Haq v Island Homes Housing Association & Anor

Negotiations expressly conducted subject to contract remain non-binding unless the parties bilaterally agree to change that status. Allowing works to begin may create an implied temporary licence and waive a precondition to commencement. It does not, without a clear and unequivocal representation, waive the requirement for eventual execution or prevent withdrawal. Proprietary estoppel requires more than expenditure and acquiescence. Reliance based only on a solicitor’s unsupported understanding is insufficient. Where estoppel is not established, the tenant remains confined to statutory renewal rights under Part II of the Landlord and Tenant Act 1954.

Mrs Haq occupied a shop under a tenancy protected by Part II of the Landlord and Tenant Act 1954. She negotiated with the Council for a 60-year lease of enlarged premises at a reduced rent, expressly subject to contract, and carried out substantial works before the documents were executed. The land was then transferred to Island Homes, which refused to grant the lease on the negotiated terms.

HHJ Collins held that the Council was estopped from denying that Mrs Haq had become entitled to the negotiated lease and ordered enforcement through a constructive trust. Island Homes appealed, supported by the Council. The central issue was whether the Council’s conduct changed the status of the negotiations or created a proprietary estoppel.

Lloyd LJ gave the leading judgment, with Tomlinson and Arden LJJ agreeing. The appeal was allowed and the order below was set aside.

1. The negotiations remained expressly subject to contract. The Council’s conduct in clearing the storage areas, allowing access and permitting the works to begin amounted to an implied temporary licence and waived the precondition that the works could not start before the documents were signed. It did not waive the requirement that the licence, agreement for lease, lease and surrender should eventually be executed.
2. A party cannot unilaterally convert negotiations conducted subject to contract into a binding transaction. Any change in that status requires bilateral agreement. The Council’s conduct did not amount to a clear and unequivocal representation that the formal documents were unnecessary or that the Council would not withdraw before execution.
3. The reasoning in Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114 supported that conclusion. That authority recognised the need for encouragement of the relevant expectation and reliance upon it, and that subject-to-contract negotiations may be converted only by subsequent agreement or circumstances establishing estoppel. The continuing correspondence about finalising the documents was inconsistent with any waiver of their execution.
4. The basic requirements of proprietary estoppel were therefore absent. Mr Haq’s belief, insofar as it derived from what his solicitor told him, was not based on a fair assessment of anything said or done by the Council. He had also committed himself to the building works before relying on the alleged representation. The Council’s delay and poor administration did not make it unconscionable for it to rely on its strict legal rights.
5. Mrs Haq remained entitled to a statutory renewal tenancy in respect of the enlarged holding, but not to the negotiated 60-year lease. The remaining proceedings were remitted to the County Court to determine the tenancy terms under Part II of the Landlord and Tenant Act 1954 if they could not be agreed. A late application to reopen the appeal was refused, and permission to appeal to the Supreme Court was also refused.

• Court of Appeal (Civil Division): The appeal was allowed, the order below was set aside, and the remaining proceedings were remitted for determination of the statutory renewal tenancy terms: [2011] EWCA Civ 805.
• Central London County Court: HHJ Collins held on 1 July 2010 that Mrs Haq was entitled to a 60-year lease of the enlarged premises on the negotiated terms. The order was sealed on 22 November 2010.