; Nevill Long & Co (Boards) Ltd v
Firmenich & Co (1983) 47 P & CR 59, CA.
(g) Inaccuracies as to when to quit
HR A[8286]
However, a notice must indicate when the premises are to be given up, and it must be expressed unequivocally1. Thus,
the notice will usually state the exact date on which the premises are to be given up2. If it does not, the requirement to
deliver up may be validly expressed generally by such words as 'at the expiration of the present year's tenancy', or 'at the
Page 423
end of the last quarter of this year'3. A notice in general terms in the latter form is not void, because it does not purport
to be served half a year before the end of the current year, and the onus of proving that it was not in fact served in due
time is on the party who disputes its sufficiency4. Such general words used alone are sufficient, since for their
interpretation all that a tenant who can read and write needs is a modern calendar and his document of tenancy5.
HR A[8287]
2 If a day is named, it is preferable to name the right day, although specifying the wrong day is probably sufficient, provided the
reasonable recipient would not be misled as to which day is intended: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997]
AC 749, HL.
3 Winchester Court Ltd v Holmes [1941] 2 All ER 542.
4 Doe d Gorst v Timothy (1847) 2 Car & Kir 351. A notice under a lease, determinable on three months' notice at any time, which merely
gave 'three months' notice to terminate the lease', without specifying any date on which the possession was to be given up, has been held to
be valid and to run from the date of its receipt by the tenant: W Davis (Spitalfields) Ltd v Huntley [1947] 1 All ER 246.
5 Addis v Burrows [1948] 1 KB 444, [1948] 1 All ER 177, CA.
HR A[8288]
Indeed, a notice to quit is valid even if it directs the tenant to quit on the earliest possible date after service of the notice
which is permissible at law: if the tenant is in any doubt as to when the notice took effect, he should take legal advice1.
This principle may not extend to situations where ascertaining the date put the tenant in the position of having to decide
difficult questions of law as to when his tenancy can be legally determined2, although this restriction may only operate
where calculating the right date is excessively complex3. Indeed, a notice to quit, 'at the earliest possible moment' is
most probably valid4.
HR A[8289]
1 Allam & Co Ltd v Europa Poster Services Ltd [1968] 1 All ER 826. So too, a notice to quit by a tenant 'as soon as by law he might'
appears to be good: Goode v Howells (1838) 4 M & W 198.
2 In P Phipps & Co v Rogers [1925] 1 KB 14, CA, the Court of Appeal held a notice to quit invalid where the tenant had to calculate the
date for quitting himself, by answering questions both of law and fact which interlocked with each other and called for complicated
calculation.
3 In Addis v Burrows [1948] 1 KB 444, [1948] 1 All ER 177, the Court of Appeal refused to extend the operation of the rule in P Phipps
& Co v Rogers beyond a comparable case.
4 May v Borup [1915] 1 KB 830. This part of the decision was disapproved by Atkin LJ, in P Phipps & Co v Rogers [1925] 1 KB 14 at
29. It is submitted that the disapproval of May v Borup [1915] 1 KB 830 is incorrect: in principle, the requirement to quit 'at the earliest
possible moment' is no really different to a notice which requires a tenant to resort to a calender and, if necessary, a solicitor to ascertain
Page 424
when he is to quit. Yet the latter requirements were held acceptable by the court in P Phipps & Co v Rogers [1925] 1 KB 14 itself.
HR A[8290]-[8300]
Also valid and effective is a notice to quit 'on or before' a specified date, since it amounts to a notice to quit at a date
certain, coupled with an offer to determine the tenancy on any earlier date on which possession is given up1. Similarly,
a notice to quit 'by' a specified date is valid2, as is a notice to quit 'within' a specified period3.
HR A[8301]
1 Dagger v Shepherd [1946] KB 215, [1946] 1 All ER 133, CA, overruling on this point Queen's Club Gardens Estates Ltd v Bignall
[1924] 1 KB 117; and see Ahearn v Bellman, Sedgwick v Ahearn (1879) 4 Ex D 201.
2 Eastaugh v Macpherson [1954] 3 All ER 214, [1954] 1 WLR 1307, CA.
3 In Manorlike Ltd v Le Vitas Travel Agency and Consultancy Services Ltd [1986] 1 All ER 573, CA the landlord was entitled under the
terms of the lease to terminate the lease at any time during the term by giving the tenant 'not less than three months' previous notice in
writing'. The landlord served a notice on the tenant requiring the tenant to vacate the premises 'within' three months. It was held that the
notice was valid and that 'within' in the context of time was capable of meaning 'during' or 'before the expiry of' that period and that a
requirement that something be done within a specified period meant that the full amount of that period was available to complete the task, in
this case a full three months.
HR A[8302]
Although the courts are tolerant of the most general of general words, a bare indication of a desire to quit without more
is not sufficient. However, where a tenant simply gave notice of his desire to quit and asked the landlord as to the time
of quitting, and the landlord by his reply fixed the time, this cured any insufficiency in the notice1.
HR A[8303]
1 General Assurance Co v Worsley (1895) 72 LT 358; Harler v Calder (1988) 21 HLR 214, [1989] 1 EGLR 88, CA.
(h) The 'catch-all' phrase and alternative notices
HR A[8304]
If the party seeking to serve notice is not clear as to the date upon which the tenancy can lawfully be determined, as can
be seen from the above, the law accepts the use of general words. The position was stated clearly by AL Smith LJ in
Sidebotham v Holland, when he said:1 'I would point out that the plaintiff has only himself to blame for the difficulties
he is in in this case. Had he added the words which are very ordinarily inserted in a notice to quit, 'or at the expiration of
the year of your tenancy, which shall expire next after the end of one half-year from the service of this notice,' and
which are inserted to avoid such a point as that now taken, all would have been in order...'
Page 425
HR A[8305]
1 [1895] 1 QB 378 at 389, CA.
HR A[8306]
The most appropriate general words, or 'catch-all phrase', sanctioned by long use are 'at the end of the period of the
tenancy which will expire next after the service of this notice'1. It is usual, after first mentioning the day which is
believed to be the anniversary of the commencement of the tenancy, to add these general words in the alternative, so
that an error as to the specific day may not invalidate the notice2.
HR A[8307]
1 Doe d Phillips v Butler (1797) 2 Esp 589; Addis v Burrows [1948] 1 KB 444, [1948] 1 All ER 177. For a precedent of a notice
incorporating these words, see 23(3) Forms & Precedents (5th edn) Form 311, p 295.
2 Doe d Digby v Steel (1811) 3 Camp 115 at 117; Mills v Goff (1845) 14 M & W 72 at 75; Sidebotham v Holland [1895] 1 QB 378, CA.
HR A[8308]
Similarly, the notice may state two specific days in the alternative, provided it is in fact served half a year before the
anniversary of the commencement of the tenancy1. Equally, where the party seeking to serve a notice to quit is at sea as
to the correct date upon which to determine the tenancy, he may serve a number of notices, each expressed to be
'without prejudice to the validity of any and all notices to quit that have been, or may be, served': such a practice may be
inelegant, but it is somewhat preferable to proceeding on a notice of dubious validity2. It is important to make it clear
that the notice itself is not 'without prejudice' as such a notice would be ineffective3.
HR A[8309]
1 Doe d Matthewson v Wrightman (1801) 4 Esp 5.
2 Lowenthal v VanHoute [1947] 1 KB 342, sub nom Loewenthal v Vanhoute [1947] 1 All ER 116, per Denning J. Provided that the effect
of the second notice (or the combination of both notices) still makes it clear to the reasonable recipient that the person giving the notice is
attempting to determine the tenancy, then no difficulty should arise by reason of the decision on inconsistent Landlord and Tenant Act 1927,
s 25 notices, in Barclays Bank plc v Bee [2001] EWCA Civ 1126, [2001] 1 WLR 332, [2001] 3 EGLR 41, CA.
3 Re Weston and Thomas' Contract [1907] 1 Ch 244. The case concerned a notice to complete the purchase of land, but the principle is
equally applicable to a notice to quit.
(i) Construction of an incorrect notice

Page 426
HR A[8310]-[8320]
Wherever possible, a notice to quit will be construed so as to make it effectual, ambiguities being construed so as to
give it validity and inaccuracies, obviously opposed to the intention of the party giving it, being corrected1. The
principle is that the court will correct an obvious literal error in a notice to quit if the notice is quite clear to a reasonable
recipient reading it with knowledge of the terms of the tenancy, so that he could not reasonably be expected to be misled
by it2. Whether or not the tenant could reasonably be expected to be misled is to be judged objectively, assuming a
knowledge of the terms of the tenancy3. Earlier cases, which suggest that notices are to be construed strictly, and errors,
particularly as to date for determination, are fatal should be treated with a degree of caution4. It is suggested, however,
that a notice which names a specific but erroneous date will not be corrected if the date is not obviously erroneous5.
Similarly, a notice, which is not long enough to determine the tenancy at the end of the current year will be interpreted
to take effect at the end of the following year, if that interpretation will effectuate the obvious intention of the party
serving it6.
HR A[8321]
1 Hankey v Clavering [1942] 2 KB 326 at 330, [1942] 2 All ER 313 at 314, CA, per Lord Greene MR (not affected by the overruling of
this case in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, HL); Frankland v Capstick [1959] 1 All ER 209,
CA; Doe d Duke of Bedford v Kightley (1796) 7 Term Rep 63 (where a notice given at Michaelmas 1795, to quit at Lady Day 1795, was held
good for Lady Day 1796).
2 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 780, per Lord Hoffmann, HL. The House of Lords
applied Carradine Properties Ltd v Aslam [1976] 1 All ER 573, [1976] 1 WLR 442; Germax Securities Ltd v Spiegal (1978) 37 P & CR 204,
CA; Micrografix v Woking 8 Ltd (1995) 71 P & CR 43, [1995] 2 EGLR 32.
3 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
4 Hence, the overruling of Hankey v Clavering [1942] 2 KB 326, [1942] 2 All ER 311, CA in Mannai Investment Co Ltd v Eagle Star Life
Assurance Co Ltd [1997] AC 749. These cases are, of course, concerned with contractual break-notices, but the principle is of universal
application.
5 So, eg it may be a sufficiently obvious error to have given the date for determination as '1793' not '1993', as suggested by Mann LJ in
Panayi v Roberts (1993) 25 HLR 421, CA. The case concerned a s 20 notice served pursuant to the Housing Act 1988, but the observation is
one of universal application.
6 Wride v Dyer [1900] 1 QB 23, disapproving of the adverse criticism of Doe d Lord Huntingtower v Culliford (1824) 4 Dow & Ry KB
248, in Doe d Richmond Corpn v Morphett (1845) 7 QB 577. See also Mills v Goff (1845) 14 M & W 72.
HR A[8322]
Thus, a notice which is expressed to be for the end of the 'present' or 'current' year will be effectual for the following
year if this is clearly the intention1, where, for instance, the current year ends only two days after service of the notice.
HR A[8323]
Page 427
1 Wride v Dyer [1900] 1 QB 23.
HR A[8324]
A notice to quit given after the determination of a term of years or after the service of another notice to quit which the
recipient has disregarded is not necessarily a recognition of an existing tenancy1.
HR A[8325]
1 Doe d Digby v Steel (1811) 3 Camp 115; Lowenthal v VanHoute [1947] KB 342, sub nom Loewenthal v Vanhoute [1947] 1 All ER 116;
Allam & Co Ltd v Europa Poster Services Ltd [1968] 1 All ER 826 at 839.
(j) Contingent notices to quit
HR A[8326]
A notice to quit is ineffective if it is expressed so as to take effect on a contingency, as a notice to quit must be in clear
and certain in its terms1. Thus, a notice to quit given by the landlord 'if a breach of covenant shall be committed' is
bad2, as is a notice served by the tenant for when he can get other accommodation3. Where the tenant gave notice that
he would surrender his tenancy and not that he would quit it, it was held that the notice was invalid as a notice to quit,
as he could only surrender by agreement, whereas service of a notice to quit is a unilateral act4.
HR A[8327]
1 Ahearn v Bellman, Sedgwick v Ahearn (1879) 4 Ex D 201 at 205, CA; Gardner v Ingram (1889) 61 LT 729.
2 Muskett v Hill (1839) 5 Bing NC 694. A notice to quit served during the pendency of ejectment for non-payment of rent is in effect
conditional and is also bad Hall v Flanagan (1877) IR 11 CL 470.
3 Farrance v Elkington (1811) 2 Camp 591.
4 Gardner v Ingram(1889) 61 LT 729. It is doubtful whether this case would now be followed in a case where it is obvious that the tenant
intended to give notice to quit.
HR A[8328]
If a definite notice to quit is given, it is not invalidated by the addition of words requiring, in a notice by the tenant, by a
diminution, of rent, if the tenant stays on1; nor, in a notice by the landlord, seeking an increase in rent2. A notice so
expressed operates as a notice to quit, with an offer to take or to grant a new tenancy as the case may be2. If the tenant
stays on, he must pay the altered rent3. A notice to quit stating that in default the landlord will require payment of
double value, obviously, is good4.
Page 428
HR A[8329]
1 Bury v Thompson [1895] 1 QB 696, CA.
2 Ahearn v Bellman, Sedwick v Ahearn (1879) 4 Ex D 201.
3 Roberts v Hayward (1828) 3 C & P 432.
4 Doe d Matthews v Jackson (1779) 1 Doug KB 175; Doe d Lyster v Goldwin (1841) 2 QB 143 at 144.
HR A[8330]-[8340]
Similarly, a notice to quit containing a statement that the giver of it hopes that in certain circumstances the notice will
be cancelled is good1. Equally, a notice to quit accompanied by a letter stating that it is intended to terminate the
tenancy unless the landlords see sufficient reason in the meantime to change their opinion is valid2. In both cases, the
validity of the notices was upheld, because the addition of such statements reserved no rights to the giver of the notice.
Therefore, the notices were not conditional.
HR A[8341]
1 May v Borup [1915] 1 KB 830, disapproved on another ground in P Phipps & Co v Rogers [1925] 1 KB 14, CA. A notice cannot be
'cancelled': see paras HR A[8490]-[8503].
2 Norfolk County Council v Child [1918] 2 KB 805, CA.
(k) Acceptance of invalid notices
HR A[8341.1]
An invalid notice to quit can still be effective, if it is accepted by the recipient as if it were a valid notice1. The exact
mechanism by which this principle operates is not wholly clear. The better view is that the defect in the notice is
waived, and thus the notice can be unilaterally treated as valid by the recipient2. Older cases explain the principle on the
basis of a surrender by operation of law3, but this does not explain problematic cases such as Lewisham London
Borough Council v Lasisi-Agiri, where a tenant sought to withdraw an invalid notice after the recipient had accepted it,
but before he gave up possession4. The effective redelivery of possession, or something which virtually amounts to it, is
essential to a surrender by operation of law5 although it may be sufficient to effect a surrender for a tenant to do all that
he can to deliver up possession, provided that the landlord otherwise accepts the surrender as effective6. Even the
statutory requirements of a good notice to quit can be waived by the parties7.
HR A[8341.2]
Page 429
1 Gray v Owen [1910] 1 KB 622; Elsden v Pick [1980] 3 All ER 235, [1980] 1 WLR 898.
2 Elsden v Pick, above; Hounslow London Borough Council v Pilling [1994] 1 All ER 432, [1993] 2 EGLR 59, CA; Hackney London
Borough Council v Snowden [2001] L & TR 6, (2001) 33 HLR 554, CA; Lewisham London Borough Council v Lasisi-Agiri [2003] EWHC
2392 (Ch); [2003] 45 EG 175 (CS).
3 Gray v Owen, above; Doe d Huddleston v Johnston (1825) M'Cle & Yo 141; Johnstone v Huddlestone (1825) 4 B & C 922; Doe d
Murrell v Milward (1835) 1 Horn & H 79; Bessell v Landsberg (1845) 7 QB 638.
4 [2003] EWHC 2392 (Ch), [2003] 45 EG 175 (CS). The tenant did deliver the keys to the landlord, so the case may actually be better
understood as one in which there was a surrender, rather than the destruction of the tenancy being pursuant to a defective notice to quit, but
this is not how the judgment is put.
5 See paras HR A[8001]-[8002.4].
6 See paras HR A[8001]-[8002.4] and London Borough of Brent v Sharma and Vyas (1992) 25 HLR 257, CA; Sanctuary Housing
Association v Campbell [1999] 1 WLR 1279, CA; Ealing Family Housing Ltd v McKenzie [2003] EWCA Civ 1602, [2004] HLR 21, [2004]
L & TR 15, CA.
7 Hounslow London Borough Council v Pilling [1994] 1 All ER 432, [1993] 2 EGLR 59, CA; Hackney London Borough Council v
Snowden [2001] L & TR 6, (2001) 33 HLR 554, CA; Lewisham London Borough Council v Lasisi-Agiri [2003] EWHC 2392 (Ch); [2003]
45 EG 175 (CS). For the Protection of Eviction Act 1977, s 5, see paras HR C[1831]-[1834]; for additional considerations where a defective
notice is given by one of two joint tenants, see further at paras HR A[8388]-[8891].
Page 430
Notice to quit/9 Service of notice
9 Service of notice
(a) Overview
HR A[8342]
A notice to quit must be given by a landlord to his immediate tenant (or vice versa) or by or to their authorised agents. It
may be served personally, by an agent, by registered post or the recorded delivery post, by ordinary post, or by leaving
it at the intended recipient's house.
(b) Notice may be given by landlord or tenant
HR A[8343]
Notice to quit may be given either by the landlord or by the tenant. A provision that one or both of the parties cannot
give a notice to quit is repugnant to the nature of a periodic tenancy and is void1.
HR A[8344]
1 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 All ER 504, HL. However, some restriction on the
right to give notice to quit may be valid: see para HR A[8149].
HR A[8345]
Notice on behalf of the landlord should be given by the person for the time being legally entitled to the immediate
reversion, or by the person whom the tenant is bound by estoppel to recognise as his landlord1. It follows, therefore,
that a valid notice cannot be given by a beneficiary under a trust, who does not hold the legal estate2, nor by a purchaser
prior to the execution of the conveyance, and payment of the purchase money where the conveyance is executed as an
escrow until payment of the purchase money3. Of course, such persons can serve a notice if they are acting as agent for
the persons having the legal estate4. Further, a purchaser may be estopped by his conduct from alleging the invalidity of
a notice served by him prior to completion of sale to him5.
HR A[8346]
1 Doe d Green v Baker (1818) 8 Taunt 241; Burton v Dickenson (1867) 17 LT 264.
Page 431
2 Stait v Fenner [1912] 2 Ch 504.
3 Thompson v McCullough [1947] KB 447, [1947] 1 All ER 265; Graham v M'Ilwaine [1918] 2 IR 353.
4 Re Knight and Hubbard's Underlease, Hubbard v Highton [1923] 1 Ch 130.
5 Farrow v Orttewell [1933] Ch 480, CA.
HR A[8347]
When the landlord has granted an intermediate or mesne lease to a third party, and so ceases to be entitled to the
reversion on, say, a yearly tenancy, and cannot give a notice to quit to the yearly tenant1. Nor can a notice be given by a
landlord to a subtenant of part of the premises so as to determine the subtenancy, even though the intermediate tenant
has given up possession of the remainder of the premises2. But where no subletting has taken place, a person who
succeeds the tenant in the occupation of the premises will be presumed to be his assign, and notice may be given to
him3.
HR A[8348]
1 Wordsley Brewery Co v Halford (1903) 90 LT 89.
2 Pleasant (Lessee of Hayton) v Benson (1811) 14 East 234.
3 Doe d Morris v Williams (1826) 6 B & C 41.
HR A[8349]
Notice may be given to a widow of a deceased tenant from year to year, unless some other person is then his personal
representative1. On an intestacy, notice to quit may be served on the Public Trustee2, or on persons who have not taken
out a grant of administration if they obtain a grant while the notice is still operative3. Needless to say, the mere death of
the tenant does not, therefore cause a periodic tenancy to determine: unless an appropriate notice to quit is served, the
landlord is not entitled to possession4.
HR A[8350]-[8360]
1 Rees d Mears v Perrot (1830) 4 C & P 230; Sweeny v Sweeny (1876) IR 10 CL 375).
2 Where the tenant dies intestate, his real and personal estate vests in the Public Trustee until the grant of administration: Administration
of Estates Act 1925, s 9(1), as substituted by the Law of Property (Miscellaneous Provisions) Act 1994, s 14, with effect from 1 July 1995.
For commencement, see the Law of Property (Miscellaneous Provisions) Act 1994 (Commencement No. 2) Order 1995, SI 1995/1317).
LP(MP)A 1994, s 19(1) permits the Public Trustee to direct at which office or offices documents may be served on him by virtue of the
substituted s 9. Prior to the substitution of s 9, the appropriate person to serve was the President of the Family Division, in his capacity as the
probate judge: see the original s 9 and the Administration of Justice Act 1970, Sch 2, para 5.
Page 432
3 Earl Harrowby v Snelson [1951] 1 All ER 140.
4 Wirral Borough Council v Smith (1982) 43 P & CR 312, CA.
HR A[8361]
Where the tenancy was in existence at the time of a mortgage it was formerly necessary that the notice should be given
by the mortgagee1, unless the mortgagor had been constituted his agent to give the notice2. Perhaps the mortgagor
while in possession can now give the notice by virtue of the Law of Property Act 1925, s 98: however, this has been
said to be merely a procedural section and not to alter the substantive rights of the parties3.
HR A[8362]
1 Miles v Murphy (1871) IR 5 CL 382.
2 Stacpoole v Parkinson (1874) IR 8 CL 561.
3 Re Ind, Coope & Co Ltd, Fisher v Ind Coope & Co Ltd [1911] 2 Ch 223. This case considered the Conveyancing Act 1881, s 10, the
predecessor of s 98.
HR A[8363]
The same considerations as set out in the preceding paragraphs relating to notice given by a landlord relate, mutis
mutandis to notices given by a tenant.
HR A[8364]
Once a notice to quit is given, it enures for the benefit of the successors in title of the landlord or tenant giving it1.
HR A[8365]
1 Doe d Earl Egremont v Forwood (1842) 3 QB 627.
(c) Notice may be given by a proper agent for either landlord or tenant
HR A[8366]
The notice may be given by the agent of either party, provided he is duly authorised for that purpose at the time of
giving it. If he is not so authorised, a subsequent ratification of the notice will not make it effectual1, since the notice
Page 433
must be one which is, in fact, binding on the intended recipient when it is served2. Moreover, the intended recipient
must have reason to believe that it is thus binding, so that he may safely act on it3. If the demise specifies the persons to
whom the notice is to be given, its requirements must be complied with4.
HR A[8367]
1 Doe d Mann v Walters (1830) 10 B & C 626; Doe d Lyster v Goldwin (1841) 2 QB 143; Dibbins v Dibbins [1896] 2 Ch 348.
2 Jones v Phipps (1868) LR 3 QB 567 at 573. In this case the trustees had given the cestui que trust full authority to manage the property,
and so he was entitled to give notice to quit as their agent. The case did not decide that a cestui que trust ordinarily acts as agent for the
trustees: Stait v Fenner [1912] 2 Ch 504.
3 Doe d Mann v Walters, (1830) 10 B & C 626 at 633, per Parke J; Doe d Lyster v Goldwin, (1841) 2 QB 143; Jones v Phipps (1868) LR
3 QB 567.
4 Quartermaine v Selby (1889) 5 TLR 223.
HR A[8368]
There is no need to specify that a notice is given by an agent, if the agent has been held out as having a general
authority1. If a notice is given by an agent having only a special authority, the fact of his agency must appear on the
face of the notice and the notice should be given expressly on behalf of the principal who must be named or otherwise
clearly identified2. Such identification may be made in any manner which truly amounts to an identification, such as
'site-owner'3.
HR A[8369]
1 Jones v Phipps (1868) LR 3 QB 567, at 572; but see Stacpoole v Parkinson (1874) IR 8 CL 561.
2 Lemon v Lardeur [1946] KB 613, [1946] 2 All ER 329, CA; Allam & Co Ltd v Europa Poster Services [1968] 1 All ER 826, [1968] 1
WLR 638.
3 Allam & Co Ltd v Europa Poster Services [1968] 1 All ER 826, [1968] 1 WLR 638.
HR A[8370]-[8380]
Whether any given agent has special or general authority is a matter of fact and law on the particular facts of any given
case, but the following pointers are helpful. A mere rent collector as such has no authority to give a notice to quit1. An
agent who is entrusted with the management of an estate, and who has authority to let as well as to receive rents, has a
general authority in respect of the tenancies, can give notice to quit2. A receiver, whether appointed by the court or by a
private party, perhaps pursuant to a charge, has general authority to give a notice to quit3. So, too, the steward of a
corporation may be a general agent for this purpose, though not appointed under seal4. A director of a company has
power to give notice to quit as an agent of the company, without an express reference to the agency5. A notice to quit
Page 434
given by a director of a company may be valid even if he purports to give it as the landlord, where the director has acted
as if he were the landlord5. Where the tenancy is held by a partnership, there is a presumption that one partner serving a
notice to quit does so with the authority of the partnership6. However, a beneficiary under a trust who did not create the
tenancy cannot give notice unless he has been held out as the agent of the trustees7, as, for instance, where he has been
permitted to have the management of the trust estate8. Where a landlord and a tenant, expressly or by implication, leave
the conduct and management of the reversion and of the tenancy to their agents, matters dealt with by the agents
between them, such as service and receipt of a notice to quit or notice to determine, are as validly done as if they were
done between the landlord and the tenant themselves9.
HR A[8381]
1 Pearse v Boulter (1860) 2 F & F 133.
2 Doe d Earl Manvers v Mizem (1837) 2 Mood & R 56; Earl Erne v Armstrong (1872) IR 6 CL 279.
3 Wilkinson v Colley (1771) 5 Burr 2694; Doe d Marsack v Read (1810) 12 East 57.
4 Roe d Dean and Chapter of Rochester v Pierce (1809) 2 Camp 96; Doe d Birmingham Canal Navigation v Bold (1847) 11 QB 127.
5 Harmond Properties Ltd v Gajdzis [1968] 3 All ER 263, [1968] 1 WLR 1858, CA.
6 Doe d Elliott, Call and Lambert v Hulme (1828) 2 Man & Ry KB 433.
7 Easton v Penny (1892) 67 LT 290.
8 Jones v Phipps (1868) LR 3 QB 567.
9 Townsends Carriers Ltd v Pfizer Ltd (1977) 33 P & CR 361.
HR A[8382]
Similarly, notice may be given to the duly authorised agent of the lessor or lessee. Thus, the landlord may give the
notice to the solicitor and agent who pays the rent for the tenant1, and the tenant may give the notice to the solicitor who
has the general management of the landlord's property, but not to a mere collector of rents2.
HR A[8383]
1 Doe d Prior v Ongley (1850) 10 CB 25 at 34; Townsends Carriers v Pfizer Ltd (1977) 33 P & CR 361.
2 Papillon v Brunton (1860) 5 H & N 518.
HR A[8384]
Page 435
A notice given by an agent of an agent is not effectual without the recognition of the principal1.
HR A[8385]
1 Doe d Rhodes v Robinson (1837) 3 Bing NC 677.
(d) Notices by joint landlords or joint tenants
HR A[8386]
At common law a notice to determine a periodic tenancy given by one of several joint landlords or one of several joint
tenants is sufficient to bring the tenancy to an end. It is not necessary that all the landlords or all the tenants join
together to give the requisite notice. The reason for this rule is historical, and not wholly easy to justify1. The concept of
an annual (or other periodic) tenancy arose out of the concept of a tenancy at will, so that an annual tenancy continued
only as long as it was the will of both parties that it should continue2. It follows that where either the landlord's interest
or the tenant's interest is vested in two or more persons it requires the assent of all the persons if the tenancy is to
continue. If no notice is served to determine the tenancy, the necessary assent is assumed to exist3. However, if one of
the joint landlords or one of the joint tenants gives a notice to end the tenancy the assent necessary for the continuation
of the tenancy does not exist and the tenancy comes to an end. This was the conclusion of the House of Lords in
Hammersmith and Fulham London Borough Council v Monk, which follows the preponderant view disclosed by the
authorities4. The motives or intentions of the person serving a notice to quit is, generally, irrelevant (as, indeed, are the
motives or intentions of the recipient) for the purposes of determining the tenancy5.
HR A[8387]
1 The modern law on this subject is contained in Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478, [1992] 1
All ER 1, HL. This case still represents the law where the landlord is not a statutory body, such as a local authority. However, where the
landlord is such a body, more complex considerations apply, on which see paras HR A[8390]-[8391].
2 See paras HR A[164]-[185] on the nature of a tenancy at will.
3 This is summed up in the Scottish phrase 'tacit relocation': see Smith v Grayton Estates Ltd 1960 SC 349, in which the nature of a
periodic tenancy was held to be the same in Scotland as in England.
4 In Doe d Aslin v Summersett (1830) 1 B & Ad 135 the Court of King's Bench held that where the landlord's interest was held jointly by
four executors of a will a valid notice to quit could be given by three of the executors. This case was followed in Doe d Kindersley v Hughes
(1840) 7 M & W 139 and Alford v Vickery (1842) Car & M 280. In both of these cases it was held that a notice to quit in respect of a yearly
tenancy was valid where the reversion was held jointly even though all the landlords did not concur in the giving of the notice. One of two
joint tenants had been held to have validly determined a tenancy by service of a notice to quit in Greenwich London Borough Council v
McGrady (1982) 48 P & CR 223, CA. See further, Parsons v Parsons [1983] 1 WLR 1390; Featherstone v Staples [1986] 2 All ER 461,
[1986] 1 WLR 861, CA; and Annen v Rattee [1985] 1 EGLR 136, CA (a case concerning a licence, not a lease). The contrary view,
expressed by Scrutton LJ in Howson v Buxton (1928) 97 LJKB 749, [1928] All ER Rep 434, CA, is now clearly incorrect.
5 See paras HR A[8151]-[8152].

Page 436
HR A[8388]
The fact that, by virtue of the statutory trusts imposed upon joint owners of estates in land, joint owners hold their
interests on trust for themselves beneficially does not alter the ability of one of two joint owners to serve a notice to
quit. Indeed, it may be that the service of such a notice by one of two joint tenants is not even a breach of trust, since the
imposition of the statutory trusts does not normally alter the beneficial rights inter se of the concurrent owners1. Nor is
there a duty between joint owners of property to consult before one of two such owners gives such a notice: this is
because the giving of a notice to quit is not a 'positive act' within the meaning of the Trusts of Land and Appointment of
Trustees Act 1996, requiring prior consultation2. Accordingly, an injunction cannot be used to prevent a notice to quit
from being between joint tenants3. Moreover, once served, a notice to quit is effective to determine the tenancy, and so
cannot be set aside by the court under its powers to make property adjustment orders in matrimonial proceedings4.
However, a notice to quit served by one of two joint owners is only effective if it complies with the general law
regulating notices to quit, including the provisions of the Protection From Eviction Act 1977, s 5, for residential
premises5 (although a recipient of a defective notice to quit can, of course, waive the defect and accept a short notice)6.
HR A[8389]
1 Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478, 493 [1992] 1 All ER 1 at 17, per Lord
Browne-Wilkinson, obiter. At first blush, it might be thought that, as the service of a notice quit by one of two joint tenants has the effect of
destroying the trust property, it is difficult to imagine a more obvious breach of trust. However, that fails to take into account that, for the
reasons given in Monk, it is inherent in the nature of a periodic tenancy that it is capable for termination by service of such a notice. It
therefore follows that there is no breach of trust when such a notice is served.
2 Crawley Borough Council v Ure [1996] QB 13, [1996] 1 All ER 724, CA; Notting Hill Housing Trust v Brackley [2001] 3 EGLR 11,
CA.
3 Harrow London Borough Council v Johnstone [1997] 1 All ER 929, [1997] 1 WLR 459, HL.
4 Newlon Housing Trust v Alsulaimen [1999] 1 AC 313, [1998] 4 All ER 1, HL. The proposed property adjustment order was to be made
pursuant to the Matrimonial Causes Act 1973, s 37.
5 Hounslow London Borough Council v Pilling [1994] 1 All ER 432, [1993] 2 EGLR 59, CA.
6 See paragraph HR A[8341.1] et seq.
HR A[8390]
The present state of domestic law is that service of a notice to quit by one of two joint tenants does not amount to
a breach of the remaining tenant's rights under art 8 of the European Convention on Human Rights (the right to
respect for private and family life and the home)1. As it is the service of a notice to quit by one of two joint
tenants that determines the property rights of all the parties, there is no determination by a local authority
landlord of the remaining former-tenant's civil rights within the meaning of art 62.
HR A[8391]
Page 437
1 This is the present effect of Harrow London Borough Council v Qazi [2004] 1 AC 983, [2003] UKHL 43, [2003] 4 All ER 461. The
House of Lords thought that there may be some 'wholly exceptional' case where this may not be true, but there has been no such case to date:
see Hounslow London Borough Council v Adjei [2004] EWHC 207 (Ch), [2004] 2 All ER 636; Newham London Borough Council v Kibata
[2003] EWCA Civ 1785, [2003] 3 FCR 724; Birmingham City Council v Bradney [2003] EWCA Civ 1783. However, the European Court of
Human Rights has decided, in McCann v United Kingdom [2008] All ER (D) 146 (May) that art 8 was, indeed, infringed by a local
authority's decision to induce one of two joint tenants to serve notice on the other. On the present state of the authorities, this decision has
not yet been incorporated into domestic law. On any view, this decision will only effect landlords which are eminations of the state, such as
statutory bodies, as art 8 only applies to them.
2 Newham London Borough Council v Kibata; Birmingham City Council v Bradney; Fletcher v Brent London Borough Council [2006]
EWCA Civ 960, [2006] PLSCS 161, CA. The correctness of these decisions is not affected by McCann v United Kingdom, above, where an
art 6 challenge failed for the same reasons as advanced in these cases.
HR A[8392]-[8400]
A notice to quit given by two owners of separate parts of the reversion is not invalidated by one of them subsequently
contracting to sell his part of the reversion1.
HR A[8401]
1 Rochester & Chatham Joint Sewerage Board v Clinch [1925] Ch 753.
HR A[8402]
Where the tenancy is held by a partnership, there is a presumption that one partner serving a notice to quit does so with
the authority of the partnership1. The fact that the landlord is in partnership with the tenant and therefore owes a duty of
good faith to his partner, does not prevent him from exercising his proprietary rights as landlord2.
HR A[8403]
1 Doe d Elliott, Call and Lambert v Hulme (1828) 2 Man & Ry KB 433.
2 Brenner v Rose [1973] 2 All ER 535, [1973] 1 WLR 443.
HR A[8404]
It is important to distinguish between the service of a notice to quit by one of two joint owners and the exercise of a
contractual option to determine the tenancy. As the tenancy in such a case is for a fixed term, the assent of all persons
holding the estate of the tenant (or the landlord, as the case may be) is needed to effect the early determination of that
estate1. The same considerations require that all persons holding the tenancy must co-operate in surrendering it2.
Page 438
HR A[8405]
1 Easton v Penny (1892) 67 LT 290; Re Viola's Lease [1909] 1 Ch 244; Leek & Moorlands Building Society v Clark [1952] 2 QB 788,
[1952] 2 All ER 492, CA; Hounslow London Borough Council v Pilling [1994] 1 All ER 432, [1993] 2 EGLR 59, CA. See further paras HR
A[8386]-[8389].
2 Leek & Moorlands Building Society v Clark [1952] 2 QB 788, [1952] 2 All ER 492, CA; Hounslow London Borough Council v Pilling
[1994] 1 All ER 432, [1993] 2 EGLR 59, CA. See further paras HR A[7927]-[7928].
(e) Mode of service generally
HR A[8406]
A notice to quit may be served in accordance with the common law, or if the tenancy agreement between the parties has
incorporated them, in accordance with the provisions of the Law of Property Act 1925, s 1961, as augmented by the
Recorded Delivery Service Act 1962. In either cases, service of a notice to quit need not be effected on the intended
recipient personally.
HR A[8406.1]
HR A[8407]
That said, personal service is always preferable. It reduces the number of vicissitudes which face the party seeking to
prove service. Further, it is preferable for a memorandum of service to be indorsed on a duplicate of the notice at the
time when the notice is served. The duplicate will then be admissible as primary evidence of service1.
HR A[8408]
1 Doe d Patteshall v Turford (1832) 3 B & Ad 890; Doe d Fleming v Somerton (1845) 7 QB 58; Stapylton v Clough (1853) 2 E & B 933.
HR A[8409]
Finally, no matter how service is effected, it is always sufficient if proof is given that the notice in fact came to tenant's
knowledge in time to be effective as a notice to quit1.
HR A[8410]-[8420]
Page 439
1 Re Poyser and Mills' Arbitration [1964] 2 QB 467, [1963] 1 All ER 612.
(f) Mode of service at common law
HR A[8421]
At common law, a notice to quit is often, but not invariably, sufficiently served if it is left at the intended recipient's
agent, or at his dwelling house with his wife1 or servant2. Such service is sufficient although the notice does not
actually come to the intended recipient's attention prior to the commencement of the notice period, provided that an
agency relationship exists between the actual recipient and the intended recipient3. Such an agency relationship may be
presumed, but may equally be disproved on the facts, either by showing that there was no agency relationship, or that
the agent was misled as to his duty to report to his principal by a wrongly-addressed notice to quit4.
HR A[8422]
1 Roe d Blair v Street (1834) 2 Ad & EL 329; Smith v Clark (1840) 9 Dowl 202; and Doe d Batten v Murless (1817) 6 M & S 110.
2 Jones d Griffiths v Marsh (1791) 4 Term Rep 464; R v North Riding of Yorkshire Justices, ex p Peckham (1844) 8 JP 663, 3 LTOS 206;
Appleton v Murray (1860) 8 WR 653; Mason v Bibby (1864) 2 H & C 881.
3 Jones d Griffiths v Marsh (1791) 4 Term Rep 464; Doe d Neville v Dunbar (1826) Mood & M 10; Papillon v Brunton (1860) 5 H & N
518 Tanham v Nicholson (1872) LR 5 HL 561, 569; London School Board v Peters (1902) 18 TLR 509.
4 Doe d Exeter Corpn v Mitchell (1837) 1 Jur 795.
HR A[8423]
It follows that reliance on such methods of service can be dangerous: the party serving notice thus must prove that the
person to whom it was delivered was the intended recipient's wife or servant, or that the notice did actually come to the
intended recipient's notice1. Service of the notice upon a relative of the subtenant upon the premises is not sufficient,
although the notice was properly addressed to the tenant2, although service upon any person who is under a duty it is to
deliver it to the intended recipient is valid3.
HR A[8424]
1 Doe v Buross v Lucas (1804) 5 Esp 153. Service on the tenant's wife, not at the demised premises and without proof that it was at her
husband's residence, is ineffective: Blair v Street (1834) 2 Ad & El 329. Compare Lord Newborough v Jones [1975] Ch 90, where the notice
to quit was validly served by being put under the door, whereupon it went underneath the linoleum covering. See further para HR A[8429].
Page 440
2 Doe d Mitchell v Levi (1811) Ad Ejec 92.
3 Tanham v Nicholson (1872) LR 5 HL 561. So, had the landlord in Doe d Mitchell v Levi (1811) Ad Ejec 92, served the subtenant, and
shown that the subtenancy contained an obligation to bring relevant documents such as a notice to quit to the mesne landlord's attention, the
service would have been effective.
HR A[8425]
Service upon a 'professional' agent, such as a surveyor or solicitor is also probably only effectual on the day it is served,
if the notice is delivered during usual business hours1. Otherwise, the notice will be taken to be served the following
working day.
HR A[8426]
1 Papillon v Brunton (1860) 5 H & N 518, 522. In that case the letter was delivered after the agent had left, but the jury found that
someone ought to have been there to receive the notice.
HR A[8427]
Apart from any question of agency, the fact that the notice has been delivered to the wife or servant of the intended
recipient raises a strong presumption that it has reached him, especially if an explanation of the notice was given when
it was delivered1. This presumption can possibly be rebutted by proof that the notice did not come to the knowledge of
the intended recipient at all2. However, this is not the case if one of those statutory methods of service which deem
service to be effected are employed3.
HR A[8428]
1 Doe d Buross v Lucas (1804) 5 Esp 153.
2 Tanham v Nicholson (1872) LR 5 HL 561; Lex Service plc v Johns (1989) 59 P & CR 427, [1990] 1 EGLR 92, CA.
3 Galinski v McHugh (1988) 57 P & CR 359, CA; CA Webber (Transport) Ltd v Network Rail Infrastructure Ltd (formerly Railtrack Plc)
[2004] 1 WLR 320, CA, approving Commercial Union Life Assurance Co Ltd v Moustafa [1999] L&TR 489; and Beanby Estates v Egg
Stores (Stamford Hill) [2001] 1 WLR 2064. See further paras HR A[8447]-[8485].
HR A[8429]
Putting the notice under the door of a intended recipient's house, or any other mode of service, has been said to be
sufficient, if it is shown that the notice came to the intended recipient's attention before the commencement of the notice
period1. However, a notice may be validly served if it has been simply left at the proper address of the intended
recipient, in a manner which a reasonable person, minded to bring the document to the attention of the person to whom
the notice is addressed, would adopt, notwithstanding that the notice was not actually received by the intended
recipient2. So, where a landlord put a notice under the tenant's door unwittingly pushed it under the linoleum, where it
Page 441
lay undisturbed for five months, the notice was nevertheless validly served3.
HR A[8430]-[8440]
1 Alford v Vickery (1842) Car & M 280.
2 Lord Newborough v Jones [1975] Ch 90. The case concerned service pursuant to the Agricultural Holdings Act 1948, s 92(1), but this
would not affect the reasoning on this issue.
3 Lord Newborough v Jones [1975] Ch 90.
HR A[8441]
In the same way, a notice to quit may be served by ordinary post1. If ordinary post is employed, the notice will be
presumed delivered on the date and time which it should arrive, 'in the ordinary course of post'2. What actually is 'the
ordinary course of post' is a question of fact3. The presumption is capable of being rebutted by credible evidence from
the intended recipient that he did not actually receive the notice in the post4. It is, at the least, doubtful whether service
by ordinary post would be held to be good where the tenant or his authorised agent is not in actual physical occupation
of the premises to which the notice is addressed5.
HR A[8442]
1 As opposed to recorded delivery or by registered post, on which see service pursuant to statute, see paras HR A[8447]-[8495].
2 R v Slawstone Inhabitants (1852) 18 QB 388; R v Richmond Recorder (1858) EB & E 253; cf Beevers v Mason (1978) 37 P & CR 452,
CA.
3 Kemp v Wanklyn [1894] 1 QB 583. These days, it may not be an easy question of fact.
4 See Lex Service plc v Johns (1989) 59 P & CR 427, [1990] 1 EGLR 92, CA as considered further at para HR A[8450], n 2.
5 Hogg v Brooks (1885) 15 QBD 256, CA.
HR A[8443]
In the case of a corporation or company, service should be effected upon an officer of the corporation or company1.
HR A[8444]
1 Doe d Earl Carlisle v Woodman (1807) 8 East 228.

Page 442
HR A[8445]
Lastly, at common law, if the tenant has disappeared, service becomes impossible unless the lease makes special
provision for such a case, as by authorising service of the notice on the premises or at the lessee's last known address1.
Where the premises are held by two tenants jointly, the service of notice on one who lives on the premises is evidence
that it reached the other who lives elsewhere2. Apparently, even without such evidence, it is effectual as to determine
the tenancy3.
HR A[8446]
2 Doe d Bradford v Watkins (1806) 7 East 551.
3 Doe d Lord Macartney v Crick (1805) 5 Esp 196.
(g) Service pursuant to the tenancy agreement
HR A[8447]
Where a tenancy agreement provides for a notice to quit to be served in a certain way, other than accordance with the
general law, such an agreement is to be given effect to by the parties and the court. It is common for tenancy agreements
to incorporate the provisions of the Law of Property Act 1925, s 196, as modified by the Recorded Delivery Service Act
19621. These provisions apply to also to any notice which is to be 'given', as there is no distinction between 'giving'and
'serving' a notice2.
HR A[8448]
1 Law of Property Act 1925, s 196(5) at para HR A[20130]. The Recorded Delivery Service Act is at paras HR A[20191]ff.
2 Re 88, Berkeley Road, NW9 [1971] Ch 648.
HR A[8449]
The effect of incorporating these statutory methods of service are to give the party serving the notice a guarantee of
presumed delivery. In other words, if one of the statutory methods of service is utilised, it shifts the burden of the risk of
non-service from the party serving the notice to the intended recipient. 'The purpose of prescribing these methods of
service is to assist the person who is obliged to serve the notice, by offering him choices of mode of service which will
be deemed to be valid service, even if in the event the intended recipient does not receive it.'1 Cases which suggest that
service in accordance with a statutory method gives rise to a rebuttable presumption of effective service are now to be
Page 443
treated as incorrectly decided2. Further, employing one of the statutory methods of deemed service by posting using
recorded delivery means that the document so served is deemed to have been served as at the date of posting.3
HR A[8450]-[8460]
1 Galinski v McHugh (1988) 57 P & CR 359 at 365, per Slade LJ, CA. See also CA Webber (Transport) Ltd v Network Rail Infrastructure
Ltd (formerly Railtrack Plc) [2004] 1 WLR 320, CA and Chiswell v Griffon Land and Estates Ltd [1975] 2 All ER 665, [1975] 1 WLR 1181,
CA.
2 Galinski v McHugh (1988) 57 P & CR 359, CA, and CA Webber (Transport) Ltd v Network Rail Infrastructure Ltd (formerly Railtrack
Plc) [2004] 1 WLR 320, CA, approving Commercial Union Life Assurance Co Ltd v Moustafa [1999] L & TR 489; Beanby Estates v Egg
Stores (Stamford Hill) [2001] 1 WLR 2064 and disapproving Lex Services v Johns [1990] 1 EGLR 92, CA.
3 Railtrack Plc v Gojra [1998] 1 EGLR 63, CA; CA Webber (Transport) Ltd v Network Rail Infrastructure Ltd (formerly Railtrack Plc)
[2003] EWCA Civ 1167 [2004] 1 WLR 320, CA.
HR A[8461]
The LPA 1925, s 196 has to be expressly incorporated into a tenancy agreement, and made applicable to the service of a
notice to quit, as it would not otherwise apply to such a notice. Unless specifically applied to notice to quit by a
contractual agreement, s 196 only applies to notices 'required' to be served, as opposed to notices 'required or authorised'
to be served1. Thus, in the absence of any contractual rights to the contrary, s 196 cannot be relied upon for the
purposes of serving a notice to quit, because service of such a notice is entirely voluntary2. Further, s 196 cannot apply
to a tenancy created orally, as it only applies to notices required to be served by 'any instrument'3.
HR A[8462]
1 The latter formulation comes from s 196 (2), (3) of the Act.
2 Wandsworth London Borough Council v Attwell (1995) 27 HLR 536, [1996] 1 EGLR 57, CA. However, local authority landlords may
be in a different position, by reason of the Local Government Act 1972, s 233: Enfield London Borough Council v Devonish (1996) 28 HLR
641.
3 LPA 1925, s 196(5) at para HR A[20130].
HR A[8463]
Because of the aforementioned difficulties, well-drafted leases and tenancy agreements expressly incorporate the
provisions of s 196 so as to make the section applicable to all or specified notices served in respect of the tenancy, be
they common law notices such as a notice to quit or statutory notices such as a notice of seeking possession pursuant to
the Housing Act 1988, s 8.
HR A[8464]
Page 444
Where LPA 1925, s 196 applies, a notice to be served on a lessee is sufficient even if only addressed to 'the lessee'
without more, or even to the persons interested1.
HR A[8465]
HR A[8466]
The section, where incorporated, also validates service of a notice left at the last-known place of abode or business in
the United Kingdom of the lessee, lessor or other person to be served, or in the case of a notice required or authorised to
be served on a lessee, is affixed or left for him on the land or any house or building comprised in the lease1. In the case
of a mining lease, it is sufficient to leave it for the lessee at the office or counting-house of the mine2.
HR A[8467]
1 Law of Property Act 1925, s 196(3); Datnow v Jones [1985] 2 EGLR 1.
2 LPA 1925, s 196(3).
HR A[8468]
If service is effected by leaving the document at the last-known place of abode of the intended recipient, it is validly
served if the document is left at a place which is the furthest that a member of the public or a postman can go to
communicate with the tenant, such as a communal letter-box.1.
HR A[8469]
1 Henry Smith's Charity Trustees v Kyriakou [1989] 2 EGLR 110, CA.
HR A[8470]-[8480]
A notice to quit is also validly served if it is sent by post in a registered letter, or by recorded delivery1, addressed to the
lessee, lessor or other person to be served by name, at the aforesaid place of abode or business, office or
counting-house. If the letter is not returned through the post as undelivered, the notice is deemed to be served. The
courts have not permitted service to be avoided by a refusal to sign, however: a registered letter is duly delivered if the
recipient is present at the property but refuses to sign for it: the same reasoning must apply to a letter sent by recorded
delivery2.
Page 445
HR A[8481]
1 Recorded Delivery Service Act 1962, s 1 at paras HR A[20191]ff.
2 Van Grutten v Trevenen [1902] 2 KB 82, CA. The judgment of the court was most laconic: 'We think that s 28 of the Act applies, and
consequently the service was good, and the appeal must be dismissed.' A study of the headnote reveals that, at trial, it was proved that the
intended recipient of a notice to quit had refused to sign the receipt for a validly addressed registered letter, thereby causing it to be returned
as undelivered. The section referred to is the Agricultural Holdings Act 1986, s 28, which is in the same terms as s 196(4).
HR A[8482]
Where postal service is employed, service is deemed at the time at which the letter would be delivered in the ordinary
course of post, in the case of a registered letter1. This presumption extends to the time of delivery, 'in the ordinary
course of post'2. What actually is 'the ordinary course of post' is a question of fact3. The same rules apply to the service
of a letter sent by recorded delivery, irrespective of whether anyone is available to sign for it4.
HR A[8483]
1 LPA 1925, s 196(4); Interpretation Act 1978, s 7; Gresham House Estate Co v Rossa Grande Gold Mining Co [1870] WN 119.
CA.
4 See WX Investments Ltd v Begg [2002] EWHC 925 (Ch), [2002] 1 WLR 2849, [2003] 24 LS Gaz R 36 in which Patten J refused to
follow a decision to the contrary in Stephenson & Son v Orca Properties Ltd [1989] 2 EGLR 129 considering that it was inconsistent with
the earlier judgment in Holwell Securities Ltd v Hughes [1973] 1 WLR 757 (confirmed on appeal at [1974] 1 WLR 155).
HR A[8484]
The registered office of a company may be its 'last known place of business' for the purposes of s 196, and it will not
cease to be its last-known place of business merely because the landlord corresponds with its agents at a different
address1.
HR A[8485]
1 National Westminster Bank v Betchworth Investments Ltd (1975) 234 Estates Gazette 675. See also Stylo Shoes Ltd v Prices Tailors Ltd
[1960] Ch 396, [1959] 3 All ER 901, a case on the Landlord and Tenant Act 1927, s 23.
Page 446
Notice to quit/10 Dispensing with a notice to quit
10 Dispensing with a notice to quit
HR A[8486]
Where rent accruing under a yearly tenancy has not been paid for a long time, a presumption that the tenancy has been
determined arises1. If at the end of a period of the tenancy, the landlord accepts a new tenant, he dispenses with notice
to quit by the old tenant2. This, however, is because there is a surrender by operation of law, and the immediate change
of possession is an essential element3.
HR A[8487]
1 Stagg v Wyatt (1838) 2 Jur 892.
2 Sparrow v Hawkes (1796) 2 Esp 504.
3 Johnstone v Hudlestone (1825) 4 B & C 922; Bessell v Landsberg (1845) 7 QB 638. As to surrender, generally, see paras HR
A[7910]-[7922].
HR A[8488]
As there probably cannot be a surrender in futuro1, the landlord's mere acquiescence in a short notice, whether by parol
or in writing, does not make the notice binding; though if the tenant quits in accordance with the notice, he is not liable
for subsequent rent2. This rule is dubious, as it is based upon the reasoning in Doe d Murrell v Milward which may be
suspect3.
HR A[8489]
1 Doe d Murrell v Milward (1838) 3 M & W 328: see paras HR A[7965]-[7966].
2 Shirley v Newman (1795) 1 Esp 266; cf Brown v Burtinshaw (1826) 7 Dow & Ry KB 603.

Page 447
Notice to quit/11 Withdrawal of a notice to quit
11 Withdrawal of a notice to quit
HR A[8490]-[8500]
A notice to quit may not be unilaterally withdrawn or abandoned during its currency, nor can the right to enforce it be
unilaterally waived, either expressly or by implication, before it has expired1. However, a notice can be withdrawn,
abandoned, or waived with the consent of the party to whom the notice is given2.
HR A[8501]
1 Newlon Housing Trust v Alsulaimen [1999] 4 All ER 1, [1998] AC 313, HL.
2 Blyth v Dennett (1853) 13 CB 178; Tayleur v Wildin (1868) LR 3 Ex Ch 303 at 305; Davies v Bristow, Penrhos College v Butler [1920]
3 KB 428 at 437-438.
HR A[8502]
It has been held that a withdrawal of the notice by consent during its currency does not nullify the notice, but operates
as evidence of an agreement for a new tenancy to take effect on the determination of the old1. Where the notice has
expired, it is technically wrong to speak of a waiver, though this convenient expression is commonly used. If the
relationship of landlord and tenant continues thereafter, it is by agreement between the parties constituting a new
tenancy, since the old tenancy is already at an end2.
HR A[8503]
1 Tayleur v Wildin (1868) LR 3 Ex Ch 303; Vance v Vance (1871) IR 5 CL 363. Although this doctrine of a new tenancy was
emphatically repudiated by the Irish Court of Appeal (Lord Inchiquin v Lyons (1887) 20 LR Ir 474, CA), it has been followed and approved
in England (Freeman v Evans [1922] 1 Ch 36, CA) and Lower v Sorrell [1963] 1 QB 959, [1962] 3 All ER 1074, CA.
2 Davies v Bristow [1920] 3 KB 428 at 437-438, per Lush J; Maconochie Bros Ltd v Brand [1946] 2 All ER 778.
Page 448
Notice to quit/12 Creation of a new tenancy after expiry of a notice to quit
12 Creation of a new tenancy after expiry of a notice to quit
HR A[8504]
Questions frequently arise whether some act done by the landlord after the expiration of the notice imports the
recognition of a new tenancy.
HR A[8505]
Often the act relied upon in support of an allegation that a new tenancy has been created will be the demand and/or
acceptance of rent. The simple payment and acceptance of rent is no longer enough to give rise to a presumption of the
existence of a periodic tenancy: the determining factor is intention. In Longrigg, Burrough & Trounson v Smith1
Ormrod LJ observed that, 'The old common law presumption of a tenancy from the payment and acceptance of a sum in
the nature of rent dies very hard. But I think the authorities make it quite clear that in these days of statutory controls
over the landlord's rights of possession, this presumption is unsound and no longer holds. The question now is a purely
open question; it is simply: is it right and proper to infer from all the circumstances of the case, including the payments,
that the parties had reached an agreement for a tenancy?'2. The same point is made by Knox J in Cardiothoracic
Institute v Shrewdcrest Ltd3 and by the Court of Appeal in Javad v Aqil4.
HR A[8506]
1 [1979] 2 EGLR 42.
2 [1979] 2 EGLR 42 at 34, CA. Ormrod LJ's dictum resurrected a much older strata of legal thought, which had been somewhat
abandoned prior to Longrigg, Burrough & Trounson v Smith [1979] 2 EGLR 42. Indeed, the possible rights created by the payment of 'rent'
by an occupier of uncertain status are sometimes referred to as 'a quo animo tenancy', following the words of Lord Mansfield in Doe d Cheny
v Batten (1775) 1 Cowp 243 at 245: '...the question therefore is quo animo the rent was received, and what the real intention of both parties
was.'
3 [1986] 3 All ER 633, [1986] 1 WLR 368.
4 [1991] 1 All ER 243, [1991] 1 WLR 1007.
HR A[8507]
It is sometimes said that receipt of rent from a third party should only be presumed to be evidence of the grant of a new
tenancy where there is no other explanation available. In Marcroft Wagons v Smith1, the daughter of a statutory tenant
by succession of a dwelling house, continued to live in the house after the statutory tenant's death2. In March 1950, the
daughter asked the landlords' agent to have the tenancy transferred into her own name, which he refused, because the
Page 449
landlords would require the house for an employee. However, he accepted a sum from the daughter equal to two weeks'
rent, and she continued thereafter to pay each week the same sum as the widow had paid for rent until September, 1950,
when possession proceedings were brought. The Court of Appeal held that, if the acceptance of rent can be explained on
some other footing than that a contractual tenancy existed, as, for instance, by reason of an existing or possible statutory
right to remain, then a new tenancy should not be inferred.
HR A[8508]
1 [1951] 2 KB 496, CA
2 [1951] 2 KB 496 at 506-507, per Denning LJ.
HR A[8509]
Thus, for example, it is permissible to adduce evidence that rent was accepted by mistake or accepted as damages for
use and occupation1. However, such evidence must tend to show the parties' state of mind: simply stating that there was
no intention to create a new tenancy is, probably, inadmissible, because the parties' intentions are to be adjudged as they
would appear to an objective observer2.
HR A[8510]-[8520]
1 See Clarke v Grant [1950] 1 KB 104 and Westminster City Council v Basson (1990) 62 P & CR 57, respectively.
2 There is a single authority to the effect that it is possible to lead evidence as to the actual, subjective intention of the parties: Sector
Properties Ltd v Meah [1974] EGD 329, CA. The case was criticised by the Court of Appeal in Land v Sykes [1992] 1 EGLR 1, CA: 'I do
not think Sector Properties can have been rightly decided: because the question is, essentially, one of contract' (see Longrigg, Burrough &
Trounson v Smith [1979] 2 EGLR 42). It is submitted that Sector Properties is per incuriam as it breaches the parole evidence rule.
HR A[8521]
If the landlord wishes to accept money from a former tenant, in respect of the tenant's continuing occupation following
the expiry of a notice to quit, he will usually be safe if he accepts rent without prejudice to his rights to possession under
the notice to quit, or if he accepts money on account of mesne profits, which the tenant being liable to pay mesne profits
for his occupation from the date of expiry of the notice to quit to the date of delivering up possession.
HR A[8522]
Another act which may be relied upon to evidence the grant of a new tenancy is the levying of distress for rent accrued
due since the expiration of the notice. This is because the landlord is not entitled to distrain, until a new tenancy is
created1. If the levying of distress is acquiesced in by the tenant, the levy operates as a recognition of a new tenancy,
provided that it was intended to operate as a recognition of a new relationship of landlord and tenant2. Levying distress
after having obtained an order for possession is not a ground for setting aside the judgment3.
Page 450
HR A[8523]
1 Jenner v Clegg (1832) 1 Mood & R 213; Alford v Vickery (1842) Car & M 280.
2 Zouch d Ward v Willingale (1790) 1 Hy Bl 311; Panton v Jones (1813) 3 Camp 372. On the primary requirement of intention, see the
quo animo cases, cited in paras HR A[8505]-[8520].
3 Doe d Holmes v Darby (1818) 8 Taunt 538.
HR A[8524]
A second notice to quit given after the expiration of the first is of no effect unless it can be inferred from other
circumstances that a new tenancy was created which could be determined by the second notice1. Where the second
notice is for the purpose of claiming double value, there is no waiver2.
HR A[8525]
1 Lowenthal v Vanhoute [1947] KB 342, sub nom Loewenthal v Vanhoute [1947] 1 All ER 116, distinguishing Doe d Brierly v Palmer
(1812) 16 East 53. It was said by Denning J in Lowenthal v Vanhoute [1947] KB 342, sub nom Loewenthal v Vanhoute [1947] 1 All ER 116
and Buckley J in Allam & Co Ltd v Europa Poster Services Ltd [1968] 1 All ER 826 at 839 that a second notice to quit might be given
without prejudice to the validity of the earlier notice: indeed, where the first notice is suspect, the practice of serving a second notice was
encouraged by Denning J.
2 Doe d Digby v Steel (1811) 3 Camp 115.
HR A[8526]
Where a tenant holds over after expiration of the notice, it is a question of fact whether a new tenancy is intended to be
created, irrespective of whether the notice was given by himself or by the landlord1.
HR A[8527]
1 Gray v Bompas (1862) 11 CBNS 520 and Jenner v Clegg (1832) 1 Mood & R 213; Cusack v Farrell (1886) 18 LR Ir 494; affd (1887)
20 LR Ir 56, CA, respectively.
HR A[8528]
An agreement by the landlord to suspend the exercise of his rights under a notice to quit (for example, where he
promises that the tenant shall not be turned out until the premises are sold) not vitiate the notice to quit: the landlord
retains all his rights under it, subject only to the agreement1.
Page 451
HR A[8529]
1 Whiteacre d Boult v Symonds (1808) 10 East 13; Jones v Shears (1836) 4 Ad & El 832; London School Board v Peters (1902) 18 TLR
509.
Page 452
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/J
Forfeiture
J
Page 453
Forfeiture/1 The right of re-entry
1 The right of re-entry
HR A[8530]-[8540]
In Clays Lane Co-operative Ltd v Patrick1 Fox LJ described the right to forfeit, or the right to re-enter2, as 'a right to
determine a lease by a landlord if: (a) when exercised, it operates to bring the lease to an end earlier than it would
"naturally" terminate; and (b) it is exercisable in the event of some default by the tenant'3.
HR A[8541]
1 (1984) 49 P & CR 72.
2 There is no difference between the two terms.
3 (1984) 49 P & CR 72 at 78.
HR A[8542]
A right to forfeit gives the landlord an option to exercise his right of determining the lease upon a cause of forfeiture
arising: the lease is not automatically void on an event giving rise to the right to forfeit occurring, but is voidable at the
landlord's option1. This is the case, even where the proviso contains a declaration that in the events specified the term
shall cease without more. The landlord has to choose to determine the term. It follows that, as the lease is merely
voidable, the fact that the landlord's right to forfeit has been triggered, does not in and of itself enable the tenant to treat
the term as at an end: the tenant cannot take advantage of his own wrong to avoid the lease2. Consequently, even
though events have occurred which give the lessor the right to forfeit the lease, the tenancy continues until the lessor
does some act which shows his intention to determine it.
HR A[8543]
1 Bowser v Colby (1841) 1 Hare 109; Davenport v R (1877) 3 App Cas 115 at 128, PC; Quesnel Forks Gold Mining Co v Ward [1920] AC
222, PC; Jardine v A-G for Newfoundland [1932] AC 275, PC.
2 Doe d Bryan v Bancks (1821) 4 B & Ald 401 at 406; Arnsby v Woodward (1827) 6 B & C 519; Dakin v Cope (1827) 2 Russ 170; Doe d
Nash v Birch (1836) 1 M & W 402; Toleman v Portbury (1871) LR 6 QB 245 at 250; Re Tickle, ex p Leather Sellers' Co (1886) 3 Morr 126;
Quesnel Forks Gold Mining Co v Ward [1920] AC 222, PC; Jardine v A-G for Newfoundland [1932] AC 275, PC.
Page 454
Forfeiture/2 Breach of condition and breach of covenant
2 Breach of condition and breach of covenant
HR A[8544]
A lease may contain an express proviso permitting the landlord to forfeit, or re-enter upon, the demised premises upon
the happening of specified events, such as non-payment of rent, non-performance or non-observance by the lessee of the
covenants of the lease, the bankruptcy of the lessee, or the levy of execution on his goods. This is often referred to as
the proviso for re-entry.
HR A[8545]
However, a lease may also be determinable without an express proviso for re-entry. A lease is determinable if an event,
specified in a condition subject to which the term was created, happens1. It is therefore important in construing an
instrument to distinguish between words which create a condition and words which only create a covenant and do not
confer a right to re-enter without the addition of a proviso for re-entry2. The modern practice is to put the matter beyond
doubt by including an express proviso for re-entry.
HR A[8546]
1 See Freeman v Boyle (1788) 2 Ridg Parl Rep 69, 79; Sexton d Freeman v Boyle (1788) Vern & Scr 402, 414, Ex Ch; Doe d Lockwood v
Clarke (1807) 8 East 185.
2 Doe d Willson v Phillips (1824) 2 Bing 13.
HR A[8547]
The question whether the lease is determinable for breach of a condition subsequent turns on the intention of the parties
to be collected from the proper construction of the document as a whole1. It appears that some terms of a lease may be
regarded as possessing the dual character of covenants and conditions2.
HR A[8548]
1 Bashir v Lands Comr [1960] AC 44, [1960] 1 All ER 117, PC. This case concerned the application of the Crown Lands Ordinance 1915
of Kenya which referred to forfeiture for breach of covenant and provided that in exercising its powers of granting relief against forfeiture
the court should be guided by the principles of English law and the doctrine of equity.
2 Bashir v Lands Comr [1960] AC 44, [1960] 1 All ER 117, PC.

Page 455
HR A[8549]
A condition subsequent may be express or implied. The words 'provided always' or 'upon condition' are suitable for
introducing an express condition, but no precise form of words is necessary. It is sufficient if the words used were
intended to have the effect of creating a condition1, even though the words are not expressed as those of the landlord,
but as those of the tenant or indefinitely2. On the other hand, formal words of condition may, in accordance with the
apparent intention of the parties be construed as creating or qualifying a covenant3. In any event, a condition must not
be illegal or repugnant to the grant4.
HR A[8550]-[8560]
1 Doe d Henniker v Watt (1828) 8 B & C 308, 315.
2 Whitchcot v Fox (1616) Cro Jac 398; Cruise Dig tit 32, C 25, s 9.
3 Shep Touch 122; Co Litt 203 b; Brookes v Drysdale (1877) 3 CPD 52.
4 Bac Abr, 'Leases and Terms for Years' (T2) 885.
HR A[8561]
If a clause in a lease constitutes only an agreement on the part of the lessee to do or not to do a specific act, it is not a
'condition', and the lessor cannot re-enter for a breach of it except under an express proviso for re-entry1.
HR A[8562]
1 Shaw v Coffin (1863) 14 CBNS 372; Crawley v Price (1875) LR 10 QB 302.

Page 456
Forfeiture/3 Construction of the proviso for re-entry
3 Construction of the proviso for re-entry
HR A[8563]
The ordinary rules of construction apply to conditions and covenants the breach of which may lead to a forfeiture1. The
intention of the parties has to be found from the language they have used, in accordance with the ordinary rules of
construction2.
HR A[8564]
1 Croft v Lumley (1858) 6 HL Cas 672, 693.
2 In City and Westminster Properties (1934) Ltd v Mudd [1959] Ch 129, [1958] 2 All ER 733, only the nature of the property was allowed
to be taken into consideration. As to matters external to the lease which, on general principles of the construction of contracts, may be taken
into account as an aid to construction see Reardon Smith Line Ltd v Hansen-Tangen [1976] 3 All ER 570, [1976] 1 WLR 989, HL; Prenn v
Simmonds [1971] 3 All ER 237, [1971] 1 WLR 1381, HL; Investors' Compensation Scheme Ltd v West Bromwich Building Society [1998] 1
All ER 98 at 113-114, per Lord Hoffmann.
HR A[8565]
Notwithstanding that the effect of a proviso may be to deprive the tenant of the benefit of the lease, a fair construction
must be put upon them according to the apparent intent of the contracting parties1. Thus, in the case of a covenant with
a proviso for re-entry, the court has to ascertain the meaning of the covenant without regard to the forfeiture, and then
see, upon that ascertained meaning, whether a forfeiture has been incurred2. But, subject to this principle, the court
leans towards a literal or strict construction of a forfeiture clause3. Some examples of the strictness of the approach
required are as follows:
(a) where a proviso for re-entry gave the landlord the right to re-enter for breach of covenants
'hereinafter contained', no forfeiture was permissible for a breach of any covenant appearing in the lease
before the proviso, even though there were no covenants after it4;
(b) where a proviso only permitted forfeiture, 'if no sufficient distress is found' every part of the
premises must be searched prior to effecting the re-entry5;
(c) where a proviso permitted re-entry if the lessee did an 'act' contrary to the covenants, it did not
apply to an omission to repair6;
(d) where a proviso permitted re-entry if lessee was duly found bankrupt, it did not apply where there
was an error in the process meaning the lessee was not 'duly' found bankrupt7;
(e) if the proviso is grammatically unintelligible the court will not find a meaning for it8;
(f) if the covenant of which breach is alleged is too vague, such as a covenant not to erect unseemly
buildings, it will not be enforceable by re-entry9; and
(g) where the breach is by act of law, such as an involuntary assignment, a forfeiture is not incurred10.
Page 457
HR A[8566]
1 Goodtitle d Luxmore v Saville (1812) 16 East 87 at 95, per Lord Ellenborough CJ; Doe d Davis v Elsam (1828) Mood & M 189; Doe d
Muston v Gladwin (1845) 6 QB 953 at 961.
2 Bristol Corpn v Westcott (1879) 12 Ch D 461 at 465, CA.
3 Doe d Lloyd v Powell (1826) 5 B & C 308 at 313; Northcote v Duke (1765) Amb 511; Simons v Farren (1834) 1 Bing NC 126.
4 Doe d Spencer v Godwin (1815) 4 M & S 265 at 269.
5 Rees d Powell v King and Morris (1800) For 19; Shepherd v Berger [1891] 1 QB 597, CA.
6 Doe d Abdy v Stevens (1832) 3 B & Ad 299.
7 Doe d Lloyd v Ingleby (1846) 15 M & W 465.
8 Doe d Wyndham v Carew (1841) 2 QB 317.
9 Murray v Dunn [1907] AC 283, HL(S).
10 Doe d Lord Grantley v Butcher (1840) 6 QB 115n; Doe d Marquis of Anglesea v Churchwardens of Rugeley (1844) 6 QB 107.
HR A[8567]
Since a proviso for re-entry destroys or defeats the estate, it is also subject to the subsidiary rule of construction that it is
to be construed against the person at whose instance it is introduced, that is, the lessor1. Thus, any doubt or ambiguity
should be resolved in favour of the lessee.
HR A[8568]
1 Doe d Sir W Abdy v Stevens (1832) 3 B & Ad 299. 303; Creery v Summersell; Flowerdew & Co Ltd v Summersell [1949] Ch 751. It is
not clear whether this proposition remains true, given the courts' increasing reluctance to rely on the contra proferentum rule: see, for
example Akici v LR Butlin Ltd [2005] EWCA Civ 1296, [2006] 1 WLR 201, per Neuberger LJ, CA.
HR A[8569]
The question of what particular acts or omissions constitute a breach of covenants of the nature usually found in leases
is considered where the covenants themselves are discussed. However, the following particular instances may be noted:
(a) a condition against assignment is not broken by the creation of an equitable charge1;
Page 458
(b) a condition against assignment is not broken by an assignment which is in fact void2; but
(c) a proviso for re-entry on the 'liquidation' of a company, being the lessee, this word, in the absence
of express restriction, includes voluntary liquidation, though only for the purpose of reconstruction3.
HR A[8570]-[8580]
1 Bowser v Colby (1841) 1 Hare 109 at 138.
2 Doe d Lloyd v Powell (1826) 5 B & C 308 at 313.
3 Horsey Estate Ltd v Steiger [1899] 2 QB 79, CA; Fryer v Ewart [1902] AC 187. In a compulsory liquidation the right of re-entry
accrues on the making of the winding-up order: General Share and Trust Co v Wetley Brick and Pottery Co (1882) 20 Ch D 260, CA.
HR A[8581]
Some covenants are negative in effect; others, such as the covenant to repair, are positive in nature. Other covenants,
such as the covenant not to assign are negative in effect1. It is, therefore, not unusual to make the proviso for re-entry
take effect on the 'non-performance or non-observance' of the lessee's covenants. This formulation is appropriate to the
positive and negative covenants respectively. However, a reference to 'non-performance' alone is sufficient. In Harman
v Ainslie Collins MR said this: 'In a proviso for re-entry for non-performance of covenants, it seems to me that the word
'perform' is used as meaning the fulfilment of the obligation or duty undertaken, and not as referring to the thing to be
done or left undone in pursuance of the covenant'2. Previously to this decision, it was considered that where there was a
reference to non-performance only of covenants, the proviso for re-entry would not apply to breach of a negative
covenant3. However, a reference also to 'non-observance' extended the proviso to such covenants4. The word
'performance' will be restricted to positive covenants, where there is a condition attached to the proviso for re-entry
which indicates that this is the intention, for instance where the proviso is to take effect on default by the lessee in the
performance of his covenants after a specified length of notice from the lessor5. It is therefore advisable in drafting a
proviso for re-entry to retain both words.
HR A[8582]
1 See generally, paras HR A[1903]ff.
2 Harman v Ainslie [1904] 1 KB 698 at 709, CA, per Collins MR.
3 Hyde v Warden (1877) 3 Ex D 72 at 82, CA; Evans v Davis (1878) 10 Ch D 747 at 761.
4 Croft v Lumley (1858) 6 HL Cas 672; Evans v Davis (1878) 10 Ch D 747; Timms v Baker (1883) 49 LT 106 ('perform and keep').
5 Doe d Palk v Marchetti (1831) 1 B & Ad 715; Harman v Ainslie [1904] 1 KB 698, CA.
(a) The burden of proof in establishing the right to forfeit

Page 459
HR A[8583]
In light of the above constraints, before a forfeiture for breach of condition is established, it must be clearly shown, in
the case of a condition, that the event specified in the condition has happened. Before a forfeiture based upon a breach
of covenant is established, it must be clearly shown that the proviso extends to the covenant1, and that there has been a
breach of it2. It is for the landlord to prove the forfeiture3. Thus, on an alleged breach of a covenant to insure, the
landlord must prove the non-insurance; it is not sufficient that the tenant fails to produce the policy, unless he is
expressly bound to do so by the covenant4. The burden of proof remains on the landlord, even where the tenant has
admitted the facts amounting to breach5. If the covenant provides that the tenant shall not do some act without the
consent of the landlord, the landlord must prove that the tenant has committed the act in question, and give evidence
that his consent was not obtained6. Equally, where the tenant has covenanted not to do something, there will be no
breach of covenant by him if the breaches were by independent contractors and sub-contractors, acting contrary to the
tenant's instructions, and not ratified by the tenant7.
HR A[8584]
1 Croft v Lumley (1858) 6 HL Cas 672 at 693; Brookes v Drysdale (1877) 3 CPD 52.
2 West v Dobb (1870) LR 5 QB 460, Ex Ch, Bristol Corpn v Westcott (1879) 12 Ch D 461 at 467, CA.
3 Jackson & Co v Northampton Street Tramways Co (1886) 55 LT 91.
4 Doe d Bridger v Whitehead (1838) 8 Ad & El 571; Doe d Chandless v Robson (1826) 2 C & P 245; Chaplin v Reid (1858) 1 F & F 315.
5 Duke's Court Estates Ltd v Associated British Engineering Ltd [1948] Ch 458, [1948] 2 All ER 137. Indeed, the previous law was that a
landlord could not have discovery to prove a forfeiture: Earl of Mexborough v Whitwood UDC [1897] 2 QB 111, CA; cf Lord Uxbridge v
Staveland (1747) 1 Ves Sen 56. This is no longer the case: now, under the Civil Procedure Rules, r 31.3(1), the Civil Evidence Act 1968, s
16(1)(a) and, possibly, the Fraud Act 2006, s 13.
6 Toleman v Portbury (1870) LR 5 QB 288, Ex Ch.
7 Hagee (London) Ltd v Co-operative Insurance Society Ltd (1991) P & CR 362, [1992] 1 EGLR 57.
HR A[8585]
For an instructive analysis of a number of alleged breaches, which indicates the court's approach to the question whether
there was in any instance a breach of covenant, see Hagee (London) Ltd v Co-operative Insurance Society Ltd1.
HR A[8586]
1 (1991) P & CR 362, [1992] 1 EGLR 57.

Page 460
Forfeiture/4 To whom the right to forfeit may be reserved
4 To whom the right to forfeit may be reserved
HR A[8587]
Prior to the coming into force of the Law of Property Act 1925, the right to re-enter could only be reserved to the person
in whom the legal estate in reversion upon the demise is vested1. It mattered not if the legal estate was only thus 'vested'
pursuant to a tenancy by estoppel2.
HR A[8588]
1 Thus, a right of entry could not be reserved in favour of a beneficiary under a trust: Doe d Barney v Adams (1832) 2 Cr & J 232; Doe d
Barker v Goldsmith (1832) 2 Cr & J 674; Saunders v Merryweather (1865) 3 H & C 902.
2 Doe d Barker v Goldsmith (1832) 2 Cr & J 674; Cuthbertson v Irving (1860) 6 H & N 135, Ex Ch.
HR A[8589]
Since the Law of Property Act 1925 came into force on 1 January 1926, all rights of entry effecting a legal estate which
are exercisable on condition broken or for any other reason, may be made exercisable by any person and the persons
deriving title under him, such as assignees of the reversionary estate1. An assignee of the reversion may forfeit in
respect of a breach of covenant which took place before the assignment of the reversion2, provided that the previous
reversioner has not waived the breach3.
HR A[8590]
1 For leases entered into prior to 1 January 1996, or pursuant to agreements for lease or court order made before that date, the relevant
provisions are the Law of Property Act 1925, ss 4(3) and 141(2) at para HR A[20116]. For leases entered into after that date (or 'new leases'
within the meaning of s 1 of the Landlord and Tenant (Covenants) Act 1995, s 1(3)), the relevant provisions are the Law of Property Act
1925, s 4(3) and the Landlord and Tenant (Covenants) Act 1995, s 4 at paras HR A[20060]-[21070]. There is no discernable difference in
operation between the two sets of provisions in this respect.
2 For leases entered into prior to 1 January 1996, or pursuant to agreements for lease or court order made before that date, the relevant
provision is LPA 1925, s 141(3) at para HR A[20116]; Re King [1963] Ch 459; London & County (A& D) v Wilfred Sportsman [1971] Ch
764, CA. For later 'new leases' within the meaning of s 1 of the Landlord and Tenant (Covenants) Act 1995, s 1(3)), the relevant provision is
s 23(3) of the 1995 at para HR A[21241].
3 For leases entered into prior to 1 January 1996, or pursuant to agreements for lease or court order made before that date, see LPA 1925,
s 141(3) at para HR A[20116]. For later 'new leases' within the meaning of s 1 of the Landlord and Tenant (Covenants) Act 1995, s 1(3)), the
relevant provision is s 23(3) of the 1995 at para HR A[21241].
Page 461
HR A[8591]
Where the reversion upon a lease has been assigned, and notification of the assignment had been given to the tenant, but
that transfer has not yet been registered at HM Land Registry, both the assignee and the assignor have concurrent
capacity to enforce a right of re-entry because both the assignee and the assignor are both entitled to the income from
the lease1. The assignor can only act in a way which is consistent with his holding the legal title on trust for the
assignee2. This is to be contrasted with the position where forfeiture is effected after registration of the transfer of the
landlord's interest, when only the registered proprietor is entitled to forfeit3. Indeed, where the assignee re-takes
possession prior to the transfer of the freehold reversion being registered, it should be possible to presume that the
assignee acted as agent for the assignor, given that the assignor hold the title on trust for the assignee pending the
registration of the transfer4.
HR A[8592]-[8601]
1 Scribes West Ltd v Relsa Anstalt (No 3) [2004] EWCA Civ 1744, CA, [2005] 1 WLR 1847, [2005] 2 All ER 690, [2005] 2 P & CR 3,
[2005] 1 EGLR 22. The case was decided in respect of an 'old lease', governed by the Law of Property Act 1925, s 141(2), on which see para
HR A[20116]. It would appear that the same result would follow under the Landlord and Tenant (Covenants) Act 1995, s 23(3), at para HR
A[21241], which governs 'new leases' within the meaning of s 1(3) of that Act.
2 Turner v Walsh [1909] 2 KB 484, CA; and IRC v John Lewis Properties Ltd [2002] 1 WLR 35 (first instance: the point is not considered
in the subsequent appeal at [2003] Ch 513). Both cases are considered in Scribes West Ltd v Relsa Anstalt (No 3) [2004] EWCA Civ 1744,
[2005] 1 WLR 1847, [2005] 2 All ER 690, [2005] 2 P & CR 3, [2005] 1 EGLR 22.
3 Mount Cook Land Ltd v The Media Centre (Properties) Ltd (No 2) [2006] PLSCS 189 (County Court).
4 Rother District Investments Ltd v Corke [2004] EWCA 14 (Ch), [2004] 2 P & CR 311, [2004] L & TR 21, [2004] 1 EGLR 47. The quid
pro quo of this presumption of regularity is that the assignee landlord cannot set up his own lack of authority to escape the consequences of
the forfeiture. The landlord may also be estopped from denying its own ability to forfeit. On both points, see Rother District Investments Ltd
v Corke, above.
HR A[8602]
A proviso for re-entry does not even require that there should be a reversion: thus, a lessee who sublets for the whole
residue of his term can reserve a right of re-entry on breach of covenant, notwithstanding that the sublease operates as
an assignment1. In such a case the right of re-entry will be an equitable interest, albeit one which is not capable of
registration as a land charge2. It may be protected by way of a notice in respect of registered land3.
HR A[8603]
1 Doe d Freeman v Bateman (1818) 2 B & Ald 168; Shiloh Spinners Ltd v Harding [1973] AC 691, [1973] 1 All ER 90, HL. Indeed, a
right of re-entry is in itself an interest in land which can exist independently: London & County (A& D) v Wilfred Sportsman [1971] Ch 764,
CA.
2 Shiloh Spinners Ltd v Harding [1973] AC 691, [1973] 1 All ER 90, HL.
Page 462
3 Prior to the commencement of the Land Registration Act 2002, the relevant provision was the Land Registration Act 1925, s 49 (1)(f);
since 13 October 2003 the relevant section is s 32 of the 2002 Act.
Page 463
Forfeiture/5 Special cases and the right to re-enter
5 Special cases and the right to re-enter
(a) Non-payment of rent
HR A[8604]
In the case of forfeiture for non-payment of rent, the landlord must first make a formal demand of payment1. A formal
demand must be made upon the land, and if there is a house thereupon, at the front door2. It should be made to the
tenant, but in his absence, it is sufficient to make demand to the occupier3, or to no-one, if the premises are unoccupied
when the demand is made4. The demand must be for no more than the sum due for rent for the last period for payment5.
Lastly, the demand must be made before sunset on the last day of payment, and be sustained until after sunset6,
although payment of the rent by the tenant at any time on the last day for payment avoids forfeiture7.
HR A[8605]
1 Doe d Chandless v Robson (1826) 2 C & P 245; Hill v Kempshall (1849) 7 CB 975; Jackson & Co v Northampton Street Tramways Co
(1886) 55 LT 91.
2 Co Litt 201 b at 202a.
3 Doe d Brook v Brydges (1822) 2 Dow & Ry KB 29.
4 Co Litt 201b.
5 Scot v Scot (1587) Cro Eliz 73; Fabian v Winston (1589) Cro Eliz 209; Doe d Wheeldon v Paul (1829) 3 C & P 613.
6 Co Litt 201 a; Wood v Chivers (1573) 4 Leon 179; Doe d Wheeldon v Paul (1829) 3 C & P 613; Acocks v Phillips (1860) 5 H & N 183
(see also at 1 Wms Saund 434); Doe d Darke v Bowditch (1846) 8 QB 973.
7 Co Litt 201a.
HR A[8606]
Fortunately, all of these requirements of a formal demand can be avoided by the insertion of suitable words in the
proviso1. Usually, the formal demand is expressly dispensed with by inserting the words 'whether formally demanded
or not'2. The days of grace contained in the lease must be allowed to expire, however3.
HR A[8607]
Page 464
1 Doe d Harris v Masters (1824) 2 B & C 490.
2 The words 'being demanded' are also sufficient: Phillips v Bridge (1873) LR 9 CP 48. 'Being lawfully demanded' is probably sufficient:
Manser v Dix (1857) 8 De GM & G 703; but see Doe d Scholefield v Alexander (1814) 2 M & S 525.
3 Phillips v Bridge (1873) LR 9 CP 48.
HR A[8608]
Alternatively, the requirement of a formal demand may be dispensed with by statute in certain circumstances1. Those
circumstances are:
(a) that the landlord had a power to re-enter2;

(b) that half a year's rent was due before service of the writ seeking possession3; and
(c) that there was no sufficient distress available at the premises4.
HR A[8609]
1 Common Law Procedure Act 1852, s 210 (re-enacting the Landlord and Tenant Act 1730, s 2).
2 Doe d Darke v Bowditch (1846) 8 QB 973.
3 Doe d Darke v Bowditch (1846) 8 QB 973.
4 Doe d Forster v Wandlass (1797) 7 Term Rep 117.
HR A[8610]-[8620]
The latter consideration is of importance: if sufficient goods are on the premises to allow distress to be levied to the
extent to which less than half a year's rent remained outstanding, the statute will not apply1. It is not necessary that the
goods should actually be distrained upon2. The goods must be so visible that a bailiff using due diligence would distrain
upon them3, although if the premises are locked and no goods can be found, the statutory requirement is satisfied4.
HR A[8621]
1 Cotesworth v Spokes (1861) 10 CBNS 103.
2 Rickett v Green [1910] 1 KB 253.
3 Doe d Haverson v Franks (1847) 2 Car & Kir 678.

Page 465
4 Hammond v Mather (1862) 3 F & F 151; Doe d Chippendale v Dyson (1827) Mood & M 77; Doe d Cox v Roe (1847) 5 Dow & L 272.
(b) Insolvency of the tenant
HR A[8622]
A proviso for re-entry may permit the landlord to re-enter if the tenant becomes insolvent1. Such a proviso for re-entry
refers to the insolvency of the person in whom the term is vested for the time being2. However, a proviso for forfeiture
upon 'the bankruptcy of the lessee, his executors, administrators or assigns' is effective upon the bankruptcy of the
personal representative of the lessee3. A proviso for re-entry, if the lessee be 'duly found and declared a bankrupt', does
not apply to an invalid adjudication of bankruptcy4. Note that there are a number of restrictions on the landlord's right
to forfeit where the tenant is insolvent5.
HR A[8623]
1 Roe d Hunter v Galliers (1787) 2 Term Rep 133.
2 Smith v Gronow [1891] 2 QB 394; Williams v Earle (1868) LR 3 QB 739, 749; Horsey Estate Ltd v Steiger [1899] 2 QB 79, CA.
3 Doe d Bridgman v David (1834) 1 Cr M & R 405.
4 Doe d Lloyd v Ingleby (1846) 15 M & W 465.
5 See further HR A[8865]-A[8880].
(c) Acts which prejudice the landlord's title
HR A[8624]
There is implied in every lease a condition that the lessee shall not do anything that may prejudice the title of the lessor;
and that if this is done the lessor may re-enter for breach of this implied condition1. The principle may be traced back to
the reign of Henry II, and appears to be founded on the oath of fealty given by a tenant of real property to his lord under
the medieval system of tenure2. The principle is a ghostly reminder of the law governing medieval feudal tenure, but
remains good law, nevertheless. The concept of repudiation of a landlord's title is analogous to that of repudiation of
contract, although the denial of title is not actually a repudiation of the tenancy3. That said, a tenant who repudiates the
relationship of landlord and tenant is in a similar position to a party to a contract who repudiates or renounces it: the
chief distinction being that the tenant who denies a landlord's title is entitled to seek relief from forfeiture, as he is in
breach of an implied condition in the tenancy4. The landlord can ignore the repudiation or accept it and re-enter or issue
possession proceedings. However, the repudiation and its acceptance must be clear: simply putting the landlord to proof
in a pleading is not enough5.
HR A[8625]
Page 466
1 On the distinction between conditions and covenants, see paras HR A[1188]-[1201].
2 Bac Abr, 'Leases and Terms for Years' (T 2) 884. See Warner v Sampson [1959] 1 QB 297, [1959] 1 All ER 120, CA, where the
underlying feudal principles were fully explored.
3 Abidogun v Frolan Health Care Ltd [2001] EWCA Civ 1821 [2002] L & TR 16; WG Clark (Properties) Ltd v Dupre Properties Ltd
[1992] 1 All ER 596, [1992] 2 EGLR 59; Warner v Sampson [1958] 1 QB 404, [1958] 1 All ER 44.
[1992] 1 All ER 596, [1992] 2 EGLR 59.
[1992] 1 All ER 596, [1992] 2 EGLR 59; Warner v Sampson [1958] 1 QB 404, [1958] 1 All ER 44.
HR A[8626]
It is a question of fact whether a particular expression amounts to a denial of the landlord's title1. What intention
underlies the words or the actions of a tenant is also a question of fact. It must be found that the tenant is definitely
asserting a title adverse to the landlord or, as the case may be, intending to enable someone else to set up such a title2.
However, a tenant probably exposes himself to the risk of forfeiture for breach of the implied condition by any of the
following:
(a) by denying the title of the landlord by alleging in writing that the title to the land is vested in
himself or another3;
(b) in the case of a tenancy from year to year, by denying the title of the landlord either in writing or
orally4;
(c) by assisting a stranger to set up an adverse title, as where the tenant acknowledges the freehold title
to be vested in the stranger5;
(d) by delivering up the premises to a stranger, in order to enable the stranger to set up a title to the
demised premises6; and
(e) in proceedings between the tenant and the landlord, the tenant, either as plaintiff or defendant, sets
up an adverse title in himself7.
HR A[8627]
1 Doe d Bennett v Long (1841) 9 C & P 773.
2 Wisbech St Mary Parish Council v Lilley [1956] 1 All ER 301, CA, where it was held that the evidence was insufficient to establish that
the tenant had let the third party into possession with the intention of enabling him to set up an adverse title.
3 Doe d Williams and Jeffery v Cooper (1840) 1 Man & G 135 at 139; Doe d Whitehead v Pittman (1833) 2 Nev & MKB 673; Doe d
Phillips v Rollings (1847) 4 CB 188 at 200 (denial proved); Doe d Lewis v Cawdor (1834) 1 Cr M & R 398; Hunt v Allgood (1861) 10
CBNS 253; Jones v Mills (1861) 10 CBNS 788 (denial not proved).
Page 467
4 Doe d Graves v Wells (1839) 10 Ad & El 427; Wisbech St Mary Parish Council v Lilley [1956] 1 All ER 301, [1956] 1 WLR 121, CA.
5 Bac Abr 'Leases and Terms for Years' (T 2) 884.
6 Ackland v Lutley (1839) 9 Ad & El 879 at 884; Doe d Ellerbrock v Flynn (1834) 1 Cr M & R 137; Wisbech St Mary Parish Council v
Lilley [1956] 1 All ER 301, [1956] 1 WLR 121, CA.
7 Bac Abr 'Leases and Terms for Years' (T 2) 884.
HR A[8628]
The denial or disclaimer of the landlord's title must be clear and unambiguous if it is to constitute a repudiation of the
relation of landlord and tenant and therefore a breach of the implied condition1. Thus, the following have been held, on
the particular facts of the case, insufficient to constitute a denial of title:
(a) that the tenant pays rent to a stranger2;

(b) that the tenant does not at once acknowledge the title of the landlord, such as by asking for proof of
his title3, or by a refusal to pay more rent until the tenant 'knows who is the right owner'4;
(c) that the tenant refuses to give up possession at a time when the landlord has no right to claim it5;
(d) a general traverse in the defence to an action for possession does no more than put the landlord to
proof and does not assert that the title is in another6; and
(e) an assertion in a pleading that the landlord has no title to a part of the land within the demise is not
sufficient to constitute a disclaimer of the whole7.
HR A[8629]
1 WG Clark (Properties) Ltd v Dupre Properties Ltd [1992] 1 All ER 596 at 602, [1991] 2 EGLR 59 at 61.
2 Doe d Dillon v Parker (1820) Gow 180.
3 Doe d Lewis v Cawdor (1834) 1 Cr M & R 398.
4 Jones v Mills (1861) 10 CBNS 788.
5 Doe d Gray v Stanion (1836) 1 M & W 695 at 703.
6 Warner v Sampson [1959] 1 QB 297, [1959] 1 All ER 120, CA.
7 WG Clark (Properties) Ltd v Dupre Properties Ltd [1992] 1 All ER 596, [1991] 2 EGLR 59. The point was left open as to whether a
partial disclaimer could lead to a partial forfeiture of the lease on the analogy of the decision in GMS Syndicate Ltd v Gary Elliott Ltd [1982]
Ch 1, [1981] 1 All ER 619.
HR A[8630]-[8640]
Page 468
If there is a denial of the landlord's title so as to give him a right to forfeit the lease the landlord must still exercise that
right by some act such as re-entry or the issue and service of proceedings for forfeiture if he is to avail himself of the
right1. It appears, therefore, that a tenant can avoid the forfeiture if he retracts his denial of title before the landlord
elects to forfeit the lease in reliance on it2. Thus, if an assertion in a pleading constitutes a breach of the implied
condition a subsequent amendment of the pleading which withdraws the offending allegation will prevent a forfeiture if
the amendment is made prior to service of the proceedings for forfeiture or actual re-entry3. It may be permissible to
amend proceedings to remove a denial of title even at trial, although the circumstances in which this will be permissible
are unclear: the exercise of the discretion to amend may turn on whether the landlord has sufficiently accepted the
breach as if it were a repudiation of the tenancy4.
HR A[8641]
1 Warner v Sampson [1959] 1 QB 297, [1959] 1 All ER 120, CA, per Hodson and Ormrod LJJ.
2 Warner v Sampson [1959] 1 QB 297, [1959] 1 All ER 120, CA.
3 WG Clark (Properties) Ltd v Dupre Properties Ltd [1992] 1 All ER 596, [1991] 2 EGLR 59.
4 Abidogun v Frolan Health Care Ltd [2001] EWCA Civ 1821, [2002] L&TR 16, CA.
HR A[8642]
In the case of a tenancy from year to year, the effect of such denial of title is that the tenancy may be determined
forthwith by the landlord without notice to quit1. Similarly, denial of the landlord's title determines a tenancy at will2.
HR A[8643]
1 Throgmorton v Whelpdale (1769) Bull NP 96; Doe d Williams v Pasquali (1793) Peake 259, Doe d Jefferies v Whittick (1820) Gow 195;
Doe d Calvert v Frowd (1828) 4 Bing 557; Doe d Grubb v Grubb (1830) 10 B & C 816; Doe d Davies v Evans (1841) 9 M & W 48; Doe d
Lansdell v Gower (1851) 17 QB 589, 592; Vivian v Moat (1881) 16 Ch D 730.
2 Doe d Price v Price (1832) 9 Bing 356, 358.

Page 469
Forfeiture/6 Restrictions on the right to forfeit: s 146 notices
6 Restrictions on the right to forfeit: s 146 notices
(a) Law of Property Act 1925, s 146
HR A[8644]
Section 146 of the Law of Property Act 1925 requires the landlord to serve the tenant with a formal warning notice,
before exercising his right to forfeit1. The purpose of the 's 146 notice' has been described as to give the tenant 'the
opportunity of considering whether he can admit the breach alleged; whether it is capable of remedy; whether he ought
to offer any, and if so, what compensation; and finally, if the case is one for relief, whether he ought not promptly to
apply for such relief. In short the notice is intended to give the person whose interest it is sought to forfeit the
opportunity of considering his position before an action is brought against him'2.
HR A[8645]
1 LPA 1925, s 146 also gives the court power to grant the tenant relief against forfeiture. It is a re-enactment of the Conveyancing Act
1881, s 14.
2 Horsey Estate Ltd v Steiger [1899] 2 QB 79 at 91, per Lord Russell of Killowen CJ.
HR A[8646]
The effect of that section is to prevent a landlord from lawfully exercising his right to re-enter, whether by action or
otherwise, unless and until a s 146 notice has been served1. The section does not apply to certain cases of forfeiture,
which are considered below2. Also, note that there are significant restrictions on serving notices under this section in
respect of long-lease residential tenancies3.
HR A[8647]
1 Law of Property Act 1925, s 146 at para HR A[20121].
2 See paras HR A[8807]-[8840].
3 See HR A[8885]-[8894].
HR A[8648]
Page 470
To be valid, such a notice must:
(a) specify the particular breach complained of;

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c) in any case, requiring the lessee to make compensation in money for the breach.
HR A[8649]
The landlord may only proceed to forfeit if the tenant then fails, within a reasonable time thereafter, to remedy the
breach, if it is capable of remedy, and to make reasonable compensation, to the satisfaction of the landlord1.
HR A[8650]-[8660]
1 Law of Property Act 1925, s 146 at para HR A[20121].
HR A[8661]
There is no prescribed form for such a notice: it is possible to construe a 's 146 notice' out of correspondence: a s 146
notice need not actually refer to s 1461. If there is some doubt about the validity of a notice already served, a fresh
notice may be served 'without prejudice to the validity of any and all notices to quit that have been, or may be, served':
such a practice may be inelegant, but it is somewhat preferable to proceeding on a notice of dubious validity2. It is
important to make it clear that the notice itself is not 'without prejudice' as such a notice would be ineffective3.
HR A[8662]
1 Van Haarlam v Kasner (1992) 64 P & CR 214, [1992] 2 EGLR 59.
2 Lowenthal v VanHoute [1947] KB 342, sub nom Loewenthal v Vanhoute [1947] 1 All ER 116, per Denning J. The case concerned a
notice to quit, but the principle is equally applicable to a s 146 notice. Provided that the effect of the second notice (or the combination of
both notices) still makes it clear to the reasonable recipient that the landlord is proceeding to forfeit the lease, no difficulty should arise by
reason of the decision on inconsistent Landlord and Tenant Act 1925, s 25 notices, in Barclays Bank plc v Bee [2001] EWCA Civ 1126,
[2001] 1 WLR 332, [2001] 3 EGLR 41, CA.
3 Re Weston and Thomas' Contract [1907] 1 Ch 244. The case concerned a notice to complete the purchase of land, but the principle is
equally applicable to a s 146 notice.
HR A[8663]
A s 146 notice must be served in respect of a subsisting breach of covenant. Accordingly, where demised premises fell
into disrepair and the landlord, pursuant to the right under the lease to enter and carry out work of repair, entered and
carried out the repairs, the landlord could not subsequently serve a s 146 notice on the tenant1.
Page 471
HR A[8664]
1 SEDAC Investments Ltd v Tanner [1982] 3 All ER 646, [1982] 1 WLR 1342.
(b) The requirement to specify the breach
HR A[8665]
The notice must direct the attention of the tenant to the particular things of which the landlord complains, so that the
tenant may have an opportunity to remedy the breach before an action is commenced. The notice need not tell the tenant
what he is required to do to to be put right the breach1. How the tenant goes about correcting the defects is a matter for
the tenant, not for the landlord2. Indeed, it suffices that the notice tells the tenant to 'examine and repair' a specified part
of the demise2.
HR A[8666]
1 Piggott v Middlesex County Council [1909] 1 Ch 134.
2 Fox v Jolly [1916] 1 AC 1, HL.
HR A[8667]
The notice must be sufficiently clear to direct the tenant with reasonable certainty to the matters complained of1. The
notice must be more particular than complaining of a general failure to perform the covenants of the lease2. It does not,
however, have to specify the covenant breach of which is complained of, provided that the breach is adequately
identified3. Thus, a tenant imprisoned for spying was taken to know what was complained of, when the notice specified
only 'use of the premises for illegal purposes'3. But, where six houses were demised under a single lease, a notice was
held bad for not indicating in which of the houses a breach default had occurred4. However, a notice not drafted using
the appropriate legal terminology may be misleading and therefore invalid: so, a notice complaining of 'assigning,
subletting or parting with possession' did not support a purported forfeiture based upon sharing occupation5.
HR A[8668]
1 Fletcher v Nokes [1897] 1 Ch 271; Re Serle, Gregory v Serle [1898] 1 Ch 652; Fox v Jolly [1916] 1 AC 1, HL.
2 Penton v Barnett [1898] 1 QB 276, CA.

Page 472
4 Fletcher v Nokes [1897] 1 Ch 271; Fox v Jolly [1916] 1 AC 1, HL.
5 Akici v LR Butlin Ltd [2005] EWCA Civ 1296, [2006] 1 WLR 201, [2005] 1 EGLR 34, CA.
HR A[8669]
A vague and indefinite description of one breach does not render defective a notice if other breaches are properly
specified1. Similarly, where a notice alleges a non-existent breach, the notice is not invalidated if a valid reason for
forfeiture is also stated2.
HR A[8670]-[8680]
1 Fox v Jolly [1916] 1 AC 1, HL; Van Haarlam v Kasner (1992) 64 P & CR 214, [1992] 2 EGLR 59.
2 Silvester v Ostrowska [1959] 3 All ER 642.
(c) The requirement to require remedy of the breach
HR A[8681]
Where a breach is capable of remedy, the s 146 notice served in respect of it must require the tenant to remedy the
breach. As before, this does not mean that the landlord must tell the tenant what he is required to do in order to remedy
the breach1. However, it does require the landlord to distinguish between remediable and irremediable breaches: if the
breach is remediable, the notice is invalid if it does not require the tenant to remedy it2. Conversely, neither requiring
the tenant to remedy an irremediable breach, nor failing to so require him, invalidates the notice.
HR A[8682]
1 Piggott v Middlesex County Council [1909] 1 Ch 134; Fox v Jolly [1916] 1 AC 1, HL.
2 Expert Clothing Service & Sales v Hillgate House [1986] Ch 340, CA.
HR A[8683]
In Savva v Houssein1 the landlord purported to forfeit the lease because there had been an irremediable breach, namely
that changing the signage at commercial premises, without consent. The Court of Appeal held that the breach was one
capable of remedy. Staughton LJ said 'In my judgment, except in the case of a breach of covenant not to assign without
consent, the question is: whether the remedy referred to is the process of restoring the situation to what it would have
been if the covenant had never been broken, or whether it is sufficient that the mischief resulting from a breach of the
covenant can be removed. When something has been done without consent, it is not possible to restore the matter
Page 473
wholly to the situation which it was in before the breach. The moving finger writes and cannot be recalled. That is not to
my mind what is meant by a remedy, it is a remedy if the mischief caused by the breach can be removed. In the case of
a covenant not to make alterations without consent or not to display signs without consent, if there is a breach of that,
the mischief can be removed by removing the signs or restoring the property to the state it was in before the
alterations.'2 Accordingly, the breach was, in effect, remediable and the landlord's s 146 notice was defective as it did
not require the remedy of the breach, nor gave time for the tenant to do so. Note, however, the important qualification to
Staughton LJ's approach: a breach of the covenant against assignment is still, it seems, to be treated as irremediable. By
parity of reasoning, it would seem that a breach of a covenant not to sublet without consent ought also to be treated as
irremediable.
HR A[8684]
1 (1996) 73 P & CR 150, [1996] 2 EGLR 65, CA.
2 (1996) 73 P & CR 150, [1996] 2 EGLR 65 at 66. The reference to 'the moving finger' is more closely examined at para HR A[8689], n
1.
HR A[8685]
It follows that every well-drafted s 146 notice should simply state that the tenant '...is required to remedy the breach, if it
is capable of being remedied'.
(d) Remediable breaches and irremediable breaches
HR A[8686]
Human frailty being what it is, there will be s 146 notices which do not use the safe formulation suggested in the
foregoing paragraph. It will, therefore, still be necessary to distinguish between remediable and irremediable breaches.
Broadly, a breach of a positive covenant will be capable of remedy. A breach of an obligation to do something can be
remedied by doing that which is required, and perhaps paying compensation. Even the breach of a promise to do
something by a certain time can be remedied by doing that which is required, albeit late1.
HR A[8687]
1 Expert Clothing Services and Sales v Hillgate House [1986] Ch 340, CA.
HR A[8688]
By parity of reasoning, a breach of an obligation not to do something should not be capable of remedy1. However
logically (and poetically) sound that parity of reasoning is, not all breaches of negative covenant are incapable of
remedy2.
Page 474
HR A[8689]
1 Scala House and District Property Co Ltd v Forbes [1974] QB 575, CA. Put another way, 'The Moving Finger writes; and, having writ,
/ Moves on: nor all thy Piety or Wit / Shall lure it back to cancel half a Line, / Nor all thy Tears wash out a Word of it': The Rubá'yát of
Omar Khayyám, translated by Edward Fitzgerald.
2 Rugby School (Governors) v Tannahill [1935] 1 KB 87, CA.
HR A[8690]-[8700]
The proposition that breaches of negative covenant are not always irremediable currently lacks logical coherence. For
example, assigning the lease without the landlord's consent is irremediable, even though the lease may be assigned
back1. The same proposition ought logically apply to an unlawful subletting2. The consequences of the breach may be
undone, but that is not the same as a remedy of the breach, as what is done is done.
HR A[8701]
1 Scala House and District Property Co Ltd v Forbes [1974] QB 575, CA; Troop v Gibson [1986] 1 EGLR 1. If the landlord chooses not
to forfeit, he can (in certain circumstances) seek an injunction requiring the unlawful assignment or subletting to be undone. See Hemingway
Securities Ltd v Dunraven Ltd (1994) 71 P & CR 30 and Crestfort Ltd v Tesco Stores Ltd [2005] EWHC 805 (Ch), [2005] 3 EGLR 25.
2 Scala House and District Property Co Ltd v Forbes [1974] QB 575, CA.
HR A[8702]
However, a breach of a user covenant may, or may not be an irremediable breach. If the use is such that the premises
will be stigmatised by it, the breach is irremediable. Such uses include using the premises for prostitution1, selling
pornographic matter2, an unlicenced gambling den3, or spying for Czechoslovakia4, at least during the Cold War.
HR A[8703]
1 Rugby School (Governors) v Tannahill [1935] 1 KB 87, CA.
2 Dunraven Securities v Holloway [1982] 2 EGLR 47, CA.
3 Hoffman v Fineberg [1949] Ch 245.
HR A[8704]
Page 475
But where the breach of the user covenant was immoral user by a subtenant, and the mesne landlord had in no way
permitted the immoral use, the breach was capable of remedy by him, provided he forfeited the sublease1. Had the
mesne landlord closed his eyes to the conduct of the subtenant, the breach would not have been remediable2.
HR A[8705]
1 Glass v Kencakes [1966] 1 QB 611.
2 British Petroleum Pension Trust Ltd v Behrendt [1985] 2 EGLR 97, CA.
HR A[8706]
Following from the cases cited above, the following situations may be tentatively identified thus as remediable or
irremediable:
(a) non-payment of rent: remediable;

(b) non-payment of service charges: remediable;
(c) failure to repair generally: remediable;
(d) failure to carry out works on time: remediable;
(e) unauthorised assignment: irremediable;
(f) unauthorised subletting: irremediable;
(g) illegal or immoral use: irremediable;
(h) other unauthorised use: remediable;
(i) unauthorised alterations: may be remediable or irremediable.
(e) The modern test for remediable or irremediable breaches
HR A[8707]
It is submitted that the test propounded in respect of a breach of a covenant against carrying out alterations without
consent now represents the general test for whether any given breach is irremediable or remediable, except a breach of
covenant not to assign (or, by parity of reasoning, sublet) without consent1. The test is derived from the judgment of
Staughton LJ in Savva v Houssain2. If the mischief caused by the breach of covenant can be undone as a matter of fact,
the breach is one which can be remedied. This is consistent with the observation in Expert Clothing Services & Sales
Ltd v Hillgate House Ltd that whether a breach of a covenant to insure is capable of remedy depends on whether the
building has burned down while uninsured3.
HR A[8708]
1 Savva v Houssein (1996) 73 P & CR 150, [1996] 2 EGLR 65, CA. It is respectfully submitted that there may be no logical distinction
Page 476
between the removal of an unlawful assignee and the removal of unauthorised subtenants. See Hemingway Securities Ltd v Dunraven Ltd
(1994) 71 P & CR 30, [1995] 1 EGLR 61 and Crestfort Ltd v Tesco Stores Ltd [2005] EWHC 805 (Ch), [2005] 3 EGLR 25. It follows,
therefore that the exception to the rule in Savva's case for unlawful assignments should be extended to unlawful granting of subtenancies,
and that both acts should be considered as irremediable breaches. In practical terms, this makes sense, as a tenant who has unlawfully
granted a subtenancy may have no immediate legal basis on which to determine it, and so will be unable to undo the breach within a
reasonable time, or at all.
2 [1996] 2 EGLR 65, CA.
3 [1986] Ch 340 at 355, per Slade LJ.
(f) The requirement to require compensation
HR A[8709]
Despite the apparently mandatory language of s 146, a notice is not invalidated by a failure to require payment or
compensation in money1. The landlord who wants compensation does not have to specify how much he considers to be
appropriate.
HR A[8710]-[8720]
1 Lock v Pearce [1893] 2 Ch 271 at 276, per Lord Esher MR.
(g) The requirement to give the tenant a reasonable time to remedy the breach
HR A[8721]
A valid s 146 notice must give the tenant 'a reasonable time'between the service of the notice and the effecting of the
re-entry, in order for the tenant to remedy all the breaches specified in the notice1. What is 'a reasonable time' is a
question of fact in each case1.
HR A[8722]
1 Hopley v Tarvin Parish Council (1910) 54 JP 209.
HR A[8723]
If a tenant makes it clear that he has no intention of remedying the specified breaches, it may be that 'a reasonable time'
elapses there and then, although it may be prudent to allow a few more days to elapse in any event1. Previous requests
that the tenant comply with the covenant may be taken into account when deciding what is a reasonable time2.
Page 477
HR A[8724]
1 Billson v Residential Apartments Ltd [1992] 1 AC 494 at 508, per Sir Nicolas Browne-Wilkinson VC, CA. This point is unaffected by
the appeal to the House of Lords reported at loc.cit.
2 Bhojwani v Kingsley Investment Trust Ltd [1992] 2 EGLR 70.
HR A[8725]
However, as has been stressed, a s 146 notice is meant not only to give the tenant chance to remedy the breach, but to
seek advice. It follows that, even in the case of an actually irremediable breach or the tenant's clear defiance of a s 146
notice, the tenant must be given time to seek legal advice. It is submitted that at least seven days should be allowed1,
although five days has been held acceptable2.
HR A[8726]
1 Civil Service Co-operative Society v McGrigor's Trustee [1923] 2 Ch 347 (14 days).
2 Fuller v Judy Properties Ltd (1991) 64 P & CR 176, [1992] 1 EGLR 75, CA in which the point was not directly addressed. Less than
five days is probably insufficient for a tenant of average means and access to advice: Horsey Estate Ltd v Steiger [1899] 2 QB 79, CA (two
days insufficient). Of course, if the breach is remediable, the tenant must be given time to take appropriate advice and act upon it: Courtney
Lodge Management Ltd v Blake [2004] EWCA Civ 975, [2005] 1 P & CR 17, [2005] L & TR 2, CA (five days insufficient for taking and
acting on advice).
(h) Serving a s 146 notice
HR A[8727]
A s 146 notice must be served on the tenant for the time being1. This is the case even if the lease is being forfeited for
an unlawful assignment: it is the unlawful assignee who is to be served2. If there is doubt as to who the tenant actually
is, it is sufficient to address the notice simply to 'the lessee'3.
HR A[8728]
1 Old Grovebury Manor Farm Ltd v W Seymour Plant Sales and Hire Ltd (Nº 2) [1979] 3 All ER 504, [1979] 1 WLR 1397, CA; Fuller v
Judy Properties Ltd (1991) 64 P & CR 176, 1992] 1 EGLR 75, CA.
2 Old Grovebury Manor Farm v W Seymour Plant Sales and Hire (No 2) [1979] 3 All ER 504, [1979] 1 WLR 1397, CA.
Page 478
3 Law of Property Act 1925, s 196(2) at para HR A[20130].
HR A[8729]
In the case of joint tenants, all tenants must be served1.
HR A[8730]-[8740]
1 Blewett v Blewett [1936] 2 All ER 188.
HR A[8741]
A s 146 notice may be served in accordance with the common law, or in accordance with the provisions of the Law of
Property Act 1925, s 196, as augmented by the Recorded Delivery Service Act 19621. In both cases, service of a s 146
notice need not be effected on the tenant personally, although personal service is always preferable, as it reduces the
number of vicissitudes which face the party seeking to prove service. Further, it is preferable for a memorandum of
service to be indorsed on a duplicate of the notice at the time when the notice is served. The duplicate will then be
admissible as primary evidence of service2.
HR A[8742]
1 Recorded Delivery Act is at paras HR A[20191]ff. Generally, the law of service of notices is the same whether the notice is a s 146
notice or a notice to quit. Accordingly, many of the cases referred to in this section are actually concerned with service of a notice to quit.
Nothing turns on this.
2 Doe d Patteshall v Turford (1832) 3 B & Ad 890; Doe d Fleming v Somerton (1845) 7 QB 58; Stapylton v Clough (1853) 2 E & B 933.
HR A[8743]
Finally, no matter how service is effected, it is always sufficient if proof is given that the notice in fact came to tenant's
knowledge in time to give effect to the requirement that the tenant has a reasonable time to remedy the breach1.
HR A[8744]
1 Re Poyser and Mills' Arbitration [1964] 2 QB 467, [1963] 1 All ER 612.
HR A[8745]
Page 479
At common law, a s 146 notice is often, but not invariably, sufficiently served if it is left with the tenant's agent, or at
his dwelling house with his wife1 or servant2. Such service is sufficient although the notice does not actually come to
the intended recipient's attention prior to the commencement of the notice period, provided that an agency relationship
exists between the actual recipient and the intended recipient3. Such an agency relationship may be presumed, but may
equally be disproved on the facts, either by showing that there was no agency relationship, or that the agent was misled
as to his duty to report to his principal by a wrongly-addressed s 146 notice4.
HR A[8746]
1 Blair v Street (1834) 2 Ad El 329; Smith v Clark (1840) 9 Dowl 202; and Doe d Batten v Murless (1817) 6 M & S 110.
2 Jones d Griffiths v Marsh (1791) 4 Term Rep 464; R v North Riding of Yorkshire Justices, ex p Peckham (1844) 8 JP 663, 3 LTOS 206;
Appleton v Murray (1860) 8 WR 653; Mason v Bibby (1864) 2 H & C 881.
3 Jones d Griffiths v Marsh (1791) 4 Term Rep 464; Doe d Neville v Dunbar (1826) Mood & M 10; Papillon v Brunton (1860) 5 H & N
518 Tanham v Nicholson (1872) LR 5 HL 561 at 569; London School Board v Peters (1902) 18 TLR 509.
4 Doe d Exeter Corpn v Mitchell (1837) 1 Jur 795.
HR A[8747]
It follows that reliance on such methods of service can be dangerous: the party serving notice thus must prove that the
person to whom it was delivered was the intended recipient's wife or servant, or that the notice did actually come to the
intended recipient's notice1. Service of the notice upon a relative of the subtenant upon the premises is not sufficient,
although the notice was properly addressed to the tenant2, although service upon any person who is under a duty it is to
deliver it to the tenant is valid3.
HR A[8748]
1 Doe v Buross v Lucas (1804) 5 Esp 153. Service on the tenant's wife, not at the demised premises and without proof that it was at her
husband's residence, is ineffective: Blair v Street (1834) 2 Ad & El 329. Compare Lord Newborough v Jones [1975] Ch 90, where the notice
to quit was validly served by being put under the door, whereupon it went underneath the linoleum covering. See further para HR A[8763].
2 Doe d Mitchell v Levi (1811) Ad Ejec 92.
3 Tanham v Nicholson (1872) LR 5 HL 561. So, had the landlord in Doe d Mitchell v Levi (1811) Ad Ejec 92 served the subtenant, and
shown that the subtenancy contained an obligation to bring relevant documents such as a notice to quit to the mesne landlord's attention, the
service would have been effective.
HR A[8749]
Service upon a 'professional' agent, such as a surveyor or solicitor is also probably only effectual on the day of service,
if the notice is delivered during usual business hours1. Otherwise, the notice will be taken to be served the following
Page 480
working day.
HR A[8750]-[8760]
1 Papillon v Brunton (1860) 5 H & N 518, 522. In that case the letter was delivered after the agent had left, but the jury found that
someone ought to have been there to receive the notice.
HR A[8761]
Apart from any question of agency, the fact that the notice has been delivered to the wife or servant of the tenant raises
a strong presumption that it has reached him, especially if an explanation of the notice was given when it was
delivered1. This presumption can possibly be rebutted by proof that the notice did not come to the knowledge of the
tenant at all2. However, this is probably not the case if one of the statutory methods of service are employed3.
HR A[8762]
1 Doe d Buross v Lucas (1804) 5 Esp 153.
2 Tanham v Nicholson (1872) LR 5 HL 561; Lex Service plc v Johns (1989) 59 P & CR 427, [1990] 1 EGLR 92, CA, on which see HR
A[8782], n 2.
3 See paras HR A[8769]ff.
HR A[8763]
Putting the notice under the door of a tenant's house, or any other mode of service, has been said to be sufficient, if it is
shown that the notice came to the tenant's attention before the commencement of the notice period1. However, a notice
may be validly served if it has been simply left at the proper address of the tenant in a manner which a reasonable
person, minded to bring the document to the attention of the person to whom the notice is addressed, would adopt,
notwithstanding that the notice was not actually received by the intended recipient2. So, where a landlord put a notice
under the tenant's door unwittingly pushed it under the linoleum, where it lay undisturbed for five months, the notice
was nevertheless validly served3.
HR A[8764]
1 Alford v Vickery (1842) Car & M 280.
2 Lord Newborough v Jones [1975] Ch 90. The case concerned service pursuant to the Agricultural Holdings Act 1948, s 92(1), but this
would not affect the reasoning on this issue.
Page 481
3 Lord Newborough v Jones [1975] Ch 90.
HR A[8765]
In the same way, a s 146 notice may be served by ordinary post1. If ordinary post is employed, the notice will be
presumed delivered on the date and time which it should arrive, 'in the ordinary course of post'2. What actually is 'the
ordinary course of post' is a question of fact3. The presumption is capable of being rebutted by credible evidence from
the intended recipient that he did not actually receive the notice in the post4. It is, at the least, doubtful whether service
by ordinary post would be held to be good where the tenant or his authorised agent is not in actual physical occupation
of the premises to which the notice is addressed5.
HR A[8766]
1 As opposed to recorded delivery or by registered post, on which see service pursuant to statute.
CA.
4 See Lex Service plc v Johns (1989) 59 P & CR 427, [1990] 1 EGLR 92, CA, on which see para HR A[8782], n 2.
HR A[8767]
In the case of a corporation or company, service should be effected upon an officer of the corporation or company1.
HR A[8768]
1 Doe d Earl Carlisle v Woodman (1807) 8 East 228.
(i) Statutory methods of service
HR A[8769]
Where the tenancy agreement or lease came into operation, or was executed after 1 January 1926, the Law of Property
Act 1925, s 196, as modified by the Recorded Delivery Service Act 1962 applies in respect of any notice authorised by
that Act, such as a s 146 notice1. These provisions apply to also to any notice which is to be 'given', as there is no
distinction between 'giving'and 'serving' a notice2.
Page 482
HR A[8770]-[8780]
1 Law of Property Act 1925, s 196(3) at para HR A[20130].The Recorded Delivery Act is at paras HR A[20191]ff.
2 Re 88, Berkeley Road, NW9 [1971] Ch 648.
HR A[8781]
The effect of employing the statutory methods of service are to give the party serving the notice a guarantee of
presumed delivery. In other words, if one of the statutory methods of service is utilised, it shifts the burden of the risk of
non-service from the party serving the notice to the intended recipient. 'The purpose of prescribing these methods of
service is to assist the person who is obliged to serve the notice, by offering him choices of mode of service which will
be deemed to be valid service, even if in the event the intended recipient does not receive it'1. Cases which suggest that
service in accordance with a statutory method gives rise to a rebuttable presumption of effective service are now to be
treated as incorrectly decided2. Further, employing one of the statutory methods of deemed service by posting using
recorded delivery means that the document so served is deemed to have been served as at the date of posting.3
HR A[8782]
1 Galinski v McHugh (1988) 57 P & CR 359 at 365, per Slade LJ, CA. See also Chiswell v Griffon Land and Estates Ltd [1975] 2 All ER
665, [1975] 1 WLR 1181, CA.
2 Galinski v McHugh (1988) 57 P & CR 359, CA, and CA Webber (Transport) Ltd v Network Rail Infrastructure Ltd (formerly Railtrack
Plc) [2004] 1 WLR 320, CA, approving Commercial Union Life Assurance Co Ltd v Moustafa [1999] L & TR 489; Beanby Estates v Egg
Stores (Stamford Hill) [2001] 1 WLR 2064 and disapproving Lex Services v Johns [1990] 1 EGLR 92, CA.
3 Railtrack Plc v Gojra [1998] 1 EGLR 63, CA; CA Webber (Transport) Ltd v Network Rail Infrastructure Ltd (formerly Railtrack Plc)
[2003] EWCA Civ 1167 [2004] 1 WLR 320, CA.
HR A[8783]
The section also validates service of a notice left at the last-known place of abode or business in the United Kingdom of
the lessee, lessor or other person to be served, or in the case of a notice required or authorised to be served on a lessee,
is affixed or left for him on the land or any house or building comprised in the lease1. In the case of a mining lease, it is
sufficient to leave it for the lessee at the office or counting-house of the mine2.
HR A[8784]
1 Law of Property Act 1925, s 196(3) at para HR A[20130]; Datnow v Jones [1985] 2 EGLR 1.
Page 483
2 LPA 1925, s 196(3) at para HR A[20130].
HR A[8785]
If service is effected by leaving the document at the last-known place of abode of the intended recipient, the s 146
notice is validly served if it is left at a place which is the furthest that a member of the public or a postman can go to
communicate with the tenant, such as a communal letter-box1.
HR A[8786]
1 Henry Smith's Charity Trustees v Kyriakou [1989] 2 EGLR 110, CA.
HR A[8787]
A s 146 notice is also validly served if it is sent by post in a registered letter, or by recorded delivery1, addressed to the
lessee, lessor or other person to be served by name, at the aforesaid place of abode or business, office or
counting-house. If the letter is not returned through the post as undelivered, the notice is deemed to be served. The
courts have not permitted service to be avoided by a refusal to sign, however: a registered letter is duly delivered if the
recipient is present at the property but refuses to sign for it: the same reasoning must apply to a letter sent by recorded
delivery2.
HR A[8788]
1 Recorded Delivery Service Act 1962, s 1 at para HR A[20191].
2 Van Grutten v Trevenen [1902] 2 KB 82, CA. The judgment of the court was most laconic: 'We think that s 28 of the Act applies, and
consequently the service was good, and the appeal must be dismissed.' A study of the headnote reveals that, at trial, it was proved that the
intended recipient of a notice to quit had refused to sign the receipt for a validly addressed registered letter, thereby causing it to be returned
as undelivered. The section referred to is the Agricultural Holdings Act 1986, s 28, which is the same as s 196(4).
HR A[8789]
Where postal service is employed, service is deemed at the time at which the letter would be delivered in the ordinary
course of post, in the case of a registered letter1. This presumption extends to the time of delivery, 'in the ordinary
course of post'2. What actually is 'the ordinary course of post' is a question of fact3. The same rules apply to the service
of a letter sent by recorded delivery, irrespective of whether anyone is available to sign for it4.
HR A[8790]-[8800]
1 LPA 1925, s 196(4) at para HR A[20130]; Interpretation Act 1978, s 7; Gresham House Estate Co v Rossa Grande Gold Mining Co
Page 484
[1870] WN 119.
CA.
4 See WX Investments Ltd v Begg [2002] EWHC 925 (Ch), [2002] 1 WLR 2849, [2002] 24 LS Gaz R 36 in which Patten J refused to
follow a decision to the contrary in Stephenson & Son v Orca Properties Ltd [1989] 2 EGLR 129 considering that it was inconsistent with
the earlier judgment in Holwell Securities Ltd v Hughes [1973] 1 WLR 757 (confirmed on appeal at [1974] 1 WLR 155).
HR A[8801]
The registered office of a company may be its 'last known place of business' for the purposes of s 196, and it will not
cease to be its last-known place of business merely because the landlord corresponds with its agents at a different
address1.
HR A[8802]
1 National Westminster Bank v Betchworth Investments (1975) 234 Estates Gazette 675. See also Stylo Shoes Ltd v Prices Tailors Ltd
[1960] Ch 396, [1959] 3 All ER 901, a case on the Landlord and Tenant Act 1927, s 23.
(j) No contracting out of s 146
HR A[8803]
The parties to a tenancy cannot contract out of the operation of s 1461. The courts will be careful to avoid clauses or
agreements which have the effect of forfeiture, but operate under a different guise. So, for example, where a deed of
surrender was to be delivered to the landlord if certain breaches of the tenants covenants had been remedied by a certain
date, the court construed the arrangement as a forfeiture2. Alternatively, where a landlord reserves the right to serve
notice determining the lease on a tenant's breach of covenant, which is shorter than he could otherwise give, the court
construed the right as a right to forfeit3. However, where the landlord is simply serving a regular notice to quit in
response to a breach of covenant, there is no forfeiture4.
HR A[8804]
2 Plymouth Corpn v Harvey [1971] 1 All ER 623, [1971] 1 WLR 549.
3 Richard Clarke & Co Ltd v Widnall [1976] 3 All ER 301, [1976] 1 WLR 845.
Page 485
4 Clays Lane Housing Co-operative v Patrick (1984) 49 P & CR 72, CA.
HR A[8805]
Where an arrangement is held to be a disguised forfeiture, it may nevertheless be lawfully operated, provided that due
notice is given (where s 146 so requires)1. Relief from forfeiture will also be available1.
HR A[8806]
1 Clays Lane Housing Co-operative v Patrick (1984) 49 P & CR 72, CA.
(k) Cases where no s 146 notice is needed
HR A[8807]
Non-payment of rent: There is no requirement to serve a s 146 in the case of re-entry for non-payment of rent1.
HR A[8808]
HR A[8809]
Insolvency: A s 146 notice need not be served in respect of a forfeiture triggered by the tenant's bankruptcy1, or the
levying of execution upon the tenant's interest if the lease is of land in the following categories:
(a) agricultural or pastoral land;

(b) mines or minerals2;
(c) a house used or intended to be used as a public house;
(d) a house let as a dwelling house, with the use of any furniture, books, works of art, or other chattels
not being in the nature of fixtures; or
(e) any property with respect to which the personal qualifications of the tenant are of importance for
the preservation of the value or character of the property, or on the ground of neighbourhood to the
lessor, or to any person holding under him3.
HR A[8810]-[8820]
Page 486
1 Bankruptcy includes liquidation of all kinds, including voluntary liquidation by a company to facilitate a reconstruction and increase of
capital: Horsey Estate Ltd v Steiger [1899] 2 QB 79; Fryer v Ewart [1902] AC 187, HL.
2 See Gee v Harwood [1933] Ch 712.
3 Earl Bathurst v Fine [1974] 2 All ER 1160, [1974] 1 WLR 905, CA; Hockley Engineering Co Ltd v V & P Midlands Ltd [1993] 1
EGLR 76.
HR A[8821]
Further, s 146(10) provides that the provisions of that section as a whole only apply to a forfeiture upon the tenant's
bankruptcy1, where the lease is not within the classes excluded by s 146(9), and if the lessee's interest is sold within one
year from the bankruptcy or taking in execution. If the lessee's interest is not sold before the expiration of that year, the
section only applies to the forfeiture condition during the first year from the date of the bankruptcy or taking in
execution.
HR A[8822]
1 Bankruptcy includes liquidation of all kinds, even of voluntary only for purposes of reconstruction and increase of capital: Horsey
Estate Ltd v Steiger [1899] 2 QB 79; Fryer v Ewart [1902] AC 187.
HR A[8823]
The effect of the subsection is to fetter the landlord's right to re-enter for bankruptcy. If the tenant's lease has not been
not sold within the one year, the fetter is removed at the end of the year. If the lease has not been sold on within the
year, the fetter continues1. The tenant's interest in the lease is 'sold' if the conveyance has completed, or if an
unconditional contract for sale has been exchanged2.
HR A[8824]
1 Civil Service Co-operative Society v McGrigor's Trustee [1923] 2 Ch 347.
2 Re Castle & Sons (1906) 94 LT 396.
HR A[8825]
Mining leases: There is no requirement to serve a s 146 in the case of re-entry for a breach of a covenant or condition in
a mining lease which allows the landlord access to, or inspection of, the mine's books, accounts, records, weighing
machines or other things, or to enter or inspect the mine or the workings thereof1.
HR A[8826]
Page 487
1 Law of Property Act 1925, s 146(8)(b) at para HR A[20121].
HR A[8827]
For the purposes of the Law of Property Act 1925, a mining lease is a lease for mining purposes, that is, the searching,
winning, working, getting, making merchantable, carrying away or disposing of mines and minerals, or purposes
connected therewith, and includes a grant or licence for mining purposes1.
HR A[8828]
1 Law of Property Act 1925, s 205(1)(xiv).
HR A[8829]
Breach of alienation covenant: There is no requirement to serve a s 146 in the case of re-entry for a breach of a
covenant or condition against assigning, under-letting, parting with the possession, or disposing of the land leased
where the breach occurred before 19261. Such breaches would, of course, now be statute-barred.
HR A[8830]-[8840]
1 Law of Property Act 1925, s 146(8)(a) at para HR A[20121].
2 See Limitation Act 1980, s 5 or 8, as the case may be, at para HR A[20203] and HR A[20204], respectively.
Page 488
Forfeiture/7 Restrictions on the right to forfeit: repairs
7 Restrictions on the right to forfeit: repairs
(a) Landlord and Tenant Act 1927
HR A[8841]
Where the breach of covenant complained relates to disrepair, by reason of the Landlord and Tenant Act 1927, s 18(2),
the right of re-entry is cannot be lawfully exercised, whether by action or otherwise, unless the landlord proves that the
fact that a s 146 notice had been served on the lessee was known either:
(a) to the lessee; or

(b) to an under-lessee holding under an under-lease which reserved a nominal reversion only to the
lessee; or
(c) to the person who last paid the rent due under the lease either on his own behalf or as agent for the
lessee or under-lessee; and
(d) and that a time reasonably sufficient to enable the repairs to be executed had elapsed since the time
when the fact of the service of the notice came to the knowledge of such person.
HR A[8842]
For the law of service of s 146 notices, including the deeming of service by the Recorded Delivery Service Act 1962,
see paras HR A[8727]-[8802], for the Recorded Delivery Service Act 1962 see paras HR A[20191]ff.
(b) Leasehold Property (Repairs) Act 1938
HR A[8843]
This Act is covered in more detail elsewhere, but for current purposes, it may be summarised as follows1. The purpose
of the Act is to give the court an overriding discretion whether or not to permit forfeiture for failure to repair premises,
so as to prevent tenants from being harassed and being put to unnecessary expense as a result of being granted relief
from forfeiture where the proceedings have been brought on trivial and unimportant breaches of the repairing
covenants2.
HR A[8844]
1 See paras HR A[7380.421]-[7380.468].

