Smith & Anor v Jafton Properties Ltd

An assignment of part of leased premises which physically severs the property gives the assignee privity of estate with the landlord only for that part. The assignee is therefore tenant of the severed part alone and is liable for the rent and lease obligations referable to it.

For the purposes of Chapter 1 of Part I of the Leasehold Reform Housing and Urban Development Act 1993, “lease” and “tenancy” concern the status of the holder of the leasehold estate. Separate assignees of physically severed parts may each be qualifying tenants, even though the original lease covered the whole premises. Operational anomalies do not justify implying a restriction where the statutory language does not clearly require one.

The appellants held a long lease of a building containing four flats through their company. The company later assigned flats 1 and 2 to Mr Smith and flats 3 and 4 to Mr Dennis in separate transfers. The common parts were assigned to them jointly.

The appellants served an initial notice under section 13 of the Leasehold Reform Housing and Urban Development Act 1993, claiming collective enfranchisement. The landlord contended that they remained joint tenants of all four flats and were therefore excluded by section 5(5). His Honour Judge Dight decided the preliminary issue in the landlord’s favour. The central question was whether each appellant was tenant only of the flats separately assigned to him, or whether both together were tenants of all four flats.

1. Appeal allowed. The preliminary issue was determined in favour of Mr Smith and Mr Dennis. Each was in principle entitled to exercise the right of collective enfranchisement.
2. At common law, an assignment of part of leased premises which physically severs the land gives the assignee privity of estate only in respect of the severed part. Rent and other obligations enforceable against the assignee are correspondingly confined to that part. The assignee has no privity of estate in the remainder, although the original tenant remains contractually liable.
3. The court rejected the submission that the leasehold estate and covenants could not be severed or apportioned. The landlord’s right to distrain on any part for rent due on the whole did not alter the analysis, since distress was a distinct remedy and did not determine privity of estate.
4. The result in Lester v Ridd remained correct, but its statutory context was different. The court preferred Slade LJ’s contract-focused reasoning to Dillon LJ’s separate-tenancy reasoning and expressed no opinion on whether severance of the legal estate necessarily creates separate tenancies in every statutory context.
5. Sections 101(2) and 101(3) of the Leasehold Reform Housing and Urban Development Act 1993 show that “lease” and “tenancy” are interchangeable and that the Act is concerned with the status of the person holding the leasehold estate. Section 101(4) concerns persons jointly holding the same estate in the same land and does not apply to physically severed land.
6. The operational difficulties identified by the landlord did not plainly justify an implied restriction on the class of qualifying tenants. Section 14(3) contemplated participation by a qualifying tenant to whom section 14(2) did not apply. Neither appellant was tenant of three or more flats, so section 5(5) did not exclude either of them.

• Court of Appeal (Civil Division): [2011] EWCA Civ 1251. Appeal allowed and the preliminary issue determined in favour of the appellants.
• Central London Civil Justice Centre: His Honour Judge Dight decided the preliminary issue in the landlord’s favour.