10 October 2013

Use as a private dwelling may prevent sub-letting

The Message: Sometimes it is better to leave an issue well alone.

The Case: The Upper Tribunal has determined whether a flat let to the lessee for use as a private dwelling can be sub-let (Burchell-v-Raj Properties Limited (23 September 2013)).

Mr Burchell is the lessee of one of 5 small flats in a converted house in City Road, London, EC1. The lease was granted for a term of 99 years from 31 December 1987. Mr Burchell's lease contains a covenant to use the flat "as a private dwelling house for the lessee and his family and for no other purpose" and the leases for the 4 other flats are in similar form.

In 2010, Mr Burchell sought to extend the length of his lease for 90 years by obtaining a new lease under the Leasehold Reform, Housing and Urban Development Act 1993. A premium of £11,845 was agreed but Mr Burchell wanted the new lease to make clear that he could sub-let. The landlord objected to this, claiming there was no right to sub-let.

The Leasehold Valuation Tribunal agreed with the landlord and Mr Burchell appealed to the Upper Tribunal.  He argued that, firstly, the wording was simply aimed at securing residential use and not prohibiting residential use by anyone other than Mr Burchell or, secondly, that the wording should be modified under the provisions of the 1993 Act to allow sub-letting. 

Mr Burchell relied on the fact that the covenant referred to use as a private dwelling house "for" the lessee and his family and not "by" the lessee and his family.  He argued that this meant that the lessee could control the residential use for his benefit and it did not have to be personal to the lessee. He further relied to other provisions of the lease which related to giving notice to the landlord of any dispositions and which he claimed were consistent with sub-letting being permitted.

None of Mr Burchell's various arguments found favour with the Upper Tribunal. It held that it made commercial sense for use of flats in a converted house of this size to be kept personal and the words should therefore be given their literal and natural meaning. Having flats occupied by their owners clearly has advantages, particularly in a small house. It was noted that these leases were entered into prior to the buy to let market becoming established.

The Tribunal rejected Mr Burchell's further argument that, where there was a lack of clarity, a covenant should be interpreted against the landlord. There has to be a real ambiguity based on consideration  of the document as a whole before the "contra proferentum" doctrine could be used against a landlord.

The argument that the new lease should allow sub-letting was also rejected as there was no defect or change of circumstances as required under the 1993 Act to justify changing what the parties had originally agreed.

Accordingly, the new lease will not allow sub-letting and Mr Burchell probably regrets ever raising this issue to begin with.

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