Page 489
2 Re Metropolitan Film Studios Ltd v Twickenham Film Studios Ltd [1962] 1 WLR 1315, [1962] 3 All ER 508; Landmaster Properties
Ltd v Thackeray Property Services [2003] EWHC 959 (QB), [2003] 2 EGLR 30, [2004] L & TR 4.
HR A[8845]
If the Leasehold Property (Repairs) Act 1938 applies to a lease, there are two additional restrictions on forfeiture for
breach of covenants to repair. The Act applies to leases which were for a term of seven years or more and of which
there are at least three years unexpired.
HR A[8846]
The first restriction is substantive: where the Act applies, there can be no action for forfeiture for a failure to comply
with a covenant to repair the premises during the term, if the tenant claims the benefit of the 1938 Act by serving a
counter-notice under s 1(1). Although a mortgagee-in-possession is a 'lessee' for some purposes, such as seeking relief
from forfeiture under the Law of Property Act 1925, s 1461, he is not 'a lessee' for the purposes of s 1 of the 1938 Act2.
HR A[8846.1]
1 See paras HR A[9285] to HR A[9302] and para HR A[9366]. A mortgagee, whether or not in possession, is not entitled to a section 146
notice, whether or not the 1938 Act is potentially applicable: Egerton v Jones [1939] 2 KB 702, [1939] 3 All ER 889, CA.
2 Smith v Spaul [2002] EWCA Civ 1830, [2003] QB 983; [2003] 1 All ER 509.
HR A[8847]
If the tenant serves a counter-notice, then proceedings cannot be started without leave of the court. There are five
grounds for obtaining leave of the court:
(a) the value of the reversion has been substantially diminished, or will be unless the breach is
remedied immediately;
(b) immediate remedy is required to comply with legislation;
(c) (if the lessee does not occupy the whole) immediate remedy is required in the interests of the other
occupiers;
(d) that immediate remedy will be relatively inexpensive, compared with the much greater expense if
there is delay; and
(e) the existence of special circumstances rendering it just and equitable to grant leave.
HR A[8848]
The landlord must prove, on the balance of probabilities, the existence of one or more of these grounds before he is
granted the court's leave to proceed with the forfeiture1. It is now incumbent upon a landlord who wishes to forfeit to
prepare his case thoroughly at a much earlier stage. These grounds must be proved to exist as at the date of the hearing,
Page 490
although the state of the premises when the landlord issued proceedings may be a relevant factor to take into account
under ground (e)2.
HR A[8849]
1 Associated British Ports v CH Bailey plc [1990] 2 AC 703, [1990] 1 All ER 929, HL.
2 Landmaster Properties Ltd v Thackeray Property Services [2003] EWHC 959 (QB), [2003] 2 EGLR 30, [2004] L & TR 4, not
following the suggestion that the correct date is the issue of the proceedings made in Re Metropolitan Film Studios Ltd v Twickenham Film
Studios Ltd [1962] 1 WLR 1315, [1962] 3 All ER 508.
HR A[8850]-[8860]
The second restriction is purely procedural. Where the 1938 Act applies, the s 146 notice must inform the tenant by
means of a statement--in 'characters not less conspicuous' than those used in the rest of the notice--of the tenant's right
to serve a counter-notice under the 1938 Act and how to do so1. A letter containing the prescribed information can be
read with an earlier notice, but it is far from desirable2.
HR A[8861]
1 Leasehold Property (Repairs) Act 1938, s 1(4) at para HR A[20160].
2 Sidnell v Wilson [1966] 2 QB 67, [1966] 1 All ER 681, CA. This point is not affected by the overruling of this case on the standard of
proof for obtaining leave in Associated British Ports v CH Bailey plc [1990] 2 AC 703, [1990] 1 All ER 929, HL.
(c) War damage
HR A[8862]
The Landlord and Tenant (War Damage) Act 1939, s 1 may suspend or modify an obligation to carry out repairs, and s
1(4) modifies, suspends or extinguishes the right to forfeit for breach of such covenants accordingly.
Page 491
Forfeiture/8 Restrictions on the right to forfeit: limitation
8 Restrictions on the right to forfeit: limitation
(a) Limitation Act 1980
HR A[8863]
By the Limitation Act 1980, s 15(1), no action shall be brought by any person to recover any land after the expiration of
12 years from the date on which the cause of action accrued, which would in these circumstances be the date upon
which the covenant was breached1.
HR A[8864]
1 Doe d Tarrant v Hellier (1789) 3 TR 162; Doe d Cook v Danvers (1806) 7 East 299; Doe d Allen v Blakeaway (1833) 5 C & P 563.
Page 492
Forfeiture/9 Restrictions on the right to forfeit: insolvency
9 Restrictions on the right to forfeit: insolvency
HR A[8865]
The impact of the law of insolvency on the law of landlord and tenant is covered elsewhere in this work1. For current
purposes, a short summary may be helpful.
HR A[8866]
1 See Chapter 12.
HR A[8867]
Where the Insolvency Act 1986 applies in the circumstances set out in this paragraph, proceedings, execution or other
legal process may not be commenced or continued without the leave of the court. The court may impose terms upon
such a grant of leave. It is settled law that these additional restrictions apply to commencing an action to forfeit a lease
(as opposed to proceeding by peaceable re-entry) in the following circumstances:
(a) between the presentation of an administration application and either the making of the
administration order or the dismissal of the application1;
(a1) where an administrator is being appointed out of court, between a notice of appointment or
intention to appoint an administrator being filed at court and the making of the administration order1A
(b) while an administration order is in force2;
(c) when a winding up order has been made or a provisional liquidator has been appointed3;
(d) while an interim order in respect of an individual voluntary arrangement is in force4;
(e) where an interim receiver has been appointed in respect of an individual 5;
(f) where a bankruptcy order has been made but the bankrupt has not been discharged6.
The court has a discretion whether or not to grant leave. Great weight will be given to the landlord's interest, but the
court must still balance his interests against the interests of the other unsecured creditors7. Different considerations
apply where there is a Company Voluntary Arrangement in force8, which are outlined in HR A[8868.3] below.
HR A[8868]
1 Insolvency Act 1986, Sch B1, para 44. Prior to the amendments introduced with effect from 15 September 2003 by the Enterprise Act
2002, the relevant section was s 10(1)(c).
Page 493
1A ibid
2 IA 1986, Sch B1, para 43(4). Prior to the amendments introduced with effect from 15 September 2003 by the Enterprise Act 2002, the
relevant section was s 11(3)(d).
3 IA 1986, s 130(2).
4 IA 1986, s 252(2).
5 IA 1986, s 286(6).
6 IA 1986, s 285(3).
7 Re Atlantic Computer Systems plc [1992] Ch 505, CA.
8 IA 1986, s 5.
HR A[8868.1]
The position regarding actual re-entry is more complex. In respect of companies in administration, the Insolvency Act
1986, as amended, provides that a landlord may not exercise a right of re-entry against a tenant in administration
without the consent of the administrator or the permission of the court1. Permission of the court is not, however, needed
prior to peaceable re-entry in respect of an individual who is bankrupt2. The basis of this distinction is that a right to
peaceable re-entry is not a 'security' for the purposes of the relevant provisions of the Insolvency Act 1986, so that the
leave of the court is not required3.
HR A[8868.2]
1 Insolvency Act 1986, s 8 and Sch B1, para 43(4), as inserted by the Enterprise Act 2002. This reverses the effect of Re Lomax Leisure
Ltd [2000] Ch 502, [1999] 2 EGLR 37.
2 The cases on administration decided prior to the amendments made by the Enterprise Act 2002 are still relevant to this issue, so see Re
Olympia & York Canary Wharf Ltd [1993] BCLC 453; McMullen & Sons Ltd v Cerone (1993) 66 P & CR 351; Re Debtors (Nos 13A10 and
14A10 of 1994) [1995] 1 WLR 1127, [1995] 2 EGLR 33, Razzaq v Pala [1997] 1 WLR 1336; Re Lomax Leisure Ltd [2000] Ch 502, [1999]
2 EGLR 37; Essex Furniture plc v National Provident Institution [2001] L & TR 32. The contrary view was taken in Exchange Travel
Agency v Triton Property Trust [1991] 2 EGLR 50, but it should now be regarded as incorrectly decided, particularly as the decision in Re
Lomax Leisure Ltd was indirectly supported by observations by the House of Lords in Re Park Air Services plc [2000] 2 AC 172.
3 Insolvency Act 1986, ss 285, 383. See particularly Razzaq v Pala [1997] 1 WLR 1336; Re Debtors (Nos 13A10 and 14A10 of
1994)[1995] 1 WLR 1127, [1995] 2 EGLR 33;Re Lomax Leisure Ltd [2000] Ch 502, [1999] 2 EGLR 37; Ezekiel v Orakpo [1977] QB 260,
CA is also still of use, although it relates to an earlier statute.
HR A[8868.3]
The position regarding actual re-entry is also difficult in respect of companies in liquidation. It seems that the balance of
authority supports the proposition that permission of the court is not needed for peaceable re-entry against a tenant in
Page 494
liquidation1. If permission is needed, then it would seem that a peaceable re-entry effected such leave is a nullity2.
HR A[8868.4]
1 Permission of the court is needed prior to the commencement of any "action or proceeding" against a company in liquidation, by reason
of the Insolvency Act 1986, s 130(2). These same words formerly appeared in the section of the Act dealing with administration, s 10. That
section was the considered in a number of cases, but the net effect is that permission is not needed: see Re Olympia & York Canary Wharf
Ltd [1993] BCLC 453; McMullen & Sons Ltd v Cerone (1993) 66 P & CR 351; Re Debtors (Nos 13A10 and 14A10 of 1994) [1995] 1 WLR
1127, [1995] 2 EGLR 33, Razzaq v Pala [1997] 1 WLR 1336; Re Lomax Leisure Ltd [2000] Ch 502, [1999] 2 EGLR 37; Essex Furniture
plc v National Provident Institution [2001] L & TR 32. There is a contrary decision to this view in respect of a liquidation: Re Memco
Engineering Ltd [1986] Ch 86, but this case must now be treated with caution as it would be inconsistent with the aforementioned cases, and
in particular the decision in Re Lomax Leisure Ltd was indirectly supported by observations by the House of Lords in Re Park Air Services
plc [2000] 2 AC 172. The position in respect of administration has been resolved by the Enterprise Act 2002. No equivalent change was
made in respect of liquidations, therefore it seems most likely that permission is not needed. As a matter of practice, it appears that
permission is rarely sought.
2 Re National Employers' Mutual General Insurance Association [1995] 1 BCLC 232; but cf Re Saunders and Bearman (bankrupts)
[1997] Ch 60.
HR A[8868.5]
Where a company enters into a Company Voluntary Arrangement, the landlord loses his right to forfeit for non-payment
of rent because the debt due under the lease is converted into a debt due under the CVA1. By parity of reasoning, the
approval on an Individual Voluntary Arrangement should have the same effect as the stautory wording is very similar2.
HR A[8868.6]
1 Insolvency Act 1986, s 5(2), as interpreted in Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 01 EG 94, CA, and
disapproving (albeit obiter) Re Naeem [1990] 1 WLR 48 and March Estates plc v Gunmark Ltd [1996] 2 EGLR 38.
2 IA 1986, s 260(2).
HR A[8869]
The fact of a disclaimer of the lease by the tenant's receiver does not prevent the landlord from forfeiting the lease, nor
does an application by a third party for a vesting order1.
HR A[8870]-[8880]
1 Pellicano v MEPC plc [1994]1 EGLR 104.

Page 495
Forfeiture/10 Restrictions on the right to forfeit: residential premises
10 Restrictions on the right to forfeit: residential premises
(a) Rent
HR A[8881]
A landlord under a long-lease1 of a dwelling is prevented from exercising a right of re-entry or forfeiture for failure by a
tenant to pay an amount consisting of rent, unless the unpaid amount either exceeds the prescribed sum or consists of, or
includes, an amount which has been payable for more than a prescribed period2. The prescribed sum is presently £350
and the prescribed period is three years3. It is possible for the landlord to aggregate together sums due as rent service
charges and administration charges in order to reach the prescribed sum4. However, if the unpaid amount for which the
landlord wishes to forfeit includes an administration charge payable in respect of the tenant's failure to pay any part of
the unpaid amount, the unpaid sum is to be treated as reduced by the amount of the charge5.
HR A[8882]
1 A 'long-lease is prima facie a lease granted for a term of years certain exceeding 21 years, whether or not it is (or may become)
terminable before the end of that term by notice given by or to the tenant, by re-entry or forfeiture or otherwise: Commonhold and Leasehold
Reform Act 2002, s 167(5), incorporating ss 76-77. For the full definition, see HR A[21989] and HR E[1586]-[1587]. A 'dwelling' means a
means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses
and appurtenances belonging to it or usually enjoyed with it: see the Landlord and Tenant Act 1985, s 38, at HR A[20343], as incorporated
by Commonhold and Leasehold Reform Act 2002, s 167(5), at HR A[21989].
2 Commonhold and Leasehold Reform Act 2002, s 167(1), see HR A[21989]. The section came into force on 28 February 2004 by reason
of the Commonhold and Leasehold Reform Act 2002 (Commencement No 5 and Saving and Transitional Provision) Order 2004, SI
2004/3056. This section is not presently in force in Wales.
3 The sums are prescribed by the Rights of Re-Entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004, SI
2004/3086, HR A[24314].
4 Commonhold and Leasehold Reform Act 2002, s 167(1), see HR A[21989]. An 'administration charge means an amount payable by a
tenant of a dwelling as part of or in addition to the rent which is payable, directly or indirectly for any of the following: for or in connection
with the grant of approvals under his lease, or applications for such approvals; (b) for or in connection with the provision of information or
documents by or on behalf of the landlord or a person who is party to his lease otherwise than as landlord or tenant; in respect of a failure by
the tenant to make a payment by the due date to the landlord or a person who is party to his lease otherwise than as landlord or tenant; or in
connection with a breach (or alleged breach) of a covenant or condition in his lease. See Commonhold and Leasehold Reform Act 2002, s
167(5), at HR A[21989] and Sch 11, para 1(1).
5 Commonhold and Leasehold Reform Act 2002, s 167(3), see HR A[21989].
HR A[8883]
Rent must, of course, actually be lawfully due before a forfeiture for non-payment can be effected. In the context of
Page 496
residential premises, statute has intervened twice. First, where premises consist of or include a dwelling, and are not
held under a tenancy to which Pt II of the Landlord and Tenant Act 1954 applies, rent is not due from the landlord until
he has supplied the tenant with an address in England and Wales at which notices (including notices in proceedings)
may be served on the landlord by the tenant1. Secondly, a tenant under a long lease of a dwelling is not liable to make a
payment of rent under the lease unless the landlord has given him a notice relating to the payment, which is in a
prescribed form and contains certain prescribed information2.
HR A[8884]
1 Landlord and Tenant Act 1987, s 48. See paras HR A[20801]-[20804].
2 Commonhold and Leasehold Reform Act 2002, s 166, see para HR A[21988]. The information is prescribed by both the section and the
Landlord and Tenant (Notice of Rent) (England) Regulations 2004, SI 2004/3096, which also prescribes the form. See HR A[24316]. For
the meaning of 'long lease' and 'dwelling', see fn 1 to A[8882], above.
(b) Service charges
HR A[8885]
There are now restrictions upon the landlord's right to forfeit leases premises let as a dwelling1, for non-payment of
service charges, by reason of the Housing Act 1996, s 81, as amended by the Commonhold and Leasehold Reform Act
20022. Only forfeiture for non-payment of service charges is affected by this section3. For the purposes of these
sections, 'service charge' has the same meaning as in ss 18(1) and 27 of the Landlord and Tenant Act 19854.
HR A[8886]
1 See paras HR A[21944]-[21948].
2 The amendment came into force on 28 February 2005 in England and 31 May 2005 in Wales:: the Commonhold and Leasehold Reform
Act 2002 (Commencement No 5 and Saving and Transitional Provision) Order 2004, SI 2004/3056 for England and for Wales, the
Commonhold and Leasehold Reform Act 2002 (Commencement No 3 and Saving and Transitional Provision) (Wales) Order 2005 WSI
2005/1353.
3 Housing Act 1996, s 81(6) at para HR A[21944].
4 See paras HR A[20250] and [20302].
HR A[8887]
The effect of these sections is to prevent a landlord from forfeiting a tenancy of such premises for non-payment of
service charges, unless either:
Page 497
(a) the amount outstanding is agreed or admitted by the tenant; or

(b) the amount outstanding has been determined by the court1, by the Leasehold Valuation Tribunal2,
or by an arbitration.
HR A[8888]
1 The court is the county court: Housing Act 1996, s 95 at para HR A[21981]. If such proceedings are also joined with other claims, in
respect of which the court would not normally have jurisdiction, the county court shall also have jurisdiction to hear and determine those
other proceedings: s 95(4). The corollary position is that proceedings brought in the High Court also contain a claim to service charges, the
High Court may also hear and determine proceedings under s 81: s 95(3) at para HR A[21944].
2 The court may transfer determination of service charges to the Leasehold Valuation Tribunal pursuant to the Landlord and Tenant Act
1985, s 31C, as inserted by the Housing Act 1996, s 83.
HR A[8889]
Once the amount outstanding has been determined, the right of re-entry or forfeiture cannot be exercised for a period of
14 clear days, beginning with the day after that on which the decision of the court or arbitral tribunal is given1.
HR A[8890]
1 Housing Act 1996, s 81(2) at para HR A[21944].
HR A[8891]
Until 2005, where a s 146 notice is required as a prelude to forfeit for non-payment of service charges in respect of
premises let as a dwelling, the notice was ineffective unless it complies with the requirements of the Housing Act 1996,
s 82. This section has been repealed.
HR A[8892]
1 The repeal came into force on 28 February 2005 in England and 31 May 2005 in Wales: the Commonhold and Leasehold Reform Act
2002 (Commencement No 5 and Saving and Transitional Provision) Order 2004,SI 2004/3056 for England and for Wales, the Commonhold
and Leasehold Reform Act 2002 (Commencement No 3 and Saving and Transitional Provision) (Wales) Order 2005, WSI 2005/1353.
HR A[8893]
Further, and in any event, if the sum due as service charges does not either exceed the prescribed sum, or consists of (or
includes), an amount which has been payable for more than a prescribed period the landlord cannot forfeit anyway1.
The prescribed sum is presently £350 and the prescribed period is three years2. It is possible for the landlord to
Page 498
aggregate together sums due as rent service charges and administration charges in order to reach the prescribed sum3.
HR A[8894]
1 Commonhold and Leasehold Reform Act 2002, s 167(1), see para HR A[21989]. The section came into force on 28 February 2005 by
reason of the Commonhold and Leasehold Reform Act 2002 (Commencement No 5 and Saving and Transitional Provision) Order 2004, SI
2004/3056. This section came into force in Wales on 31 May 2005: the Commonhold and Leasehold Reform Act 2002 (Commencement No
3 and Saving and Transitional Provision) (Wales) Order 2005, WSI 2005/1353. See further para HR A[8881], above.
2 The sums are prescribed by the Rights of Re-Entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004, SI
2004/3086, HR A[24314]. See further HR A[8881], above.
3 Commonhold and Leasehold Reform Act 2002, s 167(1), at HR A[21989]. See further HR A[8881], above.
(c) Other breaches
HR A[8895]
A landlord under a long lease of a dwelling1 may not serve a notice under the Law of Property Act 1925, s 146 in
respect of a breach by a tenant of a covenant or condition in the lease (other than to pay rent, service charges or
administrative charges, unless certain conditions are satisfied2. Those conditions are:3
(a) it has been finally determined on an application by the landlord to the Leasehold Valuation
Tribunal that the breach has occurred4;
(b) the tenant has admitted the breach; or
(c) a court in any proceedings, or an arbitral tribunal in proceedings pursuant to a post-dispute
arbitration agreement5, has finally determined that the breach has occurred.
Where conditions (a) or (c) are satisfied, notice may not be satisfied until after the end of the period of 14 days
beginning with the day after that on which the final determination is made6.
HR A[8896]
1 For the definitions of long lease see the Commonhold and Leasehold Reform Act 2002, s 169(5), HR A[21991], incorporating ss 76-77,
at HR E[1586]-[1587]. For the definition of dwelling, see the Landlord and Tenant Act 1985, s 38, at HR A[20343], as incorporated by
Commonhold and Leasehold Reform Act 2002, s 168(5), at HR A[21990].
2 Commonhold and Leasehold Reform Act 2002, s 168(1), HR A[21990].
4 For the purposes of this section, it is finally determined that a breach of a covenant or condition in a lease has occurred at the end of the
Page 499
last of the following periods: if a decision that it has occurred is not appealed against or otherwise challenged, at the end of the period for
bringing an appeal or other challenge; or if such a decision is appealed against or otherwise challenged and not set aside in consequence of
the appeal or other challenge, at the time when the appeal or other challenge is disposed of either by the determination of the appeal or other
challenge and the expiry of the time for bringing a subsequent appeal (if any), or by its being abandoned or otherwise ceasing to have effect.
See the Commonhold and Leasehold Reform Act 2002, s 169(2)-(3), HR A[21991].
5 Note the reference to a post-dispute arbitration. Any agreement by a tenant under a long lease of a dwelling (other than a post-dispute
arbitration agreement) is rendered void in so far as it purports to provide for a determination in a particular manner, or on particular evidence
by the Commonhold and Leasehold Reform Act 2002, s 169(1), HR A[21991].
HR A[8897]-[8898]
A landlord may not make an application for a determination by the Leasehold Valuation Tribunal that the breach has
occurred in respect of a matter which has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration
agreement to which the tenant is a party, or has been the subject of determination by a court, or has been the subject of
determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.
(d) Extra restrictions on physical re-entry
HR A[8899]
Further, there are a number of restrictions on the right to physical re-entry, which are considered below1.
HR A[8900]
1 See paras HR A[9003]-[9008].
(e) Assured tenancies
HR A[8901]
An assured tenancy, including an assured shorthold tenancy, cannot be forfeited1. The statutory mechanism for
obtaining possession must be employed.
HR A[8902]
1 Housing Act 1988, s 5. See further HR E[1551].

Page 500
(f) Leasehold enfranchisement
HR A[8903]
Where the tenant has claimed the right to enfranchise under the Leasehold Reform Act 19671, or has either claimed the
right to a lease extension or is participating in a claim to collective enfranchisement under the Leasehold Reform,
Housing and Urban Development Act 19932, the landlord has no right to forfeit the lease.
HR A[8904]
1 Leasehold Reform Act 1967, Sch 3, para 4(1). See HR E[947].
2 Leasehold Reform, Housing and Urban Development Act 1993, Sch 3, para 6.
Page 501
Forfeiture/11 Waiver
11 Waiver
(a) The elective nature of waiver
HR A[8905]
As noted above, the right to forfeit is an option, or power, reserved to the landlord. The landlord can, accordingly,
choose whether he will take advantage of a forfeiture or not. If he elects not to do so, the right to forfeit is waived.
HR A[8906]
This waiver of the right to forfeit the lease is properly regarded as an aspect of the wider doctrine of election. This type
of waiver arises where a person is entitled to alternative rights which are inconsistent with one another and, with
knowledge of the facts which give rise in law to these alternative rights, he acts in a manner which is consistent only
with his having chosen to rely on one of them. He is held in law to his choice even though the he was not aware of the
legal consequences of the choice1.
HR A[8907]
1 See the analysis of Lord Diplock in Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850 at 883, [1970] 2 All
ER 871 at 894, HL, as considered in Peyman v Lanjani [1985] Ch 457, [1984] 3 All ER 703, CA.
HR A[8908]
The essential elements of waiver are1:
(a) actual or implied knowledge by the landlord (or his agent) of the relevant breach; and
(b) unequivocal acts by the landlord (or his agents) which are consistent only with the continued
existence of the lease.
HR A[8909]
1 Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850 at 883, [1970] 2 All ER 871, HL; Peyman v Lanjani
[1985] Ch 457, [1984] 3 All ER 703, CA.
Page 502
HR A[8910]-[8920]
The type of knowledge necessary to found a waiver is knowledge of the actual facts not their legal consequences1. The
landlord may be imputed with the knowledge of his representative such as a caretaker or managing agent2. The landlord
is not deemed to have knowledge of a winding up order in respect of a company, simply because it is published in the
London Gazette in accordance with the requirements of the Companies Act 19853.
HR A[8921]
1 David Blackstone Ltd v Burnetts (West End) Ltd [1973] 3 All ER 782, [1973] 1 WLR 1487.
2 Metropolitan Properties Co Ltd v Cordery (1979) 39 P & CR 10, [1978] 2 EGLR 78; Trustees of Henry Smith's Charity v Willson
[1983] QB 316, [1983] 1 All ER 73, CA.
3 Official Custodian for Charities v Parway Estates Developments Ltd [1985] Ch 151, [1984] 3 All ER 679, CA.
HR A[8922]
Where the landlord knows of facts which may be consistent with a breach of covenant, this does not amount to
knowledge of the breach if he inquires and the tenant persuades him that no breach has been committed1.
HR A[8923]
1 Chrisdell Ltd v Tickner (1987) 54 P & CR 257, [1987] 2 EGLR 123, CA.
HR A[8924]
The acts required to found a waiver are many and varied, but the essential element thereof is that the landlord must
unequivocally recognise the continued existence of the tenancy, either expressly or by some act which is only consistent
with the continued existence of the tenancy. Some examples of conduct which amounts to a waiver include:
(a) accepting rent due after the date the right to forfeit arose1;
(b) accepting rent due after the breach on a 'without prejudice' basis2;
(c) demanding rent due after the breach3;
(d) commencing proceedings for arrears of rent4;
(e) suing on other covenants in the lease5;
(f) serving notices under provisions in the lease6;
(g) exercising an option contained in the lease7;
(h) granting licence to assign or to sublet8;
(i) acquiescing in breach of covenant9; and
(j) levying distress10.
Page 503
HR A[8925]
1 Oak Property Co Ltd v Chapman [1947] KB 886, CA; Windmill Investments (London) Ltd v Milano Restaurant Ltd [1962] 2 QB 373;
Central Estates (Belgravia) v Woolgar (No 2) [1972] 3 All ER 610, [1972] 1 WLR 1048, CA.
2 Croft v Lumley (1858) 5 E & B 648; Davenport v R (1877) 3 App Cas 115; Segal Securities v Thoseby [1963] 1 QB 887.
3 Segal Securities Ltd v Thoseby [1963] 1 QB 887; David Blackstone Ltd v Burnetts (West End) Ltd [1973] 1 WLR 1487. The correctness
of these decisions, both first instance, has been assumed and endorsed in Expert Clothing Service & Sales Ltd v Hillgate House Ltd [1986]
Ch 340, CA per Buckley LJ and in Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 01 EG 94, CA, per Neuberger J. Although
the point was expressly left open in Greenwood Reversons Ltd v World Environment Foundation Ltd [2008] EWCA Civ 47, [2008] PLSCS
31, CA, it is considered that the decisions are plainly correct.
4 Re a Debtor (No 13 A 10 of 1995) [1996] 1 All ER 691, [1995] 1 WLR 1127.
5 Cornillie v Saha (1996) 72 P & CR 147.
6 Doe d Rutzen v Lewis (1836) 5 Ad & El 277.
7 First Penthouse Ltd v Channel Hotels and Properties (UK) Ltd [2004] EWCA Civ 1072, [2004] L & TR 27.
8 This is by analogy with the authorities cited in the three footnotes above.
9 Whitehead v Bennett (1861) 9 WR 626; Millard v Humphreys (1918) 62 Sol Jo 505.
10 Green's Case (1582) Cro Eliz 3; Doe d Flower v Peck (1830) 1 B & Ad 428.
HR A[8926]
The following acts have been held not to be sufficient of themselves to constitute a waiver:
(a) demanding or accepting rent due before the breach of covenant1;

(b) if the landlord 'accepts' rent because it is paid directly into his bank account, he does not waive the
forfeiture, provided that he repays the money as soon as possible2;
(c) demanding or accepting rent after the lease has actually been forfeited3;
(d) service of another s 146 notice4;
(e) service of a notice under the Landlord and Tenant Act 1954 s 25, opposing the grant of a new
tenancy5;
(f) merely lying by and witnessing the breach6;
(g) 'without prejudice' negotiations between parties7; and
(h) demanding insurance monies payable in advance but not reserved as rent8.
HR A[8927]
Page 504
1 Price v Worwood (1859) 4 H & N 512; Re a Debtor (No 13 A 10 of 1995) [1996] 1 All ER 691, [1995] 1 WLR 1127.
2 John Lewis Properties plc v Viscount Chelsea (1993) 67 P & CR 120, [1993] 2 EGCR 77.
3 Grimwood v Moss (1871) LR 7 CP 360; Civil Service Co-operative Society v McGrigor's Trustee [1923] 2 Ch 347.
4 Church Comrs for England v Nodjoumi (1985) 51 P & CR 155.
5 Baglarbasi v Deedmethod Ltd [1991] 2 EGLR 71.
6 Doe d Sheppard v Allen (1810) 3 Taunt 78 at 81; Perry v Davis (1858) 3 CBNS 769; Griffin v Tomkins (1880) 42 LT 359 at 362.
7 Re National Jazz Centre [1988] 2 EGLR 57.
8 Yorkshire Metropolitan Properties Ltd v Co-Operative Retail Service Ltd [2001] L & TR 298.
HR A[8928]
Sometimes, a dispute arises as to the nature of a payment made by the tenant. A tenant may make a payment of a sum
due under the lease, which the landlord may seek to appropriate to a debt in respect of which the right to forfeit has
already been lost, thereby preserving a present right. A landlord can only do so if the tenant has not expressly stated the
payment is to be treated as rent. If the tenant has expressly appropriated a payment as rent, the landlord must either
return the payment or accept it on the basis that it has been appropriated as rent (which may thereby waive his right to
forfeit). A landlord may only dictate to what debt a payment is appropriated if the tenant has not already done so1.
HR A[8929]
1 Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 01 EG 94, CA.
HR A[8930]
Since Expert Clothing Services and Sales v Hillgate House1, there is some evidence of a less strict approach to waiver.
Cases where there has been an acceptance of rent, or a demand, fall into a special category: the rule there is absolute and
strict. However, where there is no demand or acceptance of rent, the court is free to look at all the circumstances of the
case to consider whether the act relied upon as amounting to a waiver was so unequivocal that, when considered
objectively, it could only be regarded as having been done consistently with the continued existence of the tenancy2. If
the act is equivocal, a waiver may not have occurred.
HR A[8931]
1 [1986] Ch 340, CA.

Page 505
2 This is the formulation of the test expressed in Yorkshire Metropolitan Properties Ltd v Co-operative Retail Services Ltd [2001] L & TR
298, and approved in Greenwood Reversons Ltd v World Environment Foundation Ltd [2008] EWCA Civ 47, [2008] PLSCS 31, CA.
HR A[8932]-[8940]
The onus of proof that the lessor knows of the cause of forfeiture is on the lessee1. The onus does not shift to the lessor
on proof that the lessor has recognised the tenancy after the ground of forfeiture has arisen2. It is a question of fact
whether money is tendered as rent or whether such money was accepted as rent, but, once these facts have been decided,
it is a question of law whether there was a waiver of the breach of covenant3. But if it is shown that the lessor with
knowledge of the cause of forfeiture has recognised the tenancy after he had knowledge of the cause of forfeiture, he
will be precluded from saying that he did not do the act with the intention of waiving the forfeiture4.
HR A[8941]
1 Matthews v Smallwood [1910] 1 Ch 777; Atkin v Rose [1923] 1 Ch 522.
2 Fuller's Theatre and Vaudeville Co v Rofe [1923] AC 435, PC.
3 Windmill Investments (London) Ltd v Milano Restaurant Ltd [1962] 2 QB 373, [1962] 2 All ER 680, considering the dictum of Lord
Wensleydale in Croft v Lumley (1858) 6 HL Cas 672 at 746, and that of Harman J in Creery v Summersell and Flowerdew & Co [1949] Ch
751 at 761; Segal Securities Ltd v Thoseby [1963] 1 QB 887, [1963] 1 All ER 500; Bader Properties Ltd v Linley Property Investments Ltd
(1967) 19 P & CR 620; London and County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764, [1970] 2 All ER 600, CA.
4 Toleman v Portbury (1871) LR 6 QB 245; Expert Clothing and Sales Ltd v Hillgate House [1986] Ch 340, CA.
HR A[8942]
It might be thought that the logical converse of the law of waiver was that, once an election to forfeit has been made, it
cannot be resiled from. This is clearly the case where the tenant does not dispute that the forfeiture was effective, and
simply relies upon his right to seek relief1. However, where the tenant disputes the validity of the landlord's claim to
forfeiture, the landlord can withdraw his claim to forfeiture, either by mere amendment of the proceedings or by
discontinuing the claim for possession altogether2.
HR A[8943]
1 Sergeant v Nash Field & Co [1903] 2 KB 305, CA; Canas Property Ltd v KL Television Ltd [1970] 2 QB 433, CA; GS Fashions Ltd v
B&Q plc [1995] 4 All ER 899.
2 Ivory Gate Ltd v Spetale [1998] 2 EGLR 43, CA; Mount Cook Land Ltd v The Media Business Centre Ltd [2004] EWHC 346 (Ch).
There are some grounds for suspecting the correctness of these decisions, particularly in light of the Canas decision above, and further
support for them may be derived from the decision of the Court of Appeal in Hynes v Twinsectra Properties [1995] 2 EGLR 69, CA.
HR A[8944]
Page 506
Some leases contain a contractual provision that breaches of covenant cannot be waived by any act of the landlord's:
such provisions are ineffective1. Although such a clause has been held to be valid in the context of a lease of chattels, it
is considered that such a clause would still be held ineffective in a lease of real property.2
HR A[8945]
1 R v Paulson [1921] 1 AC 271, PC; Expert Clothing Service and Sales Ltd v Hillgate House Ltd [1986] Ch 340, CA.
2 State Securities plc v Initial Industry Ltd [2004] All ER (D) 317 (Jan) a decision of Mr Jonathan Gaunt QC, sitting as a Deputy Judge of
the High Court.
HR A[8946]
It is strictly inaccurate to refer to a waiver of the breach. The lessor may still have remedies in respect of the breach, for
example a claim for damages or an injunction to prevent its continuation1. What the waiver means is that he can no
longer rely upon the breach as a reason for forfeiting the lease.
HR A[8947]
1 Stephens v Junior Army and Navy Stores Ltd [1914] 2 Ch 516, CA; Norman v Simpson [1946] KB 158, CA.
(b) To what breaches waiver extends
HR A[8948]
Where the breach of covenant which gives the right of re-entry is a continuing breach, there is a continually recurring
cause of forfeiture. An act such as a demand for rent is only a waiver of the forfeiture incurred up to the date when the
rent was due1. The landlord is not precluded from forfeiting in reliance on the breach continuing after that date2.
HR A[8949]
1 Coward v Gregory (1866) LR 2 CP 153; Penton v Barnett [1898] 1 QB 276, CA; (considered in Farimani v Gates [1984] 2 EGLR 66,
CA).
2 Penton v Barnett [1898] 1 QB 276, CA; New River Co v Crumpton [1917] 1 KB 762; London and County (A & D) Ltd v Wilfred
Sportsman Ltd [1971] Ch 764, [1970] 2 All ER 600, CA.
HR A[8950]-[8960]
Page 507
The significance of the above distinction, which is usually expressed to be the distinction between 'continuing breaches'
and 'once-and-for-all breaches' is important in the context of waiver. When a right to forfeit for a 'once-and-for-all'
breach is lost by waiver, it is lost for the remainder of the existence of the lease. A 'continuing breach' is not
irretrievably lost if waived, because the right to forfeit is resurrected after any act of waiver1.
HR A[8961]
1 London and County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764, [1970] 2 All ER 600, CA.
HR A[8962]
Some examples of continuing and once-and-for all breaches:
(a) a failure to pay rent is a once-and-for-all breach. So, where rent is payable in advance, a demand or
acceptance of rent can waive only any other breaches of covenant extant at the time of the demand or
acceptance of rent: any further breach arising thereafter is not waived1.
(b) Assigning, underletting or permitting a third person to occupy the demised premises in breach of
covenant is once-and-for-all breach1A.
(b1) Permitting a sub-tenant to remain in occupation in breach of covenant is not a continuing breach2.
(c) User of premises by an underlessee, contrary to a covenant in the headlease, is a continuing breach
of the headlease covenant on the part of the headlessee3;
(d) A breach of a covenant restricting the user of the premises is a continuing breach.4
(e) Where a lease contains a covenant to perform an act by a given date, or within a reasonable time,
there is a once-and-for-all breach on failure to perform the act within the time stipulated or by the
expiration of a reasonable time. The breach is not then a continuing breach after that time.5
(f) Breach of a tenant's covenant to lay out insurance monies in rebuilding within a reasonable time is a
once-and-for-all breach6.
(g) Breach of a covenant to put premises into repair gives rise to a once-and-for-all breach whereas a
covenant to keep the premises in repair gives rise to a continuing breach.7
(h) Breach of a covenant to build before a stated date gives rise to a once-and-for-all breach8.
HR A[8963]
1 Segal Securities Ltd v Thoseby [1963] 1 QB 887, [1963] 1 All ER 500; but see Windmill Investments (London) Ltd v Milano Resturant
Ltd [1962] 2 All ER 680 at 681, where a different conclusion seems to have been reached.
1A Scala House and District Property Co Ltd v Forbes [1974] QB 575, CA.
2 Walrond v Hawkins (1875) LR 10 CP 342; Scala House and District Property Co Ltd v Forbes [1974] QB 575, CA.
3 Lawrie v Lees (1880) 14 Ch D 249 at 262 per Bramwell LJ, CA; affirmed, albeit obiter, (1881) 7 App Cas 19 at 30 per Lord Penzance;
but see Griffin v Tomkins (1880) 42 LT 359. It is considered that the latter case is unsound.
Page 508
4 Creery v Summersell and Flowerdew & Co [1949] Ch 751.
5 Farimani v Gates [1984] 2 EGLR 66, CA; First Penthouse Ltd v Channel Hotels and Properties (UK) Ltd [2004] EWCA Civ 1072,
[2004] L & TR 27.
6 Farimani v Gates [1984] 2 EGLR 66, CA.
7 Coward v Gregory (1866) LR 2 CP 153 at 169-170, per Erle LJ.
8 Stephens v Junior Army and Navy Stores [1914] 2 Ch 516 at 523, CA, per Lord Cozens-Hardy MR.
HR A[8964]
A waiver of the breach of a covenant or condition in a lease only extends to the particular breach of covenant or
condition to which it relates, and is not a general waiver of the benefit of the covenant or condition1. The effect of a
licence granted to a lessee to do any act is similarly limited2.
HR A[8965]
1 Law of Property Act 1925, s 148, replacing the repealed Law of Property Amendment Act 1860, s 6, see para HR A[20123]. The statute
speaks of 'actual waiver', but this does not mean express waiver by formal written document: Mills v Griffiths (1876) 45 LJQB 771.
2 See the Law of Property Act 1925, s 143(1), (2). As to licences to assign or sublet, see s 143(3) at para HR A[20118].
Page 509
Forfeiture/12 Effecting the re-entry
12 Effecting the re-entry
(a) Is forfeiture desirable?
HR A[8966]
Before considering how to forfeit, the most important preliminary issue is whether forfeiture is desirable? In a depressed
property market, is it better to sue the tenant on the covenant, rather than terminating the lease? Will an original tenant
who is a 'good covenant' be allowed to escape from future liability, or can the original tenant properly be sued on his
covenants1? If this tenant is released from future liability by forfeiture, will it be possible to find another tenant for as
good a rent, and if so how quickly? Landlords should consider levying distress2, serving a statutory demand, or
obtaining an injunction to restrain a breach of covenant before deciding on forfeiture3.
HR A[8967]
1 This question will require a consideration of the Landlord and Tenant (Covenants) Act 1995, on which see paras HR A[2125]-[2200].
2 See Chapter 9.
3 See paras HR A[1188]-[1189].
HR A[8968]
The importance of reviewing all the options before choosing to forfeit the lease is illustrated by the case of GS Fashions
Ltd v B&Q plc1. In that case, the landlords served proceedings containing a claim for forfeiture, then appreciated that
the tenant would not seek relief, but would be glad to the released from the obligations. It was held that, once forfeiture
is effected and the tenant dies not contest that the forfeiture was effective, the lease is forfeit: simply amending the
pleadings to delete the claim could not avoid a bad decision to forfeit instead of suing on the covenants2.
HR A[8969]
1 [1995] 4 All ER 899.
2 The result is different where the tenant disputes the validity of the landlord's claim to forfeiture. In that case, the landlord can withdraw
his claim to forfeiture, either by mere amendment of the proceedings or by discontinuing the claim for possession altogether: Ivory Gate Ltd
v Spetale [1998] 2 EGLR 43, CA; Mount Cook Land Ltd v The Media Business Centre Ltd [2004] EWHC 346 (Ch), [2004] 2 P & CR 25.
There are some grounds for suspecting the correctness of these decisions, particularly in light of the decision of the Court of Appeal in
Canas Property Co Ltd v KL Television Ltd [1970] 2 QB 433, although further support for them may be derived from the decision of the
Page 510
Court of Appeal in Hynes v Twinsectra Properties [1995] 2 EGLR 69, CA.
(b) The intention to forfeit
HR A[8970]-[8980]
Where landlord wishes to forfeit the lease, he must commit a final and positive act, which cannot be retracted, by which
he demonstrates his intention to forfeit the lease1. Moreover, the landlord must have an intention to forfeit. Although
the act of changing the locks is usually an unequivocal act, there may be cases in which the landlord's acts are not
accompanied by the requisite intention. So, for example, where the tenant had abandoned the demised premises, but the
landlord changed the locks of the property only in order to secure it against trespassers, notwithstanding that there were
arrears of rent, there was no act of forfeiture2. Alternatively, there was no forfeiture where the landlord was also the
assignee of a mortgage of the leasehold interest, and when into possession qua mortgagee, not qua tenant3.
HR A[8981]
1 Arnsby v Woodward (1827) 6 B & C 519; Roberts v Davey (1833) 4 B & Ad 664; Baylis v Le Gros (1858) 4 CBNS 537; Serjeant v
Nash, Field & Co [1903] 2 KB 304.
2 Relvok Properties Ltd v Dixon (1972) 25 P & CR 1.
3 Hone v Daejan Properties Ltd (1976) 120 Sol Jo 488.
(c) The act of forfeiture
HR A[8982]
The landlord must elect to forfeit by an unequivocal act, such as effecting peaceable re-entry, the service of proceedings
or, in certain circumstances, re-letting the premises. These different methods of effecting re-entry will be considered
below. In either case, however, the act of forfeiture must be an act by the landlord or someone acting on his behalf. So,
where proceedings were served at a time when the person named in the proceedings as landlord transferred the
reversion to a third party, who was registered as proprietor before proceedings were served, no forfeiture was effected.
The named claimant asserting the right to possession was not the 'landlord'1.
HR A[8982.1]
1 Mount Cook Land Ltd v The Media Centre (Properties) Ltd (No2) [2006] PLSCS 189 (County Court).
HR A[8983]
Page 511
The act of forfeiture must be communicated either to the tenant1. or to someone in possession of the demised premises
with the tenant's consent2.
HR A[8984]
1 Jones v Carter (1846) 15 M & W 718; Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433; London & County (A&
D) Ltd v Wilfred Sportsman [1971] Ch 764, CA.
2 Comrs of Works Ltd v Hull [1922] 1 KB 205; Capital and City Holdings Ltd v Dean Warburg Ltd [1989] 1 EGLR 90.
(d) Whether to forfeit by service of proceedings or by re-entry
HR A[8985]
The second consideration is whether to forfeit by peaceable re-entry of by the service of proceedings. In making the
choice, the following issues should be taken into account:
(a) speed of peaceable re-entry as opposed to the speed of serving proceedings;

(b) cost of peaceable re-entry as opposed to the cost of serving proceedings forfeiture;
(c) the cost of a wrongful forfeiture by peaceable re-entry, which will probably include damages for
trespass1, whereas no damages follow from entering pursuant to a warrant, even if it is set aside
subsequently2;
(d) tactical considerations--finding the locks changed may cause the tenant to concentrate on the
desirability of performing his obligations under the tenancy;
(e) effecting a re-entry may make the landlord an involuntary bailee of the tenant's goods, which may
give rise to insurance issues, or even claims for damages from the tenant;
(f) a court order gives a greater degree of certainty to the landlord, which may be particularly desirable
when it comes to re-letting the premises3.
(g) There is no longer any impact on the tenant's options for obtaining relief from forfeiture4.
HR A[8986]
1 Yelloly v Morley (1910) 27 TLR 20; South Tottenham Land Securities Ltd v R & A Millett (Shops) Ltd [1984] 1 All ER 614, CA.
2 Hillgate House v Expert Clothing and Sales [1987] 1 EGLR 65.
3 See Fuller v Judy Properties Ltd [1992] 1 EGLR 75, CA.
4 The landlord formerly had an advantage in resisting relief if he peaceably re-entered, but there is now no significant advantage. See
Billson v Residential Apartments Ltd [1992] 1 AC 494, [1992] 1 All ER 141, as discussed at paras HR A[9090]-[9101].
Page 512
HR A[8987]
It would seem from the above that peaceable re-entry has a number of attractions, particularly in terms of speed and
cost1. However, the service of proceedings has been described as the civilised method of determining the lease, while a
re-entry has been castigated as dubious and dangerous2. Indeed, the policy of the law has been said to be to discourage
peaceable repossession, and that it would be undesirable to encourage landlords to use self-help3. Whilst judicial distain
for peaceable re-entry should not be a factor in taking the decision as to which route to use in and of itself, it is certainly
worthwhile to keep in mind that peaceable re-entry can go wrong, and can do so with expensive consequences for the
landlord4.
HR A[8988]
1 Peaceable re-entry is much quicker, even than an application for summary judgment under the CPR, Part 24, which permits summary
judgment applications for possession of non-residential land: CPR Rule 24.3(2)(a).
2 Billson v Residential Apartments Ltd [1992] 1 AC 494 at 536, [1992] 1 All ER 141 at 146, per Lord Templeman.
3 WG Clark (Properties) Ltd v Dupre Properties Ltd [1992] 1 All ER 596 at 606.
4 The author's favourite anecdote concerning a dismal peaceable re-entry involves a landlord changing the locks on premises without
properly checking them, thereby locking in a police drugs squad surveillance team using the upper floor as a 'stake-out'.
(e) Forfeiture by peaceable re-entry
HR A[8989]
Peaceable re-entry requires some form of actual, physical re-entry onto the whole of the demised land1. Entry onto part
only is sufficient if the lease so provides. Changing the locks is the best evidence of re-entry: where this is not practical
(say because there are no locks to change), there must be some other obvious manifestation of re-entry.
HR A[8990]-[9000]
1 Constructive re-entry can be effected by re-letting the demised premises. This subject is considered further at paras HR A[9026]-[9027].
HR A[9001]
It is sometimes asserted that the use of force negates a forfeiture, as there has been no physical re-entry. This is
incorrect: peaceable re-entry includes a re-entry using reasonable force or even unreasonable force, such as breaking
into locked premises1. Even use of excess force does not negate the forfeiture, but simply exposes those involved to risk
of civil or criminal proceedings. In the past, reasonable force has included taking the roof off2, and carrying the tenant's
wife across the threshold whilst she remains seated in her armchair3. This approach to peaceable re-entry has little to
Page 513
recommend it, and the removal of the tenant's wife, with or without her armchair, would now be unlawful4.
HR A[9002]
1 Harvey v Brydges 14 M & W 437; Kavanagh v Gudge (1844) 7 Man & G 316; Lows v Telford (1876) 1 App Cas 414 at 426, HL.
2 Jones v Foley [1891] 1 QB 730, DC.
3 Hemmings v Stoke Poges Golf Club [1920] 1 KB 720, CA.
4 See the Criminal Law Act 1977, s 6, considered further at paras HR A[9003]-[9008].
(f) Restrictions on the right to physical re-entry
HR A[9003]
Under the Criminal Law Act 1977, s 6, it is a criminal offence to use or threaten violence to secure entry into premises
if:
(a) there is someone physically on the premises at the time who is opposed to the entry in respect of
which violence is threatened or used; and
(b) the person using or threatening violence knows this to be the case.
HR A[9004]
There is a defence of 'lawful excuse', but exercising a right to re-enter is not included within that definition1.
HR A[9005]
1 See further Criminal Law Act 1977, s 6 at para HR A[20196].
HR A[9006]
Another criminal offence is to enforce a right of re-entry or forfeiture otherwise than by proceedings in the court while,
any person is lawfully residing in the demised premises or part of them: Protection From Eviction Act 1977, ss 1-31. An
unlawful peaceable re-entry can also give rise to a civil action for damages, under Housing Act 1988, ss 27, 282.
HR A[9007]
Page 514
1 See further HR C[1773]-[1811].
2 See further HR C[2165]-[2178].
HR A[9008]
It follows that peaceable re-entry is rarely available in respect of premises with a residential element, including premises
with mixed commercial and residential elements, but held on a single lease1. Peaceable re-entry of commercial
premises is best achieved out of normal working hours.
HR A[9008.1]
1 Pirabakaran v Patel [2006] EWCA Civ 685, [2006] 36 EG 260, CA.
(g) Forfeiture by service of proceedings:
HR A[9009]
The service of proceedings by the landlord, unequivocally claiming possession against the tenant, is equivalent to a
physical re-entry1. A claim for declaration of title is equivalent to a claim for possession, although its use is not to be
encouraged2. It is the service of the proceedings upon the tenant which actually effects the forfeiture3. Accordingly, the
proceedings must be served upon the tenant for the time being4, which includes an unlawful assignee, in respect of a
claim to forfeit for breach of the covenant against assignment5. It may be that service of proceedings on a person in
possession of the land with the consent of the tenant will suffice6. It is submitted that this method of service is only
certain if the occupier is an agent of the tenant: the intention to forfeit must be communicated to the tenant7.
HR A[9010]-[9020]
1 Jones v Carter (1846) 15 M & W 718; Serjeant v Nash, Field & Co [1903] 2 KB 304, CA; Woolwich Equitable Building Society v
Preston [1938] Ch 129. It is the best practice to expressly state that the lease is forfeited: the pleader should preferably recite the relevant
covenants, specify the breaches thereof, then state, in terms, 'By the issue and service of these proceedings herein, the Claimant forfeits the
Lease' or some words to the same effect.
2 Cohen v Donegal Tweed Co Ltd (1935) 79 Sol Jo 592.
3 Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433, CA; Billson v Residential Apartments [1992] 1 AC 494, HL.
4 Works Comrs v Hull [1922] 1 KB 205, DC.

Page 515
5 Old Grovebury Manor Farm Ltd v W Seymour Plant Sales and Hire Ltd (No 2) [1979] 3 All ER 504, [1979] 1 WLR 1397, CA; Fuller v
Judy Properties Ltd [1992] 1 EGLR 75, CA.
6 Works Comrs v Hull [1922] 1 KB 205; Capital and City Holdings Ltd v Dean Warburg Ltd [1989] 1 EGLR 90.
7 Jones v Carter (1846) 15 M & W 718; Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433; London & County (A&
D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764.
HR A[9021]
Proceedings must be served on the tenant by service on an address which conforms with the service provisions in Pt 6
of the Civil Procedure Rules. Proof of actual receipt of proceedings, even if served other than in accordance with the
CPR, but is unclear if deemed receipt of proceedings, which have not in fact been received, will suffice1.
HR A[9022]
1 Willowgreen Ltd v Smithers [1994] 2 All ER 533, [1994] 1 EGLR 107, CA. This is a pre-CPR case, which would suggest that deemed
receipt is not sufficient.
HR A[9023]
There are also certain procedural requirements:
(a) A claim for possession must identify whether the claim relates to residential premises1. If the
claim is for forfeiture of residential premises for non-payment of rent, various details relating to the
history of payments must be supplied2.
(b) In a case of forfeiture for non-payment of rent, the daily rate at which rent is in arrear is calculated
is to be pleaded3.
HR A[9023.1]
1 CPR Practice Direction Pt 55, para 2.2-2.4A.
2 CPR Practice Direction Pt 55, para 2.3-2.3A.
3 CPR Practice Direction Pt 55, para 2.3(3).
(h) Interaction with other remedies
HR A[9024]
Page 516
Because a claim for possession must be unequivocal to effect a forfeiture, some practical difficulties arise in seeking
forfeiture and alternative remedies. Thus, a claim for possession pleaded together with a claim for an injunction
restraining a breach of covenant is not unequivocal, and so does not effect a forfeiture1. Conversely, a claim for
possession pleaded together with claims for damages for breach of covenant and an interlocutory injunction restraining
further breaches of covenant is effective to forfeit the lease2. However, as the lease was forfeit, the landlord could not
rely on the covenants to obtain the interlocutory injunction3.
HR A[9025]
1 Moore v Ullcoats Mining Co Ltd [1908] 1 Ch 575; Calabar Properties Ltd v Seagull Autos Ltd [1969] 1 Ch 451.
2 Wheeler v Keeble (1914) Ltd [1920] 1 Ch 57.
(i) Constructive re-entry by re-letting
HR A[9026]
It is possible to have a constructive physical re-entry of demised premises by the grant of a new tenancy to a third
party1. The same result may be achieved by accepting an existing subtenant as a direct tenant of the superior landlord,
thereby effecting a forfeiture of the mesne lease2. However, the arrangement with an existing subtenant must be
carefully considered: if it is held that the landlord intends the subtenant to occupation pursuant to the existing
subtenancy, there will be no forfeiture: the continuation of an existing subtenancy is inconsistent with the forfeiture of
the tenancy from which it is derived3. A superior landlord who gives notice to subtenants to pay directly to him does
not forfeit the mesne lease4.
HR A[9027]
1 London & County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764; Re AGB Research Redleaf Investments Ltd v Talbot [1995]
BCC 1091.
2 Baylis v Le Gros (1858) 4 CBNS 537.
3 Ashton v Sobelman [1987] 1 All ER 755, [1987] 1 EGLR 33, CA.
4 Bishop v Bedford Charity Trustees (1859) 1 E & E 714. But see Baylis v Le Gros (1858) 4 CBNS 537.
Page 517
Forfeiture/13 The effect of forfeiture and the twilight period
13 The effect of forfeiture and the twilight period
(a) Peaceable re-entry
HR A[9028]
Where the tenancy is determined by peaceable re-entry, the term comes to an end. With the determination of the lease,
any derivative interest carved out of it, such as a subtenancy, also ends1. In certain circumstances, in respect of
residential property, statute intervenes to protect lawful subtenants2. The covenants in the lease will cease to run
(although they will revive if relief against forfeiture is given3. Since forfeiture terminates the lease, the remedy of
distress ceases to be available, even for rent which had accrued prior to the forfeiture4. The ongoing liability of
guarantors and previous lessees will cease, again subject to the effect of relief being granted5.
HR A[9029]
1 Great Western Rly Co v Smith (1876) 2 Ch D 235, CA; Moore Properties (Ilford) Ltd v McKeon [1977] 1 All ER 262, [1976] 1 WLR
1278.
2 See the Housing Act 1988, s 18 and commentary at HR C[2137]-[2140]; Rent Act 1977, s 137 and commentary at HR C[1325]-[1342].
3 See relief from forfeiture at paras HR A[9210]-[9221].
4 Murgatroyd v Silkstone & Dodworth Coal & Iron Co Ltd (1895) 65 LJ Ch 111.
5 See relief from forfeiture at paras HR A[9210]-[9221].
HR A[9030]-[9040]
It is, however, important to note that claims pursuant to the tenancy agreement which had accrued before the forfeiture
are unaffected by the determination of thereof1. For example, rent is payable in advance, is payable in full, without any
apportionment, notwithstanding that forfeiture was effected part of the way thorough the period in respect of which rent
is payable2. The better analysis of the cases shows that, although it is common to seek to recover mesne profits only
from the end of the rental period in which the forfeiture took place, as a matter of principle the tenant is to be treated as
a trespasser, and so liable to pay mesne profits, as from the date on which the lease is forfeited.3
HR A[9041]
Page 518
1 Save that the right to distrain for rent is lost: Murgatroyd v Silkstone & Dodworth Coal & Iron Co Ltd (1895) 65 LJ Ch 111.
2 Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433; Capital and City Holdings Ltd v Dean Warburg Ltd [1989] 1
EGLR 90.
3 This analysis is consistent with the explanation of the law given by Lord Denning MR in Canas Property Co Ltd v KL Television
Services Ltd [1970] 2 QB 433, 442, but not consistent with the example he then gave to illustrate the point. The explanation accords with
legal principle: in the absence of any right to apportionment, the tenant is likely to be contractually obliged to pay the full sum in respect of
the period in which the forfeiture took place: see, for example, Mount Cook Land Ltd v Media Business Centre Ltd [2004] EWHC 346,
[2004] 2 P&CR 25. The tenant is, however, liable in trespass from the date the lease is forfeit. It follows that the tenant is properly liable in
both debt and in damages for trespass simultaneously. Even though the landlord has the rent, he is still entitled to damages for being kept out
of possession of the property. The landlord is not, therefore, seeking double recovery when he seeks both the rent for the full period: he is
properly entitled to both. It is respectfully suggested that cases such as Capital and City Holdings Ltd v Dean Warburg Ltd [1989] 1 EGLR
90, in which mesne profits have been recovered only from the due date next following forefeiture are to be viewed with suspicion, possibly
as having misunderstood Lord Denning's decision in Canas.
(b) Forfeiture by service of proceedings
HR A[9042]
The situation is less clear where the landlord re-enters by service of proceedings. The tenancy is not finally determined
against the tenant, until judgment is given for possession1. The giving of such a judgment relates back to the date of
service of the writ, so that the tenancy is determined then, but as at the earlier date2.
HR A[9043]
1 Driscoll v Church Comrs for England [1957] 1 QB 330, CA; Borzak v Ahmed [1965] 2 QB 320; City of Westminster Assurance Co v
Ainis (1975) 29 P & CR 469, CA; Hynes v Twinsectra Ltd [1995] 2 EGLR 69, CA.
2 Dendy v Evans [1910] 1 KB 263, CA; Meadows v Clerical, Medical and General Life Assurance Society [1980] 1 All ER 454, (1979)
40 P & CR 238; [1980] 2 EGLR 63.
HR A[9044]
In the period between the service of proceedings and the judgment for possession, the tenancy continues to have a
'shadowy existence'1. The period in which this shadowy existence continues is usually called 'the twilight period'2. It
may be that the twilight period is further continued during the pendency of a subsisting application for relief from
forfeiture3.
HR A[9045]
1 Meadows v Clerical, Medical and General Life Assurance Society [1980] 1 All ER 454, (1979) 40 P & CR 238; [1980] 2 EGLR 63.
Page 519
2 Associated Deliveries Ltd v Harrison (1984) 50 P & CR 91, CA.
3 Liverpool Properties Ltd v Oldbridge Investments Ltd [1985] 2 EGLR 111; Sambrin Investments Ltd v Taborn [1990] 1 EGLR 61.
HR A[9046]
The effect of the twilight period on the covenants in the lease is varied. The landlord has elected to treat the tenancy as
at an end, so he landlord cannot rely on the covenants in the lease. Accordingly, he cannot claim an interlocutory
injunction to restrain a breach of those covenants1, nor recover damages for any breaches thereof, which have only
accrued after service of the proceedings2.
HR A[9047]
HR A[9048]
However, the tenant has not elected to treat the lease as at an end. Therefore, the tenant can rely upon the covenants in
the lease, and can even enforce a landlord's covenant by injunction1. The tenant can rely upon his own title in order to
collect rent from a subtenant, although he may not be entitled to keep the rent if his application for relief fails2.
HR A[9049]
1 Peninsular Maritime Ltd v Padseal Ltd [1981] 2 EGLR 413, CA.
2 Official Custodian for Charities v Mackey (No 2) [1985] 2 All ER 1016, [1985] 1 WLR 1308.
HR A[9050]-[9060]
The effect of forfeiture on the parties rights under the Landlord and Tenant Act 1954 is more even. The tenant can seek
a renewal lease1. The landlord may oppose the renewal, including by instigating the procedure by service of a s 25
notice. of the Landlord and Tenant Act 19542.
HR A[9061]
1 Meadows v Clerical, Medical and General Life Assurance Society [1980] 1 All ER 454, (1979) 40 P & CR 238, [1980] 2 EGLR 63.
Page 520
2 Baglabarsi v Deedmethod Ltd [1991] 2 EGLR 71.
HR A[9062]
As with forfeiture by peaceable re-entry, forfeiture by service of proceedings does not affect that claims pursuant to the
tenancy agreement which had accrued before the forfeiture1. Thus, for example, it is appropriate to claim rent up to the
end of the period in respect of which rent was payable in advance prior to the forfeiture being effected by service2. The
better analysis of the cases shows that, although it is common to seek to recover mesne profits only from the end of the
rental period in which the forfeiture took place, as a matter of principle the tenant is to be treated as a trespasser, and so
liable to pay mesne profits, as from the date on which the lease is forfeited.3
HR A[9063]
1 See paras HR A[9030]-[9041].
2 Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433; Capital and City Holdings Ltd v Dean Warburg Ltd [1989] 1
EGLR 90.
3 This analysis is consistent with the explanation of the law given by Lord Denning MR in Canas Property Co Ltd v KL Television
Services Ltd [1970] 2 QB 433, 442, but not consistent with the example he then gave to illustrate the point. The explanation accords with
legal principle: in the absence of any right to apportionment, the tenant is likely to be contractually obliged to pay the full sum in respect of
the period in which the forfeiture took place: see, for example, Mount Cook Land Ltd v Media Business Centre Ltd [2004] EWHC 346,
[2004] 2 P&CR 25. The tenant is, however, liable in trespass from the date the lease is forfeit. It follows that the tenant is properly liable in
both debt and in damages for trespass simultaneously. The landlord is not, therefore, seeking double recovery when he seeks both the rent
for the full period: he is properly entitled to both. It is respectfully suggested that cases such as Capital and City Holdings Ltd v Dean
Warburg Ltd [1989] 1 EGLR 90, in which mesne profits have been recovered only from the due date next following forefeiture are to be
viewed with suspicion, possibly as having misunderstood Lord Denning's decision in Canas.
(c) Tortious liabilities
HR A[9064]
A tenant may be liable to the landlord in tort for any deterioration of the property between the date of forfeiture and the
date of recovering possession1. The tenant may also have liabilities for trespass, but these are considered in the context
of relief, below2.
HR A[9065]
2 Official Custodian of Charities v Mackay [1985] Ch 168; Viscount Chelsea v Hutchinson [1994] 2 EGLR 61.
Page 521
HR A[9066]
The landlord may also be liable in trespass. If the landlord peaceably re-enters, and the re-entry is subsequently held to
be invalid, he will be liable for damages1. However, if the landlord retakes possession pursuant to a first instance
judgment but the tenant is subsequently reinstated on appeal, the landlord is not liable in damages for taking possession
during the intervening period2.
HR A[9067]
1 Cardigan Properties Ltd v Consolidated Property Investments Ltd [1991] 1 EGLR 64.
2 Hillgate House Ltd v Expert Clothing Services and Sales Ltd [1987] 1 EGLR 65, CA.
Page 522
Forfeiture/14 Relief from forfeiture
14 Relief from forfeiture
(a) Relief against forfeiture for breach of covenants other than non-payment of rent
(i) Overview
HR A[9068]
A court may by statute grant relief against forfeiture for breach of covenant or condition on such terms (if any) as it
thinks fit.
HR A[9069]
That right does not apply, or is restricted, in the following cases:
(a) forfeiture for non-payment of rent (dealt with elsewhere);

(b) forfeiture for denial of the landlord's title (possibly);
(c) forfeiture for unlawful assignment or underletting before 1926;
(d) forfeiture for bankruptcy or the taking in execution of the lessee's interest;
(e) forfeiture for breach of certain covenants in mining leases.
HR A[9070]-[9080]
An underlessee, including a mortgagee by subdemise, may be granted relief against forfeiture of the head lease by
having the residue of the head lease, or a part of it, vested in him.
(b) Jurisdiction
HR A[9081]
The right to relief against forfeiture (except for non-payment of rent) is governed by several statutory provisions, the
most important being the Law of Property Act 1925, s 146. The provisions in the Act of 1925 displace the provisions of
the Conveyancing Act 1881. Prior to the intervention by statute in 1881 there was a limited equitable jurisdiction to
grant relief against forfeiture, that jurisdiction being confined to (a) forfeiture for non-payment of rent and (b) the
exercise of the general equitable power (not confined to leases) to grant relief against the consequences of fraud,
accident or mistake. Also, under the Law of Property Amendment Act 1859, there was a limited power in the court to
grant relief against failure to insure.
Page 523
HR A[9082]
The better view now appears to be that the statutory provisions in the Act of 1925 and its predecessors have displaced
the court's inherent equitable jurisdiction to grant relief from forfeiture of leases and underleases otherwise than for
non-payment of rent1; but in a case of forfeiture of a lease for non-payment of rent it has been held that the court may
have power under its inherent jurisdiction to grant relief to a mere equitable chargee with no right to possession where
the arrears of rent had been paid in full2.
HR A[9083]
1 Billson v Residential Apartments Ltd [1992] 1 AC 494, [1991] 3 All ER 265, CA (reversed on another point in the House of Lords at
[1992] 1 AC 494, [1992] 1 All ER 141, HL); WG Clark (Properties) Ltd v Dupre Properties Ltd [1992] 1 All ER 596; Smith v Metropolitan
City Properties Ltd [1986] 1 EGLR 52. See also Official Custodian for Charities v Parway Estates Developments Ltd [1985] Ch 151, [1984]
3 All ER 679, CA; and Shiloh Spinners Ltd v Harding [1973] AC 691, [1973] 1 All ER 90, HL.
2 Ladup Ltd v Williams & Glynn's Bank plc [1985] Ch 190, [1985] 2 All ER 577.
HR A[9084]
A mere squatter who has obtained a possessory title against the leaseholder cannot apply for relief1.
HR A[9085]
1 Tickner v Buzzacott [1965] Ch 426, [1965] 1 All ER 131.
(c) When to apply for relief from forfeiture
HR A[9086]
The service of the statutory notice, and default under it, are essential preliminaries to the enforcement of a forfeiture for
breach of a covenant other than non-payment of rent. If the notice has not been served the lessor's action to enforce the
forfeiture will necessarily fail1. Nor can the lessor obtain a mere declaration of forfeiture not to be followed by
re-entry2. But a notice is not a necessary preliminary of an action for a receiver3.
HR A[9087]
1 Greenfield v Hanson (1886) 2 TLR 876; see Jacques v Harrison (1884) 12 QBD 165, CA; contra, Scott v Matthew Brown & Co Ltd
Page 524
(1884) 51 LT 746.
2 Wilson v Rosenthal (1906) 22 TLR 233.
3 Charrington & Co Ltd v Camp [1902] 1 Ch 386; Leney & Sons Ltd v Callingham and Thompson [1908] 1 KB 79, CA.
HR A[9088]
The statute provides that the lessee may apply to the court for relief against forfeiture where the lessor is proceeding, by
action or otherwise, to enforce the forfeiture1. The statutory jurisdiction to grant relief therefore depends on the
meaning to be attributed to the expression 'where the lessor is proceeding'. The lessor is taken for these purposes to start
proceeding to enforce the forfeiture when he serves the essential statutory notice, even though he may never take the
subsequent step of serving a writ or making an actual entry so as unequivocably to elect to forfeit the lease. A tenant
may therefore apply for relief against forfeiture as soon as he receives the statutory notice2. If the lessor then continues
by serving a writ claiming possession the tenant can apply for relief at any time until the lessor has obtained judgment
and has recovered possession pursuant to that judgment. If the judgment is set aside (for example, a judgment obtained
in default) or is reversed on appeal the tenant will still be able to apply for relief in the lessor's action. Once the lessor
has obtained possession pursuant to a judgment, which is not set aside or successfully appealed against, the period for
the exercise of the statutory power to grant relief ends3.
HR A[9089]
1 The power to grant relief is founded on the Law of Property Act 1925, s 146(2): see para HR A[20121].
2 Pakwood Transport Ltd v 15 Beauchamp Place Ltd (1977) 36 P & CR 112, approved in Billson v Residential Apartments Ltd [1992] 1
AC 494, [1992] 1 All ER 141, HL.
3 Billson v Residential Apartments Ltd [1992] 1 AC 494, [1992] 1 All ER 141, HL explaining and applying Quilter v Mapleson (1882) 9
QBD 672 and Rogers v Rice [1892] 2 Ch 170, CA.
HR A[9090]-[9100]
It was previously thought that in cases where the lessor enforced the forfeiture by actual re-entry without a court order
he ceased to proceed at the moment when the entry was effected, with the result that no application for relief made after
this time could be entertained. This is no longer good law1. Indeed, if the lessor, having served the statutory notice,
continues by peaceably re-entering the premises without first obtaining an order for possession from the court then the
tenant can in principle apply for relief without limitation as to time. This result is reached by construing the words 'is
proceeding' as meaning 'proceeds'. In practice if the tenant delays unreasonably in making his application for relief the
discretion of the court on whether to grant relief is unlikely to be exercised in his favour.
HR A[9101]
1 Billson v Residential Apartments Ltd [1992] 1 AC 494, [1992] 1 All ER 141, HL. It was said by Lord Templeman ([1992] 1 AC 494 at
Page 525
537, [1992] 1 All ER 141 at 146) that the right to apply for relief against forfeiture might, without violence to the statutory language, be
construed as a right to apply 'when a lessor proceeds, by action or otherwise' to enforce a right of re-entry. This was said to be the effect of s
146 of the Law of Property Act 1925. The decisions of the Court of Appeal in Quilter v Mapleson (1882) 9 QBD 672 and Rogers v Rice
[1892] 2 Ch 170 had been widely believed to establish the proposition that once a lessor had re-entered the premises whether pursuant to an
order of a court or without such an order he was no longer proceeding to enforce the forfeiture. These decisions were explained by the House
of Lords as confined to a situation where the lessor had obtained possession pursuant to an order of the court. The House of Lords applied
the statutory construction favoured in Ontario in respect of the same statutory provisions: Re Rexdale Investments Ltd and Gibson [1967] 1
OR 251 at 259, per Laskin JA.
(d) Procedure
HR A[9102]
An interim interlocutory injunction may be granted to preserve the status quo even where the landlord has asserted its
rights by peaceable re-entry1.
HR A[9103]
1 Bristol and West Building Society v Turner [1991] 2 EGLR 52.
HR A[9104]
If the lessor is proceeding by action, the lessee can apply in the lessor's action by way of counterclaim; otherwise the
lessee may himself bring an action and apply for relief. The lessee cannot apply by originating summons1. If the
application is made in an action it is not essential that the relief shall have been claimed by the pleadings2.
HR A[9105]
1 Lock v Pearce [1893] 2 Ch 271, CA.
2 Mitchison v Thomson (1883) Cab & El 72, applied by the Privy Council in Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247,
[1974] 3 All ER 137.
HR A[9106]
Relief cannot be granted to joint lessees unless all lessees apply for it1. Where a landlord obtains an order for
possession of the ground that a lease has been forfeited and the tenant makes no application for relief against forfeiture,
his failure to make such an application is not a ground for setting aside the judgment and ordering a new trial2.
HR A[9107]
Page 526
1 T M Fairclough & Sons Ltd v Berliner [1931] 1 Ch 60.
2 Ezekiel v Orakpo [1977] QB 260, [1976] 3 All ER 659, CA.
(e) The discretion to grant relief
HR A[9108]
The court's discretion to grant or refuse relief from forfeiture is unfettered, even where immediate reinstatement is
impossible1, save that it must be exercised judicially and having regard to all the circumstances2. It seems that in
appropriate circumstances a tenant will obtain relief from forfeiture following breaches of negative covenants just as
readily as for non-compliance with positive covenants3. Nor in every circumstance is the grant of a fresh tenancy to a
different party prior to the grant of relief to the old tenant an absolute bar to the grant of relief4.
HR A[9109]
1 Duke of Westminster v Swinton [1948] 1 KB 524, [1948] 1 All ER 248.
2 Egerton v Esplanade Hotels London Ltd [1947] 2 All ER 88. However, the jurisdiction to grant relief is discretionary, so an appeal will
only lie if the trial judge had come to a decision that no reasonable judge, exercising that discretion, could have come to, or if the judge had
misdirected in fact or law: Shiloh Spinners Ltd v Harding [1973] AC 691 at 727-728, per Lord Lord Simon; Greenwood Reversons Ltd v
World Environment Foundation Ltd [2008] EWCA Civ 47, [2008] PLSCS 31, CA.
3 Bass Holdings Ltd v Morton Music Ltd [1988] Ch 493, [1987] 2 All ER 1001 at 1012, per Kerr LJ.
4 In Fuller v Judy Properties Ltd (1991) 64 P & CR 176, CA, the landlord had re-entered by the time that the application for relief was
heard (wrongly, there having been a valid application for relief in existence). It was held that relief would be granted subject to the new lease
granted (to purchasers of a legal estate without notice). Thus, the former tenants, upon relief being granted, became immediate reversioners
of the tenants in possession and entitled to their rent subject to the payment of rent etc on the reinstated lease.
HR A[9110]-[9120]
The court may grant relief although there has been a serious breach of covenant as where, for instance, premises are
very much out of repair1. But if the lessee has remedied the breach, he will only be required to make compensation
when the lessor has in fact suffered loss; and where compensation is given it will, in general, be measured by the same
rule as damages in an action for breach of the covenant2.
HR A[9121]
1 Mitchison v Thomson (1883) Cab & El 72.

Page 527
2 Skinners' Co v Knight [1891] 2 QB 542, CA. As to damages for the breach of covenant to repair, see para[1187]. As to the measure of
damages for the breach of other covenants, see Duke of Westminster v Swinton [1948] 1 KB 524, [1948] 1 All ER 248, explaining Eyre v
Rea [1947] KB 567, [1947] 1 All ER 415.
HR A[9122]
But notwithstanding the wider powers given by the Act of 1925, the jurisdiction must be sparingly exercised1. Where a
tenant granted an underlease on terms which disregarded the undertakings in the licence to underlet and had thus put it
out of its hands to ensure that the undertakings would be observed relief would be refused2. Where there are wilful
breaches of covenant with no attempt to remedy the breach the court is unlikely to grant relief3. Relief was rightly
refused where the judge had found he could not accept what the tenant said in evidence, there had been falsehood in the
proceedings and points had been taken which could not really be regarded as being put forward in good faith4. Relief
may be forthcoming if the breach was not a deliberate act by the tenant5. In considering whether or not to grant relief,
the court must take into account not only the conduct of the tenant and the gravity of the breach, but also the value of
the property to be forfeited6. The court can, in a proper case, take into account discreditable behaviour by persons
connected with the tenant, even if their conduct does not amount to a breach of the lease in and of itself7. The timing of
a tenant's offer (which might otherwise have been likely to result in relief) can be crucial8.
HR A[9123]
1 Creery v Summersell and Flowerdew & Co Ltd [1949] Ch 751 (compelling tenant to concede a wider use of the premises than that
prescribed by the head lease), applied in Hill v Griffin [1987] 1 EGLR 81, CA.
2 St Marylebone Property Co Ltd v Tesco Stores Ltd [1988] 2 EGLR 40, [1988] 27 EG 72.
3 Tulapam Properties Ltd v De Almeida (1981) 260 Estates Gazette 919 (breaches of user covenant and covenant against sharing
possession); Darlington Borough Council v Denmark Chemists [1993] 1 EGLR 62.
4 Sood v Barker [1991] 1 EGLR 87, [1991] 23 EG 112.
5 Scala House and District Property Co Ltd v Forbes [1974] QB 575, CA (tenant's solicitor misled tenant as to terms of lease).
6 Cremin v Barjack Properties Ltd [1985] 1 EGLR 30, CA; Mount Cook Land Ltd v Hartley [2000] EGCS 26; Crawford v Clarke [2000]
EGCS 33, CA.
7 Shirayama Shokusan Co Ltd v Danovo Ltd (No.4) [2005] EWHC 2589 (Ch), [2005] 44 EG 134 (CS).
8 Silverman v AFCO (UK) Ltd (1988) 56 P & CR 185, [1988] 1 EGLR 51, CA; Darlington Borough Council v Denmark Chemists [1993]
1 EGLR 62; Crawford v Clarke [2000] EGCS 33, CA.
HR A[9123.1]
A tenant will often consent to an order for relief on terms that it cannot subsequently comply with. The tenant can seek
a further order for relief, as the first order does not bar a second application: however, the court's discretion will prima
facie be exercised against the tenant, unless very good grounds for a further indulgence are shown; slack or casual
performance of the terms on which relief was granted will not suffice1. However, the court retains an alternative
Page 528
jurisdiction to interfere, at least where the failure is in respect of obligations as to time. The court can always extend the
time for performance of an order, even if that order is a consent order and therefore also amounts to a contract between
the parties2. This power is limited to extensions of time, and is therefore not available to amend any other obligations in
an order for relief from forfeiture, whether by consent or otherwise3.
HR A[9123.2]
1 Chandless-Chandless v Nicholson [1942] 2 KB 321, CA.
2 CPR Part 3, Rules 3.1(2)(a) and 3.9(1), as interpreted in Ropac Ltd v Inntrepreneur Pub Co [2001] L & TR 93 and Fivecourts Ltd v JR
Leisure Development Co Ltd (2000) 81 P & CR 292, [2001] L & TR 47.
3 Fivecourts Ltd v JR Leisure Development Co Ltd (2000) 81 P&CR 292, [2001] L & TR 47. Presumably, the ability to extend time even
for late payments of money can be excluded by recording in the Order that the parties have made time of the essence of the contract for
relief, by analogy with United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, HL, on which see para HR A[4128] ff.
Page 529
Forfeiture/15 Relief in relation to breaches of particular covenants
15 Relief in relation to breaches of particular covenants
(a) Denial of landlord's title
HR A[9124]
Despite earlier doubts, it is now established that the court has jurisdiction under s 146 to grant relief to a tenant who has
denied his landlord's title1. This is because the obligation not to deny the landlord's title was, in nature, an implied
condition and s 146 was not by its terms confined to express terms or conditions2.
HR A[9125]
1 Abidogun v Frolan Health Care Ltd [2001] EWCA Civ 1821 [2002] L & TR 16, CA. The court preferred the reasoning of Mr T
Morison QC (as he then was), sitting as a deputy judge of the Chancery Division, in WG Clark (Properties) Ltd v Dupre Properties Ltd
[1992] 1 All ER 596, [1992] 2 EGLR 59 to that of Ashworth J in Warner v Sampson [1958] 1 QB 404, [1958] 1 All ER 44.
2 Abidogun v Frolan Health Care Ltd [2001] EWCA Civ 1821 [2002] L & TR 16, CA.
(b) Repairs and internal decorations
HR A[9126]
There are special provisions as to relief against a notice to effect internal decorative repairs1 and where the Leasehold
Property (Repairs) Act 1938, applies2.
HR A[9127]
1 Law of Property Act 1925, s 147. See para HR A[20122].
2 See paras HR A[7380.421]-[7380.468].
(c) Immoral user
HR A[9128]
Page 530
'In a proper case' the court can grant relief even in the case of a breach of covenant against immoral user1. A court will
refuse relief, even where the forfeiture is for non-payment of rent and the tenant is prepared and able to pay off the
arrears, if the premises are being consistently used for immoral purposes2. There must be exceptional circumstances in
favour of the tenant for the court to grant him relief in a case of immoral user3. In Ropemaker Properties Ltd v
Noonhaven Ltd [1989] 2 EGLR 50, [1989] 34 EG 39 Millett J listed the considerations which influenced him to grant
relief:
(a) the substantial value of the lease;

(b) a financial loss to the defendants out of proportion to their offence or any conceivable damage to
the plaintiffs;
(c) the immoral use had been ended and was unlikely to be renewed (the defendants inter alia would
enter into a deed of variation banning hostesses from the premises);
(d) any stigma attaching to the premises would be short-lived and might already have disappeared;
(e) getting rid of the defendants would not help to remove any remaining stigma, as those who ran the
club had already gone;
(f) the grant of relief would not saddle the plaintiffs with unacceptable tenants, as in all respects saved
the one complained of in this action, the defendants had been excellent tenants;
(g) the director of the defendant company was in seriously poor health and had been thinking of
retiring and disposing of the lease; he had offered to use his best endeavours to find a purchaser within
some appropriate time scale if relief was granted (no undertaking in respect of this offer, found to be
genuine, was required).
In addition, the court could and should take into account all breaches of covenant, including breaches in respect of
which the landlord cannot forfeit, as no section 146 notice has been served4.
HR A[9129]
1 Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 3 All ER 610, [1972] 1 WLR 1048, CA (in which it was said that to the extent
that Borthwick-Norton v Romney Warwick Estates Ltd [1950] 1 All ER 798 decided that relief is not to be exercised in favour of persons
who allow premises to be used as a brothel it went too far.
2 Gill v Lewis [1956] 2 QB 1 at 13-14, CA: see para HR A[9305]. See also Segal Securities Ltd v Thoseby [1963] 1 QB 887, [1963] 1 All
ER 500 (where it was said that the whole conduct of the plantiffs was to harass the defendant); and British Petroleum Pension Trust Ltd v
Behrendt (1985) 52 P & CR 117, [1985] 2 EGLR 97, CA (where the refusal of the trial judge to refuse relief from forfeiture in a case of the
premises being used by licensees of the tenant for prostitution was upheld on appeal).
3 GMS Syndicate Ltd v Gary Elliott Ltd [1982] Ch 1, [1981] 1 All ER 619.
4 Essex Furniture plc v National Provident Institution [2001] L & TR 32.
(d) Unlawful alienation
HR A[9130]-[9140]
Page 531
Prior to 1 January 1926, relief could not be granted against forfeiture in respect of breaches of covenants or conditions
against assigning, underletting, or parting with the possession or disposing of the land demised1, and relief cannot be
granted in respect of such breaches committed before that date2.
HR A[9141]
1 Such covenants and conditions were excepted from the operation of the Conveyancing Act 1881, s 14, now replaced by the Law of
Property Act 1925, s 146, and so no notice had to be given prior to enforcing a right of re-entry or forfeiture, nor could relief in such a case
be obtained in equity (Barrow v Isaacs & Son [1891] 1 QB 417, CA; Ellis v Allen [1914] 1 Ch 904; Atkin v Rose [1923] 1 Ch 522). The
exception did not include a covenant against sharing possession (Jackson v Simons [1923] 1 Ch 373), nor one against assigning for the
benefit of creditors (Gentle v Faulkner [1900] 2 QB 267, CA), but did include a covenant against parting with possession of part of the
premises (Abrahams v MacFisheries Ltd [1925] 2 KB 18, which did not follow the judgment of Scrutton LJ, in Russell v Beecham [1924] 1
KB 525, CA, but which was followed in Carrington Manufacturing Co Ltd v Saldin (1925) 133 LT 432).
2 Law of Property Act 1925, s 146(8). See House Property and Investment Co Ltd v James Walker (Goldsmith and Silversmith) Ltd
[1948] 1 KB 257, [1947] 2 All ER 789, where relief was granted to a lessee who, in breach of covenant had granted a short underlease to a
government department in order to avoid the premises being requisitioned. As to the order for costs in that case see House Property and
Investment Co Ltd v James Walker (Goldsmith and Silversmith) Ltd [1955] 3 All ER 506 n.
HR A[9142]
With regard to breaches of such covenants and conditions committed since that date, the same requirements as to notice
must be complied with as in the case of any other breach of covenant before the lessor can enforce any right of re-entry
or forfeiture and the general principles as to relief apply. However, breach of such a covenant is irremediable, and
accordingly the notice under the Law of Property Act 1925, s 146 need not call upon the lessee to remedy the breach1.
HR A[9143]
1 Law of Property Act 1925, s 146(1) at para HR A[20121]; Scala House and District Property Co Ltd v Forbes [1974] QB 575, [1973] 3
All ER 308, CA. See also Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247, [1974] 3 All ER 137, PC.
HR A[9144]
In practice a situation which not infrequently arises is that a tenant assigns or sublets without seeking the consent of the
landlord. A breach of covenant occurs even though the landlord could not have refused consent had consent been
properly sought. It appears that in such cases, where it is clear that consent could not have been refused, relief against
forfeiture will generally be granted1. Where the term of a lease is assigned in breach of covenant, the assignee is the
'lessee' within the meaning of the subsection, upon whom the notice must be served. The original lessee is no longer the
'lessee'2.
HR A[9145]
Page 532
1 Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247, [1974] 3 All ER 137, PC; Essex Furniture plc v National Provident Institution
[2001] L&TR 32. In the latter case, a would-be assignee, in occupation prior to an assignment but in breach of a covenant against sharing
possession, was permitted to occupy whilst consent was sought.
2 Old Grovebury Manor Farm Ltd v W Seymour Plant Sales and Hire Ltd (No 2) [1979] 3 All ER 504, [1979] 1 WLR 1397, CA.
(e) Bankruptcy
HR A[9146]
The foregoing provisions do not apply to a condition for forfeiture on bankruptcy of the lessee, or on taking in
execution of the lessee's interest, if contained in a lease of agricultural or pastoral land1, or of mines or minerals2, or of
a house used or intended to be used as a public house or beer-shop3, or of a house let as a dwelling house with the use
of furniture and other chattels not being in the nature of fixtures4, or of any property with respect to which the personal
qualifications of the tenant are of importance for the preservation of the value or character of the property or on the
ground of neighbourhood to the lessor or any person holding under him5.
HR A[9147]
1 Law of Property Act 1925, s 146(9)(a) at para HR A[20121].
2 LPA 1925, s 146(9)(b) at para HR A[20121].
3 LPA 1925, s 146(9)(c) at para HR A[20121].
4 LPA 1925, s 146(9)(d) at para HR A[20121].
5 LPA 1925, s 146(9)(e) at para HR A[20121].
HR A[9148]
Bankruptcy
'Bankruptcy' includes the liquidation of a company1, even if only for the purposes of reconstruction2. Where a right of
re-entry is reserved in the event of the bankruptcy of a surety who has guaranteed the lessee's obligations, the surety's
bankruptcy is a 'breach of ... condition' within the Law of Property Act 1926, s 146(1), thus requiring a notice prior to
exercising the right of re-entry3. Where a receiving order has been made against a bankrupt tenant, the leave of the
court under the Bankruptcy Act 1914, s 7(1) was not required before an action for possession on the ground of forfeiture
of the lease is commenced against him4.
HR A[9149]
Page 533
1 Law of Property Act 1925, s 205(1)(i), replacing the Conveyancing Act 1881, s 2(xv)); Horsey Estate Ltd v Steiger [1899] 2 QB 79, CA.
2 Fryer v Ewart [1902] AC 187; Re Walker, ex p Gould (1884) 13 QBD 454.
3 Halliard Property Co Ltd v Jack Segal Ltd [1978] 1 All ER 1219, [1978] 1 WLR 377.
4 Ezekiel v Orakpo [1977] QB 260; [1976] 3 All ER 659, CA. See now the Insolvency Act 1986, s 285 at para HR A[20391].
HR A[9150]-[9160]
Agricultural or pastoral land
To constitute a lease of agricultural land or pastoral land, it is sufficient if a substantial portion of the land is of that
character, even though a factory and other buildings are on the land demised1.
HR A[9161]
1 Ferguson & Co v Ferguson [1924] 1 IR 22, CA; but see Agricultural Holdings Act 1986, s 1, and notes thereto at HR F[571].
HR A[9162]
Lease of mines and minerals
A lease of premises used as a mineral water spa at a rent varying with the quantity of mineral water produced has been
held not to be one of mines and minerals1. As to the exclusion of s 146 in the case of covenants or conditions to allow
the lessor of mines to have access to the books, etc, of the mine and to enter and inspect the mine, see s 146(8)(ii).
HR A[9163]
1 Gee v Harwood (1932) 48 TLR 606; affd on appeal on different grounds [1933] Ch 712; CA; and under the name of Pearson v Gee and
Braceborough Spa Ltd [1934] AC 272, HL.
HR A[9164]
Public houses or beer-shops
For leases of licenced premises, see para HR A[1477].
HR A[9165]
Leases of furnished dwellings, or where tenant's personal qualifications are important

Page 534
It is said that the inquiry which the court should undertake in deciding whether s 146(9)(e) applies is to ask first whether
the lessee is a neighbour of the lessor or of someone claiming through him. If the answer is in the affirmative, the court
should then consider whether there is something about the property comprised in the lessee's lease, having regard to the
close relation involved in being neighbours, which makes it of particular importance to the lessor, or someone claiming
through him, who lives next door that the tenant of that land has certain personal qualities rather than others1.
HR A[9166]
1 Hockley Engineering Co Ltd v V & P Midlands Ltd [1993] 1 EGLR 76, [1993] 18 EG 129.
HR A[9167]
But in the case of leases other than those mentioned, the statutory provisions apply to the forfeiture condition if the
lessee's interest is sold within one year from the bankruptcy or taking in execution. If his interest is not sold within that
year, they only apply to the forfeiture condition during the first year from the taking inexecution or bankruptcy1. The
right of re-entry or forfeiture on bankruptcy of the lessee, or on taking in execution of the lessee' interest, is fettered: if
the lessee's interest is not sold within the one year, the fetter is removed at the end of the year; if the lessee's interest is
sold within one year, the fetter is not removed but continues2. The landlord's rights are not abrogated but they can only
be enforced subject to the above statutory provisions3. If the application is made during the year, the jurisdiction of the
court to grant relief does not cease with the expiration of the year4. The reason that the right to relief does not cease
after a year when the interest is sold is that the trustee in bankruptcy would find difficulty in selling the lease if the
assignee lost any right to relief after a year. Where the trustee in bankruptcy failed to sell the respondent's leasehold
interest within a year it was held that the landlords could forfeit the lease and the court had no inherent non-statutory
jurisdiction to grant relief against forfeiture5.
HR A[9168]
2 Per Russell J in Civil Service Co-operative Society v McGrigor's Trustee [1923] 2 Ch 347 at 355.
3 Civil Service Co-operative Society v McGrigor's Trustee [1923] 2 Ch 347.
4 Gee v Harwood [1933] Ch 712, CA; affd under the name of Pearson v Gee and Braceborough Spa Ltd [1934] AC 272, HL.
5 Official Custodian for Charities v Parway Estates Development Ltd [1985] Ch 151, [1984] 3 All ER 679, CA. As to a trustee in
bankruptcy's right to disclaim a lease, see paras HR A[7505], HR A[7506].
HR A[9169]
Hence, the principle is that as regards bankruptcy or taking in execution (except for the special types of leases
mentioned above) the provisions of s 146 as to notices and relief apply during the first year after bankruptcy or
execution but not thereafter unless the lessee's interest is sold within that year in which case they continue to apply
Page 535
indefinitely1. To obtain the benefit of this provision the sale must either be completed by conveyance, or the contract
for sale must be absolute; a conditional contract entered into for the purpose of the statute is not sufficient2.
HR A[9170]-[9180]
1 Horsey Estate Ltd v Steiger [1899] 2 QB 79, CA.
2 Re Henry Castle & Cons, Mitchell v Henry Castle & Sons (1906) 94 LT 396; Ferguson & Co Ltd v Ferguson [1924] 1 IR 22, CA; Gee v
Harwood [1933] Ch 712, CA; affirmed under the name of Pearson v Gee and Braceborough Spa Ltd [1934] AC 272, HL.
(f) Cases to which s 146 not applicable on an application for relief by tenant
HR A[9181]
The statutory provisions here under consideration do not apply to forfeiture for non-payment of rent1 or, in the case of a
mining lease, to a covenant or condition for allowing the lessor to have access to or inspect books, accounts, records,
weighing machines or other things, or to enter or inspect the mine or its workings2.
HR A[9182]
1 Law of Property Act 1925, s 146(11) at para HR A[20121]. As to relief in this case, see paras HR A[9303]-[9347].
2 Law of Property Act 1925, s 146(8)(ii) at para HR A[20121].

Page 536
Forfeiture/16 Terms of relief
16 Terms of relief
HR A[9183]
Relief, if granted, may be on such terms if any, as to costs, expenses, damages, compensation, penalty, or otherwise,
including an injunction against a further like breach, as the court, in the circumstances of each case, thinks fit1.
HR A[9184]
1 Law of Property Act 1925, s 146(2) at para HR A[20121] replacing the repealed Conveyancing Act 1881, s 14(2). As to the conditions
of relief, see Quilter v Mapleson (1882) 9 QBD 672, CA; North London Freehold Land and House Co v Jacques (1883) 49 LT 659; Bond v
Freke [1884] WN 47; see also the Leasehold Property (Repairs) Act 1938 at paras HR A[20160]ff. For a case where relief was granted on
complex terms (including costs on an indemnity basis) see Southern Depot Co Ltd v British Railways Board [1990] 2 EGLR 39, [1990] 33
EG 45.
HR A[9185]
In each case the court will consider all the circumstances, the conduct of the parties, and the financial position of the
lessee in deciding whether relief should be granted, and if so, upon what terms1. It has been held that where the
personal qualifications of the tenant were important for the preservation of the value or character of the property, those
qualifications were a legitimate consideration for the court to take into account in determining whether to exercise its
discretion to grant relief against forfeiture2.
HR A[9186]
1 Hyman v Rose [1912] AC 623; reversing Rose v Spicer, Rose v Hyman [1911] 2 KB 234, CA, where it was said in the Court of Appeal
that to obtain relief the applicant must so far as possible remedy the breaches alleged and pay reasonable compensation for the breaches
which cannot be remedied; and, secondly, if the breach is of a negative covenant, undertake to observe the covenant in future or at least not
avow his intention to repeat the breach.
2 Earl Bathurst v Fine [1974] 2 All ER 1160, [1974] 1 WLR 905, CA.
HR A[9187]
Relief may be granted to a lessee and underlessee who were not implicated in the breach and withheld from the
underlessee who had caused it1.
Page 537
HR A[9188]
1 Duke of Westminster v Swinton [1948] 1 KB 524, [1948] 1 All ER 248.
HR A[9189]
For the conditions which were imposed when relief was granted in a case where the landlord had suffered no
appreciable damage, see Associated Omnibus Co Ltd v Idris & Co Ltd (1919) 148 LT Jo 157.
HR A[9190]-[9200]
Where the court had ordered the parties to enter into a deed of variation of the terms of the lease as a condition for relief
from forfeiture, the provisions of the deed had to be fair as between landlord and tenant1; and in granting relief the court
should preserve the landlord's right to a rent review2.
HR A[9201]
1 Ropemaker Properties Ltd v Noonhaven Ltd (No 2) [1991] 1 EGLR 69, [1991] 09 EG 125.
2 Soteri v Psylides [1991] 1 EGLR 138, [1991] 24 EG 161, CA.
HR A[9202]
The court has jurisdiction, in appropriate circumstances, to grant relief to the lessee in respect of part of the premises
only1. This jurisdiction is only likely to be exercised where (as in GMS Syndicate Ltd1) the relevant parts of the
premises are physically separate and capable of being separately let and enjoyed, and where the breach of covenant is
confined to part only of the premises.
HR A[9203]
1 GMS Syndicate Ltd v Gary Elliott Ltd [1982] Ch 1, [1981] 1 All ER 619.
(a) Costs
HR A[9204]
Where the breach is waived at the request of the lessee or relief is granted by the court, the lessor, in addition to any
Page 538
damages awarded for breach of covenant, is entitled to recover the reasonable costs incurred by him in the employment
of a solicitor, and surveyor or valuer, or otherwise, in reference to the breach1. Where the Leasehold Property (Repairs)
Act 19382 applies, these expenses can only be recovered by leave of the court. Costs on an indemnity basis may be
given. Such costs could not be included in damages, though their payment might be made a condition of relief3.
HR A[9205]
1 Law of Property Act 1925, s 146(3) at para HR A[20121], re-enacting Conveyancing and Law of Property Act 1892, s 2(1).
3 Bond v Freke [1884] WN 47; Bridge v Quick (1892) 61 LJQB 375.
HR A[9206]
But costs under the Act are recoverable only where the lessor waives the breach by writing under his hand, or when the
lessee is relieved under the statute; not where the lessee complies with the notice, and so avoids the forfeiture1. This
omission in the statute is commonly cured by a special clause in the lease2.
HR A[9207]
1 Nind v Nineteenth Century Building Society [1894] 2 QB 226, CA.
2 Bader Properties Ltd v Linley Property Investments Ltd (1967) 19 P & CR 620.
(b) Costs and the grant of relief
HR A[9208]
In Billson v Residential Apartments Ltd, Lord Templeman observed that the practice of awarding indemnity costs in
connection with applications for relief from forfeiture was 'ripe for reconsideration'1. Lord Templeman considered that
the practice of awarding indemnity costs, might 'encourage lawyers and surveyors and other advisers to charge large
fees'2. Lord Templeman also considered that there is no reason why an unsuccessful applicant for relief should be in
any worse case than any other unsuccessful litigant3. Lastly, Lord Templeman thought that a landlord's entitlement to
costs on an indemnity basis, whether relief is obtained or not, gave no inducement to the landlord to compromise his
dispute with the tenant4.
HR A[9208.1]
Page 539
1 [1992] 1 All ER 141 at 150.
2 [1992] 1 All ER 141 at 150. Lord Templeman may have overlooked the effects of detailed assessment: under the Civil Procedure Rules,
fees may be reduced if they are unreasonable in amount or unreasonably incurred, even if indemnity costs are awarded.
3 [1992] 1 All ER 141 at 150. Lord Templeman may have overlooked the fact that the tenant is quite often flagrantly in breach of his
obligations under the lease, thereby having incurred the forfeiture in the first place, and is seeking the indulgence of the court to defeat the
landlords clear right to possession.
4 [1992] 1 All ER 141 at 150. Lord Templeman may have overlooked the effects of payments into court, Calderbank offers, the
uncertainties of litigation and the extent to which costs are irrecoverable, even if an award of indemnity costs is made. It is submitted that
there are plenty of reasons for landlords to compromise forfeiture actions, if they so desire.
HR A[9208.2]
Lord Templeman's criticisms were applied by the Court of Appeal in Swordheath Properties Ltd v Bolt, where an award
of indemnity costs as of course was refused1. However, notwithstanding those criticisms, it remains the regular practice
of both the High Court and county court to award indemnity costs against a tenant who obtains relief, or indeed who
fails to obtain relief2. Only where the landlord brings forfeiture proceedings in circumstances which do not justify a
forfeiture action should a tenant receive an order for relief and also receive his costs from the landlord3. Where the lease
contains a covenant providing for the tenant to indemnify the landlord against costs it may incur on a forfeiture, it is
difficult to see any reason why the court should refuse to give effect to such a covenant4, unless it was of the view that
the landlord was not justified in bringing a forfeiture proceedings.
HR A[9208.3]
1 [1992] 2 EGLR 68.
2 See, for example, Southern Depot Co Ltd v British Railways Board [1990] 2 EGLR 39; Iperion Investments Corpn v Broadwalk House
Residents Ltd [1992] 2 EGLR 235. For the reasons given in the footnotes to the preceding paragraph, it is respectfully submitted that the
practice of awarding indemnity costs remains appropriate in all but exceptional circumstances, and should continue.
3 Woodtrek Ltd v Jezek [1982] 1 EGLR 45; Bland v Ingram's Estates Ltd (No 2) [2001] EWCA Civ 1088, [2002] 1 All ER 244, [2002] Ch
177, [2001] 3 EGLR 34, CA.
4 Church Commissioners v Ibrahim [1997] 1 EGLR 13, CA.
HR A[9209]
A legally-aided tenant should still be required to pay the landlord's costs in order to get relief (if that would otherwise be
appropriate1), notwithstanding that the effect of legal aid is, generally, to shield the assisted party from costs orders2. If
the tenant seeks the indulgence of relief from forfeiture, he must be required pay the landlord for the loss the landlord's
right to possession.
HR A[9209.1]
Page 540
1 For cases where an order that the tenant pay some or all of the landlord's costs were not appropriate, see Woodtrek Ltd v Jezek [1982] 1
EGLR 45; Bland v Ingram's Estates Ltd (No 2) [2001] EWCA Civ 1088, [2002] 1 All ER 244, [2002], Ch 177, [2001] 3 EGLR 34, CA.
2 Factors (Sundries) Ltd v Miller [1952] 2 All ER 630, CA; Three Stars Property Holdings v Driscoll (1988) 1 CLY 2795, (Case No
9271), CA.
(c) Status of tenants pending performance of conditions for relief
HR A[9210]-[9220]
Where relief is granted it is not necessary that a new lease shall be executed: the lessee continues to hold the premises
under the old lease1.
HR A[9221]
1 Dendy v Evans [1910] 1 KB 263, CA.
HR A[9222]
Prior to performance of the conditions of relief, the tenants are tenants at will and thus, eg, the lessor may bring
proceedings under RSC Ord 113 if the premises are occupied by squatters1.
HR A[9223]
1 City of Westminster Assurance Co v Ainis (1975) 29 P & CR 469, CA.
HR A[9224]
The lessee cannot be compelled to perform the conditions of relief; but if he declines to do so, the order for relief will be
treated as abandoned1. Where the time for complying with conditions imposed is limited by the order granting relief,
the court retains power, in all cases, to extend such time, since otherwise the order would be as stringent as the
forfeiture clause2.
HR A[9225]
1 Talbot v Blindell [1908] 2 KB 114.

Page 541
2 Chandless-Chandless v Nicholson [1942] 2 KB 321, [1942] 2 All ER 315, CA.

Page 542
Forfeiture/17 Underlessee's right to relief
17 Underlessee's right to relief
HR A[9226]
Contrary to long-standing assumptions, the Court of Appeal has held that a mortgagee can seek relief from forfeiture
under s 146(2), thereby avoiding the costs and difficulties of having a new lease vested in them by s 146(4)1. The same
reasoning wold apply to undertenants, who must now be taken as having the same choice open to them. As the
mechanism for granting relief under s 146(2) has already been considered above2, the remainder of this section will
consider relief under s 146(4). The Law of Property Act 1925, s 146(4) provides that where the lessor is proceeding by
action or otherwise to enforce a right of re-entry or forfeiture, the court may, on application by any person claiming as
underlessee any estate or interest in the demised property or any part of it, either in the lessor's action (if any), or in an
action brought by the underlessee for that purpose, make an order vesting in the underlessee, for the whole term of the
lease or any less term, the property comprised in the lease or any part of it upon such conditions as to execution of any
deed or other document, payment or rent, costs, compensation, giving security, or otherwise, as the court in the
circumstances of each case thinks fit.
HR A[9226.1]
1 Escalus Properties Ltd v Robinson [1996] QB 231, [1995] 4 All ER 852, CA.
2 See paras HR A[9183]-[9211].
HR A[9227]
In the Law of Property Act 1925, 'underlease' includes an agreement for an underlease where the underlessee has
become entitled to have his lease granted, and 'underlessee' includes any person deriving title under an underlessee1.
HR A[9228]
1 Law of Property Act 1925, s 146(5)(d), (e) at para HR A[20121].
HR A[9229]
Section 146(4) by its express terms extends to relief for non-payment of rent, but by the Law of Property Act 1925, s
146(11) that section does not, save as otherwise mentioned, affect the law relating to re-entry or forfeiture of relief in
case of non-payment of rent. For relief from forfeiture for non-payment of rent generally, see paras HR
A[9303]-[9347].
Page 543
HR A[9230]-[9240]
Section 146(4) ousts the former equitable jurisdiction to grant relief to underlessees and provides a complete code1.
However, it is possible that the facts might enable an underlessee to establish rights by estoppel outside this statutory
framework2. Additionally, it has been held in the Court of Appeal that where the forfeiture was not a 'rent only' case
and therefore relief had to be granted (if at all) under s 146 of the Law of Property Act 1925, it was open to an
underlessee (as a result of the wide definition of 'lessee' in s 146(5)(b)) to apply for relief under s 146(2); thus the
underlessee had a choice whether to apply under s 146(2) or s 146(4). Under the former, there was an obvious benefit to
the underlessee since the relief granted was retrospective (that is, the underlease was reinstated)3.
HR A[9241]
1 Smith v Metropolitan City Properties Ltd [1986] 1 EGLR 52 and Billson v Residential Apartments Ltd [1991] 3 All ER 265, [1991] 1
EGLR 70 not following Abbey National Building Society v Maybeech Ltd [1985] Ch 190, [1984] 3 All ER 262. The obiter comment in
Duarte v Mount Cook Land Ltd [2002] L & TR 355 that the equitable jurisdiction to relieve against forfeiture remains in special
circumstances as an alternative to relief under s 146(4) is respectfully considered unsound.
2 Hammersmith and Fulham London Borough Council v Top Shop Centres Ltd [1989] 2 All ER 655, [1989] 2 EGLR 66.
3 Escalus Properties Ltd v Robinson [1996] QB 231, [1995] 4 All ER 852, CA.
(a) Underlessee's application for relief
HR A[9242]
As to the mode of an application for relief from forfeiture, see paras HR A[9226] and HR A[9088].
HR A[9243]
A landlord commencing a forfeiture action must give full details of any mortgage or sub-tenancy of which he knows
and give details of every person who, to the best of his knowledge, is in occupation of the subject premises1.
HR A[9244]
1 CPR Practice Direction 55, para 2.1(3) and (4).
(b) The court's discretion

Page 544
HR A[9245]
The underlessee may obtain relief even where the lessee could not obtain relief, as on the bankruptcy of a publican1.
HR A[9246]
1 Imray v Oakshette [1897] 2 QB 218; Cholmeley School, Highgate (Wardens and Governors) v Sewell [1894] 2 QB 906; Ewart v Fryer
[1901] 1 Ch 499. This privilege, of which underlessees were accidentally deprived by the 1925 legislation, was restored by the Law of
Property (Amendment) Act 1929.
HR A[9247]
The court has, under s 146(4), power to grant relief to an underlessee against conditions of forfeiture on bankruptcy1,
and against forfeiture for non-payment of rent2, and for breach of covenants of any description. But the power is clearly
discretionary, and is to be exercised sparingly and with caution3. After all, the effect of relief under s 146(4) is to foist
upon the landlord a direct contractual relationship with someone with whom he may not have not chosen to contract
with4. Thus, relief from forfeiture will not be ordered where an undertenant: (1) had been guilty of continuing to trade
in breach of restrictions after promising not to do so; (2) was likely to be in financial difficulties if he operated in
accordance with the restrictions; and (3) was a person the landlords would have to accept as a tenant, someone whom
they had never accepted as tenant in the first place5.
HR A[9248]-[9260]
1 Cholmeley School, Highgate (Wardens and Governors) v Sewell [1894] 2 QB 906.
2 See paras HR A[9303]-[9389].
3 Imray v Oakshette [1897] 2 QB 218; Matthews v Smallwood [1910] 1 Ch 777; Hurd v Whaley [1918] 1 KB 448; Atkin v Rose [1923] 1
Ch 522; Creery v Summersell and Flowerden & Co Ltd [1949] Ch 751.
4 Duarte v Mount Cook Land Ltd [2001] 33 EG 87 (CS).
5 St Marylebone Property Co Ltd v Tesco Stores Ltd [1988] 2 EGLR 40, [1988] 27 EG 72.
HR A[9261]
The general principle is that the underlessee shall have imposed upon him obligations at least as stringent as those in the
forfeited head lease1.
HR A[9262]
Page 545
1 Creery v Summersell and Flowerdew & Co Ltd [1949] Ch 751 at 767; Gray v Bonsall [1904] 1 KB 601 at 608; Hill v Griffin [1987] 1
EGLR 81.
HR A[9263]
The underlessee must pay the costs of obtaining relief1, including the costs of an inquiry necessary to determine the
new rent2. However, the lessor cannot recover as against an underlessee the costs of his solicitor and valuer in reference
to the breach which gives the right of re-entry3.
HR A[9264]
1 London Bridge Buildings Co v Thomson (1903) 89 LT 50.
2 Ewart v Fryer (1902) 86 LT 676.
3 Nind v Nineteenth Century Building Society [1894] 2 QB 226, CA. As to recovery of costs by the lessee against a sublessee, see Clare v
Dobson [1911] 1 KB 35. In Egerton v Jones [1939] 2 KB 702, [1939] 3 All ER 889 a mortgagee by subdemise was granted relief upon the
term of paying all the lessor's costs as between solicitor and client where such costs were irrecoverable from the lessee, but the lessor was to
transfer the benefit of the judgment for such costs if the mortgagees so desired.
HR A[9265]
An underlessee who cannot continue his tenancy under the Rent Act 1977, s 137 or the Housing Act 1988, s 181,
because the subletting is unlawful, may obtain relief under this provision. But the fact that at the expiration of a lease
granted to him under this provision he can claim the protection of the Rent Act is a relevant circumstance for the
consideration of the court when deciding whether or not to grant relief2. As a condition of granting relief the court can
require the underlessee to pay a sum equal to the costs of the action; and such order is not an order to pay costs within
the Legal Aid Act 1974, s 8(1) and as such objectionable where the underlessee is an assisted person3.
HR A[9266]
1 See HR C[1325]-[1342] and HR C[2137], [2140] respectively.
2 Factors (Sundries) Ltd v Miller [1952] 2 All ER 630, CA. See also Clifford v Personal Representatives of Johnson (1979) 251 Estates
Gazette 571.
3 Factors (Sundries) Ltd v Miller [1951] 2 KB 858, [1952] 2 All ER 630, CA (when the Legal Aid and Advice Act 1949, s 2(2) was in
force). See also Three Stars Property Holdings v Driscoll (1988) CLY 2795, (Case No 9271), CA.
(c) Effect of relief

Page 546
HR A[9267]
The estate vested on the grant of relief to a subtenant under s 146(4) is a new estate1. The rent may be increased2; and
relief may be restricted to part of the land originally leased3. It is for this reason that relief is now more often bought by
mortgagees and subtenants under s 146(2)4.
HR A[9268]
1 Serjeant v Nash, Field & Co [1903] 2 KB 304 at 313, CA.
2 Ewart v Fryer [1901] 1 Ch 499, CA; Cholmeley School, Highgate (Wardens and Governors) v Sewell [1894] 2 QB 906 at 913.
3 London Bridge Buildings Co v Thomson (1903) 89 LT 50; see also Gray v Bonsall [1904] 1 KB 601, CA.
4 LPA 1925, s 146(4) at para HR A[20121].
HR A[9269]
Any order made by the court under s 146(4) is not retrospective in effect1. Accordingly, there is no power to deprive the
lessor of the fruits of his unencumbered ownership (for example, by requiring him to make payments to mortgagees)
during the period prior to the making of such a vesting order. Such a requirement cannot be met by the alternative route
of imposing conditions since conditions can relate only to payments made by the underlessee or another person in
whose favour the order is made2. It has been held that moneys paid by subtenants to mortgagees of the head lease
during the twilight period between forfeiture and the date of the vesting order under s 146(4) in favour of the
mortgagees could not be recovered by the head landlords3.
HR A[9270]-[9280]
1 See eg Escalus Properties Ltd v Robinson [1996] QB 231, [1995] 4 All ER 852, CA.
2 Official Custodian for Charities v Mackey [1985] Ch 168, [1984] 3 All ER 689.
3 Official Custodian for Charities v Mackey (No 2) [1985] 2 All ER 1016, [1985] 1 WLR 1308.
HR A[9281]
In no case is any underlessee entitled to the grant of a longer term than he had under his original underlease1. For the
purposes of s 146(4), the 'term' of the original underlease includes any continuation of it by virtue of Pt II of the
Landlord and Tenant Act 1954; therefore the proviso of s 146(4) preventing the making of a vesting order for a term
longer than the applicants had under their original underlease does not operate to deprive the court of its jurisdiction to
Page 547
make a vesting order where the term was so continuing2.
HR A[9282]
1 Law of Property Act 1925, s 146(4) at para HR A[20121]; Dellenty v Pellew [1951] 2 KB 858, [1951] 2 All ER 716, CA; Factors
(Sundries) Ltd v Miller [1951] 2 KB 858, [1952] 2 All ER 630, CA.
2 Cadogan v Dimovic [1984] 2 All ER 168, [1984] 1 WLR 609, CA; Hill v Griffin [1987] 1 EGLR 81, CA.
(d) Status of underlessee pending vesting order
HR A[9283]
A landlord's right to forfeit the lease is not affected by the existence of an application for a vesting order by an
underlessee, even though he has indicated that he would not oppose it. However, if a vesting order were to be made, it
would not be retrospective, and accordingly, until it was made an applicant who remained in possession did so as a
trespasser and was liable to pay mesne profits1.
HR A[9284]
1 Pellicano v MEPC plc [1994] 1 EGLR 104.

