Avon Grounds Rents Limited v Kirstie Ward
[2023] UKUT 88 (LC)
Assethold Limited v Interface Properties Limited
20 November 2024
[2024] UKUT 371 (LC)
Upper Tribunal
A tenant's lease only promised to protect the landlord from losses due to legal issues, not to follow the law itself. The court decided the landlord couldn't add a promise to follow the law into the lease, as it wasn't needed and contradicted what was already written.
Key Facts
- •Assethold Ltd (appellant) is the tenant under a 999-year headlease of upper floors of a building, converted into flats without planning consent.
- •Interface Properties Ltd (respondent) is the freeholder and landlord.
- •Enforcement notices were served requiring the cessation of the unauthorized flat conversions.
- •The respondent sought a determination under section 168 of the Commonhold and Leasehold Reform Act 2002 that the appellant breached an implied covenant to comply with legal obligations.
- •The headlease contained an indemnity clause where the tenant indemnifies the landlord against liability for legal obligations, but no express covenant to comply with such obligations.
- •The FTT implied a covenant for the tenant to comply with legal obligations.
- •The appellant appealed the FTT's decision.
Legal Principles
Test for implying a term into a contract: reasonable and equitable; necessary to give business efficacy; so obvious it goes without saying; capable of clear expression; does not contradict express terms.
BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13
Two types of implied terms: those implied by law and those implied by the court based on contract terms, commercial common sense, and known facts.
Marks & Spencer plc v BNP Paribas Securities Services Trust (Jersey) Ltd [2015] UKSC 72
Implied terms are rare, especially in professionally drafted documents; the most usual inference when a contract doesn't address an event is that nothing is to happen.
Attorney General of Belize v Belize Telecom Limited [2009] UKPC 10
Outcomes
Appeal allowed.
The FTT wrongly implied a covenant to comply with legal obligations. The indemnity clause did not necessitate an implied covenant to comply; the absence of a usual covenant suggests a conscious decision to omit it; the unusual terms of the headlease (999-year term, peppercorn rent, perpetual breach forfeiture clause) render the FTT's reasoning based on typical commercial leases inapplicable. The implied term was not necessary for business efficacy and was inconsistent with the express indemnity clause.
FTT's finding that the appellant carried out unauthorized conversion works was wrong.
The appellant acquired the lease after the works were completed.
Order under paragraph 5A for costs of FTT proceedings and appeal.
Appellant successfully overturned the adverse decision.
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