Page 548
Forfeiture/18 Mortgagee's right to relief
18 Mortgagee's right to relief
HR A[9285]
A mortgagee of leaseholds by subdemise is an underlessee within the statutory provision1 and entitled to relief2. A
mortgagee cannot ordinarily obtain relief after the lessor has re-entered3, but it should be noted that, where the
forfeiture was for non-payment of rent, and the landlord acted unreasonably in relation to the former tenant's mortgagee
and put in a new tenant, a mortgagee has been granted relief in the form of a reversionary lease4. In an action by the
lessor to recover possession, there is no obligation on the lessor to give mortgagees by subdemise notice of the
proceedings or to join them as parties. Mortgagees can obtain relief only on indemnifying the lessors against all costs of
the action; but the lessors must, if so required by the mortgagees, transfer to the latter the benefit of the judgment for
costs. Where the facts showed that the mortgagees were in a sound financial position to stand in the place of the lessees
and, though consent to the mortgage had not been obtained, it was clear that such consent could not have been
reasonably refused if asked for, relief was granted5.
HR A[9286]
1 Law of Property Act 1925, s 146(4) at para HR A[20121]. See also para HR A[9267].
2 Egerton v Jones [1939] 2 KB 702, [1939] 3 All ER 889, CA.
3 Rogers v Rice [1892] 2 Ch 170, CA; Egerton v Jones [1939] 2 KB 702 at 707-709, [1939] 3 All ER 889 at 892, 893.
4 Bank of Ireland Home Mortgages v South Lodge Developments [1996] 1 EGLR 91.
5 Grangeside Properties Ltd v Collingwoods Securities Ltd [1964] 1 All ER 143, [1964] 1 WLR 139, CA. See also Abbey National
Building Society v Maybeech Ltd [1985] Ch 190, [1984] 3 All ER 262.
HR A[9287]
An equitable mortgagee who has the right to call for the execution of a legal charge or mortgage is a person having an
agreement for an underlease1 and is, therefore, entitled to apply for relief2.
HR A[9288]
1 In the Law of Property Act 1925, s 146(5) at para HR A[20121], an 'underlease' includes an agreement for an underlease where the
underlessee has become entitled to have his underlease granted.
Page 549
2 Re Good's Lease, Good v Wood [1954] 1 All ER 275, [1954] 1 WLR 309.
HR A[9289]
A mortgagee of leaseholds where the mortgage is a charge by way of legal mortgage is entitled to apply for relief under
these statutory provisions1 since he is entitled to the same protection powers and remedies as if a subterm, less by one
day than the term vested in the mortgagor has been created in his favour2.
HR A[9290]-[9300]
1 Grand Junction Co Ltd v Bates [1954] 2 QB 160, [1954] 2 All ER 385.
HR A[9301]
Where a mortgagee obtains relief, a new term is vested in him but it is held as a substituted security and the mortgagor
has a right to redeem that security although the original lease has been forfeited1. Where the document creating the
mortgage was drafted as an absolute assignment, the mortgagee was ordered to pay only two-thirds of the landlord's
party and party costs2.
HR A[9302]
1 Chelsea Estates Investment Trust Co Ltd v Marche [1955] Ch 328, [1955] 1 All ER 195.
2 Grangeside Properties Ltd v Collingwoods Securities Ltd [1964] 1 All ER 143, [1964] 1 WLR 139, CA.
Page 550
Forfeiture/19 Relief from forfeiture for non-payment of rent
19 Relief from forfeiture for non-payment of rent
(a) Overview
HR A[9303]-[9304]
A lessee or an underlessee may be granted relief against forfeiture for non-payment of rent in the High Court at any time
up to six months after the order of the court or at any time after actual re-entry without a court order. Proceedings may
be brought in the county court for such forfeiture within its jurisdictional limits, whereupon the provisions of the
County Courts Act 1984, ss 138, 139 apply.
HR A[9305]
The principles of relief were developed in the courts of equity but now have a statutory basis. The proviso for re-entry
on non-payment of rent is regarded in equity as merely a security for the rent, and accordingly, provided that the lessor
and other persons interested can be put in the same position as before1, the lessee is entitled to be relieved against the
forfeiture on payment of the rent and any expenses to which the lessor has been put2, and save in very exceptional cases
(as, for example, where the premises have been used as a disorderly house) the court will regard extraneous matters of
breach of covenant as irrelevant3. This statement of the law was accepted as accurate in Exchange Travel Agency Ltd v
Triton Property Trust plc4. Where the landlord forfeits the insolvent tenant may apply for relief against forfeiture, and if
the forfeiture is founded on non-payment of rent relief will normally be granted if the rent arrears are paid5. The
discretion to grant relief, even for non-payment of rent, is nevertheless to be exercised in accordance with established
principles, and not simply on such terms as may seem fair to the court; so, where a tenant had a counterclaim against the
landlord which was not before the court, the court must be satisfied that the tenant could even pay the arrears if the
counterclaim failed before it was appropriate to grant relief6. However, where the landlord has received monies by
reason of being in possession of the demised premises, such as rent from a new tenant he has let into possession after
the forfeiture but before the grant of relief, the tenant obtaining relief is entitled to set-off against the sum he must pay
to perfect the grant of relief those sums paid (or payable) to the landlord, even though the reinstatement of the forfeit
lease does not occur until all sums due from the tenant are paid by him7.
HR A[9306]
1 Stanhope v Haworth (1886) 3 TLR 34, CA; Howard v Fanshawe [1895] 2 Ch 581 at 588; Chandless-Chandless v Nicholson [1942] 2
KB 321, [1942] 2 All ER 315, CA. The equitable principles may well extend to leases of chattels: Barton, Thompson & Co v Stapling
Machines Co [1966] Ch 499, [1966] 2 All ER 222.
2 Wadman v Calcraft (1804) 10 Ves 67; Howard v Fanshawe [1895] 2 Ch 581 at 588; Dendy v Evans [1910] 1 KB 263 at 270, CA.
3 Gill v Lewis [1956] 2 QB 1, [1956] 1 All ER 844, CA.

Page 551
4 [1991] 2 EGLR 50.
5 Re Brompton Securiites (No 2) [1988] 3 All ER 677, [1988] 2 EGLR 95. The application for relief may be made by summons in the
winding up.
6 Inntrepreneur Pub Co (CPC) v Langton [2000] 1 EDLR 34, (2000) 79 P & CR D7.
7 Bland v Ingram's Estates Ltd (No 2) [2001] EWCA Civ 1088, [2002] 1 All ER 244, [2002] Ch 177, [2001] 3 EGLR 34, CA.
HR A[9307]
It is the same whether there is a proviso for re-entry or whether the lease is conditioned to be void on non-payment of
rent1.
HR A[9308]
1 Bowser v Colby (1841) 1 Hare 109 at 128.
HR A[9309]
Where a clause in a lease allowed the landlord to determine the lease upon breach of certain covenants by giving the
tenant three calendar months' notice specifying the clause of the lease alleged to have been broken it has been held that
the tenant was entitled to seek relief from forfeiture when the landlord operated the clause: Richard Clarke & Co Ltd v
Widnall1. That case was distinguished in Clays Lane Housing Co-operative Ltd v Patrick2 in which it was held that a
right to determine a lease by a landlord is a right of forfeiture if:
(a) when exercised it operates to bring the lease to an end earlier than it would 'naturally' determine
(on the contractual expiration of a fixed term or the date on which a periodic tenancy could be
determined by a notice to quit); and
(b) it is exercisable in the event of some default by the tenant.
HR A[9310]-[9320]
1 Richard Clarke & Co Ltd v Widnall [1976] 3 All ER 301, [1976] 1 WLR 845, CA.
2 Clays Lane Housing Co-operative Ltd v Patrick (1984) 49 P & CR 72, CA.
HR A[9321]
Both these elements were present in Richard Clarke & Co Ltd v Widnall1; but the former element was missing in Clays
Lane Housing Co-operative Ltd v Widnall2 and, accordingly, the tenant there was not entitled to seek relief under (now)
Page 552
the County Courts Act 1984, s 138.
HR A[9322]
1 Richard Clarke & Co Ltd v Widnall [1976] 3 All ER 301, [1976] 1 WLR 845, CA.
2 Clays Lane Housing Co-operative Ltd v Patrick (1984) 49 P & CR 72, CA.
HR A[9323]
In Ireland an underlessee or incumbrancer who paid rent to avoid a forfeiture was held to be entitled to a first lien on the
ground of salvage1.
HR A[9324]
1 Kehoe v Hales (1843) 5 I Eq R 597; Locke v Evans (1849) 11 I Eq R 52; see Fetherstone v Mitchell (1848) 11 I Eq R 35.
HR A[9324.1]
The court has, in many circumstances, a discretion whether to grant relief from forfeiture, even in cases of
non-payment. So, for example, the discretion to grant relief from forfeiture for non-payment of rent could not properly
be exercised when the tenant's ability to pay the arrears depended on the success of a separate claim against the landlord
for breach of a collateral warranty. Such a claim amounted in effect to a set-off but the lease required that rent should be
paid without deduction or set-off. Since the tenant could not show how she could pay the arrears in a reasonable time if
she was unsuccessful in the collateral warranty claim, her claim for relief from forfeiture could not succeed1. However,
where the landlord has received monies by reason of being in possession of the demised premises, such as rent from a
new tenant he has let into possession after the forfeiture but before the grant of relief, the tenant obtaining relief is
entitled to set-off against the sum he must pay to perfect the grant of relief those sums paid (or payable) to the landlord,
even though the reinstatement of the forfeit lease does not occur until all sums due from the tenant are paid by him2.
HR A[9324.2]
1 Inntrepreneur Pub Co v Langton [2000] 1 EGLR 34, (2000) 79 P & CR D7.
HR A[9325]
Both the High Court and county court have jurisdiction to grant relief against forfeiture for non-payment of rent, but
Page 553
unlike relief against forfeiture for some cause other than non-payment of rent, there are different provisions which apply
to relief in the High Court and the county court when forfeiture is sought on the ground of non-payment of rent.
(b) High Court
HR A[9326]
There was in equity no time limit for relief. The right to relief has now been recognised, and restricted as to time, by the
Common Law Procedure Act 1852, and the Supreme Court Act 1981. It is provided by the latter Act that the High
Court may give relief against forfeiture for non-payment of rent subject to the same terms and conditions in all respects
as to rent, costs and otherwise as could formerly have been imposed in the Court of Chancery1. The right to relief is
subject to the six months time limit in the Common Law Procedure Act 1852, s 2102.
HR A[9327]
1 Supreme Court Act 1981, s 38.
2 Escalus Properties Ltd v Cooper-Smith [1995] 2 EGLR 23, [1995] 18 LS Gaz R 36, CA (the effect of s 38 is that relief is granted
retrospectively by reinstatement of the lease).
HR A[9328]
It is provided by the Common Law Procedure Act 1852, s 212 that the tenant may stay proceedings before trial by
paying the arrears of rent and costs, but this right only applies when the rent is six months in arrear1. The reference to
'the trial' in this section is a reference to an effective trial binding on all necessary parties and an effective judgment
binding on all necessary parties2. In order that an assignee may obtain relief against an order for possession, it is
necessary that he should pay or tender not only the amount due from him, but also the amount of rent due from the
original lessee, his assignor3. A mortgagee is entitled to relief on the same terms as the lessee4. The relief protects
undertenants5.
HR A[9329]
1 Standard Pattern Co Ltd v Ivey [1962] Ch 432, [1962] 1 All ER 452.
2 Gill v Lewis [1956] 2 QB 1, [1956] 1 All ER 844, CA, where the signing of judgment against one joint tenant was held not to be a 'trial'
for this purpose, nor an effective judgment for possession.
3 Barratt v Richardson and Cresswell [1930] 1 KB 686 at 698.
4 Doe d Whitfield v Roe (1811) 3 Taunt 402.
5 Shine v Gough (1811) 1 Ball & B 436.

Page 554
HR A[9330]-[9340]
The Common Law Procedure Act 1852, s 210 provides that the tenant must proceed for his relief within six months
after execution, otherwise his chance of relief is lost1. If, however, he applies in time and obtains relief he holds the
demised lands, as in the former case, according to the original lease, without any new lease2. The High Court applies
the principles of the former Court of Equity3. The court is not bound to grant relief, but in practice relief is granted upon
the tenant paying arrears of rent and costs unless it would entail a particular injustice to the landlord to grant relief.
Examples of such injustice include where the landlord has reasonably relet the premises4, or where no rent had been
paid for 22 years and everyone had treated the lease as at an end5. It is an invariable condition of relief that the arrears
of rent are paid within a time specified by the court6, together with any interest thereupon from the due date until the
date of payment, either pursuant to statute or the terms of the lease7. The rent to be paid in order to obtain relief must
include that which fell due (albeit only contingently so) after the re-entry8, but possibly not any rent falling due prior to
forfeiture being effected, in respect of which the right to forfeit had already been lost9. However, where the landlord has
received monies by reason of being in possession of the demised premises, such as rent from a new tenant he has let
into possession after the forfeiture but before the grant of relief, the tenant obtaining relief is entitled to set-off against
the sum he must pay to perfect the grant of relief those sums paid (or payable) to the landlord, even though the
reinstatement of the forfeit lease does not occur until all sums due from the tenant are paid by him10.
HR A[9341]
1 Vesey v Bodkin (1830) 4 Bli NS 64, HL. It is possible to argue that, taking the wording of ss 210 and 212 of the 1852 Act together, s 210
only imposes a six-month time limit where the rent is six months in arrear. However, the view is not supported by authority and is contrary
to the generally accepted view of effect of s 210.
2 Supreme Court Act 1981, s 38. Formerly, when relief was granted after the determination of the lease, a new lease had to be executed:
see Hare v Elms [1893] 1 QB 604 at 608; Dendy v Evans [1910] 1 KB 263 at 266, CA.
3 The Common Law Procedure Act 1852, left the lessee to apply in equity for relief; the Common Law Procedure Act 1860, empowered
the courts of common law to give relief, and this jurisdiction passed to the High Court: Wilson v Bolton (1893) 10 TLR 17. See now
Supreme Court Act 1981, s 38. Breach of covenant by the lessee is no bar to the relief: Swanton v Biggs (1828) Beat 170. As to forfeiture of
a right of renewal for non-payment of rent, see Mulloy v Goff (1850) 1 I Ch R 27; M'Donnell v Burnett, Burnett v Going (1814) 4 I Eq R
216; Fitzgerald v O'Connell (1844) 6 I Eq R 455; and for non-payment of fines, see Butler v Mulvihill (1819) 1 Bligh 137, HL; Trant v
Dwyer (1828) 2 Bli NS 11.
4 Stanhope v Haworth (1886) 3 TLR 34; Silverman v AFCO (UK) Ltd (1988) 56 P & CR 185, [1988] 1 EGLR 51, CA. See also Bank of
Ireland Home Mortgages v South Lodge Developments [1996] 1 EGLR 91.
5 Public Trustee v Westbrook [1965] 3 All ER 398, [1965] 1 WLR 1160, CA.
6 Barton, Thompson & Co Ltd Stapling Machine Co [1966] 2 All ER 222 at 225, per Pennycuick J.
8 Wilson v Burne (1889) 24 LR Ir 14, CA; Maryland Estates Ltd v Bar Joseph [1999] 1 WLR 83, [1998] 3 All ER 193, [1998] 2 EGLR
142, CA.
9 Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 01 EG 94, CA, obiter explaining and not following Maryland Estates Ltd v
Page 555
Bar Joseph [1999] 1 WLR 83, [1998] 3 All ER 193, [1998] 2 EGLR 142, CA.
HR A[9342]
The fact that after judgment has been obtained against him the tenant signs an agreement whereby he undertakes to give
up possession will not necessarily deprive him of the right to relief1.
HR A[9343]
1 Nance v Naylor [1928] 1 KB 263, CA, applied in Howard v Central Board of Finance of the Church of England (1976) 244 Estates
Gazette 51.
HR A[9344]
Where the lessor has re-entered without the assistance of the court, the lessee is similarly entitled to relief, and this may
be given upon the usual terms, namely, that, on payment of rent and costs, he shall hold under the original lease without
any new lease. In this case relief is based on the old equitable principles, not on a statutory jurisdiction, and the six
months' period does not strictly apply1.
HR A[9345]
1 Thatcher v C H Pearce & Sons (Contractors) Ltd [1968] 1 WLR 748; see also Ladup Ltd v Williams & Glyn's Bank plc [1985] Ch 190,
[1985] 2 All ER 577, where it was held that the court may have power under its inherent jurisdiction to grant relief to a mere equitable
chargee with no right to possession where the arrears of rent had been paid in full.
HR A[9346]
Where relief is given against forfeiture for non-payment of rent the applicant must pay all the lessor's costs properly
incurred in the proceedings for relief, including the costs of effecting a physical re-entry1. But he does not pay the costs
of the lessor so far as they have been increased by resisting his claim for relief against forfeiture2. Moreover, a lessee
may be awarded the costs of the action where the forfeiture whilst technically justified is not justified in fact3 or the
landlord's conduct of the action has been unreasonable4. If the lessor has recovered judgment in ejectment without
costs, the lessee will, on obtaining relief, only pay the costs of the summons for that purpose5.
HR A[9347]
1 Bland v Ingram's Estates Ltd (No 2) [2001] EWCA Civ 1088, [2002] 1 All ER 244, [2002] Ch 177, [2001] 3 EGLR 34, CA. For a full
discussion of the basis on which costs should be assessed, see HR A[9208]-[9209.1].
Page 556
2 Howard v Fanshawe [1895] 2 Ch 581 at 592; Humphreys v Morten [1905] 1 Ch 739 at 743; see Newbolt v Bingham (1895) 72 LT 852,
CA.
3 Woodtrek Ltd v Jezek [1982] 1 EGLR 45.
5 Croft v London and County Banking Co (1885) 14 QBD 347, CA.
(c) Underlessee's right to relief
HR A[9348]
An underlessee is entitled to obtain relief under the Common Law Procedure Act 18521 against forfeiture of the head
lease for non-payment of rent. He need not prove his title under the original lessee: it is sufficient that he is in
possession and claims as underlessee2. But if he does not apply until after the lease has been actually determined by the
lessor3, he must bring the original lessee and, where the lease has been assigned, the last assignee, before the court4, or
must satisfactorily account for their absence5. The reason for this, is that the granting of the relief means the revival of
the lease. On the other hand, if the underlessee applies before actual determination of the lease, the presence of the
lessee and assignee is not necessary6.
HR A[9349]
1 In the Common Law Procedure Act 1852, s 210, the words used are 'the lessee or his assignee or other person claiming or deriving
under the said lease', which are clearly wide enough to include underlessees. In CLPA 1852, s 212, the words are 'the tenant or his assignee';
but 'tenant' here includes an underlessee: see Doe d Wyatt v Byron (1845) 1 CB 623 on the provisions of the Landlord and Tenant Act 1730,
s 4, replaced by the Common Law Procedure Act 1852, ss 210, 212. Also in CLPA 1852, s 210 the words, 'as often as it shall happen that
one half year's rent shall be in arrear' occur and it was held in Standard Pattern Co Ltd v Ivey [1962] Ch 432, [1962] 1 All ER 452, that these
words also governed s 212 and that that section applied only where rent was in arrear for six months. It is thought that the six months in
arrear restriction does not apply to that part of s 210 which limits relief to six months from the execution.
2 Moore v Smee and Cornish [1907] 2 KB 8, CA.
3 The judgment determines the lease; the lease does not continue till possession is delivered under the judgment: see Dendy v Evans
[1910] 1 KB 263 at 266, CA and Ivory Gate Ltd v Spetale [1998] 2 EGLR 43, CA.
4 Hare v Elms [1893] 1 QB 604 at 609; Adams v St Leger (1809) 1 Ball & B 181.
5 Humphreys v Morten [1905] 1 Ch 739, where the presence of the lessee was dispensed with on the ground of his bankruptcy and
assignment by his trustee in bankruptcy, and of the assignee on the ground of his disappearance for 26 years.
6 Doe d Wyatt v Byron (1845) 1 CB 623; Hare v Elms [1893] 1 QB 604 at 609.
HR A[9350]-[9360]
Page 557
In Gray v Bonsall1 it appears to have been considered that, in proceedings for relief under the Common Law Procedure
Acts, the presence of the lessee and assignee was necessary although the lessor had not actually obtained possession,
and this was regarded as a reason for proceeding under the Conveyancing and Law of Property Act 1892, now replaced
by the Law of Property Act 1925, s 146. In fact, however, proceedings under LPA 1925 can only be taken before
re-entry, and until re-entry the presence of the lessee is not required under the Common Law Procedure Acts. Hence,
this is not a reason for preferring the procedure under the Law of Property Act 1925, s 146. See Humphreys v Morten2
(arguendo); and cf Rogers v Rice3.
HR A[9361]
1 [1904] 1 KB 601 at 606, CA.
2 [1905] 1 Ch 739 at 741.
3 [1892] 2 Ch 170, CA.
HR A[9362]
The relief is available for mortgagees by subdemise1. It has been held that the court may have power under its inherent
jurisdiction to grant relief to a mere equitable chargee with no right to possession where the arrears of rent had been
paid in full2. But the mortgagee of a long lease seeking relief against forfeiture in the High Court more than six months
after the landlord has recovered possession in county court proceedings is prevented from doing so by the provisions of
the County Courts Act 1984, s 138(7)3.
HR A[9363]
1 Hare v Elms [1893] 1 QB 604; Newbolt v Bingham (1895) 72 LT 852, CA.
2 Ladup Ltd v Williams & Glyn's Bank plc [1985] Ch 190, [1985] 2 All ER 577.
3 United Dominian Trust v Shellpoint Trustees Ltd [1993] 4 All ER 310, 67 P & CR 18, CA.
HR A[9364]
The underlessee can also apply for relief against forfeiture of the head lease for non-payment of rent under the Law of
Property Act 19251. The principles governing the discretion of the court in granting relief are the same whether the
application is under the Supreme Court Act 1981, s 38, or under the Law of Property Act 1925, s 146(4). Relief will
generally be granted but may be refused if it is inequitable to give an underlessee or mortgagee such relief2. Section
146(4) confers on the court the widest discretion as to the terms on which such relief may be granted3. In distinction
from the position of a head lessee, who can obtain relief only on payment of all arrears due under the headlease4, the
underlessee of part can obtain relief on the payment of a part proportionate to the part of the premises comprised in his
underlease5, and where he has paid a premium for the underlease, a part of the premium6. As to contribution between
Page 558
underlessees, see Webber v Smith7. He must apply before the lessor has regained possession8, and the court can impose
terms as a condition of the relief. The accepted course is to order that the premises shall vest in the underlessee for the
residue of the term of the underlease upon his executing a deed of covenant to pay the rent and perform the covenants of
the head lease during such residue. He must also pay the arrears of rent and costs, and make good any subsisting
breaches of covenant9. An underlessee whose underlease is granted in breach of a covenant not to sublet may claim
relief under this section but cannot be granted a longer term than he had under the underlease10.
HR A[9365]
2 Belgravia Insurance Co Ltd v Meah [1964] 1 QB 436, [1963] 3 All ER 828.
3 Chatham Empire Theatre (1955) Ltd v Ultrans Ltd [1961] 2 All ER 381, [1961] 1 WLR 817 (relief granted subject to the payment of
part of the premium paid on the grant of the underlease).
4 London Bridge Building Co v Thomson (1903) 89 LT 50; Egerton v Jones [1939] 2 KB 702 at 706, [1939] 3 All ER 889 at 892, the full
principle being that the lessor is entitled to be put into the position he would have been in if the forfeiture had not been incurred.
5 Chatham Empire Theatre (1955) Ltd v Ultrans Ltd [1961] 2 All ER 381, [1961] 1 WLR 817.
6 Chatham Empire Theatre (1955) Ltd v Ultrans Ltd [1961] 2 All ER 381, [1961] 1 WLR 817.
7 (1689) 2 Vern 103.
8 Rogers v Rice [1892] 2 Ch 170, CA.
9 Gray v Bonsall [1904] 1 KB 601 at 608, CA.
10 Factors (Sundries) Ltd v Miller [1951] 2 KB 858, [1952] 2 All ER 630 (where the subtenant could not claim under the 1920 Rent Act,
s 15(3), which is now amended as the Rent Act 1977, s 137).
HR A[9366]
The notion of 'underlessee' includes an equitable mortgagee1 and a chargee by way of legal mortgage2. In such a case
the mortgagee holds the new lease granted to him as a substituted security, with the result that the lease may be
redeemed by the mortgagor3 and by a guarantor who has entered into a contract to purchase the underlease4. An
equitable chargee, who holds a charge created pursuant to the Charging Orders Act 1979 is a proprietary interest in land,
sufficient to enable the chargee to seek relief from forfeiture under the County Courts Act 1984, s 138(9C)5. In the High
Court, the holder of a charge created pursuant to the Charging Orders Act 1979 is unable to seek relief from forfeiture
directly, but has an equitable right to compel the defaulting tenants to seek relief from forfeiture for this benefit6.
HR A[9367]
Page 559
1 Re Good's Lease, Good v Wood [1954] 1 All ER 275, [1954] 1 WLR 309.
2 Grand Junction Co Ltd v Bates [1954] 2 QB 160, [1954] 2 All ER 385.
3 Chelsea Estates Investment Trust Co Ltd v Marche [1955] Ch 328, [1955] 1 All ER 195.
4 Re Brompton Securities Ltd (No 2) [1988] 3 All ER 677, [1988] 2 EGLR 95.
5 Croydon (Unique) Ltd v Wright [2001] Ch 318, [1999] 4 All ER 257, CA.
6 Bland v Ingram's Estates Ltd (No 1) [2001] Ch 767, [2001] 2 EGLR 23, [2001] L & TR 13, CA.
(d) Relief in the county court
HR A[9368]
When a lessor is proceeding by action in the county court1 to enforce against a lessee a right of re-entry or forfeiture in
respect of any land for non-payment of rent, the procedure under the County Courts Act 1984, ss 138, 139 applies.
Where the lessor claims to enforce a right of forfeiture on some other ground as well as non-payment of rent these
statutory provisions do not apply so as to prevent the court making an order it would otherwise have power to make on
that other ground2. The power of the county court (within the limits of its jurisdiction) to order possession on the
ground of forfeiture and to grant relief against forfeiture where the ground is other than non-payment of rent are the
same as those of the High Court under the Law of Property Act 1925, s 146(13).
HR A[9369]
1 For the county court's jurisdiction in relation to recovery of land, see paras HR A[9724]-[9725].
2 County Courts Act 1984, s 138(6).
HR A[9370]-[9380]
If the lessee pays into court not less than five clear days before the return day all the rent in arrear and the costs of the
action, the action shall cease, and the lessee shall hold the land according to the lease without any new lease1. The
action does not cease if the arrears are paid by some other person2.
HR A[9381]
1 County Courts Act 1984, s 138(2). For a discussion as to the basis on which costs should be assessed, see HR A[9208]-[9209.1].
2 Matthews v Dobbins [1963] 1 All ER 417, [1963] 1 WLR 227, CA. See United Dominions Trust Ltd v Shellpoint Trustees Ltd [1993] 4
Page 560
All ER 310 and Escalus Properties Ltd v Robinson [1996] QB 231, [1995] 4 All ER 852, CA.
HR A[9382]
If the action does not cease and the court is satisfied that the lessor is entitled to enforce the right of re-entry, the court
must order possession of the land to be given to the lessor at the expiration of such period as the court thinks fit, not
being less than four weeks, unless within that period the lessee pays into court all the rent in arrear and the costs of the
action1. 'All the rent in arrear' in this context means all the rent in arrear as at the date that the County Court makes the
order, assuming that the lease had continued after the forfeiture, not simply the rent due as at the date forfeiture was
effected2. However, on the proper construction of the reference in s 138(3) to 'all the rent in arrear', the court may not
make relief conditional upon payment of any arrears of rent lawfully due, but in respect of which the landlord it had
waived the right to forfeit3. The lessee should also pay the outstanding interest on the arrears of rent, whether due
pursuant to statute or a term of the lease4.
HR A[9383]
2 Maryland Estates Ltd v Bar-Joseph [1999] 1 WLR 83, [1998] 3 All ER 193, [1998] 2 EGLR 142, CA.
3 Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 01 EG 94, CA, obiter, explaining and not following the contrary suggestion
in Maryland Estates Ltd v Bar-Joseph [1999] 1 WLR 83, [1998] 3 All ER 193, [1998] 2 EGLR 142, CA.
4 This is the usual practice, but is only clearly expressed in the High Court case of Bland v Ingram's Estates Ltd (No 2) [2001] EWCA Civ
1088, [2002] 1 All ER 244, [2002] Ch 177, [2001] 3 EGLR 34, CA although it is clearly implicit in the requirement that the landlord
receives full compensation expressed in Gill v Lewis [1956] 2 QB 1, 13. It is submitted that there is no reason why the same rule should not
apply, particularly given that the right to forfeit is as a security for non-payment of rent (see, for example, Howard v Fanshawe [1895] 2 Ch
581, 588) and that, on relief under s 138, rent must be paid up-to-date as if the lease were never forfeit: see Maryland Estates Ltd v
Bar-Joseph [1999] 1 WLR 83, [1998] 3 All ER 193, [1998] 2 EGLR 142, CA. The interpretation of the Maryland Estates case taken, albeit
obiter, in Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504, [2007] 01 EG 94, CA does not affect this view.
HR A[9383.1]
An order made under the County Courts Act 1984, s 138, must be in the correct form (Forms N27 and N27(2) of the
Civil Procedure Forms). In Spurgeons Homes v Gentles1, the Court of Appeal discharged an order for possession as
void when it had been drawn up in the wrong form by mistake. Although Spurgeons Homes was decided under the
previous rules of court and prescribed forms, it would seem that the same principles apply to the current forms.
HR A[9383.2]
1 [1971] 3 All ER 902, [1971] 1 WLR 1514, CA.
HR A[9383.3]
Page 561
Once the court is satisfied that the lessor is entitled to enforce the right of re-entry, an order for possession must be
made: there is no discretion to refuse an Order for possession1. However, the order must be for possession in not less
than 28 days, even if the tenant does not seek relief, in order to give effect to the right to have relief after judgment on
payment of the sums due contained in County Courts Act 1984, s 138(3)(b). An Order for possession in less than 28
days is void2. Once an Order for possession has been granted, the period of time before its execution may be extended
by the court at any time before possession is actually recovered, even if a warrant for possession has already been
issued3.
HR A[9383.4]
1 R v A Circuit Judge (sitting as Norwich County Court), ex p Wathen (1977) 33 P & CR 423.
2 Spurgeons Homes v Gentles [1971] 3 All ER 902, [1971] 1 WLR 1514, CA. This case was decided on the predecessor section to that
presently in force, but the principles are clearly the same.
3 County Courts Act 1984, s 138(4) and (9). See Varndeon Estates Ltd v Buckland (1967) 111 Sol Jo 684, CA."
HR A[9384]
If, within the period specified, the lessee pays into court the arrears of rent and costs, he holds the land according to the
lease without any new lease. If he fails to pay the possession order may be enforced1. The arrears of rent to be paid
include those falling due (albeit only contingently so) after the notional re-entry2.
HR A[9385]
1 County Courts Act 1984, s 138(5). For a discussion as to the basis on which costs should be assessed, see HR A[9208]-[9209.1].
2 Ivory Gate Ltd v Spetale [1998] 2 EGLR 43, CA.
HR A[9386]
Where the lessor recovers possession of the land at any time after the making of the order by the court (whether as a
result of the enforcement of the order or otherwise) the lessee may, at any time within six months from the date on
which the lessor recovers possession, apply to the court for relief which the court may grant subject to such terms and
conditions as it thinks fit. Where the lessee is granted relief in these circumstances he shall hold the land according to
the lease without any new lease1. Outside the period of six months from the date on which the lessor recovers
possession the court has no jurisdiction to grant relief2.
HR A[9387]
Page 562
1 County Courts Act 1984, s 138(9a), (9b). These subsections were brought into force on 1 October 1986 by SI 1986/1503.
2 Di Palma v Victoria Square Property Co Ltd [1986] Ch 150, [1985] 2 All ER 676, CA (a case on the position prior to the introduction of
these new subsections) and also Sinclair Gardens Investments (Kensington) Ltd v Walsh [1996] QB 231, [1995] 4 All ER 852, CA.
HR A[9388]
An application for relief under s 138 of the 1984 Act may be made by a person with an interest under a lease of the land
derived (whether immediately or not) from the lessee's interest as a subtenant and on any such application the court
may, subject to the terms and conditions it thinks fit, vest the land in such person for the remainder of the forfeited term
or a lessor interest1. The provisions of the Common Law Procedure Act 1852, s 210 dispensing with the need for a
formal demand for rent are applied2. Where a right of re-entry for non-payment of rent has been enforced without a
court action the county court may grant relief providing the land is within the limits of its jurisdiction3. Possibly the
application for relief may be made later than six months after the re-entry4. An underlessee is entitled to relief on the
same principles as in the High Court5.
HR A[9389]
1 County Courts Act 1984, s 138(9c).
2 CCA 1984, s 139(1). The conditions for dispensing with formal demand are that one half-year's rent is in arrear and no sufficient distress
is to be found.
3 CCA 1984, s 139(2).
4 See para HR A[9330]-[9341].

Page 563
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/K
Frustration, repudiation and implied terms for termination
K
Page 564
Frustration, repudiation and implied terms for termination/1 Frustration
1 Frustration
HR A[9390]-[9400]
It has been decided that the doctrine of frustration may in exceedingly rare circumstances apply to any class of lease,
thereby determining it.
HR A[9401]
The doctrine of frustration is a general contractual principle, but for current circumstances, it may be summarised thus.
Both parties to a contract are discharged from their liabilities thereunder, when circumstances are so altered by
unforeseen supervening events that the whole basis of the contract disappears1.
HR A[9402]
1 See further the Law Reform (Frustrated Contracts) Act 1943.
HR A[9403]
The application of the doctrine to the law of landlord and tenant has not always been clear. The main objection hitherto
taken to the application of the doctrine of frustration to leases was that a legal estate had been created by the lease. In
Cricklewood Property and Investment Trust Ltd v Leighton's Investment Trust Ltd 1, the House of Lords held that a
building lease for 99 years was not frustrated by war-time building restrictions. Viscount Simon LC observed that, if by
legislation building on the land were permanently prohibited, frustration of the contract might occur. The majority of
their Lordships held that there was no authority binding on the House of Lords that a lease can never be frustrated.
HR A[9404]
1 [1945] AC 221, [1945] 1 All ER 252.
HR A[9405]
The question has now been finally settled by the unanimous decision of the House of Lords in National Carriers v
Panalpina (Northern)1. Iin exceedingly rare circumstances, a frustrating event may operate to determine a lease. The
the existence of a legal estate was not a reason in principle to deny the operation of the doctrine, although it would be
Page 565
relevant to the further question of whether on the facts of any given case, frustration has occurred. It was further held
that it was unrealistic to argue that the lessee obtained all that he bargained for by the vesting of the legal estate, since in
the vast majority of cases the lessee bargained also for the use of the demised premises.
HR A[9406]
1 [1981] AC 675, [1981] 1 All ER 161, HL.
HR A[9407]
Their Lordships stressed, however, that the doctrine would only apply in the most exceptional of circumstances. Lord
Wilberforce said, 'It must be so applied with proper regard to the fact that a lease, ie a grant of a legal estate, is involved.
The court must consider whether any term is to be implied which would determine the lease in the event which has
happened and/or ascertain the foundation of the agreement and decide whether this still exists in the light of the terms of
the lease, the surrounding circumstances and any special rules which apply to leases or the particular lease in question.
If the 'frustrating event' occurs during the currency of the lease it will be appropriate to consider the Law Reform
(Frustrated Contracts) Act 1943'1.
HR A[9408]-[9420]
1 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 at 697, [1981] 1 All ER 161 at 173, HL.
Page 566
Frustration, repudiation and implied terms for termination/2 Repudiation of leases
2 Repudiation of leases
HR A[9421]
There is Court of Appeal authority for the proposition that a lease is not capable of determination by repudiation and
acceptance1. A significant element of the court's reasoning was that a lease is not capable of determination by
frustration. Therefore, contractual remedies available in other cases do not apply to the law of lease.
HR A[9422]
1 Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd [1972] 1 QB 318, [1971] 3 All ER 1226, CA.
HR A[9423]
However, in Hussein v Mehlman1, Stephen Sedley QC (as he then was) considered that the doctrine of repudiation did
apply to a tenancy. He considered that the House of Lords decision in National Freight Carriers v Panalpina2 showed
that leases could be terminated by frustration, and that the House of Lords' decision in United Scientific Holdings Ltd v
Burnley Borough Council3 showed that the law of landlord and tenant was, essentially, the law of contract, with certain
special requirements. These cases left the Total Oil case4 unsupportable in law as a matter of principle, freeing him to
consider it impliedly overruled. It is respectfully submitted that the reasoning of Sedley LJ (as he now is) is impeccable,
and that a tenancy can be determined by a suitable act of repudiation5. Indeed, his decision has now been followed by
the Court of Appeal (albeit without argument)6 and by the High Court (following argument)7.
HR A[9423.1]
However, there is one curious consequence of the law of repudiation applying to the law of landlord and tenant; the
interaction with the law of forfeiture. If a tenant is in breach of his obligations under the lease, the landlord has the
remedy of forfeiture, which crucially gives the tenant the right to seek relief from forfeiture. An unqualified application
of the common law doctrine of repudiation to a lease would seem to deny the tenant access to this right to seek the
indulgence of the courts to relieve it of the consequences of a breach of covenant. It may be that the policy
considerations underlying this apparent paradox are simply that a tenant who breaches his obligations to the extent that
the lease is repudiated should not have access to the right to seek relief from forfeiture. If so, this is a new departure, as
the right to seek relief, as a discretionary remedy, has never previously been said to be so circumscribed. It is
respectfully submitted (without the benefit of authority) that a better answer may be that, where a lease reserves to the
landlord the right to re-enter for breach of covenant, the landlord elects not to use his common-law rights to repudiate
for any breach of covenant, which would otherwise prevent the tenant from seeking relief.
HR A[9424]
Page 567
1 [1992] 2 EGLR 87, sitting as an Assistant Recorder at Wood Green County Court.
2 [1981] AC 675, [1981] 1 All ER 161, HL.
3 [1978] AC 904, [1977] 2 All ER 62, HL.
4 Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd [1972] 1 QB 318, [1971] 3 All ER 1226, CA.
5 Indeed, his conclusions were supported by older authorities which may show that the law had, at an earlier stage, considered repudiation
possible: Edwards v Etherington (1825) Ry & M 268; Collins v Barrow (1831) Mood & R 112; Izon v Gorton (1839) 5 Bing NC 501; Arden
v Pullen (1842) 10 M & W 321; Smith v Marrable (1843) 11 M & W 5; Wilson v Finch Hatton (1877) 2 Ex D 336.
6 Chartered Trust plc v Davies [1997] 2 EGLR 83, CA.
7 Nynehead Developments Ltd v RH Fibreboard Containers Ltd [1999] 1 EGLR 7.
(a) What is repudiation?
HR A[9425]
Repudiation of a contract takes place where one party to a contract, whether by his words or conduct, communicates to
the other party to the contract that he no longer intends to be bound by the contract, usually by committing a major
breach of a significant contractual obligation. The 'innocent' party may seek to have the contract performed, and the
breach rectified, or may accept the repudiation and treat the contract as at an end1. The innocent party's choice is
unfettered, although he cannot change his mind once he elects to accept a repudiation or affirm the contract2. If the
repudiation is accepted, both parties are discharged from further performance of the contract, but the party accepting the
repudiation may sue the repudiator for damages occasioned by the repudiation3. The repudiator may not sue the
innocent party for any losses consequential upon the innocent party's acceptance of the breach as repudiatory, unless it
is held that the breach was not sufficiently severe to be repudiatory.
HR A[9426]
1 Mersey Steel & Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434, HL.
2 Payman v Lanjani [1985] Ch 457, CA.
3 Mersey Steel & Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434, HL.
HR A[9427]
Not every breach of a contract will amount to a repudiatory breach. The breach must be one which, by its nature,
Page 568
communicates an intention no longer to be bound by the contract. Where a contract contains only one obligation on the
part of each party (say to supply a single ascertained item and to pay the agreed price for it) the effect of a total failure
to perform is obvious. Where, however, there is a failure to perform one of many obligations, the matter is more
difficult. Essentially, the court has to look to the significance of the term breached and the enormity of the breach in
order to decide whether or not the effect of the breach is sufficient to repudiate the contract as a whole1. The question is
akin to the closely-related area of fundamental breach: indeed some cases treat the terms interchangeably. The question
is often posed thus in the cases: does the breach go to the root of the contract2? At present, all that can be said in the
context of the English law of landlord and tenant is that the following may constitute a repudiatory breach:
(a) serious breaches by the landlord of his implied repairing obligations3;

(b) serious breaches by the landlord of his covenant not to derogate from grant4;
(c) but, by contrast, minor derogations from grant or poor management of the estate on which the
premises are situate are not sufficient to repudiate a lease5.
HR A[9428]
1 Federal Commerce and Navigation Co Ltd v Molena Alpha Inc [1979] AC 757, HL; Woodar Investment Development Ltd v Wimpey
Construction (UK) Ltd [1980] 1 WLR 277, HL.
2 See, for example, Bentsen v Taylor, Sons & Co (No 2) [1893] 2 QB 274, CA; Dero-Wall International SA v Practitioners in Marketing
[1971] 1 WLR 361, 374 per Sachs LJ.
3 Hussein v Mehlman [1992] 2 EGLR 87, County Court.
4 Chartered Trust plc v Davies [1997] 2 EGLR 83, CA.
5 Nynehead Developments Ltd v RH Fibreboard Containers Ltd [1999] 1 EGLR 7.

Page 569
Frustration, repudiation and implied terms for termination/3 Implied terms for termination
3 Implied terms for termination
HR A[9428A]
In certain and very exceptional circumstances, it may be possible to infer a term into a lease that it will be determined
automatically in circumstances akin to a frustrating event occurring. Such cases are very rare indeed. There are only two
examples. First, there is the decision of Goff J in Rom Securities Ltd v Rogers (Holdings) Ltd 1, where it was decided
that an agreement for a lease could be treated as discharged by implying a term this should be the effect if planning
permission were refused.
HR A[9428B]
More recently, the Court of Appeal implied a term into an Assured Shorthold Tenancy entered into between an
estranged husband and wife that the tenacy would be determined automatically if their mutual assumption that 90% of
the rent reserved would be provided by housing benefit: Graves v Graves2. This case may properly be restricted to its
rather unusual facts, relating to the parties' personal relationship.
1 (1967) 205 Estates Gazette 427; cited with approval in National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 697, [1981] 1 All
ER 161, HL.
2 [2007] EWCA Civ 660, CA. The decision of the Court of Appeal also contains a useful, if inconclusive, review of the law on frustration
and on mistake insofar as it relates to leases.
Page 570
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/L
Compulsory Purchase
L
Page 571
Compulsory Purchase/1 General principles
1 General principles
HR A[9429]
There are numerous Acts of Parliament authorising the compulsory acquisition of land for public purposes. The general
principle is that upon compulsory purchase all interests in the land must be acquired so that there is no power to acquire
a leasehold interest independently of the freehold1. Many modern statutes define 'land' in such a way that it includes
any interest in land, thereby authorising the acquisition of existing leasehold interests2. Sometimes the Act authorises
the acquisition of specific land, when it requires nothing more than the service of a notice to treat to set the procedure
for purchase in motion3. In other cases the Act confers a general power of compulsory acquisition subject to the making
of a compulsory purchase order relating to specific lands. In some cases the order does not become effective until it has
been approved by a confirming Act of Parliament, in which case it is known as a Provisional Order; but more
frequently, in modern times, it has been provided that the order should be confirmed merely by the head of some
government department, such as the Secretary of State for the Environment. The procedure for making such orders is
now consolidated in the Acquisition of Land Act 1981 (as amended by the Planning and Compulsory Purchase Act
2004). This procedure, in general, takes the form of a compulsory purchase order, made by the acquiring authority and,
after an opportunity has been given for the making and hearing of objections and if necessary an inquiry held, the
confirmation of it by the appropriate confirming authority with a limited right of appeal to the High Court on the ground
that the Order is not within the statutory powers, or that some statutory requirement has not been complied with as a
result of which the applicant's interests have been substantially prejudiced4. The method of assessing compensation is
governed by the Land Compensation Act 1961 (as amended), under which the fundamental rule is that compensation is
determined as the open market value of the interest acquired assessed as at the relevant date5.
HR A[9430]-[9440]
1 Great Western Rly Co v Swindon and Cheltenham Extension Rly Co (1884) 9 App Cas 787, HL.
2 Examples include the Town and Country Planning Act 1990, ss 226 and 336(1) and the Local Government (Miscellaneous Provisions)
Act 1976, s 13, which confers a general power to acquire new ancillary rights, such as easements, over land. See generally Sovmots
Investments v Secretary of State for the Environment [1979] AC 144, [1977] 2 All ER 385, HL.
3 Eg the Acquisition of Land Act 1981 (as amended) and the Compulsory Purchase Act 1965.
4 An alternative procedure, replacing a notice to treat and conveyance, with a single general vesting declaration is available under the
Compulsory Purchase (Vesting Declarations) Act 1981. A further alternative, although only available in special circumstances, is provided
by Pt III of the Acquisition of Land Act 1981 and the Statutory Orders (Special Procedure) Acts 1945 and 1965.
5 Land Compensation Act 1961, ss 5(2), 5A and see Birmingham Corpn v West Midland Baptist (Trust) Association [1970] AC 874,
[1969] 3 All ER 172, HL. The principle established by the House of Lords has been given statutory force by s 5A of the Act.
Page 572
Compulsory Purchase/2 Acquisition of the tenant's interest
2 Acquisition of the tenant's interest
HR A[9441]
The principles which apply to the compulsory acquisition of leasehold interests vary according to the length of the
tenancy. The general rule is considered under this heading, and the rules which apply to short tenancies in the next.
HR A[9442]
A lessee for years is a person empowered by the appropriate Act to sell or release his interest to the acquiring authority,
and the latter have power either by agreement or compulsorily to purchase a leasehold interest1. If the acquiring
authority wish to purchase a leasehold interest compulsorily they are bound to serve a notice to treat on the lessee in
accordance with the Act2. In the event of the lessee failing to submit his claim within 21 days after the service of the
notice or failing to agree with the acquiring authority as to the amount of compensation, the amount of the
compensation must be determined by the Lands Tribunal3. When, however, the acquiring authority require to take lands
in the possession of persons holding under a tenancy, they may induce the lessor to determine the tenancy by notice in
the usual way or purchase the lessor's interest and determine the tenancy themselves by notice. In neither of these cases
is the tenant entitled to any compensation under the appropriate Act provided he is allowed to remain in possession until
the tenancy expires4.
HR A[9443]
1 See the Compulsory Purchase Act 1965, s 1(3),(6). The promoters of the undertaking or acquiring body were originally such persons as
a canal company, a railway company or a water company, but they are now generally a local authority or a government department.
2 See the Compulsory Purchase Act 1965, s 5 and the Lands Clauses Consolidation Act 1845, s 18.
3 Compulsory Purchase Act 1965, s 6.
4 Ex p Nadin (1848) 17 LJ Ch 421; Syers v Metropolitan Board of Works (1877) 36 LT 277, CA; and see Re Portsmouth Rly Co, ex p
Merrett (1860) 2 LT 471. As to tenants of mortgaged premises, see Zick v London United Tramways Ltd [1908] 2 KB 126, CA.
HR A[9444]
A tenant whose rights to a new tenancy under the Landlord and Tenant Act 1954, Pt II are restricted in the public
interest by certain special provisions of that Act is entitled to compensation1.
HR A[9445]
Page 573
1 See LTA 1954, ss 56-59 (as amended by The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, SI 2003/3096,
and B[685]-[713].
HR A[9446]
The Compulsory Purchase Act 1965 provides that if any party having a greater interest than as tenant at will claims
compensation in respect of any unexpired term or interest under any lease or grant of any such lands, the acquiring
authority may require such party to produce the lease or grant in respect of which the claim is made or the best evidence
thereof in his power; and if, after demand made in writing by the acquiring authority, such lease or grant or best
evidence thereof is not produced within 21 days, the party claiming compensation is to be considered a tenant holding
only from year to year and entitled to compensation accordingly1.
HR A[9447]
1 Compulsory Purchase Act 1965, s 20(5). However, a person displaced from a dwelling on any land may be entitled to a home loss
payment (Land Compensation Act 1973, s 29) and a disturbance payment (Land Compensation Act 1973, s 37). See the Land Compensation
1961 (as amended), s 33 for home loss payments to certain caravan dwellers and s 34 for farm loss payments where the compulsory purchase
order was made before 31 October 2004. Where the compulsory purchase order is made after that date, s 33A and 33B (as inserted by the
Planning and Compulsory Purchase Act 2004) provide for occupiers loss payments in respect of agricultural land.
Page 574
Compulsory Purchase/3 Determination of tenancy from year to year
3 Determination of tenancy from year to year
HR A[9448]
A further method of obtaining possession of land subject to leases before the expiration of the tenancies is provided by
the Compulsory Purchase Act 1965, s 20 in cases where the person in possession has no greater interest therein than as
tenant for a year or from year to year1. This is in the nature of a proviso to the general provisions of the Act2. If such a
person is required to give up possession of any lands so occupied by him before the expiration of his term or interest
therein, he is entitled to compensation for the value of his unexpired term or interest in such lands and for any just
allowance which ought to be made to him by an incoming tenant, and for any loss or injury he may sustain, or, if a part
only of such lands be required, compensation for the damage done to him in his tenancy by severing the lands held by
him, or otherwise injuriously affecting the same3. Any question of disputed compensation is determined by the Lands
Tribunal4.
HR A[9449]
1 Where a tenancy was granted excluding the protection of Pt II of the Landlord and Tenant Act 1954 and also subject to a break clause
enabling the landlord to determine the tenancy on six months' notice, the Lands Tribunal held that the tenant held a precarious interest which
came within s 20: Bishopsgate Space Management Ltd & teamworks Karting Ltd v London Underground Ltd [2004] RVR 89.
2 R v London Corpn (1867) LR 2 QB 292.
3 R v Great Northern Rly Co (1876) 2 QBD 151 at 156, per Lush J; R v Vaughan (1868) LR 4 QB 190. As to an agricultural tenancy, see
Watson v Secretary of State for Air [1954] 3 All ER 582, [1954] 1 WLR 1477, CA (profit from farming highly material consideration). The
Lands Tribunal in Bishopsgate Space Management Ltd & teamworks Karting Ltd v London Underground Ltd [2004] RVR 89 commented
that:
'although s 20 of the Compulsory Purchase Act 1965 and rules (2) and (6) of s 5 of the Land
Compensation Act. 1961 are couched in different terms they are essentially providing for
compensation on the same bases, the two elements being the market value of the interest and
disturbance.'
4 See the Compulsory Purchase Act 1965, s 20(3) and the Land Compensation Act 1961.
Compensation falls to be assessed as at the date when possession is required: R v Great Northern Rly Co
(1876) 2 QBD 151 at 155. The general principle was long thought to be that compensation was assessed
rebus sic stantibus as at the date of notice to treat, and this case was an exception to the general principle.
However, following the decision of the House of Lords in Birmingham Corpn v West Midland Baptist
(Trust) Association [1970] AC 874, [1969] 3 All ER 172 the general principle is no longer good law.
HR A[9450]-[9460]
Page 575
In order that this procedure to assess the compensation may be applicable the person must be in fact required to give up
possession before the expiration of his term. The service of a notice to treat is not in itself such a requiring of
possession1, nor is it constituted such by the going out of possession on the receipt of such a notice2, but a person who
gives up possession by agreement with the acquiring authority falls within the provision3. A person in possession as the
owner of the residue of a long term, but of which less than a year remains, falls within this provision4, but persons
having an equitable interest for a longer period than a year do not fall within it5.
HR A[9461]
1 R v Stone (1866) 1 QB 529; R v London and Southampton Rly Co (1839) 10 Ad & El 3.
2 Great Northern and City Rly Co v Tillett [1902] 1 KB 874 at 876.
3 Knapp v London, Chatham and Dover Rly Co (1863) 32 LJ Ex 236.
4 R v Great Northern Rly Co (1876) 2 QBD 151. If more than one year of the term unexpired at the date of the notice to treat, s 20 does
not apply, notwithstanding that notice of entry may be given and entry may be made on the demised land within one year of the expiry of the
term.
5 Compulsory Purchase Act 1965, s 20(5); Sweetman v Metropolitan Rly (1864) 1 Hem & M 543.
HR A[9462]
Upon payment or tender of the amount of the compensation all persons who have been so required to deliver up
possession as having interests not greater than that of a tenant for a year or from year to year must respectively deliver
up to the acquiring authority or to the person appointed by them to take possession thererof any such lands in their
possession required for the purposes of the Special Act1. If this procedure is followed, no conveyance and no notice to
treat would appear to be necessary in order to enable the promoters to acquire the tenant's interest2.
HR A[9463]
1 Compulsory Purchase Act 1965, s 20(4).
2 Syers v Metropolitan Board of Works (1877) 36 LT 277 at 278 CA, per Sir George Jessel MR. Even if a notice to treat is in fact served
when it is unnecessary the case is not thereby taken outside the ambit of s 20: Newham London Borough v Benjamin [1968] 1 All ER 1195,
[1968] 1 WLR 694, CA.
HR A[9464]
Nothing in the Landlord and Tenant Act 1954, s 24 is to affect the operation of the Compulsory Purchase Act 1965, s
20. However, the right of a tenant to apply for a new tenancy under Pt II of the 1954 Act shall be taken into account in
assessing the compensation payable by the acquiring authority: Land Compensation Act 1973, s 471. This provision
will not necessarily entitle a tenant to any greater compensation than one who does not have the benefit of the 1954 Act
Page 576
2.
HR A[9465]
1 See the note to the Landlord and Tenant Act 1954, s 39 at B[604] for a full consideration of the interrelationship between the
Compulsory Purchase Act 1965, s 20 and the Landlord and Tenant Act 1954, Pt II.
2 In Myers v South Lakeland DC [2004] RVR 279, the dispossessed tenat claimed compensation under s 20 of the Compulsory Purchase
Act 1965. The Lands Tribunal held that the value of the tenant's fittings, which were used for the purpose of dismantling cars, was nominal
and that no greater compensation should be awarded as a 'just allowance' under that provision than if the tenancy could have been
determined at the earliest possible date.
Page 577
Compulsory Purchase/4 Where parts of land taken
4 Where parts of land taken
HR A[9466]
Where lands are comprised in a lease for an unexpired term of years and part only of the lands is acquired, the rent
payable in respect of the lands comprised in the lease must be apportioned between the lands acquired and the residue of
the lands. Such apportionment may be settled by agreement between the lessor and lessee on the one part and the
acquiring authority on the other; and if not so agreed it must normally be determined by the Lands Tribunal1.
HR A[9467]
1 Compulsory Purchase Act 1965, s 19(1)-(4); Land Compensation Act 1961.
HR A[9468]
If the acquiring authority agree with the lessee as to the apportionment specific performance of an agreement to
purchase the land agreed to be sold may be decreed, although the consent of the lessor to the apportionment has not
been obtained1. The lessee cannot compel the lessor to accept the apportionment, and in case of difference between
them the acquiring authority must initiate proceedings before the Lands Tribunal2. After the apportionment, the lessee,
as to all future accruing rent, is liable only to so much as is apportioned in respect of the lands not acquired. As to the
lands not acquired, and as against the lessee, the lessor has all the same rights and remedies for the recovery of the
apportioned rent as he previously had for the whole rent; and all other covenants, conditions, and agreements of the
lease, except as to the amount of rent to be paid, remain in force as that part of the land not acquired3.
HR A[9469]
1 Slipper v Tottenham and Hampstead Junction Rly Co (1867) LR 4 Eq 112; Williams v East London Rly Co (1869) 18 WR 159.
2 Slipper v Tottenham and Hampstead Junction Rly Co (1867) LR 4 Eq 112 at 115, per Romilly MR. It would seem to follow that the
lessee and lessor together might take the promoters before the Lands Tribunal to have the rent apportioned.
3 Compulsory Purchase Act 1965, s 19(4). As to the time when apportioned rent becomes payable where there is delay in entry, see Ball v
Graves (1886) 18 LR Ir 224; Re Secretary of State for War and Hurley's Contract [1904] 1 IR 354.
Page 578
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/M
Derelict land
M
Page 579
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 14 Determination of the tenancy/M
Derelict land/1 The power of the county court
1 The power of the county court
HR A[9470]-[9480]
The county court has power to determine certain tenancies or derelict land1. The application may only be made by a
landlord who has power to serve a notice to quit. If such a landlord satisfies the court that:
(a) he has taken all reasonable steps to communicate with the person last known to him to be the
tenant;
(b) he has failed to make contact with the tenant;
(c) during the six months ending with the date of the application, neither the tenant nor any person
claiming under him has been in occupation of the property comprised in the tenancy, or any part thereof;
and
(d) that during that period either no rent was payable or the rent payable has not been paid, then
the county court may if it thinks fit by order determine the tenancy as from the date of the order.
HR A[9481]
1 Landlord and Tenant Act 1954, s 54 at HR B[681].
HR A[9482]-[9579]
The magistrates' court also has a jurisdiction to order possession of derelict land, which is considered in full at paras HR
A[9887]-[9901].
Page 580
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 15 Possession
Chapter 15 Possession
Editor
Jonathan Karas
Page 581
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 15 Possession/A The Obligation to
Deliver Up
A
Page 582
Deliver Up/1 Contractual liability
1 Contractual liability
HR A[9580]
A lease usually contains a covenant on the part of the lessee to deliver up the premises on the determination of the term
and in the absence of such an express covenant or other express stipulation the tenant is under an implied contractual
obligation to restore possession to the landlord1. The obligation applies where the lease is determined by surrender2. A
tenant cannot by use and enjoyment of demised land acquire against the landlord an easement in the land distinct from
the tenancy such as to override the obligation to deliver up possession3.
HR A[9581]
1 Henderson v Squire (1869) LR 4 QB 170 at 172; see Harding v Crethorn (1793)1 Esp 56.
2 D'Arcy v Lord Castlemaine [1909] 2 IR 474, Ir CA.
3 Outram v Maude (1881) 17 Ch D 391 at 404; see also Kilgour v Gaddes [1904] 1 KB 457, CA.
Page 583
Deliver Up/2 Exceptions to the obligation to deliver up
2 Exceptions to the obligation to deliver up
HR A[9582]
It would be extremely unusual (but not impossible) for the parties to agree that an obligation to deliver possession at the
end of the term should not be implied at all1. However, qualified modifications to the obligation to deliver up
possession do arise in certain circumstances: for instance, the tenant generally has a right to remove tenant's fixtures
from the demised premises2, and it is commonly implied by custom that a tenant has a right to hold over on agricultural
land to take crops3.
HR A[9583]
1 See generally Henderson v Squire (1869) LR 4 QB 170; and see Hyatt v Griffiths (1851) 17 QB 505; Newson v Smythies (1859)1 F & F
477.
3 See now the Agricultural Holdings Act 1986, s 10 at HR F[643] and s 21 at HR F[748].
HR A[9584]
Further, the obligation is overridden where the tenancy is continued by statute1 or the tenant is entitled to remain in
occupation by reason of statutory protection.
HR A[9585]
1 See eg Landlord and Tenant Act 1954, s 3, at HR E[269]; and s 24 at HR E[442] (business premises).
Page 584
Deliver Up/3 Sureties' obligations
3 Sureties' obligations
HR A[9586]
A covenant by a surety that the tenant will observe and perform all the covenants in the lease, extends to guaranteeing
the observance and performance of the covenant to yield up the premises at the determination of the lease1. The precise
extent of a surety's liabilities will depend upon the precise construction of his covenant.
HR A[9587]
1 Associated Dairies Ltd v Pierce (1983) 265 Estates Gazette 127, CA; see also Capital and City Holdings Ltd v Dean Warburg Ltd
(1988) 58 P & CR 346, [1989] 1 EGLR 90, CA and Active Estates Ltd v Parness [2002] EWHC 893 (Ch), [2002] 36 EG 147.
Page 585
Deliver Up/4 Tortious liability
4 Tortious liability
(a) Trespass
HR A[9588]
As well as incurring liability upon an express or implied covenant in a tenancy agreement, a tenant who fails to deliver
up possession at the end of the term may be liable to the landlord for trespass. Not only may the landlord seek
possession of the premises from the former tenant1, but he may also be entitled to damages for trespass2.
HR A[9589]

Page 586
Deliver Up/5 Premises to be yielded up
5 Premises to be yielded up
(a) Encroachments
HR A[9590]-[9600]
The obligation upon a tenant to deliver up possession obliges the tenant to yield up to the landlord any encroachments
made by the tenant for the benefit of the tenancy1. Generally, where a tenant encroaches on premises adjoining those
demised during the term the encroachments are presumed to be made for the benefit of the tenancy: the encroachments
may be enjoyed by the tenant during the term but after its expiry are for the benefit of the landlord1. This presumption
may be rebutted by evidence that when the encroachments were made the tenant intended to make them for his own
exclusive benefit1 but the mere fact that the landlord has consented to the encroachment during the term will not give
the tenant the benefit of it after the determination of the lease2. It should be noted that these presumptions apply only
between landlord and tenant3. Where a tenant encroaches upon the landlord's adjoining land during the tenancy and
occupies it for 12 years, the land upon which the encroachment has occurred cannot be recovered by reason of
limitation4. However, it is usually to be inferred that such encroachments have been occupied as part of the tenancy and
will be recoverable by the landlord at the end of the term as with other encroachments5. Encroachments made by the
tenant upon adjoining land before the tenancy commenced are not subject to this presumption and are not recoverable
by the landlord6.
HR A[9601]
1 Smirk v Lyndale Developments Ltd [1975] Ch 317, CA; Kensington Pension Developments Ltd v Royal Garden Hotel (Oddenino's) Ltd
[1990] 2 EGLR 117. See also Batt v Adams [2001] 32 EG 90, paras 36 to 42, per Laddie J.
2 Whitmore v Humphries (1871) LR 7 CP 1.
3 Doe d Baddeley v Massey (1851) 17 QB 373; Doe d Buck v Moyes (1849)13 LT OS 325.
4 See Limitation Act 1980, s 15 at para HR A[20206] and Sch 1.
5 Kingsmill v Millard (1855) 11 Exch 313; Smirk v Lyndale Developments Ltd [1975] Ch 317, CA.
6 Dixon v Baty (1866) LR 1 Ex 259.
(b) Subtenancies
HR A[9602]
Page 587
A term requiring the tenant to deliver possession of premises at the determination of the term will oblige the tenant to
yield up possession of the premises1, or any part2, which is the subject of a subtenancy. Where the premises are sublet
and the subtenant is entitled to statutory protection against the head landlord entitling the subtenant to remain in
possession, the tenant will not be liable for a failure to deliver the sublet premises to the landlord3.
HR A[9603]
1 Harding v Crethorn (1793)1 Esp 56; cf Roe v Wiggs (1806) 2 Bos & PNR 330. Ibbs v Richardson (1839) 9 Ad & EL 849; Thames
Manufacturing Co Ltd v Perrott's (Nichol & Peyton) Ltd (1984) 50 P & CR 1.
2 Henderson v Squire (1869) LR 4 QB 170.
3 Reynolds v Bannerman [1922] 1 KB 719; Watson v Saunders-Roe [1947] KB 437; Regional Properties Ltd v Frankenschwerth [1951] 1
All ER 178 (not reported on this point at [1951] 1 KB 631); see HR C[1044], HR A[1653].
Page 588
Deliver Up/6 Liability of subtenants to head landlord
6 Liability of subtenants to head landlord
HR A[9604]
Where a subtenant remains in occupation after the determination of a headlease, unless the subtenant is entitled to
statutory protection1 or the headlease is determined by surrender or merger2, the subtenant will be liable for trespass to
the head landlord3. It will be no defence to an action for trespass brought against a subtenant where the headlease is
forfeit that the subtenant is entitled to seek a vesting order under s 146(4) of the Law of Property Act 1925 since a
vesting order is not retrospective in effect4 (unlike an order for relief under s 146(2))5.
HR A[9605]
2 See para HR A[8106] (surrender) and para HR A[7906] (merger).
3 See Official Custodian for Charities v Mackey [1985] Ch 168; Pellicano v MEPC plc [1994] 1 EGLR 104.
4 Pellicano v MEPC plc [1994] 1 EGLR 104; Viscount Chelsea v Hutchinson [1994] 43 EG 153,154, CA.
5 Billson v Residential Apartments Ltd [1992] 1 AC 494.
HR A[9606]
However, there will be no contractual liability between head landlord and subtenant for a failure by the subtenant to
deliver up possession at the end of the headlease, there being neither privity of contract nor privity of estate between
head landlord and subtenant1.
HR A[9607]

Page 589
Deliver Up/7 Extent of tenant's duty to deliver up
7 Extent of tenant's duty to deliver up
HR A[9608]
The tenant is obliged to deliver possession of the premises to the landlord and he will be in breach of his obligations if
he does not remove chattels and other things not forming part of the tenancy from the land. Accordingly, a landlord can
insist on the removal of rubbish which substantially interferes with his possession1. On the other hand, the tenant will
be liable for trespass to the landlord's property if he wrongfully removes chattels during the tenancy and the landlord
can insist on their return2. Whether in a given case the tenant has in fact yielded up possession will be a question of
fact3. The question will be whether the landlord could, if it wanted to, occupy the premises without difficulty or
objection4. Accordingly, provided that the landlord is able to obtain access, the mere retention of keys (without more)
by the tenant will not be a failure to yield up possession5.
HR A[9609]
1 Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264; cf Hynes v Vaughan (1985) 50 P & CR 444.
2 See Petre v Terres (1891) 61 LJ Ch 426 and see paras HR A[1641]ff (fixtures).
3 John Laing Construction Ltd v Amber Pass Ltd [2004] 17 EG 128 (CS).
4 John Laing Construction Ltd v Amber Pass Ltd [2004] 17 EG 128 (CS).
5 Gray v Bompas (1862) 11 CB(NS) 520; Cannan v Hartley (1850) 9 CB 634; Oastler v Henderson (1877) 2 QBD 575; and Relvok
Properties Ltd v Dixon (1972) 25 P&CR 1.
Page 590
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 15 Possession/B Consequences of
failure to deliver up
B
Page 591
failure to deliver up/1 Damages and mesne profits
1 Damages and mesne profits
(a) Damages: generally
HR A[9610]-[9620]
A tenant who holds over and fails to deliver up possession will be liable for damages for a breach of his express or
implied covenant to deliver up possession (breach of contract) and as a trespasser (tort). Where there are joint tenants
but only one holds over, both will be liable for damages if the other assents to the holding over, but otherwise only the
one who holds over will be liable1.
HR A[9621]
1 Tancred v Christy (1843) 12 M & W 316, Ex Ch; cf Christy v Tancred (1842) 9 M & W 438; Draper v Crofis (1846) 15 M & W 166,
Ex Ch.
HR A[9622]
In the event of the tenant wrongfully failing to deliver possession at the end of the term, the landlord will be entitled to
damages for the actual loss sustained by him1 in accordance with the usual principles for the ascertainment of
damages2. The damages recoverable by the landlord will generally include a sum equal to the rental value of the
premises during the time the landlord is kept out of possession3, the reasonable damages and costs incurred by the
landlord in respect of claims against him naturally arising out of the tenant's failure to deliver possession4; and also
where an undertenant is in possession, the cost of an action brought to recover possession5. There seems no reason in
principle why a tenant who wrongfully fails to deliver possession should not be liable in damages for financial loss
occasioned to the landlord by a project of redevelopment being held up. But the normal principles applicable to
remoteness of damages in contract and tort will apply. It also seems that a tenant may be liable for any damage
sustained by the landlord due to the premises deteriorating while the landlord is wrongfully kept out of possession6.
HR A[9623]
1 Watson v Lane (1856) 11 Exch 769 at 774.
2 See McGregor on Damages (15th edn, 1997) paras HR A[1501]ff, p 984.
3 Henderson v Squire (1869) LR 4 QB 170; Viscount Chelsea v Hutchinson [1994] 2 EGLR 61, CA.
4 Eg where he has contracted to let the premises to a third party: Bramley v Chesterton (1857) 2 CBNS 592.
Page 592
5 Henderson v Squire (1869) LR 4 QB 170; Thames Manufacturing Co Ltd v Perrotts (Nichol & Peyton) Ltd (1984) 50 P & CR 1;
Henderson v Van Cooten [1922] WN 340. See para HR A[9602].
6 Associated Deliveries Ltd v Harrison (1984) 50 P & CR 91; cf Burchell v Hornsby (1808) 1 Camp 360.
(b) Mesne profits
HR A[9624]
The principle is that a trespasser shall not be allowed to make use of another person's land without compensating that
other person for that user1. Usually, where the landlord is kept out of his property by a tenant wrongfully failing to
deliver up possession he will be entitled to damages for trespass (or mesne profits as they are commonly called in the
context of the law of landlord and tenant) for a sum equal to the rental value of the premises during the period when the
landlord is kept out of possession2. However, even when the landlord has sustained no actual damage, for instance,
because he would not have re-let the premises, he is entitled to the letting value of the premises during the time he has
been kept out of his property; in such circumstances the mesne profits are in the nature of a restitutionary remedy for the
unjust enrichment of the tenant3. In such circumstances, it is possible for mesne profits to be awarded by reference to
the value of the occupation to the former tenant rather than simply by reference to the open market value4. Thus, where
the former tenant enjoyed the benefit of a concessionary rent and would not have stayed in occupation at the true market
value, mesne profits were awarded by reference to the value of the occupation to the former tenant rather than the higher
market value4. On the other hand, there may be instances where the former tenant receives a greater benefit than the
hypothetical market value attributable to the premises and this too may be taken into account5. Generally, the valuation
will be on the basis of a short term letting at a rack rent on the terms which would in practice form the terms on which
the landlord would let6. However, where rent is controlled by statute, mesne profits will not exceed the amount
permitted by statute7.
HR A[9625]
1 Whitwham v Westminster Brymbo Coal and Coke Co Ltd [1896] 2 Ch 538. See also Guthrie v McCrindle (1949) 65 TLR 192.
2 See para HR A[9622] and Swordheath Properties Ltd v Tabet [1979] 1 ALL ER 240, [1979] 1 WLR 285; Penarth Dock Engineering Co
Ltd v Pounds [1963] 1 Lloyd's Rep 359; Stoke on Trent City Council v W & J Wass Ltd [1988] 3 All ER 394, CA.
3 Inverugie Investments Ltd v Hackett [1995] 3 All ER 841, PC.
4 Ministry of Defence v Ashman (1993) 66 P & CR 195, [1993] 40 EG 144; Ministry of Defence v Thompson (1995) 25 HLR 552, [1993]
40 EG 148.
5 Dean and Chapter of the Cathedral and Metropolitan Church of Christ Canterbury v Whitbread plc (1995) 72 P & CR 9, [1995] 1
EGLR 82.
6 Ministry of Defence v Ashman (1993) 66 P & CR 195, [1993] 40 EG 144; and see Dean and Chapter of the Cathedral and Metropolitan
Church of Christ Canterbury v Whitbread plc (1995) 72 P & CR 9, [1995] 1 EGLR 82 (tenancy at will where there was no agreement as to
quantum of rent).
7 Newman v Dorrington Developments Ltd [1975] 3 All ER 928, [1975] 1 WLR 1642.
Page 593
(c) Date from which mesne profits run
HR A[9626]
Mesne profits may be claimed from the date on which the landlord became entitled to possession. Where the landlord
has forfeit the lease by the service of proceedings, it is the service rather than the issue of the writ of summons which
determines the tenancy and entitles the landlord to possession, accordingly mesne profits may be claimed only from the
date of service of the writ or summons1. In assessing the amount of mesne profits due, it is appropriate to give credit for
any rent payable in advance which is referable to the period after the date of forfeiture (service of the writ)2.
HR A[9627]
1 See Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433, CA and para HR A[9009].
2 See Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433, CA and para HR A[9009].
(d) Tax on mesne profits
HR A[9628]
Mesne profits are treated as income for tax purposes; accordingly, an award of mesne profits should not be reduced by
the amount of tax which the landlord would have had to pay on the income had he received it as rent1. On the other
hand, it is doubtful whether Value Added Tax is chargeable on mesne profits since the landlord makes no supply to the
former tenant.
HR A[9629]
1 Raja's Commercial College v Gian Singh & Co Ltd [1977] AC 312, PC. See generally Chapter 16.
Page 594
failure to deliver up/2 Action for double rent
2 Action for double rent
HR A[9630]-[9640]
By reason of the provisions of Distress for Rent Act 1737, s 18 if a tenant1 gives notice to quit2 at a time mentioned in
the notice and does not deliver up possession at the time so mentioned, he is liable3 thenceforward, during all the time
he continues in possession4, to pay to the landlord double the rent payable under the tenancy. The landlord has the same
remedies for double rent as, prior to the notice he had for single rent5.
HR A[9641]
1 This includes weekly tenants who have power to determine the tenancy by notice (Sullivan v Bishop (1826) 2 C & P 359 was decided on
the erroneous assumption that the statute was similar to Landlord and Tenant Act 1730, s 1: see para HR A[9646]); see Johnstone v
Huddleston (1825) 4 B & C 922; Timmins v Rowlinson (1765) 3 Burr 1603 at 1607.
2 See Johnstone v Huddlestone (1825) 4 B & C 822, 931.
3 See Flanagan v Shaw [1920] 3 KB 96: double rent was recoverable even where the Increase of Rent and Mortgage Interest Restrictions
Act 1915 applied (see also Barton v Fincham [1921] 2 KB 291 at 299, CA per Scrutton LJ and Northcott v Roche (1921) 37 TLR 364; Rent
Act 1977 (Division C).
4 Anon (1773) Lofft 275; Booth v McFarlane (1831)1 B & Ad 904.
5 Timmins v Rowlinson (1765)1 Wm Bl 533; Soulsby v Neving (1808) 9 East 310; Humberstone v Dubois (1842) 10 M & W 765.
HR A[9642]
The right to double rent conferred by s 18 of the Act of 1737 only arises where: (a) the tenant holding over after his own
notice to quit is in fact a trespasser (thus, the notice must be valid); and (b) the landlord treats him as such1. Thus, if the
landlord accepts rent in circumstances which make it clear that he does not treat the tenant as a trespasser, he may waive
the right to double rent2. The tenant may leave at any time and stop the double rent running without giving fresh notice
to quit3. The relationship of landlord and tenant continues, and thus an assignee of the reversion can sue a tenant liable
for double rent4. The action is not in the nature of an action for a penalty5.
HR A[9643]
1 Oliver Ashworth (Holdings) Ltd v Ballard (Kent) Ltd [1999] 19 EG 161, CA overruling [1998] 46 EG 190.
Page 595
2 Doe d Cheny v Batten (1775) 1 Cowp 243
3 Booth v MacFarlane (1831) 1 B & Ad 904.
4 Northcott v Roche (1921) 37 TLR 364.
HR A[9644]
For the purposes of an action for double rent it does not matter whether the notice to quit given by the tenant is either
oral or in writing1 but it must not be too vague to be acted upon2. In proceedings founded on the statute the terms of the
tenancy and of the notice to quit must be so shown that the tenant's power to determine the tenancy by notice and the
sufficiency of the notice appear3.
HR A[9645]
1 Timmins v Rowlinson (1765) 1 Wm Bl 533.
2 Farrance v Elkinton (1811) 2 Camp 591, 529 (notice to quit on contingency insufficient).
3 Humberstone v Dubois (1842) 10 M & W 765.

Page 596
failure to deliver up/3 Action for double value
3 Action for double value
HR A[9646]
Under the provisions of s 1 of the Landlord and Tenant Act 17301, if a tenant for a life or years, or any person who gets
possession of the premises under or by collusion with such tenant, wilfully holds over on the premises after the
determination of the term, and after demand made and notice in writing given for delivery of possession by the
reversioner or his lawfully authorised agent, the person so holding over is liable to pay to the reversioner at the rate of
double the yearly value of the premises. This is a penal statute and must be strictly construed2; but there is no relief
against its provisions in equity.
HR A[9647]
1 Landlord and Tenant Act 1730, see para HR A[20009].
2 Lloyd v Rosbee (1810) 2 Camp 453; Robinson v Learoyd (1840) 7 M & W 48, 54.
HR A[9648]
An action for double value can only be brought by the landlord or the assignee of the immediate reversion1. An
assignee of the reversion to whom the assignment was made after expiry of a notice to quit given by the tenant to the
assignor is entitled to sue2. But an action for double value cannot be brought by a lessee under a future lease granted to
commence after the determination of the defendant's lease, since such future lease does not pass the reversion3.
Likewise, an action for double value cannot be brought by the administrator landlord's estate until he has taken letters of
administration, even though the tenant has attorned to the administrator4.
HR A[9649]
1 Landlord and Tenant Act 1730, s 1; Harcourt v Wyman (1849) 3 Exch 817.
3 Blatchford v Cole (1858) 5 CBNS 514.
4 Tingrey v Brown (1798)1 Bos & P 310.
HR A[9650]-[9660]
Page 597
An action for double value can only be brought against a 'tenant or tenants for any life. lives or years'1. A tenant for a
fixed term of a year or more is within the scope of the statutory provision2 as is a tenant who holds from year to year3.
A weekly tenant4, however, and a tenant who holds periodically for periods of less than one year5 is not within the
section.
HR A[9661]
2 Sed quaere whether a fixed term of less than one year will be caught: a term of 8 months has been held to be a term of years certain for
the purposes of Landlord and Tenant Act 1954, s 38(4) (see HR B[594]); however, the 1730 Act is penal and will be strictly construed (see
HR A[9646]).
3 Doe d Hull v Wood (1845)14 M & W 682, 686; Ryal v Rich (1808)10 East 48.
4 Lloyd v Rosbee (1810) 2 Camp 453.
5 Wilkinson v Hall (1837) 3 Bing NC 508.
HR A[9662]
If an action is to be maintained the tenant must hold over wilfully1. Landlord and Tenant Act 1730, s 1 does not apply
where the tenant holds over under a bona fide mistake or under a fair claim of right2; for s 1 to apply the holding over
must be contumacious in the sense that the tenant knows he has no right to keep possession3. Hence, s 1 does not apply
where a subtenant holds over with the consent of the tenant4, nor where the tenant holds over genuinely claiming
statutory protection5. The distinction is between the tenant who says 'I shall stay on, I think I have a right to do so' (in
which case an action under s 1 cannot be maintained) and a tenant who says 'I will stay on, although I know I have no
right to do so' (in which case he will be liable)6.
HR A[9663]
1 See generally French v Elliott [1959] 3 All ER 866 [1960] 1 WLR 40.
2 Swinfen v Bacon (1861) 6 H & N 846, 848.
3 Wright v Smith (1805) 5 Esp 203; Soulsby v Neving (1808) 9 East 310, 313; Rawlinson v Marriott (1867)16 LT 207.
4 Rands v Clark (1870) 19 WR 48.
5 Crook v Whitbread (1919) 88 LJKB 959; Bateson v Beswick [1920] EGD 272; Hopper v Hart [1922] EGD 171; French v Elliott [1959]
3 All ER 866.
6 French v Elliott [1959] 3 All ER 866.

Page 598
HR A[9664]
Where one of a number of tenants holds over without the assent of his co-tenants, it is only the tenant who holds over
who will be liable1.
HR A[9665]
1 Draper v Crofts (1846)15 M & W 166.
HR A[9666]
Before an action for double value can be maintained there must have been a 'demand made and notice in writing given'
for the purposes of s 1 of the Landlord and Tenant Act 1730. A notice to quit given before the expiration of the term
requiring the tenant to give possession at the end of the term is sufficient1 and it is not necessary that the 'demand' and
'notice' be distinct'2; but the tenant is not bound to give up possession till the end of the last day of the term, thus a
notice to give up possession at noon on the last day of the term is insufficient for the purposes of the statute3. A demand
may also be made after the expiration of the term but in such a case the claim for double value will run from the date of
the demand and not from the end of the term4.
HR A[9667]
1 Cutting v Derby (1776) 2 Wm Bl 1075; Messenger v Armstrong (1785) 1 Term Rep 53; Johnstone v Huddlestone (1825) 4 B & C 922 cf
Hirst v Horn (1840) 6 M & 393, 395.
2 Wilkinson v Colley (1771) 5 Burr 2694.
3 Page v More (1850) 15 QB 684; see also Plumber & John v David [1920] 1 KB 326.
4 Cobb v Stokes (1807) 8 East 358 (but the landlord must not in the meantime have done any act recognising the continuance of the
tenancy ((1807) 8 East 358 at 361).
HR A[9668]
The notice to quit or demand may be served by the lawfully authorised agent of the landlord1. A receiver under a
mortgage deed with power to give notice to quit2 and a receiver appointed by the court3 are agents lawfully authorised
to give notice under the statute.
HR A[9669]
Page 599
2 Poole v Warren (1838) 8 Ad & El 582.
3 Wilkinson v Colley (1771) 5 Burr 2694.
HR A[9670]-[9680]
A landlord may bring an action for double value whether or not he has already obtained an order for possession1.The
action is distinct and separate from a claim for double rent2 but it is not in the nature of rent and cannot be distrained
for3. The value which is to be recovered is not double the passing rent4 but double what an occupier would give and the
landlord would otherwise have received, for the use of the freehold and everything connected with it, during the time
that the possession is withheld5. The action must be brought within six years6.
HR A[9681]
1 Soulsby v Neving (1808) 9 East 310.
2 Wickham v Lee (1848) 12 QB 521; see too Ballard (Kent) Ltd v Oliver Ashworth (Holdings) Ltd [1998] 46 EG 190.
3 Timmins v Rowlinson (1765) 1 Wm Bl 533, 535.
4 Doe d Matthews v Jackson (1779) 1 Doug KB 175
5 Robinson v Learoyd (1840) 7 M & W 48 (only the land and buildings are included and not incidental advantages)
6 Limitation Act 1980, s 19.
HR A[9682]
The double value is reckoned from the determination of the tenancy, if the notice was given before the determination;
and from the giving of the notice if given afterwards1. If the landlord accepts a single rent for the period covered by his
claim to double value, it is a question of fact whether he has waived his claim; or whether he takes the amount of the
single rent in part satisfaction of it2.
HR A[9683]
2 Ryal v Rich (1808) 10 East 48 at 52; Doe d Cheny v Batten (1775) 1 Cowp 243, 246; see too Ballard (Kent) Ltd v Oliver Ashworth
(Holdings) Ltd [1998] 46 EG 190; cf Rawlinson v Marriott (1867) 16 LT 207.
Page 600
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 15 Possession/C Recovery of Land
C
Page 601
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 15 Possession/C Recovery of Land/1
Generally
1 Generally
HR A[9684]
After the determination of the tenancy, the landlord is entitled to possession of the premises. Possession may be
obtained either by peaceable re-entry1 or by action2 but the exercise of both remedies is circumscribed by statute3.
HR A[9685]
3 See paras HR A[9688] and HR A[9690].

Page 602
Peaceable re-entry
2 Peaceable re-entry
HR A[9686]
After the determination of the tenancy any act of the landlord showing an intention to take possession is sufficient to
revest possession in the landlord1. At common law, the landlord is entitled to re-enter the premises since upon the
determination of the tenancy he is entitled to possession2 and is entitled to use reasonable force to secure his re-entry3.
HR A[9687]
1 See Hey v Moorhouse (1839) 6 Bing NC 52; Jones v Chapman (1849) 2 Exch 803. See also para HR A[8989] for re-entry in the context
of forfeiture.
2 See Butcher v Poole Corpn [1943] KB 48 at 53-54, CA.
3 See Jones v Foley [1891] 1 QB 730; Hemmings v Stoke Poges Golf Club [1920] 1 KB 720.
HR A[9688]
The landlord's right to re-enter the premises is circumscribed by statute: re-entry must be peaceable1 and in the case of
residential occupiers, eviction without due process of law is restricted by the Protection from Eviction Act 19772 and
statutory damages may be awarded under the Housing Act 19883. The landlord's rights are also limited by other statutes
which are dealt with below4. Even apart from statute, the law favours re-entry effected through the process of the court,
at least where there is an issue between the parties5. However, after peaceable re-entry (which is merely the exercise of
an existing proprietary right) has been completed, possession can be maintained forcibly by the landlord6.
HR A[9689]
2 See HR C[1773]. It should be noted that this Act applies to premises let wholly or partly as a dwelling: Pirabakaran v Patel [2006]
EWCA Civ 685.
3 See HR C[2165].
5 See Bilson v Residential Apartments Ltd [1992] 1 AC 494; [1992] 1 All ER 141, HL; WG Clark (Properties) Ltd v Dupre Properties Ltd
Page 603
[1992] 1 All ER 596 at 606.
6 The old law of forcible detainer was abolished by Criminal Law Act 1967: forcible detainer occurred where a person who had entered,
whether forcibly or not, without right, or who, having right, had entered forcibly withheld possession from the former possessor; R v Oakley
(1832) 4 B & Ad 307.
Page 604
Forcible entry
3 Forcible entry
HR A[9690]-[9700]
Although a landlord was entitled to possession of his premises at common law, the common law was altered by the
Forcible Entry Acts of 1381, 1391, 1429, 1588 and 16231. These Acts have now been repealed. The law is now to be
found in the Criminal Law Act 1977, s 6 under which it is an offence without lawful excuse to use or threaten violence
to secure entry into premises provided that there is someone on the premises at the time who is opposed to the entry
which the violence is intended to secure and the person using or threatening the violence knows that that is the case2.
The offence is an arrestable offence3 and punishable on summary conviction by imprisonment for up to six months or a
fine on level 5 on the standard scale or both. It is probable that the courts will not construe 'violence' in such a way as
wholly to prohibit self-help: under the Forcible Entry Acts, the mere removal of locks or bars provided that there was no
breach of the peace) was not unlawful4. However, it is a defence for the accused to prove that he was a displaced
residential occupier5. Even if the landlord enters forcibly and is thus liable to criminal proceedings, the tenant may have
no civil remedy at common law against him in respect of the entry6, or in respect of the eviction, if no more force than
is necessary is used7. Clearly, where the tenant has abandoned the premises, the landlord's entry will be peaceable8.
HR A[9701]
1 3 Bac Abr tit Forcible Entry and Detainer (7th edn) 716. It had long been held that a mere trespasser who was not in possession, might
be ejected by force, provided no personal injury was done to him: Scott v Matthew Brown & Co (1884) 51 LT 746.
3 See Criminal Law Act 1977, s 6(6); the power of arrest is preserved by the Police and Criminal Evidence Act 1984, s 26(2), Sch 2.
4 Scott v Matthew Brown & Co (1884) 51 LT 746.
5 Criminal Law Act 1967, s 12(3).
6 See Hemmings v Stoke Poges Golf Club [1920] 1 KB 720 (but see now Protection from Eviction Act 1977 at HR C[1773] and Housing
Act 1988 ss 27, 28 at HR C[2165]-[2178]); see Beddall v Maitland (1881) 17 Ch D 174; Beattie v Mair (1882) 10 LR Ir 208 at 211; see also
Taunton v Costar (1797) 7 Term Rep 431; Turner v Meymott (1823) 1 Bing 158; Kavanagh v Gudge (1844) 7 Man & G 316; Davison v
Wilson (1848) 11 QB 890; Burling v Read (1850) 11 QB 904; Pollen v Brewer (1859) 7 CBNS 371; Blades v Higgs (1861) 10 CBNS 713;
Lows v Telford (1876) 1 App Cas 414.
7 Jones v Foley [1891] 1 QB 730.
8 Lacey v Lear (1802) Peake Add Cas 210; Wildor v Rainforth (1828) 8 B & C 4 at 6. See paras HR A[9470], HR A[9887] and HR
B[681] for the determination of tenancies of deserted premises and derelict land.
Page 605
Action for possession
4 Action for possession
HR A[9702]
Upon the determination of a tenancy, the landlord is entitled to bring proceedings for an order for possession1. Where
proceedings are issued and served unequivocally demanding possession or seeking a declaration of title to possession,
such proceedings are equivalent to re-entry2. Issue and service of proceedings is in itself a method of forfeiting a lease
(and thus determining it)3: once served, the effect of service of proceedings in determining the tenancy and (notionally)
re-entering the premises, cannot be undone by the landlord even if the proceedings are subsequently withdrawn4.
HR A[9703]
1 For an historical account of the origins of the actio for ejectment see: Milson Historical Foundations of the Common Law (2nd edn) ch
7; Baker An Introduction to English Legal History (3rd edn) pp 337-343.
2 See Serjeant v Nash Field & Co [1903] 2 KB 304; Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433; Billson v
Residential Apartments Ltd [1992] 1 AC 494.
3 See generally paras HR A[8966]ff for the effect of service of proceedings for possession
4 G S Fashions Ltd v B & Q plc [1995] 4 All ER 899, [1995] 1 WLR 1088.
Page 606
Contrast between peaceable re-entry and an action for possession
5 Contrast between peaceable re-entry and an action for possession
HR A[9704]
Since an action for possession is equivalent to physical re-entry1, the legal consequences of a landlord electing one
method of obtaining possession as opposed to the other are in most respects the same. However, as indicated above2,
the law favours re-entry through the process of the court. If a landlord retakes possession of premises pursuant to a court
order, and the court order is subsequently reversed, acts done by the landlord pursuant to the order are not actionable by
the tenant3. On the other hand, if the landlord physically re-enters premises and it is established that he had no right so
to do he will be liable for trespass to the tenant. An attempt at physical re-entry also carries with it the risk that entry
may become forcible4.
HR A[9705]
2 See para HR A[8987] and HR A[9688].
3 Hillgate House Ltd v Expert Clothing Service and Sales Ltd [1987] 1 EGLR 65.

Page 607
Statutory restrictions upon landlord's right to possession
6 Statutory restrictions upon landlord's right to possession
HR A[9706]
In addition to the provisions of s 6 of the Criminal Law Act 19771, the following statutory provisions should be noted.
HR A[9706.1]
(a) Residential premises
HR A[9707]
The landlord's right to possession of residential premises, at the end of a tenancy is curtailed by the provisions of
legislation giving residential tenants security of tenure: these are examined in Divisions C and E. Further, where
premises are let as a dwelling, the Protection from Eviction Act 1977 restricts the right to possession without due
process of law1.
HR A[9707.1]
1 See HR C[1773].
(b) Forfeiture
HR A[9708]
The restrictions upon forfeiture contained in s 146(1) of the Law of Property Act 1925 are dealt with above1. Where a
landlord seeks to forfeit a lease for a breach of a tenant's repairing obligations the leave of the court is first required in
cases in which the provisions of the Leasehold Property (Repairs) Act 1938 apply2.
HR A[9709]
Page 608
(c) Insolvency etc
HR A[9710]
The effect of insolvency on 'legal process' is dealt with in Chapter 12.
(d) Human Rights Act 1998 and public law
HR A[9711]
The Human Rights Act 1998 and public law principles may affect a landlord's right to possession. A detailed treatment
of the Act and public law principles is outside the scope of this work.
HR A[9712]
In general terms, where a landlord performs statutory functions or other public functions such that its acts are
susceptible to judicial review, the landlord must act within the scope of its powers and rationally. If it does not do so, its
acts may be unlawful. Further, as a result of the Human Rights Act 1998, where the landlord is a public authority1, it is
unlawful for it to act incompatibly with Convention rights (ie rights under the European Convention on Human Rights)
unless constrained to do so by primary legislation2. In the context of the law of landlord and tenant the Convention
rights which are most likely to be engaged are those under article 8 (right to respect for home), article 14 (prohibition of
discrimination) and article 1 of the 1st Protocol (protection of property) under the European Convention on Human
Rights.
HR A[9713]
1 'Public authority' includes a court or tribunal and any person certain of whose functions are those of a public nature, but does not include
either House of Parliament or a person exercising functions with proceedings in Parliament: Human Rights Act 1998, s 6(3). Parliament does
not include the House of Lords in its judicial capacity: s 6(5).
2 Human Rights Act 1998, s 6(1), (2). In relation to a particular act, a person is not a public authority by virtue of these statutory
provisions if the nature of the act is private: s 6(5). In this context 'act' includes a failure to act: s 6(6).
HR A[9714]
Page 609
Because of these constraints, a landlord's ability to obtain possession may be constricted in a number of ways.
(i) Landlord's decision to institute proceedings
HR A[9715]
Where the landlord is itself a public authority, its decision to institute proceedings for possession will itself be
susceptible to challenge if that decision is not compatible with Convention rights or if it is otherwise outside its
powers1. It has been held that such a challenge will not usually give rise to a substantive defence to possession
proceedings, but that judicial review of the public authority's decision can be brought2. In such cases, it has been
considered that the proper course is to seek an adjournment of the action for possession and to seek judicial review3. It
seems now, however, to be the case that 'conventional' judicial review grounds can be raised by way of defence to
possession proceedings in the County Court, and it may no longer be necessary to seek an adjournment of the
possession proceedings to pursue such a claim in the High Court4.
HR A[9716]
1 Sheffield City Council v Smart [2002] EWCA Civ 4 para [40].
2 See West Glamorgan County Council v Rafferty [1987] 1 WLR 457, 468-469, CA. Compare Avon County Council v Buscott [1988] QB
656, 661 and 663-664, CA; Trustees of Denis Rye Pension Fund v Sheffield City Council [1997] 4 All ER 747, 753-756 CA. See also
Sheffield City Council v Smart [2002] EWCA Civ 4 [2002] All ER (D) 226 (Jan); Wandsworth London Borough Council v Michalak [2002]
EWCA Civ 271, para [50].
3 West Glamorgan County Council v Rafferty [1987] 1 WLR 457.
4 The majority of the House of Lords in Leeds City Council v Price [2006] UKHL 10 proceeded on the basis that a defendant has a right
to contend in his defence in the County Court that the decision of a public authority to recover possession was one which no reasonable
person could consider justifiable: see paras 86, 208. These remarks on procedure may be considered strictly to be obiter and, indeed, Lord
Bingham appears to have taken a different view: see para 30. The Court of Appeal, however, has appeared to accept that the effect of the
decision in Leeds City Council v Price has been that 'conventional' judicial review grounds can be raised by way of defence to possession
proceedings in the county court and that the whole area of controversy has 'now apparently been swept aside by the House of Lords without
further ado': see Doherty v Birmingham City Council [2006] EWCA Civ 1739 at [36].
(ii) Public authorities' actions giving rise to a substantive defence
HR A[9717]
Where the unlawfulness of a decision vitiates the common law basis upon which possession is sought (eg because the
notice which is a precondition to seeking possession is invalidated as a result of the unlawful conduct by the public
authority) then this may provide a substantive defence to possession. Such a defence may be raised within the
possession proceedings themselves and it is not necessary to apply for judicial review1.
HR A[9718]
Page 610
1 Wandsworth London Borough Council v Winder [1985] AC 461, [1984] 3 All ER 976, HL; Wandsworth London Borough Council v A
[2000] 1 WLR 1256, CA; compare Sheffield City Council v Smart [2002] EWCA Civ 4 para [40].
(iii) Constraints on the powers of the court
HR A[9719]
Where the court exercises a statutory function, for instance, as the county court does under the Rent Acts, it can only
order possession within the scope of its powers. If it orders possession outside the scope of its powers, its order may be
susceptible to challenge1.
HR A[9720]
1 See, for example, R v Bloomsbury and Marylebone County Court ex p Blackburne [1985] 2 EGLR 157 and see Baygreen Properties Ltd
v Gil [2002] EWCA Civ 1340, [2002] 34 LS Gaz R 29; see Human Rights Act 1998, s 9 (challenge in respect of human rights breach by
appeal only).
(e) The courts and human rights
HR A[9721]
The court, as a public authority, is itself bound to give effect to Convention rights: to the extent that the court acts
incompatibly with the Convention, its acts will be unlawful (unless the court is constrained by primary legislation so to
act)1. This duty may in principle result in the development of the common law to provide substantive rights for tenants
where none previously existed2. Where, however, a landlord can establish an entitlement to possession against a tenant
(or former tenant) the Convention in most cases will not affect the right of the landlord to obtain possession3. It is well
established that the role of the courts is to uphold the rule of law (and the rights of landowners, when established by
law), and if a defendant has no legal right to remain in possession of premises, the court is ordinarily bound to make the
order the landlord seeks (subject to any statutory provisions or common law discretion whereby the order may be
suspended)4. It should be noted that a tenant's right to respect for his home under art 8 is subject to such interferences as
are necessary for the protection of the rights of others; and indeed, art 8 does not concern itself with the person's right to
the peaceful enjoyment of his home as a possession or as a property right: rights of that kind are protected by art 1 of the
1st protocol5. Rights under article 1 of the 1st protocol are similarly qualified6. Since the landlord himself has a right to
property under art 1 of the 1st Protocol to the Convention, the application of common law principles will be compatible
with Convention rights in most circumstances because an order for possession is necessary to give effect to the rights of
the landlord where his right to possession has accrued7. Indeed it has been held that the absence of jurisdiction in courts
to grant relief from forfeiture to a residential tenant in certain circumstances, was not incompatible with Convention
rights8. It is only very rarely that domestic law will be incompatible with the Convention in giving effect to the
contractual and proprietary rights to possession which are enjoyed by a landowner9.
Page 611
HR A[9722]
1 Human Rights Act 1998, s 6(3)(a). See also St Brice v Southwark London Borough Council [2001] EWCA Civ 1138, [2002] 1 WLR
1537 and para HR A[9884] below.
2 See, for example, Pemberton v Southwark London Borough Council [2000] 3 All ER 924, [2000] 1 WLR 1672, CA (law extended so as
to give right to 'tolerated trespasser' to bring action in nuisance).
3 See Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, [2003] 4 All ER 461 subject to the qualifications
made by the majority of the House of Lords in Lambeth LBC v Kay; Price v Leeds CC [2006] UKHL 10: see, for example, per Lord Hope at
paras [111]-[114]; Lord Brown at paras [198]-[200]; see too Doherty v Birmingham City Council [2006] EWCA Civ 1739. See also Newham
London Borough Council v Kibata [2003] EWCA Civ 1785, [2003] 3 FCR 724, [2003] All ER (D) 157 (Dec); Birmingham City Council v
Bradney; Birmingham City Council v McCann [2003] EWCA Civ 1783, [2003] All ER (D) 163 (Dec).
4 Wandsworth London Borough Council v Michalak [2002] EWCA Civ 271 at para [48], [77], [2002] 4 All ER 1136 at para [48], [77];
and see Sheffield Corpn v Luxford [1929] 2 KB 180; Jones v Savery [1951] 1 All ER 820; McPhail v Persons Unknown [1973] Ch 447,
[1973] 3 All ER 393. See Housing Act 1989, s 89 and paras HR A[9829] and HR A[9869] below.
5 See European Convention on Human Rights, art 8(2). See generally Harrow London Borough Council v Qazi [2003] UKHL 43, [2004]
1 AC 983, [2003] 4 All ER 461, in particular per Lord Hope at [50], [55]-[56].
6 See European Convention on Human Rights, 1st protocol, art 1.
7 See Royal Borough of Kensington and Chelsea v O'Sullivan [2003] EWCA Civ 371 per Waller LJ at [82], with whom Aldous LJ agreed
at [90]; see also R (on the application of Gangera) v Hounslow London Borough Council [2003] EWHC 794 (Admin) at [49] per Moses J.
See generally Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, [2003] 4 All ER 461. See too Hounslow London
Borough Council v Adjei [2004] EWHC 207 (Ch), [2004] 2 All ER 636 (Pumfrey J).
8 Di Palma v United Kingdom (1988) 10 EHRR 149, EComHR.
9 See Lambeth LBC v Kay; Price v Leeds CC [2006] UKHL 10: see, for example, per Lord Hope at paras [111]-[114]; per Lord Scott at
para [169]-[173]; Lord Brown at paras [198]-[200]. See also Doherty v Birmingham City Council [2006] EWCA Civ 1739.
HR A[9723]
Further, it has been held that where there is a carefully devised statutory scheme for protection of tenants which
objectively justifies making an order for possession, the court will not act incompatibly with Convention rights in
ordering possession in accordance with scheme and the court will not usually be required to make a detailed inquiry into
whether there has been a breach of the defendant's human rights in any individual case1. If the statutory scheme is itself
incompatible with Convention rights, then this will provide no substantive defence to the action for possession: the
tenant's remedy will be to seek a declaration of incompatibility2. In addition to the possible effect of the Convention on
the landlord's right to possession, under art 6 of the Convention parties to proceedings are entitled to a fair trial3.
HR A[9723.1]
Page 612
1 See Sheffield City Council v Smart [2002] EWCA Civ 4 [2002] All ER (D) 226 (Jan); Royal Borough of Kensington and Chelsea v
O'Sullivan [2003] EWCA Civ 371; see also R (on the application of Gangera) v Hounslow London Borough Council [2003] EWHC 794
(Admin) Moses J. See too Hounslow London Borough Council v Adjei [2004] EWHC 207 (Ch), [2004] 2 All ER 636 (Pumfrey J). See
generally Lambeth LBC v Kay; Price v Leeds CC [2006] UKHL 10.
2 See Human Rights Act 1998, ss 4 and 6. Lambeth LBC v Kay; Price v Leeds CC [2006] UKHL 10 at para [114].
3 European Convention on Human Rights, art 6; compare St Brice v Southwark London Borough Council [2001] EWCA Civ 1138, [2002]
1 WLR 1537 (HR A[9884] below).
Page 613
Actions for possession: conduct of litigation
7 Actions for possession: conduct of litigation
HR A[9724]
Like other litigation, claims for possession by landlords against tenants (or former tenants) are governed by the Civil
Procedure Rules. It is not the purpose of this work to summarise and analyse these Rules generally. Some familiarity of
the reader with these Rules is assumed. It is proposed simply to draw attention to particular features of civil procedure
which are peculiar to claims by landlords to recover possession from tenants.
(a) General jurisdiction and procedure
HR A[9725]
Unless otherwise provided by statute1, a claim for possession may be commenced either in the High Court or in the
county court. A county court generally has jurisdiction to hear and determine any action for the recovery of land and
any action in which the title to any hereditament comes into question2. Similarly, a county court has jurisdiction to hear
and to determine any action founded in contract or tort: actions for rent and mesne profits may thus be joined with an
action for possession in a county court3. The procedure which governs claims for possession is found in Part 55 of the
Civil Procedure Rules 4.
HR A[9726]
1 See para HR A[9731] below for examples of cases where the county court has exclusive jurisdiction.
2 County Courts Act 1984, s 21(1) as amended by the High Court and County Courts Jurisdiction Order 1991, SI 1991/724.
3 CCA 1984, s 21(2).
4 The procedures under CPR, Pt 55 came into effect on 15 October 2001.
(b) The court in which proceedings should be commenced
HR A[9727]
The claim must be started in the county court for the district in which the land is situated unless the claimant files with
his claim form a certificate stating the reasons for bringing the claim in that court verified by a statement of truth1 or an
enactment provides otherwise2.
Page 614
HR A[9728]
1 For statements of truth see CPR 22.1(1).
2 CPR 55.3(1), (2).
HR A[9729]
Except where the court does not have jurisdiction, possession claims should normally be brought in the county court1.
Only exceptional circumstances justify starting a claim in the High Court2. If a claimant starts a claim in the High Court
and the court decides that it should have been started in the county court, the court will normally either strike the claim
out or transfer it to the county court on its own initiative and will normally disallow the costs of starting the claim in the
High Court and of any transfer3. Circumstances which may, in an appropriate case, justify starting a claim in the High
Court are if:
(a) there are complicated disputes of fact;

(b) there are points of law of general importance; or
(c) the claim is against trespassers and there is a substantial risk of public disturbance or of serious
harm to persons or property which properly require immediate determination4.
The value of the property and the amount of any financial claim may be relevant circumstances, but these factors alone
will not normally justify starting the claim in the High Court5.
HR A[9730]
1 CPR, Pt 55 PD, para 1.1.
HR A[9731]
The county court has exclusive jurisdiction in the context of actions by possession by landlords where the landlord is
seeking leave to re-enter under the Leasehold Property (Repairs) Act 19381. The county court also has exclusive
jurisdiction in cases where an order of 'the court' is required under the Protections from Eviction Act 19772.
Page 615
HR A[9732]
1 For the definition of 'court', see the Leasehold Property (Repairs) Act 1938, s 6. See also para HR A[20165].
2 For the definition of 'court', see the Protection from Eviction Act 1977, s 9(1). See also para HR C[1856].
(c) Claim form and form of statement of case
HR A[9733]
The claim form and form of defence sent with it must be in the forms set out in the relevant practice direction1. The
particulars of claim must be filed with the claim form2. The relevant practice direction provides that in a possession
claim the particulars of claim must3:
(a) identify the land to which the claim relates;

(b) state whether the claim relates to residential property;
(c) state the ground on which possession is claimed;
(d) give full details about any mortgage or tenancy agreement; and
(e) give details of every person who, to the best of the claimant's knowledge, is in possession of the
property.
HR A[9734]
1 CPR 55.3(5).
2 CPR 55.4.
(d) Claim form: residential property let on a tenancy
HR A[9735]
Where residential property is let on a tenancy, if the claim includes a claim for non-payment of rent the particulars of
claim must set out1:
(a) the amount due at the start of the proceedings;

(b) in schedule form, the dates when the arrears of rent arose, all amounts of rent due, the dates and
Page 616
amounts of all payments made and a running total of the arrears;

(c) the daily rate of any rent and interest;
(d) any previous steps taken to recover the arrears of rent with full details of any court proceedings;
and
(e) any relevant information about the defendant's circumstances, in particular:
(i) whether the defendant is in receipt of social security benefits, and

(ii) whether any payments are made on his behalf directly to the claimant under the Social
Security Contributions and Benefits Act 1992.
HR A[9736]
HR A[9737]
Further, in such circumstances, if the claimant knows of any person (including a mortgagee) entitled to claim relief
against forfeiture as underlessee under the Law of Property Act 1925, s 146(4) (or in accordance with the Supreme
Court Act 1981, s 38 or the County Courts Act 1984, s 138(9C))1:
(a) the particulars of claim must state the name and address of that person; and
(b) the claimant must file a copy of the particulars of claim for service on him.
HR A[9738]
(e) The hearing date
HR A[9739]
The court will fix a date for the hearing when it issues the claim form1. In possession claims (other than possession
claims against trespassers2) the hearing date will be not less than 28 days from the date of issue of the claim form3 and
the standard period between the issue of the claim form and hearing will be not more than eight weeks4. In possession
claims (other than proceedings against trespassers) the defendant must be served with the claim form and particulars of
claim not less than 21 days before the hearing date5. Provision exists for the extension or shortening of these periods6.
Particular consideration should be given to the exercise of this power if7:
(a) the defendant, or a person for whom the defendant is responsible, has assaulted or threatened to
Page 617
assault the claimant, a member of the claimant's staff or another resident in the locality; or
(b) there are reasonable grounds for fearing such an assault; or
(c) the defendant, or a person for whom the defendant is responsible, has caused serious damage or
threatened to cause serious damage to the property or to the home or property of another resident in the
locality.
If, in such circumstances, the case cannot be determined at the first hearing date, the court will consider what steps are
needed finally to determine the case as quickly as reasonably practicable8.
HR A[9740]
1 CPR 55.5(1).
2 See CPR 55.5(2).
3 CPR 55.5(3)(a).
4 CPR 55.5(3)(b).
5 CPR 55.5(3(c).
6 See CPR 3.1(2)(a).
7 CPR, Pt 55 PD, paras 3.1 and 3.2.
(f) The hearing and evidence
HR A[9741]
At the date fixed for the hearing or at any adjournment of that hearing, the court may:
(a) decide the claim; or

(b) give case management directions1.
Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions will be
given and will include allocation of the claim to a track or directions to enable it to be allocated to a track2. Except
where the claim is allocated to the fast track or to the multi-track (or the court orders otherwise) any fact that needs to be
proved by the evidence of witnesses at a hearing may be proved by evidence in writing3. Except where the possession
claim is one against trespassers4, all witness statements must be filed and served at least two days before the hearing5.
Where the claimant serves the claim form and particulars of claim he must produce at the hearing a certificate of service
Page 618
of those documents6.
HR A[9742]
1 CPR 55.8(1).
2 CPR 55.8(2).
3 CPR 55.8(3).
4 See CPR 55.8(5).
5 CPR 55.8(4).
6 CPR 55.8(6).
HR A[9743]
Each party should, wherever possible, include all the evidence he wishes to present in his statement of case, verified by
a statement of truth1. If relevant, the claimant's evidence should include the amount of any rent arrears and interest on
those arrears2. These amounts should, if possible, be up to date to the date of the hearing (if necessary by specifying a
daily rate of arrears and interest)3. Although witness statements must be filed at least two days before the hearing,
evidence of arrears of rent and arrears may be brought up to date orally or in writing on the day of the hearing if
necessary4. If relevant, the defendant should give evidence of:
(a) the amount of any outstanding social security or housing benefit payments relevant to rent; and
(b) the status of any claims for social security or housing benefit about which a decision has not yet
been made, and any applications to appear or to review a social security benefit decision where that
appeal or review has not yet concluded5.
If the maker of a witness statement does not attend a hearing and the other party disputes material evidence contained in
his statement, the court will normally adjourn the hearing so that oral evidence can be given6.
HR A[9743.1]
1 CPR 55.8(6).

Page 619
(g) Allocation
HR A[9743.2]
When the court allocates the track for a possession claim1, although the court will have regard to the financial value of
the property, the financial value of the property will not necessarily be the most important factor in deciding the track
and the court may direct a possession claim be allocated to the fast track2. The court will have regard to the nature of
the remedy sought, the likely complexity of the facts, law or evidence, the number of parties, the value of any
counterclaim or other part 20 claim and the complexity of any matters relating to it, the amount of oral evidence which
may be required, the importance of the claim to persons who are not parties to the proceedings, the views expressed by
the parties and the circumstances of the parties3. The court will also have regard to the amount of any arrears of rent,
the importance to the defendant of retaining possession of the land and the importance of vacant possession to the
claimant4.
HR A[9743.3]
1 See generally CPR, Pt 26.
2 See CPR 26.8 and 55.9(1).
3 See CPR 26.8 and 55.9(1).
4 CPR 55.9(1).
HR A[9743.4]
The court will only allocate possession claims to the small claims track if all the parties agree1. Where a possession
claim has been allocated to the small claims track the claim shall be treated, for the purposes of costs, as if it were
proceeding on the fast track except that the trial costs will be in the discretion of the court and shall not exceed the
amount of fast track costs if the value of the claim were up to £3,0002. Alternatively, where all the parties agree, the
court may, when it allocates the claim, order that the rule relating to costs on the small claims track applies3.
HR A[9744]
1 CPR 55.9(2).
Page 620
2 CPR 55.9(3).
3 CPR 55.9(4).
Page 621
Parties, service and special procedures
8 Parties, service and special procedures
(a) Parties
HR A[9745]
The proper claimant in an action to recover land which is the subject of a lease which has been forfeited or has expired,
is the person entitled in reversion immediately expectant on the determination of the term1 but it may be the person
entitled, subject to the term, to the income of the land or any part thereof2.
HR A[9746]
1 See the Law of Property Act 1925, s 141(1); see too Landlord and Tenant (Covenants) Act 1995.
2 LPA 1925, s 141(2).
HR A[9747]
Usually, the claimant must have the legal estate vested in him; or if he relies on an equitable right the owner of the legal
estate should be joined1.
HR A[9748]
1 Allen v Woods (1893) 68 LT 143, CA; but see Antrim County Land, Building and Investment Co Ltd v Stewart [1904] 2 IR 357; and as
to mortgagors, see the Law Property Act 1925, s 98.
HR A[9749]
The proper persons to be made defendants are usually the persons in actual possession1. But this is not a fixed rule, and
regard should be had to all the circumstances. Thus, if a subtenant is in possession after the determination of a lease, the
lessor may sue either the lessee or the sublessee or both2. Mortgagees by subdemise need not be joined as defendants3.
Parties may be added in existing proceedings either on the court's initiative or on the application of an existing party.
Such an application should be supported by evidence setting out the proposed new party's interest or connection with
the claim4. That the proposed party is in possession of the land in question and will be affected by the order for
possession will be a sufficient interest.
Page 622
HR A[9750]-[9760]
1 Compare Works Comrs v Hull [1922] 1 KB 205.
2 Berton v Alliance Economic Investment Co [1922] 1 KB 742 at 759; Minet v Johnson (1890) 63 LT 507; if the object of the action is to
make the lessee do repairs the costs of adding subtenants unnecessarily will be disallowed: Geen v Herring [1905] 1 KB 152.
3 Egerton v Jones [1939] 2 KB 702, [1939] 3 All ER 889, CA but see RSC Ord 6, r 2 and CCR Ord 3.3.
4 See generally CPR 19.1, 19.3 and Pt 19 PD 1.1-1.5. Where a husband and wife were secure tenants under Pt IV of the Housing Act 1985
an order for possession made with the consent of the husband alone was set aside and the wife joined as a defendant: Wandsworth London
Borough Council v Fadayomi [1987] 3 All ER 474, [1987] 1 WLR 1473, CA.
HR A[9761]
If the tenant is sued for possession by a person claiming adversely to the landlord, he must give notice to the landlord or
his bailiff or receiver1 and the court may order the landlord to be added as a defendant: application for such an order
should be made on notice2.
HR A[9762]
1 Law of Property Act 1925, s 145 and County Courts Act 1984, s 137. If the tenant fails to give notice, he is liable to forfeit to the person
of whom he holds the premises an amount equal to the value of three years' improved or rack rent of the premises, to be recovered in any
court having jurisdiction in respect of claims of such amount. The rent is not the rent reserved, but such a rent as the premises could fairly be
let at the time of service of the rent or summons: Crocker v Forthergill (1819) 2 B & Ald 652, decided on similar words in the Distress for
Rent Act 1737, s 12, now repealed.
2 CPR 19.1, 19.3 and Pt 19 PD 1.1-1.5. The landlord must rely on his own title and cannot set up any defect in the plaintiff's title as
against the tenant: Doe d Davis v Creed (1829) 5 Bing 327; Doe d Mee v Litherland (1836) 4 Ad & El 784.
(b) Service
HR A[9763]
The claim form and particulars of claim in an action for possession must be served as in any other action1. Where it
appears to the court that there is good reason to authorise service by a method not permitted by CPR, the court may
make an order permitting service by an alternative method. An application for an order permitting service by an
alternative method must be supported by evidence and may be made without notice2. Where no one is in possession of
land this power may be used to allow service of a claim form by fixing it to a conspicuous part of the land3.
HR A[9764]
Page 623
1 See CPR, Pt 6 (see Sch 1 and RSC Ord 11 regarding service out of the jurisdiction). The mere existence of a continuing legal
relationship of landlord and tenant does not of itself oblige the parties to ensure that they have in place a system for receiving
communications relating to litigation in the event that litigation occurs: Estate Acquisition & Development Ltd v Wiltshire [2006] EWCA
Civ 533.
2 See CPR 6.8.
3 This was formerly expressly permitted under RSC Ord 10, r 4.
(c) Accelerated procedures
HR A[9765]
In addition to the procedures available in other litigation1, the following should be noted in relation to assured and
assured shorthold tenancies and in relation to trespassers.
HR A[9766]
1 For example, CPR 3.4 and 3.5 (orders striking out statements of case), CPR Pt 12 (default judgment -- see 12.4(2) CPR Pt 24 (summary
judgment; but this is not available when the proceedings are for possession of residential premises against a tenant or a person holding over
after the end of his tenancy whose occupancy is protected under the Rent Act 1977 or the Housing Act 1988: CPR 24.3).
(i) Assured and assured shorthold tenancies
HR A[9767]
In certain cases where possession is claimed from an assured tenant or an assured shorthold tenant, a district judge may
make an order for possession without a hearing1.
HR A[9768]-[9800]
1 See CPR 55.11-19.
(ii) Trespassers
HR A[9801]
Within CPR Pt 55 there are special accelerated procedures governing 'possession claims against trespassers'. A
Page 624
'possession claim against trespassers' means a claim for the recovery of land which the claimant alleges is occupied only
by a person or persons who entered or remained on the land without the consent of a person entitled to possession of
that land but does not include a claim against a tenant or sub-tenant whether his tenancy has been terminated or not1. It
was held in relation to the analogous provisions available under the now superceded Rules of the Supreme Court 1965,
Ord 113 and the County Court Rules 1981, Ord 24 that the summary prcedure was available to a head-landlord against
unlawful sub-tenants2 and also against persons who entered possession by virtue of a licence once the licence had been
determined3.
HR A[9802]
1 CPR 55.1.
2 See Moore Properties Ilford Ltd v McKeon [1977] 1 All ER 262, [1976] 1 WLR 1278.
3 See Greater London Council v Jenkins [1975] 1 All ER 354, [1975] 1 WLR 155, CA. See also generally, concerning the former
procedures, McPhail v Persons Unknown [1973] Ch 447; City of Westminster Assurance Co v Ainis (1975) 29 P & CR 469; University of
Essex v Djemal [1980] 2 All ER 742; Cooper v Varzdari (1986) 18 HLR 299, CA; Crancour v Da Silvaesa [1986] 1 EGLR 80.
(d) Interim payments
HR A[9803]
In addition to its other powers1, the court may make an order for an interim payment where a claimant is seeking an
order for possession of land (whether or not any other order is sought) and the court is satisfied that, if the case went to
trial, the defendant would be held liable (even if the claim for possession fails) to pay the claimant a sum of money for
the defendant's occupation and use of the land while the claim for possession was pending2. It is clear that by making
such an application a claimant will not be acknowledging the right of the defendant to remain in occupation;
accordingly, the claimant cannot be prejudiced by such an order3. The court, however, must not order an interim
payment of 'more than a reasonable proportion of the likely amount of the final judgment4'. Further, the court must take
into account any relevant set-off or counterclaim5. A claimant may not apply for an order for an interim payment before
the end of the period for filing an acknowledgment of service6. The application must be made with notice and supported
by evidence7.
HR A[9804]-[9808]
1 See generally CPR 25.6-25.9 and PD.
2 CPR 25.7(1)(d).
3 Compare the express provisions under RSC Ord 29, r 12.
4 CPR 25.7(4).
Page 625
5 CPR 25.7(5)(b).
6 CPR 25.6(1).
7 CPR 25.6(3); PD 2.1-2.4.
HR A[9809]
If the tenant fails to satisfy a judgment for an interim payment, his defence should not be struck out but enforcement
proceedings should be taken by the plaintiff for ensuring payment1.
HR A[9810]-[9820]
1 H H Property Co Ltd v Rahim [1987] 1 EGLR 52, CA.
(e) Juries
HR A[9821]
In proceedings in the county court there can be no jury where proceedings arise under the Rent Acts, Pts I to III of the
Rent (Agriculture) Act 1976, Pt I of the Protection from Eviction Act 1977 or under Pt I of the Housing Act 1988 or in
any appeal to the county court under Housing Act 1985 or under Pt I of the Housing Act 19881. In all other proceedings
in a county court the trial is to be without a jury unless the court otherwise orders on an application made by a party2.
Similarly, in the High Court proceedings will be without a jury, unless the court orders otherwise under the Rules of the
Supreme Court3. It is hard to envisage circumstances where a jury would be appropriate in a case where possession is
the primary issue.
HR A[9822]
2 CCA 1984, s 66(2). See CPR 26.11.
3 See RSC Ord 33, r 5 and Supreme Court Act 1981, s 69. See CPR 26.11.
(f) Appeals
HR A[9823]
Page 626
Briefly, an appeal from a master or District Judge of the High Court lies to a judge of the High Court1; an appeal from a
District Judge of the county court lies to a judge of the county court2; an appeal from a decision of the county court lies
to the High Court3. Where, however, a case has been allocated to the multi-track or where the claim is made in
specialist proceedings4, an appeal lies to the Court of Appeal5. Where the decision is one made on appeal, an appeal
lies to the Court of Appeal6. An appeal from a judge of the High Court lies to the Court of Appeal. Permission is
required for every appeal from a decision of a judge of a county court or the High Court7.
HR A[9824]
1 Access to Justice Act 1999 (Destination of Appeal) Order 2000, SI 2000/1071, art 1.
4 See CPR Pt 49.
7 See the Supreme Court Act 1981, s 16 and County Courts Act 1984, s 77 as amended by the Access to Justice Act 1999 (Destination of
Appeal) Order 2000, SI 2000/1071; CPR Pt 52.3 (permission is required except where the appeal is against (i) a committal order; (ii) a
refusal to grant habeas corpus or (iii) a secure accommodation order made under the Children Act 1989, s 25).
HR A[9825]-[9827]
Further, in proceedings in which possession is claimed of any premises there is no right to appeal on any question of
fact1 if by virtue of:
(a) Landlord and Tenant Act 1954, s 13(4);

(b) Rent (Agriculture) Act 1976, Sch 4, Cases III to IX;
(c) Rent Act 1977, s 98 as it applies to Cases 1 to 6 and 8 and 9 in Sch 15 or that section as extended
or applied by any other enactment;
(d) Rent Act 1977, s 99 as it applies to Cases 1 to 6 and 9 in Sch 15;
(e) Housing Act 1985, s 84(2)(a);
(ee) Housing Act 1988, s 7 as it applies to the grounds in Sch 2, Pt II;
(ef) Local Government and Housing Act 1989, Sch 10, para 3(4); or
(f) any other enactment;
the court can only grant possession on being satisfied that it is reasonable to do so2.
HR A[9828]
Page 627
1 See Piper v Harvey [1958] 1 QB 439.
2 County Courts Act 1984, s 77(6), as amended by Housing (Consequential Provisions) Act 1985, Sch 4, para 57; Housing Act 1988 Sch
17, para 35(2); Local Government and Housing Act 1989, Sch 11, para 60.
Page 628
Orders for possession and execution
9 Orders for possession and execution
(a) High Court
(i) judgment or order
HR A[9829]
A judgment or order takes effect from the day when it is given or made or such later date as the court may specify1. An
order which requires an act to be done (other than a judgment or order for payment of money) must specify the time
within which the act should be done2.The High Court has inherent jurisdiction to suspend the date on which possession
is to be given where the defendant has no statutory right to remain3. The restrictions imposed by the Housing Act 1980,
s 894 apply to the High Court in the exercise of this discretion5. Likewise, the restrictions imposed on the making of an
order for possession under the Rent Act 1977 and the Housing Act 1988 do apply to the High Court; thus an order for
possession will be a nullity unless the court has considered the prerequisites for making such an order (eg whether it is
reasonable to make an order for possession under the Rent Act 1977, s 98(1)6): accordingly, an order for possession in
default cannot be made in such circumstances. No interlocutory order for possession may be made7.
HR A[9830]-[9842]
1 CPR 40.7.
2 CPR Pt 40 PD 8.1.
3 Sheffield Corpn v Luxford [1929] 2 KB 180; Jones v Savery [1951] 1 All ER 820; J & F Stone Lighting and Radio Ltd v Levitt [1947]
AC 209, 216; McPhail v Persons Unknown [1973] Ch 447; Bibby v Partap [1996] 1 WLR 931.
4 See Housing Act 1980, s 89 at para HR A[20200].
5 Hackney London Borough Council v Side by Side (Kids) Ltd [2003] EWHC 1813 (QB), [2004] 2 All ER 373, not following Bain & Co v
Church Comrs for England [1989] 1 WLR 24. See too Procureur v Alexander [2004] EWHC 607 (Ch) (Lewison J).
6 Peachey Property Corpn Ltd v Robinson [1967] 2 QB 543.
7 Manchester Corpn v Connolly [1970] Ch 420, CA. But see the possibility of making interim possession orders under Criminal Justice
and Public Order Act 1994, ss 61-8.
HR A[9843]
The court is unlikely to set aside an order for possession duly made when a third party has acquired an interest in the
Page 629
property in good faith from the person in whose favour the order was made1. Where, however, an order for possession
is set aside2, the person executing the order will not be liable for damages to the tenant for acts lawfully carried out
pursuant to the order3.
HR A[9844]
1 Rhodes Trust v Khan [1980] 1 EGLR 64.
2 In deciding whether to set aside an order duly made in the absence of the tenant, the reason for the absence of the tenant will be the
predominant consideration: see Lambeth London Borough Council v Henry [2000] 06 EG 169, CA.
3 Hillgate House Ltd v Expert Clothing Services and Sales Ltd [1987] 1 EGLR 65, Browne-Wilkinson V-C; Botu v Brent London
Borough Council [2000] EGCS 34, CA.
(ii) writ of possession
HR A[9845]
Judgment for possession given by the High Court may be enforced by a writ of possession1. A writ of possession will
only be issued with the leave of the court2. The leave of the court will not be granted unless it is shown that every
person in actual possession of the whole or any part of the land has received such notice of the proceedings as appears
to the court sufficient to enable him to apply to the court for such relief as he may be entitled3. An application for leave
is made ex parte supported by an affidavit containing the information required by the Rules of Court4.
HR A[9846]
1 CPR Sch 1, RSC Ord 45, r 3.
2 RSC Ord 45, r 3(2).
3 RSC Ord 45, r 3(2).
4 RSC Ord 45, r 3(2). For procedure, see Fleet Mortgage and Investment Co Ltd v Lower Maisonette, 46 Eaton Place Ltd [1972] 2 All ER
737; Practice Direction [1972] 1 All ER 576.
HR A[9847]
The benefit of a judgment will not pass on a conveyance or assignment of the plaintiff's estate or interest in land in the
absence of express assignment1; but the writ may be issued notwithstanding that the landlord's estate has terminated,
unless it would be unjust or futile2.
Page 630
HR A[9848]
1 Chung Kwok Hotel Co Ltd v Field [1960] 3 All ER 143, CA. But an order can be enforced by personal representatives of a deceased
plaintiff or the beneficiaries of his will: Goldthorpe v Bain [1952] 2 QB 455.
2 Knight v Clarke (1885) 15 QBD 294, CA.
HR A[9849]
A landlord who has obtained an order for possession is not bound to obtain a writ of possession but can re-enter
provided that he does so peaceably1 (except where he is restricted from doing so by the Protection from Eviction Act
1977 or other statutes2).
HR A[9850]-[9860]
1 Aglionby v Cohen [1955] 1 QB 558.
2 Haniff v Robinson [1993] QB 419; see Division C.
HR A[9861]
A writ of execution once issued remains in force, if unexecuted for one year only but it may, with the leave of the court
or judge, be renewed for a further year and so on from time to time1. Where the court grants leave to issue a writ of
execution and the writ is not issued within one year after the date of the order granting such leave, the order ceases to
have effect, without prejudice, however, to the making of a fresh order2.
HR A[9862]
1 CPR Sch 1, RSC Ord 46, r 8.
2 RSC Ord 46, r 2(3).
(b) County court
(i) judgment or order
HR A[9863]
Page 631
In any proceedings in a county court, the court may make any order which could be made by the High Court if the
proceedings were in the High Court1.
HR A[9864]-[9866]
1 County Courts Act 1984, s 38.
HR A[9867]
If the plaintiff establishes his entitlement to possession he will be entitled to an order for possession which will be made
in one of the forms prescribed1. However, where the court can only make an order for possession where it is satisfied
that it is reasonable to make such an order, the plaintiff will not be able to obtain such an order merely by the consent of
the defendant: admissions must be made by the defendant or evidence adduced sufficient to establish that it is
reasonable to make such an order2.
HR A[9868]
1 County Court (Forms) Rules 1982.
2 R v Bloomsbury and Marylebone County Court, ex p Blackburne [1985] 2 EGLR 157.
HR A[9869]
The county court's powers to fix a date for possession are circumscribed by statute: the giving of possession is not to be
postponed (whether by the order or any variation, suspension or stay of execution) to a date later than 14 days after the
making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to
be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the
order1. These restrictions do not apply if2: (a) the order is made in an action by a mortgagee for possession; (b) the
order is made in an action for forfeiture of a lease3; (c) the court had power to make the order only if it considered it
reasonable to make it4; (d) the order relates to a dwelling house which is the subject of a restricted contract (within the
meaning of s 19 of the Rent Act 19775); or (e) the order is made in proceedings under a rental purchase agreement6.
HR A[9870]-[9880]
1 Housing Act 1980, s 89(1). The provisions of this section affect the court's inherent discretion to postpone the date of possession: cf
Sheffield Corpn v Luxford [1929] 2 KB 180.
2 See the Housing Act 1980, s 89(2).
3 Cf the provisions of the County Courts Act 1984, ss 138 and 139.
Page 632
4 For instance, under the Rent Act 1977, s 98(1): see HR C[1041]; Housing Act 1988, s 7(4): see HR C[2066] or the Housing Act 1985, s
84(2): see HR D[632].
5 See HR C[452].
6 See the Housing Act 1980, s 88(4), and see generally s 88 for the powers of the court in relation to such agreements.
HR A[9881]
The costs of and incidental to proceedings are in the discretion of the court and will be ordered in accordance with usual
judicial principles1.
HR A[9882]
1 See CPR Pts 43-48.
(ii) warrant of possession
HR A[9883]
Judgment for possession is enforced by a warrant for possession1. The warrant will cover all persons found on the land
at the date of execution2. The warrant's duration will be such as may be fixed by or in accordance with the county court
rules3: the duration of the warrant for possession if unexecuted is 12 months beginning with the date of its issue but
may, before its expiration, by the leave of the court be renewed from time to time for 12 months at any one time4.
Where ss 3 and 4 of the Protection from Eviction Act 1977 apply, proceedings in the county court are the only method
by which the landlord can enforce his right to possession5. Once executed, the court has no general power to set aside
the warrant for possession6 unless the order on which the order is issued is itself set aside, the warrant has been
obtained by fraud or there has been an abuse of process or oppression in its execution7.
HR A[9884]
1 CPR Sch 2, CCR 1981, Ord 26, r 17. See Scott-James v Chehab [1988] 2 EGLR 61, CA. A warrant may not be executed on Sunday,
Christmas Day or Good Friday except in a case of urgency with the leave of the court: CCR 1981, Ord 7, r 3. See also St Brice v Southwark
London Borough Council [2001] EWCA Civ 1138, [2002] 1 WLR 1537 (considering the application of arts 6 and 8 of the European
Convention on Human Rights to possession proceedings and, in particular, the granting of warrants for possession). See Harrow London
Borough Council v Qazi [2003] UKHL 43, [2003] 4 All ER 461, concerning the impact of the European Convention on possession
proceedings and generally para HR A[9721] above.
2 R v Wandsworth County Court, ex p London Borough of Wandsworth [1975] 3 All ER 390, [1975] 1 WLR 1314.
3 County Courts Act 1984.

Page 633
4 CCR 1981, Ord 26, r 6.
5 Haniff v Robinson [1993] QB 419.
6 Scott-James v Chehab [1988] 2 EGLR 61, CA.
7 Peabody Donation Fund Governors v Hay (1986) 19 HLR 145; Leicester City Council v Aldwinckle (1991) 24 HLR 40; Hammersmith
and Fulham London Borough Council v Hill [1994] 2 EGLR 51; National and Provincial Building Society v Ahmed [1995] 2 EGLR 127,
[1995] 38 EG 138. See also Camden LBC v Akanni (1997) 29 HLR 845, CA; Jephson Homes Housing Association Ltd v Moisejevs [2001]
23 EGLR 14, CA; Ellis v Circle 33 Housing Trust Ltd [2005] PLSCS 164, CA; Mortgage express v Oni [2007] EWHC 371 (QB).
Page 634
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 15 Possession/C Recovery of
Land/10 Jurisdiction of county court in respect of derelict land
10 Jurisdiction of county court in respect of derelict land
HR A[9885]
By the Landlord and Tenant Act 1954, s 54, the county court is given power to determine the tenancy of derelict land.
This provision has already been dealt with1.
HR A[9886]
1 See para HR A[9470] and HR B[681] (determination of tenancies).

Page 635
Land/11 Procedure before magistrates
11 Procedure before magistrates
(a) Recovery of deserted premises
HR A[9887]
Where:
(a) there is a tenancy of lands, tenements, or hereditaments at a rack-rent, or at a rent of a full

three-quarters of the yearly value of the premises;
(b) a half-year's rent is in arrears1;
(c) the tenant has deserted the premises and left then uncultivated or unoccupied2; and
(d) there is no sufficient distress to meet the arrears of rent,
the premises can be recovered under statute3.
HR A[9888]
1 The Deserted Tenements Act 1817 altered the period of arrears from one year to half a year. It is not necessary that the landlord should
have an express power of re-entry: see Edwards v Hodges (1855) 15 CB 477 at 490; cf Ex p Pilton (1818) 1 B & Ald 369.
2 Where a tenant ceases to reside on premises for several months and leaves them without sufficient distress they are 'deserted', though a
servant is found on the premises (Ex p Pilton (1818) 1 B & Ald 369; Taylerson v Peters (1837) 7 Ad & El 110); it is otherwise when the
tenant's wife and children remained though without furniture (Ashcroft v Bourne (1832) 3 B & Ad 684).
3 Ie the Distress for Rent Act 1737, s 16.
HR A[9889]
In practice, virtually no use is made of these provisions. An ordinary action for possession based on the forfeiture of the
lease is usually more convenient; but these provisions apply even where there is no right of re-entry.
HR A[9890]-[9900]
Two or more justices, at the request1 of the landlord or his bailiff, view the premises2, and affix a notice of a second
view to take place not sooner than 14 days3. If on the second view the tenant does not appear and pay the rent in arrears,
or if there is not sufficient distress on the premises, the justices may put the landlord into possession4, and the lease, as
to the demise therein contained only, is thenceforth void. An appeal lay to the judges of assize of the respective
Page 636
counties, to the High Court in London or Middlesex, and to the judges of the Palatinate Courts in the counties Palatine5.
By virtue of the Courts Act 1971, appeal now lies to the Crown Court. A successful appeal gives no action for trespass
against the justices provided the statutory procedure has been followed6; though the landlord is liable if he has
improperly procured the interference of the magistrates7.
HR A[9901]
1 The request need not be on oath: Basten v Carew (1825) 3 B & C 649.
2 A metropolitan police magistrate may send a constable to view the premises (Metropolitan Police Courts Act 1840, s 13); but this power
cannot be exercised by the Lord Mayor or an Alderman at the Mansion House or Guildhall: Edwards v Hodges (1855) 15 CB 477. The
desertion of the premises, the absence of sufficient distress, and the non-appearance of the tenant are matters for the inspection and need not
be otherwise proved: Re Emmett (1850) 14 JP 530.
3 There must be 14 clear days: Creak v Brighton Justices (1858) 1 F & F 110.
4 If the magistrates are not satisfied that the case is within the statute an order of mandamus will not be issued to compel them to give
possession: Ex p Fulder (1840) 8 Dowl 535.
5 Distress for Rent Act 1737, s 17. Although the appeal is successful, the justices are not bound to restore possession unless so directed by
the order: R v Traill (1840) 12 Ad & El 761.
6 Basten v Carew (1825) 3 B & C 649; Ashcroft v Bourne (1932) 3 B & Ad 684.
7 See Basten v Carew (1825) 3 B & C 649 at 655.

Page 637
Land/12 Allotments and smallholdings
12 Allotments and smallholdings
HR A[9902]
The provisions of the Small Holdings and Allotments Act 1908 provide a mechanism for the determination of tenancies
of allotments held from councils1. The procedure is before magistrates.
HR A[9903]
1 See Small Holdings and Allotments Act 1908, s 30 (see HR F[502]).

Page 638
Land/13 Limitations on time for re-entry
13 Limitations on time for re-entry
(a) The new law: Land Registration Act 2002
HR A[9903.1]
The Land Registration Act 20021 creates a new code for determining when title is extinguished by reason of a
prolonged period of unlawful occupation. In short, the new regime does not depend on the application of a limitation
period to bar a cause of action but instead establishes a procedure by which a squatter can apply to be a registered
proprietor of registered land if he has been in adverse possession of the estate for a period of 10 years ending on the date
of application (whether or not the estate has been registered for the whole of the 10-year period)2. Such an application
may also be made by a person if (a) he has, in the period of six months ending on the date of the application, ceased to
be in adverse possession of the estate because of eviction by the registered proprietor, or a person claiming under the
registered proprietor (b) on the day before his eviction he was entitled to make an application on the basis that he had
been in adverse possession of the estate for the period of 10 years and (c) the eviction was not pursuant to a judgment
for possession3. An application to be registered as proprietor may not be made if the applicant is a defendant in
proceedings which involve asserting a right to possession of the land or if judgment for possession of the land has been
given against in the last two years4.The 10-year period is not a limitation period in that the registered proprietor is
entitled to object. Persons duly notified by the applicant of an application may give a counter-notice to the Land
Registrar within a prescribed period. If they fail to do so then the applicant is entitled to be entered in the register as the
new proprietor of the estate5. If a counter-notice is received by the registrar then the squatter may only be registered as
proprietor if one of three conditions is established, namely6:
(a) it would be unconscionable because of an equity by estoppel for the registered proprietor to seek to
dispossess the applicant and the circumstances are such that the applicant ought to be registered
proprietor;
(b) the applicant is for some other reason entitled to be registered as the proprietor of the estate; or
(c) (i) the land to which the application relates is adjacent to land belonging to the applicant, (ii) the
exact line of the boundary between the two has not been determined under the rule made under the Land
Registration Act 2002, s 60, (iii) for at least 10 years of the period adverse possession ending on the date
of the application, the applicant (or any predecessor in title) reasonably believed that the land to which
the application relates belonged to him; and (iv) the estate to which the application relates was registered
more than one year prior to the date of the application.
HR A[9903.2]
1 This Act came into force on 15 October 2003.
2 See LRA 2002, Sch 6, para 1(1), (4).
3 LRA 2002, para 1(2).

Page 639
4 LRA 2002, para 1(3). See also para 8 for disabilities which apply under the Limitation (Enemies and War Prisoners) Act 1945 and for
persons with mental disability etc.
5 LRA 2002, Sch 1, para 4.
6 LRA 2002, para 5.
HR A[9903.3]
If the squatter is successful in his application to register, it is provided1 that:
(a) title by virtue of adverse possession which the applicant had at the time of the application is
extinguished;
(b) the registration of a person in this manner does not affect the priority of any interest in the estate2;
and
(c) where a person is registered under the Schedule as the proprietor of an estate, the estate is vested in
him free of any registered charge affecting the estate immediately before his registration. This does not
apply where registration as proprietor is in pursuance of an application determined by reference to one of
the three conditions set out above (under para 5 of the Schedule).
HR A[9903.4]
1 LRA 2002, para 9.
2 LRA 2002, subject to para 9(3).
HR A[9903.5]
Detailed analysis of the Land Registration Act 2002, Sch 6 is outside the scope of this work.
It should be noted, however, that where a registered estate in land is held in trust for a person by virtue of the Land
Registration Act 1925, s 75(1)1 immediately before 15 October 2002 when the new regime came into force, he is
entitled to be registered as the proprietor of the estate. Such a person has a defence to any action for possession of land
(in addition to any other defence he may have) if he is entitled for this reason to be registered as the proprietor of an
estate in land2. Where in an action of possession of land a court determines that a person is entitled to a defence on this
ground, the court must order the registrar to register him as the proprietor of the estate in relation to which he is entitled
to be so registered3. Accordingly, the law as it existed prior to the coming into force of the Land Registration Act 2002
remains relevant (even in the case of registered land). The following paragraphs summarise the main aspects of this law
as it specifically affects the law of landlord and tenant.
HR A[9903.6]
Page 640
1 See para HR A[9948] below.
2 LRA 2002, Sch 12, para 18(2).
3 LRA 2002, para 18(3).
HR A[9903.7]
Further, a person is in 'adverse possession' of an estate for the purposes of the LRA 2002 if a period of limitation under
s 15 of the Limitation Act 1980 would have run in his favour (but for the disapplication of these provisions)1. A person
is also to be regarded for those purposes as having been in adverse possession of an estate in land (a) where he is the
successor in title to an estate in the land, during any period of adverse possession by a predecessor in title to that estate
or (b) during any period of adverse possession by another person which comes between, and is continuous with, periods
of adverse possession of his own. Accordingly, case law under the 1980 Act remains relevant.
HR A[9903.8]
1 LRA 2002, Sch 6, para 11; see s 96. Note also para 11(3).
(b) Generally: the law apart from the operation of the Land Registration Act 2002
HR A[9904]
No action may be brought for the recovery of land after the expiry of 12 years from the date on which the right of action
first accrued to him or the person through he claims1. In the case of the Crown (including cases where land is vested in
the Crown for administrative purposes)2 or a spiritual or eleemosynary corporation, the 12 years is extended to 30
years3; and in the case of an action by the Crown to recover the foreshore, the period is 60 years4. An administrator of
the estate of a deceased person is treated as claiming as if there was no interval of time between the death of the
deceased and the grant of letters of administration5. Where a person who brings the action or the person through whom
the person who brings the action claims has previously been in possession of land, the right of action accrues on the date
of the dispossession6 or the discontinuance of possession. So far as the right to possession upon the determination of a
lease is concerned, special considerations apply.
HR A[9905]
1 Limitation Act 1980, s 15(1). See Lodge v Wakefield Metropolitan City Council [1995] 2 EGLR 124, [1995] 38 EG 136, CA.
2 Secretary of State for Foreign and Commonwealth Affairs v Tomlin (1990) Times, 4 December.
3 Limitation Act 1980, Sch 1, para 1. See Hill v Transport for London [2005] EWHC 856 (Ch) [2005] 30 EG 90.
Page 641
4 LA 1980, Sch 1, para 11(1).
5 LA 1980, s 26.
6 LA 1980, Sch 1, para 2. See generally, Buckinghamshire County Council v Moran [1989] 2 All ER 225, CA and JA Pye (Oxford) Ltd v
Graham [2002] UKHL 30, [2003] 1 AC 419. But see J A Pye (Oxford) Ltd v United Kingdom [2005] 49 EG 90, ECtHR concerning the
incompatibility of the Limitation Act 1980 and Land Registration Act 1925, s 75 with Article 1 of the First Protocol to the European
Convention on Human Rights. See too Beaulane Properties Ltd v Palmer [2005] EWHC 1071 (Ch), [2005] 4 All ER 461.
Page 642
Land/14 Determination of leases: accrual of right of action
14 Determination of leases: accrual of right of action
(a) Generally
HR A[9906]
In cases where (a) the estate or interest claimed was an interest in reversion or remainder, or any other future estate or
interest and (b) no person has taken possession of the land by virtue of the estate or interest claimed, the right of action
to recover the land is treated as having accrued on the date on which the estate or interest falls into possession by the
determination of the preceding interest or estate1. Thus, the landlord's right of action to recover possession of land from
his tenant generally accrues when the tenancy determines2. Similarly, where premises are sublet, and after the
subtenancy determines the underlessee or a trespasser remains in possession, time does not begin to run against the
headlessor (or any new tenant claiming through the landlord) until the determination of the headlease3. However, where
the title of a tenant is extinguished by adverse possession, time will not start to run again if he acquires a new lease
pursuant to an option to renew contained in the existing lease4. Where a squatter on registered land acquires title against
a tenant, the squatter becomes entitled to be placed in the same relationship with the landlord as had previously been
enjoyed by the tenant: this entitlement may bind the landlord as an overriding interest5.
HR A[9907]
1 Limitation Act 1980, Sch 1, para 4.
2 See Doe d Davy v Oxenham (1840) 7 M & W 131; Chadwick v Broadwood (1840) 3 Beav 308. For equitable leases, see Warren v
Murray [1894] 2 QB 648; Drummond v Sant (1871) LR 6 QB 763; White and Wontner v Whitewood (1879) 13 TLR 409. See also J A Pye
(Oxford) Ltd v Graham [2002] UKHL 30, [2002] 3 WLR 221 (whether in circumstances holding over after expiration of licence was
adverse) and Williams v Jones [2002] EWCA Civ 1097, [2002] 40 EG 169 (former tenant holding over).
3 See Ecclesiastical Comrs for England v Treemer [1893] 1 Ch 166; Ecclesiastical Comrs of England and Wales v Rowe (1880) 5 App
Cas 736; Jessamine Investment Co v Schwartz [1978] QB 264.
4 Chung Ping Kwan v Island Development Co Ltd [1997] AC 38, [1996] 3 WLR 448.
5 Central London Commercial Estates Ltd v Kato Kagaku Ltd [1998] 46 EG 185; cf St Marylebone Property Co Ltd v Fairweather [1963]
AC 510, HL for the position when land is unregistered.
Page 643
Land/15 Determination of tenancies: accrual of causes of action: special cases
15 Determination of tenancies: accrual of causes of action: special cases
(a) Oral periodic tenancies
HR A[9908]
Special rules apply to tenancies from year to year or other period 'without a lease in writing'1. For these purposes a lease
will only be 'in writing' if it is created by a dispositive document: if a tenancy is simply evidenced in writing (eg by a
rent book), it will not be a tenancy in writing2. A tenant for years holding over on a periodic basis after the
determination of his fixed term can be within these provisions3.
HR A[9909]
1 Limitation Act 1980, Sch 1, para 5; Williams v Jones [2002] EWCA Civ 1097, [2002] 40 EG 169.
2 Moses v Lovegrove [1952] 2 QB 533; Long v Tower Hamlets Borough Council [1998] Ch 197, [1996] 2 All ER 683.
3 See Neall v Beadle (1912) 107 LT 646.
HR A[9910]-[9920]
A tenancy from year to year or other period without lease in writing is treated as being determined at the expiration of
the first year or other period; and accordingly the right of action of the person entitled to the land subject to the tenancy
is treated as having accrued at the date on which the tenancy is treated as being determined1. However, where any rent
has subsequently been received in respect of the tenancy, the right of action is treated as having accrued on the date of
the last receipt of rent2. In effect, as soon as the tenant ceases to pay rent, he becomes in adverse possession against his
landlord and the cause of action is treated as accruing to the landlord: this is so even where the tenant is protected by the
Rent Acts and the landlord was not entitled to possession without an order of the court3. However, if it is agreed that
the tenant should not pay rent, then possession will not be adverse to the landlord4. A mere payment of rent after the
landlord's title has been extinguished by limitation will not revive the landlord's title5.
HR A[9921]
1 Limitation Act 1980, Sch 1, para 5(1).
2 LA 1980, Sch 1, para 5(2).

Page 644
3 Moses v Lovegrove [1952] 2 QB 533, CA; Jessamine Investment Co v Schwartz [1978] QB 264, CA. See also Hayward v Chaloner
[1968] 1 QB 107; Lodge v Wakefield Metropolitan Borough Council [1995] 2 EGLR 124, [1995] 38 EG 136 CA; Price v Hartley [1995]
NPC 80, [1995] EGCS 74.
4 Smith v Lawson 75 P & CR 466.
5 Nicholson v England [1926] 2 KB 93 and see para HR A[9942] (acknowledgement).
(b) Tenancies at will
HR A[9922]
Prior to the Limitation Act 1980 the position of tenancies at will was more complicated. However, since that Act, the
right of action accrues on the date when the tenancy at will is determined1.
HR A[9923]
1 Limitation Act 1980, Sch 1, para 4.
(c) Tenancies at sufferance
HR A[9924]
Where after expiration of a term the tenant holds over 'on sufferance', the limitation period accrues at the expiration of
the term: the tenancy on sufferance is not a true tenancy since the landlord does not consent to the tenant's remaining in
occupation1.
HR A[9925]
1 See para HR A[150] for nature of tenancy on sufferance. See also Remon v City of London Real Property Co [1921] 1 KB 49 at 58. But
see Batsford Estates (1983) Co Ltd v Taylor [2005] EWCA Civ 489, [2005] 33 EG 68 for a case where permission to remain was implied so
that time for the purposes of the Limitation Act 1980 did not begin to run (and also Clowes Developments (UK) Ltd v Walters [2005] EWHC
669 (Ch), [2005] 17 EG 123 (CS)). However, see also Topplan Estates Ltd v Townley [2004] EWCA Civ 1369, [2005] 1 EGLR 89 where
time did run after the expiration of a licence).
(d) Forfeiture
HR A[9926]
Page 645
A right of action to recover land by virtue of a forfeiture or breach of condition is treated as having accrued on the date
on which the forfeiture was incurred or the condition broken1. However, this does not apply where the right has accrued
to a person entitled to an estate or interest in reversion or remainder (including the landlord) where the land was not
recovered by virtue of that right: in such circumstances, the cause of action accrues when the estate or trust falls into
possession2. Thus, if a landlord elects not to forfeit the lease, time does not run against him until the lease is otherwise
determined.
HR A[9927]
1 Limitation Act 1980, Sch 1, para 7(1).
2 LA 1980, Sch 1, para 7(2). Doe d Davy v Oxenham (1840) 7 M & W 131.
HR A[9928]
A right of action to recover land includes the right to enter possession1 and the bringing of an action for possession
includes the making of such entry2. Accordingly, the 12-year limitation period for the recovery of possession applies to
the exercise of rights of re-entry.
HR A[9929]
1 Limitation Act 1980, s 38(7).
2 LA 1980, s 38(7).
(e) Wrongful receipt of rent
HR A[9930]-[9940]
If a person is in possession of land by virtue of a lease in writing by which a rent of not less than £10 a year is reserved
and the rent is received by a person wrongfully claiming to be entitled to the reversion to the lease and no rent is
subsequently received by the reversioner rightfully entitled to the rent, then the right of the reversioner to recover the
land is treated as having accrued on the date when the rent was first received by the person wrongfully claiming to be so
entitled and not the date of determination of the lease1. In such a case no title is acquired by the tenant, but by the
person to whom he has paid the rent. Receipt by a person under a supposed title which is consistent with that of the
rightful owner in reversion will not be wrongful receipt2; but it is wrongful when a person claims an inconsistent title,
even if mistakenly3. It seems that where a stranger receives rent for a period less than 12 years and then ceases to
receive or claim it, the true landlord is not prevented from claiming possession even though he has not received rent for
more than 12 years4.
Page 646
HR A[9941]
1 Limitation Act 1980, Sch 1, para 6(1). These provisions do not apply to the Crown: LA 1980, Sch 1, para 6(2).
2 See Shaw v Keighron (1869) 3 IR Eq 574; see generally Lyell v Kennedy, Kennedy v Lyell (1889) 14 App Cas 437 at 460.
3 Williams v Pott (1871) LR 12 Eq 149 cf Laybourn v Gridley (1892) 61 LJ Ch 352.
4 Trustees, Executors and Agency Co Ltd v Short (1888) 13 App Cas 793, PC.
(f) Acknowledgement or part payment
HR A[9942]
Where any right of action to recover land has accrued, if the person in possession of the land acknowledges the title of
the person to whom the right of action has accrued the right shall be treated as having accrued on and not before the date
of acknowledgement1. For a document to constitute an acknowledgement of title, all that is required is that as between
the person in possession and the owner of the paper title, the former acknowledges that the latter has the better title to
the land: whether a document amounts to such an acknowledgment will depend upon the construction of the document
in the surrounding circumstances2. What is needed is a statement by or on behalf of the person in possession that is
reasonably understood by the owner as an acknowledgment from that person3. Acknowledgements can repeatedly
extend the limitation period; but once the limitation period has expired and the right of action barred, a subsequent
acknowledgement will not revive the cause of action4; however, an agreement or compromise between a person in
adverse possession and the true owner that the true owner has title will be binding even if made after the expiration of
the limitation period5.
HR A[9943]
1 Limitation Act 1980, s 29. See Centreprise Trust Ltd v Hackney London Borough Council [2004] PLSCS 156, ChD and Rehman v
Benfield [2006] EWCA (Civ) 1392. See too Ashe v National Westminster Bank plc [2007] EWHC 494 (Ch).
2 Edginton v Clark [1964] 1 QB 367, CA; Allen v Matthews [2007] EWCA Civ 216.
3 See Lambeth Borough Council v Bigden [2000] EWCA Civ 302.
4 Limitation Act 1980, s 29(7); see Nicholson v England [1926] 2 KB 93.
5 Colchester Borough Council v Smith [1992] Ch 421, CA.
HR A[9944]
For an acknowledgement to be valid it must be in writing and signed by the person making it1, although it may be made
Page 647
by an agent of the person by whom it is required to be made2.
HR A[9945]
1 Limitation Act 1980, s 30(1).
2 LA 1980, s 30(2).
(g) Postponement of limitation period
HR A[9946]
The running of the limitation period may be postponed where the person to whom the right has accrued is under a
disability1, where there has been fraud2 deliberate concealment3 or mistake4.
HR A[9947]
1 Limitation Act 1980, s 28.
2 LA 1980, s 32.
3 LA 1980, s 32.
4 LA 1980, s 32.
(h) Effect of expiry of limitation period
HR A[9948]
If the limitation period has expired, the true owner of the land is unable to recover possession; the expiration of the
limitation period extinguishes the title owner's title in favour of the title founded on adverse possession1. The person
whose title is founded on adverse possession may apply to have his title registered at HM Land Registry2. A person
who acquires title by adverse possession does not acquire his interest for value: he will thus obtain his title subject to
prior third party rights which bind the land3; such rights may exist in favour of the dispossessed owner4.
HR A[9949]
Page 648
1 See Limitation Act 1980, s 17. Under the Land Registration Act 1925, s 75 the estate is held in trust by the registered owner for the
person who has acquired title by adverse possession: see Central London Commercial Estates Ltd v Kato Kagaku Ltd (Axa Equity and Law
Assurance Society plc third party) [1998] 3 EGLR 55. Cf J A Pye (Oxford) Ltd v United Kingdom [2005] 49 EG 90, ECtHR.
2 Land Registration Act 1925, s 19.
3 Re Nesbitt & Potts' Contract [1906] 1 Ch 386.
4 Marshall v Taylor [1895] 1 Ch 641; Williams v Usherwood (1983) 45 P & CR 235 at 253-255.
HR A[9950]-[9960]
Where a tenant has lost his title by the operation of the Limitation Act 1980, the landlord has no right to recover
possession against the dispossessor unless or until the lease is determined1. However, where land is unregistered, it
seems that where a trespasser has, as against the tenant, acquired possession of a statutory title to the land and the tenant
surrenders the lease of the land to the lessor, the surrender confers a right of re-entry on the landlord entitling him to
possession against the trespasser on the date of surrender2. Where land is registered, the tenant against whom title has
been acquired holds the lease on trust for the squatter and the trusteeship will bind the freeholder if the tenant seeks to
surrender the leasehold interest3.
HR A[9961]
1 See Fairweather v St Marylebone Property Co Ltd [1963] AC 510, HL.
2 Fairweather v St Marylebone Property Co Ltd [1963] AC 510, HL.
3 Central London Commercial Estates Ltd v Kato Kagaku Ltd (Axa Equity and Law Assurance Society plc third party) [1998] 3 EGLR
55; see para HR A[9906] above.
HR A[9962]
A dispossessor of a tenant is not personally liable to the landlord on the tenant's covenants or as an assignee1 but is not
entitled to relief from forfeiture of the lease2.
HR A[9963]
1 Tichborne v Weir (1892) 67 LT 735; Taylor v Twinberrow [1930] 2 KB 16, 23, 28; Re Nisbet & Potts' Contract [1905] 1 Ch 391.
2 Tickner v Buzzacott [1965] Ch 426.
HR A[9964]
Page 649
The mere fact that land is inalienable or actionable only with consent will not prevent the statute operating1.
HR A[9965]-[10060]
1 Bobbett v South Eastern Rly Co (1882) 9 QBD 424; Brighton Corpn v Brighton Guardians (1880) 5 CPD 368; Midland Rly Co v Wright
[1901] 1 Ch 738.
Page 650
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax
Chapter 16
Value added tax
Editor
Rt Hon Viscount Dilhorne

Page 651
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/A Introduction
and general principles
HR A[10061]
Value Added Tax is a European Community Tax imposed on the supply of goods and services, which came into
operation in the UK on 1 April 1973 by the Finance Act 1972, as a result of the UK joining the European Community.
The law has been amended by successive Finance Acts and has been consolidated by the Value Added Tax Acts 1983
(VATA 1983) and 1994 (VATA 1994) with effect from 1 September 1994. Most of the detailed law is to be found in
the delegated legislation in the form of orders made by the Treasury or regulations made by Customs and Excise.
Guidance and explanatory leaflets, business briefs and news releases are from time to time issued by C&E to explain
their interpretation of the law. They are a valuable source but, subject to certain exceptions, do not have the force of
law. The UK is required to comply with the common system of VAT levied by Member States2 and prescribed in the
European Community's directives, particularly the Sixth Directive which may be subject to special schemes and
derogations3 and, when interpreting a directive, to construe its own legal provisions in a manner consistent with the
relevant directive and to achieve the result required by the directive4. The EC permits Member States to exercise
discretion in certain prescribed circumstances to derogate from a directive. A breach of the permitted derogation
occurred when the UK was compelled to cease allowing the zero-rating5 of commercial and industrial development
from 1 April 1989, because it was held not to be 'for clearly defined social reasons and for the benefit of the final
consumer'6.
HR A[10062]
1 A full treatment of Value Added Tax is beyond the scope of this work. This is covered in great detail in De Voil Indirect Tax Service to
which the reader is referred.
2 VATA 1994, s 93; SI 1995/2518, regs 136, 137 and 139; De Voil Indirect Tax Service V1.213-1.218.
3 Council Directive (EEC) 77/388 (Sixth Directive).
4 Case C-106/89 Marleasing SA v La Commercial Internacional Alimentacion SA [1992] 1 CMLR 305 (paras 8, 9).
5 De Voil Indirect Tax Service V4.201; V4.202.
6 Case 416/85 EC Commission v United Kingdom [1990] 2 QB 130, [1988] STC 456.
Page 652
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/A Introduction
and general principles/General principles of VAT
General principles of VAT
a The general principle
HR A[10062.1]
VAT is a tax on consumer expenditure and is charged at each stage in the supply of goods and services, and is called
'Output Tax'. If the supply is made to a VAT taxable person who uses the supply for business purposes that person will
receive credit for the VAT he has paid which is known as Input Tax. The ultimate effect of this is that the tax is borne
by the actual consumer. No distinction in charging VAT is made between Capital and Revenue items.
b Is the transaction within the scope of UK VAT?
HR A[10062.2]
The following conditions have to be met for a transaction to be vatable:
(a) It must be a supply of goods or services: Although the term 'supply' is not defined in the
legislation, it includes all forms of supply but not anything done otherwise than for a consideration.
Anything which is not a supply of goods but is done for a consideration (including if so done the
granting assignment or surrender of any right) is a supply of services1. 'Consideration' has a wide
meaning and will include anything given or made in exchange for something else other than money, such
as a barter transaction.
(b) The supply must take place in the UK: Having established that a supply of goods or services has
taken place in the UK, the law relating to the place of supply of such goods or services is contained in the
European Community Legislation2, the value added tax acts3, and the orders made by the Treasury4 by
statutory instrument5. In the context of Landlord and Tenant, only the instrument signifying the place of
supply of services is likely to have impact. Thus, where the place of supply of the services is in an EC
Member State, any liability on a supply in that state will be in that state alone (local taxes may apply)
and in no other country. If the country is not in the UK the supply is therefore outside the scope of UK
VAT.
(c) The supply must be made by a taxable person: By definition a 'taxable person' for VAT purposes
either is or is required to be registered6 for VAT.
(d) The supply must be made in the course or furtherance of any business carried on by that person7:
In preference to the use of the term 'Business'8 in the UK the European Legislation has adopted, in its
Sixth Directive, the term 'Economic Activity' and, irrespective whether it is output or input tax, the
supply of goods or services must be made in the course or furtherance of the business.
If a transaction does not meet all of the requirements listed in points (a) to (d) above it will be outside the scope of UK
VAT.
Page 653
HR A[10062.3]
1 VATA 1994, s 5(2); De Voil Indirect Tax Service V3.102, V7.104.
2 The Place of Supply of Goods is contained in EC Sixth Directive, arts 8 and 28b(B). The Place of Supply of Services is contained in EC
Sixth Directive, arts 9 and 28b(C)-(F).
3 VATA 1994, ss 7 and 9.
4 VATA 1994, s 7(11) authorises the Treasury to vary the normal rules by Statutory Instrument.
5 There are three main Statutory Instruments made by the Treasury. These are: VAT (Tour Operators) Order 1987 (SI 1987/1806) which
need not trouble this reader; VAT (Place of Supply of Services) Order 1992 (SI 1992/3121); VAT (Place of Supply of Goods) Order 1992
(1992/3283) - this Order relates to supplies on board ships, aircraft and trains involved in intra-EC transport, and is unlikely to trouble this
reader.
6 VAT Regulations, SI 1995/2518, regs 5-7; De Voil Indirect Tax Service V3.123; VATA 1994, s 3 and Sch 1 to s 3A, as amended by FA
2000, s 136(1).
7 VATA 1994, s 4(1); De Voil Indirect Tax Service V2.103,129,202,204,222; V3.101,121-125,421,501,508; V4.101,102,201.
8 VATA 1994, s 94 defines the meaning of 'Business'; De Voil Indirect Tax Service V2.202; V4.156.
c Input tax and output tax
HR A[10062.4]
'Input tax'1 in relation to a taxable person means the following:
(a) VAT on the supply to him of any goods or services;

(b) VAT on the acquisition by him from another Member State of any goods; and
(c) VAT paid or payable by him on the importation of any goods from a place outside the Member
States, being in each case goods or services used or to be used for the purpose of any business carried on
or to be carried on by him. VAT cannot be recovered on goods and services used solely for private
purposes. However, apportionment2 will apply where the goods and services are acquired partly for
business and for non-business purposes.
'Output tax'3 means the VAT due on supplies that a taxable person makes or on that taxable person's acquisition from
another Member State of goods inclusive of input tax which is to be counted as input tax by virtue of point (b) above.
Output tax may be due also on business gifts and on the private use of own goods and services.
The Act also provides that, where goods or services are supplied to a company, goods are acquired by a company from
another Member State or goods are imported from a place outside the Member States and the goods or services which
are so supplied, acquired or imported are used or to be used in connection with the provision of accommodation by the
Page 654
company, they shall not be treated as used or to be used for the purposes of any business carried on by the company to
the extent that the accommodation is used or to be used for domestic purposes by a Director of the company, or a person
connected with a director of the company.
In the course of trade it is not uncommon for a mixed supply of goods and services, some of which may be taxable at
different rates, to be charged at a single inclusive price thus giving rise, to an apportionment of the total price. To help
keep or make matters as simple as possible there are various special schemes for retailers: flat rate schemes for farmers
and for small businesses, as well as special provisions relating to second-hand goods.
HR A[10062.5]
1 VATA 1994, s 24(1); De Voil Indirect Tax Service V2.202,222; V3.304,397,402,406,407,409.421,424,426-428, 450,461,501;
V5.115,160,256; Customs and Excise Comrs v Rosner [1994] STC 228; De Voil Indirect Tax Service V3.409,410, and Part V10;
Schemepanel Trading Ltd [1996] STC 871; De Voil Indirect Tax Service Part V10.
2 VATA 1994, s 24(5); De Voil Indirect Tax Service V3.216,266,408; Victoria and Albert Museum Trustees v Customs and Excise Comrs
QB [1996] STC 1016; De Voil Indirect Tax Service Part V10; Whitechapel Art Gallery v Customs and Excise Comrs QB [1986] STC 156,
[1986] 1 CMLR 79.
3 VATA 1994, s 24(3); De Voil Indirect Tax Service V3.402,410,416,450,501; Turner (t/a Turner Agricultural) v Customs and Excise
Comrs [1992] STC 621.
d Meaning of 'business'
HR A[10062.6]
The importance, and proper identification of an activity as a business is fundamental to the correct operation of VAT.
No actual statutory definition is given either in UK legislation nor of an 'economic activity' in community legislation. If
there is a difference between the meaning of these two terms no material difference has yet come to light. Statute1 has
given guidance as to what the term includes and excludes and if an activity is not covered it then becomes necessary to
apply the business test that was applied in the 'Lord Fisher' case,'2 which was derived from decisions of the VAT
Tribunal and the Courts. This matter is more fully discussed in paras HR A[10109], [10110] and [10334].
HR A[10062.7]
1 VATA 1994, s 94; De Voil Indirect Tax Services V2.202; Customs and Excise Comrs v Apple and Pear Development Council [1984]
STC 296.
2 Customs and Excise Comrs v Lord Fisher [1981] STC 238.
e VAT rates
Page 655
HR A[10062.8]
VAT is charged at three rates, either at the standard rate of 17.5%, or at a reduced rate of 5% or at a zero-rate:
(a) The standard rate is charged on the supply of goods and services1: on the acquisition of goods
from another Member State by reference to the value of the acquisition2, and on the importation of goods
from a place outside the Member States3.
(b) The reduced rate of VAT was introduced by the Finance Act 1995, s 21 and was inserted in VATA
1994, s 2(1A), (1B), and (1C), and in Sch A1 which sets out the goods and services which shall be
charged at the reduced rate. These include: domestic fuel and power; installation of energy saving
materials; heating equipment; security goods; gas supplies; grant funded installations or connections. By
reason of the Finance Act 2001, ss 97 and 99 the foregoing categories were extended to include
residential renovations or alterations; residential conversions4. The purpose of including residential
renovations and conversions in these measures was to bring under used and vacant properties back into
use, to encourage brown field development and to help the objective of providing a decent home for
everybody.
(c) Where a supply by a taxable person of goods or services is zero-rated, then, whether or not VAT
would be chargeable on the supply, no VAT shall be charged on the supply but it shall in all other
respects be treated as a taxable supply and the rate at which VAT shall be treated as charged on the
supply shall be nil5.
HR A[10062.8]
1 VATA 1994, s 2; De Voil Indirect Tax Service V1.121,131,213,: 3.101,102,151,312,314,389.
2 VATA 1994, s 14; De Voil Indirect Tax Service V3.364,380,381,388.
3 VATA 1994, s 15; De Voil Indirect Tax Service V3.302,303,304.
4 VATA 1994, s 29A and Sch 7A, as inserted by FA 2001,s 99(4)(5) and (7)(c). For a more detailed treatment see paras HR
A[10559]-[10600].
5 VATA 1994, s 30 and Sch 8; VAT Regulations, SI 1995/2078, regs 127-135; De Voil Indirect Tax Service V4.201,202.
HR A[10063]
An effect of applying a standard rate of VAT in compliance with the EC ruling is that a taxpayer has to add the present
standard rate of 17.5% to his selling price or, alternatively, to treat his selling price as being VAT-inclusive and to
account for 14.89% of that price. This imposition of VAT will have little or no effect on a fully taxable purchaser who
will be able to recover the VAT from Customs and Excise.
Where a person makes both taxable and exempt supplies he will be partially exempt. This may restrict his recovery of
the input tax he has borne because only the income tax which is directly attributable to taxable supplies can be
reclaimed but none can be reclaimed which are attributable to exempt supplies. In this situation a partly exempt
business would have to use an approved partial exemption method to calculate the amount of input tax it is entitled to
Page 656
reclaim1.
Thus, where a purchaser is a partially or wholly exempt taxable person all or part of the VAT element will represent a
real additional cost which might well be reflected in the purchase price. Generally speaking, the grant of an interest or
right over land is an exempt supply but, in contrast, a major exception to this rule is that the sale of the freehold title to a
new commercial or industrial development in the past was, but is not now, exempt and is standard rated.
There is an important distinction to be made in relation to dilapidations in a building leased to and occupied by a
business. The terms of the lease usually require the tenant/occupier to repair any damage to the property and to replace
defective fixtures and fittings. If input tax is incurred in carrying out such reparations in accordance with the obligations
imposed by the lease, then, provided the premises have been used in making taxable supplies, the input tax can be
recovered. However, in contrast, where input tax is incurred by the owner, the lessor/landlord, in preparing or making
the premises ready for letting the cost of doing so is to be regarded as being directly attributable to the lease it is
intended to grant or is actually granted to the future tenant. The recoverability of the input tax depends therefore on
whether the lease is exempt or taxable2.
In a recent case, in the Court of Appeal, an exempt insurance company formed an intention within six years to use the
inputs in making taxable supplies and manifested this decision by making an irrevocable election that future supplies of
the properties made by it would be subject to VAT. It was held in the High Court and upheld in the Court of Appeal by
a majority that those inputs were cost components of making supplies to the subtenants because the payments to the
superior landlords preserved the superior leases. For this to operate there had to be a direct and immediate link between
the inputs and the future taxable supplies. In this case the learned Judge held that the necessary link existed3.
HR A[10064]
1 De Voil Indirect Tax Service V3.365,461-470.
2 C&E Manual VI-15, Chap 3, para 1.11.
3 Royal and Sun Alliance Insurance Group plc v Customs and Excise Comrs [2001] EWCA Civ 1476, [2001] STC 1476; De Voil Indirect
Tax Service V10; BLP Group plc v Customs and Excise Comrs [1995] ECR I-983, [1995] STC 424, ECJ; De Voil Indirect Tax Service
V3.102; V4.136; V5.454; V7.131 and Part V11.
HR A[10065]
This burden of irrecoverable VAT has, to some extent, been relieved by allowing a qualified right to waive exemption,
thereby making otherwise exempt transactions taxable1. 'Land' for these purposes includes any buildings or structures
permanently affixed to it. Certain transactions, however, which under the VAT legislation might be considered to be a
supply of goods or services made by a taxable person for a consideration fall outside the scope of VAT, for instance
transactions relating to residential property; or relating to the transfer of a business as a going concern2. For a more
detailed treatment, see paras HR A[10474]-[10497].
HR A[10066]
1 EC Sixth Directive (77/388/EEC), art 13C, permits Member States to allow taxpayers to opt for taxation in cases of letting and leasing
Page 657
immovable property and transactions covered in art 13B(d), (g) and (h). Member states may fix the scope of this option and shall fix the
details of its use. De Voil Indirect Tax Services: re art 13C, V3.453; re art 13B(d), V1.262; re art 13B(g), V3.125, re art 13B(h), V1.235,
4.111, 113. For a more detailed treatment, see paras HR A[10345]-[10440].
2 Kenmir Ltd v Frizzell [1968] 1 All ER 414 at 418 per Lord Widgery, dicta applied in a large number of subsequent VAT cases and
prescribed the tests to be applied as to whether a business was being transferred; as to whether it was on a going concern basis; and in
appeals against the disallowance of input tax. De Voil Indirect Tax Service V2.226
HR A[10066.1]
A reduced VAT rate of 5% was introduced by the Finance Act 1995, s 21 and was inserted in VATA 1994, s 2(1A),
(1B), and (1C), and Sch A1 which sets out the goods and services chargeable at the reduced rate. This applied originally
to fuel and power, and was extended to include the installation of heating equipment, security goods, gas supply and
women's sanitary products, none of which have any relevance to Landlord and Tenant matters. However, by reason of
the Finance Act 2001, ss 97 and 99, the above categories were extended to include residential conversions and
renovations which are relevant to Landlord and Tenant matters1. The purpose of these measures was to bring underused
and vacant properties back into use, to encourage brown-field development, and to help the objective of providing a
decent home for everybody.
HR A[10066.2]
1 See para HR A[10559] ff relating to the application of Reduced Rate Relief in respect of residential conversions and renovations
contained originally in FA 2001, s 97 and Sch A1 is consolidated as VATA 1994, Sch 7A, by FA 2001, s 99 and Sch 31.
HR A[10066.3]
The Treasury, by way of note, retain the right to vary by order the contents of the above Schedule, and they may, by
order, increase, or reduce, the rate of tax for up to 12 months by up to 25% of the existing rate. Thus, the standard rate
of 17.5% could be varied to between 13.125% or up to 21.875%, and the reduced rate of 5% could be varied to between
3.75% and 6.25%. However, at present, the minimum rates prescribed by Directive 77/388/EEC, art 12(3)(a)
respectively are 15% and 5%.
Page 658
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/B The European
Dimension
B
Page 659
Dimension/1 General
1 General
HR A[10067]
'The treaty is like an incoming tide. It flows into the estuaries and up the rivers. It cannot be held back.' Thus did Lord
Denning accurately forecast in 19741. The EC requires its Member States 'to take all appropriate measures to ensure
fulfilment of the obligations arising out of the treaty, or resulting from action taken by the Institutions of the
Community...and shall abstain from any measure which could jeopardise the attainment of the objectives of the treaty'.2
After consultation with the European Parliament and the Economic and Social Committee, the Council made the
following Direction:
'To adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect
taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market
within the time laid down in art 7a.'3
The time limit expired on 31 December 1992. The Council were directed by the Commission 'to issue directives for the
approximation of such laws, regulations, or administrative provisions of the Member States as directly affect the
establishment or functioning of the Common Market'4.
Statements made by the European Council and the European Commission are graded under the EC Treaty as follows5:
(a) 'Regulations': these are binding in their entirety and have general effect to all EC countries, and
are directly applicable in the legal systems of those EC countries.
(b) 'Directives' allow the form and method of compliance to the Member State, but remain binding as
to the result and their general effect is specific to an EC country.
(c) 'Decisions' are completely binding on private individuals, commercial enterprises and are specific
to an EC country.
(d) 'Recommendations and Opinions' usually are directed to specific subjects on which the Council's
or Commission's advice has been sought and are not binding.
HR A[10068]
1 HP Bulmer Ltd v J Bollinger SA [1974] Ch 401, [1974] 2 All ER 1226, CA; De Voil Indirect Tax Service V1.235,239; V5.454.
2 Treaty Establishing the European Community 1957, art 5.
3 Treaty Establishing the European Community 1957, ch 2 (tax provisions), art 99.
Page 660
4 Treaty Establishing the European Community 1957, ch 3 (approximation of laws), art 100.
5 De Voil Indirect Tax Service V1.223-229.
a UK law
HR A[10069]
Until 1992 under UK law it was prohibited to look behind a statute in construing a statutory provision. Following an
invitation from their Lordships1 to list a case for rehearing on the ground that the statutory provisions relating to the
appeal were ambiguous, Counsel was invited to submit arguments as to whether it would or would not be permissible to
have regard to the Minister's statement made in Parliament in order to construe the statutory provisions, or whether such
an action would amount to questioning the proceedings in Parliament and infringe Parliamentary privilege. The Crown
contended that it was not open to the Court to look at Parliamentary materials on the grounds that:
(a) it would be in breach of art 9 of the Bill of Rights 1688 and amount to 'questioning' the
proceedings of Parliament;
(b) if art 9 were not infringed Parliament might take the view that it enjoyed some wider privilege
which would be infringed and might regret that its views on the subject had not been sought before a
decision was reached by their Lordships; and
(c) the existing rule forbidding the use of any such material should be preserved because:
(i) Parliament should be left to legislate in words and the Courts to construe the meaning of the
words finally enacted,
(ii) there was a need for the citizen to have access to a defined text which regulated his legal
rights, and
(iii) there was the practical difficulty relating to the increased costs of researching
Parliamentary material, and indeed
(iv) it was likely that most of this research would be useless.
HR A[10070]-[10080]
1 Pepper v Hart [1993] AC 593, [1992] STC 898; De Voil Indirect Tax Service V1.241.
HR A[10080.1]
Their Lordships expressed the view that there might emerge in a few cases ambiguities and the courts should not blind
themselves by strictly adhering to the rule excluding reference to Parliamentary material as a guide to the construction
of the words used in the statute. Thus, subject to any question of Parliamentary privilege, the exclusionary rule would be
relaxed so as to permit reference to Parliamentary materials where:
Page 661
(i) legislation was ambiguous or obscure, or led to an absurdity;

(ii) the material relied on consisted of one or more statements by a Minister or other Promoter of the
Bill together if necessary with such other Parliamentary material as was necessary to understand such
statements and their effects, and
(iii) the statements relied on were clear.
b EC legislation
HR A[10080.2]
EC law was made effective for UK legislation by virtue of The European Communities Act 1972, s 2. In contrast to and
distinct from English law it is acceptable in EC law to consider the discussions, decisions, sometimes described as
'travaux preparatoires' when determining the purpose and meaning of the legislation. Thus, it is an inevitable and
logical consequence for the EC Council to issue VAT harmonisation directives addressed to all Member States having
the purpose of furthering the process of the harmonisation of taxes. The common system of VAT adopted by the EC is
given legislative effect by a series of Directives. Those directives which are still current and relevant to the UK are as
follows.
(i) First Council Directive 67/227/EEC1
HR A[10080.3]
This was addressed to all member states and was adopted on 11 April 1967. So far as is presently relevant to the UK,
the directive:
(i) provides for a common system of VAT to be operated by EC countries;

(ii) provides that it is to be applied up to and including the retail trade stage; and
(iii) prohibits member states from maintaining or introducing any measure providing for flat rate
equalisation of turnover taxes on importation or exportation in trade between member states.
HR A[10080.4]
1 Statutory effect is given to this directive in UK legislation currently from five separate sources:
(a) VATA 1994 and subordinate legislation;

(b) C&E Acts including delegated legislation through the Treasury, which provide the statutory
framework for the governance and imposition of tax on imported goods and certain assigned
matters;
(c) The Postal Services Act 2000; see De Voil Indirect Tax Service V13.2;
(d) The Police and Criminal Evidence Act 1984; see De Voil Indirect Tax Service V1.236;
(e) The Isle of Man Act 1979; see De Voil Indirect Tax Service V1.217,236,270.
Page 662
Fundamentally the legislation falling under this head is in three categories: statutes, statutory
instruments, and notices issued under a statutory authority. De Voil Indirect Tax Service
V1.256,204,205,208 and 209.
(ii) Council Directive 69/169/EEC1
HR A[10080.5]
This was addressed to all member states and was adopted on 28 May 1969. This directive is presently given effect to in
the UK by The Travellers Allowance Order 1994, SI 1994/955. It provides relief from VAT and excise duty on
non-commercial imports of goods from third countries contained in personal luggage. The level of allowances from
third countries has been increased by virtue of Council Directive 94/4/EEC.
HR A[10080.6]
1 De Voil Indirect Tax Service V1.228,271; V5.175.
(iii) Council Directive 76/308/EEC1
HR A[10080.7]
This was addressed to all member states and was adopted on 15 March 1976. The purpose of this directive was to give
mutual assistance for the recovery of claims resulting from operations forming part of the system of financing the
European Agricultural Guidance and Guarantee Fund and of agricultural levies and customs duties and in respect of
VAT, which was included by virtue of Council Directive (79/1071/EEC)2. In short, it enables one member state to
recover from another member state in its own national courts VAT due to the VAT authorities of another member state.
HR A[10080.8]
1 Statutory effect is given to this directive in UK legislation by FA 2002, s 134 and Sch 39. It was initially given effect to by FA 1977,s
11, and FA 1980, s 17(1)(3). De Voil Indirect Tax Service V1.228,236,271; V5.175; V13.2.
2 This directive was amended again to include income and capital taxes, and interest, fines and penalties. De Voil Indirect Tax Service
V1.228,271.
(iv) Sixth Council Directive 77/388/EEC1

Page 663
HR A[10080.9]
This was addressed to all member states. It was adopted on 17 May 1977. It is often referred to as the 'harmonisation
directive', and advanced the process of harmonisation. It required member states to modify their VAT system to bring it
into line with the detailed provisions contained in arts 2-22 and 26 and made provision specifically for the following:
(a) art 24: special schemes for small undertakings;

(b) art 25: a common flat rate scheme for farmers;
(c) art 27: derogations from the directive to simplify the procedure of charging tax, or preventing tax
avoidance, or evasion;
(d) arts 28A-28M: a transitional system for intra-community trade in the single market from 1 January
1993;
(e) art 29: the establishment of an Advisory Committee on VAT;
(f) art 30: derogations from the directive under agreements with non-member countries or international
organisations;
(g) art 34: for the Commission to make reports on the application of the common VAT system on 1
January 1982 and every two years thereafter; and
(h) arts 33 and 35: the making of further directives.
This directive also establishes many of the definitions of basic terms used in the legislation of individual EC countries.
Some of these provisions are precise and unconditional, and where the word 'must' is used they are obligatory and take
preference over VATA 1994. Other provisions in the Sixth directive use the words, 'countries may' which gives the
member states power to apply the provisions as it wishes or not. However, once a 'may' provision has been adopted it
must be applied precisely.
HR A[10080.10]-[10080.20]
1 For the 'statutory effect' to be given by UK legislation please refer to para HR A[10080.4], n 1. De Voil Indirect Tax Service
V1.101,204,208,210,227,229,236, 240; V2.101,113,201,204; V3.103,132,133,211,216,361,442,443,446,462,537,591; V4.111,115; V5.162;
V6.153; V7.103,149; V17.132.
(v) Council Directive 77/799/EEC1
HR A[10080.21]
This directive was addressed to all member states and was adopted on 19 December 1977. It enables the competent
authorities in each member state to exchange information for the purpose of countering international tax avoidance and
evasion, which is subject to safeguards to protect the basic rights of citizens and enterprises.
HR A[10080.22]
Page 664
1 Statutory effect is given to this legislation in the UK by reason of FA 1978, s 77 and FA 1980, s 17(2)(3). It was amended by Council
Directive (79/1070/EEC). De Voil Indirect Tax Service V1.228, 270; V13.2.
(vi) Council Directive 78/1035/EEC1
HR A[10080.23]
This directive was addressed to all member states and was adopted on 19 December 1978. It provides for relief from
VAT and excise duties and small consignments of a non-commercial character from third countries.
HR A[10080.24]
1 Statutory effect is given to this directive by virtue of The VAT (Small non-commercial consignments) Relief Order 1986, SI 1986/939;
De Voil Indirect Tax Service V1.228.
(vii) Eighth Council Directive 79/1072/EEC1
HR A[10080.25]
This directive was addressed to all member states and was adopted on 6 December 1979. The directive sets out
arrangements for the refund of VAT to taxable persons not established in the territory of the country.
HR A[10080.26]
1 Statutory effect is given to this directive by virtue of VAT Regulations 1995, SI 1995/2518, regs 173-184 (Repayments to Community
Traders); De Voil Indirect Tax Service V5.132,151,404; Part V14.
(viii) Thirteenth Council Directive 86/560/EEC1
HR A[10080.27]
This directive was addressed to all member states and was adopted on 17 November 1986. Member states are required
by this directive to implement a refund scheme for taxable persons who are established in non-EC member states by 1
January 1988.
HR A[10080.28]
Page 665
1 Statutory effect is given currently to this directive by VAT Regulations 1995, SI 1995/2518, regs 185-195 (repayments to third country
traders); De Voil Indirect Tax Service V5.152; Part V14.
(ix) Council Directive 91/680/EEC1
HR A[10080.29]
This directive was addressed to all member states and was adopted on 16 December 1991. This directive supplemented
the common system of VAT and amended Directive 77/388/EEC with a view to the abolition of fiscal frontiers.
HR A[10080.30]-[10080.31]
Traders); De Voil Indirect Tax Service V1.210; V3.361; V4.341.
(x) Council Directive 92/111/EEC1
HR A[10080.32]
This directive was addressed to all member states and was adopted on 14 December 1992. It introduced simplification
measures to the Sixth Directive.
HR A[10080.33]
Traders); De Voil Indirect Tax Service V3.361.
(xi) Council Directive 92/77/EEC1
HR A[10080.34]
This directive was addressed to all member states and was adopted on 19 October 1992 to have effect from 1 January
1993. This directive amends the Sixth Directive and deals further with the harmonisation of VAT rates arising from the
completion of the Single Market.
HR A[10080.35]
Page 666
Traders).
(xii) Seventh Council Directive 94/5/EEC1
HR A[10080.36]
This directive was addressed to all member states and was adopted on 14 February 1994. The directive amends the
Sixth directive and requires member states to adapt their present VAT system to harmonise the treatment of used goods,
works of art and collectors items and antiques.
HR A[10080.37]
1 Statutory effect to this directive is currently given in the UK legislation with effect from 1 June 1995, by concession, by VATA 1994, s
21(4)-(7) as inserted by FA 1995, s 22 and VATA 1994, s 50A as inserted by FA 1995, s 24; De Voil Indirect Tax Service
V3.325,513,531,532; VAT (Special Provisions) Order 1995, SI 1995/1268; De Voil Indirect Tax Service V14.2.
(xiii) Council Directive 95/7/EEC1
HR A[10080.38]
This directive was addressed to all member states and was adopted on 10 April 1995. The directive introduced new
simplification measures with regard to VAT, which affected the scope of certain exemptions and the practical
arrangements for implementing them by amending the Sixth directive. These measures include the following:
(a) that supplies of processing work be treated as supplies of services in all cases, but member states
are allowed to retain existing reduced rates of tax for such processing services where the equivalent
supply of goods is currently subject to such a reduced rate2;
(b) valuation of imports will include transport costs to the final EC destination where known at the
time of importation3;
(c) the maximum adjustment period for the capital goods scheme is increased to 20 years. No effect
has been given in the UK to this EC provision;
(d) the domestic transport of goods will be treated as an intra-EC transport of goods where directly
linked to such transport;
(f) the establishment of a community wide scheme for exemption of retail export of goods for
travellers from third countries4; and
(g) the introduction of VAT-only warehousing5.
HR A[10080.39]
Page 667
1 De Voil Indirect Tax Service V1.227; V3.113,176,182,190.
2 Statutory effect to this provision is currently given in the UK legislation by FA 1996, s 29, which effectively deleted VATA 1994, Sch
4, para 2 which treated processing of services as supplies of goods, and by VATA 1994, s 30(8A); De Voil Indirect Tax Service - for FA
1994, s 29, see V19.107 and for s 30(8) see V19.111,117.
3 Statutory effect to this provision is given in the UK by VATA 1994, s 21(2).
4 Statutory effect in the UK to this provision was given by VATA 1994, s 30(8A) and regulations made thereunder; De Voil Indirect Tax
Service V19.111,117.
5 Statutory effect in the UK to this provision was given by VATA 1994, ss 18-18E and Sch 5; De Voil Indirect Tax Service V5.404; and
for Sch 5, V17.187, 194; V19.116,117,118,122.
(xiv) Council Directive 96/42/EEC1
HR A[10080.40]
This directive applies to all member states and was adopted on 20 December 1996. By reason of art 1 of this directive
article 12(3)(d) of the Sixth Directive was repealed with effect from 1 January 1997, thus amending the application of
VAT rates to agricultural outputs in the horticultural and floricultural sectors.
HR A[10080.41]
1 De Voil Indirect Tax Service V1.227.
(xv) Council Directive 96/95/EEC1
HR A[10080.42]
This directive applies to all member states and was adopted on 20 December 1996 . With effect from 1 January 1997 it
amended art 12(3)(a) of the Sixth Directive by referring to the standard rates in force in member states that they be
continued at the current levels beyond 31 December 1996.
HR A[10080.43]
(xvi) Council Directive 98/80/EEC1

Page 668
HR A[10080.44]
This directive applies to all member states and was adopted on 12 October 1998. The directive provides amendments to
the special VAT scheme for the investment of gold2.
HR A[10080.45]
1 De Voil Indirect Tax Service V1.227; 5.143.
2 Statutory effect in the UK was given to this provision by VATA 1994, s 13 and the Value Added Tax (Investment Gold) Order SI 1999,
1999/3116.
(xvii) Council Directive 99/59/EEC1
HR A[10080.46]
This directive applies to all member states and was adopted on 17 June 1999. The directive amends art 9 of the Sixth
directive such that the supply of telecommunication services is taxed at the place of the recipient of the services.
Compliance is required by 1 January 20002.
HR A[10080.47]
1 De Voil Indirect Tax Service V1.227,229.
2 EC decision 97/214/EEC granted to the UK a derogation to treat such services in this way and was given effect in the UK by VATA
1994, Sch 5, para 7A. This was inserted by the Value Added Tax (Reverse Charge) (Anti-avoidance) Order 1997, SI 1997/1523, reg 3 in
respect of services performed on or after 1 July 1997
(xviii) Council Directive 99/85/EEC1
HR A[10080.48]
This directive was addressed to all member states and was adopted on 22 October 1999. It amends art 28 of Directive
77/388/EEC, by allowing for a reduced rate, on an experimental basis for certain labour intensive services currently
listed in Annex K of the Sixth Directive. In addition to including supplies of the following services, relating to repairs of
bicycles, shoes and leather goods and clothing and household linen it included the renovation and repairing of private
dwellings, excluding materials which form a significant part of the value of the supply, as well as window cleaning and
cleaning in private households. However, to date this directive has only been applied in relation to certain properties in
Page 669
the Isle of Man. It was due to expire on 31 December 2002 but has been extended to 31 December 20032.
HR A[10080.49]
1 De Voil Indirect Tax Service V1.227; 5.111.
2 By reason of Council Directive 2002/92/EEC of 3 December 2002.
(xix) Council Directive 2000/65/EEC
HR A[10080.50]-[10080.60]
This directive was addressed to all member states and was adopted on 21 October 2000. It amends art 21 of Directive
77/388/EEC by abolishing the requirement for EC businesses to appoint a tax representative in member states where
they were not established1.
HR A[10080.61]
1 Statutory effect to this provision is given in the UK legislation by amendments to VATA 1994, s 48 which restricts the circumstances
under which the Commissioners may direct that a person who is not established in the UK must appoint a representative; De Voil Indirect
Tax Service V2.105,131; V5.352,404.
HR A[10080.62]
Under powers given to them, the Commissioners may take enforcement action1 against any member state which it
considers is in violation of their community obligations. Actions have been brought under this power against the UK, in
one of which case2 the ECJ held that the UK had failed to fulfil its obligations under the treaty by exempting from VAT
supplies of goods referred to in VATA 1983, Sch 6, Group 7, and in another3 by retaining zero-rated services which
included, amongst others, the provision of goods and services relating to the construction of industrial and commercial
buildings and to community and civil engineering works in so far as they were not provided to final consumers. The UK
was held to have contravened the provisions of the Sixth Directive and had failed to fulfil its obligations under the EEC
Treaty. The Commission also has enforcement powers to inflict financial sanctions on member states which fail to
comply with a judgment of the European Court4. In a case later than the two cases brought by the EC against the UK,
which related to exemptions, the European Court expressed the view that 'any exemptions, as exceptions to the general
rule that VAT is levied on all economic activity, are to be interpreted strictly and must not exceed what is expressly and
clearly provided for'5. The approach of the European Courts to the question of zero-rating is to apply the Sixth
Directive, which refers to the Second Directive6, in such a way that member states may retain but not introduce
zero-rates and certain reduced rates7, unless certain conditions are satisfied8. Following the decision by the ECJ against
the UK, in which it was held that the UK had exceeded the derogation allowed, the derogations should have been
limited to 'clearly defined social reasons for the benefit of the final consumer', the UK enacted the following remedial
measures in order to comply with the Court's decision which came into effect on 1 April 1989, which were:
Page 670
(a) the withdrawal of zero-rating of commercial and industrial development;

(b) on the disposal of a commercial and industrial building within three years of its construction9
subject to VAT;
(c) developments post-31 July 1989 became subject to VAT in certain cases on the first letting of a
building; or
(d) on the change of use of a residential or charitable building10.
HR A[10080.63]
1 Treaty establishing the European Community 1957, art 169.
2 Case 353/85: EC Commission v United Kingdom [1988] STC 251.
3 Case 416/85: EC Commission v United Kingdom [1988] STC 456.
4 Treaty establishing the European Community 1957, art 171.
5 Case 348/87: Stichting Uitvoerinng Financiele Acties v Staatssecretaris von Financien [1989] ECR 1737. This held that services
supplied by one charitable foundation to another where the other is not a member of the former do not qualify for exemption; De Voil
Indirect Tax Service V1.241; 4.103; Part V11.
6 Council Directive (67/228/EEC) (Second Directive). This has been subsumed in and replaced by the Sixth Directive; De Voil Indirect
Tax Service V1.204,V3.103.
7 Second Directive EEC (67/228/EEC), art 289(2)(a).
8 Second Directive EEC (67/228/EEC), art 17; De Voil Indirect Tax Service, V1.204.
9 Following the implementation by the UK of the remedial measures to satisfy the EC, it became a practice to avoid standard rating of a
new commercial building (less than three years' old) by deferring the bulk of the consideration for the sale of the new building and paying it
after the three years had expired when it would have become exempt. This original scheme encapsulated in VATA 1994, s 96(10A) and Sch
9, Group 1, item 1(a): VAT Regulations 1995, SI 1995/2518, reg 84(2), gave rise to opportunities for tax avoidance. A pre-budget
anti-avoidance provision was introduced to counter this avoidance in the VAT (Amendment) (No 3) Regulations 2002, SI 2002/2918, reg 4.
These amended the 1995 regulations by inserting new regs 84(3)-(9), FA 2003, together with the VAT (Amendment) (No 2) Regulations
2003, SI 2003/1069, reg 9 have the effect of simplifying and strengthening these provisions. FA 2003 inserts a new VATA 1994, s
96(10B)(i) in relation to any supply made after 8 April 2003 arising from a prior grant for the freehold title. The 2003 regulations revoke reg
84(3)-(9) of the 1995 Regulations and substitute new reg 84(3)-(5).
10 VATA 1994, Sch 8, Group 5; De Voil Indirect Tax Service V4.233,237,242.
HR A[10081]
Member States are obliged to implement Council directives fully, correctly and timeously, 'for these shall be binding, as
to the result achieved upon each Member State to which it is addressed, but shall leave the national authorities the
choice of form or method'1. This principle was applied in a later case thus:
Page 671
'Wherever the provisions of a directive appear, as far as their subject matter is concerned, to be unconditional and sufficiently
precise their provisions may...be relied upon as against any national provision which is incompatible with the directive in so far as
the provision defines rights which individuals are able to assert against the State.'2
HR A[10082]
1 EC Treaty, art 189; De Voil Indirect Tax Service V1.251,25.
2 Case-207/87: Weissgerber v Finanzamt Neustadt an der Weinstrasse [1991] STC 589. In the absence of implementation of the Sixth
Directive by a Member State, a national of a Member State may rely on a directive provision which the Member State has failed to
implement under the doctrine of direct effect; De Voil Indirect Tax Service V1.226, Part V11.
HR A[10083]
Because the decisions of the European Court of Justice form part of Community law, the European Court held that a
preliminary ruling given by it was binding on the Courts of member states when they consider the same point of law in
later cases1. To this should be added another general rule that Member States are not permitted to derogate or deviate
from Council directives unless, expressly a deviation is allowed. The Sixth Directive allows special derogations
provided the procedure for charging tax is simplified without having effect on the tax due at final consumption, or their
effect is to prevent certain types of tax avoidance or evasion2. There is an important proviso that no tax authority is
entitled to rely on a directive which imposes a more onerous burden of taxation than is imposed by the legislation of the
Member State3. 'Derogations should assist achievement of and not run counter to the aims of the Sixth Directive'4.
HR A[10084]
1 Agrotab v Distimas SA [1985] 3 CMLR 294.
2 Sixth Directive ((EEC) 77/388), art 27(1); De Voil Indirect Tax Service V1.204,226,229,235; 3.572.
3 Case 148/78: Pubblico Ministero v Ratti [1979] ECR 1629, [1980] 1 CMLR 96, in which it was held that a Member State that had failed
to implement the provisions of a directive could not rely on the terms of a directive against the taxpayer. This decision was followed in Case
152/84: Marshall v Southampton and South West Hampshire Area Health Authority (Teaching) [1986] 2 All ER 584, [1986] 1 CMLR 688.
De Voil Indirect Tax Service V1.226,235,241; 7.103.
4 Direct Cosmetics Ltd & Laughtons Photographs Ltd v Customs and Excise Comrs Cases 138/86 & 139/86 [1988] STC 540. De Voil
Indirect Tax Service V1.229; 3.163; Part V11.
HR A[10085]
The Council of Ministers, the Commission and the European Parliament, acting jointly with the Council, are
empowered to issue decisions which are binding in their entirety upon member states, firms or individuals to whom they
are addressed. Where a pecuniary obligation is imposed on such persons it will be enforceable under the civil procedure
of the member state in which enforcement takes place1.
Page 672
The ECJ has also held that decisions may be invoked, in principle, by individuals even when addressed to member
states2.
On the receipt of a proposal from the Commission, the Council acting unanimously may authorise any member state to
introduce special measures for derogation from the Sixth Directive if the purpose is to simplify the procedure for
charging tax to prevent evasion or the avoidance of taxes3.
Listed below are decisions made by the Council which authorise the UK and sometimes all member states to introduce
special measures4. Such decisions made by the Council are deemed to have been adopted if, within two months of the
date the information contained in the decision was given to the member states, neither the Commission nor any member
state has requested that the matter be raised by the Council5.
HR A[10086]
1 The Treaty of Amsterdam renumbered arts in EC Treaty arts 249-256 (formerly 189-191).
2 Case 9/70: Franz Grad v Finanzamt Traunstein [1970] ECR 825; De Voil Indirect Tax Service V1.229, Part VII.
3 Directive 77/388/EEC, art 27(1). Measures intended to simplify the procedure for charging tax should not, except to a minimal degree,
affect the final tax due at the consumption stage.
4 De Voil Indirect Tax Service Part V15. This gives the text of these decisions.
5 Directive 77/388/EEC, art 27(2)-(4); De Voil Indirect Tax Service - art 27(2) V1.204,229; (3) V1.204,226,229; (4) V1.204,229; Direct
Cosmetics Ltd and Laughtons photographs Ltd v Customs and Excise Comrs (joined cases 138 and 139/86) [1988] STC 540; De Voil
Indirect Tax Service V1.291; 3.163 and Part V12.
(i) Council Decision 86/469/EEC1
HR A[10086.1]
This Council Decision authorised the UK to introduce a measure derogating from Directive 77/388/EEC to avoid the
perpetration of fraud/tax evasion relating to supplies of gold between taxable persons by a special tax accounting
scheme.
HR A[10086.2]
1 Statutory effect was given to this decision in the UK by VATA 1994, s 55; De Voil Indirect Tax Service - ss (1): V2.143; 5.143; ss (2):
V3.502,503,5.143; ss (3)-(6): V5.143; ss (5)(c): V4.246.
(ii) Council Decision 86/356/EEC1

Page 673
HR A[10086.3]
This Council Decision was made on 21 July 1986. By it the UK were authorised to apply flat rate measures in respect of
the non-deductible VAT charged on fuel expenditure on company cars.
HR A[10086.4]
1 Statutory effect was given to this decision by VATA 1994, ss 56 and 57; De Voil Indirect Tax Service - s 56, V1.229; 3.266; 6.110: s
56(1), V3.266: s 56(1)(a)-(c), V3.266; s 56(2), V3.266: s 56(3)(a), V3.266,435: s 56(3)(b)-(d), V3.266: s 56(4), V 2.114: s 56(5),
V3.266,408,410,435: s 56(6), V 3.102,266: s 56(7)-(10), V 3.266; see V3.266 for the flat rate charge; s 57, V1.229; 3.266; 6.110. For the
Commissioner's views see Notice 700/64/02 (January 2002) ss 8 and 9. See also C&E Manual, V1-13, Chap 2A, s 11.51.
(iii) Council Decision (adopted 10 December 1986)
HR A[10086.5]
This Council Decision authorises the UK in relation to long stays in hotels exceeding four weeks to assess VAT on a
flat rate basis that part of the service which is deemed to correspond to a letting of immovable property exempt under
Directive 77/388/EEC, art 13B(b)(1)1.
HR A[10086.6]
1 Statutory effect was given to this decision by VATA 1994, Sch 6, para 9; De Voil Indirect Tax Service V1.229; 3.166: Sch 6, para
9(1)(2), V4.113 (relating to valuation).
(iv) Council Decision (adopted 11 April 1987)1
HR A[10086.7]
Where taxable persons have artificially reduced the price for supplies, imports of goods, supplies of services to totally
or partly exempt persons with whom there is a family connection, legal or business ties, the free market value shall be
substituted as being the consideration for the transaction, irrespective of whether the latter is actually taxed or not,
where otherwise there would be a loss of tax2.
HR A[10086.8]
1 Statutory effect was given to this decision by VATA 1994, Sch 6, para 1. De Voil Indirect Tax Service para 1, V1.229, 3.161, 5.404;
Page 674
para 1(1)-(3), (5), V3.162; para 1(4), V1.229. For valuation provisions see V3.162.
2 RBS Leasing & Services (No 1) Ltd v Customs and Excise Comrs [2000] V & DR 33, VAT decision 16569; De Voil Indirect Tax
Service V1.229.
(v) Council Decision 89/466/EEC1
HR A[10086.9]
This Council Decision of 18 July 1989 authorises the UK to derogate from art 11A(1)(b) of the Sixth Directive by using
open market value as the taxable amount for the supply of buildings or parts of building before first occupation, and on
the land on which they stand, where the land or building is used by the taxable person for either the purposes of his
business or for the purposes of a non-taxable transaction.
HR A[10086.10]-[10086.20]
1 This derogation was sought in relation to the self-supply rules relating to property and construction work: see De Voil Indirect Tax
Service V3.251-254.
(vi) Council Decision 89/534/EEC1
HR A[10086.21]
This Council Decision of 24 May 1989 authorises the UK to derogate from art 11A(1)(a) of the Sixth Directive, the
valuation provisions in cases where a marketing structure based on the supply of goods through non-taxable persons
results in non-taxation at the stage of final consumption. The UK is authorised to prescribe that the supply to such non-
taxable persons shall be the open market value pertaining at the stage of final consumption2.
HR A[10086.22]
1 Statutory authority is given to this decision by VATA 1994, Sch 6, para 3; De Voil Indirect Tax Service V1.229: para 3(1), V3.154;
V5.141; for the system of charging VAT see V3.163.
2 Judicial effect has been given to this decision in Direct Cosmetics Ltd and Laughtons Photographs Ltd (joined cases 138 & 139/86)
[1988] STC 540; De Voil Indirect Tax Service V1.226,235,291: V7.103; Part V11.
(vii) Council Decision 92/621/EEC1
HR A[10086.23]
Page 675
This Council Decision of 21 December 1992 authorises the UK to introduce a measure to simplify the obligations in art
22(6)(b) of the Sixth Directive.
HR A[10086.24]
1 See De Voil Indirect Tax Service V5.271,272. For the original and transitional systems see V1.210.
(viii) Council Decision 93/111/EEC1
HR A[10086.25]
This Council Decision of 15 February 1993 authorises the UK to derogate from art 17(1) of the Sixth Directive by
providing, within an optional scheme, that enterprises with an annual turnover of less than £350,000 must postpone the
right to deduct tax until the supplier has been paid2.
HR A[10086.26]
1 Statutory authority has been given to this UK derogation by SI 1995/2518, Part VIII (Cash accounting): De Voil Indirect Tax Service
regs 56-65, V1.263; 3.503,514: reg 56, V5.201,202; reg 57, V3.418,503: reg 57A-57D V1.206: reg 58, V5.109: reg 58(1), V2.166: reg
58(1)(b), V2.166: reg 58(1)(b)(ii), V2.166: reg 58(2), V2.166;3.418: reg 59, V2.166; 3.418: reg 60(1), V2.166; 3.503: reg 60(2)(3), V2.166;
reg 61, V3.503: regs 62, 63(1)(2), V3.503,5.102,103,109: reg 63(3), V2.131,166; 3.503; 5.103,109: reg 64, V3.503: reg 64(1), V2.166;
3.503; 5.109: reg 69, V3.418,421,514; 5.202. For postponement of right to deduct input tax under the cash accounting system, see De Voil
Indirect Tax Service V3.418.
2 This derogation applied until 31 December 1996 and was replaced by Council Decision 97/375 which extended the derogation until 31
December 1999 increasing the turnover limit for cash accounting from £300,000 to £400,000 and by a further Council decision 2000/435 the
limit was increased to £600,000 and is set to expire on 31 December 2003.
(ix) Council Decision 93/204/EEC1
HR A[10086.27]
This Council Decision of 5 April 1993 authorises the UK to derogate from arts 5(8) and 21(1)(a) by applying (a) a
provision whereby a supply of goods is deemed to occur when assets (other than capital goods) are wholly or partly
transferred to a company which is included in a group registration and not entitled to a deduction of input tax in full and
(b) a provision whereby the company which is the recipient of the supply of assets becomes liable to tax2.
HR A[10086.28]
Page 676
1 Statutory authority was given to this decision by VATA 1994, s 44, which was applied until 31 December 1996 when the Commission
sought an extension but were advised by the Commission that the second sentence of art 5(8) meant that a derogation was not required.
2 This decision supersedes Council Decision 90/127/EEC. Statutory Authority was given to this decision by VATA 1994, s 44. De Voil
Indirect Tax Service V1.229; 3.424: s 44(1)-(4), 3.246: s 44(5), V3.102,246: s 44(6)-(10), V3.246: s 6, V3.461,462.
(x) Council Decision 93/609/EEC
HR A[10086.29]
This Council Decision of 22 November 1993 authorises the UK to derogate from art 22(12)(a)1 of the Sixth Directive
by authorising taxable persons to file one-year recapitulative statements2 thereby simplifying obligations laid down in
art 22(6)(b) with effect from 1 January 1993.
HR A[10086.30]-[10086.40]
2 See De Voil Indirect Tax Service V5.271-272.
(xi) Council Decision 95/252/EEC1
HR A[10086.41]
This Council Decision of 29 June 1995 authorises the UK to derogate from Council Directive 77/388/EEC, arts 6 and
17, by allowing the introduction of a 50% restriction of the right of the lessee or hirer to deduct input tax in respect of a
motor car lease or hire where the car is used for private purposes, and to waive the output tax chargeable on the private
use of the car so leased or hired.
HR A[10086.42]
1 This derogation expired on 17 June 1999 and was replaced by Council Decision 99/59/EEC. Statutory effect was given to this
derogation by SI 1992/3222, art 7(2H). For Input Tax credit for motor cars see De Voil Indirect Tax Service V3.443.
(xii) Council Decision 97/214/EEC1
HR A[10086.43]
Page 677
This Council Decision of 17 March 1997 authorises the UK and all member states to derogate from Council Directive
77/388/EEC, art 92, by allowing the UK to treat the place of supply of telecommunications services as the place where
the recipient belongs3.
HR A[10086.44]
1 This derogation expired on 17 June 1999 by Council Directive 77/388/EEC being amended by Directive 99/59/EEC of 17 June 1999.
This derogation applies to all member states. De Voil Indirect Tax Service V1.227,229.
2 Re art 9, De Voil Indirect Tax Service V1.227,235: 9(1), V3.182,183: 9(2), V3.182: 9(2)(e), V3.102,183,193: 9(3), V3.194.
3 For the place of supply of such services see De Voil Indirect Tax Service V3.193.
(xiii) Council Decision 97/375/EEC
HR A[10086.45]
This Council Decision of 9 June 1997 authorised derogation from Council Directive 77/388/EEC art 171, which has the
effect of increasing the turnover limit of cash accounting from £350,000 to £400,000, which was extended further to
£600,000 by reason of the Council Decision 2000/435/EC of 29 June 2000.
HR A[10086.46]
1 De Voil Indirect Tax Service V1.229,235; 3.408,409,422: 4.246.
(xiv) Council Decision 98/23/EEC1
HR A[10086.47]
This decision extends Council Decision (92/546/EEC) until 31 December 2003, and authorises derogation by the UK
from Directive 77/388/EEC, art 28e(1) which introduced a special measure relating to the taxable amount of goods
acquired from another member state. The appropriate authorities may direct that open market value is to apply where:
(a) the person acquiring the goods is not a fully taxable person; and
(b) certain family, legal or business ties exist between the supplier and the person acquiring the goods.
HR A[10086.48]
Page 678
1 Statutory Authority is given by VATA 1994, Sch 7, para 1(1).
(xv) Council Decision 98/198/EEC
HR A[10086.49]
This decision replaces Council Decision 95/252/EEC, and extends the expiry date to 31 December 2003 by virtue of
Council Decision 2000/747/EEC.
Page 679
Dimension/2 The doctrines of supremacy, direct effect and indirect effect
2 The doctrines of supremacy, direct effect and indirect effect
HR A[10087]
The essential nature of Community law and of the relationship between the European Community and national law, are
set out in four important decisions1, from which the doctrines of supremacy and direct effect have been derived and
established. These doctrines provide answers to the questions as to whether, in a conflict, EC law or national law is to
prevail and the extent to which individuals of Member States and firms can enforce EC law against their own national
courts.
HR A[10088]
1 Case 26/62: Algemene Transport En expeditie Onderneming Van Gend en Loos NV v Nederlandse Belastingadministratie [1963]
CMLR 105; Case 6/64: Costa v ENEL [1964] CMLR 425; Case 11/70: Internationale Handelgesellschafft v Einfuhr-und Voratstelle fur
Getriedes [1972] CMLR 255; Case 106/77: Amministrazione delle Finanze dello Stato v Simmenthal SpA [1978] ECR 629.
HR A[10088.1]
The extent of the primacy of the EC legislation over national legislation is demonstrated in the judgment of a case1
given in 1978 that:
'A national court which is called upon within the limits of its jurisdiction to apply provisions of Community law is under a duty to
give full effect to those provisions, if necessary refusing of its own motion, to apply any conflicting provisions of national
legislation, even if adopted subsequently and it is not necessary for the court to request or await the prior setting aside of such
provisions by the legislative or by other constitutional means.'
The Simmenthal judgment2 was applied in the Merseyside case3 concerning a reclaim of input tax on supplies received
before the commencement of business, but intended for use in the future business. However, in applying the dicta of
Lord Templeman in a later case4 the VAT Tribunal held that:
'The European Communities Act 1972 does not enable or constrain a British court to distort the meaning of a British statute in
order to enforce against an individual a Community Directive which has no direct effect between individuals...there is no rule of
law compelling, or enabling, any court to construe a pre-existing statute of the United Kingdom in order to comply with a directive
subsequent in time, where the legislature or executive of the United Kingdom has not implemented that Directive.'5
HR A[10088.2]
Page 680
1 Case 106/77: Amministrazione delle finanze dello Stato v Simmenthal SpA [1978] ECR 629, [1978] 3 CMLR 263.
2 106/77: [1978] ECR 629, [1978] 3 CMLR 263
3 Merseyside Cablevision Ltd v Customs and Excise Comrs [1987] VATTR 134.
4 Duke v GEC Reliance Ltd [1988] AC 618, [1988] 1 All ER 626, HL.
5 George Kuikka Ltd v Customs and Excise Comrs [1990] VATTR 185.
(a) Supremacy and direct effect
HR A[10089]
By reason of this doctrine all forms of Community law shall prevail over all forms of conflicting national law. The EEC
Treaty established the pre-eminence of the new Community law to which full and immediate effect is required to be
given. This inevitably restricts Member States' sovereign rights and renders inapplicable all inconsistent national law in
whatever form that law is enacted or applied. There are no exceptions to the application of this doctrine, which has been
and is to be strictly applied. The question whether the doctrine required an injunction to be granted and enforced against
the Crown, contrary to the doctrine of parliamentary supremacy, arose in a House of Lords case on which a preliminary
ruling was sought. The European Court ruled that the operation of the national statute should be suspended and that
individual rights conferred by Community law had to be adequately protected. The injunction was granted1.
HR A[10090]-[10100]
1 Factortame Ltd v Secretary of State for Transport [1989] 2 All ER 692.
(b) Doctrine of direct effect
HR A[10101]
The fundamental question of the extent to which Community law was capable of being enforced by individual persons
was addressed in the Simmenthal, Costa and Van Gend en Loos cases1. The opinion expressed by the European Court
was that Community law could impose obligations and give rights to individuals and that such rights and obligations
were not just restricted to the Community and its Member States2. Before direct enforcement of Community law could
be applied by individuals the measure sought to be enforced was required to be clear and precise, unconditional and not
be subject to the exercise of discretion either by the Member State of the Community. Directives are also capable of
being directly enforced even though most directives leave discretion to the Member State as to the choice and form of
the implementation of the directive3. Direct enforcement of a directive is, however, incapable of enforcement until the
official time for its implementation has passed. A preliminary ruling may be sought under art 177 by a national judge at
any time. A full treatment of this topic is, however, beyond the scope of this work4.
Page 681
HR A[10102]
1 Case 106/77: Amministrazione delle Finanze dello Stato v Simmenthal SpA [1978] ECR 629; Case 26/62: Algemene Transport En
expeditie Onderneming Van Gend en Loos NV v Nederlandse Belastingadministratie [1963] CMLR 105; Case 6/64: Costa v ENEL [1964]
CMLR 425.
2 Case 152/84 Marshall v Southampton and South West Hampshire Area Health Authority (Teaching) [1986] 2 All ER 584.
3 Case 9/70: Grad v Finanzamt Traunstein [1970] ECR 825.
4 The reader is referred to De Voil Indirect Tax Service, to which references are made by footnote to the text.
(c) Doctrine of indirect effect
HR A[10103]
The principle of the doctrine of indirect effect was introduced by the European Court of Justice in a case1 in which they
ruled that art 5 of the treaty applied to organs of state, which included national legislature and national courts and that
all Member States, or 'emanations of the state'2 were obliged to take 'all appropriate measures' to ensure fulfilment of
the treaty. The intention behind this decision was to ensure that 'indirect effect' was to be given to Community law by
the Member States who should be prevented from deriving any benefit arising from the failure to give effect to a
directive. The initial application of this doctrine was severely limited by the UK courts, whose view was that it had no
national application in cases where the UK government had failed to implement a directive. The limitation applied by
the UK courts was that the doctrine applied only to specially enacted UK legislation which gave effect to an EC
measure. By reason of the narrow application of this doctrine by the UK courts, the European Court decreed in 1990
that the principle of 'indirect effect' must be applied to all national law3. This ruling was followed in the UK in 1992
and has been expressly accepted since then4.
HR A[10104]
1 Case-14/83: Von Colson v Land Nordrhein-Westfalen [1984] ECR 1891.
2 Case 188/89 Foster v British Gas [1990] ECR I-3313: the European Court held that 'a Directive could be directly enforced against a
body, whatever its legal form, which had been made responsible, pursuant to a measure adopted by the State, for providing for public service
under the control of the State and has for that purpose special powers beyond those which result from the normal rules applicable in relations
between individuals'.
3 Case C-106/89: Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135.
4 Webb v EMO Air Cargo (UK) Ltd [1992] 4 All ER 929, HL.
(d) UK and EC systems of law contrasted

Page 682
HR A[10105]
In the UK judges have adopted, as a general rule, a literal approach to the interpretation and construction of statutes,
strictly adhering to the letter of the law. Recently, it has become the case that UK judges are prepared to consider and to
examine documents such as Hansard, Commission reports and White Papers in certain circumstances1. Under EC law,
the European Courts interpret the law according to their perception of its spirit and intendment, rather than by the letter.
HR A[10106]
1 R v Henn [1980] AC 850, HL, per Lord Diplock on the task of interpreting European law: 'The European Court, in contrast to the
English courts applies teleological rather than historical methods to the interpretation of the treaties and other community legislation. It seeks
to give effect to what it conceives to be the spirit rather than the letter of the treaties; sometimes indeed to an English judge, it may seem to
the exclusion of the letter. It views the communities as living and expanding organisms and the interpretation of the provisions of the treaties
as changing to match their growth.' Pepper v Hart [1992] STC 898 and Supreme Court Practice Note of 20 December 1994 [1995] STI 98,
which lays down the procedures to be adopted in referring to extracts from Hansard.
Page 683
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/C Charge to
value added tax
HR A[10107]
Value Added Tax shall be charged in accordance with the provisions of the VATA 1994 on the supply2 of goods and
services in the UK made by a taxable person3 in the course or furtherance of any business carried on by him4 (including
anything treated as such a supply)5; on the acquisition in the UK of any goods from other Member States6 and on the
importation of goods from places7 outside the Member States8. The person making any supply of goods or services is
liable for VAT, which becomes due at the time of supply9, (subject to the provisions relating to accounting and
payment)10. VAT on any acquisition of goods from another Member State11 is a liability of the person who acquires
the goods and becomes due at the time of acquisition12 (subject to the provisions relating to accounting and payment).
VAT on the importation13 of goods from places outside the Member States shall be charged14 and is payable as if it
were a duty of Customs and Excise15.
HR A[10108]
1 VATA 1994, Pt I, ss 1-29.
2 VATA 1994, Pt I, s 4(2): a taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.
VATA 1994, s 5, Sch 4 (matters to be treated as a supply of goods or services). Sixth Directive ((EEC) 77/388) Title VI (place of taxable
transactions), art 5 (supply of goods) and art 6 (supply of services); De Voil Indirect Tax Service V3.101, 3.502: V3.111, 3.118: V3.211,
3.212.
3 VATA 1994, Pt I, s 3: a taxable person is a person who makes or intends to make taxable supplies while he is or is required to be
registered for VAT; De Voil Indirect Tax Service V3.123.
4 VATA 1994, Pt I, s 4(1).
5 VATA 1994, Pt I, s 1(1)(a). The supply of goods and services which are the subject of a total ban are excluded. See Case C 343/89:
Witzemann v Hauptzollamt Munchen-Mitte [1993] STC 108: R v Goodwin & Unstead [1997] STC 22, CA. De Voil Indirect Tax Service
V1.304.
6 VATA 1994, Pt I, ss 1(1)(b), 11 (for the meaning of 'acquisition of goods from other Member States'), 96 (for interpretative provisions),
93 (for the territories included as other Member States).
7 Sixth Directive ((EEC) 77/388), Title VI (place of taxable transactions), art 8 (supply of goods).
8 VATA 1994, ss 15 (general provisions relating to imports of goods from outside the Member States) and 16; Sixth Directive ((EEC)
77/388), art 2(2) (application of Customs enactments); Case 294/82: Einberger v Hauptzollamt Freiburg (No 2) [1984] ECR 1177; De Voil
Indirect Tax Service V1.262, 263, V3.302.
9 VATA 1994, ss 6 (for time of supply), 96(1) (for interpretative provisions); De Voil Indirect Tax Service V3.131.
Page 684
10 VATA 1994, s 25(1) and Sch 11, para 2 (for the accounting rules); De Voil Indirect Tax ServiceV3.402, 501: V5.109.
11 VAT (General) Regulations 1985, SI 1985/886, regs 18B-20, 21-28; VATA 1994, s 10 (scope of VAT acquisition from other Member
States); De Voil Indirect Tax Service V3.366.
12 VATA 1994, ss 1(1)(c), 12 (for time of acquisition), 96(1) (for interpretative provisions); De Voil Indirect Tax Service V3.388.
13 VAT (General) Regulations 1985, SI 1985/886, regs 18A, 20A.
14 VATA 1994, ss 15 (general provisions relating to imports of goods from outside the Member States), 16; Sixth Directive ((EEC)
77/388), art 2(2) (application of Customs enactments); Case 294/82: Einberger v Hauptzollamt Freiburg (No 2) [1984] ECR 1177; De Voil
15 VATA 1994, s 1(4).

Page 685
value added tax/1 Business: is it an 'economic activity'?
1 Business: is it an 'economic activity'?
HR A[10109]
It has been seen that VAT shall be charged on any UK supply of goods or services made in the course or furtherance of
a business. For VAT purposes the term 'business' includes any trade, profession or vocation1. The provision by a club,
association or organisation for a subscription or other consideration2 of the facilities or advantages3 supplied or made
available to members and the admission for a consideration4 of persons to any premises constitutes the carrying on of a
business. The meaning of 'business': public organisations as defined in VATA 1994, s 94(3), whereby a body with
objects which are in the public domain and are of a political, religious, philanthropic, philosophical or patriotic nature,
is not to be treated as carrying on a business only because its members subscribe to it, if a subscription obtains no
facility or advantage for the subscriber other than the right to participate in its management or receive reports on its
activities, shall cease to have effect5. In consequence, therefore, such bodies are not treated as carrying on a business
merely because members pay a subscription, and therefore its supplies are outside the scope of VAT6. The courts have
established more detailed principles to determine what is a business7 or a deemed business8 in the UK and what is an
'economic activity in the European Community9. The European concept of an 'economic activity', which is the sole term
used in the 'EC', is wider than the UK concept of 'business' and is defined somewhat differently from the UK basis10.
The application of these twin concepts has led to conflict, for instance a taxpayer applying to waive exemption11 in
relation to a property transaction could be held only to be holding an investment and not carrying on a business12 and
thereby be prevented from waiving exemption, whereas such a transaction clearly is an 'economic activity' within the
ambit of the Sixth Directive. There are many decisions made by the UK courts which relate to the meaning of 'business'
and in the courts of the EC which relate to the meaning of 'economic activity', for instance, as to a statutory body
carrying on a business13; as to a charitable trust raising funds for a theatre in the Royal Exchange14; as to the provision
by a charity of accommodation for school children15; as to whether the furnished letting of three houses was a business
or an investment and was considered by the Inland Revenue to be an investment16; in which the holding, owning and
letting of business property was not in itself a business17; as to whether a company's activities were mere investments
or amounted to a business18; on a referral by the VAT Tribunal to the European Court whether a multiplicity of share
transactions by a company registered for VAT on a single day by a person who was not a dealer in shares was an
economic activity within art 4(2)19.
HR A[10110]
1 VATA 1994, s 94(1).
2 For examples of subscriptions and other considerations see Lord Advocate v Largs Golf Club [1985] STC 226 and Customs & Excise
Comrs v Automobile Association [1974] STC 192 (apportionment).
3 For examples of facilities or advantages supplied by clubs see Eastbourne Town Radio Cars Association v Customs & Excise Comrs
[1998] STC 669 and Customs & Excise Comrs v British Field Sports Society [1998] STC 315, CA (campaigning against deer and stag
hunting).
4 For examples of admission to premises for a consideration see Eric Taylor Testimonial Match Committee v Customs & Excise Comrs
Page 686
[1975] VATTR 8 and contrast with Rochdale Hornets Football Co Ltd v Customs & Excise Comrs [1975] VATTR 71 and Jarmain v C&E
Comrs [1979] VATTR 41 where admission was by programme.
5 Sub-s (3) is to be repealed by FA 1999, s 20 and Sch 20, Pt II, which shall come into force from a date to be appointed by order made by
statutory instrument.
6 Directive 77/388/EEC art 13A(1)(l). EC Commission v Italy (case C-45/95) [1997] STC 1062, ECJ held that exempt supplies cannot be
treated as outside the scope of VAT unless the effect for VAT purposes is the same. The effect of VATA 1994, s 94(3) is not the same.
Consequently, on the appointed day by statutory instrument the scope of the exemption under Sch 9, Group 9 is to be extended to include
such bodies.
7 Customs and Excise Comrs v Lord Fisher [1981] STC 238; Rael-Brook Ltd v Minister of Housing and Local Government [1967] 2 QB
65 at 76; Town Investments Ltd v Department of the Environment [1978] AC 359 at 402; Customs and Excise Comrs v Morrison's Academy
Boarding Houses Association [1978] STC 1.
8 VATA 1994, s 4(1).
9 Customs and Excise Comrs v Apple and Pear Development Council [1986] STC 192, refd sub nom Apple and Pear Development
Council v Customs and Excise Comrs [1988] STC 221: the European Court ruled that annual charges made to recover costs under a statutory
order were not supplies of services effected for a consideration and did not amount to a business activity. To come within art 2(1) of the
Sixth Directive there had to be a direct link between the consideration and the service given. Mandatory charges did not constitute
consideration. Case C 186/89: WM van Tiem v Staatssecretaris van Financien [1993] STC 91: the European Court ruled that the exploitation
of property for a consideration is an economic activity as a matter of EEC VAT law. The term 'business' is substituted for the term 'economic
activity'.
10 Sixth Directive ((EEC) 77/388), art 4(1) and (2).
11 VATA 1994, Sch 10, para 2; De Voil Indirect Tax Service V4.115.
12 In NSPCC v Customs and Excise Comrs [1992] VATTR 417, [1993] STC 275 the charity held a substantial fund of investments
producing income of more than £1m each year. Its charitable activities were accepted as not constituting a business, save for about 5% on
which it had reclaimed input tax. The charity sought to have its investment activities treated as a business to enable it to deduct substantially
more input tax. The Commissioners ruled that the charity's investment activities did not amount to a business. The charity in their appeal
relied on the statement contained in customs notice on p 12 that 'if a charity becomes actively involved in buying and selling shares on a
regular basis, or receives commission for brokerage services, that will be regarded as a business activity'. The Tribunal in dismissing the
charity's appeal applied the ruling in Polysar Investments Netherlands BV v Inspecteur der Invoerrechten en Accijnzen, CJEC 1991,
C-60/90: [1993] STC 222 ,and strongly criticised Customs 'for seeking to resile from the straight forward interpretation' of notice no
701/1/92 expressing 'the hope that the leaflet will now be withdrawn and replaced by a leaflet which Customs and Excise will support'.
13 National Water Council v Customs and Excise Comrs [1979] STC 157.
14 Customs and Excise Comrs v Royal Exchange Theatre Trust [1979] STC 728.
15 Customs and Excise Comrs v Morrison's Academy Boarding Houses Association [1978] STC 1.
16 Walker v Customs and Excise Comrs [1976] VATTR 10.
17 Godlin v Customs and Excise Comrs (LON/88/912Y) 10/89, (4416).
18 Sherwin v Customs and Excise Comrs (MAN/86/171) (3299).
19 The Wellcome Trust v Customs and Excise Comrs (LON/93/1491) May 1994 (12206).
Page 687
value added tax/2 Input tax
2 Input tax
HR A[10111]
Input tax consists of VAT charged to a 'taxable person1' on the following:
(a) goods and services supplied to him;

(b) goods acquired by him from another EC country; and
(c) goods imported from outside the EC which the taxable person has paid for or are payable by him.
This is subject to the proviso that the goods or services supplied are used, or to be used, for the purposes of the business
carried on or to be carried on by him2.
HR A[10112]
1 For a definition of a 'taxable person', see para HR A[10108], note 3.
2 VATA 1994, s 24(1).
(a) Deductibility criteria
HR A[10113]
For Input tax to be deductible certain criteria have to be met. VAT paid does not automatically, as a matter of course,
become 'input tax'. The criteria to be applied for input tax to be deductible are as follows:
(a) at the time VAT was incurred the recipient of the supply or the acquirer or importer of the goods is
required to be registered for VAT;
(b) for input tax to be reclaimed the goods have to be physically supplied, thus any payments in
advance for goods to be supplied which are never delivered are not a 'supply' for VAT purposes1;
(c) the amount claimed as input tax must be the VAT properly chargeable which may be different to
the VAT that has actually been charged2:
(i) if the supplier is not a taxable person but includes VAT on his invoice, input tax cannot be
deducted because it is not input tax. HMCE, however, may allow a claim for input tax if they are
satisfied that:
Page 688
-- there is no involvement in or 'close knowledge' of the supplier's business by the

taxable person,
-- the taxable person was reasonable in his belief that input tax had been charged
lawfully, and
-- the supply of goods and services at the stated value was genuine.
(ii) even though there can be no valid VAT invoice because the taxable person has failed to
register, and has no registration number but is a taxable person, HMCE will allow any input tax
charged to be recoverable3,
(iii) where VAT has been wrongly charged or the transaction is exempt or zero-rated, it is
outside the scope of VAT and is not input tax4.
(d) thus to be treated as deductible, the goods or services supplied on which VAT was charged have to
have been supplied to or acquired or imported by the claimant to input tax. The goods or services
supplied must have been incurred for the purposes of the business and they must be received in the
accounting period in which the claim is made;
(e) generally, there has to be a valid invoice or document held by the claimant to input tax, but see the
conflicting Tribunal decisions set out in note 5 below5.
For supporting authority, see note 6 below6.
HR A[10114]
1 Customs and Excise Comrs v Weldons (West One) Ltd (VAT Tribunal Decision 'VTD' 984); Customs and Excise Comrs v Theotrue
Holdings Ltd (VYD 1358); Customs and Excise Comrs v Pennystar Ltd QB [1996] STC 163.
2 Customs and Excise Comrs v Podium Investments Ltd (VTD 314); Genius Holdings BV v Staatssecretaris van Financien CJEC 1989
[1991] STC 239.
3 Customs and Excise Comrs v Ellen Garage (Oldham) Ltd (VTD 12407).
4 Customs and Excise Comrs v Da Conti International Ltd (VTD 6215).
5 Customs and Excise Comrs v Croydon Hotel & Leisure Co Ltd (VTD 14920). In this case no VAT invoices had been issued.
Nevertheless, the Tribunal ruled that the claimant was entitled to reclaim input tax on the ground that the right to deduct was not limited to
cases where output tax had been paid but extended to where it was payable. In contrast, in Customs and Excise Comrs v Holiday Inns (UK)
Ltd (VTD 10609), which was disputed in Croydon, it was held that the payment in the hands of the recipient did not represent consideration
for a taxable supply.
6 VAT Notice 48, ESC 2.9; Customs and Excise Manual VI-13, chapter 1, para 1, chapter 2, para s 2.2, 2.3 and chapter 3, table 1; De Voil
Indirect Tax Service V3.402
(b) Disallowance of input tax
HR A[10115]
Page 689
New provisions relating to the disallowance of input tax, where the consideration had not been paid, were introduced by
the Finance Act 2002 which amended VATA 1994, s 26. This amendment applies where a person has become entitled
to credit for any input tax and the consideration for the supply to which the input tax relates or any part of it, is unpaid at
the end of six months following the relevant date he shall be taken, as from the end of that period, not to have been
entitled to credit for input tax in respect of the VAT that is referable to the unpaid consideration or part. For these
purposes the relevant date is either the date of supply, or if later, the date on which the sum became payable.
Under the ruling prior to enactment of this amendment, where the purchaser is a taxable person and the relevant supply
was made before 1 January 2003, the claimant shall not before, but within seven days1 from, the day he makes a claim
give to the purchaser a notice in writing containing the following information:
(a) the date of issue of the notice;

(b) the date of the claim;
(c) the date and number of any VAT invoice issued in relation to any relevant supply;
(d) the amount of the consideration for each relevant supply which the claimant has written off as a
bad debt; and
(e) the amount of the claim.
The consequence of such a notification is that the customer ceases to be entitled to input tax credit in relation to the
VAT included in the supplier's bad debt relief claim2. If the customer has deducted all or part of this VAT as input tax
he must repay that amount to the Commissioner and make the appropriate adjustment in his VAT account3.
Under the new ruling the notification requirements are abolished and the symmetry between Bad Debt Relief claims and
repayment of input tax is retained but abolishes the notification requirements. VATA 1994, s 26A(2) has the effect of
repealing VATA 1994, s 36(4A) so that regs 166A and 172D of SI 1995/2518 become redundant. Consequentially, the
power to make regulations to restore the customer's input tax in specified circumstances also becomes redundant. Thus,
VATA 1994, s 26A(2) repeals VATA 1994, s 36(5)(ea) which renders spent reg 172E of SI 1995/2518. These
provisions are replaced by VATA 1994, s 26A which came into force by virtue of SI 2002/3028, Finance Act 2002,
section 22, (Appointed Day) Order 2002, on 31 December 2002.
The effect of the new ruling under s 26A(1), (2), and (6) is that a person who has become entitled to input tax credit in
relation to a supply made to him ceases to be entitled unless the consideration for that supply is paid within six months
from the time of the supply4, as determined by VATA 1994, s 6, or if later within six months from the due date for
payment. If by the later of those two dates a proportionate part of the consideration remains unpaid the consumer ceases
to be entitled to credit for that part remaining unpaid.
The remaining provisions under s 26A(3)-(5)give the Commissioners authority to make regulations5 and the scope of
those regulations is prescribed.6
HR A[10116]
1 VAT Regulations, SI 1995/2518, reg 16A.
2 VATA 1994, s 36(4A).
3 VAT Regulations, SI 1995/2518, reg 172D.

Page 690
4 As determined in accordance with VATA 1994, s 6.
5 VATA 1994, s 26A (3)-(5).
6 Budget Notice CE37 of 17 April 2002 and the regulations proposed are announced in Business Brief 13/02 of 9 May 2002).
(c) Who can claim input tax?
HR A[10117]
For a claim to be valid it is a fundamental principle that it must be made by the person to whom the supply was made.
The principle overrides the question as to who may have paid for the supply or who may have the relevant invoice. If,
for instance, a third party pays for the goods or services which are supplied to another person, the third party does not
have the right to deduct input tax, whether or not there is a legal or commercial requirement to do so1. Such situations
have occurred:
(a) in the payment of legal costs awarded against an unsuccessful litigant;

(b) in the payment of a landlord's costs by the tenant for the drawing up of a lease; and
(c) in the payment of costs incurred for a viability study undertaken say by a bank in relation to their
clients' business activities.
For further information see note 2 below2.
HR A[10118]
1 Leesportefeuille Intiem CV v Staatssecretaris van Financien CJEC [1989] 2CMLR 856 for consideration whether a supply has been
made to a taxable person even though it is delivered to a third party. Customs and Excise Comrs v Redrow Group plc [1999] STC 161 (estate
agents' fees for sale of existing houses paid for by builder on purchase of one of its new houses.
2 C&E Manual VI-13, chapter 2, paras 3.1, 3.2.
(d) Leases of commercial and agricultural property and input tax
HR A[10119]
A practice often resorted to by certain landlords is to grant a lease to a particular partner rather than to the partnership as
a whole or to a director rather than to the company for the sound reason that if such an individual should default in
paying rent, action will be more effective against an individual rather than a partnership or a company. In such
circumstances, HMCE accept that the partnership and/or the company may treat the VAT as input tax provided that:
(a) the individual partner is not VAT-registered in his own right and provided that he passes over to
Page 691
the partnership the rent invoices for payment to the landlord; and
(b) the business uses the whole of the premises for the purposes of its business and also shows the full
amount of the rent in its accounts1.
HR A[10120]
1 Customs and Excise Manual VI-13, chapter 2, para 3.7.
(e) Business purpose use
HR A[10120.1]
Although no definition exists as to what constitutes 'business purpose use', only goods or services supplied for that
purpose, for the benefit of the business, and not always then, qualify for input tax relief. The lack of any definition has
caused various tests to be applied to determine whether or not the goods and services have been supplied for the purpose
of the business, where, in particular, the connection between the expenditure and the business is not clear. The tests that
can be applied are:
(a) what is the subjective intention of the person when he incurs the expenditure?;
(b) whether there is an obvious association between the business and the expenditure concerned;
In both (a) and (b), circumspection and care in determining these questions should be used by the
Court1.
(c) what is the objective test of the use to which the goods or services are to be put? Also, is there any
clear connection between the intended or actual use in the business activity?
HR A[10120.2]
1 Ian Flockton Developments Ltd v Customs and Excise Comrs [1987] STC 394.
HR A[10120.3]
In their manual, HMCE have recited various examples illustrating where goods and services supplied are not used for
business purposes, with the result that VAT suffered on such goods cannot be reclaimed, for example:
(a) supplies for another person's business;

(b) expenditure for the benefit of the company's directors, or for partners in a partnership and for
proprietors;
(c) expenditure related to domestic accommodation, which is regarded as a general rule to be personal
rather than business, may be incurred genuinely towards a business operated from home which does not
prevent VAT being deducted as input tax;
Page 692
(d) supplies to third parties even if the taxable person pays for them - see para HR A[10117] above.
(e) supplies to a business in connection with a non-business activity, which will require an
apportionment of the VAT paid to ensure that only so much of the VAT as is referable to business
purposes is counted as input tax1. Such items as telephones, lighting, and heating, repairs and
maintenance, where say the taxpayer lives over the shop premises, are examples of partly business
goods; and
(f) the pursuit of personal interests such as sporting and leisure activities. There is a distinction to be
made between ensuring that the legitimate costs of a taxable person in promoting his business by
providing facilities for his staff and, on the other hand by, in effect, providing a subsidy to persons who
control a business in relation to their own favoured sporting or recreational activities2.
For further information see note 3 below3.
HR A[10120.4]
1 VATA 1994, s 24(5).
2 Customs and Excise Comrs v Rosner [1994] STC 228.
3 Customs and Excise Manual VI-13, chapter 2, paras 4.2, 4.3.
(f) Input tax and anti-avoidance
HR A[10120.5]
Banks and other financial institutions within the ambit of VATA 1994, schedule 9, Group 5 Finance are exempt from
VAT and thus there can be no deduction allowed for input tax. In a recent case1, a bank wanted to build a number of
'call centres'. If the bank had arranged this for itself most of the input tax would have been irrecoverable. In an
endeavour to put itself into a position to get relief, it granted a leasehold interest in the relevant sites to an associated
company (AC1) which was not a member of the bank's VAT Group. AC1 contracted with another associate company
(AC2) to carry out the necessary construction works. AC2 reclaimed input tax on the charges made by the builders and
charged output tax to AC1 which reclaimed it as input tax. This was disputed by HMCE. The Tribunal held that the
whole purpose of the Bank's manoeuvre to insert AC1 and AC2 contractually between itself and the arms' length
construction contractors, was solely to recover input tax. The Bank's scheme constituted tax avoidance and there was no
business purpose for it. In reality, the supply was made to the Bank by the building constructors and therefore neither
AC1 nor AC2 were entitled to the input tax claimed. On appeal the High Court remitted the case back to the Tribunal on
the grounds it had wrongly directed itself by failing to consider what the real purpose and intentions of AC1 and AC2
really were and by concentrating entirely on the intention of the Bank. All that AC1 and AC2 did in this regard was to
act as a conduit for the Bank2.
HR A[10120.6]
Page 693
1 Customs and Excise Comrs v Halifax plc, Country Wide Property Investment Ltd, Leeds Permanent Development Services Ltd [2001]
VATDR 73.
2 Customs and Excise Comrs v Halifax plc [2002] STC 402, Ch D.

Page 694
value added tax/3 Output tax
3 Output tax
HR A[10120.7]
By definition a 'taxable person' is a person who is registered or is required to be registered for VAT1. Such a person
must charge VAT on any taxable supply of goods or services made in the UK in the course or furtherance of any
business carried on by him. A 'taxable supply' is a supply of goods or services made in the UK other than an exempt
supply2. For these purposes, the UK includes waters within 12 nautical miles of the coast line often referred to as the
territorial sea of the UK. VAT becomes due at the time the supply is made, but for convenience it is accounted for and
paid by reference to the due date on the VAT return form completed for the relevant accounting period3.
HR A[10120.8]
1 VATA 1994, ss 3(1), 24(2).
2 See paras HR A[10121]ff. VATA 1994, s 4.
3 VATA 1994, s 1(2).
Rates of output tax
HR A[10120.9]
There are presently three main rates of output tax in VAT, a standard rate of 17.5%, a reduced rate of 5% and a zero
rate. The categories of goods which are subject to the reduced rate charge of 5% are specified as follows1:
(a) Group 1: supplies of domestic fuel and power;

(b) Group 2: installation of energy saving materials;
(c) Group 3: grant funded installation of heating equipment or security goods, or connection of gas
supply
(d) Group 4: women's sanitary products;
(e) Group 5: children's car seats;
(f) Group 6: residential conversions; and
(g) Group 7: residential renovations and alterations.
These groups may be varied by the Treasury2.

Page 695
HR A[10120.10]
1 VATA 1994, Sch 7A.
2 VATA 1994, ss 2(1A)-(1C), 29A(3), (4), 96(9) and FA 2001, s 99 and Sch 31, para 5.
Page 696
value added tax/4 Special schemes for VAT - registered businesses
4 Special schemes for VAT - registered businesses
HR A[10120.11]
A number of special schemes have been devised by HMCE and are approved and available for VAT-registered
businesses, some of which are more relevant than others to landlord and tenant matters, as follows:
(a) cash accounting scheme (see para HR A[10120.48]);

(b) an annual accounting scheme (para HR A[10120.58]);
(c) flat rate scheme for farmers (paras HR A[10120.36]ff);
(d) VAT registration scheme for racehorse owners; and
(e) flat-rate scheme for small businesses (paras HR A[10120.12]ff).
(a) Flat-rate scheme for small businesses
HR A[10120.12]
With effect from 25 April 2002, a flat-rate scheme was open to small businesses which had a VAT-exclusive annual
taxable turnover of up to £100,000, and VAT-exclusive annual total turnover (including the value of exempt and
non-taxable income) of up to £125,0001. The budget proposals made in April 2003 seek to increase the flat rate scheme
entry thresholds from £100,000 to £150,000 and from £125,000 to £187,500. The scheme operates by businesses
applying a flat-rate fixed percentage to total income, but generally the businesses are not entitled to recover input tax.
The flat-rate percentage depends on the classification of the business, for example the 'appropriate percentage' in
relation to the following businesses, are presently as follows2:
Building and Construction Services where materials supplied 9%
Building and Construction Services where primarily labour only supplied 14.5%
Real Estate activity not elsewhere listed 13%
Rental of Household or Personal Goods machinery and equipment 9.5%
Property Management and Estate Agency 11.5%
Hotels and Accommodation 10.5%
Agricultural Services 9%
Financial Services 12%
Forestry , Fishing 10%
Wholesale of food or agricultural products 7%
Other manufacture not elsewhere listed 10%
Agriculture not elsewhere listed 6.5%
Computer and IT consultancy or data processing 14.5%
HMCE treat the appropriate percentage for building or construction services:

Page 697
(a) where materials are supplied as applying if the materials supplied constitute more than 10% of
turnover; or
(b) where primarily labour only is supplied as applying where goods supplied with services are less
than 10% by value of turnover3.
HR A[10120.13]
1 FA 2002, s 23, inserted as VATA 1994, s 24B. The March 2003 Budget proposes to raise the limit to £150,000.
2 SI 1995/2518, regs 55H, 55K, and SI 2002/1142.
3 VAT Notice 733, para 5.1.
HR A[10120.14]
It is not infrequently the case that a flat-rate trader carries on business in more than one of the categories listed above in
para HR A[10120.12] at the 'relevant date'. In such a case the trader is regarded as being expected to carry on that
category of business which is expected to be his main business activity during that period determined by reference to
turnover expected to be generated by each business activity concerned. An illustration as to how this operates may be
helpful:
A small tenant farmer, in addition to providing agricultural services (9%) is a wholesaler of food and agricultural
products (7%). The farmer generates, say, £60,000 from his agricultural service activity and from the food wholesale
activity a gross taxable income of £15,000 is generated. The flat-rate trader should apply to the income generated of
£75,000 the flat rate percentage of the agricultural service business of 9%.
The flat-rate percentage to be applied for any VAT period is to be determined thus1:
(a) for the VAT period current at the date the trader is authorised to use the scheme (his start date), the
appropriate percentage is that specified in the table above for the category of business he is expected on
reasonable grounds at his start date to carry on in that period or, if his start date is not the first day of the
VAT period, in the remainder of the period;
(b) for any subsequent VAT period current at an anniversary of the trader's start date the appropriate
percentage is as specified in the table above for the category of business he is expected, on the first day
of that VAT period, on reasonable grounds, to carry on in that period; and
(c) for another VAT period, if any, the appropriate percentage is the same as that applicable for the
VAT period that was current at his start date or the most recent anniversary of his start date, which ever
is the later.
For the above purposes the 'relevant date' is as follows:
(i) where para (a) above applies, his start date;

(ii) where para (b) above applies, the first day of a VAT period current at an anniversary of his start
date; and
Page 698
(iii) where there is a change in business activity, the change date2.
HR A[10120.15]
1 SI 1995/2518, regs 55H, 55K and SI 2002/1142.
2 SI 1995/2518, reg 55K and SI 2002/1142.
HR A[10120.16]
Where the balance between the activities of the flat-rate trader changes during the year the appropriate rate used at the
beginning of the year must continue to be used1. This should be reviewed at each annual anniversary of the start date
and if the balance has changed then the flat-rate trader must use the flat-rate appropriate to the largest portion of his
business for the next year. Notification of any change should be made within 30 days of the change date to the
Commissioners of Customs and Excise in writing also informing them of the rate the trader intends to adopt2.
HR A[10120.17]
2 SI 1995/2518, reg 55n(1)(2)(4) and SI 2002/1142.
(i) The issue and content of VAT invoices
HR A[10120.18]
The rules relating to the issue and content of VAT invoices have been amended and provision is made for regulations
relating to self-billing and electronic invoicing. The new rules introduced by the Finance Act 2002 were designed to
comply with the provisions of EC Directive 2001/115/EC and are to come into force on a day to be appointed before 1
January 2004. By reason of VATA 1994, s 36A, the Treasury is empowered to provide by order that no VAT is to be
payable on an acquisition where relief from VAT would be due on the importation of the same goods from outside the
EC1.
HR A[10120.19]
1 VATA 1994, s 25.
(ii) The flat-rate scheme compared to the normal VAT rules

Page 699
HR A[10120.20]
The reason why this scheme was introduced was to simplify the way in which small businesses account for VAT. Under
the normal rules as originally envisaged, VAT was meant to be a simple and uncomplicated tax. Instead, it has become
far from simple and, in a worthy attempt to redress the balance somewhat, the flat rate scheme was introduced. Under
normal VAT rules, a business is required to identify VAT on each and every sale it makes, the value of which it is
required to record and to pay to Customs and Excise as 'output tax'. In a similar fashion, it must identify and record the
VAT on its purchases which it claims back from HMCE. The flat rate scheme dispenses with these niceties. There is no
need to identify and record each and every purchase and sale transaction in order to calculate the VAT due to HMCE.
Instead, the business calculates the sum of its business supplies including exempt supplies and to this figure the
appropriate flat-rate percentage is applied to the 'relevant turnover of the period1 to calculate the VAT owing to HMCE.
The appropriate percentage, as has been seen above, varies from trade to trade, and is calculated by HMCE so as to give
a fair allowance for input tax which normally, save in certain circumstances, cannot claimed.
HR A[10120.21]
1 SI 1995/2518, reg 55D and SI 2002/1142.
HR A[10120.22]
A necessary step in calculating liability under the flat-rate scheme is to determine whether a purchase is a relevant
supply or not, because not all purchases qualify as 'relevant supplies'. For these purposes, 'relevant supplies' comprise
all supplies made by a person other than those specified in VAT regulations 1995, SI 1995/2518, reg 55C(1), (2), (3),
and (5), as inserted by reg 7 of the 2002 regulations. The 'appropriate percentage' is the percentage specified in the table
in VAT Regulations 1995, SI 1995/2518, reg 55K (as inserted by reg 7 of the 2002 Regulations) for the type of business
carried on by the person concerned. It should be well noted that 'taxable supplies' and 'exempt supplies' for flat-rate
purposes are included in 'relevant turnover' if they are 'relevant supplies'. Thus, for a prescribed accounting period
'relevant turnover' is the aggregate of:
(a) the value of the taxable supplies for the period plus the VAT chargeable thereon; and
(b) the value of exempt supplies for the period.
For exceptions to the principle that a person participating in a flat-rate scheme is not entitled to input tax credit, see
VAT Regulations 1995, SI 1995/2518, regs 55E and 55F(as inserted by reg 7 of the 2002 Regulations).
(iii) Qualifying input tax and the flat-rate scheme
HR A[10120.23]
There are exceptions to the principle that a flat-rate trader does not ordinarily make a separate claim for input tax or for
VAT on imports or acquisitions because the appropriate percentage includes an allowance to cover this element.
Page 700
However:
(a) where such a trader, in any VAT period, incurs Capital expenditure over £2,0001, inclusive of
VAT, the trader is entitled to credit for input tax in respect of any such relevant purchase, provided he
acquired the goods:
(i) for the purpose of resale or incorporation into goods supplied by him, or
(ii) for consumption by him within the space of one year, or
(iii) to generate income by being leased, let or hired.
However, purchases of capital items for less than £2,000 inclusive of VAT are to be treated like any
other purchase under the flat-rate scheme whereby no separate claim can be made for input tax.
Where the above applies, any input tax should be claimed on the VAT return in the normal manner. It
follows that where it has been claimed on acquisition it must be accounted for in the normal manner on
any subsequent disposal by adding any VAT on the disposal to the VAT calculated under the flat-rate
scheme2.
It has also to be borne in mind that nothing in the above provisions gives an entitlement to credit for
input tax if it is not allowed under any order made by the Treasury, who are empowered to specify that
VAT from them is to be excluded from any credit3.
(b) VAT incurred before registration clearly is not input tax yet, subject to satisfying certain
circumstances, it can be treated as input tax. The circumstances briefly stated are as follows:
(i) the goods are for the purpose of the business which was either carried on or was to be
carried on by him at the time of supply or payment,
(ii) all the normal rules allow the input tax to be reclaimed,
(iii) the goods have not been supplied or consumed by the taxable person before the date he
was or was required to be registered4. This requirement is satisfied according to HMCE if the
goods have been used to make other goods and remain held at that date5,
(iv) the goods must not have been supplied to or imported or acquired by the taxable person
more than three years before the date with effect from which he was or was required to be
registered, and
(v) a stock account is compiled which has to be retained for such period as HMCE in their
wisdom require. This must show separately the quantities purchased, the quantities used in the
making of other goods, the date of purchase, and the date and manner of subsequent disposals of
both such quantities.
Subject to satisfying the foregoing provisions a business can recover input tax incurred before registration. These
provisions apply where the first VAT period for which the business is authorised to account for and pay VAT in
accordance with the flat rate scheme is the first VAT period for which it is registered or required to be registered. Thus,
the claim should be made on the first VAT return following registration. It is important not to overlook the accounting
for any subsequent disposal of capital assets which, on acquisition, were the subject of a claim. This is easily done by
adding any VAT due on the disposal to the VAT calculated under the flat-rate scheme6.
Where the whole of the matters set out above apply, the whole of the input tax on goods and services will be regarded as
used or to be used by the taxable person exclusively in making taxable supplies7.
HR A[10120.24]
Page 701
1 SI 1995/2518, regs 55A, 55E and SI 202/1142.
3 VATA 1994, s 25(7).
4 Schemepanel Trading Co Ltd v Customs and Excise Comrs [1996] STC 871 (tvc 34.491).
7 SI 1995/2518, reg 55F and SI 2002/1142.
(iv) Keeping special records and accounting
HR A[10120.25]
It is obligatory for a taxpayer to keep special records of his flat rate calculations with his normal VAT account. The
records must show the following:
(a) the flat-rate turnover for the VAT accounting period;

(b) the flat-rate percentage(s) applied; and
(c) the tax calculated as due1.
It remains necessary for the taxpayer to continue to issue VAT invoices to their VAT registered customers and to charge
VAT at the normal rate for the supply (ie standard, reduced or zero) and not at the flat-rate percentage. These invoices
will be treated by the customers as normal VAT invoices2.
It is of obvious importance to know how to determine correctly the turnover to which the flat-rate percentage is to be
applied, because if items are included which are not part of the turnover too much VAT will be paid. If the converse
applies and too little VAT is paid because items are omitted, the taxpayer will be exposed to and have to pay a penalty
and interest. It is fundamental in calculating the flat-rate turnover not to forget to include the VAT inclusive value of
any invoices issued or paid for. Flat-rate turnover includes all supplies made by the business including the following:
(a) the VAT inclusive considerations for standard rated, reduced rated and zero-rated supplies;
(b) the value of exempt supplies3 such as rent or lottery commission;
(c) supplies of capital assets unless they are supplies on which VAT has to be calculated outside the
flat-rate scheme4; and
(d) the value of the taxpayer's despatches to other member states of the EC if the taxpayer is making
intra EC supplies5.
Page 702
Examples of income which can be excluded are set out in Customs and Excise Notices6 and include the following:
(a) private income such as income from shares;

(b) the proceeds from the sale of goods owned by the taxpayer but which are not be used in the
business;
(c) any sales of gold which are covered by VATA 1994, s 55, to which the special accounting scheme
applies;
(d) non-business income and any supplies outside the scope of VAT; and
(e) sales of capital assets which must be accounted for outside the scheme, which depends on how they
were treated when they were acquired.
No special rule will apply if, when under the flat-rate scheme, no separate claim for input tax was made. In that case all
that has to be done is to include the income received from the disposal in the income to which is the flat-rate percentage
applied.
If the capital asset was acquired before joining the flat-rate scheme or the taxpayer took advantage of the concession to
claim input tax relief separately while under the scheme output tax upon disposal of the capital asset will have to be
accounted for in the normal manner and the income will not form part of the turnover to which the flat-rate percentage
will be applied.
HR A[10120.26]
3 For more concerning exempt income, see VAT Notice 700, 'The VAT Guide'.
4 Calculation to be in accordance with VAT Notice 733, para 11.8.
5 See VAT Notice 725, 'The Single Market'.
6 VAT Notice 733, paras 6.1, 6.2, 11.8.
(v) Methods of calculating flat-rate turnover
HR A[10120.27]
Turnover can be calculated in three ways: the basic method, the cash-based method and the retailer's method.
The basic turnover method

Page 703
HR A[10120.28]
The basic turnover method is principally for those who deal mainly with other VAT Registered business. The flat-rate
percentage is applied to supplies for which a tax point has passed. It follows the normal VAT rules about the time of
supply for VAT purposes1.
HR A[10120.29]
1 The detailed rules required to be followed are in VAT Notice 700, 'The VAT Guide' and VAT Notice 733, paras 6.3 and 8.
The cash-based turnover method
HR A[10120.30]
This is based not on the time the supply is made but on the time payment is received for the goods or services. The
flat-rate percentage is applied therefore to the supplies for which payment has been made in the accounting period. This
is different from the normal method when payment is based on the time the supply is made and may prove
advantageous to the taxpayer who gives or allows extended credit, or who has a lot of bad debts, or in the event of a
change in the VAT rate.
Where a net payment has been received, the full value of the payment must be included before any deductions are made.
The type of deductions likely to be made are payments of commission, for expenses by a factor or agent. Likewise,
where there is a barter or an exchange of goods resulting in payment partly in kind, the full value including VAT must
be included in its flat-rate turnover calculation. In other words, the price for these purposes is what the customer would
have to pay for the supply if they had paid for it with money only1.
HR A[10120.31]
1 VAT Notice 733, paras 6.3, and 9 to 9.6.
Retailer's turnover method
HR A[10120.32]
This operates essentially as a retail scheme and is best for a tradesman selling goods to the public. It is based on daily
takings and requires transactions to be recorded as they are made. At the end of the accounting period the appropriate
flat-rate percentage will be applied to the daily takings for that period, which perforce will include non-cash sales. The
provisions relating to such matters as till shortages and excesses, counterfeit notes, unsigned and dishonoured cheques
and all other matters relating to retail schemes are set out in the relevant Customs and Excise notices1.
Page 704
HR A[10120.33]
1 VAT Notice 727/3 - 'Retail Schemes: How to work the point of sale scheme' and Notice 733, paras 10-10.6. SI 1995/2518, reg 55G and
SI 2002/1142.
HR A[10120.34]
Certain matters relating to the flat-rate scheme for small businesses have not been included in this text. These include
the following:
(a) acquisitions and sales from and to other EC countries;

(b) further matters relating to using the scheme and keeping records;
(c) bad debt relief1;
(d) disposals and purchases of capital assets not covered by the capital goods scheme2;
(e) disbursements where a business pays amounts to third parties as agents for a client then it may be
possible to treat the money received in compensation for those disbursements as not part of the turnover
to which the flat-rate percentage is applied3;
(f) the application or non-application of partial exemption calculations4;
(g) treatment of the sale of second-hand goods5;
(h) the treatment of reverse charges on supplies from abroad outside the Member States6;
(i) the problems and consequences of leaving the flat-rate scheme, say by voluntary withdrawal,
during the middle of a VAT period, the making of adjustments relating to work-in-progress and
stock-in-hand, and self-supply on withdrawal from the flat-rate scheme7; and
(j) the right to appeal and the test of reasonability8.
HR A[10120.35]
1 SI 1995/2518, reg 55V and SI 2002/1142.
2 VAT Notice 733, paras 11.7, 11.8.
3 VAT Notice 733, para 11.9 and VAT Notice 700 'The VAT Guide'.
6 VATA 1994, s 8, SI 1995/2518, para 55U and SI 2002/1142.
7 VAT Notice 733, para 7.11, SI 1995/2518, regs 55B(4), 55L(c), 55M, 55N(3)(4), 55P-55S and SI 2002/1142.
8 VATA 1994, ss 83(fza), 84(4ZA); FA 2002, s 23(2)(3).

Page 705
(b) Flat-rate scheme for farmers
HR A[10120.36]
Farmers may use this scheme as an alternative to VAT registration. If a farmer is already registered for VAT he may
either remain registered or choose, subject to HMCE approval, to deregister, and join the flat-rate scheme subject to the
proviso that the value of his non-farming activities remains below the VAT registration threshold. The flat-rate scheme
may also be used by farmers even though they would otherwise qualify for voluntary registration. Application to join
the scheme has to be made by the farmer to HMCE who, before certifying the farmer, have to be satisfied that the
farmer is:
(a) carrying on a business involving one or more of the 'designated activities; and
(b) complying with the necessary conditions for admission to the scheme.
(i) The designated activities1
HR A[10120.37]
The farmer will qualify for the flat-rate scheme2 if he engages in any of the following designated activities which are
made by Treasury Order3 and are set out below4:
(a) crop production consisting of any of the following:
(i) general agriculture, including viticulture,

(ii) growing of fruit, vegetables, flowers and ornamental plants in the open and under glass,
(iii) production of mushrooms, spices, seeds and propagating materials, and
(iv) nursery production.
(b) stock farming comprising any of the following:
(i) this includes the breeding, rearing and caring of animals which are eaten by humans or, if
not eaten by humans, produce food that is eaten by humans, or such animals as are bred for their
skins,
(ii) poultry or rabbit farming, the breeding, rearing and keeping of chickens, turkeys, ducks,
geese, pigeons and game birds, unless they are reared specifically for shooting which are
generally eaten by humans or animals,
(iii) beekeeping and silkworm farming up to and including the sale of the bees or the silkworm
cocoons,
(iv) snail farming, comprising the breeding and rearing of edible snails and their farming for
any other purpose.
Certain activities do not qualify for the flat-rate scheme for farmers. These include such activities as
raising budgerigars, butterflies, cats and dogs, except sheep dogs. Pony trekking, riding lessons, hunting,
training horses bred for racing, show-jumping or eventing are also excluded, likewise training pigeons
Page 706
for racing.
(c) forestry:
This covers the growing, felling and general husbandry of trees in a forest. Any process beyond
the stage of converting the felled timber into sawlogs, industrial small diameter roundwood,
pitprops, cordwood, fencing material and roundwood, is excluded.
(d) fisheries:
This comprises freshwater fishing, fish farming, and the breeding of molluscs and crustaceans.
(e) processing:
Processing of a farmer's own products by the farmer which fall within (a)-(d) above using only
such means as are normally employed in the course of such activities are within the flat-rate
scheme. Examples which are included are the gutting of fish, drying of hops, slaughter and
preparation of animals raised by the farmer for sale at the farm gate, and the picking and
packaging of fruit for sale on the farm.
(f) supplies of agricultural services - this category extends the designated services set out in (a) to (e)
above and consists of the following:
(i) storage of agricultural products,

(ii) field work, reaping and mowing, thrashing, bailing, and mowing collecting, harvesting,
sowing and planting,
(iii) packing and preparation of products for market which includes drying, cleaning, drying,
disinfecting, and ensilaging,
(iv) hiring out equipment for use in any designated activity,
(v) stock minding, rearing and fattening of animals within (b) above or fish within (d) above,
(vi) destruction of weeds and pests dusting and spraying of crops and land,
(vii) technical assistance in relation to any designated activity which includes thatching,
provided the farmer has grown the reeds; deer management, for example the culling and
prevention of deer going on to forestry land; vermin control and agricultural pest control,
(viii) operation of irrigation and drainage equipment, and
(ix) lopping, tree felling and other forestry services which will include clearing undergrowth,
spraying trees, marking trees for felling, making inventories of trees suitable for felling and
creating firebreaks.
Activities not specified do not qualify as 'designated activities'.
HR A[10120.37]
1 VAT Notice 700/46/02, paras 4.1-4.4, 5.2, 6.1-6.3, 8.1, 8.2.
2 VATA 1994, s 54(1)(a) and VAT Regulations, SI 1995/2518, reg 204a; by reference to Directive 77/388/EEC, art 25(2).
Page 707
3 For the Commissioners' interpretation of the scope of these activities, see Leaflet 700/46/93, Annex B.
4 VAT (Flat-rate scheme for farmers)(Designated Activities) Regulations SI 1992/3220, reg 2(1), Sch, Pts 1 VI.
(ii) Special situation transactions
Auctioning1
HR A[10120.38]
Where the auctioneer is using the auctioneer's scheme or the margin scheme and is acting in his own name, he will be
acting as principal, which means that he is taking title to the goods as a VAT registered person and the goods will attract
the full appropriate VAT rate. In these circumstances the flat-rate farmer will be able to charge the flat rate addition to
the auctioneer.
Where the auctioneer is using neither of the schemes mentioned above and he is not acting in his own name, the
auctioneer will not be regarded as purchasing and selling the goods for VAT purposes. The flat-rate farmer will not then
be able to charge the flat-rate addition to the auctioneer. His recourse in these circumstances is to charge it to the
eventual buyer provided he is a VAT registered person.
HR A[10120.39]
1 VAT Leaflet 700/46/93, para 17.
The flat-rate addition instead of VAT
HR A[10120.40]
The consideration for any taxable supply made by a certified flat-rate farmer, who is not a taxable person, in the course
or furtherance of the relevant part of the business made to a taxable person is treated as including an amount called the
flat-rate addition which is equal to 4%1 of the sum which with the addition of the flat-rate addition is equal to the
consideration for the supply2. This expressed more simply is that farmers certified under the flat-rate scheme do not
account for VAT, fixed or submit returns on sales of goods and services within the designated activities to other VAT
registered customers. That means they cannot reclaim the related input tax. In compensation for this, such farmers, on
sales of designated goods and services to VAT registered persons may charge a fixed flat-rate addition of 4% on top of
the sale price (ie equal to 1/26 of the consideration) and this applies also to zero-rated goods. The addition is retained by
the farmer and the registered person may recover it as if it were VAT under the normal rules3. However, the flat-rate
addition must not be charged on supplies of goods and services which are not designated or on supplies to
non-registered persons in which category are included other flat-rate farmers.
HR A[10120.41]
Page 708
1 VAT (flat-rate Scheme for Farmers)(Percentage Addition) Order SI 1992/3221, reg 2. For the manner in which the percentage is
ascertained see Directive 77/38/EECart 25(3) and EC Commission v Italy (Case 386) [1989] 3 CMLR 748, ECJ.
2 VATA 1994, s 54(3)(4).
3 VATA 1994, s 54(3)(4); SI 1992/3221; SI 1995/2518, reg 209.
Sales through farmers' groups and co-operatives
HR A[10120.42]
Usually the selling farmer's goods are combined with the produce of other farmers, some or many of whom may not be
flat-rate farmers. In such cases, the buyer should pay only the agreed produce price without the flat-rate addition. The
flat-rate farmer does not, however, lose out because he can recover the flat-rate addition from the group on production
of his flat-rate certificate when the proceeds of sale are shared out. The flat-rate addition is recoverable by the non
flat-rate farmers on their own VAT return as though it were input tax.
Sales to and from other EC countries and those made outside the EC
HR A[10120.43]-HR A[10120.44]
(a) sales to other EC countries: the flat-rate farmer can charge the addition to the VAT registered
person in the EC country, who can reclaim the addition subject to producing a flat-rate invoice;
(b) purchases from other EC countries: where a VAT registered person in the UK acquires goods or
services from a farmer in another EC country who charges the flat-rate he may reclaim from the VAT
authority in the supplier's country but not from HMCE;
(c) sales made outside the EC; and
(d) subject to the proviso that the goods sold are used by the purchaser outside the EC for his business
purposes the flat-rate farmer can charge the addition on designated goods and services to the purchaser
outside the EC.
(iii) Eligibility for scheme
HR A[10120.45]
The Commissioners are required to certify a person if that person on application satisfies the following conditions:
(a) that he is carrying on one or more of the 'designated activities';

(b) that in the three years before the date of application for certification the applicant has not:
(i) been convicted of any offences in connection with VAT,

(ii) accepted an offer to compound proceedings in connection with a VAT offence, or
(iii) been assessed to a penalty for VAT evasion involving dishonest conduct.
Page 709
(c) that he applies for certification on Form VAT 98, obtainable from HMCE, Carmarthen District
Registry, Old Station Road, Carmarthen, Dyfed, SA31 1BT; and
(d) that in the year following the date of certification he satisfies the Commissioners that the amounts
of the flat-rate additions charged by him will not exceed the amount of the input tax to which otherwise
he would be entitled to credit by £3,000 or more. Thus, normally certification is likely to be refused if the
net figure (ie the 4% figure less input tax in preceding 12 months) is more than £3,000. This will always
be satisfied where the estimated value of agricultural supplies is £75,000 or less.
(iv) Invoices1
HR A[10120.46]
In order that a registered person in receipt of a supply of designated goods and services may treat the flat-rate addition
as if it were input tax for VAT purposes, the farmer must issue an invoice containing the following particulars:
(a) an identifying invoice number;

(b) his name, address and certificate number;
(c) the name and address of the person to whom the goods and services are supplied;
(d) the time of the supply;
(e) a description of the goods or services supplied;
(f) the consideration of the supply, excluding the flat-rate addition; and
(g) an amount entitled 'flat-rate addition or FRA.
HR A[10120.47]
1 SI 1995/2518, Reg 209.
(c) Cash accounting scheme1
HR A[10120.48]
A taxable person may account and pay for VAT under the cash accounting scheme, subject to meeting certain criteria
which are laid down by HMCE by publishing a fresh notice of which some of the provisions have the force of law. It
should be noted that the cash accounting scheme cannot be used at the same time as the flat-rate scheme for small
businesses2. The main attractions of this scheme to taxpayers is that automatic bad debt relief is given, and the time of
payment for VAT is deferred where extended credit is given3.
HR A[10120.49]
Page 710
1 VATA 1994, s 25(1), Sch 11, para 2(7); SI 1995/2518, regs 57, 59; SI 1997/1614, reg 4. By reg 57 the ceiling of £400,000 was
increased to £600,000 with effect from 29 June 2000 (Council Decision 2000/435/EC, amending Council Decision 97/375/EC).
2 SI 1995/2518, reg 57A; SI 2002/1142; DeVoil Indirect Tax Service V2.166 and V2.199.
3 See VAT Notice 731, para 1.3.
(i) Eligibility to join the scheme
HR A[10120.50]
A taxable person may operate this scheme from the beginning of any VAT period without applying to the
Commissioners for leave to do so1 provided that he meets the following conditions:
(a) he has reasonable grounds for believing that the value of his taxable supplies for the period of one
year then beginning will not exceed £600,0002. All standard and zero-rated supplies should be included,
but exempt supplies should be excluded. Anticipated sales of capital assets should also be excluded;
(b) he has made all returns which he is required to make and he has paid to the Commissioners all
sums shown as due including penalties and interest on those returns;
(c) he has paid to the Commissioners all sums shown as due on any assessments made under VATA
1994, s 76 or Sch 11;
(d) he has not, in the period of one year preceding the date when he becomes eligible to begin
operating the scheme, either:
(i) been convicted of any offence relating to VAT,

(ii) made any payment to compound proceedings in connection with VAT offences under
CEMA 1979, s 152,
(iii) been assessed to a penalty under VATA 1994, s 60, or
(iv) ceased to be eligible to operate the scheme,
(e) he has not been denied access in writing by the Commissioners3;

(f) he has not had cash accounting withdrawn from him in the last year; and
(g) if at the end of a prescribed accounting period the value of his taxable supplies for the one year
then ending has exceeded £750,000, he must leave the scheme at the end of the VAT accounting period
in which he first exceeds the limit, unless the Commissioners allow or direct otherwise4.
HR A[10120.51]
1 SI 1995/2518, reg 58(1). Before 3 January 1994 all persons wishing to use the cash accounting scheme were required to apply for
authorisation from the Commissioners.
2 The figure of £600,000 was substituted for the previous figure of £350,000 by The VAT (amendment) (No 2) Regulations, SI 2001/677,
reg 4(a) with effect from 1 April 2001.
3 VAT Notice 731, (March 1999) para 2.1.

Page 711
4 VAT Regulations, SI 1995/2518, reg 60(3) with effect from 3 July 1997; and VAT Notice 731 (March 1999) part 5.2.
(ii) Transactions outside the cash accounting scheme1
HR A[10120.52]
The normal time of supply rules must be used in respect of the following transactions2:
(a) lease purchase;

(b) hire-purchase;
(c) conditional sale;
(d) credit sale agreement;
(e) a supply which will not be paid for in full within six months from the date of issue of the VAT
invoice; and
(f) a supply where an invoice is issued before the goods are delivered or made available or the services
performed, unless such goods or services have been delivered, made available or performed in part and
the invoice relates solely to that part.
HR A[10120.53]
1 SI 1995/2518, reg 58(2)(3); SI 1997/1614, reg 3. VAT Notice 731, paras 2.3, 4.3.
2 VAT Regulations, SI 1995/2518, reg 58(2)(3) with effect from 3 July 1997.
(iii) Factored debts
HR A[10120.54]
Where factored debts are sold or formally assigned to a factor, thus becoming the debts of the factor, output tax must be
accounted for on their full value, and not on any reduced value for which they may have been assigned. If, at a later
date, all or any of the factored debts are formally assigned back to the business under a recourse clause, the business
may claim bad debt relief on any unpaid element subject to the normal bad debt rules.
A distinction has to be made between a business that merely uses a factor or invoice discounter as a debt collector under
which legal title to the debt is retained and does not pass and the situation expressed above. In these circumstances, the
initial advance made by the factor is not a payment for the purposes of the cash accounting scheme as it is simply a
loan. When the customer pays the factor the business must account for output tax in the VAT period in which the factor
is paid by the customer. VAT is due on the full amount received by the factor without deduction for commission or
other charges imposed by the factor1.
HR A[10120.55]
Page 712
1 VAT Notice 731, paras 4.2, 4.5; C&E Manual VI-23, chapter 4, para 5.
HR A[10120.56]
Certain matters relating to the cash accounting scheme have not been included in this text. These include the following:
(a) records and receipted invoices1;

(b) treatment of deposits2;
(c) payments received net of deductions3;
(d) payments received in a foreign currency4;
(e) exports and supplies to other European countries5;
(f) payments in kind6;
(g) partial exemption7;
(h) prompt payment discount8;
(i) own volition withdrawal9;
(j) expulsion from scheme10;
(k) appeals11; and
(l) cessation of business12.
HR A[10120.57]
1 SI 1995/2518, reg 65(3); C&E Manual VI-23, chapter 4, para 5.1 and VAT Notice 731, para.3.2.
2 VAT Noitce 731, para 4.1.
4 VAT Notice 731, paras 4.10, 4.11.
6 VAT Notice 731, para 4.9 and Customs and Excise Comrs v A-Z Electrical (VTD 10718).
8 C&E Manual VI-23, chapter 4, para 4.6.
9 SI 1995/2518, reg 60(2); SI 1997/1614, reg 5.
10 SI 1995/2518, reg 64(1); SI 1997/1614, reg 9 and VAT Notice 731, para 2.6.
11 VAT Notice 731, paras 2.10, 2.11.

Page 713
12 SI 1995/2518, regs 62, 63(1); SI 1997/1614,regs 7, 8; and VAT Notice 731, paras 5.8, 5.9, 5.10.
(d) Annual accounting scheme
HR A[10120.58]
Regulations may be made allowing a business to account and pay for VAT in accordance with a scheme made under
VATA 1994, s 25(1) and Sch 11, para 2(1) which provides that the Commissioners may authorise a taxable person to:
(a) modify1 the length of the period in respect of which VAT returns are furnished, other than the
usual three-monthly period;
(b) modify1 the time limit within which VAT returns must be furnished; and
(c) modify1 the time and manner in which tax must be paid.
This scheme allows a taxable person to complete one VAT return each year making interim payments to account, which
is described as the 'current accounting year', and is the 'prescribed accounting period'2. The annual VAT return must be
completed and sent to the Commissioners with any balancing payment within two months of the end of the annual VAT
prescribed accounting period.
HR A[10120.59]
1 VAT Regulations, SI 1995/2518, reg 50.
2 VAT Regulations, SI 1995/2518, reg 49.
(i) Eligibility conditions
HR A[10120.60]
A taxable person can apply for authorisation to join the scheme if1:
(a) he has been registered for at least 12 months at the date of his application unless the business has
reasonable grounds for believing that the value of his taxable supplies in the 12 months beginning on the
date of application for authorisation will not exceed £100,0002;
(b) there are reasonable grounds for believing that the value of taxable supplies, exclusive of VAT,
likely to be generated in the period of 12 months starting at the date of the application, will not exceed
£600,0003. For this purpose all standard rated, reduced rated and zero-rated supplies should be included
except capital assets previously used in the business. Exempt supplies should be excluded;
(c) it is a body corporate, its registration is neither in the name of a group4 nor in the name of a
division5; and
Page 714
(d) the business has not, within the last 12 months to the date of the application, ceased to operate the
scheme for any of the following reasons:
(i) where at the end of any transitional accounting period or after the end of the annual
accounting period the value of taxable supplies has exceeded £750,000 (if prior to 1 April 2001
this figure was £375,000)6,
(ii) if HMCE have terminated their authorisation to use the scheme for any of the following
reasons:
-- the making of a false statement relating to the business to induce approval to use the
scheme,
-- failure by the business to render payments due under the scheme,
-- failure to render returns timeously under the scheme,
-- failure by the business to notify in writing within 30 days where they have reason to
believe that the taxable supplies will exceed in the transitional or annual accounting
period £750,000,
-- that in the view of HMCE it is necessary to terminate the authorisation for the
protection of the revenue,
-- because the business has failed to make payments due and the debt created exceeds
20% of the expected annual liability7,
-- where HMCE have issued four reminder letters in relation to the last six interim
payments7, and
-- where the business has failed to submit two consecutive annual VAT returns and
balancing payments by the due date7,
(iii) where a business authorised to use the scheme ceases to be registered, or becomes
insolvent and ceases to trade, or if a person dies or becomes incapacitated, the authorisation to
use the scheme will terminate on the date on which any such event occurs.
(iv) where by notice in writing a business authorised to use the scheme decides of its own
volition to cease to operate the scheme8, the authority for the scheme will cease and the scheme
to operate.
HR A[10120.61]
1 SI 1995/2518, reg 52; SI 1996/542; SI 2001/67; SI 2002/1142, reg 6.
2 SI 1995/2518, reg 52, effective from 1 April 1996.
3 VAT notice 732, para 2.5.
4 The figure of £600,000 was substituted for £300,000 by the VAT (Amendment) (No 2) Regulations, SI 2001/677, reg 3(a) with effect
from 1 April 2001; and VAT Notice 732, para 2.3. In the case of group registration, under VATA 1994, s 43, and De Voil Indirect Taxes
V2.190.
5 In the case of divisional registration, under VATA 1994, s 46(1); and De Voil Indirect Taxes V2.190A.
Page 715
6 The figure of £750,000 was substituted for the previous figure of £375,000 by The VAT (Amendment) (No 2) Regulations, SI 2001/677,
reg 3(b) with effect from 1 April 2001.
7 C&E Manual VI-23, chapter 1, para 5.4.
8 VAT Regulations, SI 1995/2518, reg 53(d).
(ii) Consequences of leaving the scheme
HR A[10120.62]
The taxable person must render a final return and pay any outstanding VAT within two months of the date on which its
authorisation is terminated . From that day the taxable person must account for and pay VAT in the normal manner and
it cannot rejoin the annual accounting scheme for a period of 12 months1.
HR A[10120.63]
1 SI 1995/2518, reg 55(2); SI 1996/542.
(iii) Appeals
HR A[10120.64]
There is no right of Appeal to a Tribunal against a refusal or termination of authorisation to use the scheme.
(iv) Compatibility of the annual accounting scheme with the flat-rate scheme
HR A[10120.65]
A business may apply jointly to use the annual accounting and flat-rate scheme. The rules of the latter are applied once
a year instead of four times a year. If leave is granted it is usual for the joint scheme to commence at the beginning of
the annual scheme. Leave can be granted to commence on different dates but this would require the calculation to be
done when completing the annual return with the total liability being the sum of the two calculations1.
HR A[10120.66]
1 VAT Notice 732, paras 10.1, 10.2, 10.7, 10.8, 10.10 and 10.11.
Page 716
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/D Requirement
to register for vat
HR A[10121]
In the context of VAT registration, a 'person' who is making or intending to make 'taxable supplies' of goods or services,
whether that person is a sole proprietor, partnership, limited company, association or charity, is required to be registered
if his taxable turnover exceeds or is expected to exceed the prescribed threshold1. It is the person who is required to
register, not the business, or the businesses carried on and no matter how dissimilar may be the businesses carried on by
the person, all that person's business activities must be covered by one registration, regardless whether the turnover of
any one or more of those businesses is below the threshold limit for registration2.
HR A[10122]
1 VATA 1994, s 3 (taxable persons and registration), Schs 1, 2 and 3; De Voil Indirect Tax Service V3.123.
2 Customs and Excise Comrs v Glassborow [1974] STC 142.
HR A[10122.1]
Member States are required to enact national legislation relating to VAT Representatives by giving effect to a new EEC
Directive by 31 December 20011. Effect has been given to this Directive in the UK in the FA 2001, s 100, which
amends s 48(1) of the VATA 1994, by inserting a new s 48(1A), (1B) and replacing s 48(1) with a new s 48(2), (2A),
sub-ss (1) to (3) and in (4) rendering these provisions effective from 31 December 2001. The new provisions contain
directions requiring the appointment of VAT representatives. These provisions continue to apply where any person is a
taxable person or without being a taxable person is a person who makes supplies or who acquires goods in the UK from
one or more other Member States2.
HR A[10122.2]
1 EEC Directive 77/388, art 21.
2 VATA 1994, s 48(1)(a).
HR A[10122.3]
Under the new regulations the Commissioners may direct a person to appoint a VAT representative to act on his behalf
Page 717
in relation to VAT, where any person:
(a) falls within any of the following provisions:
(i) he is a taxable person1,

(ii) he makes taxable supplies, or
(iii) he acquires goods in the UK from other Member States.
(b) he neither is established nor has any fixed establishment in the UK;
(c) he is established in a country or territory in which in the Commissioners view the new conditions
are not satisfied2.
(d) the new conditions referred to in para (c) above are that:
(i) the country or territory is neither a Member State nor a part of a Member State,
(ii) there is no provision for mutual assistance between the UK and the country or territory
similar in scope to the assistance provided for between the UK and each Member State by the
'Mutual Assistance Provisions'.
which are contained in the Finance Act 1977, s 113, the Finance Act 1978, s 774, and in reg (EEC) No
218/925 in the non-member country or territory where he is established; and
(iii) in the case of an individual he does not have his usual place of abode in the UK.
HR A[10122.4]
1 VATA 1994, s 3 and VAT Regulations 1995, SI 1995/2518, regs 5, 7-9.
2 VATA 1994, s 48(1)(ba) and (1A).
3 FA 1977, s 11 relates to the recovery of duty due in other Member States.
4 FA 1978, s 77 provides for the disclosure of tax information to tax authorities in other Member States.
5 Council Regulation EEC No 218/92 of 27 January 1992 provides for administrative co-operation in the field of indirect taxation.
HR A[10122.5]
A person who has not been required to appoint, under the provisions set out above, another person to act on his behalf in
relation to VAT and in relation to whom the conditions in sub-s (1)(a),(b) and (c) are satisfied, may appoint, with the
agreement of the Commissioners, a person to act on his behalf in relation to VAT1.
HR A[10122.6]
Page 718
1 FA 2001, s 100(3); VATA 1994, s 48(2)and (2A).
HR A[10122.7]
Save for sub-s 7A of s 48 the remaining provisions of s 48 have been left unchanged by the FA 2001. The unamended
sub-sections set out the entitlements and personal liabilities of a VAT representative acting on behalf of his
principal.The VAT representative appointed under s 48 to act on behalf of his principal is required to ensure that the
duties imposed on his principal relating to VAT or of any subordinate legislation are complied with or discharged either
by his principal or by himself if necessary. He is personally liable, having been thus appointed, for any failure to carry
out such duties and for anything done while acting on his principal's behalf as if the obligations and liabilities imposed
on his principal were imposed jointly and severally on himself and his principal1.
HR A[10122.8]
1 VATA 1994, s 48(3); De Voil Indirect Tax Service V2.105, 5.404 and 5.352.
HR A[10122.9]
By reason of these provisions the tax representative is made personally liable for any failure to carry out these duties
and for anything done while acting on his principal's behalf. He is open to prosecution for any contravention he causes
or participates in, and thus he will be liable to prosecution for his principal's actions on the ground of consent,
connivance or neglect.
HR A[10122.10]
However, the tax representative is not required to be registered for VAT although HMCE will include his particulars in
the VAT register in the normal manner according to the regulations which govern his appointment and retirement1.
HR A[10122.11]
1 VATA 1994, s 48(5) and (6); VAT Regulations 1995, SI 1995/2518, reg 10: for penalties see VATA 1994, s 69(1).
HR A[10122.12]
A person failing to appoint a tax representative when directed to do so by the Commissioners may be required also to
provide security, or further security as the Commissioners think fit. The statutory criteria to be applied as to the amount
of security to be provided is whatever the Commissioners may think is appropriate for the payment of any VAT which
is or may become due from him1. Payment of such security can be enforced by distress or diligence and for the
purposes of FA 1997, s 51 (enforcement by distress) and s 52 (enforcement by diligence) as if it were VAT due from the
person who is required to provide it2. The Commissioners' direction to appoint a tax representative as having been
required or as having been directed unless the Commissioners have served on him the notice of direction or requirement
Page 719
to appoint, or taken all such other steps as appear to them to be reasonable for bringing the direction or requirement to
his attention3.
HR A[10122.13]
1 VATA 1994, s 48(7).
2 VATA 1994, s 48(7A) as inserted by FA 1997, s 53(6) with effect from 1 July 1997 (see SI 1997/1432).
3 VATA 1994, s 48(8).

Page 720
to register for vat/1 Compulsory registration
1 Compulsory registration
HR A[10123]
If at any month's end the value of taxable supplies of goods or services made, or intended to be made in the course or
furtherance of a business, in the period of one year then ending, currently exceeds £51,000 with effect from 1 April
1999, the person making the supplies becomes liable to be registered for VAT1. The taxable person also becomes liable
to register for VAT at any time, if there are reasonable grounds for believing that the value of his taxable supplies in the
period of 30 days then beginning will exceed the present threshold limit of £51,000 with effect from 1 April 19992.
HR A[10124]
1 Mr and Mrs Norton LON/75/5(151) relied on in G & E Aspinall (t/a Aspinall Consulting) MAN/93/1231. (12676).
2 VATA 1994, Sch 1, para (1)(b).
HR A[10125]
Compulsory registration is required also where, at any time, a business is transferred as a going concern to another
person who is not registered for VAT at the time of the transfer, provided that the value of the transferee's taxable
supplies in the year ended at the date of transfer have exceeded £51,000, or that there are reasonable grounds for
believing that the value of the taxable supplies in the 30-day period then beginning will exceed £51,000.
HR A[10126]
The transferee is to be treated, in these circumstances, as having carried on the business before, as well as after the
transfer and thus the transferee is compelled to take into account the transferor's taxable supplies for the year to the date
of transfer, in deciding whether registration is compulsory1. If, at the time that the taxpayer would become liable to be
registered and Customs and Excise are satisfied that the value of the persons taxable supplies at the time at which he
would become liable will not currently exceed £49,000, the taxpayer will not be liable to register for VAT.
HR A[10127]
1 VATA 1994, s 49 (transfers of going concerns), Sch 1, paras 1(1)-(3); De Voil Indirect Tax Service V2.226.
HR A[10128]
Page 721
In order for the Commissioners of Customs and Excise to be satisfied that future supplies would not exceed the relevant
threshold, they must be informed of all the relevant circumstances1. In the calculation to decide whether the tax
threshold registration limit has been reached, certain assets have to be disregarded, which for example include the
supply of the capital assets used in the business in the course or furtherance of the trade, such as plant and machinery,
office furniture. To be excluded from the taxable supplies made is the supply of an interest in, right over, or licence to
occupy land which is not zero-rated2.
HR A[10129]
1 VATA 1994, Sch 1, para 1(2), (3). W F Shepherd LON/86/318 (2232), dicta of Lord Grantchester applied in R.J & J Nash
MAN/96/1132 (14944), in which the turnover had fallen below the registration threshold limit and it was held that, the taxpayer having
failed to apply to the Commissioners to consider the relevant circumstances, the Commissioners could not reasonably be expected, without
evidence, to have believed that the turnover had fallen below the threshold limit.
2 VATA 1994, Sch 1, para 1(7) and (8); Voil Indirect Tax Service V2.135-137.
Page 722
to register for vat/2 Entitlement to be registered
2 Entitlement to be registered1
HR A[10130]-[10140]
Provided there exists acceptable evidence to Customs and Excise that a person who requests to be registered and who is
not liable to be registered for VAT has a firm intention to make taxable supplies, or is carrying on a business and
intends to make such supplies in the course or furtherance of that business, Customs and Excise have to register him
from a particular date2, which can be retrospectively effected to a date no earlier than three years to be mutually
agreed3 with Customs and Excise. This provision accords with the Sixth Directive requirements and to the statement of
intention contained in a decision of the European Court4.
HR A[10141]
1 De Voil Indirect Tax Service V2.120; V2.121; V2.144; V2.145.
2 VATA 1994, Sch 1, para 9(b).
3 Customs and Excise Notice 700/1/97, para 1.15.
4 Case 268/83 Rompelman v Minister van Financien [1985] 3 CMLR 202 at 211, [1985] ECR 655 and Merseyside Cablevision Ltd v
Customs and Excise Comrs [1987] VATTR 134.
HR A[10142]
Prior to the Finance Act 1989, supplies in relation to property ownership and development were exempt. The law
applicable to traders who make or have made only exempt supplies is that they are not entitled to be registered for VAT.
If exemption is granted in such circumstances it is incumbent on the person making taxable supplies to notify Customs
& Excise within 30 days of any material change occurring in the nature of the supplies made, or within 30 days of the
end of the accounting period in which the material change occurred. Exemption will continue to apply until the request
is either withdrawn by the trade or it appears to Customs & Excise that the request should no longer be acted upon1.
Applicants requesting registration, which includes property owners and developers, must produce evidence satisfactory
to Customs and Excise which includes that the supplies it intends to make or has made, indicate that preparatory
activities have begun; that input tax has been incurred and the amounts of that tax incurred to date; that a feasibility
study has been commissioned for which a consideration has been, or will be paid; that the applicant holds title to land,
or buildings, or is currently negotiating to purchase or holds an option to purchase; that full or outline planning
permission is held by the applicant, or that he has commissioned architects, or other professional services in connection
with the intended sale or letting of the property; that he has obtained listed building consent for the conversion of
substantially reconstructed protected buildings to residential use2. The circumstances in which businesses only making
or intending to make exempt supplies may choose to register for VAT if the supplies made are outside the UK but
would be taxable if made within the UK, or with effect from 19 March 1997 supplies of services which are supplied to a
Page 723
person belonging outside the Member States, or are directly linked to the export of goods to a place outside the Member
States, or consist of making arrangements for a supply of such services provided that the supply is exempt or would
have been if made in the UK3.
HR A[10143]
1 VATA 1994, Sch 1, para 14.
2 Customs and Excise News Release, 65/90, 25 September 1990.
3 VATA 1994, ss 4(2) and 26; SI 1992/3123; VATA 1994, Sch 9, Group 2, or Group 5, Items 1-8; De Voil Indirect Tax Service V3.101,
417, 502.
Page 724
to register for vat/3 Failure to register
3 Failure to register1
HR A[10144]
The consequences of an unregistered taxable person failing to register are severe and are to be avoided, for example:
(a) the Commissioners are obliged and have no discretion but to backdate registration to the date
when, in their opinion, registration should have been effected2.
(b) failure to notify the Commissioners by the due date of liability to register renders the unregistered
taxable person liable to civil penalties3.
(c) the defaulting unregistered taxpayer is liable to account for all output tax incurred from the date
registration should have been effected4.
(d) whilst unregistered the taxpayer is prohibited by statute from issuing tax invoices5.
(e) the taxpayer who during the default period has issued invoices without charging VAT appears to
have no right to recover tax from such customers unless there is an implied or specific contractual power
enabling the defaulting taxpayer to do so6.
HR A[10145]
1 De Voil Indirect Tax Services V5.347-350.
2 Whitehead v Customs and Excise Comrs (1975) VATTR 152.
3 VATA 1994, s 67; FA 1995, s 32; FA 1996, s 37, Sch 1, paras 5, 7, 14(2), (3), Sch 2, para 3, Sch 3, paras 3, 8(2), Sch 11, para 2(4);
Customs and Excise Notice 700/41/95, para 9.
4 VATA 1994, s 19(2): if the supply is for a consideration in money its value shall be taken to be such amount as with the addition of the
VAT chargeable, is equal to the consideration: Franks & Collingwood v Gates (21 September 1983, unreported).
5 Sixth Directive ((EEC) 77/388), art 27(1). VAT Regulations 1995, SI 1995/2518, reg 13(1) (obligations to provide a VAT invoice).
6 VATA 1994, s 19; and see s 89 (failure to collect further sums relating to a change of rate in VAT after making a contract for the supply
of goods and services).
Page 725
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/E Supply
E
Page 726
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/E Supply/1
General nature of supply
1 General nature of supply1
HR A[10146]
VAT is charged on any supply of goods or services made in the UK where it is a taxable supply made by a taxable
person in the course or furtherance of any business carried on by him2. Even if the supply of goods is unlawful such a
supply will remain subject to VAT unless the goods are subject to a total prohibition3. Although there is no statutory
definition of the term 'supply' the legislation provides that Sch 4 shall apply for determining what is, or is to be treated
as, a supply of goods or a supply of services4. It further provides that subject to Sch 4 and to alterations by the Treasury
that 'supply...includes all forms of supply, but not anything done otherwise than for a consideration; anything which is
not a supply of goods but is done for a consideration (including if so done, the granting, assignment, or surrender of any
right)' is a supply of services5. The matters to be treated as a supply of goods or services are set out in more detail in
Sch 46.This provides, inter alia, that any transfer of the whole property in goods is a supply; but, subject to sub-para (2),
the transfer (a) of any undivided share of the property, or (b) of the possession7 of goods is a supply of services.
However by sub-para (2) 'If the possession of goods is transferred: (a) under an agreement for the sale of goods, or (b)
under agreements which expressly contemplate that the property also will pass at some time in the future (determined
by, or ascertainable from, the agreements but in any case not later than when the goods are fully paid for), it is then in
either case a supply of goods'. Included also in a supply of goods is a supply of any form of power, heat, refrigeration,
or ventilation and the grant, assignment or surrender of a major interest in land8. Some guidance is given in Sch 4 on
the statutory construction relating to land to be applied to these provisions9. This provides that in relation to land
forming part of the assets of, or held or used for the purpose of a business as if it were goods forming part of the assets
of, or held or used for the purposes of a business references to transfer, disposition or sale shall have effect as references
to the grant or assignment of any interest in, right over or licence to occupy the land concerned, save in relation to the
grant or assignment of a major interest10; or a grant or assignment otherwise than for a consideration. Furthermore in
the application of para 5(1) to Sch 411, which provides that 'where goods forming part of the assets of a business are
transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part
of those assets, whether or not for a consideration, that is a supply by him of goods' this reference to a supply of goods
shall have effect as a reference to a supply of services.
HR A[10147]
1 De Voil Indirect Tax Service V3.102-104.
2 VATA 1994, s 4; De Voil Indirect Tax Service V3.101, 502.
3 R v Goodwin and Unstead [1997]STC 22 in which it was held that although the supply of counterfeit perfume was unlawful it was not
liable to seizure in the hands of the final consumer and the user had committed no criminal offence. VAT was charged.
4 VATA 1994, s 5; De Voil Indirect Tax Service V3.111, 118.
5 VATA 1994, s 5(2).

Page 727
6 De Voil Indirect Tax Services V3.112 and 113.
7 Customs and Excise Commissioners v Oliver [1980] STC 73, in which 'possession was held to mean control over the goods, in the sense
of having immediate facility for their use'.
8 VATA 1994, Sch 4, Items 3 and 4.
9 VATA 1994, Sch 4, Item 9.
10 VATA 1994, s 96(1).
11 See the statutory constraints on sub-para (1) in VATA 1994, Sch 4, para 5(2) and (3).
HR A[10148]
Once it has been established that a transaction is a supply, it has to be decided whether it is a supply of goods or
services. Certain supplies are neither of goods nor of services1. Such supplies are outside the scope of VAT. These
include, for instance: the transfer of a business as a going concern2; the supply of goods between members of a group
where a group registration is in force3; the services of employees4; temporary imports of goods; and the sale to persons
established outside the UK5. The Treasury may, by order, deem any transaction to be a supply of services or of goods.
HR A[10149]
1 Bristol Bloodstock Ltd v Customs and Excise Comrs (LON/93/436A). The taxpayer contended unsuccessfully that supplies of semen
were supplies of goods.
2 Held to be supplies of services and the input tax claimed was not allowed. Customs and Excise Notice 700/9/96, para 1.2 and 2.1. VAT
(Special Provisions) Order 1995, SI 1995/1268, art 5. De Voil Indirect Tax Service V2.226; V3.116.
3 Customs and Excise Comrs v Kingfisher plc [1994] STC 63: group registration creates a single taxable person: the company applying for
group registration is nominated as the representative member in whose name the registration is effected. It is he who bears the responsibility
for completing VAT returns and paying or reclaiming tax for the group. See amendments in FA 1999, s 16 and Sch 2, and also in paras HR
A[10443] and [10444]. De Voil Indirect Tax Service V2.114.
4 Sixth Directive ((EEC) 77/388), art 4(1), (2) and (4).
5 VAT (Supply of Temporarily Imported Goods) Order 1992, SI 1992/3130. VAT (Treatment of Transactions) Order 1995, SI 1995/958.
HR A[10150]
A supply of goods includes the transfer of the whole property in the goods1. Most supplies of land are exempt. Some
transactions are outside the scope of VAT altogether. Some are always taxable. Some are ignored for VAT purposes.
Certain exempt transactions in land may become taxable because the taxpayer has elected to waive exemption. In
addition to deciding whether a transaction is of goods, or of services, or whether it is an exempt, standard-rated, or a
zero-rated supply, or is a transaction which gives rise to a single composite supply, or to multiple supplies, requires that
it be analysed because it is likely the tax consequences relating to each transaction will be different.
Page 728
HR A[10151]
1 VATA 1994, Sch 4, para 1(1). Astor (Sir John Jacob) v Customs and Excise Comrs [1981] VATTR 174 (1030).
HR A[10152]
A gift of business assets, or a gift of their free use, including land, is a 'deemed supply' for VAT purposes, and therefore
subject to VAT, only if the donor, or after 16 March 1998, any of his 'predecessors' was or will become entitled to
credit, whether total or partial, for any input tax on the supply, acquisition or importation of goods1. This new provision
applies to land, including other gifts, which have been transferred, disposed of, put to use, used, or made available for
use on or after 17 March 19982. Input tax is not incurred by a trader who acquires the land when all or part of the
donor's business was transferred as a going concern3. In such circumstances, the goods transferred are treated as neither
a supply of goods nor a supply of services, with the effect that no entitlement to input tax can arise. For these purposes,
a person is a 'predecessor' of another if he has transferred land or anything comprised in the land to the other person as a
going concern, and the assets gifted included or consisted of the land or those goods, which will fall to be treated as
neither a supply of goods nor a supply of services, which takes it out of the scope of VAT4. For these purposes a
person's predecessors include the predecessors of his predecessor through any number of transactions, and will have the
effect of making the cost of the goods gifted unchanged throughout such transfers. Where the business assets include
land, the grant or assignment of a major interest in the land, or the grant or assignment of any interest in, right over or
licence to occupy the land otherwise than for a consideration is a supply of goods, and any other supply of land will be a
supply of services5. Gifts made on more than one occasion are a series of gifts on which VAT is due on all the gifts.
Gifts made on a random basis or annual gifts made at Christmas or where the donee receives a gift more than once are
generally not regarded as a series of gifts6. Gifts of goods made in the course or furtherance of business are not a supply
if the cost to the donor of acquiring or producing the goods is £15 or less7. Where land forms part of the business assets
and is gifted, the grant or assignment of a major interest in land, or of any interest in, right over, or licence to occupy
other than for a consideration is a supply of goods. Any other supply of land is a supply of services8.
HR A[10153]-[10161]
1 VATA 1994, Sch 4, paras 5(4) and 5(5): FA 1998, s 21.
2 VATA 1994, Sch 4, para 5(6): FA 1998, s 21(6).
3 VAT (Special Provisions) Order 1995, SI 1995/1268, art 5.
4 VATA 1994, Sch 4, paras 5(2), (2A) and (3): FA 1998, S 21 (4) and (5). VAT (Special Provisions) Order 1995, SI 1995/1268, art 5. See
also paras HR A[10480] and HR A[10497].
5 VATA 1994, Sch 4, para 9.
6 Customs & Excise Notice 700/35/97, para 1.3.
7 VATA 1994, Sch 4, para 5(2)(a).

Page 729
8 VATA 1994, Sch 4, para 9.
HR A[10162]
Land and property may be supplied with services, which will form part of a composite supply, for example, the supply
of office equipment may be incidental to the supply of land. One of the dangers inherent in this topic is to fail to analyse
each of the components of a single transaction by treating a multiple supply of goods or services as a single inseparable
transaction1.
HR A[10163]
1 Bophuthatswana National Commercial Corpn Ltd v Customs and Excise Comrs [1993] STC 702; Rayner v Keeler Ltd v Customs and
Excise Comrs [1994] STC 724; MEJ Burgess and AP Holmes (t/a Cards n Cuddles) (LON/96/292) (14475); VAT Regulations 1995, SI
1995/2518, reg 111(2)
HR A[10164]
It is also important to distinguish between supplies made in the course or furtherance of business relating to interests in,
rights over, or licences to occupy land and whether these are supplies of goods or services1, when establishing the place
and time of supply and the consequences of supplies for no consideration. The complexity of this area of the VAT
legislation is well illustrated in the opinion of the Advocate General in an important recent decision in the European
Courts.2 The facts of this case were that a partnership surrendered a lease of its offices for which they received from
their landlords £850,000. The partnership did not account for VAT on this sum. The Commissioners assessed this sum
for VAT. The partnership appealed on the grounds that in accordance with their interpretation of art 13B of the EEC
Sixth Directive, they should be treated as exempt from VAT. A ruling was sought from the CJEC as to whether the
surrender of a lease of immovable property for consideration paid by the landlord to the tenant fell within the ambit of
art 13B(b) of the EEC Sixth Directive and whether the restriction imposed by VATA 1983, Sch 6, Group 1, note (1)
was a permissible restriction of the exemption provisions. The CJEC ruled that this transaction fell within the ambit of
this article and accordingly was exempt from VAT. In his opinion the Advocate General, contrary to the statutory
provision contained in Sch 4, para 4 that freehold sales and the grant, assignment, or surrender of leases exceeding 21
years are supplies of goods, expressed the view that the surrender in this action can only be a supply of services.
Effect to this decision of the European Court was given by the UK from 1 March 1995, whereby the term 'grant'
included an assignment or surrender and a reverse surrender which is one in 'which the person to whom the interest is
surrendered is paid by the person by whom the interest is being surrendered to accept the surrender'3.
HR A[10165]
2 Case C-63/92 Lubbock Fine and Co v Customs and Excise Comrs [1994] STC 101.
3 VATA 1994, Sch 9, Group 1, note (1) and note (1A).

Page 730
HR A[10166]
Business premises are often provided with serviced office accommodation, which includes cleaning and other services.
Customs and Excise treated such transactions by ruling that the supplies were a licence to occupy land the consideration
for which was exempt1. Accordingly, the taxpayer company was unable to reclaim VAT.
HR A[10167]
1 Business Enterprises (UK) Ltd v Customs and Excise Comrs [1988] VATTR 160; Birchforest Ltd v Customs and Excise Comrs (MAN/
90/1063; WS Atkins (Services) Ltd (LON/92/1872).
Page 731
Exempt supplies
2 Exempt supplies
HR A[10168]
The grant of any interest in or right over land, or of any licence to occupy land are exempt supplies.1
HR A[10169]
1 VATA 1994, Sch 9, Group 1; De Voil Indirect Tax Service V4.111, 112.
HR A[10170]-[10180]
Land is considered to include buildings, walls, trees, plants, natural objects in under or over it, which remain attached to
it and other structures1. Where there are fixtures and fittings included with a building or land the liability attaching to
them will be the same as the building or land and will not be treated as separate supplies2. A supply of goods or services
is an exempt supply if it is of a description for the time being specified under the Act3. Under prevailing European law4
all member countries must exempt the supply of land which has not been built upon other than building land which has
been treated as taxable in the UK5 rather than exempt, unless, for a transitional period, the building comes within
certain authorised exemptions6.
HR A[10181]
1 Customs and Excise Notice 742, para 2.4.
3 VATA 1994, s 31(1) and Sch 9.
4 Sixth Directive ((EEC) 77/388), art 13B(h).
5 Norbury Developments Ltd v Customs and Excise Comrs [1996] VATTR 531, (14482).
6 Sixth Directive ((EEC) 77/388), art 28(3)(b).
(a) Exclusions from exempt supplies

Page 732
HR A[10182]
The exceptions to the rule relating to exempt supplies of land and buildings include the following which are specifically
excluded from exemption and are zero-rated or standard rated:
(a) The first grant of a 'major interest'1 in a qualifying building which is defined as:
(i) a dwelling or building intended for use for a relevant residential or charitable purpose,
(ii) a dwelling converted from a non residential building, or
(iii) a substantially reconstructed protected building
by the person constructing, converting, or reconstructing the property, will be zero-rated2.

(b) Supplies of gaming and fishing rights and the grant of any right, licence or interest are to be
standard rated. Where, however, there is a grant of the fee simple in the land over which the right to take
game or fish is allowed to be exercised the grant will be exempt, but will require an apportionment where
there is included a valuable right or interest or licence over the land to take game or fish between the
exempt and standard rated parts3.
(c) The provision in a hotel, inn, boarding house, or 'similar establishment'4 of accommodation with or
without provision of catering and with furnished sleeping accommodation is standard rated5.
(d) The grant of any interest in right over or licence to occupy holiday accommodation in a building,
hut, tent, chalet, caravan, or houseboat, if held out as holiday accommodation or as suitable as holiday or
leisure use is standard rated. Excluded is the grant of a fee simple, or a lease of a major interest, for a
premium, quaere whether payment of a ground rent under such an interest is exempt or taxable is a
matter of doubt6 and a question of law.
(e) The provision for seasonal pitches for caravans and the grant or assignment of facilities at caravan
parks to persons for whom such pitches are provided is standard rated7. However, following a recent
provision, a caravan pitch will only be regarded as seasonal if it is on site, or part of a site and is
advertised or held out for holiday use8. The effect of this provision was to exempt the provision of
pitches at permanent residential caravan parks and sites for gypsies (travellers)9.
(f) The grant of a fee simple or an assignment of a new building which has not been completed and
which is neither designed as a dwelling house nor intended for use solely for a relevant residential
purpose or a relevant charitable purpose is to be standard rated. Likewise, new civil engineering work or
civil engineering work that has not been finished and a new building not used or to be used as a
qualifying building10, are to be standard rated. In a recent case11 the opinion of the Advocate General
was sought and a ruling was given by the CJEC12 on the interpretation of art 28(3)(b) of the EEC Sixth
Directive, based on the following facts: a company contracted to buy land. Planning permission was
obtained by the company to build on the land, and the land was then sold at a profit. The company
contended that the provisions of VATA 1994, Sch 9 Group 1 were inconsistent with art 13B(h) of the
EEC Sixth Directive on the grounds that the land was building land and this article provided for the
exemption 'of land... other than building land'. The commissioners contended that the land was exempt
under the provisions of VATA 1994, Sch 9, Group 1, item 1. The Tribunal held that the land was
'building land' and was therefore taxable, and not exempt, but this was made subject to the Tribunal's
direction referring their decision to the European Court as to whether exemption was authorised under art
28(3)(b) which permits Member States to continue to exempt certain supplies including building land for
a transitional period. The CJEC ruling which was based on the opinion of the Advocate General was that
the UK was entitled to exempt the supply under art 28(3)(b).
(g) The grant or assignment of any right to fell or remove standing timber is standard rated, unless the
land containing the standing timber is sold with right to fell, then the supply will be exempt and subject
Page 733
to the option to tax13.

(h) The grant or assignment of facilities for playing any sport or participating in any physical
recreation is standard rated, save when the facilities are to be used for more than 24 hours, or subject to
certain conditions such as a series of ten shorter periods, when the supply of such facilities will be
exempt if they are let for a continuous period exceeding 24 hours. Exemption is extended also to the
granting of such facilities to organisations, schools, clubs, or associations for a series of ten or more
periods whether or not they exceed 24 hours, provided the activity carried on is the same in each period
and pursued in the same place: that the interval between periods is not less that a day or more than 14
days: that the consideration paid is in writing evidencing that it is for the whole series and that the
grantee has exclusive use of the facilities14.
(i) The grant or assignment of any right to occupy a box or seats or other accommodation at a sports
ground, theatre, concert hall or other place of entertainment is standard rated whether or not the
entertainment is in progress15.
(j) The grant or assignment of facilities for parking a vehicle are standard rated16. Included in the
category of standard rated supplies are the provision of bicycle storage, the letting of taxi ranks and of
land specifically for the construction of a garage and the provision of rights to park in car parks and
commercial garages. For these purposes it is irrelevant whether the lease or license to park vehicles in a
lock-up garage or in bays is used for storage purposes for the supply will remain standard rated17. If,
however, the garage or parking bays had been built less than three years before, it is considered to be
new when sold and provided it is sold with a new dwelling it will be zero-rated. Taxpayers have
contended unsuccessfully against assessment to VAT on the ground that they had been granted rights
over land which were exempt only to find that the tribunal ruled that they came within the meaning of
the term 'parking facilities', which were specifically taxable18.
HR A[10183]
1 VATA 1994, s 96(1) definition; SI 1995/280.
2 VATA 1994, Sch 8, Group 5, Item 1 and notes (9) and (13); De Voil Indirect Tax Service V4.233, 237, 238, 242.
3 VATA 1994, Sch 9, Group 1, Items 1(c) and note (8); De Voil Indirect Tax Service V3.411, 112 and customs leaflet 742/2/92 para 2.
4 Customs and Excise Comrs v HD Paddon (LON/85/132 (1987) (guest house for permanent residents excluded from exemption);
Customs and Excise Comrs v BL Mills (LON/84/91) (1686) (serviced flats not 'similar accommodation' licences held to be exempt); Customs
and Excise Comrs v Soka Gakkai International (LON/95/2554) (accommodation at a Buddhist centre, a registered charity, was held to be a
religious centre and not, as contended by Customs, an establishment similar to a hotel).
5 VATA 1994, Sch 9, Group 1, Item 1(d) and note (9).
6 VATA 1994, Sch 9, Group 1, Item 1(e) and notes (12) and (13). Compare Customs and Excise Comrs v Star Automatics (BIR/75/117)
(311); Cooper & Chapman Builders v Customs and Excise Comrs [1993] STC 1, QB 1992; Groupement des Hauts Fourneaux et Acieres
Belges v High Authority of the European Coal and Steel Community CJEC [1958] ECSC 245. VATA 1994, Sch 8, Group 5, note (7); VATA
1994, Sch 9, Group 1, note (11); Sixth Directive ((EEC) 77/388), art 13B and 13B(b).
7 VATA 1994, Sch 9, Group 1, Item 1(f) and (g) and note (14).
8 Customs and Excise Leaflet 701/20/96, para 3. Ashworth v Custom and Excise Comrs [1994] VATTR 275 (12924).
Page 734
9 Customs and Excise Leaflet 701/20/96, para 3; De Voil Indirect Tax Service V4.113; Customs and Excise Comrs v T & M Smith
(MAN/94/45) (13052).
11 Norbury Developments Ltd v Customs and Excise Comrs [1996] VATTR 531 (14482) and CJEC [1999] STC 511.
12 VATA 1994, Sch 9, Group1; Sixth Directive ((EEC) 77/388), arts 13B(h) and 28(3)(b).
13 VATA 1994, Sch 9, Group 1, Item 1(j). Customs and Excise Notice 742, para 2.8.
14 VATA 1994, Sch 9, Group 1, note (16) and Items 1(m) and (n). Queens Park Football Club v Customs and Excise Comrs [1988]
VATTR 76 (2776); Customs and Excise Comrs v LH Johnson (LON/97/9 (14955); Customs and Excise Comrs v Southend United Football
Club (LON/96/1476) (15109); De Voil Indirect Tax Service V6.131 and 161.
15 VATA 1994, Sch 9, Group 1, Item 1(l); Customs and Excise Notice 742, para 2.8.
16 VATA 1994, Sch 9, Group 1, Item 1(h).
17 Customs and Excise Comrs v Trinity Factoring Services Ltd [1994] STC 504.
18 Customs and Excise Comrs v AJ Dowse (LON/73/102) (46); Customs and Excise Comrs v AC Slot (LON/94/1089) (15076); Customs
and Excise Comrs v DH Commercials (Leasing) Ltd (MAN/95/2125).
HR A[10184]
Certain supplies are regarded by Customs as not being supplies of parking facilities which, subject to waiving
exemption to tax, remain exempt supplies. Included in this category of supply are the letting of land or buildings:
(a) where no specific reference is made to the provision/use of parking facilities;

(b) where parking is incidental to the main use of the building;
(c) where the parking is permitted to a lessee who is a motor dealer, to store his stock in trade;
(d) where it is let for the business of a vehicle transportation firm, a vehicle distributor or auctioneer
for his business use; or
(e) where it is for the exhibition of vehicles or for a travelling fair with incidental parking for vehicles,
or for a car boot sale or market.
HR A[10185]
There is a further distinction to be made. Where a dwelling house is let with a garage that is reasonably proximate to the
dwelling house by the same landlord, the supply of the garage will be exempt. If the dwelling is in freehold ownership
and the garage is leased the supply of the garage will be standard rated. The freehold sale of a garage which is not 'new'
will be an exempt supply.
HR A[10186]
Page 735
If the supply of garaging is provided in conjunction with the letting of commercial premises it will be treated as a single
supply provided it is supplied by the same landlord and will be exempt. In any other circumstances the supply will be
standard rated1. Local authority parking meters are outside the scope of VAT2.
HR A[10187]
1 Skatteministeriet v Henriksen [1990] STC 768, [1990] 3 CMLR 558.
2 Customs and Excise Leaflet 701/24/92;Voil Indirect Tax Service V4.113.
HR A[10188]
The grant or assignment of facilities for housing or storage of aircraft or for mooring a ship, boat or other vessel is
standard rated. This includes berthing and anchoring1. Appeals have been brought unsuccessfully by the taxpayer on
similar grounds as the appeals in relation to parking vehicles, that what in effect had been granted was a right over land
which should be treated as exempt2.
HR A[10189]
1 VATA 1994, Sch 9, Group 1, Item 1(k) and note (15).
2 Customs and Excise Comrs v JW Fisher (LON/75/47); Customs and Excise Comrs v Strand Ship Building Co Ltd (LON/84/74) (1651);
Roberts v Customs and Excise Comrs [1992] VATTR 30 (7516).
HR A[10190]-[10200]
Different rules apply to mooring rights for houseboats. These are exempt. Likewise, the provision of garaging and
parking spaces for owners of houseboats are exempt provided they are reasonably proximate to the mooring and are
supplied by the same person supplying the mooring1.
HR A[10201]
1 Customs and Excise Notice 701/20/96, paras 19-24.
HR A[10202]
Where transport, freight and/or handling services are provided for the handling of ships, or aircraft in a 'port'1, a
'customs airport'2, or outside the UK the supply is zero-rated when provided for qualifying ships, or qualifying aircraft,
or are supplied to a person who belongs outside the UK and who receives the supply in the course of his business3.
Page 736
HR A[10203]
1 'Port' means any port appointed for Customs purposes and includes all seaports in the UK.
2 'Customs and Excise Airport' means an airport designated for the landing and departure of aircraft pursuant to the Civil Aviation Act
1982, s 60.
3 VATA 1994, Sch 8, Group 8, Items 6(a), 11(b), notes (5)-(7); SI 1995/3039; Customs and Excise Notice 744C, Appendix C; De Voil
HR A[10204]
The grant of any right, including: (a) an equitable right; (b) a right under an option, or a right of pre-emption; or (c) to
call for or be granted an interest or right which was itself excluded from exemption became standard rated1.
HR A[10205]
1 VATA 1994, s 96(10A): FA 1997, s 35(1).

Page 737
Other supplies between landlord and tenant
3 Other supplies between landlord and tenant
(a) Rent
HR A[10206]
Rental income from residential property is always exempt save on one occasion where the first rental payment under a
lease which can be zero-rated if no premium is payable1. Rents for relevant charitable purposes are always exempt, save
in respect of office buildings when the landlord waives the exemption. The liability to VAT on supplies made
subsequent to the grant of an interest in or right over land, or a licence to occupy land, which are exempt from VAT,
have to be determined not by reference to the time the original grant was made, but at the time of each subsequent
supply. A separate supply is made on each occasion a payment for rent is received, or a lease is assigned or
surrendered2.
HR A[10207]
1 VATA 1994, Sch 8, Group 5, note (14) and for exemption see Sch 9, Group 1.
2 VATA 1994, s 96(10A): FA 1997, s 35(1).
(b) Rent-free periods
HR A[10208]
If the landlord gives a rent free period as consideration, or in exchange for an agreement by the tenant to carry out
works for the benefit of the landlord, VAT will be payable on the amount of rent foregone by the landlord to obtain this
benefit. Where there is a rent free period, without strings attached, there is no supply and exemption will apply1.
HR A[10209]
(c) Rent and unoccupied premises

Page 738
HR A[10210]-[10220]
Where building premises have been leased, with the original intention of using them for the purposes of the business
and part of the premises have been vacated by the lessee and the lessee sought to recover input tax, being the continued
payment of the rent while the premises were unoccupied and attributable to the vacant period that the transaction was
taxable. The Commissioners issued an assessment to recover the input tax attributable to the vacant period on the basis
that the transaction was exempt. The taxpayer was successful before the tribunal on the grounds that he had retained the
unoccupied part exclusively for the purpose of making taxable supplies and not for the carrying out any other activity.
The original purpose of taking the leases was never departed from and could have been carried out at short notice - the
vacant periods should be treated as residual, the rents being attributable overheads of the business during this time and
not attributable either to taxable or exempt supplies1.
HR A[10221]
1 Customs and Excise Comrs v Harper Collins Publishers Ltd (EDN/92/219).
(d) Guarantees, guarantors and sureties
HR A[10222]
Any payments of rent by a guarantor or surety under the lease follow the liability of the original rent1. In cases where
the seller of a lease or freehold gives a guarantee that if the purchaser cannot find a tenant the seller will pay the open
market rent to the purchaser and the transaction will be outside the scope of VAT, provided the guarantee payments are
not consideration for the purchaser taking the property and the documents clearly show this. Nor may such payments,
without explicit consent of the parties, be regarded as a reduction of the value of the freehold or the original lease. If,
however, the purchaser by deed relets the property back to the seller there is a supply for VAT purposes2.
HR A[10223]
(e) Defaulting tenant and recovery of rent
HR A[10224]
In relation to the failure by a tenant, following an assignment of the lease, to pay the rent the landlord may be able to go
against a predecessor tenant for the rent unpaid. Likewise, where a tenant sublets a property and the tenant is in default,
Page 739
the landlord can serve a notice1 on the subtenant and collect the arrears of rent from him. In both these cases this state
of affairs has no effect on the supply for VAT purposes because the supply of property remains from the landlord to the
new tenant who will have the right to recover the rent as input tax, provided that the landlord has opted to tax2. The
same principal applies in the latter stated case. Such transactions, likewise, have no effect on the nature of the supply for
VAT purposes. In this case the chain is longer. Supplies are made by the landlord to the tenant who makes them to the
subtenant. The landlord assuming the option to tax has been exercised should address his demand to the tenant who
alone has the right to recover the tax charged as input tax.
HR A[10225]
1 Law of Distress Amendment Act 1908, s 6.
(f) Effect on completion of purchase or sale of property
HR A[10226]
The VAT position remains unaffected so far as completion of the purchase or sale of the property. Both are outside the
scope of VAT1.
HR A[10227]
(g) Surrenders, assignments and variations of leases
HR A[10228]-[10229]
Following the decision in Lubbock Fine, Customs (having taken legal advice) considered the future treatment of
variations to an existing lease and reverse premiums1.
'To what extent the Lubbock Fine decision applies to variations is not absolutely clear, but counsel has given advice on this point
and Customs accept that variations to existing leases should be treated as being part of the original supply of the lease and should
therefore follow the liability of the original lease. Variations will therefore be exempt unless the landlord has elected to waive
exemption (has opted to tax) on the lease, in which case both the lease and the variations to it will be standard rated...
...A reverse surrender occurs when a tenant surrenders a lease to the landlord before the term of the lease has expired and pays the
landlord for the surrender.
Page 740
Customs' view is that reverse surrender is not a supply of the letting or the leasing of immovable property under art 13B(b) of the
EC Sixth Directive and is therefore excluded from the exemption conferred by Item 1, Sch 6 of the VAT Act 1983 [now VATA
1994, Sch 9, Group 1, Item 1]. In a reverse surrender, the tenant is making a payment for the release from future obligations arising
under the lease and in settlement or satisfaction of any existing obligations under that lease. Such a release is a supply made by the
landlord, not the tenant and is the equivalent of an entry into an obligation to refrain from an act, or to tolerate an act, or a situation
such as is referred to in art 6(1) of the EC Sixth Directive and is therefore a taxable supply under what is now VATA1994, s
5(2)(b).'
HR A[10229.1]
1 Business Brief 16/94 (25 July 1994).
(i) Surrenders
HR A[10230]-[10239]
From 1 April 1989 to 29 February 1995, Customs specifically excluded from exemption the assignment of an interest to
the tenants immediate landlord for the reason that 'there would be an added complication in relation to the landlords
option for taxation', also for the reason that there is no provision to relieve 'surrenders' under the Sixth Directive, art 13.
The taxpayer in Lubbock Fine & Co v Customs and Excise Comrs1 contended that surrenders fell within the exemption
in art 13B of the Sixth Directive for the 'leasing or letting of immovable property' and that Member States were not
entitled to exclude surrenders from the scheme of this directive.
HR A[10240]
1 Case C-63/92: [1994] STC 101.
HR A[10241]
The European Court stated in their decision that the term 'letting of immovable property' covers the case where the
tenant for a consideration surrenders his lease and returns the property to his landlord:
'Where a given transaction such as the letting of immovable property, which would be taxed on the basis of the rents paid, falls
within the scope of an exemption provided for in the Sixth Directive, the change in the contractual relationship, such as the
termination of the lease for a consideration must also be regarded as falling within the scope of that exemption. Although art 13B of
the Sixth Directive allows Member States to apply further exclusions to the scope of the exemption for the letting of immovable
property, it does not authorise them to tax the consideration paid by one party to the other in connection with the surrender of the
lease where the rent paid under the lease was exempt from VAT.'
HR A[10242]
Page 741
The Commissioners responded to this decision1 dealing with the taxpayers' administrative consequences flowing from
the decision and limited the application of that decision to the payment by the landlord to the tenant but did not extend it
to a payment by the tenant to the landlord (a reverse surrender).
HR A[10242.1]
1 Business Brief 35/93 (20 December 1993).
HR A[10243]
In a further brief1, the Commissioners, having taken legal advice, expressed the view that, in relation to variations to an
existing lease, they will remain exempt unless the landlord has opted to waive exemption to tax when they will be
standard rated. Also that reverse surrenders are not a supply of the letting or leasing of immovable property under art
13B(b) of the Sixth Directive and are therefore excluded from the exemption conferred by VATA 1983, Sch 6, Group 1
(now VATA 1994, Sch 9, Group 1, Item 1). The specific reason given for not extending the European Court decision to
reverse surrenders was that:
'In a reverse surrender, the tenant is making a payment for the release from future obligations arising under the lease and in
settlement or satisfaction of any existing obligations under that lease. Such a release is a supply made by the landlord, not the
tenant and is the equivalent of an entry into an obligation to refrain from an act, or to tolerate an act or situation such as is referred
to in art 6(1) of the EC Sixth Directive and is therefore a taxable supply under what is now VATA 1994, s 5(2)(b).'
HR A[10243.1]
1 Business Brief 16/94 (25 July 1994).
HR A[10244]
The Commissioners made a further statement in relation to these matters1 in which they confirmed their previous ruling
that reverse surrenders continue to be subject to the standard rate of VAT. This policy was challenged2 in the courts. A
reverse premium was paid to the landlord by the tenant. Customs contended it was taxable at the standard rate. The
tribunal allowed the taxpayers appeal holding that by surrendering its lease it had made an exempt supply of land to the
landlord. The tribunal could see no reason to distinguish this case from Lubbock Fine & Co v Customs and Excise
Comrs3 merely because the tenant and not the landlord had paid a premium to surrender a lease.
HR A[10245]
1 Business Brief 17/94 (12 September 1994).
2 Marbourne Ltd v Customs and Excise Comrs (LON/93/590A) (12670).

Page 742
3 Case C-63/92 [1994] STC 101.
HR A[10246]
The Commissioners appealed this decision, but did not pursue it because the taxpayer ceased to trade and could not be
represented1. Nevertheless, the Commissioners contended that it must be the person receiving payment, the landlord,
who had made the supply2. No concessions, nor admissions by the Commissioners were made that their treatment of
reverse surrenders had been incorrect. It was only following the decision in another case3 that caused the
Commissioners to change their opinion, even though the VAT Tribunal had had no hesitation in applying the principle
in Lubbock Fine & Co v Customs and Excise Comrs4 to apply to reverse surrenders. The tribunal considered the
Commissioners' opinion to be untenable in the light of the words used--'paid by one party to the other'--especially if the
intention was that only a payment by the landlord was consideration for a supply to the tenant. In the tribunal's view it
seemed that what the court was doing was to indicate that a payment by or to the tenant in such circumstances was
covered by the exemption in art 13B of the Sixth Directive, nor was the judgment restricted to one way surrenders but
should apply to surrenders in general.
HR A[10247]
1 Business Brief 18/95 confirmed this position and invited claims from landlords who had not claimed exemption
2 SI 1995/282.
3 Central Capital Corpn Ltd v Customs and Excise Comrs (MAN/94/2393) (13319).
4 Case C-63/92 [1994] STC 101.
HR A[10248]
In a later case1 in which the Tribunal followed Lubbock Fine & Co v Customs and Excise Comrs [1994] STC 101 in
which an unlimited stock-broking company took an assignment of an underlease the consideration for which was that it
received £1,500,000 from the assignor. The commissioners of Customs & Excise contended that this sum was taxable
on the grounds that because the assignee was neither a party to the original lease, nor did it have possession of an
interest in the property at the material time which it could grant to the assignee that the acceptance by the assignee of
the payment and the remaining term was separate from the original lease agreement and was taxable. The Tribunal
Chairman held the fact that the monetary consideration for the assignment of the underlease moved from the assignor to
the assignee rather than vice versa was immaterial because the payment was for the variation of the contractual
relationship established by the original underlease and was exempt from VAT. In a later case2 in which the Tribunal
also followed the decision in Lubbock Fine & Co, the Tribunal held that a supply, even if it were made by the tenant
rather than by the landlord, could qualify for exemption and that there was no sound reason to exclude from exemption
'a transaction by which a lease is created, where that transaction differs from the grant of a lease in return for a premium
payable by the tenant, essentially because the tenant pays no premium while the landlord provides him with an
inducement to secure his entry into the lease and his consequential compliance with the tenants' covenants.' The Mirror
decision has been appealed by the commissioners and it was referred to the CJEC by the High Court for clarification.
Page 743
HR A[10249]
1 Customs and Excise Comrs v Cantor Fitzgerald International Ltd [1997] V & DR 233 (15070) LON/1212 Customs and Excise Business
Brief 28/97 (12 December 1997).
2 Customs and Excise Comrs v Mirror Group plc [1998] V & DR 206, (154430).
HR A[10250]
Until this matter is resolved, identical receipts by businesses of such payments need not be accounted for, but the
Commissioners may issue protective assessments for the tax claimed by them to be due, pending the decision of the
court. Interest will become payable to Customs & Excise in the event that the commissioners succeed on appeal, and the
commissioners may issue protective assessments. Businesses may prefer to pay on account and, in the event that they
succeed on appeal, to submit claims for repayment plus statutory interest against the commissioners. This would be
subject to the three-year capping limit1.
HR A[10251]-[10260]
1 Customs & Excise Business Brief 28/97 (12 December 1997) and Customs & Excise Business Brief 17/98 (10 August 1998).
(h) Variation of leases
HR A[10261]
In some circumstances the variation of a lease may result in the surrender of that lease and the grant of a new lease in its
place. For VAT purposes where there is no consideration paid for the variation, the general rule is that no supply has
taken place1. Where consideration has been paid by the tenant to the landlord to obtain an additional right, for instance
by extending the original demise of the property, or by altering the term of the lease, or by varying the covenants under
the original lease, the treatment by Customs is that the lease is deemed to be surrendered and a new lease is granted in
its place.
HR A[10262]
HR A[10263]
The legal position seems to be that variations should be treated as being part of the original supply and should follow
Page 744
the liability to VAT of the original lease and subject to the exercise of the option to waive exemption will be exempt1. It
seems to be straining the ordinary meaning of word 'variation' when major changes to a lease cause the surrender of the
old lease and the grant of another lease in its entirety in its place. True 'variations' seem therefore to effect only minor
changes to the original lease which survives the change.
HR A[10264]
1 Business Brief 16/94 (25 July 1994) based on legal advice taken by the Commissioners.
HR A[10265]
The valuation of such transactions has for many years caused difficulty. Serious consideration was given to this in an
exchange of letters between the Law Society1 and the Commissioners who at the time (1991), pre-Lubbock Fine2, held
the view that surrenders were mandatorily standard rated.
HR A[10266]
1 The Law Society letter containing the agreed statement with Customs and Excise was published in the Law Society's Gazette of 1 May
1991.
2 Case C-63/92 Lubbock Fine & Co v Customs and Excise Comrs [1994] STC 101.
(i) Lifting of restrictive covenants
HR A[10267]
The purpose of lifting a restrictive covenant is to permit something to be done that otherwise is forbidden and would be
a breach of covenant, such as development. Generally, such a variation is exempt for VAT purposes unless the person
receiving the payment has opted to waive exemption from VAT1.
HR A[10268]
(j) Indemnity payments under a lease
HR A[10269]
Page 745
Such payments, if they relate to the obtaining of a lease or licence and the disbursement of costs by the landlord, are
considered to be part of the consideration for the grant. Likewise, in cases where the tenant exercises rights under the
lease to assign, or otherwise, there is frequently a provision entitling the landlord to recover his legal or other costs from
the tenant. Such reimbursements are consideration for the principal supply of the lease for VAT purposes.
HR A[10270]-[10280]
Any VAT charged to the landlord by his advisers relating to advice given to the landlord cannot be treated by the tenant
as input tax and deductible, unless the landlord has waived the exemption to tax and the tenant is using the property to
make taxable supplies1.
HR A[10281]
(k) Mesne profits
HR A[10282]
Any award for mesne profits, which are damages for wrongful occupation of property can only be recovered in relation
to continued occupation after the right of occupation has expired and are not considered to be a supply and are outside
the scope of VAT. Where there has been litigation and the landlord has claimed arrears of rent and mesne profits, the
landlord must account for VAT purposes by applying the money received first as relating to accrued rent arrears and
then by applying the remaining balance received to mesne profits1.
HR A[10283]
1 Law Society Gazette, 14 October 1992, at p 16.
(l) Dilapidations
HR A[10284]
Damages in respect of dilapidations may fall to be paid at the end of a lease in accordance with the terms of the lease
and if paid after the lease has ended are normally treated as an indemnity payment compensating the landlord for the
wants of repair by the tenant. The contract having ended, such a payment constitutes damages and is not considered by
Customs as consideration for a supply for VAT purposes and falls outside the scope of VAT. If however payment for
dilapidations is made before the lease was determined by effluxion of time the payment by the tenant might be looked
Page 746
upon by Customs as consideration for a taxable supply of services by the landlord. In essence the precise nature of the
contractual relationship subsisting between the landlord and the tenant will need to be looked at to decide what are the
precise VAT consequences. It is often the custom at the start of a contract for the landlord to require a deposit of fees
from their lessee to protect themselves against future wants of repair or damage to the property1. The Commissioners
have accepted that such payments fall outside the scope of VAT because they are not consideration for any supply2.
Whilst the landlord clearly is under no obligation either to carry out any repair and may simply retain the money after
the lease has expired, it is prudent to have included in the lease that the dilapidation payment be based on the cost to the
landlord of putting the building back into the condition it was at the start of the lease but also that the amount payable
by the tenant be reduced by any VAT which the landlord is entitled to recover. If it is the case that the landlord has not
opted to waive the exemption and the landlord is partially exempt he will expect to recover from the tenant the sum the
landlord is unable to recover. The views of Customs and Excise on this matter are expressed in these words:
'The terms of a lease may provide for the landlord to recover from the tenants at or near the termination of the lease an amount to
recover the cost of restoring the property to its original condition. The amount is often agreed between the parties and may be based
on a surveyor's or contractor's estimate.
A dilapidation payment represents a claim for damages by the landlord against the tenant's "want of repair". Consequently, the
payment involved is not the consideration for a supply for VAT purposes and is outside the scope of VAT.'2
HR A[10284.1]
1 Business Enterprises Ltd v Customs and Excise Comrs [1988] VATTR 160.
2 Customs and Excise Notice 742 (December 1995), para 4.12.
HR A[10285]
Generally, the landlord is under no obligation when he receives the money to carry out the work of repair. The landlord
may just retain the money. Normally, a dilapidations clause in a lease provides that the amount payable by the tenant is
to be reduced by any VAT which the landlord recovers. In calculating the extent of his claim, the landlord expects to
recover from the tenant any element of VAT he will have suffered but is unable to recover. This is on the basis of
making two assumptions: the first being that the landlord is partially exempt and the second that the landlord has not
opted to tax the rent.
(m) Statutory compensation
HR A[10286]
Compensation paid by a landlord to a tenant in compliance with the terms of the Landlord and Tenant Act 1954 and the
Agricultural Holdings Act 1986 is outside the scope of VAT, but is subject to a proviso that a 'notice to quit' in statutory
form and following the prescribed statutory procedures is served by the landlord and complied with by the tenant.
HR A[10287]
Page 747
When and where payments are made by the landlord in excess of the statutory level, for instance for the tenant vacating
at an earlier date than that agreed, the excess will be treated as consideration for the tenant surrendering the lease and
are exempt unless the tenant has opted to tax by waiving the exemption1. From 1 March 1995 a surrender of the lease
will be exempt but subject to the option to waive exemption from tax.
HR A[10287.1]
(n) Service charges
HR A[10288]
As a general rule, if the rent is exempt the service charges are also exempt. If exemption has been waived by the
landlord, the service charges are to be standard rated. The question whether exemption actually applies will depend on
the nature of the property and the terms of the arrangements between the landlord and the tenant.
(i) Service charges on domestic accommodation1
HR A[10289]
Fundamentally, subject to certain exceptions, the grant of any interest or right over land, or of any licence to occupy
land is an exempt supply2. This statement of principle extends to service charges on domestic accommodation relating
to the common areas of an estate of dwellings or to a multi-occupied domestic dwelling provided the service charges are
paid under the terms of the lease by the lessees or by persons renting property to the lessor. Unless the service charges
on domestic accommodation come within the parameters set out above, for example if service charges are paid by
owners of the fee simple title of domestic property or by any other persons for services not supplied by or on behalf of
the lessor, those services will be standard rated.
HR A[10290]
1 Customs and Excise Notice 742, paras 5.7, 5.10, 5.11.
2 VATA 1994, Sch 9, Group 1.
HR A[10291]
Included in the above exemption relating to the common areas maintenance will be the provision of a caretaker, security
guards, upkeep of landscaped general areas, the paths, driveways and the common parts within the block of flats and
Page 748
costs incurred in the general maintenance of the exterior parts of the building. Optional personal services supplied for an
individual tenant such as carpet cleaning and shopping done for instance by the janitor will be standard rated1. Certain
other services provided by managing agents, or of electricity, light and heat or recreational facilities require individual
treatment.
HR A[10292]
1 Customs and Excise Notice 48, Extra Statutory Concession 2.22.
HR A[10293]
Managing agents and managing charges
It is frequently the case that a landlord whose covenants bind him to provide certain services employs a managing agent
to supply those services on his behalf. There is no contractual nexus between the lessee and the managing agent only
between the landlord and the managing agent. Accordingly, the supply is made by the managing agent to the landlord
and not to the tenant and will be standard rated.
HR A[10294]
Electricity, light and heat
Where the supply of any or all of these services forms an integral part of the supply of the accommodation there is a
single composite supply exempt from VAT. Alternatively where the landlord made a separate charge for electricity used
for heating, the Commissioners contended that this supply was part of a single supply of accommodation which was
exempt from VAT. The landlord contended that the supply was a separate supply subject to VAT at the reduced rate of
8%. The Tribunal allowed the landlords appeal on the basis also that there was a long standing practice of separate
charge and indeed separate payment1.
HR A[10295]
1 Suffolk Heritage Housing Association Ltd v Customs and Excise Comrs (LON/94/2563) (13713) applying Adams, Woskett & Partners
(LON/91/2182Z) (9647).
HR A[10296]
Recreational facilities
The same principle applied in the supply of electricity, fuel and heating applies to the provision of such facilities. If the
supply say of a swimming pool, a sauna, or a gymnasium are supplied to the tenants at no separate extra charge they
will follow the liability of the main supply1.
Page 749
HR A[10296.1]
1 Customs and Excise Notice 742, paras 5.6, 5.7; Customs and Excise Business Brief 2/96 (9 February 1996).
(II) Shared occupation and occupation by joint tenants
HR A[10297]
Occupation of a building separately or together by a number of joint tenants under which by agreement between the
tenants that one of them is responsible for collecting each occupants share of rent or service charges relating to the
common parts is for VAT purposes to be treated as a 'disbursement' outside the scope of VAT. The collection and
payment over to the Lessor in one sum is not a taxable supply between the tenant collector and the other tenants. The
individual tenants are to be regarded as paying their individual rent to the landlord and the paying individual is to be
regarded as their agent1.
HR A[10297.1]
1 Durham Aged Mineworkers Homes Association v Customs and Excise Comrs [1994] STC 553 and Customs and Excise Notice 742, para
5.8.
HR A[10298]
Where no exempt grant has been made to the occupants by the owner the VAT position regarding supplies is that they
have t o be standard rated, even if the owner is merely passing on the appropriate share of such costs as electricity, staff
wages, gas or telephone. Where however a bill is paid which is wholly the liability of another occupant the payment can
be treated as a disbursement1.
HR A[10299]
(o) Commercial service charges
HR A[10300]
The general rule relating to provision by the landlord of general and specific services to tenants of non-domestic
property is that where in terms of the lease the landlord will supply and the tenants will pay for the services required for
Page 750
the upkeep to the building either by an inclusive rental charge, by a service charge which is often described as additional
rent the VAT liability will assume the same liability as the rent proper payable under the lease which is likely to be
exempt unless the landlord has exercised his option to waive the exemption to tax. For exemption to apply the burden of
payment must fall on all the various occupants of the non-residential building through a common service charge that has
arisen on the basis of maintaining the external fabric and common parts of the building. Where there has been a specific
supply of services by the landlord to the tenant in relation to non-domestic property payments made by the tenant to the
landlord: (a) will likewise be exempt in relation to the supply of property unless the option to tax has been exercised
when they will be standard rated; (b) will be separately taxable where the supplies are other than supplies of property,
for example, where a telephone account is in the name of the landlord any charge to the tenants will be standard rated,
whereas conversely where the account is in the tenants name but the landlord pays the bill that will be a 'disbursement'
and not a supply for VAT purposes; or (c) will be a disbursement being outside the scope of VAT because it is not a
supply for VAT purposes. General service charges usually comprise all or any of the following items; payment for
general maintenance of the building; heating and lighting of the common parts; maintenance of the lifts: provision of
hot water; central heating and/or air conditioning; provision of a porter; rubbish collection and security.
HR A[10301]
Fixtures
These are normally treated as part of the building. The VAT liability follows the rent. However, in a comparatively
recent case1 the question arose whether the leasing of fire doors and fire and smoke detection alarm systems was a
separate supply from that of leasing the building in which the equipment was installed. The building was over 100 years
old and had been occupied by the taxpayer for the last 40 years. This equipment was purchased following a visit by the
local authority's fire inspection officer. The Commissioners issued an assessment to recover the tax on the equipment on
the grounds that the equipment was part of the supply of the premises which were exempt from tax. The company
appealed successfully on the grounds that this was separate supply which was taxable. The tribunal held that the effect
of art 13B(b)(3) of the Sixth Directive was that the leasing of the equipment was a separate taxable supply for VAT
purposes. This article provides for a mandatory treatment of 'lettings of permanently installed equipment and machinery'
as being taxable and not exempt. The Commissioners relied on art 13B(b)(2) in contending that this was a single
economic transaction in accord with the decision of the European Court2 relating to 'parking facilities3'. The tribunal
also decided that although under English land law the equipment would form part of the premises, art 13B(b)(3)
overrides it in this particular case because this transaction was not a single economic transaction.
HR A[10302]
1 Aquarium Entertainments Ltd v Customs and Excise Comrs (LON/92/2679A) (11845).
2 Case 173/88: Skatteministeriet v Henriksen [1990] STC 768.
3 Compare with para HR A[10182], sub-para (j) in relation to the grant or assignment of parking facilities which are to be zero-rated.
HR A[10303]
Furniture and equipment

Page 751
Generally, these are not fixed to the premises and are in principle standard rated. Where such items as desks, filing
cabinets, computers, photocopiers are reasonable in quantity and associated with the type of building in which they are
located the Commissioners are prepared to treat them as fittings and as additional rent. If they are provided by way of a
contract distinct from the lease or licence of the building they will be a separate taxable supply.
HR A[10304]
Insurance and rates
Where the tenant contributes to insurance and rates and the landlord is the policyholder or rateable person, the
contribution is treated as additional rent, but where the tenant is the policyholder and the rateable person all payments
made by the landlord on the tenant's behalf are to be treated as disbursements.
HR A[10305]-[10306]
Electricity, lighting and heating
Where the supplies are unmetered they will form an integral part of the accommodation and will be treated as a single
composite supply as additional rent and exempt from VAT. Where the supply is separately identifiable, or the tenants
have secondary credit meters, or coin operated machines on which a separate charge is made the supply is standard
rated. Likewise, when a tenant takes additional services for an identifiable consideration there is a single supply subject
to VAT at the standard rate1.
HR A[10307]
1 Adams, Woskett & Partners v Customs and Excise Comrs (LON/91/2182Z) (9647); Suffolk Heritage Housing Association Ltd v Customs
and Excise Comrs (LON/94/2563) (13713).
HR A[10308]
Office services
Where the landlord includes a charge for such services as typing, photocopying and secretaries in the overall rent charge
payable by the tenants whether or not they use such services, there is no separate supply of standard rated services.
Where there is a separate supply of these services they are standard rated.
HR A[10309]
Reception and switchboard
If the provision for the use of such services compulsorily forms a common part of the premises, payments by the tenant
are treated as additional rent.
Page 752
HR A[10310]-[10320]
Telephone
Where the telephone account is in the name of the tenant and the landlord pays the bill on behalf of the tenant, payments
made by the tenant fall outside the scope of VAT. Where, however, the account is in the landlord's name and the
landlord charges the tenant, the charge is to be standard rated.
HR A[10321]
Management charges
These as a whole are treated as additional rent. Where a landlord who has the legal responsibility for providing the
services but contracts with a managing agent, the supply by the managing agent to the landlord is standard rated.
HR A[10322]
Where no election to waive exemption has been made by the landlord, no claim to recover VAT by the tenant is
possible on the landlord's service charge expenditure, whatever happens to be the VAT status of the tenant. Opting to
tax by the landlord will enable the landlord to recover as input tax this VAT and the tenant, subject to his VAT status to
recover it.
HR A[10323]
Domestic service charges
By reason of an extra statutory concession1 all mandatory services charges paid by the occupants of dwellings towards
the upkeep of the common areas of an estate, for example the paths, driveways, landscaped general areas or the
common areas of flats, inclusive of the general maintenance of the exterior of the block of flats, or individual dwellings
if the residents cannot refuse such an obligation, together with the provision of caretakers or superintendents, can be
treated as exempt from VAT. Services such as carpet cleaning and shopping supplied personally to any of the tenants
individually are standard rated. Because the treatment of these services are concessionary, the landlord is not obliged to
exempt such charges2.
HR A[10324]
1 Customs and Excise Business Brief 2/22 (September 1997) Notice 748 of September 1997 effective from 1 April 1994.
2 Nell Gwynn House Maintenance Fund Trustees v Customs and Excise Comrs [1996] STC 310.
HR A[10325]
Where the services are provided not by the lessor but by management trustees who had not been joined in the lease as
Page 753
agents for the lessor, the contractual obligations undertaken by them and the supply to the tenants were held by the
tribunal to be standard rated. In an illustrative case, the trustees (three solicitors) had not accounted for output tax on the
maintenance contributions they had received from the tenants or on the service charges they had received from the
company which held the lease. The Commissioners issued an assessment charging tax on the receipts. The trustees
appealed, contending that the limited services they supplied were to arrange for employees to carry out the maintenance
services for which they received remuneration on which they accounted for output tax. It was the employees who
supplied the maintenance services directly to the tenants. The Court of Appeal accepted this argument and allowed the
trustees' appeal, on the grounds that the contributions were not received by the trustees as consideration because they
had no entitlement to use the moneys paid in as their own, or for their benefit and for the additional reason that that they
were not themselves supplying the services to the tenants. The Commissioners have appealed to the House of Lords1.
HR A[10326]
1 Customs and Excise Comrs v Richard Haynes Associates (LON/92/2597) (12300).

Page 754
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/E Supply/4 The
place of other taxable supplies
4 The place of other taxable supplies
(a) European Community legislation
HR A[10327]
Under EC law the place of supply of goods1 shall be deemed to be as follows:
(a) In the case of goods dispatched or transported where the goods are at the time when dispatch or
transport to the person to whom they are supplied begins. Where the goods are installed or assembled,
with or without a trial run, by or on behalf of the supplier, the place of supply shall be the place where
the goods are assembled or installed. Where the assembly or installation takes place in a Member State
other than that of the supplier, the Member State within whose territory the assembly or installation was
carried out is required to take all necessary steps to avoid double taxation in that state2.
(b) By way of derogation where the place of departure of the consignment or transport of goods is in a
third territory, the place of supply by the importer3 and the place of any subsequent supplies shall be
deemed to be within the Member State of the import of the goods4.
(c) In the case of goods not dispatched or transported, the place of supply shall be the place where the
goods are when the supply takes place5.
HR A[10328]
1 Sixth Directive ((EEC) 77/388), art 8.
2 Sixth Directive ((EEC) 77/388), art 8(1)(a).
3 Sixth Directive ((EEC) 77/388), art 21(2).
4 Sixth Directive ((EEC) 77/388), art 8(2), as amended by EEC Council Directive 91/680; OJ L376, 31.12.1991, p 1, art 1(3)(4)(5).
HR A[10329]
Under EEC law the general rule relating to the place of supply of services1 shall be deemed to be the place where the
supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence
of such a place of business or fixed establishment, the place where he has his permanent address or usually resides2.
This general rule concerning the place of supply of services is overridden in the following cases, in particular:
Page 755
(a) the supply of services connected with immovable property, including the services of estate agents
and experts, and of services for preparing and co-ordinating construction works, such as the services of
architects and of firms providing on-site supervision, shall be the place where the property is situated3;
(b) the place of supply of transport services shall be the place where the transport takes place, having
regard to the distance covered4;
(c) the place of supply of services relating to:
(i) cultural, artistic, sporting, scientific, educational, entertainment or similar activities,

including the activities of the organisers of such activities, and where appropriate the supply of
ancillary services,
(ii) ancillary transport facilities such as loading, handling and similar activities,
(iii) valuations of and work on movable tangible property,
shall be the place where those services are carried out5;

(a) the place where the following services are supplied when performed for customers established
outside the Community or, for taxable persons established in the Community but not in the same country
as the supplier, shall be the place where the customer has established his business or has a fixed
establishment to which the service is supplied or, in the absence of such a place, the place where he has
his permanent address or usually resides. The services in question are:
(i) transfers and assignments of copyrights, patents, licences, trade marks and similar rights,
(ii) advertising services,
(iii) services of consultants, engineers, consultancy bureaux, lawyers, accountants, and other
similar services, as well as data processing and the supplying of information,
(iv) obligations to refrain from pursuing or exercising, in whole or in part, a business activity
or a right within this list,
(v) banking, financial and insurance transactions, including reinsurance, with the exception of
the hiring of safes,
(vi) the supply of staff,
(vii) the service of agents who act in the name and for the account of another when they
procure for their principal the services referred to within this list,
(viii) the hiring out of movable tangible property excluding all forms of transport,
(ix) telecommunications services6.
In order to avoid double taxation, non-taxation or the distortion of competition, the Member States may, in relation to
the supply of services under paragraph (d) and the hiring out of forms of transport, consider the place and supply of
services:
(a) which under this article would be situated within the territory of the country outside the EC where
the effective use and enjoyment of the services take place outside the EC, and
(b) which under this article would be situated outside the EC, as being within the territory of the
country where the effective use and enjoyment of the services take place.
The place of supply rules set out in (a) and (b) above must be adopted in relation to telecommunications within (d)(ix)
above where supplied by a taxable person7 established outside the EC to non-taxable persons established within the EC.
Page 756
HR A[10330]
1 Sixth Directive ((EEC) 77/338), art 9.
2 Sixth Directive ((EEC) 77/338), art 9(1).
3 Sixth Directive ((EEC) 77/338), art 9(2)(a).
5 Sixth Directive ((EEC) 77/338), art 9(2)(c).
6 Inserted into Sixth Directive ((EEC) 77/338) by Council Directive 17.06.99: 99/59/EC; see OJ L162/64, 26.06.99.
7 Inserted by Council Directive 17.06.99: 99/59/EC; see OJ L162/64, 26.06.1999.
HR A[10331]
The EC provisions set out above relating to arts 8 and 9 of the Sixth Directive have 'direct effect'1, and thus entitle an
individual to enforce such rights in proceedings against any Member State who has failed to implement the Directive,
but not in proceedings against another individual. Whilst it is permissible for an individual to proceed against a Member
State under the doctrine of 'direct effect', the Member State cannot rely on the doctrine to proceed against an
individual2. Derogation from art 9 is allowed3.
HR A[10332]
1 The authority that art 8 has direct effect is AZO-Maschinenfabrik Adolf Zimmermann GMBH v Customs & Excise Comrs [1987]
VATTR 225. The authority that art 9 has direct effect is Customs & Excise Comrs v Chinese Channel (Hong Kong) Ltd [1998] STC 347.
2 Marshall v Southampton and South West Hampshire Area Health Authority (Teaching) (Case 152/84) [1986] 2 All ER 584 at 600, ECJ.
Also National Smokeless Fuels Ltd v IRC [1986] STC 300. VATA 1994, Sch 9, Group 7, item 1, formerly VATA 1983, Sch 6, Group 7,
item 1, conferring a wider exemption than that granted by Sixth Directive ((EEC) 77/388), art 13(A)(1)(c), did not prevent a person claiming
relief under United Kingdom legislation until such time as it was amended to reflect the EC Directive. See EC Commission v United
Kingdom (Case 353/85) [1988] STC 251.
3 Council Decision of 17.03.97 authorising the UK to apply a measure derogating from art 9 of Sixth Directive ((EEC) 77/388) OJ L86,
28.03.97, p33.
(a) Generally
HR A[10333]
As a general rule under UK law VAT is chargeable1 on taxable supplies2 of goods and services3 made in the UK for a
Page 757
consideration4 provided they are made in the course of the furtherance of business5, other than an exempt6 supply, and
are made by a taxable person or persons7. The place of supply rules are different for goods and for services. The
Treasury may by order, in relation to goods and services generally or to particular goods and services specified in the
order, vary the normal rules by Statutory Instrument8. It is the case, therefore, that a taxable supply which does not
come within these conditions is outside the scope of the tax.
HR A[10334]
1 VATA 1994, s 1(1)(a) - see s 43 (supplies between bodies corporate included in a group registration) which are disregarded for VAT
purposes.
2 VATA 1994, s 7 - place of supply of goods or services. De Voil Indirect Tax Services, V3.124.
3 VATA 1994, Sch 4, paras 1-6, determines whether a supply is a supply of goods or services. Customs & Excise Comrs v Jeffs [1995]
STC 759 is an example of the dividing line between a supply of goods and a supply of both goods and services. See also Faaborg-Gelting
Linien A/S v Finanzamt Flensburg (Case C-231/94) [1996] STC 774, ECJ.
4 For the nature of consideration see Staatssecretaris van Financiën v Coöperatieve Vereniging Cooperatieve Aardappelenbewaarplaats
GA (Case 154/80) [1981] 3 CMLR 337, ECJ, and Julius Fillibeck Sohne GMBH & Co KG v Finanzamt Neustadt (Case C-258/95) [1998]
STC 513, ECJ.
5 VATA 1994, s 94(1)-(3) - meaning of business.
6 VATA 1994, s 4(1), (2) - scope of VAT on taxable supplies. See Trustees of the Mellerstain Trust v Customs & Excise Comrs [1989]
VATTR 223. A supply is an exempt supply if it falls within the description specified in VATA 1994, Sch 9.
7 VATA 1994, s 3 - taxable persons and registration.
8 VATA 1994, s 7(11) - place of supply of goods and services.
(b) The place of supply of goods
HR A[10335]
The place of supply of goods in the UK is determined by their location at the time of supply. A supply must be made in
the UK if the goods concerned are to be charged with VAT, and the supply does not involve the removal of the goods
from the UK. The provisions relating to the supply of goods are detailed and complex1. These rules cover the place of
supply of goods removed from and to the UK; the place and supply of goods supplied outside the UK where the supply
does not involve their removal to the UK; to the supply of goods produced or manufactured in the UK which are to be
treated as taking place outside the UK in certain prescribed circumstances; and to the supply of goods from a third
country as well as to goods acquired from another EC Member State. Where a property or land transaction involves a
sale of the freehold and the property or land is located in the UK, it is a supply of goods2.
HR A[10336]
Page 758
1 For reference to a more detailed treatment see De Voil Indirect Tax Service V 3.124 and V 3.171-3.180.
2 VATA 1994, s 7 and De Voil Indirect Tax Service V 3.124.
(c) The place of supply of services1
HR A[10337]
The place of supply is determined in accordance with rules set out in VATA 1994, s 72. These are varied with effect
from 1 January 1993 as set out below. A supply of services relating to land is treated as made where the land or property
is situated provided the supply of services consists of one of the following descriptions3:
(a) the grant, assignment, or surrender of:
(i) any interest in or right over land. Land is considered by the commissioners to include:
buildings, walls, trees, plants and other structures and natural objects in, under or over it so long
as they remain attached to the land4. This category will include growing crops, and structures
fixed permanently to the seabed,
(ii) a personal right to call for, or be granted, any interest in or right over land,
(iii) a licence to occupy land, and, or any other contractual right exercisable over or in relation
to land;
(b) the construction, demolition, alteration, conversion, enlargement, reconstruction, repair or

maintenance of a building or civil engineering work; such supplies, unless the building is a protected
building, will be standard rated and not exempt. Machinery installed other than as a fixture in a building
is regarded normally as goods and not 'land'; and
(c) services of a kind provided by estate agents, auctioneers, architects, engineers, and others involved
in matters relating to land. Such services will be standard rated.
The foregoing rules do not apply where the land connected with such supplies is outside the UK, nor where there is only
an indirect connection with the land or property in question, nor where the land related service is only an incidental
component of a more comprehensive service. The services therefore must relate directly to the land5 and the land must
be situated within the UK, otherwise the supply will be outside the scope of UK VAT. Thus, the place where the supply
of services is made or deemed to be made is the only place where the supply can be liable to VAT. It is the case
therefore that a supply outside the UK will not be liable to VAT in the UK. If the supply is outside the EC and the UK it
will not be liable to VAT in either the UK or the EC6. Nevertheless, input tax may in certain circumstances be
recoverable even though the supply is deemed to take place outside the scope of UK VAT, indeed Customs & Excise
are required to make regulations to secure a fair and reasonable attribution of input tax to, for instance, supplies outside
the UK which would be taxable supplies if made in the UK7.
HR A[10338]
Page 759
1 De Voil Indirect Tax Service V 3.181.
2 VATA 1994, s 7(11) as varied by VAT (Place of Supply of Services) Order 1992.
3 SI 1992/3121, art 5 - services relating to land. VAT (Place of Supply of Services) Order 1992.
4 Customs & Excise Notice No 742, (December) 1995, para 2.4.
5 Aspen Advisory Services v Customs & Excise Comrs (1995) VAT decision 13489, unreported - management services supplied by UK
company to Channel Island Companies relating to properties in the UK. On the contention that the place of supply of the accountancy and
bookkeeping services was the Channel Isles, the VAT Tribunal held that the services were services relating to land within VAT (Place of
Services) Order 1992, SI 1992/3121, art 5. Mechanical Engineering Consultants v Customs & Excise Comrs (1995) VAT decision 13287,
unreported - services relating to commissioning of industrial waste incinerator: question was whether 'services relating to land'. Customs &
Excise ruled they fell within SI 1992/3121. The grounds of appeal were that the services should be treated as supplied within Switzerland
where the recipient was resident and within the effect of art 9 of the EC Sixth Directive. On the grounds that under English law anything
affixed to the land becomes part of it the VAT Tribunal held that the services were services relating to land within art 5 of SI 1992/3121.
6 Customs and Excise Notice 741 - Place of Supply of Services, para 1.4 'What is a place of supply?'; De Voil Indirect Tax Service V
3.181, 183 and 186; Customs & Excise Notice 741, para 1.5 - 'What does place of supply mean for UK suppliers?'
7 VATA 1994, s 4(2), s 26 and SI 1992/3123; De Voil Indirect Tax Service V 3.417, V 3.418.
HR A[10339]
Anti-avoidance transitional provisions relating to place of supply orders1 were enacted2 to give effect to any order
made on or after 17 March 1998 , under s 7(11) if the order provides for services of a description specified in the order
to be treated as supplied in the UK; or if the services would not have fallen to be so treated apart from the order; or if
the services are not services that would have fallen to be so treated under any provision re-enacted in the order; and if
the order is expressed to come into force in relation to services supplied on or after a date specified in the order (the
commencement date). The new transitional rules are set out3 for the purpose of determining whether, or to what extent,
the place of supply of a particular supply of 'specified services' is determined in accordance with the old or the new
dispensation:
(a) Invoices and other documents issued before the 'commencement date' are disregarded in
determining the time of supply of any services which by virtue of the statutory instrument would be
treated as supplied in the UK if their time of supply occurred on or after the 'commencement date'4.
(b) If there is a payment in respect of any services of the specified description received by the supplier
before the 'commencement date', so much (if any) of that payment as relates to times on or after the
'commencement date' shall be treated as if it were a payment received on the 'commencement date'5.
(c) If there is a payment in respect of services received by the supplier on or after the 'commencement
date' which relates to services before, the 'commencement date' shall be treated as if it were a payment
received before that date6.
(d) A payment in relation to any services shall be taken to relate to the time of the performance of
those services7, save where
(e) A payment is received in respect of a period which falls both before and after the 'commencement
date' in relation to services spanning that date, a just and reasonable apportionment must be made as to
the services performed before that date and those that relate to times on or after that date8.
Page 760
HR A[10340]
1 VATA 1994, s 7(11) - Treasury empowered to vary normal rules by Statutory Instrument in relation to services specified in the order
(Specified services).
2 VATA 1994, s 97A; FA 1998, s 22; De Voil Indirect Tax Service V 3.181-195.
3 VATA 1994, ss 6(14A) and 97A(1)(2).
4 VATA 1994, s 97A(2).
5 VATA 1994, s 97A(3).
6 VATA 1994, s 97A(4).
7 VATA 1994, s 97A(5).
8 VATA 1994, s 97A(6)(a), (b), (c).

Page 761
Examples of services relating to 'land'
5 Examples of services relating to 'land'
HR A[10341]
Customs and Excise have set out in their notice1 examples they consider relate directly to land and services they
consider do not relate directly to land or where the land element is incidental:
(a) the supply of hotel accommodation;

(b) the provision of a site for a stand at an exhibition where the exhibitor obtains the right to a defined
area of the hall;
(c) services supplied in the course of construction, alteration, demolition, repair or maintenance
including the painting, decorating and interior design work of any building or engineering;
(d) the supply of plant and machinery together with an operator for work on a construction site;
(e) services of estate agents, auctioneers, architects, surveyors and engineers, in addition to
management, conveyancing, surveying, or loss adjuster;
(f) services connected with oil/gas/mineral exploration relating to specific sites of land or the sea bed;
(g) the surveying (such as seismic, geological, or geomagnetic) of land or sea bed, including
associated data processing services to collate the required information;
(h) legal services such as conveyancing or dealing with applications for planning permission or
compulsory purchase orders;
(i) packages of property management services which may include rent collection, arranging repairs
and the maintenance of financial accounts.
HR A[10342]
1 Customs & Excise Notice 741, paras 4.4-4.6.

Page 762
Examples of services which are not land related
6 Examples of services which are not land related
HR A[10343]
(a) repair and maintenance of machinery which is not installed as a fixture, which is work on goods
where the services are supplied where performed1;
(b) the hiring out of a civil engineering on its own, which is the hire of goods, or the secondment of
staff to a building site, which is a supply of staff2;
(c) the legal administration of a deceased person's estate which happens to include property. These are
lawyers' services2;
(d) advice or information relating to land prices or property markets as they do not relate to specific
sites2;
(e) feasibility studies assessing the potential of particular businesses or business potential in a
geographical area. Such services do not relate to a particular property or site2;
(f) provision of a recording studio where technicians are included as part of the supply2;
(g) services of an accountant in simply calculating a tax return from figures provided by a client even
where those figures relate to rental income2.
HR A[10344]
1 Customs & Excise Notice 741, paras 4.6 and 5.1 and SI 1992/3121, art 15; De Voil Indirect Tax Service V 3.192.
2 Customs & Excise Notice 741, para 11.

Page 763
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/F Electing to
waive exemption
HR A[10345]
Member states of the EC are allowed to grant taxpayers a right of option to tax, at the standard rate2, certain supplies
which otherwise would be exempt3. These supplies are as follows:
(a) letting and leasing of immovable property;

(b) certain financial sector supplies;
(c) the supply of buildings or parts thereof and the land on which they stand, other than the supply
before first occupation of buildings or parts of buildings and the land on which they stand;
(d) the supply of land which has not been built on other than building land.
HR A[10346]
1 VATA 1994, Sch 10 paras 2-3A;De Voil Indirect Tax Service V.115.
2 VATA 1994, Sch 10, para 10(1).
3 Sixth Directive ((EEC) 77/388), art 13C; VATA 1994, Sch 9, Group 1.
HR A[10347]
Exercise of the option to tax enables the recovery of input tax which would otherwise be lost under the partial
exemption rules. There is no provision in the VAT Acts to enable a person to elect to waive exemption in relation to
supplies of land made outside the UK, nor of foreign land1. Member states are entitled to restrict the scope of the right
to opt to tax. The UK granted a restricted right in respect only of paras HR A[10345] (a), (c) and (d), which are given
effect to in Sch 10, paras 2 and 3 of the Act.The election can be made by anyone who lets property, including a pension
fund and a local authority2.
HR A[10348]
1 Customs and Excise Comrs v International Trade & Exhibitions J/V Ltd (LON/96/083) (14212).
2 Case C-247/95 Finanzamt Augsburg-Stadt v Marketgemeinde Welden [1997] STC 531.

Page 764
waive exemption/1 Advantages and disadvantages of electing
1 Advantages and disadvantages of electing
(a) Advantages
HR A[10349]
VAT is recovered on the development or purchase of land and buildings: on continuing building upkeep and costs of
maintenance of the building, especially where the landlord is able to pass on the cost of irrecoverable VAT to his
tenants. The landlord will be able to make an additional saving by recovering on a proportion of his overheads input tax
and fully taxable tenants will be able to recover the VAT on the service charges they pay, which is irrecoverable if the
rent is exempt.
(b) Disadvantages
HR A[10350]
The tenant will have to pay stamp duty on any premium paid by him on the lease. VAT for tenants in the financial
sector who are not fully taxable will have to bear the extra cost of irrecoverable VAT, which may be material,
particularly in a market such as the City of London or other financial centres. This factor may affect the capital value of
a property because of the existence of a differential between elected and non-elected buildings in a two-tier market.
Election will cause extra costs in (a) the issuing of tax invoices; (b) the unproductive consumption of time inflicted on
the elector, who will be required to act as a tax collector for Customs and Excise and more unproductive time will be
consumed during periodic regulation control visits to the taxpayer by Inspectors of Customs and Excise. Perhaps the
financially greatest disadvantage likely to be suffered by the elector is that future disposals of land or buildings, after
election has been effected, are to be standard rated and will increase the stamp duty payable by the purchaser. It is also
important to note that, under the rules relating to the transfer of a business as a going concern1, the purchaser must also
elect to tax.
HR A[10351]
1 De Voil Indirect Tax Service V2.226; V3.116; Customs and Excise Notice 700/9/96, para 2.1.
Page 765
waive exemption/2 Does the lease permit VAT to be added to rent?
2 Does the lease permit VAT to be added to rent?
HR A[10352]
In making his decision whether or not to elect, the landlord should ascertain whether, in relation to existing leases, the
actual lease gives him the right to add rent to the reserved rent. If it gives no such right and the election is made the
landlord will be treated as if the rent paid was rent inclusive, thereby reducing the amount of rent received in relation to
the rent that would have been received if no election had been made. The VAT inclusive element in the rent is
calculated by multiplying the rent received by what has been described as the 'jumbo jet' fraction of 7/471.
HR A[10353]
1 VATA 1994, s 89. Customs and Excise Notice 742, para 8.6; De Voil Indirect Tax Service V3.151.
HR A[10354]
Most leases contain a clause which in effect provides that any supplies made to a tenant are exclusive of VAT. A typical
clause found in leases dating prior to the VAT acts is in the following form:
'The tenant is to pay and discharge all general rates, water rates and all existing and future rates, taxes, charges, assessments,
impositions and outgoings whatsoever (whether parliamentary, municipal, parochial or otherwise) which are now or may at any
time hereafter be payable charged or assessed on or in respect of the demised premises during the said term except tax assessable
on the landlord in respect of rents and other payments arising under this lease or any superior lease.'
HR A[10355]
A clause such as the above will not prevent an elector from exercising his option to tax exempt supplies and adding
VAT to the rent1. Even if the lease is silent VATA 1994, s 89 permits the landlord to add VAT to any rent or service
charges payable. The consideration for a supply of goods or services specified in a lease or contract must be adjusted,
unless the lease provides otherwise, to reflect a subsequent change in the rate of tax or the fact that tax has become or
has ceased to be chargeable on the supply as a result of a change in the legislation or the making of an election to waive
exemption. A lease 'specifies otherwise' only if it refers specifically to VAT or to VATA 1994, s 89 . If the landlord
elects to charge tax and there is a clause in the lease preventing its charge to the tenant, the effect will be that the
landlord will have a continuing liability to pay the VAT included in the rent charge and the tenant, insisting on his right
to obtain a VAT invoice, will be entitled to recover the VAT element to the extent allowed by his VAT status. It is
therefore of some consequence for the elector, before deciding to opt to tax, to discover whether his tenants are fully
taxable persons able to recover VAT in full or not.
Page 766
HR A[10356]
1 VATA 1994, s 89; De Voil Indirect Tax Service V3.151.
HR A[10357]
VATA 1994 provides, in s 89(1):

'Where, after the making of a contract for a supply of goods or services and before the goods or services are supplied, there is a
change in the tax charged on the supply, then unless the contract otherwise provided, there shall be added to or deducted from the
consideration for the supply an amount equal to the change.'
By this subsection, the consideration for a supply of goods or services specified in a lease or a contract falls to be
adjusted when there has been a change either in the rate of tax, or that tax has become chargeable, or ceased to be
chargeable, in consequence of a change in the rate of VAT and also where an election to waive exemption has been
made. A contract 'otherwise provides' only if it refers specifically to this section or to VAT.
HR A[10358]-[10360]
Section 89(2) of VATA 1994 provides that s 89(1) shall apply:

'...in relation to a lease or tenancy as it applies in relation to a contract except that a term of the tenancy of lease shall not be taken
to provide that the rule contained in that sub-section is not to apply in the case of a tenancy or a lease if the term does not refer
specifically to VAT or to s 89.'
And finally, in s 89(3) it is provided:

'References...to a change in the VAT charged on a supply include references to a change to or from no tax being charged on the
supply (including a change attributable to the making of an election under para 2 of Sch 10.'
Page 767
waive exemption/3 Nature of the election
3 Nature of the election
(a) Revocation of the option to tax
HR A[10361]
The election to waive exemption, save for two important exceptions, is irrevocable1. The first exception permits the
option to tax to be revoked where more than 20 years have elapsed since the date on which it took effect. Revocation
will take effect from the date on which written consent is given by Customs and Excise, or at such later date as they
specify in their written consent. The second exception allows revocation to occur at the date on which the election took
effect2, subject, however, to the following provisos:
(a) that written consent of Customs and Excise has been obtained within three months of the date the
election became effective;
(b) that no VAT has become chargeable and no credit for input tax has been claimed by reason of the
election; and
(c) that the property has not been sold with the business which has been treated as neither a supply of
goods nor services under the rules relating to the transfer of a business as a going concern3.
HR A[10362]
1 Coach House Property Management Ltd v Customs and Excise Comrs (LON/91/1709Z) (7564), applying Brollies Ltd v Customs and
Excise Comrs (MAN/93/556) (11966).
2 VATA 1994, Sch 10, para 3(4) and (5); SI 1995/279.
3 See paras HR A[10474]ff for a fuller explanation of the provisions relating to transfers of a business as a going concern.
(b) Disapplication of election and the anti-avoidance provisions
HR A[10363]
Connected persons
Within the period commencing 29 November 1994 and before 27 November 1996, by reason of VATA 1994, Sch 10,
para 2, as amended by SI 1994/3013, the scope of grants between 'connected persons' of the option to tax interests in
land became restricted in the following circumstances:
Page 768
(a) where the grantor and the grantee were connected persons by reason of Income and Corporation
Taxes Act 1988, s 839; and
(b) where at the end of the prescribed accounting period in which the grant was made either the
grantor or the grantee was not a fully taxable person, that is to say that neither were entitled to credit for
input tax on all supplies and acquisitions in that period.
Then, by concession, with retrospective effect from 30 November 1994 Customs could treat any person as a fully
taxable person for these purposes who was able to recover 80% or more of the input tax incurred in the VAT period in
which the grant was made1. Where businesses were not able to take advantage of this concession and where it was
clear, beyond doubt, that the motivation was commercial and not tax avoidance, Customs allowed the concession to
operate2.
HR A[10364]
1 Customs and Excise Notice 48 (extra-statutory concession) 2.19.
2 VATA 1994, Sch 10, paras 2(3A) and 3(8A); Customs and Excise Notice 48, ESC 2.20; Customs and Excise News Release 62/95, 21
December 1995.
(c) Disapplication of election
HR A[10365]
Where an election has been made under Sch 10, para 2 in relation to any land, a supply shall not be taken by virtue of
that election to be a taxable supply if:
(a) the grant giving rise to the supply was made by a person (the grantor) who was a developer of the
land1; and
(b) at the time of the grant, it was the expectation of the grantor, or a person responsible for financing
the grantor's development of the land for exempt use2;
that the land would become exempt land (whether immediately or eventually and whether or not by virtue of the grant)
or as the case may be, would continue, for a period at least to be such land3.
HR A[10366]
1 VATA 1994, Sch 10, para 3A(2).
2 VATA 1994, Sch 10, para 3A(7).

Page 769
3 VATA 1994, Sch 10, para 2(3AA). This para was inserted by FA 1997, s 37(2), in relation to any supply made on or after 19 March
1997 other than a supply arising a relevant pre-commencement grant as defined in FA 1997, s 37(5), (6); De Voil Indirect Tax Service
V4.115.
HR A[10367]
Input is allowable under VATA 1994, s 25 only if it is attributable to taxable supplies1 - that is to say, supplies made or
to be made in the course or furtherance of his business by a taxable person provided they are taxable supplies; or
supplies outside the UK, which would be taxable supplies if made within the UK; or such other supplies outside the UK
and such exempt supplies as the Treasury may by order specify for the purpose of this subsection. If input tax is
attributable to taxable supplies solely because of an election, the election must have effect for these purposes before
deduction is claimed. Clearly, an intention held by a potential elector, without communicating the intention to apply to
waive exemption gave no grounds for Customs to treat the input tax as being attributable to an intended taxable
supply2.
HR A[10368]
1 VATA 1994, s 26(2); De Voil Indirect Tax Service V3.417.
2 Lawson Mardon Group Pension Scheme v Customs and Excise Comrs (LON/92/492) (10231); De Voil Indirect Tax Service V4.115.
HR A[10369]
The terms used in Sch 10, para 2(3AA) are defined in para 3A of the same Schedule, as follows:
A person is a 'developer of the land' if:
(a) the land, building or part of a building concerned is a 'Capital Item'1, for the purposes of the
capital goods scheme2; and
(b) the grant giving rise to the supply was made during the 'period of adjustment'3 applicable to the
land, building or part for the purposes of the capital goods scheme. This has to be construed in terms of
the EEC's Sixth Directive4 which requires Member States to take account of variations in entitlement of
input tax on capital goods, which is a term of 'Community law' that does not refer to the law of the
Member States to determine its scope and meaning5.
HR A[10370]-[10380]
1 VAT Regulations 1995, SI 1995/2518, reg 113.
2 VAT Regulations 1995, SI 1995/2518, regs 112-116, which mainly affect businesses which were or became partly exempt on or after 1
April 1990 (ie those with limited input tax).
3 VAT Regulations 1995, SI 1995/2518, reg 114(3)-(7).

Page 770
4 Sixth Directive ((EEC) 77/388), art 20.2.
5 Case 51/76 Verbond van Nederlandse Onderemingen (Federation of Dutch Industries) v Inspecteur der Invoerrechten en Accijuzen
[1977] ECR 113; [1977] 1 CMLR 413.
HR A[10381]
The EEC make the distinction that costs of 'capital goods' are 'written off' over several years, whereas the day-to-day
current costs are 'written off' as current expenditure. Because this distinction lacks any uniform or precise guidance, it
has the effect, by omission, of giving the Member States discretion to apply this directive, provided they maintain the
distinction between capital goods and the current day-to-day running costs of the business.
HR A[10382]
'Adjustments' relating to the deduction of input tax to be made are regulated under VATA 1994, s 26(3) and (4). The
Commissioners are empowered to make regulations to secure a fair and reasonable attribution of input tax to the
supplies specified in VATA 1994, s 25(2). The Commissioners in the exercise of this power2 may make different
provisions for different circumstances for different descriptions of goods and services which may contain such
incidental and supplementary provisions as appear to the Commissioners necessary and expedient3. Broadly,
adjustment periods begin with either the date of purchase invoice by the owner, or the date of first use of the building in
which the item is located in other cases.
HR A[10383]
1 VAT (Tour Operators) Order 1987, SI 1987/1806, art 12, relates to Treasury Order excluding input tax credit.
3 Customs and Excise Comrs v University of Wales College, Cardiff [1995] STC 611 (which gives a comprehensive explanation of the
nature of these regulations); VAT Regulations 1995, SI 11995/2518, regs 101-109.
HR A[10384]
Land is 'exempt land' if it is occupied at a time falling within the capital items period of adjustment for the purposes of
the capital goods scheme and such occupation is other than wholly or mainly for an eligible purpose by the grantor, or a
person responsible for financing the grantor's development of the land for exempt use, or a person connected with the
previous persons above1.
HR A[10385]
1 ICTA 1988, s 839; VATA 1994, Sch 10, para 3A(7).

Page 771
HR A[10386]
The meaning of 'grantor's development of land' is the acquisition by the grantor of an asset consisting of land or a
building or part of a building on the land and otherwise comes within para HR A[10384]. Development includes in its
meaning the construction or reconstruction and the carrying out in relation to the capital item of any other works which
also fall to be treated as a capital item within the adjustment period1.
HR A[10387]
1 VATA 1994, Sch 10, para 3A(6).
HR A[10388]
The person responsible for financing the grantor's development is any person who directly or indirectly either does or
enters into any agreement, arrangement or understanding to do any one or more of the following, in particular:
(a) provides funds by making a loan, provides security for a loan, subscribes for shares or other
securities, or transfers assets or value so that funds are made available for meeting all or part of the cost
of the land, building or part concerned, or of the construction, reconstruction, or other works which
resulted in the land building or part becoming a capital item;
(b) provides funds for discharging all or any part of any past or future liability relating to funds raised
to meet the cost of the land building or part or of the construction, reconstruction or other works which
result in the land, building or part becoming a capital item;
(c) procured the full or partial discharge of any such liability by another person;
(d) procured the provision of funds for the objects recited in (a)1.
HR A[10389]
1 VATA 1994, Sch 10, paras 3A(3), (4), (5) and (6); De Voil Indirect Tax Service V4.115; V3.251-254.
HR A[10390]-[10400]
Land for exempt use is 'exempt land' if it is occupied wholly or mainly for an eligible purpose during a period of
adjustment for the purposes of a capital goods scheme by the grantor, or by a person responsible for financing the
grantor's development of the land for exempt use, or by a person connected with either of the foregoing persons.
HR A[10401]
Only a person registered or intending to be registered for VAT as a taxable person is capable of being in occupation for
Page 772
eligible purposes1. The taxable person has to occupy the land for the purpose of making supplies in the course or
furtherance of a business of such a description that the input tax attributable qualifies and entitles the taxable person to
credit2.
HR A[10402]
1 VATA 1994, Sch 10, para 3A(8).
2 VATA 1994, Sch 10, para 3A(9) and s 26(2) (for supplies within this description); De Voil Indirect Tax Service V3.417.
HR A[10403]
Where a person is in occupation of land but is not a taxable person and his supplies are treated as supplies made by
someone who is a taxable person the person in occupation of the land and that other person are treated as single taxable
person1.
HR A[10404]
1 VATA 1994, Sch 10, para 3A (11) and (12).
HR A[10405]
A body listed in VATA 1994, s 33(3), or in an order made thereunder is in occupation of land for eligible purposes to
the extent that the statutory body occupies the land for purposes other than those of a business carried on by that body1.
It is further provided that taxable supplies made by the Crown are to be treated in the same way as taxable supplies
made by any other taxable persons. Goods or services supplied by a government department are treated as if they were
supplied in the course or furtherance of business if the treasury so directs2.
HR A[10406]
1 VATA 1994, Sch 10, para 3A(10)(a) and s 43(1)(b); De Voil Indirect Tax Service V2.113.
2 London Gazette, 12 June 1996, for the Treasury directions. VATA 1994, Sch 10, para 3A(10)(a), (b).
HR A[10407]
Government departments may claim a refund of tax in respect of goods and services obtained otherwise than for the
purposes of a business or deemed business if the treasury so directs1.
Page 773
HR A[10408]
1 London Gazette, 2 April 1993, 8 April 1994, 7 April 1995, 12 April 1996; De Voil Indirect Tax Service V5.161.
HR A[10409]
The Commissioners' interpretation of these provisions was published in their revised Notice 742 in relation to supplies
made on or after 19 March 1997 in cases where tax has been incurred on the cost of acquiring or constructing property
to be used by the person who acquired it, or constructed it, or financed it acquisition other than for taxable purposes.
The restriction on the operation does not apply to supplies arising from grants made before 26 November 1996 or from
grants made before 30 November 1999 on terms agreed in writing before 26 November 1996.
Page 774
waive exemption/4 Effect of opting to tax (electing to waive exemption)
4 Effect of opting to tax (electing to waive exemption)
HR A[10410]
When exemption has been waived, the person making the election (the elector) must charge VAT on all future supplies
made in relation to that property which would otherwise be exempt. In deciding whether to waive exemption, the person
electing is not obliged to follow the decision of the previous owner, nor of an owner with a separate interest in the same
property save where a company is a member of a VAT group. Where a property is co-owned, both the co-owners must
elect jointly or not at all.
HR A[10411]-[10420]
The exercise of the option to waive exemption is individual and personal to the applicant. It is not always realised that
the option to waive does not travel with either the building or the land when the land or building is sold to an
unconnected person. This is usefully illustrated thus: A sells land and buildings on which he has exercised the option to
waive exemption. A is obliged not only to charge VAT on taxable supplies he makes but also when he comes to sell the
property he is obliged to charge the purchaser, B, VAT on the sale price. Purchaser B can notify Customs and Excise at
any time, but at the latest very shortly after acquisition of the property, whether he wishes to waive exemption or not. It
is a personal and individual decision and whether B elects should be a commercial decision made by B. This is to be
inferred from the language of VATA 1994, Sch 10, para 2(1).
HR A[10421]
The option applies to the whole building including its curtilage and its interlinking parts, albeit that the elector may own
only part of that building1. Nevertheless, an election will affect only those supplies made by an elector in relation to his
own interest, which is also subject to the provisions relating to 'group registration'. The 'curtilage of a building'2 is
defined as land lying immediately around the building and forms the grounds of the building. This will include
forecourts, landscaped areas, yards and parking bays3.
HR A[10422]
1 VATA 1994, Sch 10, para 3(3).
3 VATA 1994, Sch 10, para 3(2), (3); SI 1995/279.

Page 775
HR A[10423]
Since 1 March 1995, 'complexes consisting of a number of units grouped around a fully enclosed concourse' replaced
the previous concept of a 'parade, precinct, or complex' and enabled election on buildings to be made on an individual
basis which previously was not allowed.
HR A[10424]
When a building is destroyed or demolished, the option to tax ceases to apply to the land on which the election has been
made. It is important, therefore, in the making of an election to waive exemption that the elector is precise in his
definition of the land. Demolition for these purposes allows a single facade wall to remain standing, or to existing
foundations to remain in existence. Once demolition has taken place, there remains no obligation on the new taxpayer
developer to opt for election on the new buildings constructed on the site.
HR A[10425]-[10440]
On or after 1 March 1995, the restriction previously applying to agricultural land when an election was made which
included all the arable, pastoral, or grazing land including, land lying fallow, moorland, scrubland and marshland, as
well as buildings lying on the land ceased to apply. In its place, subject to clear notification it is possible to opt to tax a
discrete area of land within the same ownership as land over which no discretion has been exercised. Details should be
given on a plan or map indicating the land over which the exemption applies.
Page 776
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/G Group
registration
HR A[10441]
The governing legislation is contained in art 4 of the EC Sixth Directive, in which a 'Taxable Person' is defined to mean
any person who independently carries out in any place any economic activity whatever the purpose or results of that
economic activity happen to be. Again, by definition, economic activity is statutorily defined to comprise all activities
of producers traders and persons supplying services including mining and agriculture and the activities of the
professions. The exploitation of tangible or intangible property for the purpose of obtaining an income therefrom on a
continuing basis shall also be considered an economic activity. However, by art 4(4) of the Sixth Directive Member
States are permitted to treat legally independent persons as a single taxable person provided such persons are closely
bound to one another by financial, economic and organisational links, although this is subject to the consultations
provided for in art 29 of the Sixth Directive.
HR A[10442]
(a) The rules prior to 27 July 1999
HR A[10443]
New rules have been enacted1 which take effect from 27 July 1999, by amending the existing legislation, most of which
remains in force, relating to the VAT treatment of groups of companies2, concerning in particular:
(a) The question of 'eligibility'3, which imposes a new test for membership of a VAT group, requires
that the body corporate be either 'established' in the UK or have a 'fixed establishment' in the UK4. An
established place of business5 in the UK was understood by Customs & Excise to mean a specific or
identifiable place at which business was carried on and there was some physical indication or visible sign
that the company had some connection with the premises6.
(b) A more relaxed regime was introduced relating to the making of applications7 either to form new
VAT groups, or to alter or disband them. The purposes for which an application under this provision8
can be made are as follows:
(i) for two or more bodies corporate to be treated as members of a VAT group;
(ii) for another body corporate to be treated as a member of an existing VAT group;
(iii) for a body corporate to cease to be treated as a member of an existing VAT group;
(iv) for a different group member to be substituted as the 'representative member';
Page 777
(v) for the members to cease to be treated as members of a VAT group.
The persons eligible to make such an application9 are as follows:
(i) one of the bodies corporate seeking group registration or the person controlling them10; and
(ii) in the case of bodies corporate to be treated as a group, a representative member must be
appointed;
(iii) the members of the group, as under the old legislation, will remain jointly and severally
liable for any VAT due from its representative member.
It is the practice that a grouping application is given immediate provisional effect from the day on which the application
is received by Customs & Excise, who have the power to allow its effectiveness earlier or later than this day. Customs
& Excise have expressed the intention of responding within 15 working days of receipt with either a new registration
number or that the application is being processed, and if further enquiries are set to be made they aim to confirm
registration within a further 15 days. This is a noticeable improvement in relation to the time taken under the old rules
prior to 27 July 1999 when the application had to be made not less than 90 days before the date on which it was to take
effect11. Prospective applicants should not overlook the possibility of backdating their application by up to 30 days
before the date of the application, if they are applying to leave one group to join another12. Retrospective registration
depends entirely on the non-appealable discretion13 of the commissioners who are unlikely to grant it unless one of
their officers is guilty of culpable delay.
The commissioners can refuse an application if they consider that one of the bodies corporate is not eligible to be
treated as a member of a VAT group or if they consider refusal to be a necessary expedient to protect the revenue14.
Refusal is subject to an appeal process but once an application has been refused it shall be taken never to have been
granted15.
Under the considerable powers given to the commissioners to protect the revenue, the commissioners may, 'in any case',
refuse an application for grouping provided the loss to the revenue is material and not de minimis16. For these powers
to be exercised there is no requirement that it solely covers artificial avoidance schemes, for straightforward transactions
are within its embrace. In other words, if the natural consequence of grouping led to a loss of revenue, the
commissioners would be acting within their powers to refuse the application to group. In a recent decision17 on appeal
against the commissioners' decision to allow an Irish subsidiary company to join the Nat West Group, which it was
accepted would lead to substantial loss of revenue, the appellant contended that the mere reduction in VAT liability
without there being any intention to avoid tax was not a sufficient reason to refuse the application. The Tribunal held
that the protection of the revenue extended and applied to any loss provided it was not de minimis irrespective of
whether it arose from deliberate tax avoidance or the normal operation of a VAT group. The Tribunal rejected the
commissioners' view that group treatment was not permitted where there could be any substantial loss of revenue. The
Tribunal also held that the commissioners had not given sufficient weight to the effect of the refusal on the appellant on
the grounds that if the administrative and accounting matters had been taken into account the decision would not
inevitably have been the same. The appeal was allowed but, because the commissioners had not agreed to waive the
90-day notice requirement, the appellant's application to add this bank to its VAT group did not succeed. The
commissioners are going to publish a statement of practice setting out the circumstances in which they will use their
revenue protection powers.
(c) New powers are also given to the commissioners to change the composition of an existing VAT
group or to terminate a body corporate's membership of a VAT group if they consider it necessary to
protect the revenue. Notice of termination is served on the body corporate and is to take effect from the
date of the notice or such other date as is therein specified. The commissioners may also, on grounds that
Page 778
the body is ineligible, terminate its membership of a VAT group18.
HR A[10444]
1 FA 1999, s 16 and Sch 2.
2 VATA 1994, s 43.
3 VATA 1994, s 43 A (1) - this replaces s 43(3). Although s 43A(2) and (3) replace s 43(8), there is no change in the text.
4 Shamrock Leasing Ltd v Customs & Excise Comrs [1998] V & DR 323 - matter at issue is whether a USA company with no business
establishment in the UK with one UK director was resident in the UK; and whether it was eligible for membership of a UK VAT group.
Directive 77/388/EEC, art 4(4) and VATA 1994, s 43(1)(a).
5 Newey and Eyre Group Ltd v Customs & Excise Comrs [1995] V & DR 244 and Customs & Excise Notice 700/2/95.
7 VATA 1994, s 43B - this replaces s 43(4), (5) and (7).
8 VATA 1994, s 43B(1) and (2); FA 1999, Sch 2, para 2(1), (2).
9 VATA 1994, s 43B(3).
10 Mannin Shipping Ltd v Customs & Excise Comrs [1979] VATTR 83 (individuals with casting vote held to have control owning more
than 50%).
11 Customs & Excise Business Brief 15/99, 12 July 1999.
12 Customs & Excise News Release 13, 26 November 1996; Customs & Excise Notice 700/2/97; Standing Committee B (Miss Dawn
Primarolo) fifth sitting 13 May 1999.
13 Save and Prosper Group v Customs & Excise Comrs [1979] STC 205.
14 VATA 1994, s 43B(5), (6); FA 1999, Sch 2, para 2 - 43B Groups: applications.
15 VATA 1994, s 84(4A); FA 1999, Sch 2, para 2.
16 VATA 1994, s 43B(5)(c) .
17 National Westminster Bank plc v Customs & Excise Comrs (1998) VAT decision 15514, unreported.
18 VATA 1994, s 43C, which replaces s 43(6).
HR A[10445]
Page 779
Any business carried on by any bodies corporate shall be eligible to be treated as carried on by a member of the group
through its 'representative member'1, but the members of the group shall be liable jointly and severally for any VAT due
from its representative member, if, being resident in the UK or having an established place of business2, one of the
group controls3 each of the others, or one person whether of corporate or individual identity controls all of them, or two
or more individuals carrying on business in partnership control all of them.
HR A[10446]
1 VATA 1994, s 43(1).
2 Newey and Eyre Group Ltd v Customs and Excise Comrs [1995] V & DR 244 and Notice 700/2/95.
3 Mannin Shipping Ltd v Customs and Excise Comrs [1979] VATTR 83 (individuals with casting vote held to have control owning more
than 50%).
HR A[10447]
Group treatment creates a single taxable person1 and has the following consequences:
(a) 'The representative member' is deemed to carry on the business of the group members for VAT
purposes.
(b) Supplies by members of the group to one another are disregarded for VAT purposes2, save for the
services3 purchased or received by a group member who 'belongs'4 in a country outside the UK, where
the supplier has a business establishment, or some other fixed establishment, and if there are neither of
these then he will belong where he has his usual place of residence5.
(c) Where the services are not disregarded under this provision, the services are to be deemed to be
treated as a self-supply by the representative member who is required to account for output tax and may
be entitled to credit for part or all of the input tax. It is important in this context to note that no input tax
is attributable to the deemed supply to be made when the partial exemption rules are applied6. However
it should be carefully noted that the person resupplying and the person receiving are to be treated as
'connected persons'7 which will enable the Commissioners to make a valuation direction8.
(d) The 'representative member' is deemed to make all supplies to and to receive all supplies from third
parties and to pay all VAT chargeable on acquisitions and importations9.
(e) All members of the group are jointly and severally liable for any VAT due from the 'representative
member'.
HR A[10448]
1 Customs and Excise Comrs v Kingfisher plc [1994] STC 63; Svenska International plc v Customs and Excise Comrs [1996] STC 1000.
2 Customs and Excise Comrs v Thorn Materials Supply Ltd and Thorn Resources Ltd [1996] STC 1490, CA.
3 VATA 1994, Sch 5, paras 1-8; De Voil Indirect Tax Service V3.193.
Page 780
5 Sixth Directive 77/388/EEC, art 9(1) and Berkholz v Finanzamt Hamburg - Mitte - Alstadt (Case 168/84) [1985] 3 CMLR 667, ECJ;
WH Payne & Co v Customs and Excise Comrs [1995] V & DR 490 and Customs and Excise Business Brief 26/96 (19 December 1996). In
contrast, see Binder Hamlyn v Customs and Excise Comrs [1983] VATTR 171 (for a UK office) and with Chantry Vellacott v Customs and
Excise Comrs [1992] VATTR 138 (not a fixed establishment).
6 VAT Regulations 1995, SI 1995/2518, regs 99-110: for determination of the time of supply see reg 82.
7 TA 1988, s 839 defines 'connected persons'.
8 In accordance with VATA 1994, Sch 6, para 1, or otherwise under para 8. De Voil Indirect Tax Service V3.162: V3.231.
9 VATA 1994, s 5(5) and (6); Value Added Tax (Self-supply of Construction Services) Order 1989, SI 1989/472; VAT (Cars) Order
1992, SI 1992/3122; VATA 1994, Sch 10, para 5 for self-supplies by developers. De Voil Indirect Tax Service V3.111, 118.
HR A[10449]
The Commissioners of Customs and Excise may refuse an application by two or more eligible bodies for group
treatment only on the ground of protecting the revenue. They may also exclude an existing member from remaining in
the group from a certain date after giving notice of this intention to the group on the grounds that the Commissioners
consider that the body to be excluded has ceased to be controlled by another group member or by a third party. The test
of 'protecting the revenue' is irrelevant in these circumstances.
HR A[10450]
Under the pre-27 July rules, notice of at least 90 days must be given by applicants for group registration, or to change or
terminate an existing group registration, or to substitute a new 'representative member' before it is to have effect. Whilst
it is in the discretion of the Commissioners whether not to grant retrospective applications of shorter than 90 days
notice, they are reluctant to do so other than in exceptional circumstances. The strict application of the 90-day rule can
be seen in the decision in the National Westminster case1 referred to in footnote 17 of para HR A[10444]. Under the
new rules, the intention as expressed by Miss Dawn Primarolo in Standing Committee B2 and as expressed also by
Customs & Excise is that applications will be dealt with within 15 working days of receipt. Refusal to grant an
application remains a ground of appeal3.
HR A[10451]
1 National Westminster Bank plc v Customs & Excise Comrs [1999] V & DR 201.
2 Standing Committee B, fifth sitting 13 May 1999.
3 VATA 1994, s 83(k); De Voil Indirect Tax Service V5.404; Blue Boar Property Investment Co v Customs and Excise Comrs [1984]
VATTR 12; Legal and Contractual Services Ltd v Customs and Excise Comrs [1984] VATTR 85.
HR A[10452]
Page 781
Guidance is given by the Commissioners1 of their policy on refusing applications for group treatment, which is itself
subject to review by the Commissioners who are going to publish a Statement of Practice setting out the circumstances
when they will use their powers of protecting the revenue. The following statement may give some guidance as to the
content of the promised new revised statement:
'Applications for VAT Group treatment (whether they are to form a new group, to change the composition of an existing group or
to change the representative member) may be refused for the protection of the revenue where that treatment would put at risk our
ability to collect the revenue or where it would lead to a significant tax advantage, either for the group itself, or for its suppliers, or
customers. We make judgment on whether there is a significant tax advantage on the facts of each case, taking into consideration
the scheme of VAT as a whole.'
HR A[10453]-[10460]
1 Business Brief 31/97 (22 December 1997).
HR A[10461]
However, as a general guide, applications for group treatment may be refused where a proposed group's members have
a poor compliance record which might pose a threat to our ability to collect the revenue (for example, where they have
consistently failed to pay VAT debts). They may also be refused if we have reason to believe that the applicants intend
to use the grouping facility in order to operate a VAT avoidance scheme.
HR A[10462]
Applications are also refused where group treatment would cause a distortion in the VAT liability of the group's
supplies. For example where grouping would lead to exempt supplies becoming taxable with a consequent increase in
entitlement to recovery of input tax; or it would lead to a significant revenue loss. For example, where the group's
entitlement to recover previously irrecoverable input tax is increased; the irrecoverable input tax that the group incurs is
reduced; or lost revenue results from a reduction of the group's liability to output tax. These are only broad examples of
situations where our revenue protection powers can be used and this should not be taken as an exhaustive list.
Page 782
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/G Group
registration/1 Anti-avoidance provisions
1 Anti-avoidance provisions1
HR A[10463]
The Commissioners are empowered to give a direction if, in any case a 'relevant event' has occurred; the condition
specified in para HR A[10465] been fulfilled; that condition would not be fulfilled apart from the occurrence of that
event and the transaction in question is not a supply which is the only supply by reference to which the case falls within
any of the three preceding matters2.
HR A[10464]
1 De Voil Indirect Tax Service V2.104; VATA 1994, Sch 9A.
2 VATA 1994, Sch 9A, para 1(1); De Voil Indirect Tax Service V2.104.
HR A[10465]
A 'relevant event'1 occurs when a body corporate begins or ceases to be treated as a member of the group, or enters into
any transaction. The conditions qualifying the 'relevant event' that there has been or will or may be a taxable supply on
which VAT has been or will or may be charged otherwise than by reference to the supply's full value; and there is at
least a part of the supply which is not or would not be zero-rated; and the charging of VAT on the supply at less than
full value gives rise or would give rise to a tax advantage.2
HR A[10466]
1 VATA 1994, Sch 9A, para 1(2).
2 VATA 1994, Sch 9A, para 1(3); De Voil Indirect Tax Service V2.104.
HR A[10467]
The Commissioners are enabled by this provision1 to give directions that:
(a) separately registered companies eligible to be treated as members of a VAT group may be
compelled to group from a specified date; or
(b) a company within a group may be compelled to leave a group from a specified date; and
Page 783
(c) a supply within a group initially treated as a disregarded supply may subsequently be made subject
to tax.
HR A[10468]
1 VATA 1994, Sch 9A, para 3.
HR A[10469]
An assessment in consequence of such a direction may require in the best of their judgment an assumption to be made
by the Commissioners in recovering tax which would have been due on the basis that the assumptions made had been
correct1.
HR A[10470]
1 VATA 1994, Sch 9A, para 6.
HR A[10471]
In order to clarify their policy in this complex area of law, the Commissioners issued a Statement of Practice in June
1996 on the new VATA 1994, Sch 9A. Two examples are incorporated in the Statement of Practice itself and a third
example is included in Notice 700/2/97 as at para HR A[1047.1].
Example 1
HR A[10471.1]
'Take a lease of a building. Each payment of rent could be regarded as a transaction in itself. However, the mere payment of rent
would not be regarded as covered by the term "enters into any transaction" as used in the legislation.
Customs will regard the entering into of the lease by the landlord or tenant as a relevant event which would (if other conditions are
met), potentially bring a company within the scope of the provisions. Other examples falling within the scope of the provisions are
an agreement for a lease, an assignment, variation or surrender. The performance of obligations under the lease (eg the carrying out
of repairs or the payment of rent), would not normally be caught unless, exceptionally, such obligation constituted the entering into
of a separate contract.
Full value condition
In the context of these measures, a supply at less than full value (the undercharged supply) means only those supplies which to any
extent have been, or will be disregarded under VATA 1994, s 43 because they arise between VAT group members. Supplies which,
although not disregarded under s 43, are less than full value for other reasons are not covered. Customs could not, for instance,
compulsorily group the parties to a lease and lease back agreement under arrangements that had nothing to do with the operation of
an intra-group disregard. This is not to say that other measures would not apply.
Page 784
Tax advantage
A tax advantage is defined as arising in circumstances where an input tax credit or payment under VATA 1994, s 39 is taken on
goods and services used to make the undercharged supply. It is not essential that the right to a tax credit or payment should be that
of the supplier of the undercharged supply. The legislation specifically provides that the condition is also fulfilled where the
supplier acquires the goods and/or services tax free under the provisions relating to the transfer of a business as a going concern1
and the transferor or some previous owner of the business had been entitled to an input tax credit. The following example based on
an entry scheme illustrates why this is necessary.'
Example 2
HR A[10471.2]
'A partly exempt group of companies (the PX group) wishes to reduce the VAT on computer equipment. It therefore arranges for
the equipment to be provided by an associated company, Newco 1, which operates a leasing business.
Newco 1 purchases the necessary equipment and deducts input tax under its own VAT registration against its intended supplies of
leasing services to the PX group.
Before entering into the lease agreement Newco 1 transfers its business, including the assets for use by PX group, as a going
concern to another associated company, Newco 2. This transfer is not subject to VAT.
Newco 2 enters into a leasing agreement with the PX group and after an appropriate period joins the group to ensure that the major
part of the lease rentals fall to be disregarded. Overall, the tax arrangements deliver the tax advantage which Sch 9A is intended to
counter even though Newco 2 has not itself had any entitlement to an input tax credit.
In providing that in such cases the transferor and the transferee shall be treated as the same person, the legislation ensures that such
arrangements are not excluded from the scope of these anti-avoidance measures.
Other provisions deem that, for the purpose of determining whether the input tax credit is used to make an undercharged supply,
separate right to goods or services (including options or priorities in connection with goods or services) and the goods and services
themselves shall be treated as a single supply. The intention is to ensure that variations of avoidance schemes such as that in the
following example are covered.'
Example 3
HR A[10471.3]
'PX group comprising companies A and B wishes to mitigate VAT on purchase of computer equipment.
A pays B 90% of the cost for an option to purchase the equipment at a nominal value and the supply falls to be disregarded.
B leaves the group and registers in its own right.
A exercises its option and B supplies the goods to A after purchasing the goods and deducting the input tax thereon. The argument
could run that the input tax deduction was attributable only to the supply of the goods and not to the option. Without the special
provision, therefore, there would not be undercharged supply enabling a direction to be issued.
By providing that the supply of the option and the supply of the goods are to be treated as a single supply, the legislation ensures
that such schemes are brought within the scope of Sch 9A.'
Page 785
[10472]
1 VATA 1994, s 49 and De Voil Indirect Tax Service V2.226.
[10473]
In addition to the three examples from Customs and Excise Notice 700/2/97 (set out at paras HR A[1047.1]) contained
in the June 1996 Statement of Practice, an additional Example 4 is set out in Notice 700/2/97 Group Treatment and
illustrates the background information, the likely commercial considerations and the structure likely to be chosen,
followed by a summary and the possibility of the Commissioners issuing a direction and an assessment under Sch 9A.
Example 4
HR A[10473.1]
'Background
A partly exempt group of companies (the PX group) wishes to sell one its head office buildings which is surplus to requirements
following a downsizing exercise. All of the PX group of companies are included in a single VAT group. The property is owned by
P Ltd, the group property company, and used by M Ltd, the group management services company. M Ltd pays (and has historically
paid) annual rentals in advance on 1 January under a formal 15-year lease. The PX group has elected to waive exemption in respect
of all its properties, although this currently has no effect in respect of the rentals paid by M Ltd, these being disregarded under s
43(1)(a). It is now May 1996 and the PX group wishes to dispose of the property on or around December 1997, when M Ltd's lease
(coincidentally) runs out. It will be difficult to relocate M Ltd's staff before that date. However, the directors have found a willing
buyer for the property. The buyer is unrelated to the PX group.
Commercial considerations
In structuring the purchase the PX group considers four main factors:
(a) cash flow: the group would like to make the disposal as soon as possible using the proceeds to pay off
expensive debts;
(b) accounting: the group would like the profit on disposal of the building to be included in this year's results
if possible;
(c) direct tax: the gain on disposal of the building can be sheltered if the disposal takes place this year;
(d) VAT: as a matter of policy, the group manages the irrecoverable VAT on all its overheads.
Structure chosen
The directors managed to agree with the purchaser the following arrangements:
(a) P Ltd will sell its freehold of the property to the purchaser on 1 July 1996;
(b) however the freehold will be subject to M Ltd's lease which will have 18 months to run;
(c) the purchaser will opt to tax the property prior to sale so that the transaction can be treated as the transfer
Page 786
of a business as a going concern for VAT purposes;
(d) in order to avoid the situation where the purchaser charges M Ltd VAT on the final year's rent, M Ltd pays
the final years rent to P Ltd before the sale takes place with an adjustment being made to the sale price to reflect
this.
Summary of effects of structure
The structure meets all of the group's commercial objectives. However, the group's advisers are concerned that the advance
payment of rent by M Ltd might lead to Customs and Excise issuing a direction and assessment under Sch 9A.
Customs and Excise approach to these arrangements
Customs and Excise would not issue a direction based on the above facts. Even though the final year's rent is advanced in order to
avoid the incidence of irrecoverable VAT, it is not considered that this would have been the main purpose of the sale of the
property.'
Page 787
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/H Transfer of
business as a going concern
HR A[10474]
By reason of the provision in art 5.81, which provides that Member States, in the event of a transfer, whether for a
consideration or not, or as a contribution to a company of a totality of assets or part thereof, may consider that no supply
of goods has taken place and in that event the recipient shall be treated as the successor to the transferor, Member States
may take, where appropriate, necessary measures to prevent distortion of competition in cases where the recipient is not
wholly liable to tax. In reliance on this discretion the transfer of a business or part of a business as a going concern is
neither a supply of goods nor a supply of services and thus does not attract VAT2 provided certain conditions are met.
HR A[10475]
1 Sixth Directive (77/388/EEC), art 5, para 8.
2 VAT (Special Provisions) Order 1995, SI 1995/1268, art 5, as amended by the VAT (Special Provisions) (Amendment) Order, SI
1998/760 with effect from 18 March 1998.
HR A[10476]
The conditions required to be met for the transfer not to be a taxable supply are set out below:
1 subject to certain exceptions stated below in para (2) there shall be treated as neither a supply of
goods nor a supply of services the following supplies by a person of assets of his business:
(a) their supply is to a person to whom the vendor has transferred his business as a going
concern where:
(i) the assets are to be used by the transferee in carrying on the same kind of business,
whether or not as part of any existing business, as that carried on by the transferor, and
(ii) in the case where the transferor is a taxable person, the transferee is already, or
immediately becomes as a result of the transfer, a taxable person or a person defined as
such in s 3 of the Manx Act;
(b) their supply is to a person to whom the vendor has transferred his business as a going
concern where:
(i) that part is capable of separate operation,

(ii) the assets are to be used by the transferee in carrying on the same kind of business,
whether or not as part of any existing business, as that carried on by the transferor in that
Page 788
part, and
(iii) in the case where the transferor is a taxable person, the transferee is already, or
immediately becomes as a result of the transfer, a taxable person, or a person defined as
such in s 2(2) of the Manx Act.
2 A supply of assets shall not be treated as either a supply of goods or a supply of services by virtue of
para (1) above to the extent that it consists of:
(a) a grant which would fall within item 1, group 1 of Sch 9 to the Act but for an election
which the transferor has made; or
(b) a grant of a fee simple which falls within para (a) of item 1, group 1 of Sch 9 unless the
transferee has made an election in relation to the land concerned which has effect on the relevant
date and has given written notification no later than the relevant date of election required by para
3(6) of Sch 10 to the Act.
If part of a business is transferred, it must be capable of separate operation. The transferor must not only have power to
transfer the business, and in this respect the transferee should be alert to discover whether any licence to operate the
business which the transferor enjoyed has terminated or is shortly to determine1.The transferor must also have carried
on the business2. The facts in another recent borderline decision3 as to whether the transaction was a sale of assets or
the transfer of a going concern were that a textile merchant who was in financial difficulties and against whom a
winding-up petition had been issued decided to form a new company to whom he sold certain assets belonging to the
company threatened with being wound up. The commissioners contended that this transaction constituted the transfer of
the business as a going concern. These assets represented about 70 per cent of the company's total stock. The company
appealed and the Tribunal allowing appeal held that there was no intention to transfer any part of the business, just
simply to sell certain equipment and stock. On appeal to the High Court, the Tribunal decision was upheld. It was not
inconsistent with the evidence and it was right to take into account the intentions of the transferor and the transferee.
The effect of the transfer has to be to put the new owner in possession of a business which is capable of operation. The
sale of capital assets will be a transfer of a going concern if its effect is to put the purchaser in possession of a business.
If it does not do this it is just a sale of assets. Even if the sale of the various assets takes place at different dates to the
same person, the commissioners will regard it as a transfer. Although there should not be any significant break in the
normal trading pattern before or immediately after the transfer, the commissioners will ignore a short non-disruptive
period of closure4. This contrasts with a decision in which it was held that there was a valid transfer even if there had
been a cessation of trade before the date on which the transfer took place, provided the wherewithal to carry on the
business was available and was transferred5. Where there is a series of consecutive transfer, for example where A sells
to B who immediately sells to C and so forth, B cannot have carried on the business and the special provisions cannot
apply. There is no transfer6.
HR A[10476.1]
1 Ryan & Townsend v Customs & Excise Comrs Lon/94/512A (12806).
2 Kwik Save Group v Customs & Excise Comrs [1994] VATTR 457 (12749) - Kwik Save carried on a retail business and bought a number
of food stores which it transferred to its wholly-owned subsidiary. Output tax was not accounted for on the transfer of these businesses. C&E
assessed 'Kwik' charging interest thereon. On appeal by 'Kwik', the Tribunal dismissed the appeal and held that Kwik had never operated the
foodstores and the transaction did not fall within art 5 of the Special Provisions Order. However, the commissioners accepted that the
Page 789
subsidiary could reclaim the tax charged but could not reclaim the interest which Kwik had to pay.
3 Padglade Ltd v Customs & Excise Comrs [1995] STC 602.
5 JMA Spijkers v Gevroeders Benedik Abattoir CV, CJEC [1986] 2 CMLR 296.
HR A[10477]
When interpreting the meaning of 'transfer of a business as a going concern' the decision in Kenmir v Frizzell1 remains
good authority for deciding whether a transaction amounts to a transfer of a going concern even though that case dealt
with an employment law provision2 and was distinguished in Hartley Engineering Ltd [1994] VATTR 453 (12385), on
the grounds that the wording of the Employment Act differed significantly from the provision of art 5 of the Special
Provisions Order. The judgment of Widgery LCJ included the following:
'In deciding whether a transaction amounted to the transfer of a business, regard must be had to its substance rather than its form
and consideration must be given to the whole of the circumstances weighing the factors which point in one direction against those
which point in another. In the end the vital consideration is whether the effect of this transaction was to put the transferee in
possession of a going concern, the activities of which he could carry on without interruption.
Many factors may be relevant to this decision although few will be conclusive in themselves. Thus if the new employer carries on
business in the same manner as before, this will point to the existence of a transfer, but the converse is not necessarily true because
a transfer may be complete even thought the transferee does not choose to avail himself of all the rights he acquires thereunder.
Similarly, an express assignment of goodwill is strong evidence of the transfer of the business but the absence of such an
assignment is not conclusive if the transferee has effectively deprived himself of the power to compete. The absence of an
assignment of premises, stock in trade, or outstanding contracts will likewise not be conclusive, if the particular circumstances of
the transferee nevertheless enable him to carry on substantially the same business.'
HR A[10477.1]
1 [1968] 1 All ER 414 at 418e, per Lord Widgery LCJ.
2 Contracts of Employment Act 1963, Sch 1, para 10(2).
HR A[10478]
When the Kenmir case was decided, neither the VAT nor the Sixth Directive existed and, because the decision relied on
an employment law provision, it is perhaps prudent to consider in rather more detail the decision in Hartley1, which
distinguised and relied in part on Kenmir. The facts, briefly, were that the appellant company was wound up in
December 1991. The liquidators sold machinery and other assets to the new company whose VAT registration took
place with effect from 1 January 1992. The commissioners disallowed the appellants' claim to deduct input tax on its
Page 790
purchase of the old company's assets, contending in following Kenmir that, in acquiring the old company's assets, the
appellant had taken over a going concern which could be carried on without interruption. The Tribunal held that the old
company's business was not viable because of an insufficiency of demand for its products and because its activities had
nothing in common with the old company's business. They also held that a transaction was not the transfer of a going
concern unless the assets transferred were to be used in carrying on the same kind of business2. These orders suggest
that the transferee had to have an intention that the assets should so be used. In this case the appellant intended to carry
on a distinctly different type of business and in any event the old business was defunct. Indeed, the words in the article
'where the assets are to be used by the transferee in carrying on the same kind of business' indicate that 'are to be' does
not mean 'could' as distinct from 'would' and imports an intention existing at the moment of transfer.
HR A[10479]
1 Hartley Engineering v Customs & Excise Comrs [1994] VATTR 453 (12385).
2 VAT (Special Provisions) Order, SI 1981/1741, art 12(1)(a)(i), and SI 1992/3129, art 5(1)(a)(i).
HR A[10480]
By art 5(2) of the Value Added Tax (Special Provisions) Order 1995, SI 1995/1268:
'A supply of assets shall not be treated as neither a supply of goods nor a supply of services by virtue of paragraph (1) above to the
extent that it consists of--
(a) a grant which would, but for an election which the transferor has made, fall within Item 1 of Group 1 of
Schedule 9 to the Act; or
(b) a grant of a fee simple which falls within para (a) of Item 1 of Group 1 of Schedule 9 to the Act,
unless the transferee has made an election in relation to the land concerned which has effect on the relevant date and has given any
written notification of the election required by para 3(6) of Sch 10 to the Act, no later than the relevant date.'
HR A[10481]
The option to tax needs to made before the supply takes place which will normally happen on completion. Even if the
building is a new building which will be sold on by the purchaser within the 3-year period a formal election under Sch
10 is required to be made. It is the case therefore that if the transferee acquires property subject to VAT as a going
concern and does not exercise the option to tax only the property will attract VAT and the 'going concern' exclusion will
continue to apply to the other assets1.
HR A[10482]
1 Customs and Excise Press Release 75A/91.

Page 791
HR A[10483]-[10490]
The supply of assets consisting of land and buildings is not treated as a transfer of a going concern to the extent that it is
a grant of land or buildings which would be exempt under VATA 1994, Sch 9, Group 1, save for the making of an
election to waive exemption, or the grant of title in fee simple absolute in new and uncompleted buildings again unless
the transferee has given written notice to Customs & Excise of his election, no later than the date on which the grant
would have been treated as having been made1 or on the earliest date if there is more than one such date2. If the
transferee has made no election, the transfer of land and buildings is a supply on which VAT will be payable at the
standard rate.
HR A[10491]
1 Customs & Excise Notice 700/9/96, para 2.3. C&E Manual V1-10, Chap 2, para 5.3.
2 VATA 1994, s 5(3), SI 1995/1268, art 5(2)(3).
HR A[10492]
A sale of a building for letting can be a transfer of a business as a going concern if:
(a) the purchaser carries on the same kind of business of letting though not necessarily to the same
tenant; and
(b) the business transferred can operate as an independent business.
The question whether there was a transfer of a going concern or an exempt supply of land arose in the case of the
Golden Oak Partnership v Customs and Excise Comrs1. This concerned the transfer of land on which partial
development had occurred and on which the intention was to build accommodation units. There was no stock in trade,
no goodwill, but the land was in the course of active development which was taken over by the transferee who
continued and completed the development without any break. Zero-rated sales followed. The Tribunal held in the
particular circumstances of the case that the land that was transferred as a going concern had been part of the business
being carried on by the transferor. The Commissioners attempts to claim back the input tax, previously claimed by the
company, failed. The fact that at the time of the sale no supplies had been made in respect of the land was not
conclusive.
HR A[10493]
1 LON/90/958Z (7212).
HR A[10494]
Page 792
Nominees
Where land is acquired in the name of a nominee, for instance by a partnership, or held for an unincorporated
association, or by trustees, for some one else who is the owner of the beneficial interest, the beneficial owner is
substituted for the legal owner as the taxable person making the supply of the land or the buildings1. Customs will only
treat the beneficial owner as the transferee if the nominee holds the land for such named beneficiary, whose identity is
required to be disclosed to the vendor. By this device the beneficial owner is deemed for the purposes of art 5 of SI
1995/1268, the special provisions order, to be the transferor. The vendor is expected to verify as far as possible that the
beneficial owner is VAT registered. Because there is no provision in Sch 10, para 8 which can deem the beneficial
owner to be the recipient of a supply, it would appear that the only transferee of the legal estate can be the transferee for
the purposes of art 5 of the 'special provisions order'.
HR A[10495]
1 VATA 1994, Sch 10, para 8.
HR A[10496]
This aspect relating to nominees has only been touched on here. To assist practitioners the Commissioners have issued a
statement of practice1 on the transfer of a property letting business as a going concern.
HR A[10496.1]
1 Business Brief 10/96 (5 June 1996).
HR A[10497]
Objectives of the 'transfer of a going concern' provisions
The provisions of art 5 of SI 1995/1268 are mandatory. If all the conditions of this instrument were to be complied with
there would be neither any charge to nor any claim for VAT. The first purpose of Customs and Excise is to assist in the
cash flow and the transfer of assets between businesses and avoid the need to separately value assets sold as a whole.
The second purpose is to protect the revenue from phoenix syndrome companies arising from the ashes owing large
sums of revenue from defaulting or fraudulent transferors, by removing a charge to VAT and entitlement to input tax
where no output tax has been paid to Customs & Excise.
Page 793
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/I Zero-rating
HR A[10498]
A supply of goods or services is zero-rated if the goods, services, or supply comply with the description for the time
being specified in Sch 8, Group 5, which relates to the construction of buildings2 and in Group 6, which relates to
protected buildings3. No tax is charged on a supply of goods or services which is zero-rated, but supplies nevertheless
are subject to VAT which is charged at the zero-rate and in every respect the supply is treated as a taxable supply.
HR A[10499]
1 De Voil Indirect Tax Service V4.201 and 202; VATA 1994, s 30.
2 De Voil Indirect Tax Service V4.233, 237, 238, 242.
3 De Voil Indirect Tax Service V4.235, 239.
HR A[10500]-[10505]
Fundamental to the operation of zero-rating is the requirement that the goods or services supplied are of a description
specified in Sch 8. If a treatment or process is applied to goods zero-rated, they will only remain zero-rated if they
remain within a specified Sch 8 description. Likewise, no tax is chargeable on importations or acquisitions if the goods
are of a description for the time being specified in Sch 8, which may be varied by Treasury order.
Page 794
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/I Zero-rating/1
Eligibility for zero-rating post 1 March 1995--construction of buildings
1 Eligibility for zero-rating post 1 March 1995--construction of buildings
(a) Sch 8, Group 5, Item 1
HR A[10506]
The first grant1, which includes an assignment or surrender, by a person, (a) constructing a building2 designed as a
dwelling or a number of dwellings or intended for use solely for a relevant residential3 or charitable purpose4; or (b)
converting a non-residential building or non-residential part of a building into a building designed as a dwelling or
number of dwellings5 or a building intended for use solely for a relevant residential purpose of a major interest in, or in
any part of the building dwelling or its site is eligible to be zero-rated.
HR A[10507]
1 Monsell Youell Developments Ltd v Customs and Excise Comrs [1978] VATTR 1 and Hulme Education Foundation v Customs and
Excise Comrs [1978] VATTR 179.
2 Walle v Customs and Excise Comrs [1976] VATTR 101, which attempts to define a building.
3 Whitley v Customs and Excise Comrs [1993] VATTR 248, for buildings used for a 'relevant residential purpose'.
4 Jubilee Hall Recreation Centre Ltd v Customs and Excise Comrs [1997] STC 414 and VATA 1994, Sch 8, Item 1(a)(ii), note (6).
5 Smith v Customs and Excise Comrs (MAN/89/708 (5579)) for buildings 'designed as one or more dwellings'.
HR A[10508]
'The first grant...'
The word 'first' was introduced by extra statutory concession from 21 July 1994. Customs and Excise intended to make
it clear by the introduction of the word 'first' that zero-rating cannot apply in cases where the original builder takes back
the house in part exchange and then resells it. Thus the intention is to prevent zero-rating of a second disposal of the
same part but a subsequent disposal of a different part1.
HR A[10509]
1 VAT Information Sheet 10/95.

Page 795
HR A[10510]
'...of a major interest in...'1
A lease of precisely 21 years would not qualify as a major interest. The date from which the lease runs, for these
purposes, is the date of execution of the lease and not necessarily from the actual date of the lease, for example a lease
for 21 years from 31 December 1998 executed on 28 February 1999 is not a major interest. Likewise, a lease for the life
of a tenant does not qualify for zero-rating, for it is not for a term certain exceeding 21 years. It is somewhat surprising
that Customs and Excise have accepted2 that a lease for 25 years with break clauses, say every five years from inception
of the lease qualifies as 'a major interest'. The earlier statement to this effect made by Customs and Excise in January
1990 has not been repeated in their December 1995 notice, perhaps for the reason that the Inland Revenue have
contended that cross options are equivalent to a contract for sale. In a Tribunal decision in which a newly married
couple reclaimed input tax relating to a lease granted for precisely 21 years, Customs and Excise sought to recover input
tax deducted on the ground that no major interest had been created. The married couple and the lessees entered into a
Deed of Rectification by which they extended the term to 22 years. The couple succeeded in their appeal against the
decision of the Commissioners on the grounds that 'the mere fact that the sole purpose of the rectification is a tax
advantage is not a bar to rectification'3.
HR A[10511]
1 VATA 1994, s 96(1) defines the meaning of a 'major interest' to be in relation to land the fee simple or a tenancy for a term certain
exceeding 21 years.
2 Customs and Excise Notice 742A (January 1990), para 11 (subsequently withdrawn) but compare Notice 742 (December 1995).
3 CS and JM Isaac (MAN/96/254 (14656)) applying Colebrook's Conveyances; Re Taylor v Taylor [1973] 1 All ER 132, Ch D.
HR A[10512]
'...person constructing...'
The sale or a grant of a lease (ie the supply) must be made by the person constructing or the person who has
constructed1 the building for it to qualify for zero-rating. The expression is not defined in the Act. The next best course
is to try to discover the interpretation applied by Customs and Excise to this legislation. Clearly, to be included are the
persons constructing or who have constructed the building: a landowner constructing a building on his own land
provided he exercises some control over the construction and planning2. A landowner, therefore, who engages another
person to supply the whole package from start to finish of a development would not qualify and would be excluded
from zero-rating.
HR A[10513]
1 Customs and Excise Comrs v Link Housing Association Ltd [1992] STC 718; and Stapenhill Developments v Customs and Excise Comrs
[1984] VATTR 1, in relation to partly constructed buildings.
Page 796
HR A[10514]
'Construction' is defined in detailed and exclusive terms, in that in civil engineering work1 references to conversion,
reconstruction, or alteration or enlargement of a work are excluded2. Also excluded from construction of a building3 are
conversion, reconstruction, or alteration of an existing building, or any enlargement of, or extension to, an existing
building except to the extent that the enlargement or extension creates an additional dwelling or dwellings. The
construction of an annexe to an existing building is also excluded save where it is intended for use for solely a 'relevant
charitable purpose'4 and then only when it is capable of functioning independently from the existing building and the
only means of access to or from the annexe is not via the main building.
HR A[10515]
1 GKN Birwelco Ltd v Customs and Excise Comrs [1983] VATTR 128, for civil engineering work; Customs and Excise Comrs v Rannoch
School Ltd [1993] STC 389, for civil engineering work carried out with the construction of a building.
2 VATA 1994, Sch 8, Group 5, note (15).
HR A[10516]
Use for a 'relevant residential purpose' means use as a home or other institution providing residential accommodation
for children, or for providing personal care for persons in need by reason of their old age, disablement, past or present
dependence on alcohol or drugs, or present mental disorder: use as a hospice: use as residential accommodation for
students or school pupils: residential accommodation for any members of the armed forces: a monastery, nunnery or
similar establishment or an institution which is the sole or main residence of at least 90% of its residents1.
HR A[10517]
HR A[10518]
Use for a 'relevant charitable purpose'1 means use by a charity in either or both the following ways, namely:
(a) otherwise than in the course or furtherance of a business;

(b) as a village hall, or similarly in providing social or recreational facilities for a local community.
Page 797
HR A[10519]
HR A[10520]
The word 'business' has been held to have a wide meaning. It is now established that although the words 'commerce' or
'profit' are not used in association with the word business that if the activities are 'predominantly concerned with the
making of taxable supplies to consumers for a consideration' the taxpayer is in the business of making taxable supplies1.
HR A[10521]
1 Customs and Excise Comrs v Royal Exchange Theatre Trust [1979] STC 728, per Niell J.
HR A[10522]
There are some interesting and somewhat conflicting zero-rating cases relating to the use of a building as a village hall
or similarly in providing social or recreational facilities for a local community, which are as follows.
(a) Changing rooms had been constructed for an under-16s' football club. The builder did not account
for VAT on the work, which was assessed on the builder by the Commissioners. The builder appealed
contending that the work should be zero-rated because it was for a 'relevant charitable purpose'. The
Tribunal adjourned the appeal on the basis following the decision in the Special Commissioners v
Pemsel1 that although the club was not a registered charity, nor might it qualify as a registered charity, it
was established for 'purposes beneficial to the community' and it therefore fell within the Recreational
Charities Act 19582.
(b) In contrast to the previous case, a bowling club on a DIY basis erected a pavilion building3. The
club reclaimed input tax on materials used for the construction of the pavilion. The Commissioners
contended that the club was not a charity and was carrying on a business on the basis that it made
charges to non-members at well below a commercial rate which it used to maintain the bowling green
and not the pavilion. The interpretation of the statutory provisions by the Tribunal was strict and perhaps
harsh in dismissing the club's appeal.
(c) A registered charitable association constructed a leisure centre. Automatic membership was
granted to the inhabitants of ten adjoining parishes. The Commissioners contended that the centre was
being operated as a business. The association appealed on the grounds that it was entitled to zero-rating
because it was being used as a village hall 'in providing social or recreational facilities for a local
community'. The building was part of a large complex containing a badminton court, changing rooms,
toilets, crèche, club room, office, kitchen, tea room, craft shop, thrift shop, fitness rooms and an
equipment store. The area served was within a six mile radius of the centre and that this constitutes a
local community. The Tribunal allowed the appeal. Size did not prevent it from being treated as a village
hall4.
Page 798
HR A[10523]
1 (1891) 3 TC53, HL.
2 Meadows v Customs and Excise Comrs (LON/93/213A (11817)).
3 Hunmanby Bowling Club v Customs and Excise Comrs (MAN/93/862 (12136)).
4 Customs and Excise Comrs v Bennachie Leisure Centre Association (EDN/96/60 (14276)), disapproving Ormiston Charitable Trust
[1995] VATTR 180 (13187). Bennachie was later approved by the QB in Jubilee Hall Recreation Centre v Customs and Excise Comrs
[1997] STC 4114.
HR A[10524]
More particularly sub-paras (a)-(c) below relate to 'persons constructing a building': items (a)-(c) at para HR A[10526]
relate to persons converting a non-residential building; and items (a)-(b) at para HR A[10528] relate to persons
converting a non-residential part of a building. Common to all these items is the provision relating to leases only1,
where a 'major interest' has been granted. Then the consideration for the grant will qualify for zero-rating, if it is in the
form of a premium being payable or, if no premium is payable, then the first payment of rent. Thus all rents, if a
premium qualifies, or the second and subsequent payments of rent if there is no premium, are excluded from
zero-rating.
(a) In relation to all grants, the person constructing a building which is designed as one or more
dwellings2 qualifies for zero-rating, provided the purchaser or tenant is entitled to reside in the dwelling
throughout each year. If the terms of a covenant, planning consent or other restriction prevents year
round residential occupation zero-rating will be excluded3. Likewise, if there is a similar prohibition on
the grantor using it as his principal private residence that will exclude zero-rating4.
(b) In relation to all grants by the person constructing a building to be used solely for a relevant
residential or charitable purpose5 provided the purchaser or tenant gives the grantor a certificate stating
that the building is to be used solely for this purpose it will qualify for zero-rating, provided also that the
certificate has been provided before the grant is made.6
(c) In relation to all grants by the person constructing a garage to be occupied with a dwelling7, which
is constructed at the same time as the dwelling it will qualify for zero-rating.
HR A[10525]
2 VATA 1994, Sch 8, Group 5, Item 1(a)(i); De Voil Indirect Tax Service V.4.223, 237, 238, 242.
3 VATA 1994, Sch 8, Group 5, note (13)(i).

Page 799
4 VATA 1994, Sch 8, Group 5, note (13)(ii).
5 VATA 1994, Sch 8, Group 5, Item 1(a)(ii).
6 VATA 1994, Sch 8, Group 5, note (12)(b) and Leaflet 708/4/90 Annexes B, C, D for form and content of certificate.
7 VATA 1994, Sch 8, Group 5, Item 1(a)(i) and note (3).
HR A[10526]
'...person converting a non-residential building...into a building designed as a dwelling'
Part of a building only may be designed as one or more dwellings leaving a part not so designed and likewise part of
building may be used for a relevant residential or charitable purpose. In that event where a supply is made to both parts
there will have to be an apportionment for zero-rating purposes between the qualifying and the non-qualifying part to
determine the extent to which zero-rating applies1, for example a retail shop may have a flat over it. The shop will not
qualify and the accommodation may qualify.
(a) Zero-rating will apply in relation to all grants by a person converting a non-residential building
into a building designed as one or more dwellings2 provided notes (13)(i) and (ii) are complied with and
provided the non-residential building does not comprise a garage occupied together with a dwelling3.
The provisions contained in footnote 23 above relating to leases in note (14) have equal application to
this para.
(b) Zero-rating will apply in relation to all grants by a person converting a non-residential building
into a building intended to be used solely for 'relevant residential purpose' provided the purchaser or the
tenant provides the grantor with a certificate before the grant is made that the building is to be used
solely for a relevant residential purpose4, and provided the non-residential building does not comprise a
garage occupied together with a dwelling. The provisions contained in footnote 23 relating to leases in
note (14) have equal application to this para.
(c) Zero-rating will apply in relation to all grants by a person converting a non-residential building into
a garage to be occupied with a dwelling5 ,provided there is compliance with notes (13)(i) and (ii) and the
non-residential part of the building does not comprise a garage occupied together with a dwelling. Where
the building contains both a residential part and a non-residential part one or more additional dwellings
must result from the conversion.
HR A[10527]
2 VATA 1994, Sch 8, Group 5, Item 1(b).
[1995] VATTR 180 (13187). Bennachie was later approved by the QB in Jubilee Hall Recreation Centre [1997] STC 414.
Page 800
5 VATA 1994, Sch 8, Group 5, Item 1(b) and notes (8), (9).
HR A[10528]
'...person converting a non-residential...part of a building into...'
(a) Zero-rating will apply in relation to all grants by a person converting a non-residential part of a
building into a building designed as a one or more dwellings, provided the non-residential part of the
building does not comprise a garage occupied together with a dwelling1 and if the building contains both
a residential part and a non-residential part, one or more residential dwellings must result from the
conversion. The provisions relating to leases in note (14) have equal application to this para.
(b) Zero-rating will apply to all grants by a person converting a non-residential part of a building into a
building intended to be used solely for a relevant residential purpose, the provisions of note (12)(b) must
be complied with2 and provided the non-residential part of the building does not comprise a garage
occupied together with a dwelling3. The provisions relating to leases in note (14) have equal application
to this para.
HR A[10529]
1 VATA 1994, Sch 8, Group 5, notes (8), (9).
[1995] VATTR 180 (13187). Bennachie was later approved by the QB in Jubilee Hall Recreation Centre [1997] STC 4114.
(b) Sch 8, Group 5, Item 2
HR A[10530]-[10535]
Zero-rated are supplies in the course of the construction of either a building designed as a dwelling or number of
dwellings or is intended for use for a relevant residential or charitable purpose. Included in this item, somewhat out of
context, is any civil engineering work necessary for the development of a permanent park for residential caravans. The
supplies included are specified to be any which are related to the construction, other than those of an architect, surveyor
or other person acting as a consultant or in a supervisory capacity.
HR A[10536]
Not included in supply in the course of construction, nor in the supply to a 'relevant housing association' in the course of
conversion of a non-residential building1 are the following services2 which must comprise something other than3:
Page 801
(a) the transfer of possession of goods which amounts to a supply of services; or

(b) the use of business assets for non-business or private purposes.
HR A[10537]
1 VATA 1994, Sch 8, Group 5, Item 3.
2 VATA 1994, Sch 4, para 1(1) or 5(4); De Voil Indirect Tax Service V3.112, 113; V3.211, 212.
HR A[10538]
'A relevant housing association' means, in England, a registered social landlord within the meaning of Pt 1 of the
Housing Act 19961.
HR A[10539]
1 VATA 1994, Sch 8, Group 5, note (21): as substituted by the VAT (Registered Social Landlords) (No 1) Order 1997, SI 1997/50.
HR A[10540]
It may be helpful to summarise the conditions relating to the supply of services in constructing a building designed as
one or more dwellings, or to be used for a relevant residential or charitable purpose. Essentially these must be related to
the construction or conversion works concerned and supplied to the person intending to use the building for the relevant
residential or charitable purpose. Where there is a zero-rated and non-zero-rated element in the same building,
apportionment will be necessary between the these two conflicting elements. The services of an architect, surveyor,
consultant or supervisor are excluded1.
HR A[10541]
1 VATA 1994, Sch 8, Group 5, notes (2), (3), (11), (12)(a), (b), (20).
(c) Sch 8, Group 5, Item 4
HR A[10542]
Page 802
The supply of building materials to a person to whom the supplier is supplying services within Items 2 and 3 of this
Group which include the incorporation of materials into the building (or its site) in question.
HR A[10543]
'Building materials'1
In relation to any description of building these mean goods of a description ordinarily incorporated by builders in a
building of that description (or its site), but does not include:
(a) finished or pre-fabricated furniture other than furniture designed to be fitted in kitchens;
(b) materials for the construction of fitted furniture2, other than kitchen furniture;
(c) electrical or gas appliances, unless the appliance is an appliance is:
(i) designed to heat space, or water (or both) or to provide ventilation, air cooling, air
purification or dust extraction; or
(ii) intended for use in a building designed as a number of dwellings as a n umber of dwellings
and is a door entry system, a waste disposal unit, or a machine for compacting waste; or
(iii) a burglar alarm, a fire alarm, or fire safety equipment or designed solely for the purpose of
enabling aid to be summoned in an emergency; or
(iv) a lift or hoist;
(d) carpets or carpeting material;
The 'incorporation' of goods in a building includes their installation as fittings3.
HR A[10544]
2 Customs and Excise Comrs v McLean Homes Midlands Ltd [1993] STC 335.
HR A[10545]-[10550]
Under Item 2 supplies in the course of demolition of a building normally are excluded. Where however the contract is
for the construction of a zero-rated building it will extend to the demolition of any building on site as being done in the
course of the construction, when it will qualify for zero-rating. The demolition contract must be a single project
included in the construction contract in order to qualify for zero-rating.
HR A[10551]
Page 803
Where there has been substantial but not total demolition it is never easy to determine whether building work utilising
part of the old building is a conversion, reconstruction, alteration or the creation of a completely new building.
Disregarding for the moment the added complication whether the building is a listed building, a building ceases to be an
existing building only if it is demolished completely to ground level or the part remaining above ground level consists
of no more than a single facade or if it is a corner site a double facade, the retention of which is a condition precedent to
the granting of planning permission.1 'Ground level' is interpreted by Customs to allow a concrete slab to remain, but
where two cottages are derelict and have been unoccupied for some years Customs consider that zero-rating does not
apply if they are converted.
HR A[10552]
(d) Sch 8, Group 6, protected buildings1
HR A[10553]
The items that qualify for zero-rating are the:
(a) first grant by a person substantially reconstructing a protected building of a major interest in or in
any part of, the building or its site;
(b) supply in the course of an approved alteration of a protected building of any services other than the
services of an architect, surveyor, or any person acting as a consultant or in any supervisory capacity;
(c) supply of building materials to a person by a supplier who also supplies to the same person services
within (b) which include the incorporation of the materials into the building.
HR A[10554]
1 De Voil Indirect Tax Service V4.235 and 4.239.
HR A[10555]
A building is not to be regarded as substantially reconstructed unless either:
(a) at least 60% (by cost) of the work carried out (excluding the work of an architect, surveyor or other
consultant) would, if supplied by an independent contractor, be within (a) and (b) of para HR A[10521];
or
(b) the reconstructed building incorporates no more of the original building than the external walls
together with other external features of architectural or historic interest1.
Page 804
HR A[10556]
HR A[10557]
Where a person to whom one or more supplies are or are able to be made gives a certificate as to zero-rating to the
supplier that the supply or supplies fall, or will fall within VATA 1994, Sch A1, para 1 (Charge at Reduced Rate); Sch
8, Group 5 (Construction of Buildings for a qualifying residential or charitable use) or Group 6 (Protected Buildings for
a qualifying residential or charitable use); or Sch 9, Group 1 (Land), and the certificate is incorrect, the person giving
the certificate shall be liable to a penalty1. The prescribed penalty is an amount equal to the difference between2 the
amount of tax which would have been chargeable if the certificate has been correct and the amount of tax actually so
chargeable. The assessment to the penalty must be made by the commissioners on the person concerned3 no later than
three years after the event giving rise to the penalty4, being the giving or preparing of the incorrect certificate. It should,
however, be noted that the giving or preparing of an incorrect certificate does not give rise to a penalty if the person
who gave it can establish to the commissioners' satisfaction or on appeal the VAT Tribunal that he had a reasonable
excuse for giving it5. The supplies falling within para 1 of Sch A1 which qualify for being charged at the reduced rate
of 5%6 consist of certain types of fuel and power for domestic or charitable use. Supplies to a qualifying person of any
services relating to the installation of energy saving materials in the qualifying person's sole or main residence also
qualifies.
HR A[10558]
1 VATA 1994, s 62(1) as amended by FA 1999, s 17; De Voil Indirect Tax Service V 5.342.
2 VATA 1994, s 62(2).
3 VATA 1994, s 76(1); De Voil Indirect Tax Service V 5.333.
4 VATA 1994, s 77; De Voil Indirect Tax Service V 5.137, V 5.139.
5 De Voil Indirect Tax Service V 5.335.
6 VATA 1994, s 2(1A) as amended by F(No 2)A 1997, s 6.

Page 805
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/J Residential
conversions and renovations
HR A[10559]
The Finance Act 2001 extended the scope of VATA 1994, s 2(1A) by providing that the reduced rate of VAT of 5%
should be applied to the measures set out below concerning certain services relating to the conversion of various
properties into a different number of residential dwellings to take effect from 20 May 2001. The new measures
extending the scope are contained in the Finance Act 2001, s 97 and are to be inserted into Sch A1 of this Act as paras
1(6), (7), (8), (9) and 8-22 (ss (1), and (2)). Furthermore, VATA 1994, Sch A1 as amended by this section and s 96 is
consolidated as VATA 1994, Sch 7A by s 99 and Sch 31, Pt 1, Groups 6 and 7.
HR A[10560]
By reason of the Finance Act 2001, s 97 and VATA 1994, Sch A1, the following supplies of goods and services may be
charged to tax at the reduced rate of 5%1:
(a) a supply of 'qualifying services' made relating to and in the course of a 'qualifying conversion' of
any building or part of a building;
(b) a supply of building materials by a person who, in the course of a 'qualifying conversion', is
supplying services related to the conversion; and
(c) where those services include the 'incorporation' of the materials in the building concerned or its
immediate site these will also qualify for the reduced rate.
HR A[10561]
1 FA 2001, s 97, as inserted into VATA 1994, Sch A1 as para 1(6), and now consolidated in Sch 31, Gp 6, items 1 and 2, and notes 1 to
12 inclusive thereto.
HR A[10562]
The supplies which qualify for reduced rate relief under sub-para (6) are those which1:
(a) are a supply of services made in the course of renovation or alteration of a single household
dwelling, provided they are related to the renovation or alteration;
(b) are a supply of building materials provided that the person supplying the materials does so in the
course of supplying 'qualifying services' to and for the renovation or alteration of a single household
dwelling; and
Page 806
(c) provided also that those services include the incorporation of the materials in the dwelling
concerned or its immediate site.
HR A[10563]
1 FA 2001, s 97, as inserted into VATA 1994, Sch A1 as para 1(7), and now consolidated in Sch 31, Gp 7, items 1 and 2, and notes 1 to 6
inclusive thereto.
HR A[10564]
Where the supply is a supply of services in the course of a qualifying conversion under sub-para (6) or a supply of
services in the course of a renovation or alteration of a single household dwelling under sub-para (7) and there is only
'in part a supply', an apportionment has to be made to determine the extent applicable to those two sub-paragraphs1.
HR A[10565]
1 FA 2001, s 97, Sch 31, note 1(3) to items 1 and 2: VATA 1994, Sch A1, as para 1(6), (8) and (9).
Page 807
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 16 Value added tax/J Residential
conversions and renovations/The statutory provisions relating to interpretation of para 1(6)
The statutory provisions relating to interpretation of para 1(6)
HR A[10566]
The Act requires the insertion after VATA 1994, Sch A, para (7), which is inserted by s 6 of the Act, the paragraphs 8 to
17 and 22, which provide how the terms included in para 1(6) of the Act are to be interpreted. Using the same notation
as in the Act:
(a) para 8 is introductory and provides interpretation of para 1(6) in accordance with paras 9 to 17 and
22;
(b) para 9 defines the meaning of a 'qualifying conversion';
(c) para 10 defines the meaning of 'changed number of dwellings conversion';
(d) para 11 defines the meaning of 'house in multiple occupation conversion';
(e) para 12 defines the meaning of 'special residential conversion';
(f) para 13 prescribes in relation to 'special residential conversion' that the reduced rate applies only for
supplies made to the intended user of the converted accommodation;
(g) para 14 provides that 'qualifying conversion' includes related garage works;
(h) para 15 provides that the conversion is not 'qualifying' if planning consent and building control
approval has not been obtained;
(i) para 16 defines the meaning of 'supply of qualifying services';
(k) para 17 defines the meaning of 'qualifying residential purpose' and provides interpretation of paras
11 to 14; and
(l) para 22 defines the meaning of 'building materials'.
Each of the above paragraphs is defined below in the same order:
HR A[10567]
Paragraph 8 contains the definitions of the following:
(a) a 'single household dwelling'1 in paras 10 to 14 means a dwelling:
(i) that is designed for occupation by a single household, and

(ii) in relation to which the conditions set out in sub-para 3 are satisfied,
(b) a 'multiple occupancy dwelling'2 in paras 10 to 14 means a dwelling:
(i) that is designed for occupation by persons not forming a single household, and
(ii) in relation to which the conditions set out in sub-para 3 are met,
Page 808
(c) the conditions referred to above requiring fulfilment are as follows3:
(i) that the dwelling consists of self-contained living accommodation,

(ii) that there is no provision for direct internal access from the dwelling to any other dwelling
or part of a dwelling,
(iii) that the separate use of the dwelling is not prohibited by the terms of any covenant,
statutory planning consent or other similar provision, and
(iv) that the separate disposal of the dwelling is not prohibited by any such terms,
(d) for the purposes of this paragraph a dwelling 'is designed' for occupation of a particular kind if it is
so designed4:
(i) as a result of not having been originally constructed for occupation of that kind and not
having been subsequently adapted for occupation of any other kind, or
(ii) as a result of adaptation.
HR A[10568]
1 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 4(1): VATA 1994, Sch A1, para 1(6)(8).
2 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 4(2): VATA 1994, Sch A1, para 1(6)(8).
3 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 4(3): VATA 1994, Sch A1, para 1(6)(8)(4).
4 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 4(4): VATA 1994, Sch A1.
HR A[10569]
Under para 9 a 'qualifying conversion'1, which is subject to paras 14 and 15, means any of the following three types of
conversion:
(a) 'a changed number of dwellings conversion' (see para 10);

(b) 'a house in multiple occupation conversion' (see para 11);
(c) 'a special residential conversion' (see para 12).
HR A[10570]
1 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 2: VATA 1994, Sch A1, para 1(6)(9).
HR A[10571]
Page 809
Under para 10 'a changed number of dwellings conversion' is:
(a)
(i) a conversion of premises consisting of a building where the following conditions specified
in this paragraph are satisfied, or
(ii) a conversion of premises consisting of a part of a building where those conditions are
satisfied,
(b) the first condition is that after conversion the converted premises must contain a number of single
household dwellings:
(i) different from the number (if any) that the premises contain before the conversion, and
(ii) greater than, or equal to one.
(c) the second condition is that there is no part of the premises being converted that is a part that after
the conversion contains the same number of single household dwellings whether zero, one or two or
more as before the conversion.
HR A[10572]
In summary and perhaps consolidation of the provisions relating to 'Changed number of dwellings converted'1, a list of
the various statutory requirements to enable enjoyment of the reduced rate relief seems to be as follows:
(a) that the supply has to be made in the course of conversion of any building or part of any building;
(b) that after conversion the premises are required to contain a different number of'single household
dwellings' or one or more 'single household dwellings'2;
(c) that the services are 'qualifying services' as defined3;
(d) that the services relate to the conversion4;
(e) that the conversion is subject to statutory planning consent which has been granted and that
statutory building control approval has been granted5.
HR A[10573]
1 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 3: VATA 1994, Sch A1, para 1(6)(10).
2 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, notes 2 and 3: VATA 1994, Sch A1, para 1(6)(10)(2) and (3).
3 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 3(2) and (3): VATA 1994, Sch A1, para 1(6)(a) and para 10(2)(3) and para 16.
4 FA 2001, s 97, Sch 31, Gp 6, item 1: VATA 1994, Sch A1, para 1(6)(a).
5 FA 2001, s 97, Sch 31, Gp 6, items 1 and 2, note 10(1) and (2): VATA 1994, Sch A1, para 15(1) and (2).
Page 810
HR A[10574]
A 'house in multiple occupation', under para 11 is:
(1)
(a) a conversion of premises consisting of a building in which the conditions specified in

sub-para (2) below are satisfied, or
(b) a conversion of premises consisting of a part of the building where that condition is
satisfied,
(2) the condition is that:
(a) before the conversion the premises being converted contain only a single household
dwelling or two or more such dwellings,
(b) after the conversion those premises contain only a multiple occupancy dwelling or two or
more such dwellings, and
(c) the intended future use of those premises after conversion is not, to any extent, use for a
qualifying residential purpose as that term is defined in para 17.
HR A[10575]
In summary, or perhaps consolidation of the provisions relating to 'a house in multiple occupation conversion', a list of
the various statutory requirements to enable enjoyment of the reduced rate relief seems to be as follows:
(a) that the supply has to be made in the course of a conversion of premises comprising a building or
part of a building1;
(b) that the premises contained one or more 'single household dwellings' before the conversion2;
(c) that after conversion the premises contained one or more 'multiple occupancy dwellings'3;
(d) that the premises are not intended to be used wholly or partly for a 'qualifying residential purpose'
after the conversion4;
(e) that the services are 'qualifying services'5;
(f) that the services relate to the conversion6; and
(g) that the conversion is subject to statutory planning consent which has been granted and that
statutory building control approval has been granted7.
HR A[10576]
1 FA 2001, s 97, Sch 31, Gp 6, item 1, note 5(1): VATA 1994, Sch A1, para 11(1).
2 FA 2001, s 97, Sch 31, Gp 6, item 1, note 5(2): VATA 1994, Sch A1, para 11(2)(a).
Page 811
3 FA 2001, s 97, Sch 31, Gp 6, item 1, note 5(2)(b): VATA 1994, Sch A1, para 11(2)(b).
4 FA 2001, s 97, VATA 1994, Sch 31, Gp 6, item 1, note 5(2)(c): VATA 1994, Sch A1, para 11(2)(c).
7 FA 2001, s 97, Sch 31, Gp 6, item 10: VATA 1994, Sch A1, para 15(1) and (2).
HR A[10577]
A 'special residential conversion' under para 12 is:
(1) a conversion of premises consisting of:
(a) a building or two or more buildings, or

(b) a part of a building or two or more parts of buildings, or
(c) a combination of:
(i) a building or two or more buildings, and

(ii) a part of a building or two or more parts of a buildings,
where the conditions specified below are satisfied.
(2) The first condition is that before the conversion the premises being converted contain only1:
(a) a dwelling or two or more dwellings, or

(b) a dwelling or two or more dwellings and2:
(i) an ancillary outbuilding occupied together with the dwelling or one or more
dwellings, or
(ii) two or more ancillary outbuildings each occupied together with the dwelling or one
or more of the dwellings.
(3) For these purposes a 'dwelling' is defined to mean a 'single household dwelling' or a 'multiple
occupancy dwelling'.
(4) The second condition is that where before the conversion the premises being converted contain a
'multiple occupancy dwelling' or two or more such dwellings and the use to which that dwelling or any
of those dwellings was last put before the conversion was not to any extent for a 'qualifying residential
purpose'3.
(5) The third condition is that the premises being converted must be intended to be used solely for a
'qualifying residential purpose'.
(6) The fourth condition is that where the 'qualifying residential purpose' is an institutional purpose the
premises being converted must be intended to form after the conversion the entirety of an institution used
for that purpose4.
Page 812
HR A[10578]
1 FA 2001, s 97, Sch 31, Gp 6, item 7: VATA 1994, Sch A1, para 12(2).
2 FA 2001, s 97, Sch 31, Gp 6, item 1, note 7(2) and (3): VATA 1994, Sch A1, paras 1(6) and 12(2)(3).
3 FA 2001, s 97, Sch 31, Gp 6, item 1, note 7(4): VATA 1994, Sch A1, paras 1(6) and 12(4) and see also para 17 for the definition of a
'qualifying residential purpose'.
4 'Institutional purpose' means a purpose within VATA 1994, Sch A1, paras 1(6) and 17(a) to (c), (f) to (g).
HR A[10579]
Further provisions relating to 'special residential conversions' are contained in para 13 whereby the reduced rate is given
only for supplies made to an intended user of the converted accommodation1:
(a) the provisions of this paragraph apply only where the qualifying conversion is a 'special residential
conversion';
(b) para 1(6)(a) or (b) has no application to a supply unless:
(i) it is made to a person intending to use the premises for the qualifying relevant residential
purpose2, and
(ii) before it is made the person to whom it is made has given to the person making it a
certificate which satisfies the conditions set out in sub-para (c) below.
(c) The requirements are that the certificate3:
(i) is in such form as may be specified in a notice published by the Commissioners, and
(ii) states that the conversion is a 'special residential conversion'.
(d) In sub-para (b)(i) above the term 'qualifying residential purpose' means the purpose within para 17
for which the premises being converted are intended to be used after the conversion.
There is an additional statutory requirement before the reduced rate relief can be enjoyed which is that planning consent
needed for the conversion has to have been granted as well as any statutory building control approval needed for the
conversion4. Thus, the lack of either planning consent or building control approval will be fatal and will prevent the
conversion from qualifying for reduced rate relief.
HR A[10580]
1 FA 2001, s 97, Sch 31, Gp 6, item 1, note 8: VATA 1994, Sch A1, paras 1(6) and 13.
Page 813
2 FA 2001, s 97, Sch 31, Gp 6, item 1, note 8(4) in which 'qualifying' has been deleted and substituted in its place is the word 'relevant':
VATA 1994, Sch A1, paras 1(6) and 13(4). The term used instead of 'relevant residential purpose' was 'the qualifying residential purpose'
which is now consolidated in VATA 1994.
4 FA 2001, s 97, Sch 31, Gp 6, item 1, note 10: VATA 1994, Sch A1, para 15(1) and (2).
HR A[10581]
In interpreting para 1(6), para 14 provides that:
(1) a 'qualifying conversion' includes garage works provided they are related to the:
(a) 'changed number of dwellings conversion',

(b) 'house in multiple occupation conversion', or
(c) 'special residential conversion' concerned.
(2) For these purposes 'garage works'1 means:
(a) the construction of a garage, or

(b) the conversion of a 'non-residential2 ' building or of a non-residential part of a building that
results in a garage.
(3) For the purposes of sub-para (1) above garage works are 'related' to a conversion if:
(a) they are carried out at the same time as a conversion, and
(b) the resulting garage is intended to be occupied with:
(i) in the case of a 'changed number of dwellings conversion', a 'single household

dwelling' that will after conversion be contained in the building or a part thereof being
converted,
(ii) in the case of a 'house in multiple occupation conversion', a 'multiple occupancy
dwelling' resulting from the conversion that will after the conversion be contained in the
building or part thereof being converted, or
(iii) in the case of a 'special residential conversion', the institution or other
accommodation resulting from the conversion.
(4) For the purposes of sub-para(2) above 'non-residential' means neither designed, nor adapted for
use:
(a) as a dwelling or two or more dwellings, or

(b) for a 'qualifying residential purpose' in terms of para 17.
(5) As in para 13, the conversion will not be 'qualifying' if either planning consent or building control
approval is not obtained3.
Page 814
HR A[10582]
1 FA 2001, s 97, Sch 31, Gp 6, item 1, note 9(2): VATA 1994, Sch A1, paras 1(6)(a) and 14(1)(2).
2 FA 2001, s 97, Sch 31, Gp 6, item 1, note 9(4): VATA 1994, Sch A1, paras 1(6) and 14(4) for definition of 'non-residential'.
3 FA 2001, s 97, VATA 1994, Sch 31, Gp 6, item 1, note 10: VATA 1994, Sch A1, paras 1(6) and 15(1) and (2).
HR A[10583]
In the interpretation of para 1(6) under para 15, sub-paras (1) and (2) a conversion is not a qualifying conversion if
planning consent and building control approval has not been obtained.
HR A[10584]
The term 'supply of qualifying services'1 is defined in para 16 to mean:
(1) In the case of a conversion of a building a supply of services that consists in:
(a) the carrying out of works to the fabric of the building, or

(b) the carrying out of works in the immediate site of the building that are in connection with:
(i) the means of providing water, power, heat or access to the building,
(ii) the means of providing drainage or security for the part, or
(iii) the provision of means of waste disposal for the building.
(2) In the case of a conversion of part of a building, a 'supply of qualifying services' means a supply of
services that consists in:
(a) the carrying out of works to the fabric of the part, or

(b) the carrying out of works to the fabric of the building, or within the immediate site of the
building, that are in connection with items (i), (ii), and (iii) of para (1)(b) above.
(3) For the purposes of para 16, references to the carrying out of works to the fabric of a building, or of
a part of a building do not include the incorporation, or installation as fittings, in the building or part of
any goods that are not building materials2.
HR A[10585]
Page 815
2 See notes (22) and (23) of VATA 1994, Sch 8, Gp 5 (zero-rating and construction of buildings) for the meaning of 'Building Materials';
and FA 2001, s 97 Sch 31, Gp 6, item 1, note 11: VATA 1994, Sch A1, para 1(6) and (7).
HR A[10586]
The term 'qualifying residential purpose'1 for the purposes of paras 11 to 14 is defined by para 17 to mean use as:
(a) a home or other institution providing residential accommodation for children;

(b) a home or other institution providing residential accommodation with personal care for persons in
need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs
or past or present mental disorder;
(c) a hospice;
(d) residential accommodation for students or school pupils;
(e) residential accommodation for members of the armed forces;
(f) a monastery, nunnery, or similar establishment; or
(g) an institution which is the sole or main residence of at least 90% of its residents.
Excluded from the above is use as a hospital, prison, or similar institution or an hotel, inn or similar establishment.
HR A[10587]
1 In the consolidation of FA 2001, s 97 and Sch A1 into VATA 1994, Sch 31, Gp 6, item 1, note 6 the word 'qualifying' has been replaced
by the word 'relevant'.
HR A[10588]
Interpretation of para 1(7)1-'introductory' is contained in para 18 to mean:
(a) it is to be construed in accordance with this paragraph and paras 19 to 21 below;

(b) the term 'Alteration'2 includes extensions;
the term 'single household dwelling' has the meaning given to it by para 8(2),(4) and (5) of FA 2001, s 97.
HR A[10589]
1 Refer back to para HR A[10563], footnote 1 and to subsections (4), (5), and (6) under the heading of 'Residential Conversions and
Renovations', which set out the provisions of s 1(7) of FA 2001, Sch 31, Gp 7, items 1 and 2.
2 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2 and notes 1 & 2 ff: VATA 1994, Sch A1, para 18.
Page 816
HR A[10590]
Interpretation of para 1(7) in para 191 applies only where the dwelling has been empty for at least three years and is as
follows:
(1) it does not apply unless the empty home conditions set out in paras (2) and (3) below are satisfied;
(2) the first 'empty home condition'2 is that the dwelling concerned has not been lived in during the
period of three years ending with the commencement of the relevant works;
(3) the second 'empty home condition'3 is that:
(a) the dwelling was not lived in during a period of at least three years,
(b) the person or one of the persons whose beginning to live in the dwelling brought that period
to an end was a person who, whether alone or jointly with another or others, acquired the
dwelling at a time:
(i) no later than the end of that period, and

(ii) when the dwelling had not been lived in for at least three years,
(c) no works by way of renovation or alteration were carried out to the dwelling during the
period of three years ending with the acquisition,
(d) the supply is made to a person who is:
(i) the person or one of the persons whose beginning to live in the property brought to
an end the period mentioned in para (a) above, and
(ii) the person or one of the persons who acquired the dwelling as mentioned in para (b)
above, and (e) the relevant works are carried out during the period of one year beginning
with the day of acquisition.
(4) In this paragraph 'the relevant works' means:
(a) where the supplies are of the description set out in para 1(7)(a) of the FA 20014, that is that
the materials are supplied by a person who, in the course of the renovation or alteration of a
single household dwelling, is supplying qualifying services related to the renovation or alteration,
and
(b) where the supply is of the description set out in para 1(7)(b) of FA 20015, that is that the
supply of building materials if:
(i) the materials are supplied by a person who, in the course of the renovation or
alteration of a single household dwelling, is supplying qualifying services related to the
renovation or alteration, and
(ii) those services include the incorporation of the materials in the dwelling concerned
or its immediate site.
(5) References in sub-para (3) above to a person acquiring a dwelling are to that person having a major
interest in the dwelling granted or assigned to him for a consideration6.
Page 817
HR A[10591]
1 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2 and note 3: VATA 1994, Sch A1, para 19.
2 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2 and note 3(2): VATA 1994, Sch A1, para 19(2).
3 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2 and note 3(3): VATA 1994, Sch A1, para 19(3).
4 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2, note 4(1): VATA 1994, Sch A1, para 19(4)(a).
5 FA 2001, s 97,(1)(7), Sch 31, Gp 7, items 1 and 2, note 4(2): VATA 1994, Sch A1, para 19(4)(b).
6 FA 2001,s 97(1)(7), Sch 31, Gp 7, items 1 and 2, note 3(5): VATA 1994, Sch A1, para 19(5).
HR A[10592]
Paragraph 1(7) of the FA 2001 only applies if planning consent and building control approval are obtained, in relation to
which para 20 provides:
(a) that para 1(7) does not apply to a supply unless any statutory planning consent needed for the
renovation or alteration has been granted;
(b) para 1(7) also does not apply to a supply unless any statutory building control approval needed for
the renovation or alteration has been granted1.
HR A[10593]
1 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2, note 4(1) and (2): VATA 1994, Sch A1, para 20(1) & (2).
HR A[10594]
The meaning of the term 'supply of qualifying services' for the purposes of para 1(7) of FA 2001 is defined in para 21 to
be1:
(a) the carrying out of works to the fabric of the building; or

(b) the carrying out of works within the immediate site of the dwelling that are in connection with:
(i) the means of providing water, power, heat, or access to the dwelling,
(ii) the means of providing drainage or security for the dwelling, or
(iii) the provision of means of waste disposal for the dwelling,
Page 818
(c) in sub-para (1)(a) of the FA 2001 the reference there to the carrying out of works to the fabric of
the building does not include the incorporation or installation as fittings in the dwelling of any goods that
are not building materials. Reference should be made to para 22.
HR A[10595]
1 FA 2001, s 97(1)(7), Sch 31, Gp 7, items 1 and 2, note 5: VATA 1994, Sch A1, para 21.
HR A[10596]
The term 'Building Materials' under para 22, for the purposes of para 1(6) and (7) of the FA 20011, has the meaning
given by notes (22) and (23) of Sch 8, Gp 5 relating to zero-rating of construction and conversion of buildings.
HR A[10597]-[10600]
1 FA 2001, s 97(1)(6) and (7), Sch 31, Gp 7, items 1 and 2, note 6: VATA 1994, Sch A1, para 22.
Page 819
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty
Chapter 17 Stamp duty
Editor
Rt Hon Viscount Dilhorne

Page 820
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/A Introduction
HR A[10601]
Radical changes have been made by the Finance Act 2003 (FA 2003) and in subsequent legislation to the stamp duty
regime introduced by the Stamp Act 1891 and effective up to 30 November 2003. The new measures under the Stamp
Duty Land Tax ('SDLT') introduced by the FA 2003 became effective from 1 December 2003 and will be the subject of
this chapter, so far as they relate to landlord and tenant matters they have the appearance of being assembled hastily,
without adequate prior consultation or sufficient parliamentary time given to the operation of the completely new
structure adopted or the terminology used. This has made it dangerous to assume that the ordinary meaning in English
necessarily always applies. In the complete rewrite of this chapter, every endeavour has been made by its author to
follow and elucidate upon the structure of the Act, to detail cross-references and comments in the footnotes appended to
each section of text, but for a full treatment of the new SDLT regime reference should be made to Sergeant and Sims on
Stamp Duties.
Page 821
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/A Introduction/1 The
tax - Stamp Duty Land Tax
1 The tax - Stamp Duty Land Tax
HR A[10602]
SDLT is imposed upon any 'acquisition' of a 'chargeable interest'1 in land in the UK for a 'consideration', other than
'exempt interests'2, and/or where there is no consideration chargeable for the transaction and no chargeable
consideration, the transaction will be treated as being exempt. The categories of transaction that are exempt from charge
are set out in the FA 2003, Sch 3. These will be considered in more detail later in this chapter. Professional advisers and
practitioners in this new area of law should take particular care to distinguish between an 'exempt transaction' that does
not require notification on a 'Land Transaction Return' (LTR), and a chargeable interest which, though exempt and does
not produce a charge to tax, requires notification to the Stamp Office on a LTR, which is a matter considered later.
HR A[10603]
1 FA 2003, s 49(1).
2 FA 2003, s 48(2).
HR A[10604]
SDLT on land transactions within the UK is payable whether or not:
(a) any party to the transaction is present or resident in the UK1, or is otherwise connected with the
parties2;
(b) it is executed within or outside the UK3; and whether or not
(c) the transaction is effected by instrument4.
It matters not whether the acquisition is effected:
(a) by order of the court or other authority;

(b) by act of the parties;
(c) by or under a statutory provision; or
(d) by operation of law;
the transaction will remain chargeable to SDLT.
These new measures, introduced by the FA 2003, are intended to lead towards 'e-conveyancing' and to the introduction
Page 822
of 'electronic instruments'. They are also intended to prevent the avoidance practices resorted to under the old stamp
duty regime.
HR A[10605]
1 FA 2003, s 42(2)(c).
2 FA 2003, s 44(11) and Income and Corporation Taxes Act 1988 (ICTA 1988), s 839.
3 FA 2003, s 42(2)(b).
4 FA 2003, s 42(2)(a).
HR A[10606]
The 'implementation date' of the SDLTs, spelt out in the FA 2003 and the Stamp Duty Land Tax (Administrative)
Regulation 2003, SI 2003/2837, was 1 December 2003. Its instant effect was:
(a) to prevent avoidance of the tax by resorting to the lack of instruments conveyancing property, by
holding over and non-completion, by surrenders of leases and constructive trusts, all of which escaped
liability because stamp duty was a tax on instruments and if there was no instrument, there was no tax on
which the charge could be made because all documentation was avoided; or
(b) to prevent 'value shifting', that is to say by moving value between different items of property, say
between different classes of shares in a company, and by varying the rights attached to such shares, and
then to create or reserve rights over the land not subject to stamp duty, such as surrender, variation or
release of interests; and
(c) preventing the use of a much-favoured practice to postpone the tax charge by delaying completion
of the lease. This has been defeated by the introduction of a new 'substantial performance' test upon
which duty will arise and become payable even where completion is not effected. This topic will be
considered in more detail later.
Some of the anti-avoidance measures introduced include the following:
(a) by introducing a charge on interests in property that previously were not subject to duty, such that
the following types of transactions will now fall within the charge to SDLT:
(i) variations in covenants relating say to commuting rent;

(ii) granting of options, and waivers or reservations;
(iii) introduction during the life of a lease of obligations which affect the underlying value of
the land over which they will operate, whereby a payment to vary will become a chargeable
transaction.
Page 823
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/A Introduction/2 The
role of the Board of HMRC and the Treasury
2 The role of the Board of HMRC and the Treasury
HR A[10607]
The new tax SDLT, the Stamp Duty Reserve Tax (SDRT) and stamp duty are under the care and management of the
Commissioners of HM Revenue and Customs (HMRC) ('the Board')1 and are administered by HMRC (Stamp Taxes),
formerly the Stamp Taxes Office. The remaining provisions of the stamp duties are regulated by the Stamp Duties
Management Act 1891. The management of the SDRT is regulated by the Finance Act 1986 (FA 1986), Pt IV, and the
Stamp Duty Reserve Tax Regulations 1986, SI 1986/1711, and according to the provisions of the FA 2003, s 42. The
Board are endowed with huge and extensive powers, the exercise of which, according to their subjective view, is to be
in 'the public interest', and will apply to land transactions of any description. Their powers will be exercised by
'Regulations' or 'Statements of Practice' and extend to making such consequential amendments as appear to them to be
appropriate, for instance the Treasury may2 by regulation adjust the threshold at which tax is to be charged. They may
reach agreement with individual taxpayers and if they consider it expedient they may, in the public interest, 'alter the
description of land transactions'3 that are chargeable and notifiable in relation to which tax is chargeable at any existing
rate or amount.
HR A[10608]
1 FA 2003, ss 42(3) and 109, which gives general powers to vary Pt 4 of the Act by regulation.
2 FA 2003, s 112(1) and (2).
3 FA 2003, s 109(1). Subject to the exercise of the power being in the public interest, the Board may make provision for the variation in Pt
4 in its application to land transactions of any description.
HR A[10609]
The exercise of these powers is subject to parliamentary consent. The Board are required to lay its proposed statutory
instrument before Parliament for scrutiny by a joint parliamentary committee. The fact is that the instrument is rarely, if
ever after such scrutiny, aired in the House of Commons1. It goes through on the 'nod'. What is certain is that this
delegated legislation procedure does not receive the same degree of parliamentary attention as it would have enjoyed
had it been primary legislation2. By reason of the lack of any definition of public interest, tax practitioners and advisers
will have to be particularly vigilant when protecting their clients' interests to be alert to the exercise of such powers and
to the possibility of their abuse. Furthermore, where regulations proposed by the Board have failed to receive the
approval of Parliament or have ceased to have effect3, the taxpayer may be entitled to claim repayments of any tax,
interest or penalty that would not have been payable but for the regulation. A repayment claim must be made within two
years of the effective date of the relevant transaction4, and carries interest from the date the payment was made.
HR A[10610]-[10620]
Page 824
1 FA 2003, ss 109(5) and 110(1)(2).
2 See the Stamp Duty and Stamp Duty Land Tax (Variation of Finance Act 2003) (No. 2) Regulations, SI 2003/2816, reg 51, which
revoked the Stamp Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2003, SI 2003/2760 because it
contained errors.
3 FA 2003, s 110 (approval of regulations under general power to vary regulations cease to have effect under s 110.
4 FA 2003, s 111 provides for a claim to be made for repayment of tax where the claim is to be made within two years after the effective
date of the transaction.
HR A[10621]
The extent of the Board's powers to alter transactions that are chargeable or notifiable at any existing rate or amount
could enable the Board, if it considered it expedient and in the public interest, to rewrite the basic legislation, even
theoretically enabling it to be abolished by means of a statutory instrument. Such a radical variation could have a
maximum life of 18 months from the date on which the regulation was made. It is likely, one suspects, that Parliament
will not nod its acceptance to such a proposal and allow it to run for the 18 months until it expired.
The FA 2003 bestows additional powers to the Board to make general regulations, for instance:
(a) to reproduce the effect of enactments providing for exemption from stamp duty1; and
(b) to make any necessary or expedient supplementary, transitional and incidental provision(s),
deemed expedient by the Treasury2.
HR A[10622]
1 FA 2003, s 123(3).
2 FA 2003, s 109(b).
Page 825
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/B Land transactions
B
Page 826
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/B Land transactions/1
Land transactions
1 Land transactions
HR A[10623]
We have seen in HR A[10602] above that a land transaction1 means 'any acquisition of a chargeable interest'2 in the
UK however acquired by the parties, whether it be by an order of the court or other authority, by or under any statutory
provision or by operation of the law. Special rules in the FA 2003 amplify, elucidate and override this somewhat bare
definition3. It is significant that in the provisions relating to 'contract and conveyance'4, the Act provides that 'a person
is not regarded as entering into a land transaction by reason of entering into the contract', but this is subject to sub-s (3)
to (11) of s 44. Thus the contract alone does not necessarily trigger the liability to notify or report the transaction, nor to
pay any SDLT that may be exigible. The trigger under the Act for most transactions is the earlier of completion or
substantial performance of the contract - a topic that will be considered in detail later in this chapter.
HR A[10624]
1 FA 2003, s 42.
2 FA 2003, s 43(1) - the term 'chargeable interest' is defined in FA 2003, s 48.
3 FA 2003, ss 44-47.
4 FA 2003, s 44(2).
HR A[10625]
As to notification of such a transaction, the FA 2003 requires 'completion' and substantial performance, both to be
notified as and when each occurs1. It may be the case also that a contract is substantially performed before completion
occurs, and then on such occasions the effective date will be when substantial performance occurs2. Careful reference
should be made by professional advisers to these provisions, which relate to contract and completion and substantial
performance3.
HR A[10626]
1 FA 2003, s 44(8).
2 FA 2003, s 44(4).
Page 827
3 ICTA 1988, s 839.
HR A[10627]
Each of the elements of charge and of a land transaction require detailed explanation. The following elements of charge
that will be considered in the text below are, amongst others, 'land', 'acquisitions', 'the main subject matter', 'chargeable
interests', 'licences', 'secured interests' and 'consideration'.
(a) Land
HR A[10628]
Land is defined briefly in the FA 2003 as being a 'minor definition' which includes:
(a) buildings and structures; and

(b) land covered by water1.
Additionally, the FA 2003 provides2 for the 'just and reasonable apportionment' of the consideration attributable in part
to a land transaction and in part to another, or in part to matters making it chargeable consideration and in part to other
matters. Thus, the Act distinguishes between chargeable consideration attributable to land transactions which only is
subject to SDLT, and to consideration given for other matters, which is not subject to SDLT.
HR A[10629]
1 FA 2003, s 121.
2 Schedule 4, para 4(i)(b) and (c).
HR A[10630]-[10640]
Land is also defined in the Interpretation Act 1978 (IA 1978), Sch 1 to include 'buildings and other structures, land
covered by water, and any Estate Interest, easement, servitude or right in or over land'. The extension to the FA 2003 in
the IA 1978 introduces interests in land on which the minor definition in the FA 2003 is silent. Yet it is these 'interests
in land' which are vital to the operation of the new system and to the charge to SDLT, particularly in the area of value
shifting (see HR A[10763]). Fuller definitions of land are to be found in the Law of Property Act 1925 (LPA 1925), s
205(1)(ix) and in the Law of Property Act 1989, s 2(6), but these apply only to these specific acts. Nevertheless, these
definitions are more exhaustive, are hallowed by time and merit attention. In the 1925 Act, land includes the following:
'Land of any tenure, and mines and minerals, whether or not held upon the surface, buildings or parts of buildings (whether the
division is horizontal, vertical or made in any other way) and other incorporeal hereditaments, and an easement, right, or privilege,
or benefit in, over, or derived from land; and mines and minerals include any strata, or seam of minerals or substances in or under
Page 828
any land, and powers of working or getting the same, and "manor" includes a lordship and reputed manor or lordship; and
"hereditament" means any real property which on an intestacy occurring before the commencement of this Act might have
devolved upon an heir'.
The FA 2003 basic definitions do not extend the minor definition applied by the statutory draftsman, such as in
'fixtures', 'interests in land', 'rights over land' and others which to the author indicates that the definition is not
exhaustive and needs to be extended in order to include transactions that are treated as being within the Act and
chargeable.
(b) Subject matter of the transaction ('the main subject matter')
HR A[10641]
This term is central to the operation of SDLT1. It is defined to mean:
'the chargeable interest acquired together with any interest or right which is appurtenant or pertaining to the chargeable interest
acquired that is acquired with it.'
The term 'appurtenant to' describes land or rights or profits attached to and arising out of the land which is annexed to
other land2, where money being held in trust to be used to buy land was held to be appurtenant to the chargeable
interest acquired. The term 'main subject matter' is of special importance because the relevant rate of charge to SDLT is
fixed to the nature of the 'relevant land' (the main subject matter) and not to things pertinent or appurtenant to it3.
HR A[10642]
1 FA 2003, ss 43(6) and 48(5), Sch 3, para 5(i).
2 Gosselin, Re; Gosselin v Gosselin [1906] 1 Ch 120.
3 FA 2003, s 55(3)(a) and (b).
(c) Acquisition
HR A[10643]
The normal meaning of the word 'acquisition' in the Concise Oxford Dictionary is the 'useful or welcome addition to the
thing acquired or the act of acquiring'. In the FA 20031, the term is specifically directed to the following:
(a) the creation of a chargeable interest;

Page 829
(b) the surrender of a chargeable interest;

(c) the release of a chargeable interest;
(d) the variation of a chargeable interest.
The more conventional application of acquisition in the Stamp Duty Act 1891 was more limited than the meaning given
in s 43(3) of the FA 2003 and was directed to transfers and assignments of property and their passing or vesting. In the
present context, acquisition is qualified by the requirement that there must be a chargeable interest and, furthermore, it
should be borne in mind that a land transaction is a chargeable transaction if it is not a transaction that is exempt from
charge2 and it will, inter alia, be exempt if there is no chargeable consideration for the transaction3.
HR A[10644]
1 Section 43(3).
2 FA 2003, s 49(1).
3 FA 2003, Sch 3, para 1.
HR A[10645]
For the term 'acquisition' to have any statutory meaning, there has to be not only a chargeable interest but also a
chargeable consideration for SDLT purposes. This provision may prove to be more restrictive than at first is imagined,
for example, where a court imposes an obligation on a party, it is likely that there will be no consideration, particularly
when an obligation is ordered to be undertaken by an assignee of a lease to pay future rent, and as that assignee cannot
accept the benefit of the lease without that obligation, it will not be chargeable consideration1. The question of the
extent that consideration has to be by agreement remains at present a question of debate.
HR A[10646]
1 FA 2003, Sch 4, para 8 and Sch 17A, para 15 (Swayne v IRC [1900] 1 QB 172).
Page 830
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/B Land transactions/2
Contract and conveyance
2 Contract and conveyance
HR A[10647]
Provision is made in s 44 of the FA 2003 where a contract for a land transaction is entered into under which the
transaction is to be completed by a conveyance. Fundamental to the operation of the provision is that a person is not
regarded as entering into a land transaction just by reason of entering into the contract, but this is made subject to the
statutory provisions which shall have effect and are as follows:
(a) Where the transaction is completed without there being substantial performance, the transaction
will be treated as parts of a single transaction. Completion is the effective date of the transaction.
(b) Where the contract is substantially performed, but not completed, the effective date of the
transaction is when the contract is substantially performed.
(c) Substantial performance is statutorily defined to occur when:
(i) the purchaser, or person connected, takes possession of the whole or substantially the whole
of the subject matter of the contract; or
(ii) a substantial amount of the consideration is paid or provided.
The Act amplifies (c)(i) above that possession is achieved when rent or profits are recovered, or a right to receive them
is created, and it matters not whether possession is taken under a contract, a licence or a lease of a temporary character.
HR A[10648]
The FA 2003 amplifies (c)(ii) above that a substantial amount of the consideration is achieved:
(a) if rent is the only consideration when the first payment is made;
(b) if none of the consideration is rent, where the whole or substantially the whole is paid or provided;
and
(c) if the consideration includes both rent and other consideration when the whole or substantially the
whole is provided or the first payment of rent is made.
The difficulty arising here is the lack of any definition of the word 'substantial'. HMRC have said it will be a question of
'fact', but that normally it will not be less than 90% of any consideration other than rent paid1. The term 'substantial
performance' has not yet been tested by the court, which is free to take a totally different view from HMRC's 90%
opinion, currently being applied. HMRC's manual amplifies their opinion by stating2 that where the circumstance of the
transaction are such that in substance the whole of the consideration has been paid or provided, it will not apply the 90%
rule. An example is given where a purchaser agrees with a vendor to pay an inflated price, but paying only the market
value which is calculated to be less than 90% of the inflated price. HMRC will regard that as being substantial
Page 831
performance.
HR A[10649]
1 See SDLT Customer Newsletter No. 3, 2 September 2003.
2 Stamp Duty Land Tax Manual, para 7950.
HR A[10650]-[10660]
Another example is given by HMRC in the manual1 as follows: the contract price of the property at market value was
£15m, of which £10m was payable instantly and £5m payable in 2099. HMRC would regard that as substantial
performance with SDLT payable on the full consideration of £15m because no discount is to be given for postponed
consideration.
HR A[10661]
1 Stamp Duty Land Tax Manual, para 7950.
(a) Conditional building contracts and consideration
HR A[10662]
Difficulty has arisen in cases where the landlord offered to grant a lease of premises to a development company,
conditional upon the construction of a building, or in the case that the subject condition is to rebuild/refurbish another
building which is not the subject of the proposed lease. One of the difficulties to be resolved is the extent to which
works constitute consideration and amount to substantial performance of the subject matter. There is authority to show
that such an undertaking was not a condition, but was in fact consideration for the grant of the lease1.
For example:
(a) X is acquiring land from Y. X agreed with Z, an adjoining landowner, to construct works on Z's
land provided Z releases a restrictive covenant. Under this agreement, consideration is given for the
acquisition of a restrictive covenant. It will not be consideration for the acquisition of land from Y, even
though X's acquisition of land from Y is conditional upon Z's agreement to release the restrictive
covenant.
(b) In this example, Y transfers land to Z in consideration of Z building a structure on Y's land. Under
such an agreement, Z will be liable to SDLT on the open market cost of construction of the building.
HR A[10663]
Page 832
1 Eastham v Leigh, London and Provincial Properties Ltd [1971] 2 All ER 887, CA.
HR A[10664]
The FA 2003 provides1 in relation to the carrying out of works that:
(a) Where the whole or part of the consideration for a land transaction consists of carrying out works
of construction, improvement, or repair of a building or other works to enhance the value of land, then
provided the following conditions are met:
(i) works are carried out after the effective date of the transaction on land acquired or to be
acquired under the transaction, or on land held by the purchaser or person connected with them,
and that it is not a condition of the transaction that the works are carried out by the vendor or
person connected with him; the value of the work does not count as chargeable consideration; and
(ii) to the extent that the above conditions are not met, the value of the works shall be taken
into account as chargeable consideration.
For these purposes, references to the acquisition of land are to a major interest and the value of works shall be taken to
be the amount that would be paid in the open market for carrying out such works.
HR A[10665]
1 Schedule 4, para 10.
HR A[10666]
It should be noted that where a contract has been substantially performed and subsequently is completed by a
conveyance, both the contract and the conveyance following completion become notifiable transactions. If further tax
additional to that payable on the contract becomes payable, it has to be paid and if, for instance, the contract is rescinded
or annulled or for any reason is not put into effect, the tax paid shall be repaid by HMRC.
(b) Effect of transfer of rights
HR A[10667]
It was only after representations from professional bodies made during the course of the Finance Bill through
Parliament that material amendments were made, which are not embodied in s 45 of the FA 2003. As the law stood
before the making of these amendments, it was the case that where a contract for sale of land was made between two
Page 833
parties, X and Y, but completion does not take place because Y sells on the land or assigns the benefit of the contract to
a third party Z, the consequence was that X transfers the land under the original contract with Y to Z. Under the law,
prior to amendment, two charges would have been made to SDLT which were considered by the body of professional
advisers to be disproportionate and unfair: no relief was given and the time span of such transaction was bound to be
short. The representations made were successful, subject to satisfying the conditions in s 45(1), which applies where:
'(a) A Contract for a land transaction (the "Original Contract") is entered into under which the transaction is to
be completed by a Conveyance; and
(b) there is an assignment subsale or other transaction (relating to the whole or part of the subject-matter of the
Original Contract), as a result of which a person other than the original purchaser becomes entitled to call for a
conveyance to him.'
References in the following provisions of s 45 to a transfer of rights are to any such assignment, subsale or other
transaction.
HR A[10668]
Where the above conditions are satisfied, the FA 2003 then provides1 that there is a contract for a land transaction
whereby the transferee (Z) becomes the purchaser and the consideration for the transaction is:
(a) so much of the consideration under the original contract as is referable to the subject matter of the
transfer of rights and is to be given (directly or indirectly) by the transferee or a person connected with
him; and
(b) the consideration given for the transfer of rights.
The substantial performance, or completion, of the original contract at the same time as, and in connection with, the
substantial performance, or completion of the secondary contract, shall be disregarded. Where there is more than a
single transfer of rights, the provision of s 45 will apply to each transfer. The requirement to enable the original
transaction to be ignored is that substantial performance or completion of the secondary contract takes place at the same
time as substantial performance or completion of the original contract.
HR A[10669]
1 Section 45(3).
HR A[10670]-[10680]
Page 834
In effect therefore, and the FA 2003 so expresses it, the original transferee Y is not regarded as entering into a land
transaction by reason of the transfer of rights, but s 44 (Contract and conveyance) has effect in accordance with s 45(3)
to (7).
HR A[10681]
Section 45 of the FA 2003 is a significant provision, particularly in relation to the derivation of benefits under contracts
to acquire land or under agreements for a lease, which are chargeable interests1. Where consideration has been given
and a right to specific performance exists, the purchaser will have acquired an equitable interest under what, at that
stage of the transaction, might be deemed to be a constructive trust which arises by operation of law2. Where, however,
as may be the case, the vendor has a lien for the balance of purchase monies unpaid, no equitable interest could arise
which could be vested in the purchase until such monies had been paid. Likewise, where a contract is conditional upon
the happening of an event, such as the grant of planning permission, the SDLT position would seem to be that the
contract is a chargeable interest, but subsequent assignments conditional upon certain events occurring would be
excluded from the charge to SDLT by reason of section 45. It does seem somewhat unlikely that HMRC, having
specifically treated options as chargeable interests, should treat conditional contracts as not being chargeable interests.
HR A[10682]
1 Eastham v Leigh London and Provincial Properties Ltd [1971] 2 All ER 887; GUS Merchandise Corp v Comrs of C & E [1981] STC
569.
2 Neville v Wilson [1997] Ch 144.

Page 835
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/C Chargeable
interests, transactions and consideration
C
Page 836
interests, transactions and consideration/1 Chargeable interests
1 Chargeable interests
HR A[10683]
A chargeable interest is defined1:
(a) as an estate, interest, right or power in or over land in the UK; or

(b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest,
right or power;
other than an 'exempt interest'2.
HR A[10684]
1 FA 2003, s 48(1).
2 FA 2003, s 48.
HR A[10685]
Exempt interests for the purposes of the FA 2003 are as follows:
(a) any security interest which means an interest or right (other than a rent charge) held for the purpose
of securing the payment of money or the performance of any other obligation1; and
(b) a licence to use or occupy land2;
(c) in England, Wales and Ireland:
(i) a tenancy at will3;

(ii) an advowson, franchise or manor4.
HR A[10686]
1 FA 2003, s 48(2)(a) and (3)(a).

Page 837
2 FA 2003, s 48(2)(b).
3 FA 2003, s 48(2)(c)(i).
4 FA 2003, s 48(2)(c)(ii) and (3)(b).
HR A[10687]
A frequent occurrence that takes place on an estate is where a tenant farmer contracts to sell crops or other things
attached to the land, which require severing from the land to be sold. The established point at which to start an analysis
of such a transaction is that anything annexed to the land is itself 'land'1. The next issue of importance to consider is the
degree and purpose of the annexation with more emphasis being placed on purpose than degree (see HMRC guidance
on fixtures and chattels). A common factor in many transactions requiring resolution is whether it is a sale of an interest
in the land or a sale of goods2.
HR A[10688]
1 Buckland v Butterfield (1820) 2 Brad & Bing 54.
2 Lavery v Pursell (1889) 39 Ch D 508; Sims v Thomas (1840) 12 Ad & EI 536; ex parte Foss, re. Baldwin (1858) 2 De G & J 230; Jarvis
v Jarvis (1893) 63 LJ Ch 10.
HR A[10689]
The definitions of 'land' and 'goods'1 overlap each other and cause some confusion in resolving whether the sale is a
land transaction or a sale of goods. This problem arises in a contract for the demolition of a building and the removal,
amongst other things, of fixtures and fittings. The cases cited in HR A[10688], fn 2 above may help, albeit that the
judicial definitions relate to statutes other than SDLT. Another transaction which may be affected are those where crops
are severed from the land. The broad definition of a chargeable interest referred to above may cause HMRC to treat
such transactions as 'acquisitions' involving an interest in land.
HR A[10690]-[10700]
1 LPA 1925, s 205(1)(x) and Sale of Goods Act 1979 (SGA 1979), s 61.
HR A[10701]
Another example of this difficulty arises where fixtures attached to the land are not owned by the owner either of the
freehold or the reversion, but ownership is retained by say the leasing company or the tenant whose property it is. It has
been held that goods subject to a lease or hiring agreement are a sale of goods, although it could arguably have been
held to be a sale of a contractual right1. However, where the leasing agreement entitles the lessor to recover the fixture
for breach of contract, the lessor will be entitled to have an equitable right of entry over the land to recover the fixture2.
Page 838
HR A[10702]
1 Drages Ltd v IRC (1927) 46 ATC 389.
2 Morrison, Jones and Taylor Ltd, Re, Cookes v Morrison, Jones and Taylor Ltd [1914] 1 Ch 50.
HR A[10703]
The width of the definition expressed above seems sufficient to include within its ambit a positive covenant made as
part of a land transaction amounting to the acquisition of a chargeable interest. At the present time, the view of HMRC
is that an SDLT return would not be required in the following circumstances, for example:
A purchases a plot of land for £500,000 from B on condition that B constructs a roadway on the land he has acquired
and on land B has retained. When B comes to release this covenant and assuming he is paid a sum of money or monies
worth doing so, that will amount to the acquisition of a chargeable interest.
(a) Goodwill
HR A[10704]
Generally, there is no charge to SDLT when goodwill is sold or otherwise disposed of. However, part of the goodwill
may be attributable to the location of the building and therefore be part of the value of the land, for example where there
is in the sale agreement a restrictive covenant prohibiting the vendor from carrying on a similar business within the
same locality1. Such goodwill arising from the location of the building may be regarded by HMRC as being part of the
land value and therefore subject to SDLT, or alternatively be treated as not inherent in the building but as arising out of
the profitability of the business.
HR A[10705]
1 Kirby v Thorn EMI plc [1988] 2 All ER 947, [1987] STC 621, CA; Eastern National Omnibus Co. v IRC [1939] 1 KB 161; Connors v
Connors Bros [1940] 4 All ER 179.
(b) Interests in and rights over land
HR A[10706]
The rights and interests here referred are rights such as to light, rights of way and to minerals. These are often referred
to as easements1, incorporeal hereditaments2, which may not be land and therefore not subject to SDLT. If, however,
they are regarded as interests in or rights over land, they will be subject to SDLT. Difficulties can be experienced in
distinguishing between sale of goods and sale of an interest in land. The definitions in the LPA 1925 and the SGA 1979
Page 839
overlap with terms common to both definitions. The best source to distinguish these aspects are the court's decisions.
The broad application of the words rights, interests in or over land in the FA 2003 will include all rights whether they be
easements, profits a prendre, restrictive covenants and others. An interesting matter that may arise is whether a benefit
can be derived from something which does not increase the value of the land, for example where there is a contractual
agreement limiting dealings in land or its development may fall within the ambit of a chargeable interest. Re Danson
(1895) 11 TLR 455, cf. Smith v Milward (1782) 3 Doug KB 70. In the strict sense incorporeal hereditaments and
easements may not be land but a vein of gold or coal under the land3 maybe land. For SDLT purposes, it is sufficient to
establish whether they are interests in land or rights over land.
HR A[10707]
1 Chelsea Waterworks Co. v Bowles (1851) 17 QB 358; Metropolitan Railway Co. v Fowler [1893] AC 416; Pugh v Heath (1945) 7 App
Cas 235; Nevill v IRC [1924] AC 385; Marlborough (Duke) v AG No.(2) [1945] Ch 78.
2 Re Danson, Bell v Danson (1895) 13 R 633, 39 Sol Jo 557, 11 TLR 455.
3 Wilkinson v Proud (1843) 11 M&W 33.
HR A[10708]
The following transactions have been held by the courts to be 'interests in land':
(a) a share in the proceeds of sale of land under a trust for sale in relation to dealings with an equitable
interest1;
(b) easements and profits2;
(c) an agreement to sell freehold fixtures unsevered3, but where the purchaser is to sever the fixtures
attached to the land and to remove them that would constitute a sale of goods;
(d) an agreement to quarry stone4;
(e) a lease of land;
(f) an interest under a trust for sale of land;
(g) a sale of future rents5;
(h) a general power of appointment to property may be an interest in land;
(i) a purchaser of an interest in possession in a discretionary trust or in a trust for land falls within the
definition of a chargeable interest.
HR A[10709]
1 Glassington, Re, Glassington v Follett [1906] 2 Ch 305; Newman, Re, Slater v Newman [1930] 2 Ch 409.
2 Webber v Lee (1882) 9 QBD 315.
3 Horsfall v Hey (1848) 17 LJ Ex 266; Underwood Ltd v Burgh Castle Brick & Cement Syndicate [1922] 1 KB 343.
Page 840
4 Hughes v Budd (1840) 8 Dowl 478.
5 Hall, Ex parte; Re, Whiting (1879) 10 Ch D 615.
HR A[10710]-[10720]
The following transactions have been held not to be land or interests in or matters relating to land:
(a) Proceeds of the sale of land subject to an immediate trust for sale are not land according to the IA
19781.
(b) The rights of a person who is the object of a general power of appointment before its exercise2
may be an interest in land.
(c) A mere hope ('spes') of acquiring or inheriting an interest in property, even if relating to land, is not
property3.
(d) An agreement to compromise litigation relating to land is not, per se, a contract relating to land and
has been held not to be land or an interest in or a matter relating to land4, and is not liable to SDLT.
(e) A lock-out agreement controlling negotiations for the sale of land5.
HR A[10721]
1 Re Sidebottom: Beeley v Waterhouse [1902] 2 Ch 389 (CA).
2 Brook's Settlement Trusts, Re, Lloyds Bank Ltd v Tillard [1939] 3 All ER 920.
3 Allcard v Walker [1896] 2 Ch 369; Parsons, Re, Stockley v Parsons (1890) 45 Ch D 51.
4 Law of Property (Miscellaneous Provisions) Act 1989, s 2.
5 Pitt v PHH Asset Management Ltd [1993] 4 All ER 961.
(c) Equitable interests
HR A[10722]
Equitable interests in land are subject to and within the charge to SDLT. The FA 2003 provides that 'major interests'
defined as any estate in fee simple or a term of years absolute may exist in law or in equity1. Where an interest
attributed to the beneficial owner2 is held by a bare trustee, or nominee for the beneficial owner, all dealings with such
land are attributed to the beneficial owner and may be held by a person as a bare trustee3. In other words, the beneficial
owner in such circumstances will be treated as the owner of the interest in the land.
HR A[10723]
Page 841
1 FA 2003, s 117.
2 FA 2003, Sch 16, para 3.
3 FA 2003, Sch 16, para 1(3).
(i) Discretionary trusts
HR A[10724]
In the case of non-interest in possession trusts there are only personal rights against the trustees who only have to
exercise their discretion and act as proper administrators1. Neither of these will constitute chargeable interests.
However, by reason of the exercise of a power of appointment or discretion in favour of a beneficiary who has to have
provided consideration, the transaction will be treated as an acquisition for such consideration given by the beneficiary
in whose favour the power or discretion was exercised.
HR A[10725]
1 IRC v Holmden [1968] AC 685.
(ii) Legal and equitable estates
HR A[10726]
It is anticipated that the definition of equitable and legal estates that will be relied on for SDLT purposes will be that
contained in the LPA 19251 and, although there is no provision to that effect in the FA 2003, there are no provisions to
the contrary. However, help may be at hand in the provisions of the LPA 1925, s 1 which provides a definition for legal
estates and equitable interests as follows:
(a) The only estates in land which are capable of subsisting or of being conveyed or created in law are:
(i) an estate in fee simple absolute in possession;

(ii) a term of years absolute.
(b) The only interests or charges in or over land capable of subsisting or of being conveyed or created
at law are:
(i) an easement, right or privilege in or over land for an interest equivalent to an estate in fee
simple absolute in possession or a term of years absolute;
(ii) a rent charge in possession issuing out of or charged on land being either perpetual or for a
Page 842
term of years absolute;

(iii) a charge by way of a legal mortgage;
(iv) and any other similar charge on land which is not created by an instrument;
(v) rights of entry exercisable over or in respect of a legal term of years absolute, or annexed,
for any purpose to a legal rent charge.
(c) All other estates, interests and charges in or over land take effect as equitable interests.
(d) The estates, interests and charges, which under this section are authorised to subsist or to be
conveyed or created at law are (when subsisting or conveyed, or created at law) in this Act referred to as
'legal estates', and have the same incidents as legal estates subsisting at the commencement of the Act
and the owner of the legal estate is referred to as an 'estate owner' and his legal estate is referred to as his
estate.
(e) A legal estate may subsist concurrently with or subject to any other legal estate in the same land in
like manner as it could have done before the commencement of the Act.
(f) A legal estate is not capable of subsisting or of being created in an undivided share in land or of
being held by an infant.
(g) Every power of appointment over, or power to convey or charge land or any interest therein,
whether created by a statute or other instrument or implied by law, and whether created before or after
the commencement of the Act (not being a power vested in a legal mortgagee or an estate owner in right
of his estate and exercisable by him or by another person in his name and on his behalf), operates only in
equity.
(h) Estates, interests and charges in or over land which are not legal estates are in the Act referred to as
'equitable interests' and powers which by this Act are to operate in equity only are in this Act referred to
as 'equitable powers'.
(i) The provisions in any statue or other instrument requiring land to be conveyed to uses shall take
effect as directions that the land shall (subject to created or reserving thereout any legal estate authorised
by this Act which may be required) be conveyed to a person of full age upon the requisite trusts.
HR A[10727]
1 Section 1.
(iii) Dispositions arising on death
HR A[10728]
The first question for determination is whether dispositions arising on death, such as devises of land or of UK
chargeable interests, give rise to liability to SDLT. In considering this question it should be remembered, and not
overlooked, that pursuant to statute a personal representative or testamentary beneficiary may vary the dispositions of
the will within a period of two years from the date of death, such dispositions are generally exempt1. The relationship
between the residuary beneficiaries and the personal representatives while assets remain in the residue of the estate, is
limited to being a personal relationship under which the personal representatives' liability is properly to administer the
estate and to be held liable if they fail to do this2. Obviously, when the personal representatives have administered the
estate, the beneficial ownership of the residuary assets will vest in the residuary legatees and it is then that they will
acquire chargeable interests.
Page 843
HR A[10729]
1 FA 2003, Sch 3, para 4.
2 Commissioner of Stamp Duties (Queensland) v Livingston [1964] 3 All ER 692 (PC).

Page 844
interests, transactions and consideration/2 Chargeable transactions
2 Chargeable transactions
(a) Licences
HR A[10730]-[10740]
Licences to use or occupy land are exempt interests for SDLT purposes. This is based on the HMRC view that a licence
to occupy land is a personal right, but not an estate, interest or right over land. In distinguishing leases from licences for
SDLT purposes, an accepted test is the decision of the House of Lords and the speech of Lord Templeman in Street v
Mountford [1985] 2 All ER 289. In this case, an occupier was granted exclusive possession for a fixed or periodic term
at a stated rent and, it was held that unless special circumstances existed which negate the presumption of a tenancy, it
will in fact be a lease because it is the grant of a right over land with exclusive possession for a fixed or periodic term at
a stated rent, which may be sold or given away. With these ingredients present in the agreement, it matters not what
label is put on it, nor what is manifested, nor that the parties intention was only to create a licence. Reference has to be
made to the wide terms defining the meaning of a lease1. Thus:
(a) an interest or right in or over land for a term of years (whether fixed or periodic); or
(b) 'a tenancy at will or other interest or right in or over land terminable by notice at any time'2.
In addition to the test above to establish a lease or a licence, where 'substantial performance' of the contract has
occurred, that will be sufficient to convert a licence into being a notifiable transaction and trigger an SDLT liability.
Nevertheless, neither a 'tenancy at will' nor a licence are 'chargeable interests'.
HR A[10741]
1 FA 2003, Sch 17A, para 1.
2 FA 2003, s 48(1)(a).
HR A[10742]
The acquisition of a chargeable interest may be effected by an act of the parties, an order of the court, by other
authority, by or under a statutory provision or by operation of law. The FA 20031 amplifies the application of
chargeable interests to include their creation, surrender, release, or variation, thus:
(a) The creation of a chargeable interest is:
(i) an acquisition by the person becoming entitled to the interest created; and
Page 845
(ii) a disposal by the person whose interest or right is subject to the interest created.
(b) The surrender or release of a chargeable interest is:
(i) an acquisition of that interest by any person whose interest or right is benefited or enlarged
by the transactions; and
(ii) a disposal by the person leasing to be entitled to that interest.
(c) The variation of a chargeable interest is:
(i) an acquisition of a chargeable interest by a person benefiting from the variation; or

(ii) a disposal of a chargeable interest by the person whose interest is subject to or limited by
the variation.
HR A[10743]
1 Section 43(3)(a)(i)(ii), (b)(i)(ii) and (c)(i)(ii).
(b) Tenancy at will
HR A[10744]
A tenancy at will for the purposes of SDLT is to be treated as an exempt interest1. In November 2003, Sch 17A, para 4
was introduced and defines a tenancy at will as a lease for an indefinite term, treating such leases as if they were a lease
for a fixed term of one year initially, and if the lease continues in the following year as a lease for a fixed term of two or
of three years if occupation continues into the third year2, and so forth. At the least, this is confusing, if not entirely
misleading. When rent is payable for the tenancy at will, which is a likely event, the inevitable question is whether or
not the transaction retains or loses its 'exempt' status? The answer seems to be that where the rent after calculation of the
net present value (NPV) exceeds the zero-rate threshold, it will be chargeable to SDLT and become a notifiable
transaction at the earlier of that time or when the tenancy at will continues for seven years, which in any event cannot be
said to be exempt3.
HR A[10745]
1 FA 2003, s 48(2)(c)(i).
2 FA 2003, Sch 17, para 4(i).
3 FA 2003, s 77(2).
Page 846
(c) Franchise
HR A[10746]
A 'franchise' means the grant of a right from the Crown to hold a market or a fair or the right to take tolls.
(d) Advowson and a manor
HR A[10747]
An 'advowson' is a perpetual right of presentation to an ecclesiastical living. A 'manor' is a lordship having equitable
estates in land that are registrable at a Land Registry. Transactions dealing with such interest as these are outside the
ambit of SDLT. Such transactions are neither notifiable nor are they land transactions1. Special provision is made2
entitling the Treasury to provide by 'regulations' any other description of interest or right in relation to land in the UK as
an exempt interest.
HR A[10748]
1 FA 2003, ss 43, 48 and 77.
2 FA 2003, s 48(5).
(e) Purchaser and vendor
HR A[10749]
The remaining provisions of FA 2003, s 43 relate to the following matters and provide:
(a) that the terms 'purchaser' and 'vendor' in a land transaction relate to the person acquiring and
disposing of 'the subject matter of the transaction'1. Purchaser and vendor apply even if there is no
consideration given for the transaction;
(b) however, a purchaser is not treated as a purchaser unless he has given consideration for, or is a
party to, the land transaction2; and
(c) the term 'subject-matter of a land transaction' refers to the chargeable interest acquired together
with any interest or right appurtenant or pertaining to it that is acquired with it3.
A purchaser for these purposes includes4 a person connected to the purchaser, as defined in the Taxes Act5, who is
acquiring the chargeable interest, and any right appurtenant or pertaining to the subject matter of the transaction that is
acquired with it.
Page 847
HR A[10750]-[10760]
1 FA 2003, s 43(4).
2 FA 2003, s 43(5).
3 FA 2003, s 43(6).
4 FA 2003, Sch 4, para 1(1) and (2).
5 ICTA 1998, s 839.
(f) Options and pre-emption rights
HR A[10761]
The law relating to the granting and exercise of options has been changed. Under the old stamp duty regime, ad valorem
duty was payable on the grant of an option 'to buy land' as a conveyance on sale1. Duty was payable on the price paid
for the land.
Under the SDLT transaction provisions, usually there will always be two land transactions. The first occurs when there
is an acquisition of an option which binds the grantor to enter into a land transaction, or there is a right of pre-emption
preventing the grantor from entering into or restricting his right to enter into a land transaction. The right to enter, or
restrict entry, into a land transaction is distinct from a transaction resulting from the exercise of a right or option which
is itself a land transaction. Thus it is the case that SDLT will be charged in relation to the following, which are all
separate SDLT transactions:
(a) the grant of the option or the pre-emption right;

(b) the assignment of the option or the pre-emption right;
(c) the variation of the terms of the option or the pre-emption right;
(d) the release of the option or the pre-emption right;
(e) the exercise of the option or the pre-emption right.
The grant and exercise of the option or pre-emption right will be a 'linked transaction'2, which will require the
chargeable consideration to be aggregated. There will also be the need for separate reporting and notification of the
grant and exercise of the option.
HR A[10762]
1 Wimpey (George) & Co. Ltd v Comrs of Inland Revenue [1975] STC 248.
Page 848
2 FA 2003, ss 55(4) and 108.
(g) Value shifting
HR A[10763]
The pre-SDLT regime charged duty on the transfer or vesting of property by written instrument. Where the rights were
attaching to different items of property, stamp duty could be avoided. In relation to land, value shifting could be
achieved by creating or reserving rights in or over land by release or surrender of existing rights or the creation or
variation of new rights. The new legislation attacks value shifting in a variety of ways, and the transactions that used to
be resorted to are now ineffective. These include the following:
(a) the inclusion as chargeable consideration covenants undertaken under the lease by a tenant such as
will affect the open market rent payable by the tenant1; and
(b) any payment pursuant to such an obligation2;
(c) the grant, release or notification of restrictive covenants, options and similar arrangements;
(d) the benefit of obligations or restrictions affecting the value of an interest in land, where payments
to vary these constitutes chargeable transactions;
(e) variations of leases, such as payments to commute rent.
SDLT attacked the moving of value without transferring by including the transfer of property, such as releases or
variations, but not, it seems, disclaimers or exceptions and reservations. What is striking is that the effect of a disclaimer
will be that the property effectively will pass to another person. Nevertheless, it is to be regarded as not involving a
surrender or release even if consideration is given for it3, the argument being that this is not the termination of an
interest but is an action to prevent one arising.
HR A[10764]
1 FA 2003, Sch 17A, para 11(1)(C). Cases where assignment of a lease is treated as a grant.
2 FA 2003, Sch 17A, para 11(2) The provisions included are: FA 2003, s 57A (sale and leaseback arrangements); Sch 7, Pt 1 or 2 (group
relief or reconstruction or acquisition relief); s 66 (transfers involving public bodies); Sch 8 (charities relief); any such regulations as are
mentioned in s 123(3) (regulations reproducing, in relation to SDLT, the effect of enactments providing for exemption of stamp duty).
3 Paradise Motors Ltd, Re [1968] 2 All ER 625.
HR A[10765]
SDLT attacked this avoidance by the introduction of the FA 2003, s 48, which defined a 'chargeable interest' to mean:
(a) an estate, interest, right or power in or over land in the UK; and
(b) the benefit of an obligation, restriction or condition affecting the value of any such interest, estate,
Page 849
right or power.
This provision lists the exempt interests considered earlier in this chapter, such as 'any security interest'; a 'licence to
occupy or use land'; a tenancy at will; an advowson; a manor and a franchise. On the topic of a 'licence', mention should
be briefly made that entry into land as a licensee may involve substantial performance of the contract; questions relating
to notifiability of the transaction or self-certification, which compel clearance from HMRC to remove the danger of a
wrong self assessment, with attendant penalties and interest arising.
Page 850
interests, transactions and consideration/3 Chargeable consideration
3 Chargeable consideration
HR A[10766]
'Chargeable consideration' for a transaction is defined to be any consideration in money or money's worth given directly
or indirectly for the subject matter of the transaction1, by the purchaser or by a person connected2 with him. This
statutory provision limits the chargeable consideration to what the purchaser, or person connected with him, directly or
indirectly provides. This suggests when construing this provision that where the consideration comes from an
unconnected party, it does not acquire the character of being chargeable consideration. A purchaser is defined by statute
to be the person acquiring the subject matter of the lease and this definition applies even if no consideration is given for
the transaction3. The FA 2003 specifically defines a 'purchaser' to be the person acquiring and a 'vendor' to be the
person disposing of the subject matter of the transaction, together with any interest or right appurtenant or pertaining to
it that is acquired with it4. The definitions apply even where there is no consideration given for the transaction with the
statutory limitation applying that a person is not to be treated as a purchaser unless he has given consideration for, or is
a party to the transaction5. This leaves a fundamental question unanswered and hovering in the air because the
legislation makes no provision to cover it. It is whether an inducement from a third party, which is consideration for
something, is chargeable consideration.
Chargeable consideration is more fully explained below and includes the following:
(a) any consideration;

(b) money or money's worth;
(c) consideration given for the subject matter of the transaction;
(d) consideration given directly or indirectly;
(e) consideration given by the purchaser or by a person connected with him6.
HR A[10767]
1 FA 2003, Sch 4, para 1(1),(2).
2 ICTA 1988, s 839 - Connected persons. See HR A[10790] below.
3 FA 2003, s 43(4).
4 FA 2003, s 43(6).
5 FA 2003, s 43(5).
6 FA 2003, Sch 4, para 1(2).

Page 851
(a) Any consideration
HR A[10768]
The term 'any consideration' requires analysis. Help is given to this analysis in two VAT cases1. In the first case, a
tenant paid a landlord to accept the surrender of his lease. The payment made by the tenant was consideration for the
landlord agreeing to accept the surrender, but it was not consideration for the surrender itself. In the second case, in
contrast, it was held that where a sum is paid by the landlord to induce a tenant to take the lease, payment of a premium
was not consideration for the lease but was consideration for entering into the agreement for the lease. By reason of the
FA 2003, Sch 17A, para 18, specific provision is made for a 'reverse premium' from the landlord to the tenant not to
qualify as chargeable consideration. The Act provides specifically that in the case of a grant, assignment or surrender of
a lease, a reverse premium shall not count as chargeable consideration. This exclusion also applies to payments by
tenants to landlords and to assignees.
HR A[10769]
1 Gleneagles Hotel v Customs and Excise [1986] VATTR 196 and in Neville Russell v Customs and Excise [1987] VATTR 194.
(b) Money or money's worth
HR A[10770]-[10780]
No statutory definition of 'money's worth' is given by the FA 2003. To qualify as money's worth, reliance must be
placed on the court's determination that it has to be something which is capable of being sold and converted into
money1. In defining money's worth, the Secretan case refers to 'services' as a matter not easily sold on the open market,
and that the value of the consideration shall be taken to be the amount that would have to be paid to obtain such services
in the open market2. Market value is to be considered in conjunction with money's worth and is to be determined in
accordance with the Taxation and Chargeable Gains Act 1992 (TCGA 1992), ss 272-274 and with the FA 2003, Sch 4,
para 7, which provide in relation to the valuation of non-monetary consideration that:
'except as otherwise expressly provided, the value of any chargeable consideration for a land transaction for other than (a) money
(whether in sterling or another currency) or (b) debt as defined for the purposes of para 8 (debt as consideration) shall be taken to
be its market value at the effective date of the transaction.'.
This raises the question whether the provision of consideration by the purchaser or a person connected with him is
overridden by other provisions relating to chargeable consideration, a matter which will be considered in greater detail
in this work. The resolution of such issues with others is incapable of solution by reference solely to the statutory
provisions as they presently stand because those provisions fail to address these other issues.
HR A[10781]
Page 852
1 Secretan v Hart [1969] 3 All ER 1196, 45 TC 701.
2 FA 2003, Sch 4, para 11(i).
(c) Consideration for the subject matter of the transaction
HR A[10782]
Subject to the special rules1 which override the general definition of a land transaction which we have seen is defined as
being 'any acquisition of a chargeable interest', each interest acquired with it is the 'main subject matter of the lease'. In
HMRC's opinion, recently expressed, this would mean where a freehold was transferred and a related right of way
created or transferred, it would be treated as a single transaction on the basis that it was a right appurtenant or pertaining
to the freehold, the subject of the transfer. However, under the FA 2003, a right of way clearly is a right in or over land
which, in this case, is freehold land and is a separate creation of an interest over that land. Furthermore, it is certainly a
restriction over the freehold land which will affect its value. It seems to be, but it is not indisputable, that there are two
interests being acquired - the freehold and the right of way, both of which are chargeable interests, which should not be
consolidated. They should be treated individually, especially if it were the case that one of those interests was an
exempt interest.
HR A[10783]
1 FA 2003, ss 44-47.
(d) Services and chargeable consideration
HR A[10784]
The legislation provides that services are chargeable consideration'1. We have seen above also that a reverse premium,
being a sum paid by the landlord to induce the tenant to take the lease, did not constitute consideration. This was
reinforced by the legislation, specifically providing that a premium moving from the landlord to the tenant is not to
count as chargeable consideration2. This exclusion from the realm of consideration applies also to payments made by
tenants relating to surrender, to assignments and to payments relating to dilapidations made to an assignee who is to be
bound contractually to make good such dilapidations. Payments by a tenant to an assignee because the current rent is in
excess of the market rent, come into the same category and fall to be treated in the same manner and are not
consideration. Reference has been made in HR A[10869] to the VAT decision in Neville Russell v Customs and Excise
[1987] VATTR 194 in analysing any consideration. Here, in relation to providing a service, it was held that in accepting
a lease, that is in effect agreeing to do something he was not compelled to do, and if, for instance, he was paid a reverse
premium as an inducement, it could be said that the service specifically chargeable was being provided for the reverse
premium, and that was a separate service to accepting the grant of the lease. This is equivalent to saying that the lease is
being granted on the basis of the tenant receiving payment of a reverse premium for the lease, the subject matter of the
Page 853
transaction. This can be illustrated thus: X pays Y money to surrender the lease to Z. The subject matter of the
transaction is the lease. The payment by X is for Y's service of surrendering the lease to Z. The drafting of the element
of consideration for the chargeable interest will need care.
HR A[10785]
1 FA 2003, Sch 4, para 11.
2 FA 2003, Sch 17A, para 18.
(e) Consideration given directly or indirectly
HR A[10786]
The introduction of the 'direct' or 'indirect' element into consideration may indicate that if the consideration is sourced
by an unconnected person, it is not chargeable consideration. The reader will recall that the definition of 'purchaser'
included the case where no consideration was given for the transaction1, but in the same provision in a later sub-section,
the FA 2003 states that a purchaser is not to be treated as a purchaser unless he has given consideration for or is a party
to the transaction2. In addition to the apparent contradiction outlined above, the question of identifying the purchaser
can be more tortuous, particularly where there are four parties involved in the acquisition of land and its authorised
development. Where a local authority is involved and the developer acquires the site and vests the interests in the land
in that authority, after the development that authority grants a lease either to the developer or other parties. It takes little
imagination to envisage the addition to the above of the surrender of the lease and its acquisition by another party to
appreciate the difficulty of applying the SDLT provisions. One of the basic questions likely to occur is whether an
inducement by a third party, as consideration, is chargeable consideration. The third party being neither the purchaser
nor connected with the purchaser3.
HR A[10787]
1 FA 2003, s 43(4).
2 FA 2003, s 43(5).
3 Crane Fruehauf v IRC [1975] STC 51; Shop and Stores Developments v IRC [1967] 1 All ER 42 (HL); Central and District Properties
v IRC [1966] 2 All ER 433.
HR A[10788]
The qualifying terms 'directly' or 'indirectly' carry significant importance in the context they are used relating to
consideration deriving from the purchaser or a connected person. It may be the case that a third party provides
consideration in the form of an inducement, for a guarantee, either express or implied, moving from the purchaser.
Page 854
Where there is no inducement and no guarantee and the third party makes a genuinely independent offer, it cannot be
said that the consideration is supplied by the purchaser. In such circumstances, it can be said with near certainty as the
legislation presently stands, that it is not, nor will be, part of the consideration for the transaction. Where, however,
there has been a fee agreed between the third party and the purchaser, or a guarantee entered into by the purchaser, or
other financial arrangement moving to the third party, the indirect and apparently unconnected aspect of the transaction
is unlikely to free the purchaser from liabilities to SDLT. In any event, it would be extraordinarily remiss of HMRC to
fail to scrutinise such a transaction vigorously.
(f) Consideration - site development and planning consent
HR A[10789]
Apart from the exemption provided in connection with compulsory purchase schemes, where these do not exist there is
difficulty in computing liability where a site is subject to planning for development with the local planning authority,
say to develop and construct social or affordable housing. This is best illustrated by a simple example: D, the developer,
agrees to pay consideration to X and to surrender his leasehold interest to the the local authority, which agrees, subject
to certain conditions, to grant a lease to D, when the development has been successfully completed. This indicates that
the difference in consideration provided by D to X with that passing between the local authority and D that D cannot be
providing the consideration indirectly or directly between X and the local authority.
(g) Consideration and connected persons
HR A[10790]-[10800]
As to 'consideration given by the purchaser or by a person connected with him', such persons may be connected, for the
purposes of the FA 2003, through various relationships, by statute and judicial decision. These relationships are
company, partnership, trust and family.
(1) Company relationships.

A company is connected with another if:
(a) the same person has control of both; or

(b) a person has control of one company and persons connected with him have control of the
other company(s);
(c) a group of two or more persons has control of each company; and
(d) the group consist either of the same persons; or
(e) could be regarded as consisting of the same persons by treating a member of the group as
being replaced by a person with whom he is connected1.
(2) Partnership relationships.
(a) a person is connected with any person with whom he is in partnership; or

(b) with the relative of any individual with whom he is in partnership2.
(3) Trust relationships.

Page 855
(a) a trustee is connected with the settlor or any person connected with the settlor and/or a
body, corporate connected with that settlement;
(b) a body, corporate is connected with a settlement if it is a 'close company' or would be if it
was resident in UK and the participation include the trustees. For a settlement to be a settlement
there must be an element of bounty3.
(4) Family relationships.
(a) a person is connected with an individual if the person is the individual's spouse, relative,
spouse of a relative of the individual or of the individual's spouse4;
(b) a husband and wife remain connected even if they are not living together. They are only
separated from the time when a decree absolute is pronounced5;
(c) a relative is defined as brothers and sisters, consanguinean, ancestors and lineal descendants
and collaterals6.
It is helpful to note that a trustee is connected with a beneficiary only if the settlor is living and the beneficiaries are
connected with the settlor.
HR A[10801]
1 ICTA 1988, s 839(5).
2 ICTA 1988, s 839(4).
3 ICTA 1988, s 660G(1)(2).
4 ICTA 1988, s 839(2).
5 Aspden v Hildsley [1982] STC 206.
6 ICTA 1988, s 839(8).
HR A[10802]
Considerable care in drafting agreements needs to be exercised, particularly in relation to development where the
developer is required to carry out works at the behest of either the vendor or the purchaser on the land to be acquired.
Where, for instance, the vendor 'excepts and reserves' rights, it is arguable that this would not create new rights within
the FA 2003, s 43 on the basis that the vendor already owned, and was retaining rights he had, prior to the sale,
provided that they did not form part of the consideration for sale. In other words, such transactions as these would
become chargeable interests if subsequently there were variations or dealings.
HR A[10803]
Page 856
An alternative scenario arises where land is transferred to a developer who grants new rights to the vendor. The grant of
the new rights constitutes consideration for the transfer of the land with SDLT becoming chargeable on the market
value of such rights, but how market value can be evaluated where there is only one purchaser will be interesting to see.
Subsequent dealings with such rights will be chargeable to SDLT.
HR A[10804]
In both of the situations above, the question that it is difficult to answer is whether, and to what extent, the grant of a
licence affects the liability to SDLT and whether the grant of an easement to the builder can have any effect on liability.
Under SDLT, the grant of an easement is likely to qualify as a chargeable interest in or over land, but liability to SDLT
may depend on the form in which the rights are brought into existence.
Page 857
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/D Amounts of tax
chargeable and supplementary provisions
D
Page 858
chargeable and supplementary provisions/1 Amount of SDLT chargeable
1 Amount of SDLT chargeable
HR A[10805]
The amount of tax chargeable in respect of a chargeable transaction is a percentage of the chargeable consideration for
the transaction. The rate of tax is to be fixed by reference to the 'main subject-matter' of the land transaction, often
referred to as the relevant land1. The subject matter of the transaction2, it will be recalled, is defined as3 the chargeable
interest acquired together with any interest or right which is appurtenant or pertaining to the chargeable interest acquired
that is acquired with it.
HR A[10806]
1 FA 2003, s 55.
2 FA 2003, s 48(5) and Sch 3, para 5(1).
3 FA 2003, s 43(6).
HR A[10807]
The rate of charge will depend upon the following considerations:
(a) whether the consideration consists solely of or includes rent;

(b) whether the property is residential or non-residential;
(c) whether the transaction was linked with other chargeable transactions1;
(d) the level of the consideration;
(e) whether the property is wholly or partly within a disadvantaged area used to apply, but the
exemption in relation to non-residential property was abolished with effect from 17 March 2005.
HR A[10808]
1 FA 2003, ss 55(4) and 108.
(a) Exchanges involving non-major interests

Page 859
HR A[10809]
The FA 2003 provides that only chargeable consideration is within the charge to SDLT. The Act also describes some
consideration as being 'non-chargeable'. Whilst, somewhat obviously, such consideration will not be subject to SDLT, it
may be subject to notification. The non-chargeable consideration includes the following:
(1) Exchanges involving non-major interests.

Where a non-major interest was acquired, the chargeable interest disposed of as part of an exchange for a
non-major interest is not within the chargeable consideration. This will apply to:
(a) variation of trusts involving the mutual exchange of interests;

(b) the grant of mutual or cross-options;
(c) variations of deceased persons estates outside the scope of the variation exemptions.
(2) Works by purchaser.

Certain works carried out by an acquirer of land on the land are not chargeable consideration1. However,
where works are carried out by the landlord, they will be treated as consideration for the grant of a lease
to a tenant in addition to rent payable by a tenant.
(3) Partition.
Where property is jointly owned land, the exchange of the undivided interests in the land is not
chargeable consideration2.
(4) Surrender and regrant.
Where a new lease is granted after surrender of the old lease, no chargeable consideration arises3.
(5) Payments under covenants under a lease.
Covenants to repair, pay service charges, insurance premiums are to be ignored. However, where these
amounts are reserved as rent, they may be taxable as additional rent.
(6) Reverse premiums.
Specifically4 reverse premiums in relation to the grant, assignment, or surrender of leases are not
chargeable consideration.
(7) Third parties.
It will be noted that liability can arise where chargeable consideration is provided by the purchaser
indirectly or by a person connected with him. Consideration payable by third parties, unless deemed to
be by the purchaser indirectly, will be considered non-chargeable consideration5.
HR A[10810]-[10820]
1 FA 2003, Sch 4, para 10(2).
2 FA 2003, Sch 4, para 6.
3 FA 2003, Sch 17A, para 16.
4 FA 2003, Sch 14, para 15.
5 FA 2003, Sch 4, para 1.

Page 860
(b) Percentage tax chargeable1
HR A[10821]
(1) The percentage tax chargeable is determined by reference to whether the 'relevant land':
(a) consists entirely of residential property (Table A below); or

(b) consists of or includes land that is not residential property (Table B below applies);
and, in either case, by reference to the amount of the relevant consideration.

(2) Table A: Residential and Table B: Non-residential or mixed.
Table A: Residential
Relevant consideration Percentage
Not more than £120,000 0%
More than £120,000 but not more than £250,000 1%
More than £500,000 4%
With effect from 17 March 2005, the limit of the zero-rate band on residential property is increased from
£60,000 to £120,000 (Finance Act 2005 (FA 2005), s 95).
Table B: Non-residential or mixed
More than £500,000 4%
In both the residential and non-residential or mixed categories above, the slab system operates so that
where the consideration exceeds a particular threshold, the higher rate will apply to the whole
consideration and not just to the excess consideration over the threshold.
(3) For the purposes of the above:
(a) the relevant land is the land, an interest in which is the main subject matter of the
transaction; and
(b) the relevant consideration is the chargeable consideration for the transaction, subject as
follows.
(4) If the transaction in question is one of a number of linked transactions:
(a) the relevant land is any land, an interest in which is the main subject matter of any of those
transactions; and
(b) the relevant consideration is the total of the chargeable consideration for all those
transactions.
(5) The FA 2003 has effect subject to:
(a) Section 74 (collective enfranchisement by freeholders); and

(b) Section 75 (crofting, community right to buy);
which provides for rate of tax to be determined by reference to a fraction of the relevant consideration.
Page 861
(6) In the case of a transaction for which the whole or part of the chargeable consideration is rent, this
section has effect subject to s 56 and Sch 5 of the Act (amount of tax chargeable: rent).
(7) Where the chargeable consideration for the transaction consists of or includes rent, the calculation
of tax is to be provided by Sch 5 of the Act, the 'rate of tax' means the percentage determined by s 55.
HR A[10822]
1 FA 2003, s 55.
(c) Calculation of amount of tax chargeable - rent
HR A[10823]
In relation to wholly residential property, SDLT will be charged as a percentage of 'net present value' of the rent payable
over the term of the lease1.
Net relevant consideration Percentage
More than £120,000 1%
The 1% rate applies only to the excess of the NPV over the nil-rate threshold, not to the whole value2. SDLT is payable
on the NPV of the rent plus any tax chargeable upon any other chargeable consideration3. The NPV of the rent for the
mathematically strong of heart is calculated according to the following formula:
Click here to view image
Where:
n = length of lease in years.
r = rent in the relevant year of the lease (i).
T = discount rate - 3.5%.
HMRC will publish an online calculator.
VAT can be ignored if the landlord has not elected to waive exemption. The dramatic effect of the NPV calculation on
duty will be between 4.5 and 9.5 times the amount payable under the old stamp duty taxes, at present rates. For
example, calculation of NPV on the following facts: three-year lease at a rent of £100,000 per annum in year 1, of
£150,000 in year 2, and £200,000 in year 3:
100,000 150,000 200,000 = £417,003-£150,000 @ 1%
(1 + 0.035) (1 + 0.035) (1 + 0.035)
= £267,033
A graph, set out below, comparing the stamp Duty and SDLT has been calculated showing the SDLT over a term of 125
years where the annual rent is £100,000.
Stamp Duty on £100,000 over 125 years

Page 862
Click here to view image
HR A[10824]
1 FA 2003, Sch 5, para 2(4)(b).
2 FA 2003, Sch 5, para 2 as amended.
3 FA 2003, Sch 17A, para 9(4).

Page 863
chargeable and supplementary provisions/2 Lease duty schedule - comparisons between old and new
2 Lease duty schedule - comparisons between old and new
(a) Linked transactions
HR A[10825]
The FA 20031 provides that the rate of tax for linked transactions is to be the total of the chargeable consideration for
these transactions. Transactions are 'linked'2 if they form part of a single scheme arrangement or a series of transactions
between the same vendor and purchaser or, in either case, persons connected with them as defined in ICTA 1988, s 839.
Where there are two or more linked transactions with the same effective date, the purchaser, or all of the purchasers if
there are more than one, may make a single LTR as if all of those transactions that are notifiable were a single notifiable
transaction.
Where two or more purchasers make a single return in respect of linked transactions, the FA 2003, s 103 (Joint
purchasers) applies as if:
(a) the transactions in question were a single transaction; and

(b) those purchasers were purchasers acting jointly.
HR A[10826]
1 Section 55.
2 FA 2003, s 108 which is reproduced above because its application is complex and not entirely certain and because of its impact on
liability.
HR A[10827]
The linked transactions provisions should not be applied without awareness of the provision1 that where six or more
separate dwellings are the subject of a major interest2 in, or the grant of a lease over them, then those dwellings are to
be treated as non-residential property. The FA 2003 is silent as to what a single transaction is, but by virtue of its
introduction it has to be distinguished from, and obviously cannot be the same as, a linked transaction. There should be
a provision which is lacking in the Act if it was the intention of Parliament to provide that linked transactions are to be
treated as a single transaction. By definition in the Act, transactions are linked if they form part of a 'single scheme
srrangement, or series of transactions' between the same vendor and purchaser or a person connected with them. In such
cases, aggregation of the chargeable consideration will occur, with the likely consequent loss of the lower rates on both
transactions. Taking as an illustration for example:
(1) where A seeks to acquire adjacent blocks of property from different owners, the linked transaction
Page 864
route cannot apply because the transaction is not between the same vendor or purchaser. If the adjacent
blocks are residential property and leases are granted over six or more residential dwellings, the
threshold for SDLT on each will be £150,000 rather than the amended £120,000;
(2) where, however, A acquires adjacent blocks of dwellings and houses, six or more in number, from
the same owner, the transaction will be linked and the consideration aggregated.
Under (1) the transaction cannot be treated as a single transaction and is to be treated as several separate transactions.
Under (2) a difficult issue arises, which is caused by the lack of any statutory provision that says that linked transactions
are to be a single transaction. The facts in example (2) consisting of several independent legal transactions could be
described equally as well as a 'single commercial transaction'. This could give rise to the question whether the single
includes the plural, which is normally found to occur in the construction of most contracts. It appears, therefore, that the
acquisition from different property owners, even if part of one overall plan and even if the vendors were connected
persons, would not qualify. For linked transactions to apply, the transactions must be between the same parties, which
will rule out the acquisition of a site by a developer from several different vendors.
HR A[10828]
1 FA 2003, s 116(7).
2 FA 2003, s 117 defines a 'major interest'.
HR A[10829]
Subject to certain provisions1, the FA 2003 provides2 that there is to be no SDLT upon agreements for a lease, whereas
the grant of an option to enter into a lease is a chargeable transaction and will be, upon the grant and exercise of the
option, a linked transaction. This may well create a problem, for example, where a second lease extending the original
lease is entered into. The second lease may well be considered sufficient to link it to the original, thereby causing
'aggregation' and a recalculation of the tax position3. It should be added that there is no statutory requirement for the
properties to be adjoining for the relief to be available. Unresolved problems continue to exist in relation to this
provision, in particular where the interest includes the common parts of a block of flats which cannot, at first sight, be
classed as 'residential' and where, for example, a management company, either independent of the owners of the flats or
consisting or representative of all the owners, buys the freehold. Subject to the residential tenancies, the management
company is acquiring the reversion of residential property, which does not confer vacant possession and cannot be used
as a dwelling by the management company. This is a matter that remains to be ruled upon by the Stamp Taxes Offices.
HR A[10830]-[10840]
1 FA 2003, s 44(3)-(11).
2 FA 2003, s 44(2).
3 FA 2003, Sch 17A, para 5.

Page 865
HR A[10841]
The FA 20031 provides that:
(a) Where a land transaction is entered into by the purchaser (alone or jointly) wholly or partly in
consideration of another land transaction being entered into by him (alone or jointly) as vendor, Pt 4 of
the Act applies in relation to each transaction as if each were distinct and separate from the other.
(b) A transaction is to be treated as entered into by the purchaser, wholly or partly in consideration of
another land transaction being entered into by him as vendor, in any case where an obligation to give
consideration for a land transaction that a person enters into as a purchaser is met wholly or partly, by
way of that person entering into another transaction as vendor.
(c) As to the amount of chargeable consideration, in the case of exchanges and similar transactions,
see paras 5 and 6 of Sch 4.
HR A[10842]
1 Section 46.
HR A[10843]
Although exchanges of land and property are often between the same parties, they are not linked transactions by reason
of the statutory provision that they are 'distinct and separate from each other'1. Additionally, they are not linked
transactions for the reason that the consideration moves from the seller of property A to the buyer of property A and
from the seller of B to the buyer of B. That is to say the consideration moves in opposite directions and although it is
between the same parties, it is not linked and the consideration should not be aggregated. If equalisation payment is
made, duty will be charged at 1% if the transaction (each part) is less than £250,000. There are special rules relating to
the computation of SDLT where the transaction relates to major or minor interests in land2, part-exchanges of new
buildings3 and to partitions of land4. Relief is also given for certain acquisitions of residential property where its
acquisition is5:
(a) by a house building company from an individual acquiring the new building;
(b) by a property trader from personal representatives;
(c) by a property trader from an individual acquiring new dwelling;
(d) by an employer in case of relocation of employment;
(e) by a property trader in case of relocation of employment.
HR A[10844]
1 FA 2003, s 47(1).
Page 866
2 FA 2003, Sch 4, para 5.
3 FA 2003, s 58.
4 FA 2003, Sch 4, para 6.
5 FA 2003, Sch 6A, paras (1)-(6).

Page 867
chargeable and supplementary provisions/3 Partition
3 Partition
HR A[10845]
For there to be a partition, there has to be a jointly owned chargeable interest with each party giving up his partial or
undivided interest in the asset, or in a specified part of the asset, in return for their giving up a partial interest in that or
other assets. Where circumstances such as these occurred, it appears that there would be little or no distinction between
exchange or partition. Statutory relief1, though limited, is given where there is an exchange of part, joint or undivided
interests in the respective parts2, then the share held by the person acquiring immediately before partition of the
chargeable interest, but passing the partition to the other party does not become a chargeable consideration.
HR A[10846]
1 FA 2003, Sch 4, para 6.
2 FA 2003, s 121.
(a) Limitations on partition relief
HR A[10847]
Limitations are placed on this relief thus:
(a) there has to be a division of single chargeable interest, such as an undivided share of property;
(b) it has no application where there is a pool of jointly owned chargeable interests divided between
co-owners;
(c) the parties must be beneficially entitled as Joint Tenants or Owners-in-Common in England and
Wales;
(d) the interest must be held concurrently1; and
(e) it does not apply where the interests are held in succession, such as under a trust say, to A for life,
remainder to B. There is always the further limitation that where this relief does not apply, the parties
will have to consider whether the interests exchanged, or to be exchanged, are major or minor interests
and whether the special charging provisions apply2.
HR A[10848]
Page 868
1 FA 2003, s 121.
2 FA 2003, Sch 4, para 5.

Page 869
chargeable and supplementary provisions/4 Fixtures
4 Fixtures
HR A[10849]
Fixtures are an important issue, but remain undefined in the FA 2003. In general law, they have been described as
anything so attached to the land as to become legally part of the land1. Fixtures so attached to the land pass with the
land on a conveyance and belong to the landlord as the person entitled to the freehold reversion2. Where fixtures are
attached to and form part of the land, they will be subject to SDLT, but if the character of the equipment or the fixtures
retained are as a chattel3 it will not be subject to SDLT. This is a vital question for purchasers to determine because its
determination may increase the rate of tax above the next high threshold, and careful searching will have to follow as to
what is excluded or included in the price of chattels in the sale of such a property. In determining this question, it is also
important to look very carefully at the terms of the tenancy or of the lease because this may indicate certain fixtures that
are part of the landlord's property, but agreement has been reached that they should be removed, in which case, SDLT
will not be exigible. There may be other assets, such as those subject to some lease or hire purchase agreement with a
third party, under which the third party remains the owner of the goods and in such a case, obviously, there would be no
charge on those items to SDLT. Likewise, if some of these fixtures are owned by the tenant, any consideration allocated
to such equipment will be ignored when it comes to computing the SDLT on these fixtures.
HR A[10850]-[10860]
1 Hulme v Brigham [1943] KB 152; Reynolds v Ashley & son [1904] AC 466.
2 Stokes v Costain Property Investments [1984] STC 204.
3 FA 2003, Sch 4, para 4.
HR A[10861]
Some of the issues that will arise for consideration are as follows:
(a) Where a fixture is part of the land, it will be subject to SDLT upon the sale of the freehold land.
(b) The tenant always has the right to detach from the landlord's land the tenant's fixtures. Such a
transaction has been described as being neither land nor goods, but an intangible right to sever1.
(c) A question requiring resolution is whether a contract for the sale of equipment attached to the land
is a contract for the sale of goods or the sale of an interest in the land. Clearly, if the equipment is sold
together with the land without any tenants rights attaching, it will be subject to SDLT. On the other hand,
if it is sold under a contract whereby the fixture is to be detached from the land and removed by the
purchaser who does not acquire any interest in the land, it will not be subject to SDLT2 and will be a sale
of goods.
Page 870
(d) Equipment may be held by a tenant under a lease or hire purchase agreement with a third party, the
question here is whether it is a fixture, and if it is a fixture whether SDLT is to be paid on it.
(e) There is the issue of the rights of a third party owner of the leased or hired equipment, and if the
equipment is chattels or land, or some other form of intangible interest that may constitute an interest in
land.
HR A[10862]
1 Lee v Gaskell (1876) 1 QBD 700.
2 Underwood v Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343.
HR A[10863]
General principles:
(a) Where the fixtures are true fixtures, they will pass as part of the land and the consideration payable
for them will attract SDLT.
(b) Where the fixtures are chattels and moveable property, they will not be subject to SDLT and that
part of the price that is allocated to them can be ignored for the purposes of the linked transaction rules,
and can be deducted from the total consideration in the calculation of SDLT.
(c) The following principle relates to the treatment of tenant's fixtures, which have lost their character
as chattels when the lease is sold, and the tenant has retained the right to remove them. HMRC consider
that such assets are a kind of intangible property, being neither goods attached to the land nor true
fixtures belonging to the landlord because of the right retained by the tenant to remove them. If HMRC's
decision is right, and they are intangible assets, they are neither goods nor land, which cannot qualify as
a chargeable interest in land. However, a court could hold the view that such items were an interest in, or
right in or over land, and for the purposes of SDLT that could make them taxable. The likely outcome is
that HMRC will seek to include the consideration paid for such items within the charge to SDLT in order
to maximise the revenue ingathered. This is a matter that professional advisers would be wise to
approach the Stamp Duty Tax Office to ascertain what their current views were in relation to such
matters.
(d) Where there is a freehold or leasehold sale of land, the question is whether equipment attached to
the land, held under an arrangement from a third party, is a chargeable interest, or an item of property not
subject to SDLT.
(a) Tenants fixtures
HR A[10864]
It is occasionally the case that chattels can become, over a period of time, fixtures and the lease requires the tenant, at
the end of the term, to remove those chattels from the premises. If that is not the case the chattels, having become
fixtures, might vest in the landlord whose title would be defeasible because the tenant would be entitled in law to
Page 871
remove the equipment at any time according to a decision of the High Court1. The power to remove such fixtures does
not apply to all the chattels which the tenant has installed. It will apply to chattels installed by the tenants which can be
regarded as trade2, as to ornamental and domestic chattels3 or as agricultural4. HMRC has for some years held the view
that such chattels becoming fixtures are subject to a charge to stamp duty and that is likely to be the case for SDLT.
HMRC base their reliance on this doctrine and on the decisions in Hallen v Runder (1834) 1 Cr M & R 266 and Lee v
Gaskill (1876) 1 QBD 700. A better view seems to be that where there is the right of a tenant to sever and remove, its
effect will be to remove this asset from being an interest in land5. Clearly it is not land and the consideration
attributable to it, because it is not land, may well fall outside the charge to SDLT. For HMRC to succeed in contending
that such a transaction was within the ambit of SDLT, they would have to establish that this interest of the tenant is a
right in or over land, or is the benefit of a right or power in, or over, land, within the definition of a chargeable interest6.
HR A[10865]
1 Crossley Bros v Lee [1908] 1 KB 86.
2 Climie v Wood [1869] LR 4 Exch 328.
3 Spyer v Philipson [1931] 2 Ch 183.
4 Agricultural Holdings Act 1986, s 10.
5 Thomas v Jennings (1896) 66 LJQB 5.
6 FA 2003, s 48.
Page 872
chargeable and supplementary provisions/5 Are they goods, fixtures or chattels?
5 Are they goods, fixtures or chattels?
HR A[10866]
Whether they be goods, fixtures or chattels is a question to be determined on the state of the equipment on the day that
the contract is executed, that is to say the effective date of the transaction for SDLT purposes. There is a real conflict
here because the majority of the case law is in favour of the taxpayer, whereas HMRC's Stamp Taxes Bulletin Issue 1,
August 2002, places its emphasis in favour of the equipment being a fixture. HMRC firmly believe that where a chattel
is attached to land it is a fixture, and indeed Stamp Form 22 of the Stamp Taxes Office Manual requires an actual state
of severance at the date of the sale.
HR A[10867]
Questions such as industrial safety or necessity, the putting of petrol pumps on a forecourt and the bolting of automatic
car washing equipment to the floor have no relevance in determining the nature of the chattel, whether it is a fixture or a
chattel for SDLT purposes. It is important to note the aspects of debate on this topic that make the purpose of affixation
a matter requiring investigation. If the intention of attaching the equipment to the land is to make it part of the land, it
would be a fixture, but if it was attached to the land, not with the intention of making it part of the land because it had to
be fixed for its proper use as a chattel, it will retain its character as a chattel. The question to be decided depends upon
the ease of removal without causing any substantive damage to the premises. It is only where the removal of the chattels
would cause substantial damage to the building to which it is attached, that would prevent it from being treated as a
chattel, thereby making it a fixture.
HR A[10868]
The older cases relating to the question of annexation, were recently reviewed in the decision of the High Court1 that a
chattel may not become a fixture if it is capable of removal without significant damage to the land, or alternatively
where the landlord has agreed with the owner of the chattel that it can be removed2.
HR A[10869]
1 TSB Bank plc v Botham [1996] EGCS 149.
2 Simmons v Midford [1969] 2 All ER 1269.

Page 873
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/E Notifiable
transactions
E
Page 874
transactions/1 The obligation to notify
1 The obligation to notify
HR A[10870]-[10880]
A LTR is required only where the transaction is 'notifiable'. Notification of every notifiable land transaction1 has to be
made within 30 days of the 'effective date' on which the transaction took place, with payment of self-assessed SDLT
accompanying the LTR. Notification timeously made within the 30 days will avoid the imposition of penalties2. This is
a pre-condition that has to be fulfilled to enable the Land Registry to enter title and issue a Land Registration
Certificate. This proves that duty has been paid and the LTR delivered3.
HR A[10881]
1 FA 2003, Sch 17A, para 4(1).
2 FA 2003, s 77.
3 FA 2003, Sch 17A, paras 7 and 8.
HR A[10882]
HM Land Registry time scales differ from those required by HMRC. Because it is a frequent event that the Land
Registration Certificate is not received before the Land Registry deadline, it is sensible and prudent for professional
advisers to protect their clients' interest on an interim basis, which is recognised by the Land Registry.
HR A[10883]
The law provides specifically that the grant of a lease is a notifiable transaction1 if:
(a) the lease is for a term of seven years or more and is granted for chargeable consideration; or
(b) the lease is for a term of less than seven years and either:
(i) the chargeable consideration consists of or includes a premium, in respect of which tax is
chargeable at a rate of 1% or higher2; or
(ii) the chargeable consideration includes rent, in respect of which tax is chargeable at a rate of
1% or higher;
or in either case, in respect of which tax would be so chargeable but for relief3;
(c) any other acquisition of a major interest in land is notifiable unless it is exempt from charge under
Page 875
the FA 2003, Sch 3, which makes provision relating to transactions that are exempt from charge;
(d) an acquisition of a chargeable interest other than a major interest in law is notifiable if there is
chargeable consideration in respect of which tax is chargeable at a rate of 1% or higher, or in respect of
which tax would be so chargeable, but for relief.
In addition to the requirement that the acquisition of a 'major interest' in land is a notifiable transaction provided it is not
exempt, and to the provisions relating to 'agreements for lease' not requiring notification where there has been
substantial performance, there is a general obligation to notify the subsequent grant of the lease as well as the
substantially performed agreement for the lease. It is thus the case that the parties must be alert to earlier substantial
performance, even though this does not necessarily connote a grant4, nor a chargeable transaction. A grant of a lease
only occurs formally when the provisions of the LPA 1925, s 52 are satisfied, albeit that the effective date for SDLT
purposes is the date 30 days from which the tax becomes payable. This may raise questions where the grant is subject to
genuine and not artificial conditions. The effective date for leases may fall on the earliest of any of the following:
(a) the grant of the lease;

(b) the payment of a substantial premium;
(c) the first payment of rent; or
(d) entry into possession.
Notification in these situations should occur when there is an agreement for a lease and upon grant of the lease or the
effective date, whichever occurs earlier.
HR A[10884]
1 FA 2003, Sch 17A, para 4.
2 FA 2003, Sch 5, para 9(2). 'Tax chargeable in respect of consideration other than rent', sub-s (2) provides if the relevant rental figure
exceeds £600 pa, the 0% band in s 55(2) does not apply and any case that falls within that band is to be treated as falling within the 1% band.
3 FA 2003, s 77(2) and 77(3) for non-major interests.
4 City Permanent Building Society v Miller [1952] Ch 840.

Page 876
transactions/2 Adjudication and self assessment
2 Adjudication and self assessment
HR A[10885]
Where the taxpayer had a problem requiring resolution under the old stamp duty rules, the taxpayer could go to the
Stamp Office and require 'adjudication' in relation to a specific instrument. SDLT is a self-assessment tax which
requires the taxpayer or his professional advisers to take a reasonable view of the transaction and on that basis render
the LTR, allowing for reliefs and submitting the tax payable with the return. The taxpayer is required under the SDLT
rules to claim the exemption he/she considers available. Then, pursuant to the FA 2003, Sch 10 which makes provisions
relating to returns, enquiries, assessments and appeals, the taxpayer is likely to receive from HMRC a 'notice' instigating
their enquiry into the transaction. If, instead of receipt of such notice, HMRC Stamp Taxes Office (STO) issue a
certificate entitling the taxpayer to register title, this is not to be read as granting STO approval and the taxpayer
remains exposed to the risk that the exemption or relief sought will be rejected by the STO, and the consequent
imposition by the STO of interest and penalties from the effective date.
HR A[10886]
No equivalent procedure to that enjoyed under the old stamp duty regulations entitling the taxpayer to an adjudication is
provided under the SDLT provisions. Neither are there any provisions for depositing the SDLT with the STO awaiting a
ruling. The lack of any such provision is certainly unreasonable and it is also unfair that the taxpayer, properly
submitting his return, is left to take his chances and, if wrong, be exposed not only to interest and penalties but also to
the considerable expense in defending the entries he has made on his return. The foregoing expresses the official view,
which makes it particularly important to keep well-documented records, and the entire rationale underlying why such
reliefs have been claimed. Where any doubts exist as to the correct treatment of the land transaction, the right course of
action to be adopted should be, nevertheless, to write to the STO and ask for their guidance setting out the facts in X, Y
and Z form to preserve client confidentiality, and then hope for a response. The adoption of such measures will make it
difficult for the STO to establish that the taxpayer was negligent or fraudulent. Indeed, where the taxpayer will have
sought and taken proper professional advice it is unlikely, however wrong such advice may have been, that the taxpayer
would be held to have been negligent, much less fraudulent. There is the additional benefit to the taxpayer in taking
advice in that the STO will have to instigate enquiries within nine months of the effective date and this will not be
capable of being extended up to 21 years.
Page 877
transactions/3 The effective date
3 The effective date
HR A[10887]
Essentially, the effective date is the date on which the land transaction is completed1, subject to two exceptions. One
exception is where a contract has been made and is 'substantially performed'2. The other exception is where a land
transaction is created by a grant of an option or a right of pre-emption3, and the effective date will be the date on which
such rights are acquired and not the date those rights are exercised4. So far as a lease is concerned, the effective date
will be:
(a) either the date of completion (the actual grant of the lease)5; or
(b) the date on which the contract has been substantially performed without having been completed6.
The physical granting of a lease after the date the contract has been substantially performed will create further
obligations to report and to self-assess the tax, paying any tax additional to that which has already arisen7.
Reference has been made earlier in this chapter to the provision that specifically states that where there is no chargeable
consideration, the transaction is exempt from charge8. However, there may be a contention, whether or not in terms of
notifiability, that this is a relief in terms of the FA 2003, s 77, and whether notification is, or is not, obligatory.
HR A[10888]
1 FA 2003, ss 44(2), (9), 119 and Sch 17A, para 12(1)(d).
2 FA 2003, s 44(3), (4), (5)(a) and (b).
3 FA 2003, s 46(1)(b), (3). Pritchard v Briggs [1980] Ch 338.
4 FA 2003, s 46(3).
5 FA 2003, Sch 17A, para 11.
6 FA 2003, Sch 17A, para 14.
7 LPA 1925.
8 FA 2003, Sch 17A, para 4(3)(a).

Page 878
transactions/4 Substantial performance
4 Substantial performance
HR A[10889]
A lease is substantially performed when:
(a) possession is taken by the purchaser of the whole or substantially the whole of the chargeable
interest, together with any other right or interest pertaining to the chargeable interest acquired1;
(b) a substantial amount of the consideration other than rent is paid or provided; or
(c) rent is first paid.
Notification is required in relation to any of the above. However, although there has been substantial performance
requiring a return, the following circumstances render a return unnecessary because they are exempt and:
(a) because there is no consideration2;

(b) because the transaction is within the provisions relating to divorce3;
(c) because the lease has been granted by a registered social landlord4; and
(d) because it is within the exemption for variations of estates of deceased persons5.
HR A[10890]-[10900]
1 FA 2003, s 44(4) if the contract is substantially performed without having been completed the contract is to be treated as if it were itself
the transaction provided for in the contract.
2 FA 2003, Sch 3, para 1.
3 FA 2003, Sch 3, para 3.
4 FA 2003, Sch 3, para 2.
5 FA 2003, Sch 3, para 4.

Page 879
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases
F
Page 880
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/1
Introduction
1 Introduction
(a) Leases defined for SDLT purposes
HR A[10901]
For the purpose of SDLT a lease is defined to mean1:
(a) an interest or right, in or over land for a term of years, (whether fixed or periodic); or
(b) a 'tenancy at will', or other interest or right, in or over land terminable by notice at any time.
Although a tenancy at will forms part of the definition of a 'lease' under the FA 20032, it is 'exempt' and therefore
outside the scope of SDLT and thus is not a chargeable interest. Leases, for a term of years absolute subsisting in law or
in equity, or an estate in fee simple absolute, are estates in land3 and are 'major interests' for SDLT purposes, having a
clear obligation to notify.
The SDLT definition is sufficiently widely drawn to include within its ambit, amongst other things, an easement
acquired, for example, to enable or facilitate development of adjacent land. This is embraced in the terms of the Act
which states it as being 'another interest in or over land'.
HR A[10902]
1 FA 2003, Sch 17A, para 1(a), (b) and s 120.
2 FA 2003, s 48(2)(c)(i).
3 FA 2003, s 48(1).
(b) Leases defined under LPA 1925
HR A[10903]
In the LPA 1925, s 1(1)(b), a lease is defined as 'a term of years absolute'1, a term hallowed by time and use and well
understood by professional advisers, which is in these terms:
'"Term of years absolute" means a term of years (taking effect either in possession or in reversion whether or not at a rent) with or
Page 881
without impeachment for waste, subject or not to another legal estate, and either certain or liable to determination by Notice,
Re-entry, Operation of Law or by a Provision for cesser on redemption, or in any other event (other than the dropping of a life, or
the determination of a determinable life interest); but does not include any term of years determinable with life or lives or with the
cesser of a determinable life interest, nor if created after the commencement of the Act, a term of years which is not expressed to
take effect in possession within twenty-one years after the creation thereof where required by this Act to take effect within that
period; and in this definition the expression term of years includes a term for less than a year, or for a year, or years, and a fraction
of a year, or from year to year.'
The FA 2003 does not define rent, which leaves the professional adviser to apply the normal meaning of the term, and it
may be a tenable construction to the wider definition to apply a term other than rent, say royalty payments, to 'another
interest in or over land...'. This would mean that such payments would be regulated by the rule relating to periodical
payments2. The fact is that such payments are to be treated like leases in relation to the notification obligation (see HR
A[10870]ff above).
HR A[10904]
1 LPA 1925, s 205(1)(xxvii).
2 FA 2003, Sch 17A.

Page 882
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/2 Leases for
a fixed term
2 Leases for a fixed term
HR A[10905]
The FA 2003 provides1 in relation to a lease for a fixed term that no account shall be taken of:
(a) any contingency as a result of which the lease may determine before the end of the fixed term; or
(b) any right of either party to determine the lease or renew it.
This has the meaning that no account may be taken in determining the fixed term of any contingency, which may result
in determination of the lease before effluxion of time at the end of the fixed term. Likewise, any provisions, such as an
option to renew or the existence of a break clause or a notice to quit, are to be ignored. From this provision there flows
an unattractive and unfair consequence, for example, where there is a break clause and the lease is terminated before it
expires by time, the notice to quit does not trigger or allow any claim for the SDLT calculator on the full term from the
effective date to be reclaimed or any refund to be sought. The original calculation will have ignored the break clause
and will have charged SDLT on the NPV of the rents for the whole term.
HR A[10906]
1 Schedule 17A, para 2.

Page 883
Agreements for and grants of leases
3 Agreements for and grants of leases
HR A[10907]
An agreement for a lease is not a grant of a lease1 nor is it a chargeable transaction2, but it is likely to lead to multiple
reporting and to SDLT payment obligations3. Where an agreement for a lease is substantially performed and when the
lease is granted, liability to SDLT arises4. The stages through which an arrangement passes to become a grant of the
lease are as follows:
(a) the agreement for the lease5, or the entering into a contract simpliciter;
(b) substantial performance of the lease6;
(c) the grant of a lease as required by the LPA 1925, s 52, which triggers notification and an obligation
to pay;
(d) further reporting and payment where the FA 2003, s 51 - contingent, uncertain, or unascertained
consideration applies, and s 80 - requiring adjustment where contingency ceases or consideration
becomes ascertained.
Provisions are made in the FA 2003 where a contract is entered into which can be regarded as not entering into a land
transaction and where the transaction is to be completed by a conveyance. However, the agreement and the grant are to
be treated as parts of a single transaction, which may require dual notification, first on the agreement and secondly on
the grant. Duty becomes payable, therefore, when the transaction is completed, even though at that stage it may not
have been substantially performed7 for the reason that the effective date of the transaction will be the date of
completion. Duty also becomes payable when the contract becomes substantially performed even though at that time the
contract has not been completed. In such a case, the effective date of the transaction will be the date of substantial
performance8. The events amounting to substantial performance will either be the taking of possession of the whole or
substantially the whole of the subject matter of the contract, or the payment of a substantial amount of the
consideration9. In relation to the taking of possession, possession is defined to include the receipt of or the right to
receive rents or profits.
HR A[10908]
1 City Permanent Building Society v Miller [1952] Ch 840; [1952] 2 All ER 621.
2 FA 2003, s 44(2).
3 FA 2003, ss 44(8), 51, 77 and 80.
4 FA 2003, ss 44(8) and 77(2).
5 FA 2003, s 44(2).
Page 884
6 FA 2003, s 44(4).
7 FA 2003, s 44(3).
8 FA 2003, s 44(4).
9 FA 2003, s 44(5).
HR A[10909]
Even though there is no tax upon the agreement for a lease, where an option has been granted to enter into a lease, the
grant qualifies as a chargeable transaction, albeit that there is no charge upon the exercise of the option, substantial
performance of the 'agreement for the lease' after exercise of the option is likely to involve a linked transaction1. An
issue also arises where an option exists and as a result of its exercise, a second lease is granted. In such circumstances,
the matter at issue will be whether the second lease has to be aggregated with the first lease and the duty recalculated2.
The FA 2003 applies where successive leases are granted of the same or substantially the same premises as if the series
of leases were single leases granted at the time of the grant of the first lease in the series for a term equal to the
aggregate of the terms of all the leases, and in consideration of the rent payable under all of the leases.
HR A[10910]-[10920]
1 FA 2003, ss 46(1) and 108 - if they are linked transactions.
2 FA 2003, Sch 17A, para 5 - Treatment of successive linked leases - such events are linked transactions.
(a) Cases where assignment of a lease is treated as the grant of a lease
HR A[10921]
The FA 2003 provides1 that if the grant of a lease (the original lease) is exempt by reason of the following provisions:
(a) sale and lease back arrangements2;

(b) group relief or reconstruction or acquisition relief3;
(c) transfers involving public bodies4;
(d) charities relief5;
(e) any such regulations as are mentioned in the FA 2003, s 123(3) being regulations reproducing, in
relation to SDLT, the effect of enactments providing for exemption from stamp duty.
The grant is to be treated as being for a term equal to the unexpired term of the original lease, and on the same terms as
that on which the assignee holds that lease after this assignment6. However, on the first assignment of the lease that is
not exempt from charge, it is to be treated as if it were the grant of a lease by the assignor. The grant is treated as being
for a term equal to the unexpired term of the original lease, and on the same terms as those on which the assignee holds
Page 885
that lease after assignment.
HR A[10922]
1 Schedule 17A, para 11.
2 FA 2003, Sch 17A, para (2)(a) and s 57A - sale and leaseback.
3 FA 2003, Sch 17A, para 11(2)(b) and Sch 7, parts 1 or 2 - group relief, reconstruction or acquisition relief.
4 FA 2003, Sch 17A, para 11(2)(c) and s 66.
5 FA 2003, Sch 17A, para 11(2)(d) and Sch 8.
6 FA 2003, Sch 17A, para 11(3).
HR A[10923]
These provisions do not apply where the relief is group relief, reconstruction or acquisition relief, or charities relief and
is withdrawn as a consequence of any of the following disqualifying events occurring before the effective date of the
assignment. For these purposes a disqualifying event is
(a) in relation to the withdrawal of group relief, the purchaser ceasing to be a member of the same
group as the vendor;
(b) in relation to the withdrawal of reconstruction or acquisition relief, the change of control of the
acquiring company mentioned in the FA 2003, Sch 7, para 9(1)(a) of that schedule or as the case may be
the event mentioned in para 11(1)(a) or 2(a) of that schedule; and
(c) in relation to the withdrawal of charities relief, or as defined in Sch 8, para 2(3).
Page 886
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/4 Substantial
conformity
4 Substantial conformity
HR A[10924]
For the purposes of the FA 20031:
'references to completion are to completion of the land transaction proposed, between the same parties, in substantial conformity
with the contract which includes any agreement and "conveyance" includes any instrument.'2
The manner in which this part of the FA 2003 is drafted creates a problem where there has been substantial
performance3 of the agreement for a lease where shortly after such a agreement the lease is granted to a third party. This
can arise simply where the owner of the title in fee simple enters into an agreement for a lease with a developer who is
contractually bound with the owner of the freehold to carry out building works. The builder has no desire to live in a
building of his own construction or to retain any element or the whole of the major interest under the lease.
Consequently, the builder who will be the original tenant, under the lease, enters into a contract with a third party for a
consideration4 and directs that the lease be granted directly to that third party. This part of the transaction raises
questions and consequences which are provocative and not entirely straightforward. They are as follows:
(1) Has the developer by going into possession of the land to carry out the building works succeeded
in substantially performing the contract. If that were to be the case, and it is a possibility, the developer
will find himself liable to SDLT upon the rent and any other consideration given5.
(2) Can the lease be regarded as completing the substantially performed original contract between the
freehold owner and the developer, or does it complete the contract between the developer and the third
party and how or whether the third party is to be taxed in relation to the premium or the rent6?
(3) The developer on the above facts by virtue of being the 'original tenant' will be liable for SDLT on
the NPV of the rent initially, and is likely to remain liable to SDLT on all future variations of rent, a
potential burden which they will be reluctant to be saddled with.
(4) The effect of the FA 2003, s 45(3) clearly is that the third party is made the taxpayer for all future
occasions, which amounts to double charging SDLT on the developer and the third party.
However, attention should be drawn to two further provisions in the FA 2003. The first makes provisions, where there is
an assignment of a lease, to the assumption by the assignee of the obligation8 which provides that in the case of an
assignment the obligation to pay rent or to perform or observe any other undertaking of the tenant does not count as
chargeable consideration for the assignment9. The second makes provision for the assignee, under an assignment of a
lease, to have responsibility for rendering returns in their circumstances therein set out10. The most presently prudent
and least expensive course to avoid any prospect of double charging by HMRC seems to be for the original tenant, the
developer, to assign the lease to the third party and to take advantage of para 17 of the FA 2003, Sch 17A that the
payment of rent or performance or observation of any other undertaking does not count as chargeable consideration.
Page 887
HR A[10925]
1 FA 2003, s 44(10)(a).
2 FA 2003, s 44(10)(b).
3 See HR A[10730] above for more detail on 'substantial performance'.
4 FA 2003, s 45(2). This transaction is not taxable because the transferee is not regarded a entering into a land transaction by reason of the
transfer of rights.
5 FA 2003, Sch 4, para 10 - chargeable consideration and the carrying out of works.
6 FA 2003, s 45 - 'contract and conveyance: effect of transfer of rights'.
7 FA 2003, s 45(1) - applies where:
'(a) a contract for a land transaction ("the original contract") is entered into under which the
transaction is to be completed by a conveyance; and (b) there is an assignment, subsale or other
transaction (relating to the whole or part of the subject matter of the original contract) as a result
of which a person other than the original purchases becomes entitled to call for a conveyance to
him.'
References in the following provisions of this section to a transfer of rights are to any such assignment,
subsale or other transaction.
8 FA 2003, s 45(3), (4) applies:
'as if there were a contract of a land transaction ("a secondary contract") whereby (a) the
transferee is the purchaser; and (b) the consideration for the transaction is (i) so much of the
consideration under the original contract as is referable to the subject matter of the transfer of
rights and is to be given (directly or indirectly) by the transferee or a person connected with him;
and (ii) the consideration given for the transfer of rights.'
The substantial performance or completion of the original contract at the same time as and in connection
with the substantial performance or completion of the secondary contract shall be disregarded.
Sub-section (4) where there are successive transfers of rights, sub-s (3) has effect in relation.
9 FA 2003, Sch 17A, para 17.
10 FA 2003, Sch 17A, para 12.
Page 888
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/5 Exceptions
to the rule that conveyances must be by deed
5 Exceptions to the rule that conveyances must be by deed
HR A[10926]
All conveyances of land, or of any interest therein, unless made by deed, are void for the purpose of conveying or
creating a legal estate. The exceptions to this rule are provided by the LPA 1925, s 52(2) as follows:
(a) assents by a personal representative;

(b) disclaimers made in accordance with [ss 178-to 180 or ss 315-319 of the Insolvency Act 1986] or
not required to be evidenced in writing;
(c) surrenders by operation of law, including surrenders which may, by law, be effected without
writing;
(d) leases or tenancies or other assurances not required by law to be made in writing;
(e) receipts [other than those falling within the LPA 1925, s 115];
(f) vesting orders of the court or other competent authority;
(g) conveyances taking effect by operation of lien.
Page 889
Pre-implementation date leases
6 Pre-implementation date leases
HR A[10927]
Where a lease has been entered into before the 'implementation date' of the SDLT regime on 1 December 2003 and has
been held over, the SDLT regime will not operate where the contractual term expires after that date. Paragraph 3 of Sch
17A of the FA 2003 makes no provision to cover this eventuality. The present practice of HMRC is to treat the lease as
a stamp duty transaction not within the ambit of the SDLT1.
HR A[10928]
1 FA 2003, Sch 19, para 2.

Page 890
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/7 Leases for
a fixed term or until determined
7 Leases for a fixed term or until determined
HR A[10929]
A lease granted for a fixed term and thereafter until determined is to be treated as for a definite term equal to the fixed
term, together with such period as must elapse before the earliest date at which the lease can be determined1 or it may
be determinable by operation of law2. In such a case, the FA 2003 provides that it is to be treated:
(a) in the first instance as if it were a lease for the original fixed term and no longer;
(b) if the lease continues after the end of that term, as if it were a lease for a fixed term, one year
longer than the original fixed term;
(c) if the lease continues after the end of the term resulting from the application of (b) above, as if it
were a lease for a fixed term two years longer than the original term, and so on.
HR A[10930]-[10940]
1 FA 2003, Sch 17A, para 2.
2 FA 2003, Sch 17A, para 3(1)(a), (b).
HR A[10941]
The FA 2003 also provides in relation to a lease for a fixed term that no account shall be taken of:
(a) any contingency as a result of which the lease may determine before the end of the fixed term; or
(b) any right of either party to determine the lease or renew it.
This has the meaning that no account may be taken in determining the fixed term of any contingency, which may result
in determination of the lease before its end at expiration of the fixed term. Likewise, any provisions such as an option to
renew, or the existence of a break clause or a notice to quit, are to be ignored. From this provision there flows an
unattractive and unfair consequence, for example, where there is a break clause and the lease is terminated before it
expires by time, the notice to quit does not trigger or allow any claim for the SDLT calculator on the full term from the
effective date to be reclaimed or any refund to be sought. The original calculation will have ignored the break clause
and will have charged SDLT on the NPV of the rents for the whole term.
HR A[10942]
Page 891
The extension of the fixed term lease until determined, or of a lease continued beyond the fixed term by operation of
law, is to be treated, for SDLT purposes, as a lease for the definite term equal to the fixed term, plus the further period
that shall elapse up to the earliest date on which the lease can be determined1. Where the lease thus continues beyond
the fixed term, the transaction becomes notifiable and additional tax is likely to be payable. It may well prove to be the
case that tax will become payable where none was payable on the fixed-term land transaction. In such a case, the
purchaser must deliver a return or further return before the expiry of thirty days after the end of the term. The return
must include a self assessment of the tax chargeable on the basis of the information in the return. The rates applicable
are those pertaining at the effective date of the transaction, with payment of the tax accompanying the return2.
HR A[10943]
1 FA 2003, Sch 17A, paras 2-3.
2 FA 2003, Sch 10 and s 76(3)(a), (b).

Page 892
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/8 Returns or
holding over
8 Returns or holding over
HR A[10944]
The provisions of the FA 2003, Sch 10 (returns, enquiries, assessments, and other matters) apply to a return under this
provision as they apply to a return under s 76 (general requirement to deliver a LTR), with the adaptation that references
to the effective date of the transaction shall be read as references to the day on which the lease becomes treated as being
for a longer fixed term. The language of the Act indicates, therefore, that the holding over is to be treated as a new
SDLT lease for one year1, which will be a two-year, three-year lease if holding over continues until it becomes a fully
reporting lease for seven years.
HR A[10945]
1 FA 2003, Sch 17A, paras 3-4.

Page 893
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/9 Effective
date and holding over
9 Effective date and holding over
HR A[10946]
The construction of the meaning and application of the term effective date as indicated above differs from the
construction applied by HMRC Stamp Taxes/SDLT office to the same provision. Where there is a holding over,
pursuant to leases granted after the implementation date under the SDLT regime, the assessment or the
deemed/proposed extension requires going back to the earlier of the original grant of the lease or the date of its
substantial performance. This will cause a recalculation of the tax, and observance of the 'notification procedures',
where the term of the lease exceeds seven years. In other words, where there is a holding-over of a five-year lease by,
say, one year, the recalculation will be based on a six-year lease and SDLT in excess of that charged for the five-year
term will become exigible. Recalculations will be required for every year the lease is held over or where there are orders
for interim rents.
Page 894
Acquisition
10 Acquisition
HR A[10947]
The term 'acquisition' in the SDLT legislation has an extended meaning that is broader than the 'conveyance of sale'
under the former stamp duty legislation. It applies1 to the following:
(a) the creation of a chargeable interest;

(b) the surrender of a chargeable interest;
(c) the release of a chargeable interest; and
(d) the variation of a chargeable interest.
There must also be a chargeable consideration2. This brings into question whether there can be consideration if the
obligation is imposed by operation of law and in such circumstances where there may be no consideration whether any
SDLT is chargeable. In such a case, the obligation may be imposed, thereby not constituting consideration for the
simple reason that consideration has to be by consent. An actual illustration may help to elucidate this somewhat
tortuous application. In Swayne v IRC [1900] 1 SQB 172, an assignee of a lease took on the obligation to pay future
rent. Because the assignee cannot accept the benefit of the lease without taking on the liability to pay future rent, it will
not constitute chargeable consideration. Furthermore, on the question of an assignment of a lease and the assumption of
obligations by the assignee, the FA 2003 provides:
(1) that the payment of rent; or

(2) the performance or observation of any other undertaking of the tenant under the lease;
shall not count as chargeable consideration for the assignment.
HR A[10948]
1 FA 2003, s 43(3).
2 FA 2003, Sch 3, para 1.

Page 895
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/11 Extension
of fixed term
11 Extension of fixed term
HR A[10949]
(1) Where a lease is continued after the end of a fixed term, it will be treated for SDLT purposes as if
it were a lease for a fixed term of one year longer than the original term. This land transaction becomes
notifiable and if additional rent becomes payable where none was payable before, the purchaser must
deliver a return or further return in relation to that transaction before expiry of 30 days from the end of
the term. The return must include a self assessment of the tax chargeable on the basis of the information
in the return, at the rate of tax in force at the effective date of the transaction. For the purposes of this
part of the FA 2003, the effective date shall be the day on which the lease becomes treated as being for a
longer fixed term1.
(2) If the lease continues after the end of the term resulting in a fixed term of one year, it is to be
treated as if it were a lease for two years, and if it continues after the end of that term, it is to be treated as
a lease for three years and so on. However, if such an arrangement were to continue and to become a
lease for seven years, it would become fully reportable, regardless of the rent level. Where the rents are
variable, reasonable estimates will have to be prepared for the HMRC review after expiration of the fifth
year of the tenancy2.
(3) In calculating the length of the fixed term, no weight or consideration is to be given to any manner
in which the lease may determine before expiry of the fixed term, thus options to renew, break clauses,
notices to quit are to be ignored for this purpose. However, where there is a holding over of a stamp duty
lease, that is to say a lease entered into before the implementation date, it seems that under the SDLT
regime it will be treated as a new lease for one year until the lease becomes a fully reporting seven-year
lease. This contrasts with HMRC's present view where a lease for a fixed term is held over on the
implementation date of the SDLT regime. Then the view is that it is a continuation of the old stamp duty
regime and does not fall within the new regime. In all such cases, where the initial transaction was not
notifiable, or was one in which no tax was payable, but the deemed extension lease becomes notifiable
because it is a lease for seven or more years, the taxpayer must render a return and calculate the tax at the
rate in force on the effective date of the transaction3.
(4) Where holding over of the fixed term relates to leases granted on or after the implementation date,
the tax is required to be recalculated by reference to the original effective date of the grant of the lease, or
the date of substantial performance. The whole has to be recalculated and adjustments made in reporting
the transaction where the term becomes seven years or longer. Recalculation may also be required
following rent reviews during the term of the lease.
HR A[10950]-[10960]
1 FA 2003, Sch 10 and s 76.
2 FA 2003, Sch 17A, paras 7-8.

Page 896
2 FA 2003, Sch 10 makes provision for such returns.

Page 897
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/12 Deemed
leases
12 Deemed leases
HR A[10961]
'Deemed leases' are subject to SDLT and arise in relation to:
(a) leases that continue after a fixed term1;

(b) leases for an indefinite term2;
(c) successive linked leases3;
(d) cases where assignment of a lease is treated as a grant of a lease4; and where
(e) increase of rent is treated as grant of a new lease and is a variation of lease5.
HR A[10962]
1 FA 2003, Sch 17A, para 3.
2 FA 2003, Sch 17A, para 4.
3 FA 2003, Sch 17A, para 5.
4 FA 2003, Sch 17A, para 11.
5 FA 2003, Sch 17A, para 14.
HR A[10963]
Where the lease continues after the end of the deemed fixed term and the effect is that the transaction become notifiable
or additional tax payable in respect of a transaction, or that tax is payable in respect of a transaction where none was
payable before1:
(a) the purchaser must deliver a return or further return in respect of that transaction before the end of
the period of 30 days after the end of that term. It should be noted that this provision overrides any
legislative provisions relating to leases for indefinite terms, such as the provisions dealing with leases for
life or perpetually renewable leases2.
The tenant has to be particularly alert where the rent is variable, which can occur for different reasons,
for instance a high rent may be chargeable for one year and meet the 'notifiable' requirements of the FA
2003, s 77 and may be lower in subsequent years, giving rise to a refund of SDLT overpaid, or there may
be a mere obligation to notify HMRC of the variation. Such occasions can occur where the rent is linked
Page 898
or related to turnover in the business or to some other form of profit sharing These can be added to this
unquantified rent review to say market value, which may be 'up' or 'down', and for instance where there
are 'rent holidays' with a subsequent review to market rent. Notification is required before the expiration
of 30 days after the end of the initial term3;
(b) the return must include a self assessment of the tax chargeable in respect of the transaction on the
basis of the information contained in the return;
(c) the tax chargeable is to be calculated by reference to the rates in force at the effective date of this
transaction;
(d) the return must be accompanied by payment of the tax or additional tax payable.
HR A[10964]
1 FA 2003, s 77(2). Notifiability of lease for less than a term of seven years.
2 LPA 1925.
3 FA 2003, Sch 17A, para 4(3)(a).
HR A[10965]
Leases with variable rent granted on or after 1 December 20031 which are subject to SDLT have a complex set of
provisions to be applied. Leases varied after 1 December 2003 which were stamp duty leases at the date of their original
creation are unaffected by the 1 December 2003 provisions. Even in this situation it does not automatically follow that
stamp duty leases will remain unaffected because holding over may deem new leases to come into existence for SDLT
purposes. Exactitude is providing for future rents, such as by linking the rent to the Retail Price Index, will cause the
rent to be treated as certain, but where the rent provision is in such terms 'as the greater of the RPI or 5%', such certainty
is abandoned. All other rents are variable or uncertain.
HR A[10966]
1 FA 2003, Sch 17A, para 7.
HR A[10967]
The provisions of the FA 2003, Sc 10 apply to a return under para 4 of Sch 17A (Treatment of leases for an indefinite
term) as they apply to a return under s 76, which prescribes the duties obligatory to a purchaser to deliver a LTR with
the adaptation that references to the effective date of the transaction shall be read as references to the day on which the
lease becomes treated as a lease for the longer fixed term.
Page 899
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/13 Leases
for an indefinite term
13 Leases for an indefinite term
HR A[10968]
The FA 20031 defines the meaning of the term 'leases for an indefinite period' to include:
(a) a periodic tenancy or other interest or right terminable by a period of notice;

(b) a tenancy at will; or
(c) any other interest or right terminable by notice at any time.
Provision is made in Sch 17A, para 4(2) that no account is to be taken for the purpose of this part of the Act of any other
statutory provision deeming a lease for an indefinite period to be a lease for a different term. This will exclude,
therefore, the provision contained in the LPA 1925 dealing with leases for life or perpetually renewable leases which
allow a lease to be for a different period to that prescribed in the FA 20032.
HR A[10969]
1 Schedule 17A, para 4(5).
2 Schedule 17A, para 4(2).
HR A[10970]-[10980]
A lease for an indefinite term1 is to be treated, in the first instance, as if it were a lease for a fixed term of one year2. If
the lease continues into the second, third or fourth years it becomes a lease for a fixed term of two, three or four years,
or as appropriate3. By reason of the notification procedures4, this lease, being for a term not exceeding seven years, will
be notifiable only if the chargeable consideration (rent) being paid is chargeable at a rate of 1% or higher, that is to say
where the relevant rental value for residential is more than £120,000 and for non-residential or mixed is £150,000. It
should be noted in relation to the hold-over provisions that where there is a holding over of a lease for an indefinite term
without the creation of a new lease beyond one year, any assignee of such a lease or a deemed lease becomes
responsible for any reporting or payment obligations5.
HR A[10981]
1 FA 2003, Sch 17A, para 4(1).

Page 900
2 FA 2003, Sch 17A, para 4(1)(a).
3 FA 2003, Sch 17A, para 4(1)(b), (c).
4 FA 2003, s 77.
5 FA 2003, Sch 17A, para 12(1)(d).
HR A[10982]
In construing the FA 2003, Sch 17A, para 4(3), it is necessary to consider the effect of sub-para 4(1) in relation to the
continuation of a lease after the end of a deemed fixed term. The effect is that the transaction becomes notifiable, or that
additional tax becomes payable or that tax becomes payable where none was payable previously:
(a) the purchaser must deliver a return or further return in respect of that transaction before expiry of
30 days after the end of that term1;
(b) the return must include a self assessment of the tax chargeable in respect of the transaction based
on the information contained in the return2;
(c) the tax so chargeable must be based on the tax rates in force at the effective date of the
transaction3; and
(d) the return must be accompanied by payment of the tax or additional tax payable4.
The same statutory provisions apply to the continuation of a lease as they did in relation to a fixed term regarding
notifiability, in delivery of a return, and in the rendering of a self assessment of the tax payable, calculated by reference
to the rates in force at the effective date of the transaction. It will be recalled that where the lease is for less than seven
years, notification has to be given either where the chargeable consideration consists of or includes a premium in respect
of which tax is chargeable at 1% or higher and likewise where the chargeable consideration consists of or includes rent
in respect of which tax is chargeable at 1% or higher5.
HR A[10983]
1 FA 2003, Sch 17A, para 4(3)(a).
2 FA 2003, Sch 17A, para 4(3)(b).
3 FA 2003, Sch 17A, para 4(3)(c).
4 FA 2003, Sch 17A, para 4(3)(d).
5 FA 2003, s 77(2).
HR A[10984]
Page 901
Adding to the complexity of the FA 2003, Sch 17A, para 4 is the provision whereby Sch 10 (returns, enquiries,
assessments and other matters) apply to a return under para 4 as they apply to a return under s 76 (general requirements
to deliver a LTR), with the adaptation that references to the effective date of the transaction shall be read as references
to the day on which the lease becomes treated as being for a longer fixed term.
HR A[10985]
In summary, if the transaction is not initially notifiable, but subsequently becomes notifiable, or tax becomes payable
for the first time, the 30-day limit will apply within which the return has to be rendered. If the transaction was
previously notifiable, or tax had been paid, a further return will be required.
Page 902
Successive linked leases
14 Successive linked leases
HR A[10986]
(1) Where the lease is one of a number of linked transactions, the relevant rental value will be the total
of the NPV of the rent payable over the term of the linked leases1. For these purposes, the relevant land
is the land that is the subject of the lease. The tax chargeable is the total of the amounts produced by
taking the relevant percentage of as much of the relevant rental value as falls within each rate band. The
relevant percentage and rate bands are determined by reference to whether the relevant land consists
entirely of:
(a) residential property; or

(b) includes land that is not residential property.
The linking of leases applies also where there are successive leases of the same property or substantially
the same premises, rendering such successive grants as linked transactions such that the series of leases
will be treated as a single lease granted at the time of the first lease in the series for a term equal to the
aggregate term of the series, and in consideration of the rent payable under all the leases.
With regard to notification of successive linked leases, all or any one of the purchasers may make a
single LTR as if all the transactions were a single notifiable transaction2. Where a single LTR is made,
those persons making the return are treated as acting jointly with the other purchasers in relation to the
single transaction3. Where subsequent transactions occur, these have to be notified by the assignees of
the lease4.
(2) The requirement to establish what constitutes a single arrangement may be fraught with difficulty.
For instance, if there is a short lease and there is an option to renew, which could be part of the original
agreement or entered into much later in time such that it could be cogently argued by the taxpayer that it
was not originally in his mind nor did he intend initially to extend the lease, the question arises whether
the option is linked with the original, in which case in computing liability the rents of both would have to
be aggregated5, or if not then the second transaction would stand on its own.
Another example is where at auction separate acquisitions of property, between the same persons, are
acquired in separate lots. HMRC's view presently seems to be that they are separate transactions and not
a single transaction6.
The introduction of having to take into account the terms of the original lease and recalculate liability
introduces a new principal into the British tax system which might be called 'creeping retrospection', and
the question whether or not creeping retrospection is acceptable is one for Parliament to make.
(3) Notifiability of successive linked transactions is not a straightforward nor easy exercise. For
instance, a transaction first entered into may not be notifiable, but when linked to a later transaction
becomes notifiable. This is another example of creeping retrospection. The same can occur in relation to
an initial transaction taxed at a lower rate which by reason of its being linked to a later transaction, the
tax element is increased. Both the above circumstances render obligatory the completion of an LTR and
submission of the self-assessed tax payable with the return, at the rate in force, calculated on the basis of
the effective date of the initial transaction7. However, the 30-day period of notification runs from the
effective date of the subsequent transaction8.
(4) Reference still has to be made to what essentially are further anti-avoidance provisions aimed at
Page 903
preventing taxpayers from capitalising on the nil-band rate by the linking of transactions. The reader and
professional advisers will be aware that although there is no tax upon an agreement for a lease, the actual
grant of an option to enter into a lease is a chargeable event, although no charge arises on the exercise of
the option. However, where there is substantial performance of the agreement for the lease arising on its
exercise and grant, there will be a linked transaction9. The FA 2003 provides, in relation to options and
rights of pre-emption, that the acquisition of:
(a) an option binding the grantor to enter into a land transaction; or

(b) a right of pre-emption preventing the grantor from entering into or restricting the right of
the grantor to enter into a land transaction;
is a land transaction distinct from any land transaction resulting from the exercise of the option or the
right. It then becomes necessary to ascertain whether such transactions are linked10.
(5) In summary, thereof:
(a) Where there is an option exercised to renew a five-year lease for a further term of five
years, there is for SDLT purposes one ten-year lease, which will impact on the lower rates of the
earlier transaction; and
(b) Will require the purchaser under the initial term to render a further return within the 30-day
period. Assignees of leases are required also to render such a return11. The return has to comply
with the provision of the FA 2003, Sch 10.
(c) Under the FA 2005, the residential nil band rate has increased from £60,000 to £120,000.
The nil-rate band will have to be allocated to the separate properties which are treated as one
property under the linked transaction provisions on the basis of the NPVs of rent relating to each
property, which will be carried forward for future computations when rent is reviewed.
(d) Linked transactions only apply between the original parties and those parties or persons
connected with them as defined in ICTA 1988, s 839. This can be an important aspect where a
landlord grants a lease of a chain of shops to a single tenant.
HR A[10987]
1 FA 2003, Sch 5, para 2(4)(b).
2 FA 2003, s 108(2) where there are two or more linked transactions with the same effective date, the purchaser or all of the purchasers
may make a single LTR as if all of those transactions that are notifiable were a single notifiable transaction.
3 FA 2003, s 108(4).
4 FA 2003, Sch 17A, para 12(1)(b).
5 FA 2003, Sch 17A, para 5 - this requires a recalculation of SDLT upon the original lease.
6 Kimbers & Co v IRC [1935] All ER Rep 609; Prudential Assurance Co. v IRC [1992] STC 863 and Cohen & Moore v IRC [1933] All
ER 950.
7 FA 2003, s 81A - this provides for further returns where relief is withdrawn under Sch 6A, para 11 for certain acquisitions of residential
Page 904
property; Sch 7 part 1, group relief; Sch 7, part 2, reconstruction or acquisition relief or Sch 8, charities relief.
8 FA 2003, s 87(3)(aa) - 'Interest on unpaid tax' which provides that the relevant date in the case of an amount payable under s 81A in
respect of an earlier transaction because of the effect of a later linked transaction, the effective date of the later transaction.
9 FA 2003, ss 46(1) and 108.
10 FA 2003, s 108.
11 FA 2003, s 87 and Sch 17A, para 12.

Page 905
Chargeable consideration
15 Chargeable consideration
(a) Its ascertainment and taxation
HR A[10988]
The amount of tax chargeable in respect of a chargeable transaction is a percentage of the chargeable consideration for
the transaction1. The rate charged depends upon a number of factors, in particular upon:
(a) the level of the consideration;

(b) whether the transaction is a linked transaction with other chargeable transactions2;
(c) whether the property is residential or non-residential; and
(d) whether the consideration consists solely of or includes rent3.
The rate is fixed by reference to the nature of the 'relevant land', that is to say to the 'main subject matter of the
transaction' and not by reference to anything which pertains or is appurtenant thereto4. The term 'appurtenant' is used to
describe land or rights and profits attached to or arising out of the land5 which is annexed to other land. The structure of
the rates is certainly complex because the consideration can include not only just rent, but any other consideration, such
as premiums, which are required to be aggregated with the rent, but both are taxed at different rates. The percentage
charge also depends upon whether the relevant land6, that is to say the land - an interest in which the chargeable interest
is acquired7, is wholly or partially residential. Residential property is defined8 to mean:
(a) a building used or suitable for use as a dwelling;

(b) a building that is in the process of being constructed or adapted for use as a dwelling;
(c) land that is or forms past of a garden or grounds of a building that is used or circled for use or is
being constructed or adapted for use as a dwelling; or
(d) an interest in or right over land, that subsists for the benefit of a building or land suitable for use
with a dwelling.
HR A[10989]
1 FA 2003, s 55(1).
2 FA 2003, ss 55(4) and 108, and Sch 19, para 7.
3 FA 2003, s 56 and Sch 5.
4 FA 2003, s 55(3).
Page 906
5 Gosselin, Re, Gosselin v Gosselin [1906] 1 Ch 120 - in which it was held that trust monies brought in to be used to purchase land came
within this category.
6 FA 2003, s 44(3)(a).
7 FA 2003, s 44(6).
8 FA 2003, s 116.
Page 907
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/F Leases/16 Premiums
16 Premiums
HR A[10990]-[11000]
SDLT is charged on both premium and rent1. On rent the charge is on the NPV of the rent as computed in accordance
with the FA 2003, Sch 5, para 3. The rates are as follows.
HR A[11001]
1 FA 2003, Sch 5, para 9(1).
(a) Transactions involving wholly residential property1
HR A[11002]
(1) Where the consideration does not include rent (ie it includes other consideration such as
premiums).
More than £500,000 4%
(2) Where the consideration consists solely of rent, the SDLT will be charged as a percentage of the
NPV of the rent payable over the term of the lease3.
Relevant consideration - relevant rental value Percentage
More than £120,000 1%
The apparent distinction between rates of tax on rent and other consideration, including premiums, is
evident from the above tables. In the table in (1) above, under which consideration other than rent will be
charged, no duty will be payable on premiums up to the FA 2005 new threshold of £120,000, but once
that level has been exceeded, the entire premium will be charged at the higher rate, for example say that
the consideration was £130,000, the duty would be at 1% amounting to £1,300. This works on the 'slab'
system rather than the 'slice' system. In contrast, under the table in (2) above, the 1% rate applies only to
the excess of the NPV as calculated in HR A[10823]4 above over the nil-rate threshold and not as above
to the whole value5.
(3) Where the consideration includes rent and other consideration, such as premium or a ground rent.
Duty will be chargeable on the rent and other consideration6 as follows:
(a) When annual rent does not exceed £600 pa.

Relevant consideration - premium Percentage
Page 908

More than £500,000 4%
To be added to the following:
Relevant consideration -relevant rental value7 Percentage
The excess over £120,000 1%
(b) Where the annual rent exceeds £600 pa.
Relevant consideration - premium Percentage
More than £500,000 4%
Relevant consideration -relevant rental value8 Percentage
Where the chargeable consideration includes rent and exceeds £600 pa, in order to avoid two nil-rate bands applying,
the nil-rate band for transactions below £120,000 does not apply and such transactions fall within the 1% band up to
£250,0009. As to rents it should be noticed that where different amounts of rent are payable for different periods of the
term, such amounts must be taken into account in determining the average annual rent over the period for which the
highest rent is payable.
HR A[11003]
1 FA 2003, s 55(2)(a).
2 (i) FA 2005, s 95(1): Threshold of £60,000 in the FA 2003, s 55(2) (amount of SDLT chargeable - general) to be substituted by
£120,000 in Table A (bands and percentages for residential property).
(ii) FA 2005, s 95(2): Threshold of £60,000 in the FA 2003, Sch 5, para 2(3) (amount of SDLT chargeable - rent) to be substituted by
£120,000 in Table A (bands and percentages for residential property.
(iii) FA 2005, s 95(3): Threshold of £60,000 in the Finance Act 1999 (FA 1999), Sch 13 (stamp duty instruments chargeable and rates of
duty) to be substituted by £120,000 in para 4 (bands and percentages for conveyance or transfer or sale of property other than stock or
marketable securities).
(iv) The effective date for the operation of these measures (i)-(iii) is 16 March 2005.
3 FA 2003, Sch 5, para 2(4)(b).
4 FA 2003, Sch 5, para 3.
5 FA 2003, Sch 5, para 2(2) as amended.

Page 909
6 FA 2003, Sch 5, para 9(4).
7 FA 2003, Sch 5, para 2(4)(b).
8 FA 2003, Sch 5, para 2(4)(b).
9 FA 2003, Sch 5, para 2(4)(b).
(b) Transactions involving wholly residential property situated in a disadvantaged area.
HR A[11004]
Effect has been given to the FA 2005, s 96 and Sch 9 whereby amendments were made to the FA 2003, Sch 6
(Disadvantaged Area Relief) (DAR) which effectively limited this relief to transactions involving residential land or to
consideration properly attributable to residential land. Under this legislation, DAR has been removed for non-residential
property with effect from 16 March 2005. Thus it will no longer be necessary to apportion the consideration between
residential and non-residential property.
(1) Where consideration does not include rent1.

Not more than £150,000 Exempt2
More than £500,000 4%
(2) Where consideration consisted solely of rent.
Relevant rental value Percentage
Not more than £150,000 Exempt
(3) Where consideration included rent.
Relevant rental value - rent Percentage
Not more than £150,000 Nil/Exempt
(a) Where the annual rent did not exceed £600 pa.
More than £500,000 4%
More than £500,000 4%
Page 910
Where in relation to residential property in a disadvantaged area the consideration includes rent and the relevant rental
value does not exceed £150,000, the rent does not count as chargeable consideration3 with the consequence that the
transaction will be treated as not including rent. Where, however, the annual rent is less than £600 pa and the
consideration is less than £150,000, the consideration other than rent does not count as chargeable consideration4, and if
this is less than £150,000 no SDLT will be payable.
HR A[11005]
1 FA 2003, Sch 5, para 2(4)(b).
2 FA 2003, Sch 6, para 5(2)(a)
3 FA 2003, Sch 6, para 5(3).
4 FA 2003, Sch 5, para 9(4).
(c) Transactions involving wholly residential land situated partly in a disadvantaged area
and partly outside
HR A[11006]
Consideration falls to be apportioned between residential land that is outside a disadvantaged area and residential land
that is within the disadvantaged area1. The consideration will be taxed, area by area, at the rates set out above.
HR A[11007]
1 FA 2003, Sch 6, para 7(2). Saunders v Edwards [1987] 2 All ER 651 - failure to apportion properly may constitute fraud and/or forgery.
(d) Transactions involving wholly non-residential property
HR A[11008]
By reason of the FA 2005, DAR has been removed for SDLT purposes for non-residential property with effect from 16
March 2005.
(1) Where the consideration does not include rent.

Page 911

More than £500,000 4%
(2) Where the consideration consists solely of rent.
The excess above £150,000 1%
(a) Where the annual rent does not exceed £600 pa.
More than £500,000 4%
More than £500,000 4%
(e) Land partly residential and partly non-residential outside a disadvantaged area
HR A[11009]

More than £500,000 4%
(3) Where the consideration includes rent.
Page 912
More than £500,000 4%

More than £500,000 4%
(f) Land which is partly residential and partly non-residential and is wholly within a
disadvantaged area
HR A[11010]-[11020]
For the reasons given above and by reason of the FA 2005, s 96 and Sch 9, DAR for non-residential property has been
removed.

More than £500,000 4%
(3) Where the consideration includes rent.
More than £500,000 4%
More than £500,000 4%
Page 913
(g) Transactions involving both residential and non-residential properties
HR A[11021]
(1) Land not in a disadvantaged area.

More than £500,000 4%
(2) Residential property.
(a) Apportioned consideration not including rent.

More than £500,000 4%
(b) Apportioned consideration consisting solely of rent.
(c) Apportioned consideration including rent.
(i) Where annual rent does not exceed £600 pa.

Relevant other consideration - premium Percentage
More than £500,000 4%
(ii) Where the annual rent does exceed £600 pa.
Relevant other consideration - premium Percentage
More than £500,000 4%
Page 914
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/G Exemptions and
reliefs
G
Page 915
reliefs/1 Introduction
1 Introduction
HR A[11022]
The former practice familiar to professional advisers relating to stamp duty required 'adjudication' to be obtained where
exemption or mitigation of the duty on an 'instrument' was sought. This procedure was uncomplicated and led directly
to the granting of the relief or to its refusal. Under the SDLT scheme, no equivalent to the stamp duty adjudication
procedure exists. SDLT requires the tax payer, usually through his professional advisers, to render a LTR in relation to
any chargeable transaction. The LTR must include a self assessment of the tax chargeable in respect of the transaction
and be accompanied by payment of the tax on the transaction1. The SDLT procedure places a new burden on the
taxpayer and his professional advisers to analyse accurately the proposed transaction. They are required to take a
reasoned view of its nature and its merits in attracting the relief sought before completing the LTR, thus making it
evident to HMRC that the relief has been claimed from their inspection of the LTR which, when computing the liability,
the taxpayer will have accounted for the relief claimed. The SDLT self-assessment regime, in imposing such a duty on
the taxpayer, makes it absolutely essential that the taxpayer and/or his professional advisers maintain a detailed
contemporaneous record of their reasoning in support of their decision to claim relief. It also makes it almost essential
for the taxpayer to seek professional advice from someone skilled in SDLT to avoid, or at least to limit, exposure to a
claim by HMRC of negligence and the imposition of penalties. Although the taking of professional advice will incur
cost, the taxpayer will be better protected against erroneous entries made in his LTR and against the possibility of a
negligence claim being made against him.
HR A[11023]
1 FA 2003, s 76(3)(a) and (b).
HR A[11024]
The term 'exempt' under the old regulations was held to mean that the transaction had to be an instrument that failed to
be within the charge to tax and was specifically taken out of charge for it to be exempt1. It was a commonly held, but
mistaken, belief that the term exempt meant that the transaction was not liable because the transaction fell totally
outwith the charging provisions of the FA 2003. This view has been vigorously rejected by the Stamp Office. An effect
of this is that taxpayers, when making their LTRs, must make it absolutely clear what relief they are claiming and its
amount in the same return. A claim for relief by the taxpayer should, under the SDLT regime, be made in the LTR. It is
unlikely that HMRC will gratuitously grant any relief unless such a claim is made. There are many tortuous and
convoluted relieving provisions in the Act which require very careful construing when completing the LTR to ensure
that no relief is overlooked to which the taxpayer is entitled.
HR A[11025]
Page 916
1 IRC v Ansbacher (Henry) & Co [1963] AC 191, [1962] 3 All ER 843 (HL).
HR A[11026]
The FA 2003 contains a number of reliefs in ss 59-75. These sections give cross references to schedules, which give
greater operational detail than the sections and to which reference will be made in the text or the footnotes. Sections 57
through to 75 deal with a wide variety of different transactions. The first of these will be 'sale and leaseback'
arrangements. Others will follow.
Page 917
reliefs/2 Sale and leaseback transactions
2 Sale and leaseback transactions
HR A[11027]
Sale and leaseback transactions consist of the transfer of a major interest, as defined, in land by A to B ('the sale') and
out of that interest B grants a lease to A ('the leaseback'). This transaction, amongst others, fall within the ambit of the
FA 2003, s 47(1) which provides as follows: where one land transaction is entered into wholly or partly in consideration
of another land transaction being entered into by him as seller, then each transaction is treated as a separate chargeable
transaction attracting its own separate charge to SDLT. This rule applies in addition to exchanges of land; to surrenders
of leases; to variations of trusts or variations to the estates of deceased persons1 which may also include equitable
interests inland2 or deemed equitable interests in the case of foreign trusts.
HR A[11028]
1 FA 2003, Sch 3.
2 FA 2003, Sch 16, para 2.
(a) Conditions for relief
HR A[11029]
Relief is given on a leaseback of non-residential property where the leaseback element qualifies for relief1.
In order to qualify for exemption, the following conditions must be met:
(a) That the property is not residential property.

(b) That the consideration for the sale does not consist of or include anything other than payment of
money or the assumption, satisfaction or release of a debt.
(c) Where the leaseback is of the same premises that were the subject of the sale.
The consideration for the sale shall not be less than the market value of the interest transferred. The market value must
be calculated on the basis that it was not part of a sale and leaseback arrangement.
HR A[11030]-[11040]
Page 918
1 FA 2003, s 57A as inserted by the Stamp Duty and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2) Regulation 2003,
2003/2816, Sch, para 2.
(b) Consideration for sale and leaseback transactions
HR A[11041]
A consideration has to consist of money or money's worth or the assumption, satisfaction, or release of a debt. In this
context, a debt means an obligation, certain or contingent, to pay a sum of money immediately or in the future. The sum
of money may be in Sterling or any foreign currency. The relief is available for 'any arrangement'. The use of the term
arrangement presupposes that a wider construction exists or can be applied than would be the case under contract. The
consideration is limited to the payment of money or the assumption, satisfaction or release of a debt, but it would seem
to the author that this would exclude the case where the consideration for the sale is a leaseback of the property.
(c) Exceptions to the rule that residential property does not qualify for exemption
HR A[11042]
There are two exceptions to the rule prescribed in the FA 2003, s 57A(3)(a) that residential property does not qualify for
exemption. The first exception relates to where there are mixed commercial and residential use properties when the
residential properties will be treated as non-residential1. The second exception to the case is where six or more
residential properties are the subject of a single transaction involving the transfer of a major interest in, or grant of a
lease over, then those dwellings will be treated as not being residential property2.
HR A[11043]
1 FA 2003, s 116(1).
2 FA 2003, s 116(7).
Page 919
reliefs/3 Exchanges
3 Exchanges
HR A[11044]
It has been shown in HR A[10809] that certain land transactions, though subject to notification, are deemed to have no
chargeable consideration. The transactions included in this category are as follows:
(a) exchanges involving non-major interests;

(b) works carried out by an acquiring purchaser;
(c) the partition of undivided jointly owned property;
(d) surrender and regrant of an old lease;
(e) payments under covenants under a lease;
(f) reverse premiums relating to the grant, assignment or surrender of a lease;
(g) consideration payable by third parties unless deemed to be made by the purchaser indirectly will
constitute non-chargeable consideration.
A chargeable interest in land may be exchanged for a consideration that can consist of a property other than land. In
such a case, this would be a single acquisition with SDLT chargeable on the market value of the consideration1. Special
rules apply where the consideration consists of another chargeable interest in land. In such a case, where one land
transaction is entered into wholly or partly in consideration of another land transaction, each transaction will attract its
own separate charge2. This will apply to sales of land and leasebacks; to variation of trusts; to estates of deceased
persons and to equitable interests in land. Although in respect of each transaction the chargeable interest rules depend
upon whether the subject matter of the transaction is a major interest in land3. However, where there is an exchange of a
major interest for a non-major interest or transfer in consideration of a grant for release of a restrictive covenant, SDLT
will be payable on the minor interest on the market value of the interest acquired4, or if the acquisition is the grant5 of a
lease at a rent6, the SDLT payable will be the aggregate of tax on the market value of the lease plus the tax on the rent7.
HR A[11045]
1 FA 2003, Sch 4, paras 1 and 4.
2 FA 2003, s 47(1).
3 FA 2003, s 117 defines a 'major interest' in land.
4 FA 2003, Sch 4, para 5(3)(a)(i).
5 Substantial performance may trigger the charge to SDLT where such a grant does not include an agreement for a lease.
Page 920
6 FA 2003, Sch 4, para 1.
7 FA 2003, Sch 4, para 5(3)(a)(ii) and Sch 5.

Page 921
reliefs/4 Surrenders
4 Surrenders
HR A[11046]
Where a lease is granted in consideration of the surrender of an existing lease between the same parties1:
(a) the grant of the new lease does not count as chargeable consideration for the surrender; and
(b) the surrender does not count as chargeable consideration for the grant of the new lease.
There is a difficult issue to be determined for relief to be fully applied. The FA 2003 provides2 that variation of leases
are chargeable transactions if done for a consideration. The question that is difficult to answer is whether the variation
amounts to a surrender and regrant. The position presently is that the tenant will pay SDLT on any actual consideration
paid to the landlord for the extension. The tenant will also pay SDLT upon the rent reserved by the new lease, but this
will be relieved by reducing the liability by the rent that would have been paid over the balance of the term of the lease.
HR A[11047]
1 FA 2003, Sch 17A, para 16.
2 Section 43(3)(c).
Page 922
reliefs/5 Assignments
5 Assignments
HR A[11048]
Reference has been made to assignments in HR A[10921]. This needs to be amplified. The FA 20031 provides certain
cases where the assignment of a lease is treated as a grant of a lease with the assignee becoming responsible for
anything that would be required from or authorised to be done by the assignee to the assignor2. This assumption by the
assignee of the obligation to pay rent or to perform or observe any other undertaking of the tenant under the lease does
not count as chargeable consideration for the assignment.
HR A[11049]
1 Schedule 17A, paras 13 and 14.
2 FA 2003, Sch 17A, para 12.

Page 923
reliefs/6 Financial institutions, house acquisition and chargeable interests
6 Financial institutions, house acquisition and chargeable interests
HR A[11050]-[11060]
By virtue of the FA 2003, s 48(1) and (2), a chargeable interest includes the benefit of an obligation, restriction or
condition affecting the value of any such estate as is described in s 48(1)(a), or any interest, right or power other than an
exempt interest, which includes 'any security interest' - a term defined in sub-s (3)(a) as being an interest or right (other
than a rent charge) held for the purpose of securing the payment of money or the performance of any other obligation.
Duty will be charged on the acquisition of a house, but no additional duty will arise in relation to the mortgage since by
reason of the above provision, grants of mortgages are not chargeable interests and are therefore exempt1. Exemption,
however, will be lost where there is foreclosure of the security in the illustration, the mortgage following default which
will be a chargeable transaction being made in satisfaction of the mortgage debt2. In such an arrangement, there is likely
to be an individual3 and a financial institution, such as a bank4 or a building society5, under which the institution
acquires a major interest and grants a lease or a sub-lease out of that interest to the individual. Part of the deal is likely
to be that the individual has written into the agreement a right to require the transfer of the major interest purchased by
the reversion. Exemption from SDLT is given if, under the first transaction, the seller is an individual or another
financial institution by whom the interest was acquired under arrangement not dissimilar from those currently entered
into. The leaseback is exempt if the acquisition of the major interest by the financial institution is itself exempt. If the
individual holds the lease as trustee and any beneficiary under the trust is not an individual, the requirements for relief
will not be satisfied. Likewise if he is a partner and any of his other partners are not individual persons6.
HR A[11061]
1 FA 2003, s 48(2)(a).
2 FA 2003, Sch 4, para 8.
3 The relief does not extend to Corporate employers seeking to provide accommodation for their employees.
4 ICTA 1988, s 840A.
5 Building Societies Act 1986 (BSA 1986).
6 FA 2003, s 73(4).
Page 924
reliefs/7 Capital 'freeing up' transactions
7 Capital 'freeing up' transactions
HR A[11062]
Recently, there has been a rash of advertisements offering to 'free-up' capital that is locked up in a home or dwelling
house to enable individuals to maintain their standard of living or to buy something special. This has come about due to
the increase in value of residential properties.
The so-called 'freeing up' of capital can be achieved in various ways, by using straightforward conventional mortgages,
which are an exempt interest, to variations upon sale and leaseback and by granting annuities. Whatever way is chosen
to achieve this, the arrangement is likely to constitute a sale at a price lower than the full market value of the property
where a person is granted a lease. It matters not whether the lease is for life, or for whatever fixed term, but what does
matter is whether the rent payable is significantly below the market rent. Although this transaction could be described as
being dressed up as a lease at a rent, it is no more than a loan on the security of the house at interest. Because this is part
of an arrangement under which the house owner sells part of his interest in the house in consideration for funding from
a financial institution, in effect agreeing to a leaseback arrangement, it will be subject to rules set out in the FA 2003, s
50 and Sch4, para 5(3), (4) and (5). These are short provisions and are set out below.
HR A[11063]
The following rules apply to determine the chargeable consideration where one or more land transactions are entered
into by a person as purchaser (alone or jointly), wholly or partly in consideration of one or more other land transactions
being entered into by him (alone or jointly) as vendors. The following rules apply if the subject matter of any of the
relevant transactions is a major interest in land:
(a) Where a single relevant acquisition is made, the chargeable consideration for the acquisition is:
(i) the market value of the subject matter of the acquisition; and
(ii) if the acquisition is the grant of a lease at a rent, that rent.
(b) Where two or more relevant acquisitions are made, the chargeable consideration for each relevant
acquisition is:
(i) the market value of the subject matter of that acquisition; and
(ii) if the acquisition is the grant of a lease at a rent, that rent.
HR A[11064]
The following rules that apply relate if the subject matter of none of the relevant transactions is a major interest in land:
Page 925
(a) Where a single relevant acquisition is made in consideration of one or more relevant disposals, the
chargeable consideration for the acquisition is the amount or value of any chargeable consideration, other
than the disposal or disposals that is given for the acquisition.
(b) Where two or more relevant acquisitions are made in consideration of one or more relevant
disposals, the chargeable consideration for each relevant acquisition is the appropriate proportion of the
amount of value of any chargeable consideration other than the disposal, or disposals, that is given for
the acquisitions1.
This provision is designed to provide for the case where there are mutual transfers of beneficial interests in land on one
side or by both parties. There may be an agreement to exchange land held in trust in consideration for the other party
becoming absolutely entitled to shares held by the trustees. There is here the acquisition of an interest in land for shares
calculated as equalling the value of land. SDLT will be charged on the apportioned value of shares relating to the
proportion of the land interest acquired.
Where, however, there is an exchange of interests only in land between the parties, the land exchange rates will apply2.
Where the land, the subject of this hypothetical transaction, is held in trust, the interest of the beneficiary is likely to be
a limited interest and not a major interest3 in land. This will bring into operation the FA 2003, Sch 4, para 5(4)(a) and
(b) and have the effect of limiting the charge to SDLT to any consideration that represents equality with the interests in
land being mutually exchanged being ignored in the computation of duty payable.
HR A[11065]
1 FA 2003, Sch 4, para 5(4).
2 FA 2003, s 47 (Exchanges).
3 FA 2003, s 117.
HR A[11066]
Schedule 4, para 5 provides the appropriate proportion for the purposes of subparagraph 5(4)(b) of Sch 4, and has effect
subject to para 6 of Sch 4 (partition: disregard of existing interest) and para 17 (arrangements involving public or
educational bodies).
Page 926
reliefs/8 Consequences - funding institutions and leasebacks
8 Consequences - funding institutions and leasebacks
HR A[11067]
This example is of a funding institution entering into a leaseback where there are dealings in freehold and leasehold
interests. This will lead to an exchange of major interests within the charging provisions1, with both parties being
required to produce separate LTRs because both transactions are separate transactions2. An interesting and arguable
consequence arising from such transactions as these, which is strongly resisted by HMRC is that the funding institutions
who will be liable to report and to pay SDLT upon the market value of the land that it is acquiring is that the grant of a
leaseback should reduce the market value of the land being acquired, which should lead to a reduction in the SDLT
payable. This contention has not been tested in the courts so far as the author knows, However, at the present time it
will remain the liability of the financial institution funding this leaseback to report and pay SDLT upon the market value
of the land it has acquired. It will be the liability of the owner of the house parting with that part of that interest to report
and pay SDLT upon the market value of the lease which it has acquired, and which will be dependent upon the level of
rent actually paid. It is likely, however, that this will be based upon the market value of what has been transacted, plus
the NPV of the rent.
HR A[11068]
1 FA 2003, Sch 4, para 53.
2 FA 2003, s 47.
HR A[11069]
Two further points require summarising. They are, first, that the relief is available in respect of any arrangement, but it
is available only if the consideration consists of the payment of money or the assumption, satisfaction or release of a
debt. The conclusion which could be drawn from that rather restrictive specific provision is that relief is not available
when a sale is entered into in consideration of the leaseback of the property, because this does not feature as relevant
consideration for such a transaction. Finally, this subject has only been touched upon in this work. If fuller detail is
required, the reader should consult Sergeant and Sims on Stamp Duties.
Page 927
reliefs/9 Relief for certain acquisitions of residential property
9 Relief for certain acquisitions of residential property1
(a) Acquisition by a house building company from an individual who is acquiring a new
dwelling
HR A[11070]-[11080]
Subject to satisfying the following provisions, the acquisition of a building by a house building company from an
individual whether alone or with other individuals will be exempt. The conditions to be satisfied2 are:
(a) that the individual, whether alone or with other individuals, acquires from the house building
company a new dwelling;
(b) that the individual:
(i) occupied the old dwelling as his only and main residence at some time in the period of two
years ending with the date of its acquisition; and
(ii) intends to occupy the new building as his only or main residence;
(c) that each acquisition is entered into in consideration of the other; and
(d) that the area of land acquired by the house building company does not exceed the permitted area.
Full relief is available if all the conditions stated above are met. Failure to meet condition (d) is not necessarily fatal to
the obtaining of relief under this provision.
HR A[11081]
1 FA 2003, Sch 6A.
2 FA 2003, Sch 6A, para 3(1)(2).
HR A[11082]
Where the area of land acquired by the house building company exceeds the permitted area, the chargeable
consideration for the acquisition will be the amount calculated by deducting the market value of the permitted area from
the market value of the old building. The term and references to 'acquisition of the new dwelling' are to the acquisition
by way of grant or transfer of a major interest in the dwelling. References to the market value of the 'old dwelling' are to
the market value of that major interest in that dwelling. The term 'dwelling' for these purposes is defined in the FA
2003, Sch 6(A), para 7 to include land occupied and enjoyed with the dwelling as its garden or grounds. It also defines a
Page 928
building or part of a building to be a new dwelling if it has been constructed for use as a single dwelling and has not
previously been occupied or it has been adapted for use as a single dwelling and has not been occupied since its
adaptation. The same paragraph in the Schedule comments on the permitted area in relation to a dwelling as meaning
land occupied and enjoyed with a dwelling as its ground or gardens that does not exceed an area of half a hectare, or
such larger area as is required for the reasonable enjoyment of the dwelling, as a dwelling, having regard to its size and
character. A house building company is defined to mean a company that carries on the business of constructing or
adapting buildings or parts of buildings for use as dwellings and such definition includes any company connected with
it.
HR A[11083]
The statutory requirement that both acquisitions of these properties must be of major interest in the dwellings means
that there must be an outright transfer of the freehold or leasehold interest in the existing house of the individual. It
would seem tempting to many to grant a sub-lease of the existing house in an attempt to reduce the value of the interest
being acquired in the existing house below the value of the interest in the new house being occupied. Such a transaction
has been foreseen by HMRC and will not be effective. It is relevant to note that this relief is not available for houses
owned by companies, regardless of the fact that they may use those houses to house their employees. There has to be an
individual acting as the vendor of the old dwelling and also acting as the purchaser of the new dwelling. He can act with
another individual, but of course from what has been said above, he cannot act with a company. The house building
company must be a member of the Construction Industry Scheme (CIS) and must quote its reference number in that
scheme in order to enable the individual to claim the relief. The relief must be claimed in the LTR in answer to question
9, and the code that one would expect to see entered is O8.
HR A[11084]
A brief example might help to illustrate this more clearly. Take, for instance, two persons, X and Y, both living together
in a house that is owned by X. X and Y want to buy a new property from a registered CIS house building company in
exchange for the house owned by X. This transaction consists of two separate transactions and falls within s 47 of the
FA 2003. The chargeable consideration will be the market value. X and Y will pay SDLT. However, Sch 6, para 1 gives
relief to the CIS registered house building company because it deems the acquisition to be exempt. HMRC are likely to
look at the source from which the moneys were derived by X and Y. If, for instance, Y owned cash in a company and he
intended to use that to fund his share of the purchase, relief would not be available for the reason that X will not be
acquiring together with individuals, but will be acquiring with a company. Care must be taken, therefore, to look at the
source from which the moneys are derived in purchasing such a property because there is a danger that the relief
claimed will not be allowed in such circumstances.
(b) Acquisition by property trader from individual acquiring new dwelling1
HR A[11085]
Where a dwelling (the old dwelling) is acquired by a property trader from an individual, whether alone or with other
individuals, the acquisition is exempt from charge if the following conditions are met. These conditions are:
(a) that the acquisition is made in the course of a business that consists of, or includes, acquiring
dwellings from individuals who acquire new dwellings from house building companies;
Page 929
(b) that the individual or individuals acquire a new dwelling from a house building company;
(c) that the individual:
(i) occupied the old dwelling as his only or main residence at some time in the period of two
(ii) intends to occupy the new dwelling as his only or main residence;
(d) that the property trader does not intend:
(i) to spend more than the permitted amount on refurbishment of the old dwelling; or
(ii) to grant a lease or licence of the old dwelling; or
(iii) to permit any of its principals or employees, or any person connected with any of its
principals or employees, to occupy the old dwelling; and
(e) that the area of land acquired by the property trader does not exceed the permitted area.
This particular relief was introduced in the Stamp Duty and Stamp Duty Land Tax (Variation of Finance Act 2003)
Regulations 2003, SI 2003/2760. Its purpose was to cover the case where a house building company uses an
unconnected company to buy the individual's former dwelling where relief would not be given under the FA 2003, Sch
6A, para 1. Full relief is available if all the conditions are satisfied and, as in the previous example, if the permitted area
is exceeded, partial relief may still be available. The chargeable consideration for the acquisition is the market value of
the old dwelling including the land. Both acquisitions must be by way of grant or transfer of a major interest in the
dwelling2.
HR A[11086]
1 FA 2003, Sch 6A, para 2.
2 FA 2003, Sch 6A, para 2(5).
HR A[11087]
There is a definition for the meaning of property trader and principal1. A property trader means a company, a limited
liability partnership or a partnership whose members are all either companies or limited liability partnerships that carries
on the business of buying and selling premises or dwellings. In relation to a property trader, a principal means2:
(a) in the case of a company, a director;

(b) in the case of a limited liability partnership, a member;
(c) in the case of a partnership whose members are all either companies or limited liability
partnerships, a member or a person who is a principal of a member.
There is added that for purposes of the FA 2003, Sch 6A, anything done by or in relation to a company connected with a
property trader is to be treated as being done by, or in relation to, that property trader, and references to the principals or
employees of a property trader include the principals or employees of any such company.
Page 930
HR A[11088]
1 FA 2003, Sch 6A, para 8(1) and (2).
2 FA 2003, Sch 6A, para 8(1).
HR A[11089]
Schedule 6A of the FA 2003 also defines the terms 'refurbishment' and the 'permitted amount' which are used in the
legislation. Refurbishment of a dwelling means the carrying out of works that enhance or are intended to enhance the
value of the dwelling, but it does not include1:
(a) cleaning the dwelling; or

(b) works required solely for the purposes of ensuring that the dwelling meets minimum safety
standards.
The permitted amount2 in relation to the refurbishment of the dwelling, which has been previously referred to, is in
relation to a dwelling and is:
(a) £10,000; or
(b) five per cent of the consideration for the acquisition of a dwelling, whichever is the greater, but
subject to a maximum of £20,000.
Relief may be withdrawn3 and in the following circumstances will be withdrawn:
(a) where the property trader spends more than the permitted amount on refurbishment of the old
dwelling; and
(b) the property trader grants a lease or licence of the old dwelling; or
(c) the property trader permits any of its principals or employees, or any person connected with any of
its principals or employees, to occupy the old dwelling.
Where relief is withdrawn, the amount of tax chargeable will the amount that would have been chargeable in respect of
the transaction but for the relief.
HR A[11090]-[11100]
1 FA 2003, Sch 6A, para 9(1).

Page 931
2 FA 2003, Sch 6A, para 9(2).
3 FA 2003, Sch 6A, para 11(1) and (2).
(c) Acquisition by a property trader from personal representatives1
HR A[11101]
Where a dwelling is acquired by a property trader from the personal representatives of a deceased individual, the
acquisition is exempt from charge provided, as previously, if the following conditions are met. These conditions are:
(a) that the acquisition is made in the course of a business that consists of or includes acquiring
dwellings from personal representatives of deceased individuals;
(b) that the deceased individual occupied the dwelling as his only or main residence at some time in
the period of two years ending with the date of his death;
(c) that the property trader does not intend:
(i) to spend more than the permitted amount on refurbishment of the dwelling; or
(ii) to grant a lease or licence of the dwelling; or
principals or employees, to occupy the dwelling; and
(d) that the area of land acquired does not exceed the permitted area2.
There is the same restriction as in the previous reliefs under the FA 2003, Sch 6A relating to the permitted area. Again,
both acquisitions must be by way of grant or transfer of a major interest in the dwelling3. Failing to comply with the
various conditions is likely to lead to the relief being withdrawn. The circumstances in which this happens are as
follows:
(a) the property trader spends more than the permitted amount of refurbishment on the old dwelling; or
(c) the property trader permits its principals or employees, or any person connected with any of its
principals or employees, to occupy the old dwelling.
As in the previous example, where relief is withdrawn, the amount of tax that is charged will be the amount that would
have been charged if there had been no relief whatsoever.
HR A[11102]
1 FA 2003, Sch 6A, para 3(1).
2 FA 2003, Sch 6A, para 3(2).

Page 932
3 FA 2003, Sch 6A, para 4(a), (b).
(d) Acquisition by a property trader from individual where the chain of transactions breaks
down1
HR A[11103]
Where a dwelling, the 'old dwelling', is acquired by a property trader from an individual, whether alone or with other
individuals, the acquisition is exempt from charge if:
(a) the individual has made arrangements to sell a dwelling (the old dwelling) and acquire another
dwelling (the 'second dwelling');
(b) the arrangements to sell the old dwelling fail; and
(c) the acquisition of the old dwelling is made for the purpose of enabling the individual's acquisition
of the second dwelling to proceed.
And the following conditions are met2. These are as follows:
(a) that the acquisition is made in the course of a business that consists of, or includes, acquiring
dwellings from individuals in those circumstances;
(b) that the individual:
(i) occupied the old dwelling as his only or main residence at some time in the period of two
(ii) intends to occupy the second dwelling as his only or main residence.
(c) that the property trader does not intend:
(i) to spend more than the permitted amount on refurbishment of the old dwelling; or
(ii) to grant a lease or licence of the old dwelling;
principals or employees, to occupy the old dwelling;
(d) that the area of land acquired does not exceed the permitted area.
There is a similar provision, as in the above such provisions, that the area of land acquired shall not exceed the
permitted area. If the area does exceed the permitted area, then the chargeable consideration for the acquisition will be
taken to be the amount calculated by deducting the market value of the permitted area from the market value of the old
dwelling.
HR A[11104]
Page 933
1 FA 2003, Sch 6A, para 4.
2 FA 2003, Sch 6A, para 4(2).
HR A[11105]
Reference to the acquisition of the second dwelling in the FA 2003 are to the acquisition by way of grant or transfer of a
major interest in the dwelling; references to the acquisition of the old dwelling are to the acquisition by way of transfer
of a major interest in the dwelling; and references to the market value of the old dwelling and of the permitted area are
respectively to the market value of that major interest in the dwelling and of that interest so far as it relates to that area1.
In the following circumstances, relief will be withdrawn:
(a) where the property trader spends more than the permitted amount on the refurbishment of the old
dwelling; or
the principals or employees, to occupy the old dwelling.
Full relief will only be available if all the conditions are satisfied. However, there is a partial relief available where the
permitted area is exceeded, and under this head of charge, the amount of tax chargeable will be the amount which would
have been chargeable in respect of the transaction, but for the relief.
HR A[11106]
1 FA 2003, Sch 6A, para 4(4).
(e) Acquisition by employer in case of relocation of employment1
HR A[11107]
Relief is provided where a dwelling is acquired from an individual or individuals by his employer, the acquisition is
exempt from charge, provided that the following conditions are met:
(a) that the individual occupied the dwelling as his only or main residence at some time in the period
of two years ending with the date of acquisition;
(b) that the acquisition is made in connection with a change of residence by the individual resulting
from relocation of employment;
(c) that the consideration for the acquisition does not exceed the market value of the dwelling; and
(d) that the area of land acquired does not exceed the permitted area.
The same conditions are repeated as in the previous paragraphs where the permitted area has been exceeded, and the
Page 934
chargeable consideration for the acquisition is taken to be the amount calculated by deducting the market value of the
permitted area from the market value of the dwelling.
HR A[11108]
1 FA 2003, Sch 6A, para 5.
HR A[11109]
The term 'relocation of employment' means a change of the individual's place of employment due to the following
circumstances:
(a) his becoming an employee of the employer;

(b) an alteration of the duties of his employment with the employer; or
(c) an alteration of the place where he normally performs those duties.
A 'change of residence' is also defined and results from relocation of the employment if the change is made wholly, or
mainly, to allow the individual to have his residence within a reasonable daily travelling distance of his new place of
employment, and his former residence is not within a reasonable daily travelling distance of that place. Furthermore, the
new place of employment means the place where he normally performs or is normally to perform the duties of his
employment after the relocation.
HR A[11110]-[11120]
Again, as in similar situations above, the acquisition must be by way of a transfer of a major interest in the dwelling.
Full relief would be given if all the conditions cited above are met. There is partial relief in respect of exceeding the
permitted area, which has been set out before. The chargeable consideration of the acquisition is therefore the market
value of the old dwelling, including the land, less the market value of the permitted area (dwelling and permitted
grounds). Relief is given to a prospective employee which is included in the definition of an employee for these
purposes1.
HR A[11121]
1 FA 2003, Sch 6A, para 5(6)(c).
(f) Acquisition by a property trader in case of relocation of employment1
HR A[11122]
Page 935
Where a dwelling is acquired by a property trader for an individual, whether alone or with other individuals, the
acquisition is exempt from charge if the following conditions are met. These are:
(a) if the acquisition is made in the course of a business that consist of, or includes, acquiring
dwellings from individuals in connection with a change of residence resulting from relocation of
employment;
(b) that the individual occupied the dwelling as his only or main residence at some time in the period
of two years ending with the date of the acquisition;
(c) that the acquisition is made in connection with a change of residence by the individual resulting
from relocation of employment;
(d) that the consideration for the acquisition does not exceed the market value of the dwelling;
(e) that the property trader does not intend:
(i) to spend more than the permitted amount in refurbishment of the dwelling; or
(ii) to grant a lease or licence to the dwelling; or
principals or employees, to occupy the dwelling; and
(f) that the area of land acquired does not exceed the permitted area.
Relief will be withdrawn in the following circumstances:
(a) where the property trader spends more than the permitted amount on the refurbishment of the old
dwelling; or
its principals or employees, to occupy the old dwelling.
The amount of tax chargeable will be the amount that would have been chargeable in respect of the transaction but for
the relief, where the relief is withdrawn. Again, both acquisitions must be by way of grant or transfer of a major interest
in the dwelling2.
HR A[11123]
1 FA 2003, Sch 6A, para 6.
2 FA 2003, Sch 6A, para 3(3).

Page 936
reliefs/10 Compulsory purchase facilitating development
10 Compulsory purchase facilitating development1
HR A[11124]
The compulsory purchase of land to facilitate development is exempt from charge. The term 'compulsory purchase
facilitating development' means the acquisition by a person of a chargeable interest in respect of which that person has
made a compulsory purchase order for the purpose of facilitating development2 by another person3. It makes no
difference how the acquisition is made. The relief will apply when the acquisition is effected by agreement or vesting
order4.
HR A[11125]
1 FA 2003, s 60.
2 Town and Country Planning Act 1990 (TCPA 1990), s 55.
3 FA 2003, s 60(2).
4 FA 2003, s 60(3) and (4).

Page 937
reliefs/11 Compliance with planning obligations
11 Compliance with planning obligations1
HR A[11126]
A land transaction entered into in order to comply with a planning obligation2 or modification3 of a planning obligation
is exempt from SDLT provided that:
(a) the planning obligation or modification is enforceable against the vendor;

(b) the purchaser is a public authority; and
(c) the transaction takes place within a period of five years beginning with the date on which the
planning obligation was entered into or modified4.
The term 'planning obligation' means either of the following:
(a) a planning obligation within the meaning of the TCPA 1990, s 106 that is entered into in
accordance with sub-s (9) of that section; or
(b) a planning obligation within the meaning of the TCPA 1990, s 299A that is entered into in
accordance with sub-s (2) of that section.
The term 'modification' must comply with its definition in s 106A(1) of the TCPA 1990. The FA 2003 lists the public
authorities for the purposes of this section5. The relief must be claimed on the LTR at question 9, and the code will be
11.
HR A[11127]
1 FA 2003, s 61.
2 TCPA 1990, s 106(9) or 229A(2).
3 TCPA 1990, s 106A(1).
4 FA 2003, s 102.
5 FA 2003, s 61(3).
Page 938
reliefs/12 Charities relief
12 Charities relief1
HR A[11128]
A land transaction is exempt from charge if the purchaser is a charity formed or established in the UK2. The relief is
subject to the following conditions being met3:
(a) The first condition is that the purchaser must intend to hold the subject matter of the transaction for
qualifying charitable purposes, that is:
(i) for use in furtherance of the charitable purposes of the purchaser, or of another charity; or
(ii) as an investment from which the profits are applied to the charitable purposes of the
purchaser.
(b) The second condition is that the transaction must not have been entered into for the purpose of
avoiding tax under this part of the FA 2003, whether by the purchaser or by any other person.
The term 'charity' has the meaning attributed to is as being a body or trust established only for charitable purposes.
HR A[11129]
1 There is a question extant that a limitation to the charities relief is in proper discrimination against the European community.
2 FA 2003, s 68 and Sch 8.
3 FA 2003, Sch 8, para 2.
HR A[11130]-[11140]
Relief will be withdrawn where a disqualifying event occurs within three years after the effective date of the transaction
or in pursuance of or in connection with arrangements made before the end of that period and at the time of the
disqualifying event the purchaser holds a chargeable interest which the purchaser acquired under the relevant
transaction. The relief may be withdrawn partly or wholly. The amount chargeable is the amount, but for charities relief,
that would have been chargeable, or alternatives that constitute an appropriate proportion, bearing in mind what remains
to be held by the charity at the time of the disqualifying event. A 'disqualifying event' means:
(a) the purchaser is ceasing to be established for charitable purposes only; or

(b) the subject matter of the transaction, or any interest or right derived from it, being used or held by
Page 939
the purchaser otherwise than for qualifying charitable purposes.

Page 940
reliefs/13 Demutualisation of insurance company
13 Demutualisation of insurance company1
HR A[11141]
A land transaction is exempt from charge if it is entered into for the purposes of, or in connection with, a qualifying
transfer of the whole or part of the business of a mutual insurance company ('the mutual') to a company that has a share
capital ('the acquiring company').
A transfer is a qualifying transfer if:
(a) it is a transfer of business consisting of the affecting or carrying out of contracts of insurance and
takes place under an insurance business transfer scheme; or
(b) it is a transfer of business of a general insurance company carried on through a permanent
establishment in the UK and takes place in accordance with authorisation granted outside the UK for the
purposes of:
(i) Article 14 of the Life Assurance Directive (2002/83/EC); or

(ii) Article 12 of the Third Non-Life Insurance Directive (92/49/EEC); and
in either case, the requirements of the FA 2003, s 63(3) and (4), set out below, are met in relation to the shares of a
company ('the issuing company'), which is either the acquiring company or a company of which the acquiring company
is a wholly owned subsidiary.
HR A[11142]
1 FA 2003, s 63.
HR A[11143]
The reference above to the FA 2003, s 63(3) relate(s) to shares in the issuing company which must be offered under the
scheme to at least 90% of the persons who are members of the mutual immediately before the transfer. Sub-section (4)
provides that under the scheme, all of the shares in the issuing company will be in issue immediately after the transfer
has been made, other than shares that are to be or have been issued pursuant to an offer to the public, and must be
offered to the persons who at the time of the offer are:
(a) members of the mutual;

(b) persons who are entitled to become members of the mutual; or
Page 941
(c) employees, former employees or pensioners of:
(i) the mutual; or

(ii) the wholly owned subsidiary of the mutual.
The Treasury may, by regulations, amend sub-s (3) by substituting a lower percentage for the percentage mentioned
there. In other words, it can be less than 90% and they may, by regulation, provide that any or all of the references in
sub-s (3) and (4) shall be construed as references to members of a class specified in the regulations.
HR A[11144]
The FA 2003 defines, for the purposes of this section, the following terms:
· 'Contract of insurance' - follows the meaning in Art 3(i) of the Financial Services and Markets Act
2000 (Regulated Activities) Order 2001 (SI 2001/544).
· 'Employee' in relation to a mutual insurance company or its wholly owned subsidiary.
· 'General insurance company' means the company that has permission under Pt 4 of the Financial
Services and Markets Act 2000 (FSMA 2000) to effect or to carry out contracts of insurance.
· 'Insurance company' means a company that carried on the business of effecting or carrying out
contracts of insurance.
· 'Insurance Business Transfer Scheme' - has the same meaning as in Pt 7 of the FSMA 2000.
· 'The Life Assurance Directive' means a Council Directive of the 5 November 2002 concerning life
assurance (2002/83/EC).
· 'Mutual insurance company' means an insurance company carrying on business without having any
share capital.
· 'The Third Non-Life Insurance Directive' means the Council Directive of the 18 June 1992
(92/49/EEC) on the co-ordination of laws, regulations and administrative provisions relating to direct
insurance other than life insurance and the directives (First Non-Life Insurance Directive (73/239/EEC)
and Second Non-Life Insurance Directive (88/357/EEC)) .
· 'Pensioner' in relation to a mutual insurance company or its wholly owned subsidiary means the
person entitled presently or respectively to a pension lump sum gratuity or other like benefit referable to
the service of any person as an employee of the company or subsidiary.
Where a claim for relief is made, it must be claimed in the LTR at question 9. The code is 15.
Page 942
reliefs/14 Demutualisation of building society
14 Demutualisation of building society1
HR A[11145]
The transaction affected by s 97(6) or (7) of the BSA 1986 (transfer of building society's business to a commercial
company) is exempt from charge. This relief must also be claimed in the LTR at question 9. The code is 16.
HR A[11146]
1 FA 2003, s 64.
Page 943
reliefs/15 Initial transfer of assets to trustees of unit trust scheme
15 Initial transfer of assets to trustees of unit trust scheme1
HR A[11147]
The acquisition of a chargeable interest by trustees of a unit trust scheme is exempt from charge if the following
conditions are met, that:
(a) immediately before the acquisition:
(i) there were no assets held by the trustees for the purposes of the scheme; and
(ii) there were no units of the scheme in issue;
(b) the only consideration of the acquisition is the issue of units in the scheme to the vendor; and
(c) immediately after the acquisition, the vendor is the only unit holder of the scheme.
This legislation thus provides that the acquisition of a chargeable interest in land in the UK by trustees of a unit trust
scheme is exempt from SDLT2, provided that immediately before the acquisition there were no assets held by the
trustees. It will be seen that the only consideration for the acquisition is the issue of units in the scheme to the person
disposing of the chargeable interest. The relief will not be available if the property is subject to any form of charge3.
Immediately after the acquisition, the vendor disposing of the chargeable interest is the only unit holder of the scheme.
On the assumption that the singular includes the plural and therefore the acquisition from several transferors jointly
entitled would be eligible for this relief.
HR A[11148]
1 FA 2003, s 64A.
2 FA 2003, ss 107 and 64A.
3 FA 2003, Sch 4, para 8.

Page 944
reliefs/16 Incorporation of limited liability partnerships
16 Incorporation of limited liability partnerships1
HR A[11149]
The transfer of a chargeable interest by a person (the transferor) to a limited liability partnership in connection with its
incorporation is exempt from charge provided that the three following conditions are met. They are:
(a) that the effective date of the transaction is not more than one year after the date of incorporation of
the limited liability partnership;
(b) that at the relevant time, the transferor;
(i) is a partner in a partnership comprised of all the persons who are or are to be members of
the limited liability partnership (and no one else); or
(ii) holds the interest transferred as nominee or bare trustee for one or more of the partners in
such a partnership;
(c) the third condition is that the proportions of the interest transferred to which the persons mentioned
in the FA 2003, s 65(3)(a), which is (b)(i) in this text:
(i) are entitled, immediately after the transfer, are the same as those to which they were entitled
at the relevant time; or
(ii) none of the differences in those proportions have arisen as part of a scheme or arrangement
of which one of the main purposes is the avoidance of liability to any duty or tax.
For the purposes of this section, the relevant time means where the transferor acquired the interest after the
incorporation of the limited liability partnership, immediately after he acquired it, and in any other case immediately
before its incorporation. The term 'limited liability partnership' is defined to mean one formed under the Limited
Liability Partnerships Act 2000. This relief has to be claimed in the LRT at question 9 and the code for the relief is 17.
HR A[11150]-[11160]
1 FA 2003, s 65.
Page 945
reliefs/17 Transfers involving public bodies
17 Transfers involving public bodies1
HR A[11161]
A land transaction entered into on, or in consequence of or in connection with, a reorganisation effected by or under a
statutory provision is exempt from charge if the purchaser and vendor are both public bodies. The Treasury may, by
order, provide that a land transaction that is not entered into as mentioned above be exempt from charge if the
transaction is effected by or under a prescribed statutory provision, and either the purchaser or the vendor is the public
body. The term 'prescribed' in this context means prescribed in an order made under the FA 2003, s 66(2). A
'reorganisation' means changes involving:
(a) the establishment, reform or abolition of one or more public bodies;

(b) the creation, alteration or abolition of functions to be discharged or discharged by one or more
public bodies; or
(c) the transfer of functions from one public body to another.
The FA 2003 then sets out the qualifying public bodies2 it envisages for the purpose of this section. Relief under this
section, even though by government bodies, has to be claimed in the LTR. The code for the relief is 18.
HR A[11162]
1 FA 2003, s 66.
2 FA 2003, s 66(4).
Page 946
reliefs/18 Transfers in consequence of reorganisation of parliamentary constituencies
18 Transfers in consequence of reorganisation of parliamentary constituencies1
HR A[11163]
Where a transfer has to be made in pursuance to an order in Council, made under the Parliamentary Constituencies Act
1956 (an act specifying new parliamentary constituencies), an existing local constituency association which transfers a
chargeable interest to a new association, that is a successor to the existing association or a related body, then such a
transfer is exempt from charge2. A local constituency association is defined to be an unincorporated association whose
primary purpose is to further the aims of a political party in an area which at any time is or was the same or substantially
the same as the area of a parliamentary constituency or two or more parliamentary constituencies3. A related body in
the context of this section to such an association means a body, whether it is corporate or unincorporated, which is an
organ of the political party concerned. A new association is a successor to an existing association if any part of the
existing association's area is comprised in the new association's area. This area is comprised in the new association's
area4. This relief must also be claimed in the LTR at question 9. The code for the relief is 19.
HR A[11164]
1 FA 2003, s 67.
2 FA 2003, s 67(1), (2).
3 FA 2003, s 76(4)(a).
2 FA 2003, s 67(5).
Page 947
reliefs/19 Acquisition by a body established for national purposes
19 Acquisition by a body established for national purposes1
HR A[11165]
A land transaction is exempt from charge if the purchaser is any of the following:
(a) the Historic Buildings and Monuments Commission for England;

(b) the National Endowment for Science, Technology, and the Arts;
(c) the Trustees of the British Museum;
(d) the Trustees of the National Heritage Memorial Fund;
(e) the Trustees of the Natural History Museum2.
A notable omission from this list of bodies is the National Trust that has not been mentioned at all. The reason for this is
not clear. The relief has to be claimed on the LTR at question 9. The code for the relief is 21.
HR A[11166]
1 FA 2003, s 69.
2 FA 2003, s 69.
Page 948
reliefs/20 Right to buy transactions, shared ownership leases, etc
20 Right to buy transactions, shared ownership leases, etc1
HR A[11167]
Provision is made for relief in the case of right to buy transactions, shared ownership leases and certain related
transactions.
HR A[11168]
1 FA 2003, Sch 9.
(a) 'Right to buy transaction'
HR A[11169]
In the case of a right to buy transaction, the FA 2003, s 51(1) (contingent consideration to be included in chargeable
consideration on assumption that contingency will occur) does not apply, and any consideration that would be payable
only if a contingency were to occur, or that is payable only because a contingency has occurred, does not count as
chargeable consideration.
A right to buy transaction is defined to mean:
(a) the sale of a dwelling at a discount, or the grant of a lease of a dwelling at a discount, by a relevant
public sector body; or
(b) the sale of a dwelling, or the grant of a lease of a dwelling, in pursuance of the preserved right to
buy.
A list of relevant public sector bodies is included in the schedule for the purposes of this relief1. The purpose of this
relief is to enable a tenant to buy either a freehold or a leasehold gradually from a housing association. A long lease is
likely to be granted to a tenant at a premium equal to the value of the share acquired, with rent payable on the remaining
portion.
HR A[11170]-[11180]
1 FA 2003, Sch 9, para 1(1), (2), (3).

Page 949
(b) Shared ownership leases1
HR A[11181]
Provision is made in the FA 2003, Sch 9 for shared ownership leases with power to elect for market value treatment.
This can apply where a lease is granted by a qualifying body or in pursuance of a preserved right to buy, subject to
meeting the following conditions and, in addition, the purchaser must elect for tax to be charged in accordance with this
paragraph. The conditions are as follows:
(a) the lease must be of a dwelling;

(b) the lease must give the lessee or lessees exclusive use of the dwelling;
(c) the lease must provide for the lessee or lessees to acquire the reversion;
(d) the lease must be granted partly in consideration of rent and partly in consideration of a premium
calculated by reference to:
(i) the market value of the dwelling; or

(ii) the sum calculated by reference to that value;
(e) the lease must contain a statement of the market value of the dwelling or the sum calculated by
reference to that value by reference to which the premium is calculated.
An election for tax to be charged in accordance with this paragraph must be included in the LTR made in respect of the
grant of the lease, or in the amendment of that return, and is irrevocable so that the return may not be amended so as to
withdraw the election.
HR A[11182]
1 FA 2003, Sch 9, para 2.
HR A[11183]
Subject to the terms of the shared ownership lease, the purchase of the freehold may take place in two, three or four
steps. The purchaser will pay rent for the part of the property not purchased. Subsequently, he will acquire a further
share of that property and then his rent will be proportionately reduced. This system is referred to frequently as the
staircasing provisions. The tenant has a choice of paying SDLT on either:
(a) the separate parts as each is purchased, for instance if it was in two parts, the lease and then the
freehold reversion;
(b) the market value of the whole property1.
Page 950
The election that the purchaser must make for SDLT purposes must be based either on the market value of the dwelling,
or the sum calculated by a reference to that value in the LTR at question 9, code 22, made in respect of the grant of the
lease. The election is irrevocable and thus the return may not be amended2. The election is an important step to take
because when duty is paid on the basis that the whole property is purchased at the outset, no further duty will be payable
when the freehold is eventually purchased3, provided that a valid election has been made under the FA 2003, Sch 9,
para 2 and any SDLT due has been paid. The application of the relief in this way effectively fixes the SDLT payable at
the outset, based on the entire property. The purchaser is thereby protected against future rate increases, or increases in
the property price.
HR A[11184]
1 FA 2003, Sch 9, para 2(3).
2 FA 2003, Sch 9, para 2(3).
3 FA 2003, Sch 9, para 2(3).
HR A[11185]
A qualifying body is defined to be:
(a) a local housing authority within the meaning of the Housing Act 1985 (HA 1985);
(b) a housing association within the meaning of the Housing Associations Act 1985 or the Housing
(Northern Ireland) Order 1992, Pt 2.
(c) a housing action trust established under the Housing Act 1988 (HA 1988), Pt 3.
(d) the Commission for the New Towns;
(e) a development corporation established by an order made, or having effect, under the New Towns
Act 1981.
The grant of a lease preserves the right to buy provided that:
(a) the vendor is the person against whom the right to buy under the HA 1985, Pt 5 is exercisable by
virtue of s 171 of that Act; or
(b) the lessee or lessees are the qualifying person for the purposes of the preserved right to buy; and
(c) the lease is of a dwelling that is the qualifying dwelling house in relation to the purchaser.
The FA 2003 defines the type of shared ownership transactions that qualify for relief. These conditions have to be
satisfied for relief to be obtained. Relief is given under the same way as under Sch 6, para 2 to allow the tenant to pay
the SDLT on either:
(a) the separate parts as each is purchased, ie the lease and then the freehold reversion; or
(b) the market value of the whole property.
Page 951
The following conditions must be satisfied:
(a) the lease is of a dwelling;

(b) the lease gives the lessee or lessees exclusive use of the dwelling;
(c) the lease provides that the lessee or lessees may, on payment of a sum, require the terms of the
lease to be altered so that the rent payable under it is reduced;
(d) the lease is granted partly in consideration of rent and partly in consideration of a premium,
calculated by reference to either the premium obtainable on the open market for the grant of a lease
containing the same terms as the lease, but with the substitution of the minimum rent for the rent payable
under the lease or the sum calculated by reference to that premium;
(e) the lease contains a statement of the minimum rent and on the premium obtainable on the open
market, or the sum calculated by reference to that premium, by reference to which the premium is
calculated1.
The election to be made by the purchaser under Sch 6, para 4 must be entered in the LTR in respect of the grant of the
lease at question 9 using code 22. It has been said already that the election is irrevocable and that the return may not be
amended so as to withdraw the election.
HR A[11186]
1 FA 2003, Sch 9, para 4(2).

Page 952
reliefs/21 Rent to mortgage or rent to loan: chargeable consideration
21 Rent to mortgage or rent to loan: chargeable consideration1
HR A[11187]
The chargeable consideration for a rent to mortgage or rent to loan transaction is determined in accordance with para 6
of the FA 2003, Sch 9. A rent to mortgage transaction means:
(a) the transfer of a dwelling to a person; or

(b) the grant of a lease of a dwelling to a person pursuant to the exercise by that person of the right to
acquire on rent to mortgage terms under Pt 5 of the HA 1985.
The chargeable consideration for such a transaction is equal to the price that, by virtue of s 126 of the HA 1985, would
be payable for:
(a) a transfer of the dwelling to the person (where the rent to mortgage transaction is a transfer); or
(b) the grant of a lease of the dwelling to the person (where the rent to mortgage transaction is the
grant of a lease) if the person were exercising the right to buy under Pt 5 of that Act.
HR A[11188]
1 FA 2003, Sch 9, para 6.

Page 953
reliefs/22 Acquisitions by registered social landlords
22 Acquisitions by registered social landlords1
HR A[11189]
A land transaction under which the purchaser is a registered social landlord is exempt from charge, provided that:
(a) the registered social landlord is controlled by its tenants;

(b) the vendor is a qualifying body; or
(c) the transaction is funded with the assistance of a public subsidy.
The reference to a registered social landlord controlled by its tenants is to a registered social landlord, the majority of
whose board members are tenants occupying properties owned or managed by it. A board member, in relation to a
registered social landlord, means:
(a) if it is a company, a director of the company;

(b) if it is a body corporate, whose affairs are managed by its member, a member;
(c) if it is a body of trustees, a trustee;
(d) if it is not within paragraphs (a) to (c), a member of the Committee of Management or other body
to which is entrusted the direction of the affairs of the registered social landlord.
For the purposes of this section, a qualifying body under the FA 2003, s 71(1)(b) means:
(a) a registered social landlord;

(b) a Housing Action Trust established under Pt 3 of the HA 1988;
(c) a Principal Council within the meaning of the Local Government Act 1972;
(d) the Common Council of the City of London;
(e) the Scottish Miners;
(f) a council constituted under s 2 of the Local Government Scotland Act 1994.
HR A[11190]-[11200]
1 FA 2003, s 71.
Page 954
reliefs/23 Alternative property finance
23 Alternative property finance
(a) Land sold by a financial institution and leased to individuals1
HR A[11201]
This section applies to three transactions under which arrangements are entered into between an individual and a
financial institution. The financial institution in the first transaction purchases a major interest in land (the first
transaction). The financial institution then grants to the individual out of that interest a lease (if the interest acquired is
freehold) or a sub-lease (if the interest acquired is leasehold), and then enters into an agreement under which an
individual has a right to acquire the institution, or its successor in title, to transfer the major interest purchased by the
institution under the first transaction. For the first transaction to be exempt, the vendor must be an individual, or another
financial institution, by whom the interest was acquired under arrangements of the kind mentioned in the FA 2003, s
72(1) and entered into between it and the individual. The second transaction is exempt from charge if the provisions of
this part of the Act relating to the first transaction are complied with (including the payment of any tax chargeable). So
far as regards the third transaction, a transfer to the individual that results from the exercise of the right mentioned in s
72(1)(c) will be exempt from charge if:
(a) the provisions of this part relating to the first and second transactions are complied with; and
(b) at all times between the second and third transactions:
(i) the interest purchased under the first transaction is held by a financial institution; and
(ii) the lease or sub-lease granted under the second transaction is held by the individual.
The agreement in sub-s (1)(c) is not to be treated as substantially performed unless and until the third transaction is
entered into and accordingly s 44(5) of that Act does not apply, or as a distinct land transaction by virtue of s 46
(Options and rights of pre-emption).
HR A[11202]
1 FA 2003, s 72.
HR A[11203]
The requirements of the FA 2003, s 72(1) or (4)(b)(ii) are not met if:
(a) the individual enters into the arrangement, or holds the lease or sub-lease, as trustee, and any
Page 955
beneficiary of the trust is not an individual; or

(b) the individual enters into the arrangements or holds the lease or sub-lease as partner, and any of the
other partners is not an individual.
HR A[11204]
The term financial institutions for the purposes of this section means any of the three following:
(a) a bank within the meaning of s 840A of the ICTA 1988;

(b) a building society within the meaning of the BSA 1986; or
(c) a wholly owned subsidiary of a bank within paragraph (a) or a building society within paragraph
(b).
In the latter case relating to a wholly owned subsidiary of a bank or a building society within paragraph (b), a company
is a wholly owned subsidiary of a bank or a building society (a parent) if it has no members except the parent and the
parent's wholly owned subsidiaries or persons acting on behalf of the parent or the parent's wholly owned subsidiaries.
(b) Land sold to financial institution and re-sold to individual1
HR A[11205]
This provision applies where arrangements are entered into between an individual and a financial institution under
which:
(a) the institution:
(i) purchases a major interest in land (the first transaction); and

(ii) sells that interest to the individual (the second transaction); and
(b) the individual grants the institution a legal mortgage over that interest.
The first transaction is exempt from charge if the vendor is the individual concerned or another financial institution by
whom the interest was acquired under other arrangements of the kind mentioned in s 72(1) of the FA 2003 entered into
between it and the individual. The second transaction is exempt from charge if the financial institution complies with
the provisions of this part relating to the first transaction (including the payment of any tax chargeable). The section
does not apply if the individual enters into the arrangement as trustee and any beneficiary of the trust is not an
individual, or the individual enters into the arrangement as partner and any of the other partners is not an individual. For
the purposes of s 72(1), financial institution has the same meaning as it did in s 72 above. Legal mortgage in relation to
land in England and Wales means a legal mortgage as defined in s 205(1)(xvi) in the LPA 1925.
HR A[11206]
Page 956
1 FA 2003, s 73.
HR A[11207]
The purpose of this provision is to ensure that relief is not available where a person who is not living at the time the
arrangements are entered into can benefit from the relief. This could arise where the arrangements for an individual are
entered into and the individual holds the lease or sub-lease as trustee and any beneficiary of the trust is not an individual
or the individual enters into the arrangements or holds a lease or sub-lease as a partner, and any of the other partners is
not an individual1. The sale to the financial institution in respect of the first transaction is exempt from charge provided
that the vendor is the individual concerned and another financial institution by which the interest was acquired is of the
kind mentioned in relation to the sale and leaseback relief between vendor and financial institution. In relation to the
second transaction, the sale back to the individual is exempt from charge provided that the conditions for the first
transaction are met and the financial institution pays any SDLT chargeable. The relief must be claimed on the LTR at
question 9. The code for the relief is 24.
HR A[11208]
1 FA 2003, s 72(6).
Page 957
reliefs/24 Collective enfranchisement by leaseholders
24 Collective enfranchisement by leaseholders
HR A[11209]
The FA 2003, s 73 applies where a chargeable transaction is entered into by a Right to Enfranchise (RTE) company in
pursuance of a right of collective enfranchisement. An RTE company by definition has the meaning given to it by s 4A
of the Leasehold Reform Housing and Urban Development Act 1993 (LRHUDA 1993) and really stands for the right of
collective enfranchisement exercised by a company that has such a right. The rate of tax in such a transaction is
determined by dividing the total relevant consideration by the number of flats1 in respect of which the right of
collective enfranchisement is being exercised. The appropriate rate of tax is applied to the chargeable consideration for
the transaction. To qualify for this right, the right must be enforceable by an RTE company under the Landlord and
Tenant Act 1987, Pt 1 or the LRHUDA 1993, Ch 1, Pt 1, where flat has the same meaning as in the FA 2003 concerning
the right conferring enfranchisement2.
HR A[11210]-[11220]
1 FA 2003, s 74.
2 FA 2003, s 74(4)(c).
(a) Liability
HR A[11221]
As to liability and who pays the tax, in this relief the RTE company will be liable to pay the SDLT and it will also be
liable to complete the LTR and claim the relief under the FA 2003, s 74. It is interesting to note that although the RTE
company is liable to pay the SDLT, the legislation does not specify the basis that the liability should be apportioned
between the flat owners. Thus it is left to let the happy flat owners decide amongst themselves as to the fair and proper
apportionment.
Page 958
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/H Group relief
HR A[11222]
The law on this subject is complex and is contained in the FA 2003, s 62 and Sch 7, which is divided into two parts. Part
1 makes provision for group relief. Part 2 makes provision for reconstruction and acquisition reliefs. There is a further
provision in the body of the Act which requires any relief under Sch 7 has to be claimed in a LTR or in an amendment
of such a return.
HR A[11223]
1 FA 2003, s 62.
HR A[11224]
A transaction is exempt from charge if the vendor and the purchaser are companies that at the effective date of the
transaction are members of the same group1. The relief will apply to transfers between parent, subsidiaries and sister
subsidiaries. For group relief purposes, a company is defined to mean a body corporate2, which widens the meaning of
a company enabling it to include foreign bodies corporate that are not necessarily companies. To become a member of
the same group a company has to be a 75% subsidiary of the other or both have to be 75% subsidiaries of a third
company3. In addition, for the purposes of this relief a company ('A') is the 75% subsidiary of another company ('B') if
company B:
(a) is the beneficial owner of not less than 75% of the ordinary share capital of company A;
(b) is beneficially entitled to not less than 75% of any profits available for distribution to equity
holders of company A; and
(c) would be beneficially entitled to not less than 75% of any assets of company A available for
distribution to its equity holders on a winding up4.
The ownership of not less than 75% in (a) above is ownership either directly or through another company or
companies5. The FA 2003 also provides that for the purposes of this part of Sch 7 that the amount of ordinary share
capital in relation to company A owned by company B through another company or companies shall be determined by
the ICTA 1988, s 838(5)-(10)6. The term 'ordinary share capital' means all the issued share capital of the company other
than the capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the
profits of the company7. Schedule 18 of the ICTA 1988 (Equity holders and profits or assets available for distribution)
applies for the purposes of sub-s (3)(b) and (c) of Sch 7, para 1 as it applies for the purposes of s 413(7)(a) and (b) of the
1988 Act, omitting paragraphs 5(3) and 5B to 5E of that Act. This entire paragraph is subject to the FA 2003, Sch 7,
para 2 (Restrictions on availability of group relief) and para 3 (Withdrawal of group relief).
Page 959
HR A[11225]
1 FA 2003, Sch 7, para 1(1) and s 62.
2 FA 2003, Sch 7, para 1(2)(a).
3 FA 2003, Sch 7, para 1(2)(b).
4 FA 2003, Sch 7, para 1(3)(a), (b) and (c).
5 FA 2003, Sch 7, para 1(4).
6 FA 2003, Sch 7, para 1(4).
7 FA 2003, Sch 7, para 1(5).
HR A[11226]
Schedule 18 of the ICTA 1988 (Equity holders and profits or assets available for distribution) applies for the purposes
of the FA 2003, Sch 7, para 1(3)(b) and (c), but with the omission of paras 5(3) and 5B to 5E of Sch 18 as it applies for
the purposes of s 473(a) and (b) of the 1988 Act. For the purposes of group relief, company A is a 75% subsidiary of
another company B if company B is beneficially entitled to not less than 75% of any profits available for distribution to
equity holders of A, and would be beneficially entitled to not less than 75% of any assets of company A available for
distribution to its equity holders on a winding up. This is similar to the application of s 413(7)(a) and (b) of the ICTA
1988, omitting paras 5(3) and 5B to 5E.
Page 960
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/H Group relief/1
Restrictions on availability of group relief
1 Restrictions on availability of group relief
HR A[11227]
Group relief is not available if at the effective date of the transaction there are arrangements in existence which, at that
or some later time, a person has, or could obtain, or any persons together have or could obtain, control of the purchaser
but not of the vendor. This does not apply to arrangements entered into with a view to an acquisition of shares by the
company ('the acquiring company'):
(a) in relation to which s 75 of the FA 1986 (Stamp duty: acquisition relief) will apply;
(b) in relation to which the conditions for relief under that section will be met; and
(c) as a result of which the purchaser will be a member of the same group as the acquiring company.
Group relief is not available if the transaction is affected in pursuance of, or in connection with, arrangements under
which the consideration, or any part of the consideration for the transaction, is to be provided or received directly or
indirectly by a person other than a group company, or the vendor and the purchaser are to cease to be members of the
same group by reason of the purchaser ceasing to be a 75% subsidiary of the vendor or the third company. The term
'arrangements' includes any scheme, agreement or understanding, whether or not legally enforceable; and 'control' has
the meaning attributed to it by s 840 of the ICTA 1988.
Page 961
Withdrawal of group relief
2 Withdrawal of group relief
HR A[11228]
Where the relevant transaction is exempt from charge by the principal provision in the FA 2003, Sch 71, the purchaser
ceases to be a member of the same group as the vendor before the end of the period of three years beginning with the
effective date of the transaction, or in pursuance of or in connection with arrangements made before the end of the
period, and at the time the purchaser ceases to be a member of the same group as the vendor (the relevant time), it, or a
relevant associated company holds a chargeable interest:
(a) that was acquired by the purchaser under the relevant transaction; or
(b) that is derived from a chargeable interest so acquired, and that has not subsequently been acquired
at market value under a chargeable transaction for which group relief was available that was not claimed;
group relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable
in accordance with Sch 7. The amount chargeable is the tax that would have been chargeable in respect of the relevant
transaction but for the group relief. If the chargeable consideration for that transaction had been an amount equal to the
market value of the subject matter of the transaction or, as the case may be, an appropriate proportion of the tax, that
would have been so chargeable. The term 'appropriate proportion' in this context means an appropriate proportion
having regard to the subject matter of the relevant transaction and what is held at the relevant time by the transferee
company or, as the case may be, by that company and its relevant associated companies.
HR A[11229]
1 Paragraph 1(1)(Group relief).

Page 962
Cases in which group relief not withdrawn
3 Cases in which group relief not withdrawn1
HR A[11230]-[11240]
Group relief is not withdrawn under the FA 2003, Sch 7, para 3 in the following cases:
(1) where the purchaser ceases to be a member of the same group as the vendor because the vendor
leaves the group;
(2) the vendor is regarded as leaving the group if the company cease to be members of the same group
by reason of a transaction relating to shares in the vendor or another company that, as a result of the
transaction, ceases to be a member of the same group as the purchaser;
(3) where the purchaser ceases to be a member of the same group as the vendor by reason of anything
done for in the course of winding up the vendor or another company that is above the vendor in the group
structure.
For these purposes, a company is above the vendor if the vendor or another company is a 75% subsidiary of the
company.
HR A[11241]
1 FA 2003, Sch 7, para 4.
HR A[11242]
In (3) above, where the purchaser ceases to be a member of the same group as the vendor as a result of acquisition of
shares by another company, the acquiring company, in relation to which:
(a) the FA 1986, s 75 applies (Stamp duty: acquisition relief), and the conditions for relief under that
section are met;
(b) the purchaser is immediately after that acquisition a member of the same group as the acquiring
company.
In the third case above, if the purchaser ceases to be a member of the same group as the acquiring company before the
end of the period of three years beginning with the effective date of the relevant transaction, or in pursuance of or in
connection with arrangements made before the end of that period, and at the time the purchaser ceases to be a member
of the same group as the acquiring company, it, or a relevant associated company, holds a chargeable interest:
Page 963
(a) that was acquired by the purchaser under the relevant transaction; or
(b) that is derived from an interest so acquired, and that has not subsequently been acquired at market
value under a chargeable transaction for which group relief was available but not claimed;
the provisions of this part relating to group relief apply as if the purchaser had then ceased to be a member of the same
group as the vendor.
Page 964
Recovery of group relief from another group company or controlling director
4 Recovery of group relief from another group company or controlling director
HR A[11243]
The FA 2003, Sch 7, para 5 applies where tax is chargeable under para 3 (Withdrawal of group relief), the amount so
chargeable has been finally determined and the whole or part of the amount so chargeable is unpaid six months after the
date on which it became payable. The following persons may, by notice under para 6 of Sch 7 (see HR A[11244]
below), be required to pay the unpaid tax:
(a) the vendor;

(b) any company that at any relevant time was a member of the same group as the purchaser and was
above it in the group structure;
(c) any person who at any relevant time was a controlling director of the purchaser or a company
having control of the purchaser.
For these purposes, 'a relevant time' means any time between the effective date of the relevant transaction and the
purchaser ceasing to be a member of the same group as the vendor, and a company ('A') is above another company ('B')
in a group structure if company B or another company that is above company B in the group structure is a 75%
subsidiary of company A. 'Director' for these purposes has the meaning given to it by s 67 of the Income Tax (Earnings
and Pensions) Act 2003 (ITEPA 2003).
Page 965
Recovery of group relief: supplementary
5 Recovery of group relief: supplementary1
HR A[11244]
This provision enables HMRC to serve a notice on a person within para 5(2) of the FA 2003, Sch 7 requiring him,
within 30 days of the service of the notice, to pay the amount that remains unpaid. Any such notice must be served
before the end of the period of three years beginning with the date of the final determination mentioned in para 5(1)(b).
The notice must state the amount required to be paid by the person on whom the notice is served. The notice has effect
for the purpose of recovery from that person of the amount required to be paid and of interest on that amount and for
purposes of appeals, as if it were a notice of assessment, and that amount were an amount of tax due from that person. A
person who has paid an amount in pursuance of the notice under para 5 may recover that amount from the purchaser. A
payment in pursuance of a notice under this paragraph is not allowed as a deduction in computing any income profits or
losses for any tax purposes.
HR A[11245]
1 FA 2003, Sch 7, para 6.

Page 966
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/I Reconstruction and
acquisition reliefs
I
Page 967
acquisition reliefs/1 Reconstruction relief
1 Reconstruction relief
HR A[11246]
A transaction entered into for the purposes of, or in connection with the transfer of an undertaking or part, is exempt
from charge where a company ('the acquiring company') acquires the whole or part of the undertaking of another
company ('the target company') in pursuance of a scheme for the reconstruction of the target company and the first,
second and third condition specified below are met. This relief is referred to in this part of the FA 2003 as
'reconstruction relief'.
Page 968
acquisition reliefs/2 The conditions for reconstruction relief
2 The conditions for reconstruction relief
HR A[11247]
The first condition is that the consideration for the acquisition consists wholly or partly of the issue of non-redeemable
shares in the acquiring company to all the shareholders of the target company. Where the consideration for the
acquisition consists partly of the issue of non-redeemable shares, as mentioned in the first condition, that condition is
met only if the rest of the consideration consists wholly of the assumption or discharge by the acquiring company of
liabilities of the target company. The second condition is that after the acquisition has been made:
(a) each shareholder of each of the companies is a shareholder of the other; and
(b) the proportion of shares of one of the companies held by any shareholder is the same or as nearly
as may be the same as the proportion of shares of the other company held by that shareholder.
The third condition is that the acquisition is effected for bonefide commercial reasons and does not fall part of the
scheme or arrangement of which the main purpose, or one of the main purposes, is the avoidance of liability to tax. Tax
in this context includes stamp duty, Income Tax, Corporation Tax, Capital Gains Tax, or tax under this part of the FA
2003. There may be withdrawal of reconstruction or acquisition relief because para 7 of Sch 7 of the Act is made
subject to the later para 9.
Page 969
acquisition reliefs/3 Acquisition relief
3 Acquisition relief
HR A[11248]
Where a company (the acquiring company) acquires the whole or part of the undertaking of another company (the target
company), and the first and second conditions specified below are met, the rate of tax chargeable on the land transaction
entered into for the purposes of or in connection with the transfer of the undertaking or part is limited to 0.5%. Relief
under para 8 of the FA 2003, Sch 7 is referred to in this part as 'acquisition relief'.
Page 970
acquisition reliefs/4 The conditions for acquisition relief
4 The conditions for acquisition relief
HR A[11249]
The first condition is that the consideration for the acquisition consists wholly or partly of the issue of non-redeemable
shares in the acquiring company to the target company or all or any of the target company's shareholders. Where the
consideration for the acquisition consists partly of the issue of non-redeemable shares as mentioned in the first
condition, that condition is met only if the rest of the consideration consists wholly of cash not exceeding 10% of the
nominal value of the non-redeemable shares so issued, or the assumption or discharge by the acquiring company of
liabilities of the target company or both of those things. The second condition is that the acquiring company is not
associated with another company that is a party to arrangements with the target company relating to shares of the
acquiring company issued in connection with the transfer or undertaking of that part. For the purpose of this part of the
FA 2003, companies are associated if one has control of the other or both are controlled by the same person or persons
and arrangements include, as before, any scheme, agreement or understanding, whether or not legally enforceable.
Page 971
acquisition reliefs/5 Withdrawal of reconstruction or acquisition relief
5 Withdrawal of reconstruction or acquisition relief1
HR A[11250]-[11260]
Where, in the case of a transaction ('the relevant transaction') that is exempt by virtue of reconstruction relief or is
subject to a reduced rate of tax by virtue of acquisition relief:
(a) control of the acquiring company changes before the end of the period of three years beginning
with the effective date of the transaction; or
(b) changes in pursuance of or in connection with arrangements made before the end of that period;
and
(c) at the time control of the acquiring company changes, it, or a relevant associated company, holds a
chargeable interest:
(i) that was acquired by the acquiring company under the relevant transaction; or
(ii) that is derived from an interest so acquired, and that has not subsequently been acquired at
market value under a chargeable transaction in relation to which the reconstruction or acquisition
relief was available, but was not claimed;
the reconstruction or acquisition relief in relation to the relevant transaction, or an appropriate proportion of it, is
withdrawn and tax is chargeable in accordance with para 9 of the FA 2003, Sch 7.
HR A[11261]
1 FA 2003, Sch 7, para 9(1).

Page 972
acquisition reliefs/6 Tax chargeable
6 Tax chargeable
HR A[11262]
The amount of tax chargeable is the tax that would have been chargeable in respect of the relevant transaction, but for
reconstruction or acquisition relief if the chargeable consideration for the transaction had been an amount equal to the
market value of the subject matter of the transaction, or as the case may be, an appropriate proportion of the tax that
would have been so chargeable.
Page 973
acquisition reliefs/7 Definitions
7 Definitions
HR A[11263]
The term 'appropriate proportion' is defined to mean an appropriate proportion having regard to the subject matter of the
relevant transaction and what is held at the relevant time by the acquiring company or by that company or any relevant
associated companies. Also defined is the term 'relevant associated company' in relation to the acquiring company and
this means a company that is controlled by the acquiring company immediately before the control of that company
changes, and of which control changes in consequence of the change of control of that company.
Page 974
acquisition reliefs/8 Cases in which reconstruction or acquisition relief is not withdrawn
8 Cases in which reconstruction or acquisition relief is not withdrawn1
HR A[11264]
Reconstruction or acquisition relief is not withdrawn under para 9 of the FA 2003, Sch 7 in the following cases. There
are five cases in which this occurs. The first case is where control of the acquiring company changes as a result of a
share transaction that is affected, as mentioned in Sch 3, para 3(a)-(d). This relates to transactions in connection with
divorce. The second case is where control of the acquiring company changes as a result of a share transaction that (i) is
affected as mentioned in Sch 3, para 4(1), and (ii) meets the conditions in para 4(2) of that Schedule (variation of
testamentary dispositions etc). The third case is where control of the acquiring company changes as a result of an
exempt intra-group transfer and is defined to mean a transfer of shares affected by an instrument that is exempt from
stamp duty by reason of the Finance Act 1930, s 42. Attention has to be drawn to the case where there is subsequent
non-exempt transfer that will cause withdrawal of the relief. The fourth case is where control of the acquiring company
changes as a result of a transfer of shares to another company in relation to which share acquisition relief applies. Share
acquisition relief is defined in the FA 1986, s 77 and a transfer is one in relation to which that relief applies if an
instrument affecting the transfer is exempt from stamp duty by virtue of that provision. Attention is again to be drawn to
the withdrawal of reconstruction or acquisition relief on a subsequent non-exempt transfer. The fifth case is where the
control of the acquiring company changes as a result of a loan creditor becoming or ceasing to be treated as having
control of the company and the other persons who were previously treated as controlling the company continue to be so
treated. A loan creditor has the same meaning as is attributed to it in the ICTA 1988, s 417(7)-(9).
HR A[11265]
1 FA 2003, s 10(1).
Page 975
acquisition reliefs/9 Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer
9 Withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer
HR A[11266]
Reconstruction or acquisition relief in relation to the relevant transaction in this paragraph or an appropriate proportion
of it is withdrawn and tax is chargeable in accordance as hereunder. Where the FA 2003, Sch 7, para 10(4) (change of
control of acquiring company as a result of exempt intra-group transfer) has effect to prevent the withdrawal of
reconstruction or acquisition relief on a change of control in the acquiring company, but:
(a) a company holding shares in the acquiring company to which the exempt intra-group transfer
related, or that are derived from shares to which that transfer related ceases to be a member of the same
group as the target company:
(i) before the end of the period of three years beginning with the effective date of the relevant
transaction; or
(ii) in pursuance of or in connection with arrangements made before the end of that period; and
(b) the acquiring company or a relevant associated company at that time ('the relevant time') holds a
chargeable interest:
(i) that was transferred to the acquiring company by the relevant transaction; or
(ii) that is derived from an interest that was so transferred and that has not subsequently been
transferred at market value by a chargeable transaction in relation to which the reconstruction or
acquisition relief that was available but was not claimed;
paragraph 10(5) (change of control of acquiring company as a result of a transfer to which share acquisition relief
applies) has effect to prevent the withdrawal of reconstruction or acquisition relief on a change of control of the
acquiring company. However, where:
(a) control of the other company mentioned in that provision changes:
(i) before the end of the period of three years beginning the effective date of the relevant
transaction; or
(ii) in pursuance of or in connection with arrangements made before the end of the period at a
time when the company holds any shares transferred to it by the exempt transfer or any shares
derived from those shares so transferred; and
(b) the acquiring company or a relevant associated company at the relevant time holds a chargeable
interest:
(i) that was transferred to the acquiring company by the relevant transaction; or
Page 976
(ii) that is derived from an interest that was so transferred, and that has not subsequently been
transferred at market value by a chargeable transaction in relation to which reconstruction or
acquisition relief was available that was not claimed;
reconstruction or acquisition relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn
and tax is chargeable in accordance with para 10(5). The amount chargeable is the tax that would have been chargeable
in respect of the relevant transaction but for reconstruction or acquisition relief. It is a chargeable consideration for that
transaction being an amount equal to the market value of the subject matter of the transaction or, as the case may be, an
appropriate proportion of the tax that would have been so chargeable. An 'appropriate proportion' is defined to mean
having regard to the subject matter of the relevant transaction what is held at the relevant time by the acquiring
company or, as the case may be, by that company and any relevant associated companies.
HR A[11267]
The term 'relevant associated company' means a company:
(a) that is controlled by the acquiring company immediately before the control of that company
changes; and
(b) of which control changes in consequence of a change of control of that company.
Arrangement is also defined, but there is no variation to the definition given above. Control has to be construed in
accordance with the ICTA 1988, s 416. References to control of a company changing are to the company becoming
controlled:
(a) by a different person;

(b) by a different number of persons; or
(c) by two or more persons, at least one of whom is not the person or one of the persons by whom the
company was previously controlled.
Page 977
acquisition reliefs/10 Recovery of reconstruction or acquisition relief from another group company or controlling
director
10 Recovery of reconstruction or acquisition relief from another group company or controlling

director1
HR A[11268]
This provision applies:
(a) where tax is chargeable under paras 9 or 11 of the FA 2003, Sch 7. Paragraph 9 makes provision
for the withdrawal of reconstruction or acquisition relief (see HR A[11250]). Paragraph 11 makes
provision for the withdrawal of reconstruction or acquisition relief on subsequent non-exempt transfer;
(b) where the amount so chargeable has been finally determined; and
(c) where the whole or part of the amount so chargeable is unpaid six months after the date on which it
became payable.
HR A[11269]
1 FA 2003, s 12.
Page 978
acquisition reliefs/11 Recovery of tax
11 Recovery of tax
HR A[11270]-[11280]
Power to demand payment of the unpaid tax is given to HMRC to recover it from the following persons:
(a) Any company that was a member of the same group at any relevant time as the acquiring company
and was above it in the group structure.
(b) Any person who at any relevant time was a controlling director of the acquiring company or a
company having control of the acquiring company.
(a) Definitions
HR A[11281]
'Relevant time' means any time falling between the effective date of the relevant transaction and the change of control
by virtue of which tax is chargeable. A company ('A') is above another company ('B') in the group structure if that other
company in the group structure is a 75% subsidiary of company (A). A 'director' in relation to a company has the
meaning given it by the ITEPA 2003, s 67(1) (read with sub-s (2) of that section) and includes any person falling within
the ICTA 1988, s 417(5) (read with sub-s (6) of that section); and a 'controlling director' means a director who has
control of the company within the ICTA 1988, s 416.
Page 979
acquisition reliefs/12 Recovery of reconstruction or acquisition relief: supplementary
12 Recovery of reconstruction or acquisition relief: supplementary
HR A[11282]
The powers given to HMRC to recover reconstruction or acquisition relief are set out in the FA 2003, Sch 7, para 13.
Schedule 7 also prescribes the procedure to be followed by HMRC in such a case. HMRC may serve a notice on a
person within the FA 2003, Sch 7, para 12(2) requiring that person to pay the amount unpaid within 30 days of the
service of the notice. Such a notice must be served before the end of the period of three years beginning with the date of
the final determination mentioned in the FA 2003, Sch 7, para (1)(b), and it must state the amount to be paid by the
person on whom it is served. The notice has effect for the 'purposes of recovery' of the amount required to be paid,
including interest, and for the purpose of appeals as if it were a notice of assessment and that amount were an amount of
tax due from that person. That person, having paid that amount, may recover the amount from the acquiring company.
However, such a payment is not allowed as a deduction in computing any income profits or losses for any tax purposes.
Page 980
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/J Trust, trustees and
estates
J
Page 981
estates/1 Introduction
1 Introduction
HR A[11283]
For SDLT purposes1, the legislation confines trusts to two types, namely:
(a) bare trusts2, which include nominees; and

(b) settlements, which means a trust that is not a bare trust.
The term 'settlements' will include interest and non-interest in possession trusts, such as discretionary settlements,
accumulation and maintenance trusts, constructive trusts, mixed trusts and foreign trusts. Where there is a person acting
in a representative capacity directing, managing or controlling the property of an incapacitated person, the responsibility
for discharging the special obligations of trustees in these circumstances is dealt with separately for SDLT purposes3.
HR A[11284]
1 FA 2003, s 105 and Sch 16.
2 FA 2003, Sch 16, para 1(2).
3 FA 2003, s 106.
Page 982
estates/2 Bare trusts
2 Bare trusts
HR A[11285]
For SDLT purposes, a 'bare trust' means:
(a) A trust under which property is held by a person as trustee, either:
(i) for a person absolutely entitled as against the trustee or who would be so entitled but for
being a minor or other person under a disability; or
(ii) for two or more persons who are or would be jointly entitled1; and
(b) includes a case in which a person holds property as 'nominee for another'.
The references to a person being 'absolutely entitled' to property as against the trustee are references in (i) and (ii) above
to a person who has the exclusive right, subject only to satisfying any outstanding charge, lien or other right of the
trustee to resort to the property for payment of duty, taxes, costs or other outgoings or to direct how property is to be
dealt with and invested2. These definitions are clearly based on the Capital Gains Tax legislation3.
HR A[11286]
1 FA 2003, s 65 and Sch 16, para 1(2)(a) and (b).
2 FA 2003, Sch 16, para 1(3).
3 TCGA 1992, s 60.
HR A[11287]
Where a trustee acquires or holds a chargeable interest as a bare trustee, that acquisition is deemed to be an act of the
beneficiary who, under such a trust, has the power to direct what the trustee can do. Thus the trustee is merely the
repository of the property, having no active management duties to perform. In cases where the beneficial owner is a
minor or suffers under some other disability, the person(s) responsible for ensuring compliance with the legislation,
such as signing the LTR declaration or self-certificate, will fall on the parent or guardian of the minor. There is another
variation in such a trust that occurs during the period of time before the absolutely entitled sui juris beneficiary calls for
the property to be transferred to him - the trustees will act not merely as a respository, but as active trustees1 by reason
of the rule in Saunders v Vautier (1841) 4 Beav 115. It is of course possible for absolutely beneficially entitled persons
to leave the property in trust to be held to their order. It is also possible for two or more beneficiaries to combine, for
example where one has an absolute vested interest payable on a future date but subject to a condition precedent, for
Page 983
example by a gift of capital and accumulated income to the beneficiary if he attains 25 years of age. In such a case, that
beneficiary would not be absolutely entitled and would have no right to bring the trust to an end, whereas if the property
had been held for A for life and B thereafter in remainder, neither A nor B would have an absolute interest, but if these
interests were combined they would be absolutely entitled to bring the trust to an end2.
HR A[11288]
1 Booth v Ellard [1980] 3 All ER 569.
2 White, Re, White v Edmond [1901] 1 Ch 570: Smith, Re, Public Trustee v Aspinall [1928] 1 Ch 915.
(a) Nominees
HR A[11289]
Included within the category of bare trusts are 'nominees' who hold property as a nominee for another, for instance such
as acting as trustee of a will trust or for a specific devisee in a bare trust under which the beneficiary was under age or
under some disability. Were it not for such disability, the transaction would be treated as being carried out by the
beneficiary and not the nominee1. Normally the beneficial owner would be liable to meet the tax and be the only
competent person to sign the declaration in the LTR. Any other signature would be invalid and could lead to the
imposition by HMRC of penalties for rendering an incorrect return2.
HR A[11290]-[11300]
1 FA 2003, Sch 16, para 3.
2 FA 2003, Sch 10, paras 3-5 and 8.

Page 984
estates/3 Settlements
3 Settlements
HR A[11301]
In contrast to the position of trustees of bare trusts, trustees of settlements who acquire chargeable interests will be
accountable to SDLT on disposal of the beneficial interest. The tax burden in such settlements will fall, not on the
beneficiaries, but on the trustees1. A distinction has to be drawn, however, between the liability for payment of SDLT,
which will include interest and penalties, and the making and rendering of the LTR. The former responsibility is fixed
on all the trustees (the 'responsible trustees'), whereas the task of making and rendering the LTR may be done by any
one or more of the responsible trustees who become the relevant trustees'.
The responsible trustees are the persons in a land transaction who, at the effective date, are the trustees, or who
subsequently become trustees2. They are liable:
(a) to make payment of tax and interest;

(b) to make payment in accordance with an assessment under the FA 2003, Sch 10, para 29 (recovery
of excessive payment); or
(c) to a penalty under this part or to interest on such a penalty.
The 'relevant trustees' are the trustees making or rendering a return or self-certificate in relation to a land transaction and
may be one or two of the responsible trustees. Frequently, the trustees are referred to as the 'purchaser' which has a
special meaning for SDLT purposes, namely 'the person acquiring the subject matter of the transaction'3. Thus where a
chargeable interest is created, the purchaser will be the lessee when the interest created is a lease or the person who
enjoys upon creation a major right of way. Another example would be the beneficiary of a release of a restrictive
covenant or under a variation of a lease. All the situations above require the purchaser to give consideration for the
transaction. Without such consideration there can be no exposure to SDLT.
HR A[11302]
1 FA 2003, Sch 16, para 4.
2 FA 2003, Sch 16, para 5(3).
3 FA 2003, s 43(4).
HR A[11303]
The term 'chargeable interest' for these purposes means an estate, interest, right or power in or over land in the UK or
the benefit of an obligation, restriction or condition affecting the value of an estate interest, right or power other than an
Page 985
exempt interest1 consisting of any security interest, licence to use or occupy land, a tenancy at will, an advowson,
franchise or manor. Equitable interests, where land is a trust asset, have to be included as chargeable interests and will
affect a life tenant in a trust governed by the laws of England and Wales. There is an important statutory provision2
relating to interests of beneficiaries under certain trusts where property is held in trust under the law of Scotland, or of a
country or territory outside the UK on terms that if the trust had effect under the law of England and Wales, a
beneficiary would be regarded as having an equitable interest in the trust property:
(a) that beneficiary shall be treated as having such an interest notwithstanding that no such interest is
recognised under Scottish law or the law of the country or territory outside the UK;
(b) an acquisition of the interests of a beneficiary under the trust shall be treated as involving the
acquisition of an interest in the trust property.
The effect of this important piece of legislation is to override the limited rights under foreign law (which includes
Scotland) which merely give the beneficiaries rights in personam, and which only permit the beneficiaries to pursue
trustees to compel proper administration of the trust and to sue for breach, whereas under English and Welsh law the
beneficiary enjoys a proprietary interest in the underlying property. This also has the effect of bringing the foreign
governed trust administered by trustees outside the United Kingdom, of non-resident beneficiaries, within the charge to
SDLT. This is an interesting and contestable proposition and is likely to raise problems of enforcement, for the reason
the interest is a limited interest but is not necessarily a 'major interest' in land being neither a leasehold or freehold
interest in equity. Certainly great care will have to be taken in complying with the reporting obligations.
HR A[11304]
1 FA 2003, Sch 16, para 5(3).
2 FA 2003, Sch 16, para 2.
HR A[11305]
This is a complex area of law and it maybe helpful if an example is given:
(1) The trust deed gave the trustees powers to accumulate the income derived from the trusts assets
until the beneficiary attained 25 years of age. He then becomes entitled to have transferred to him1 the
trust capital and the accumulated income comprising the trust fund. The beneficiary, upon attaining 21
years of age, becomes sui juris and acquires an absolute vested interest in the trust.
(2) However, if the interest in (1) above was made subject to a condition that the gift of capital and
income depended upon the beneficiary attaining 25 years of age, the beneficiary would have no right to
end the trust, but if that beneficiary and the remainderman agreed to combine their interests in order to
partition the funds, then provided they were sui juris, they could direct the trustees, if they so wished, to
hand over the trust property in accordance with their directions2. This transaction will not qualify for
partition relief because the interest disposed of was not jointly owned, neither were they joint tenants nor
tenants in common, even though they would have had interests in succession.
(3) The trust can be terminated in the following somewhat different circumstances:
Page 986
(a) The rule in Saunders v Vautier applies where the beneficiaries are sui juris and between
them are entitled absolutely to the income.
(b) The trusts deed directs that the whole or part of the trust income is to be applied for A's
benefit during his life, and whatever is not applied for A is to be applied for the benefit of B
during his lifetime, with the remainder going to C absolutely on the deaths of A and B who
during their lifetimes are absolutely entitled to the income but not the capital.
Thus the trustees can enjoy the power to apply the income:
(i) wholly to A, or alternatively;

(ii) equally to A and B; or
(iii) in whatever proportions to A and B as trustees elect.
The trust cannot be determined until C is sui juris.
(4) Another variant can apply where all beneficiaries are sui juris and are absolutely entitled but
decline to accept from the trustees the transfer of the title to the trust property. In that event, the trustees
have power to pay the trust fund into court3.
HR A[11306]
1 Saunders v Vautier (1841) 10LJ Ch 354, [1835-42] All ER 58.
2 Gosling v Gosling (1859) John 205.
3 IRC v Hamilton-Russell Executives [1943] 1 All ER 474.

Page 987
estates/4 Discretionary trusts
4 Discretionary trusts
HR A[11307]
Under a discretionary trust, the beneficiaries have no interests in the trust assets as they may have in other types of
settlement. The beneficiaries are subject to the exercise of discretion by the trustees over which they have no
jurisdiction, save to ensure that the trustees use their discretion. The beneficiaries' rights are personal only such that the
claim against the trustees is merely for maladministration of the trust.
The legislation1 makes provision relating to consideration for the exercise of power of appointment or discretion in the
following manner:
'Where a chargeable interest is acquired by virtue of:
(a) the exercise of a power of appointment, or
(b) the exercise of a discretion vested in trustees of a settlement,
there shall be treated as consideration for the acquisition of the interest or right by virtue of the exercise of the power or discretion
any consideration given for the person in whose favour the appointment was made or the discretion was exercised becoming an
object of the power or discretion'.
This specific provision was made to ensure that SDLT was chargeable upon land transactions for the reason that without
such a provision, dealings in such interests would not be dealings in chargeable interests, even if they were done for a
consideration. Without such a provision, because discretionary trusts have no interest in the underlying property, only
personal rights against the trustees could be brought.
HR A[11308]
1 FA 2003, Sch 16, para 7.

Page 988
estates/5 Trust reorganisation
5 Trust reorganisation
HR A[11309]
Trust reorganisations are often triggered by the changed circumstances of the beneficiaries and often involve a mutual
exchange of some of the beneficial interests of the trust, which may include the transfer of land or the exchange, say, of
land for shares held in trust. Where such a transaction is entered into and one side of the bargain consists of the
acquisition of an interest in land in exchange for shares, SDLT will be charged upon the apportioned value of the shares
relating in value to the proportion of the land interest being acquired. It will be necessary to apportion any shares
received between the interest in the land and the other trust assets on a just and reasonable basis1, so that only that part
apportioned to the land is chargeable to SDLT. This may arise and be the case where the exchange, including the land
transaction, is to enable the shares to be held absolutely by the other party. Where, however, both interests to be
exchanged are land, the land exchange rules2 as provided by the FA 2003 will apply.
HR A[11310]-[11320]
1 FA 2003, Sch 4, para 4.
2 FA 2003, s 47 (Exchanges), and Sch 4, paras 5 and 6.

Page 989
estates/6 Deceased persons estates
6 Deceased persons estates
HR A[11321]
A transaction following a person's death that varies a disposition whether effected by will, under the law relating to
intestacy, or otherwise of property of which the deceased was competent to dispose is exempt from charge if the
following conditions are met:
(a) that the transaction is carried out within the period of two years after a person's death; and
(b) that no consideration in money or money's worth other than the making of a variation of another
such disposition is given for it.
This provision applies whether or not the administration is complete or the property has been distributed in accordance
with the original dispositions1.
HR A[11322]
1 FA 2003, Sch 3, para 4.
HR A[11323]
In English law, the rights of a residuary legatee are purely a personal claim against the executors for proper
administration. It is only when the administration is complete that the expectant legatee can say with any certainty that
their expectation or hope becomes a reality that a particular asset is theirs. That is the reason why, until then, the
legatees rights are merely in personam and why, until then, arguably no chargeable interest arises. As soon as the
interest becomes a chargeable interest, the beneficiaries rights in personam will cease and any dealings by the
beneficiaries under a bare trust or by the executors once administration is complete will be subject to SDLT and the
executors will become the vendors. However, where provision is made in a will entitling personal representatives to
appropriate property in satisfaction of a legacy or legacies without the beneficiary having to consent, the SDLT position
would seem to be non-consensual and not in satisfaction of a debt sufficient to bring it within the ambit of a chargeable
interest or an acquisition. In this instance, there will be no charge to SDLT. However, it would seem that where the
acquisition results from or by reason of a statutory provision, it will become chargeable by virtue of the FA 2003, s
43(2) which provides that:
'however the acquisition is effected, whether ... by order of the Court or other authority, by or under any statutory provision or by
operation of law, it will be chargeable to SDLT.'
Page 990
The reason for this somewhat convoluted provision is that there has to be a consensual arrangement in order for there to
be consideration.
Page 991
estates/7 Variation of testamentary dispositions
7 Variation of testamentary dispositions
HR A[11324]
A transaction following death which varies the disposition of property made by will, intestacy or otherwise of which the
deceased was competent to dispose is exempt from charge to SDLT provided certain conditions are satisfied1.
The requisite conditions are:
(a) the transaction is carried out within two years of death;

(b) no consideration in money or money's worth other than the making of a variation of another such
disposition is given for it2.
Exemption is given under both the Inheritance Tax Act 1984 (IHTA 1984) and the FA 2003 in the same terms, the only
distinction being that under the IHTA 1984 provisions, a statement of intention has to be made by the parties that the
provisions will apply, whereas the SDLT exemption is automatic. For example, under the provisions of a will, A
inherits 'house A' and D inherits 'house D'. A gives up 'house A' in consideration for D exchanging 'house D'. These
transactions qualify for exemption under the IHTA 1984, s 142(3) and from SDLT under the FA 2003, Sch 3, para 4. If
any equalisation payment was required to be paid, there would be no exemption because such a payment constitutes
consideration being given for the variation.
HR A[11325]
1 Stamp Duty (Exempt Instruments) Regulations 1987, SI 1987/516, Category M.
2 IHTA 1984, s 142(3) the relief given by this provision will be denied if consideration is given for this variation. The FA 2003, Sch 3,
para 1 also gives SDLT exemption to this transaction.
Page 992
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/K Returns and other
administrative matters
HR A[11326]
The duty of a purchaser to deliver LTRs1 before the expiry of 30 days commencing immediately after the 'effective
date' has been considered earlier in this chapter. Likewise, consideration has been given in the text as to what land
transactions are notifiable2. It will be recalled that all acquisitions of major interest in land are notifiable unless they are
exempt from charge under the FA 2003, Sch 3. There may on occasions be an acquisition of a chargeable interest other
than a major interest, which will be a notifiable transaction if the chargeable consideration in relation to which tax is
chargeable at a rate of 1% or higher, or in respect of which tax would be so chargeable but for a relief3. The other
administrative matters remaining to be covered relate to the following:
(1) Returns, enquiries, assessments and related matters4.

(2) Registration of land transactions in the register of title maintained by the Chief Land Registrar5.
(3) Adjustment where contingency ceases or consideration becomes ascertained6.
(4) Further return where relief withdrawn7.
(5) Return or later return in consequence of later linked transaction8.
(6) Declaration by person authorised to act on behalf of an individual9.
(7) Loss or destruction of, or damage to, return etc10.
(8) Formal requirements as to assessments, mistakes, defects and penalty determinations.
(9) Delivery and service of documents11.
HR A[11327]
1 FA 2003, s 76.
2 FA 2003, s 77.
3 FA 2003, s 77(4).
4 FA 2003, s 78 and Sch 10.
5 FA 2003, s 79 and Sch 11.
6 FA 2003, s 80.
7 FA 2003, s 81.
8 FA 2003, s 81A.
Page 993
9 FA 2003, s 81B.
10 FA 2003, s 82.
11 FA 2003, s 84.
Page 994
administrative matters/1 Returns, enquiries, assessments and related matters
1 Returns, enquiries, assessments and related matters
HR A[11328]
Apart from the provision in the FA 2003, s 78(3) which gives power to the Treasury, by regulation, to make any
amendments it considers necessary or expedient from time to time, as well as any consequential amendments, the law
relating to returns, enquiries, assessments and related matters is contained in the FA 2003, Sch 10, which:
(a) makes general provisions about returns;

(b) imposes a duty to keep and preserve records;
(c) makes provision for enquiries into returns;
(d) provides for a revenue determination if no return is delivered;
(e) provides for HMRC assessments;
(f) provides for relief in case of excessive assessments; and
(g) provides for appeals against HMRC decisions on tax.
(a) General provisions relating to returns: content of return
HR A[11329]
The LTR must be in the form prescribed by the STO in the Stamp Duty Land Tax (Administration) Regulations 2003,
SI 2003/2837. Guidance notes are provided1 and are an indispensable aid to completing the form which taken together
with the package of forms is contained within the space of 50 pages, and this does not include other obligatory reading
on the form of supplemental documents, for instance form:
(a) SDLT 2 - is required to be completed where there are two or more vendors and for each additional
vendor or purchaser.
(b) SDLT 3 - requires to be completed when all the details relating to the main land transaction cannot
be fitted in to SDLT 1.
(c) SDLT 4 - is required to be completed where additional information about the transaction and/or the
lease can be provided. This arises where there is, for example, the sale of a lease by say several vendors
or with several purchasers or of several parcels of land2.
The effect of all this is that there are likely to be 10-15 more pages in addition to the 50 pages referred to above which
are a minimum. The first-time reader of these provisions would not be unreasonable in harbouring the hope that when
these documents were completed that would be the task finished. The reader would be disappointed because the FA
2003, Sch 10 prescribes with particularity what the contents of the return should include. The LTR must be in the
prescribed form, containing information prescribed by regulations made by HMRC and approved by the Treasury,
which must, in any event, include a declaration by the purchaser or each of them that the return is to the best of his
Page 995
knowledge, correct and complete. The regulations give power to issue a variety of forms dealing with different
situations and included in this are the particulars formerly required under the Finance Act 1931, Sch 2, requiring
delivery of particulars of land transactions in Great Britain; there is a corresponding provision for Northern Ireland
under the Finance Act 1994, s 244.
HR A[11330]-[11340]
1 Telephone STO enquiry line on 0845 603 0135 between hours of 8.30-17.00.
2 There is power to apply for multiple HMRC certificates (SDLT 5) where several land registries are involved.
(b) Meaning of filing date and delivery of return
HR A[11341]
This requires filing of the LTR by the last date of the period within which the return must be delivered. The return has
to comply with the requirements set down in the FA 2003, Sch 10, para 1(1) and must be accompanied by payment of
any tax required. This just states briefly what the FA 2003 prescribed. The operation of this simple provision is more
complex. The reader will have appreciated that the taxpayer is required to notify the tax payable by filing the LTR
before the end of the period of 30 days after the effective date1. However, the term 'effective date' has far greater
significance than triggering the liability to pay SDLT. Some of the consequences that flow from the effective date and
its significance are as follows:
(a) Value Added Tax, normally when included in the purchase price, is actually chargeable to SDLT, a
prime example of double taxation on a single transaction. However, VAT arising by reason of the
exercise of an option to tax exercised after the effective date is not chargeable to SDLT2.
(b) The effective date of the transaction is the date on which the market value of non-monetary
consideration other than money itself or a debt as consideration is to be valued. Put rather more simply,
this seems to mean that the market value of consideration in land is to be determined by reference to its
value at the effective date3.
(c) Where debt or liabilities form part of the consideration, it will be their amount determined as at the
effective date4.
(d) The conversion of foreign currency is at the rate of exchange prevailing on the effective date5.
(e) Where the whole or part of the consideration for a land transaction consists in the carrying out of
works of construction, improvement or repair of a building or other works to enhance the value of the
land, then to the extent that the conditions specified below6 are met, the value of the work does not count
as chargeable consideration. The conditions are:
(i) that the works are carried out after the effective date of the transaction;
(ii) that the works are carried out on land acquired or to be acquired under the transaction or on
other land held by the purchaser or a person connected with him; and
(iii) that it is not a condition of the transaction that the works are carried out by the vendor or a
person connected with him.
Page 996
(f) Penalties for failing to file an LTR are calculated by reference to the time elapsed since the 30 day
after the effective date7.
(g) The time for retaining and maintaining records is six years from the effective date8.
(h) The time within which a taxpayer may amend a return is limited to 12 months after the expiration
of 30 days from the effective date. The FA 2003 permits the purchaser to amend a LTR so as to correct
obvious errors or omissions in the return (whether such errors are errors of principle, arithmetical
mistakes or otherwise) by giving notice in writing to the purchaser. An amendment may not be made
more than 12 months after the failing date.
HMRC on the other hand have only nine months to correct obvious errors or omissions by giving notice
to the purchaser.
(i) The STO have, from the effective date, six years9 within which to issue a determination of tax if no
return is delivered. A similar rule applies to impose a time limit for assessments to be made. The general
rule is that no assessment may be made more than six years after the effective date of the transaction,
save in cases involving fraud or negligence on the part of the purchaser or any person acting on his
behalf or a partner of his and, in such cases of fraud or negligence, time runs out 21 years after the
effective date10. Where the taxpayer has died, the time limit for pursuing the personal representatives is
limited to three years after his death.
(j) The period during which reliefs, company reconstructions, acquisition by charities, inter group
transactions are subject to clawback is to be calculated from the effective date11. In cases relating to
group relief and withdrawal of that relief where the 'relevant transaction' is exempt from charge by virtue
of the FA 2003, Sch 7, para 1 (Group relief), the relief will be withdrawn where the purchaser ceases to
be a member of the same group as the vendor before the end of the period of three years beginning with
the effective date of the transaction or in pursuance of, or in connection with, arrangements made before
the end of that period and at the time the purchaser ceases to be a member of the same group as the
vendor. It, or a relevant associated company, holds a chargeable interest that was acquired by the
purchaser under the relevant transaction or that is derived from a chargeable interest so acquired, and that
has not subsequently been acquired at market value under a chargeable transaction for which group relief
was not claimed but was available, then group relief in relation to the relevant transaction or an
appropriate part of it will be withdrawn and tax will become chargeable.
(k) Although the following measure was repealed, the current view is when calculating the NPV of the
rent that the length of the lease should be calculated by reference to the effective date12.
HR A[11342]
1 FA 2003, ss 76(1) and 86(1).
2 FA 2003, Sch 4, para 2.
3 FA 2003, Sch 4, para 7.
4 FA 2003, Sch 4, para 8.
5 FA 2003, Sch 4, para 9.
6 FA 2003, Sch 4, para 10(1)(a) and (2).
7 FA 2003, Sch 10, paras 2-5.

Page 997
8 FA 2003, Sch 10, para 9.
9 FA 2003, Sch 10, para 25.
10 FA 2003, Sch 10, para 31.
11 FA 2003, Sch 7, paras 3(1) and 9(1) and Sch 8, para 2(1).
12 FA 2003, Sch 5, para 6.
(c) Failure to deliver return: flat rate penalty
HR A[11343]
If a return is not delivered within the 30-day period, a flat rate penalty is imposed:
(a) if the return is delivered within three months of the expiration date, the penalty will be limited to
£100; and
(b) in any other case to £2001.
HR A[11344]
1 FA 2003, Sch 10, para 3.
(d) Failure to deliver return: tax-related penalty
HR A[11345]
A purchaser who fails within a period of 12 months after the filing date to deliver an LTR in respect of a chargeable
transaction will suffer a tax-related penalty in addition to the imposition of the flat rate penalty1. The amount of the
penalty is not allowed to exceed the amount of the tax chargeable in respect of the transaction2.
HR A[11346]
1 FA 2003, Sch 10, para 4(1).
2 FA 2003, Sch 10, para 4.

Page 998
(e) Formal notice to delivery return: daily penalty
HR A[11347]
Where the STO consider that a purchaser has failed to deliver a return within the prescribed time, they can issue and
serve a notice upon the purchaser requiring him to deliver an LTR which is likely to carry a threat in case of
non-compliance of applying to the Special Commissioner for an order imposing a daily penalty not exceeding £60 for
each day in which the default continues1. This is in addition to the flat-rate or tax-related penalty2.
HR A[11348]
1 FA 2003, Sch 10, para 5.
2 FA 2003, Sch 10, para 5(5).
(f) Correction of return by HMRC
HR A[11349]
This matter has been dealt with partly in the previous text. Its purpose is to correct obvious errors or omissions in the
return and is achieved by giving notice to the purchaser. The time within which such errors may be corrected is no more
than nine months after the day on which the return was delivered, or if made by the purchaser, the day on which the
amendment was made. Where, however, the purchaser rejects the correction, which he may do within three months
from the date of issue of the correction, the correction proposed will be of no effect1. The STO have the power, after
giving notice in writing to the purchaser, to require production of such documents as they reasonably may require for
the purposes of any enquiry they are conducting. The notice must specify the time within which compliance is required.
The purchaser may appeal against such a notice to the Commissioners2. However, where the purchaser fails to produce
the documents or information sought, he will be liable to a fine of £50, but where the default continues after imposition
of the penalty, the taxpayer will become liable to a daily penalty of £30. This is imposable by the STO. If the penalty
was imposed by the courts, it rises to £1503.
HR A[11350]-[11360]
1 FA 2003, Sch 10, para 7.
2 FA 2003, Sch 10, para 15 and Sch 11, para 10.
3 FA 2003, Sch 10, para 6 and Sch. 11, para 11.

Page 999
(g) Penalty for incorrect or uncorrected return
HR A[11361]
Statutory provision has been made1 to impose a tax-related penalty upon a purchaser who fraudulently or negligently
delivers an incorrect LTR relating to a chargeable transaction. Where such an error is not remedied without
unreasonable delay, the penalty is limited to an amount not exceeding the amount of tax understated being the
difference between the amount of tax chargeable in respect of the transaction and the amount of tax that would have
been chargeable on the basis of the return delivered. The self assessment process exposes the taxpayer and his
professional advisers to considerable risk of incurring penalties because any errors they might make will mean
defending an incorrect return that has been filed and will, because of self-assessment, be open to review and later
possibly to revenue enquiry by reason of the FA 2003, Sch 10, para 8. See also para 12 et seq where a self-assessment is
open to review upon an enquiry by the STO.
HR A[11362]
1 FA 2003, Sch 10, para 8.

Page 1000
administrative matters/2 Duty to keep and preserve records
2 Duty to keep and preserve records
HR A[11363]
The provisions in HR A[11364]-[11366] are reproduced from the FA 2003, Sch 11, Pt 2, paras 4-6.
(a) Duty to keep and preserve records
HR A[11364]
(1) A purchaser who may be required to give a self-certificate must--
(a) keep such records as may be needed to enable him to deliver a correct and complete certificate, and
(b) preserve those records in accordance with this paragraph.
(2) The records must be preserved for six years after the effective date of the transaction and until any later date on
which--
(a) an enquiry into the certificate is completed, or

(b) if there is no enquiry, the Inland Revenue no longer have power to enquire into the certificate.
(3) The records required to be kept and preserved under this paragraph include--
(a) relevant instruments relating to the transaction, in particular, any contract or conveyance, and any
supporting maps, plans or similar documents;
(b) records of relevant payments, receipts and financial arrangements.
(b) Preservation of information instead of original records
HR A[11365]
(1) The duty under paragraph 4 to preserve records may be satisfied by the preservation of the information contained
Page 1001
in them.
(2) Where information is so preserved a copy of any document forming part of the records is admissible in evidence
in any proceedings before the Commissioners to the same extent as the records themselves.
(c) Penalty for failure to keep and preserve records
HR A[11366]
(1) A person who fails to comply with paragraph 4 in relation to a transaction is liable to a penalty not exceeding
£3,000, subject to the following exception.
(2) No penalty is incurred if the Inland Revenue are satisfied that any facts that they reasonably require to be proved,
and that would have been proved by the records, are proved by other documentary evidence provided to them.
Page 1002
administrative matters/3 Enquiry into return
3 Enquiry into return
HR A[11367]
Items in HR A[11368]-[11382] and HR A[11385]-[11390] are reproduced from the following provisions relating to
self-certificates in the FA 2003, Sch 11, Pt 3, paras 7-9, save for HR A[11383]-[11384] which are considered below and
are not dealt with in Sch 11.
(a) Notice of enquiry
HR A[11368]
(1) The Inland Revenue may enquire into a self-certificate if they give notice of their intention to do so ("notice of
enquiry")--
(a) to the purchaser,

(b) before the end of the enquiry period.
(2) The enquiry period is the period of nine months after the date on which the self-certificate was produced.
(3) A self-certificate that has been the subject of one notice of enquiry may not be the subject of another.
(b) Scope of enquiry
HR A[11369]
An enquiry extends to anything contained in the certificate, or required to be contained in the certificate, that relates--
(a) to the question whether the transaction to which the certificate relates is chargeable or notifiable, or
(b) to the amount of tax chargeable in respect of it.
(c) Notice to produce documents etc for purposes of enquiry

Page 1003
HR A[11370]-[11380]
(1) If the Inland Revenue give notice of enquiry into a self-certificate, they may by notice in writing require the
purchaser--
(a) to produce to them such documents in his possession or power, and

(b) to provide them with such information, in such form,
as they may reasonably require for the purposes of the enquiry.
(2) A notice under this paragraph (which may be given at the same time as the notice of enquiry) must specify the
time (which must not be less than 30 days) within which the purchaser is to comply with it.
(3) In complying with a notice under this paragraph copies of documents may be produced instead of originals, but--
(a) the copies must be photographic or other facsimiles, and

(b) the Inland Revenue may by notice require the original to be produced for inspection.
A notice under paragraph (b) must specify the time (which must not be less than 30 days) within which the purchaser is
to comply with it.
(4) The Inland Revenue may take copies of, or make extracts from, any documents produced to them under this
paragraph.
(5) A notice under this paragraph does not oblige the purchaser to produce documents or provide information relating
to the conduct of--
(a) any pending appeal by him, or

(b) any pending referral to the Special Commissioners under paragraph 12 to which he is a party.
(d) Appeal against notice to produce documents etc
HR A[11381]
10
(1) An appeal may be brought against a requirement imposed by a notice under paragraph 9 to produce documents or
provide information.
(2) Notice of appeal must be given--

Page 1004
(a) in writing,
(b) within 30 days after the issue of the notice appealed against,
(c) to the officer of the Board by whom that notice was given.
(3) An appeal under this paragraph shall be heard and determined in the same way as an appeal against an
assessment.
(4) On an appeal under this paragraph the Commissioners--
(a) shall set aside the notice so far as it requires the production of documents, or the provision of
information, that appears to them not reasonably required for the purposes of the enquiry, and
(b) shall confirm the notice so far as it requires the production or documents, or the provision of
information, that appears to them reasonably required for the purposes of the enquiry.
(5) A notice that is confirmed by the Commissioners (or so far as it is confirmed) has effect as if the period specified
in it for complying was 30 days from the determination of the appeal.
(6) The decision of the Commissioners on an appeal under this paragraph is final.
(e) Penalty for failure to produce documents etc
HR A[11382]
11
(1) A person who fails to comply with a notice under paragraph 9 (notice to produce documents etc for purposes of
enquiry) is liable--
(a) to a penalty of £50, and

(b) if the failure continues after a penalty is imposed under paragraph (a) above, to a further penalty or
penalties not exceeding the amount specified in sub-paragraph (2) below for each day on which the
failure continues.
(2) The amount referred to in sub-paragraph (1)(b) is--
(a) £30 if the penalty is determined by an officer of the Board, and

(b) £150 if the penalty is determined by the court.
(3) No penalty shall be imposed under this paragraph in respect of a failure at any time after the failure has been
remedied.
(f) Amendment of self-assessment during enquiry to prevent loss of tax

Page 1005
HR A[11383]
If HMRC form an opinion that during the course of an enquiry, the amount of tax payable is insufficient and is likely,
unless an assessment is immediately amended, to result in a loss of tax to HMRC, they are entitled, by notice in writing
to the purchaser, to amend the assessment to make good the deficiency. For these purposes, the period during which an
enquiry is in progress is the whole of the period, beginning with the day on which the notice of enquiry is given, and
ending with the day on which the enquiry is completed.
(g) Amendment of return by taxpayer during enquiry
HR A[11384]
A return may be amended by the purchaser under the FA 2003, Sch 10, para 6, during the course of a HMRC enquiry.
The amendment does not restrict the scope of the enquiry and forms part of the enquiry and may be taken into account
in drawing conclusions. If the amendment affects the amount stated in the self-assessment, HMRC may then state in
their closure notice that they have taken the amendments into account in formulating the amendments contained in the
notice, and their conclusion is that the amendment is correct or incorrect and therefore following that the amendment
obviously takes effect.
(h) Referral of questions to Special Commissioners during enquiry
HR A[11385]
12
(1) At any time when an enquiry is in progress into a self-certificate any question arising in connection with the
subject-matter of the enquiry may be referred to the Special Commissioners for their determination.
(2) Notice of referral must be given--
(a) jointly by the purchaser and the Inland Revenue,

(b) in writing,
(c) to the Special Commissioners.
(3) The notice of referral must specify the question or questions being referred.
(4) More than one notice of referral may be given under this paragraph in relation to an enquiry.
(5) For the purposes of this paragraph the period during which an enquiry is in progress is the whole of the period--
(a) beginning with the day on which the notice of enquiry was given, and
(b) ending with the day on which the enquiry is completed.
Page 1006
(i) Withdrawal of notice of referral
HR A[11386]
13
(1) The Inland Revenue or the purchaser may withdraw a notice of referral under paragraph 12 by notice in
accordance with this paragraph.
(2) Notice of withdrawal must be given--
(a) in writing,
(b) to the other party to the referral and to the Special Commissioners,
(c) before the first hearing by the Special Commissioners in relation to the referral.
(j) Effect of referral on enquiry
HR A[11387]
14
(1) While proceedings on a referral under paragraph 12 are in progress in relation to an enquiry--
(a) no closure notice shall be given in relation to the enquiry, and

(b) no application may be made for a direction to give such a notice.
(2) For the purposes of this paragraph proceedings on a referral are in progress where--
(a) notice of referral has been given,

(b) the notice has not been withdrawn, and
(c) the questions referred have not been finally determined.
(3) For the purposes of sub-paragraph (2)(c) a question referred is finally determined when--
(a) it has been determined by the Special Commissioners, and

(b) there is no further possibility of the determination being varied or set aside (disregarding any
power to grant permission to appeal out of time).
(k) Effect of determination

Page 1007
HR A[11388]
15
(1) The determination of a question referred to the Special Commissioners under paragraph 12 is binding on the
parties to the referral in the same way, and to the same extent, as a decision on a preliminary issue in an appeal.
(2) The determination shall be taken into account by the Inland Revenue--
(a) in reaching their conclusions on the enquiry, and

(b) in formulating any amendments of the self-certificate required to give effect to those conclusions.
(3) Any right of appeal under paragraph 35 of Schedule 10 (appeals against assessments etc) may not be exercised so
as to reopen the question determined except to the extent (if any) that it could be reopened if it had been determined as a
preliminary issue in that appeal.
(l) Completion of enquiry
HR A[11389]
16
(1) An enquiry under paragraph 7 is completed when the Inland Revenue by notice (a "closure notice") inform the
purchaser that they have completed their enquiries and state their conclusions.
(2) A closure notice must state whether in the opinion of the Inland Revenue the self-certificate was correct, and if
their opinion is that it was not whether in their opinion the transaction to which it relates was chargeable or notifiable.
(m) Direction to complete enquiry
HR A[11390]-[11400]
17
(1) The purchaser may apply to the General or Special Commissioners for a direction that the Inland Revenue give a
closure notice within a specified period.
(2) Any such application shall be heard and determined in the same way as an appeal.
(3) The Commissioners hearing the application shall give a direction unless they are satisfied that the Inland Revenue
have reasonable grounds for not giving a closure notice within a specified period.
Page 1008
administrative matters/4 Revenue determination if no return delivered
4 Revenue determination if no return delivered
(a) Determination of tax chargeable if no return delivered
HR A[11401]
Paragraph 4 of Sch 10 to the FA 2003 makes provisions for HMRC to determine the liability and the tax chargeable if
the purchaser fails to render any return. If there is a chargeable transaction and no return is delivered by the filing date,
HMRC will make what is called in the Act 'a Revenue determination' to the best of their information and belief of the
amount of tax chargeable in respect of the transaction. HMRC have to serve a notice of determination on the purchaser
and that notice must state the date on which it is issued. There is a limit in time in which HMRC may issue a
determination and it must not be made more than six years after the effective date of the transaction. It may be the case,
of course, that a purchaser delivers a LTR after the determination has been made. In such a case, the self-assessment
supersedes the determination, provided that the return is delivered not more than six years after the day on which the
power to make the determination first became exercisable, or not more than 12 months after the date of determination,
whichever is the later.
(b) Determination to have effect as a self-assessment
HR A[11402]
A HMRC determination has effect for enforcement purposes as if it were a self-assessment by the purchaser. The term
enforcement purposes is defined in the FA 2003 to mean the provisions of Sch 10 providing for tax-related penalties; s
87 (Interest on unpaid tax); and s 91 and Sch 12. Schedule 12 deals with collection and recovery of unpaid tax.
(c) Determination superseded by actual self-assessment
HR A[11403]
The FA 2003 provides that if a LTR is submitted by a purchaser, after HMRC have made a determination in respect of
the transaction, the self-assessment included in that return will supersede the determination of HMRC. This does not
apply to a return delivered more than six years after the day on which the power to make the determination first became
exercisable, or more than 12 months after the date of the determination, whichever happens to be the later. An occasion
may arise, where after proceedings have begun, to recover any tax charged by a HMRC determination, the
determination is superseded by a self-assessment. In such a case, the proceedings may be continued as if they were
proceedings for the recovery of so much of the tax charged by the self-assessment as is due and payable and has not
been paid.
Page 1009
administrative matters/5 Revenue assessments
5 Revenue assessments
(a) Assessment where loss of tax discovered
HR A[11404]
A loss of tax will arise where HMRC discover a chargeable transaction that ought to have been assessed and has not
been assessed, or an assessment to tax is or has become insufficient, or relief is being given that is or has become
excessive. Such an assessment is known as a 'discovery assessment' in the amount, or further amount, that ought in
HMRC's opinion to be charged to make good to the Crown the loss of tax. There is, in addition, in Pt 5 of the FA 2003,
Sch 10, power to restrict a discovery assessment, which will be dealt with in HR A[11406] below.
(b) Assessment to recover excessive payment of tax
HR A[11405]
Where the STO discover that an amount of tax that ought to have been assessed has not been assessed, or an assessment
that a tax has become insufficient, or a relief that has been given has become excessive, HMRC are empowered to make
an assessment of such amount of tax as in their opinion ought to be charged. Power is also given to issue an assessment
where an excessive amount of tax has been repaid to any person. The recovery will include specifically any interest
element paid on the repayment originally made to the taxpayer.
(c) Restrictions on assessment where return delivered
HR A[11406]
This part of the act restricts assessments which can only be made where either:
(a) there is a non-payment or under payment of tax, or an excessive repayment which is attributable to
fraudulent or negligent conduct on the part of the taxpayer or the person acting on his behalf or a person
who is a partner of the purchaser at the relevant time; or
(b) the STO at the time it ceased to be entitled to give notice of an enquiry into the return or had
completed its enquiries into the return could not have been reasonably expected, on the basis of the
information then available to it, to be aware of the non-payment, under payment or excessive
repayment1.
This provision also raises a question that requires some consideration. Information is regarded as being made available
to HMRC if it is contained in a LTR made by the tax payer, or it is contained in any documents produced or information
provided for the purposes of an enquiry into an LPR, or the existence and relevance of which, as regards the
Page 1010
non-payment or underpayment or excessive repayment, could reasonably be expected to be inferred by the STO from
information or documents supplied to it in the return or during the enquiry, or which had been notified in writing to it by
the taxpayer or a person acting on his behalf. Also, if it relates to a mistake in a return, where the return was made on
the basis of the practice generally prevailing at the time when it was made2.
HR A[11407]
1 Cenlon Finance Company Limited v Ellwood [1962] 1 All ER 854 (HL).
2 FA 2003, Sch 10, para 30(5).
(d) Time limit for assessment
HR A[11408]
The general rule is that no assessment may be made more than six years after the effective date of the transaction to
which it relates. However, in a case involving fraud or negligence on the part of the purchaser, a person acting on his
behalf, or a partner of his at the time of purchase, an assessment may be made up to 21 years after the effective date of
the transaction to which it relates. However, where the purchaser has died, the time is curtailed. Any assessment of the
personal representatives of the deceased must be made within three years after his death, and an assessment shall not be
made in respect of a transaction of which the effective date was more than six years before the death.
(e) Assessment procedure
HR A[11409]
Again, the FA 2003 lays down the procedure that has to be followed. Obviously a notice of an assessment must be
served on the purchaser. It must state the tax due, the date on which the notice is issued, and the time within which any
appeal against the assessment must be made. Following the service, the assessment is, in effect, crystallised and may not
be altered except in accordance with the express provisions of the FA 2003.
Page 1011
administrative matters/6 Relief in case of excessive assessments
6 Relief in case of excessive assessments
HR A[11410]-[11420]
(a) Relief in case of double assessment
The statutory treatment of relief in case of excessive assessment is under Pt 6 of the FA 2003, Sch 10. This arises where
a person believes that he has been assessed tax more than once in respect of the same transaction. Surprisingly, this
entitles him to claim relief. An appeal against the decision of the STO refusing a claim for relief in such circumstances
can be brought to the Commissioners who have the jurisdiction necessary to hear an appeal relating to the assessment to
which the claim relates. The claim must be made by notice in writing given to HMRC. HMRC have to be satisfied that
the person has been assessed for tax more than once, in which case they are entitled to amend the assessment or
assessments concerned, or to give relief by way of discharge or repayment of tax to eliminate the double charge.
(b) Relief in case of mistake in return
HR A[11421]
Relief may be claimed where a taxpayer believes that an assessment was excessive because of some mistake in a LTR.
Again, the notice has to be in writing, given not more than six years after the effective date of the transaction1. There is,
however, a catch in this because it is provided that no relief can be given in respect of a mistake as to the basis upon
which liability ought to have been computed when the return was in fact made on the basis or in accordance with the
practice generally prevailing at the time when it was made, nor can it be made in respect of a mistake in a claim or an
election included in the return2. Where the taxpayer is dissatisfied with the result of the appeal against the STO's
decision on the claim, he will have a right to appeal to the Special Commissioners3.
HR A[11422]
1 FA 2003, Sch 10, para 34.
2 FA 2003, Sch 10, para 34(4).
3 FA 2003, Sch 10, para 34(6).

Page 1012
administrative matters/7 Appeals against HMRC decisions on tax
7 Appeals against HMRC decisions on tax
HR A[11423]
This is contained in Pt 7 of the FA 2003, Sch 10.
(a) Right of appeal
HR A[11424]
A right of appeal lies to the General or Special Commissioners against:
(a) an amendment of a self-assessment under para 17 (amendment by HMRC during enquiry to

prevent loss of tax);
(b) a conclusion stated or an amendment made by a closure notice;
(c) a discovery assessment; or
(d) an assessment under para 29 (assessment to recover excessive repayment).
Where an appeal is sought against an amendment of a self-assessment made while an enquiry is in progress, the FA
2003 prescribes that it shall not be heard and determined until the enquiry is completed.
(b) Notice of appeal
HR A[11425]
An appeal against a HMRC decision on tax must be given in writing, within 30 days after the specified date, and to the
relevant officer of the Board. For these purposes, the specified date is the date on which the notice of amendment was
issued and the relevant officer of the board is the officer by whom the notice of amendment was given. That relates to
an appeal under HR A[11424] above. In the case of an appeal against a conclusion stated, or an amendment made by a
closure notice, the specified date is the date on which the closure notice was issued and the relevant officer of the Board
is the officer by whom the closure notice was given. In the case of an appeal against a discovery assessment, the
specified date is the date on which the notice of assessment was issued, and of course the relevant officer of the Board is
the officer by whom the notice of assessment was given. It is laid down then that the notice of appeal must specify the
grounds of appeal, which is not surprising, and when the appeal is heard, the Commissioners may allow the appellant to
put forward grounds not specified in the notice and take them into consideration if they are satisfied that the omission
was not deliberate or unreasonable.
(c) Settling of appeals by agreement

Page 1013
HR A[11426]
If, before an appeal is determined, the appellant and HMRC agree that the decision appealed against should be upheld
without variation, or should be varied in a particular manner, or should be discharged or cancelled, the consequences
that follow are those that would have followed if, at the time the agreement was come to, the Commissioners had
determined the appeal in that manner and had upheld the decision without variation, or varied it in that manner, or
discharged or cancelled it, as the case may be. This provision does not apply, however, if within 30 days from the date
when the agreement was come to the appellant gives notice in writing to HMRC that he wishes to withdraw from the
agreement. The consequences set out above do not apply where the agreement is not in writing unless the fact that an
agreement was come to and the terms agreed are confirmed by notice in writing, given by HMRC to the appellant, or by
the appellant to HMRC, and the references in those provisions to the time when the agreement was come to shall be
read as references to the time when the notice of confirmation was given.
(d) Recovery of tax not postponed by appeal
HR A[11427]
Where there is an appeal to the Commissioners, the tax charged by the amendment or assessment in question remains
due and payable as if there had been no appeal. This is subject to a direction by the Commissioners postponing payment
and an agreement by them to postpone payment.
(e) Direction of Commissioners to postpone payment
HR A[11428]
Postponement of tax may be applied while an appeal is pending, or before it's determination. This does not affect the
date from which interest is payable, which continues to run from 30 days after the effective date. Such an agreement is
made without prejudice to any further agreement or any further direction. If the agreement is not in writing, the fact that
an agreement was come to and the terms agreed by the relevant office of the board to the appellant means that the
payment of an amount of tax should be postponed pending the determination of the appeal.
(f) Agreement to postpone payment of tax
HR A[11429]
An agreement between the appellant and the Board's relevant officer to postpone payment of tax pending has the same
effect as if the Commissioners had made a direction to that effect. The Commissioner and the appellant are not
restricted from making a further agreement. If, however, the payment is not deferred for contingent or uncertain
consideration, interest on all tax paid upon subsequent adjustments1 will run from the effective date of the transaction2.
HR A[11430]-[11440]
Page 1014
1 FA 2003, s 80.
2 FA 2003, s 87(5).
Page 1015
Hill and Redman's Law of Landlord and Tenant/Division A General Law/Chapter 17 Stamp duty/L Registration of land
transactions
L
Page 1016
transactions/1 The certificate
1 The certificate
HR A[11441]
The FA 2003 provides that unless there is produced, together with the relevant application, a certificate as to
compliance with the statutory requirements, the land transaction shall not be registered, recorded or otherwise reflected
in an entry made in the register of title by the Chief Land Registrar1. This applies to every land transaction other than:
(a) a contract for a land transaction under which the transaction is to be completed by a conveyance; or
(b) a transfer of rights under such a contract in accordance with the FA 2003, s 45, in particular this
means that where there is an assignment subsale, or other transaction as a result of which a person other
than an original purchaser becomes entitled to call for a conveyance to him - references to 'a transfer of
rights' are to any such assignment, subsale or other transaction.
For these purposes, a 'contract' includes any agreement and a 'conveyance' includes any instrument. The certificate will
be issued either by HMRC that a LTR has been delivered in respect of the transaction, or a 'self-certificate' by the
purchaser that no LTR is required. This rule applies to every land transaction, save to those mentioned above. HMRC
are empowered to make provisions by regulation in relation to HMRC certificates as to the conditions to be met before a
certificate is issued; as to form and content of the certificate; as to duplicates for lost or stolen certificates and as to
multiple certificates where a return is made relation to more than one transaction.
HR A[11442]
1 FA 2003, s 79.
Page 1017
transactions/2 Self-certificates
2 Self-certificates
(a) General
HR A[11443]
It has been seen in the above text that a land transaction may only be recognised by the relevant Land Registry when a
certificate issued by the STO is produced. This makes it necessary to consider the procedure required in relation to
non-notifiable land transactions. Where the transaction is non-notifiable, the taxpayer is required to produce a certificate
(self-certificate) to the effect that no LTR is required in relation to the particular transaction. A self-certificate must be
in the prescribed form, contain the prescribed information and include a declaration by the purchaser. However, a
tax-related penalty for fraud or negligence is imposed on a person who:
(a) fraudulently or negligently gives a self-certificate in respect of a chargeable transaction; or

(b) discovers that a transaction to which he has given a self-certificate, neither fraudulently nor
negligently, is a chargeable transaction and does not remedy the error without unreasonable delay.
The penalty must not exceed the amount of tax chargeable in respect of the transaction1.
HR A[11444]
1 FA 2003, Sch 11, paras 1-3.
(b) Duty to keep and preserve records
HR A[11445]
A purchaser who is required to give a self-certificate must keep such records to enable him to deliver a correct and
complete certificate and preserve those records for six years after the effective date of the transaction, and until any later
date on which an enquiry into the certificate is completed. If, in this context, there is no enquiry, HMRC have no power
to enquire into the certificate. All records relating to relevant payments, receipts and financial arrangements are to be
preserved as well as any instruments relating to the transaction, any contracts or conveyances, maps, plans or similar
documents1. The consequences of failing to keep and preserve records will create exposure to a penalty not exceeding
£3,000.
HR A[11446]
Page 1018
1 FA 2003, Sch 11, para 4.
(c) Enquiry into self-certificate
(i) Notice of enquiry
HR A[11447]
Notice of intention to enquire into a self-certificate has to be given by HMRC to the purchaser before the end of the
enquiry period which runs for a period of nine months after the date on which the self-certificate was produced1.
HR A[11448]
1 FA 2003, Sch 11, para 7.
(ii) Scope of enquiry
HR A[11449]
The scope extends to anything contained or required to be contained in the certificate that relates to the question
whether the transaction is chargeable or notifiable or to the amount of the tax chargeable in respect of it2.
HR A[11450]-[11460]
1 FA 2003, Sch 11, para 8.
(iii) Notice to produce documents for purpose of the enquiry
HR A[11461]
HMRC, in writing, may give notice requiring production of documents or information in the taxpayer's possession or
power as they may reasonably require. Copies can be taken. The purchaser must comply within 30 days. The purchaser
is excused from complying if there is an appeal pending or a hearing before the Special Commissioners.
(iv) Appeal against notice to produce documents

Page 1019
HR A[11462]
Notice of such an appeal must be in writing and given within 30 days after the issue of the notice appealed against and
to the Officer of the Board to whom the notice was given1.
HR A[11463]-[19999]
1 FA 2003, Sch 11, para 10(2).

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Page 1

Chapter 10 The maintenance of the physical condition and management of the

Jonathan Karas QC, Edward Cole and Tiffany Scott

1 See HR A[7380.196] and A[7380.196] below.

2 See HR A[7380.211] - A[7380.255] and Chapter 11 below.

(1) the subject matter of the covenants1; and

1 See HR [A7380.4] FF below.

2 See HR A[7380.26] FF below.

3 See HR A[7380.69] ff below.

4 See HR A[7380.89] ff below.

5 See HR A[7380.196] ff below.

6 See HR A[7380.283] ff below.

7 See HR A[7380.505] ff below.

"The demised premises"

1 See HR A[1501] et seq.

"Fixtures", "tenant's fixtures", "landlord's fixtures"

What constitutes a fixture is considered in Chapter 31.

1 See HR A[1641] et seq.

"The building", "common parts", "the estate" etc

2 See Housing Act 1985, s 116; see HR D[845] - [850].

3 See eg Landlord and Tenant Act 1987, s 60(1).

"Party walls", structures "used in common" with other premises

1 See HR A[7380.162] - alterations: removal of party walls.

2 Twyman v Charrington [1994] 1 EGLR 243.

1 See eg Landlord and Tenant Act 1985, s 11; HR A[7380.239] FF below.

4 Campden Hill Towers Ltd v Gardner [1977] QB 823.

3 Pembery v Lamdin [1940] 2 All ER 434.

4 Rapid Results College Ltd v Angell [1986] 1 EGLR 53, CA.

6 Plough Investments Ltd v Manchester City Council [1989] 1 EGLR 244.

7 Brown v Liverpool Corpn [1969] 3 All ER 1345, CA per Sachs LG at 1347.

9 Irvine v Moran [1991] 1 EGLR 261.

10 Brown v Liverpool Corpn [1969] 3 All ER 1345, CA.

1 For a discussion of the word "structure" see HR A[7380.13] above.

"Main structure", "main walls", "main timbers"

4 Manchester Bonded Warehouse Ltd v Carr (1880) 5 CPD 507.

5 Plough Investments Ltd v Manchester City Council [1989] 1 EGLR 244.

"Roofs" and "balconies"

2 Petersson v Pitt Place (Epsom) Ltd [2001] L & TR 21, CA.

3 Ibrahim v Dovecorn Reversions Ltd [2001] 2 EGLR 46, Rimer J.

1 See HR A[7380.239] and HR A[20243].

1 Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716 per Atkins LJ.

2 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055.

5 McDougall v Easington DC [1989] 1 EGLR 93, CA at 95H per Mustill LJ.

7 Proudfoot v Hart (1890) 25 QBD 42: see HR A[7380.45].

1 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055.

(a) inserting expansion joints1;

1 Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12.

4 Elite Investments Ltd v TI Bainbridge Silencers Ltd [1986] 2 EGLR 43.

5 Roper v Prudential Assurance Co Ltd [1992] 1 EGLR 5.

7 Wandsworth London Borough Council v Griffin [2000] 2 EGLR 105, LT.

3 Mullaney v Maybourne Grange (Croydon) Management Co Ltd [1986] 1 EGLR 70.

6 Murray v Birmingham City Council [1987] 2 EGLR 53, CA.

7 McDougall v Easington DC (1989) 21 HLR 310, [1989] 1 EGLR 93.

1 Proudfoot v Hart (1890) 25 QBD 42, CA.

2 Saner v Bilton (1878) 7 Ch D 815.

3 Payne v Haine (1847) 16 M & W 541.

4 Proudfoot v Hart (1890) 25 QBD 42, CA.

Works going beyond repair: "amend" "renew" "rebuild" "reconstruct" "replace"

2 Crédit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76, Lindsay J.

1 Gibson Investments Ltd v Chesterton plc [2002] 2 P & CR 494.

3 Eyre v McCracken (2000) 80 P & CR 220.

"Maintaining and keeping in good and substantial condition"

3 Proudfoot v Hart (1890) 25 QBD 42.