Tweedie & Anor v Souglides

An option to extend a lease, and the statutory perpetuity exception for such an option, depend on title to the relevant lease rather than occupation of the premises. The phrase “successors in title” refers to successors to the lease to which the option is reversionary. A later deed which adds premises and operates as a surrender and regrant therefore creates a different title; the later lessee is not, without more, successor in title to the original lessee. The option could not be exercised by that lessee. Appeal allowed and claim dismissed.

The appellants, the freeholders, granted an option to extend an underlease held by the first appellant. After the option was granted, the respondent acquired the underlease. A later deed between the head lessee and the respondent added a roof terrace and, by common ground, operated as a surrender and regrant. The freeholders were not parties to that deed.

The respondent exercised the option, but the appellants refused to grant the extension lease. The High Court held that the option was valid, transferable and not rendered nugatory by the later deed, and ordered specific performance: [2012] EWHC 561 (Ch). The appeal concerned whether the respondent was a successor in title for the purposes of the option and section 9(1)(a) of the Perpetuities and Accumulations Act 1964. The assignment issue was not reached.

Appeal allowed unanimously. The Chancellor gave the judgment, with which Rix LJ and Patten LJ agreed.

1. The court accepted that varying a lease to include further land operates as a surrender of the original lease and a regrant of a lease of the original and additional land for the unexpired term on equivalent terms and conditions. This was supported by Jenkin R Lewis & Son Ltd v Kerman [1971] Ch 477 and Friends Provident Life Office v British Railways Board [1996] 1 AER 336.
2. “Successors in title” concerns title to property, not actual occupation. In the context of the option, it referred to successors to the lease to which the option related. The same construction applied to section 9(1)(a) of the Perpetuities and Accumulations Act 1964, which concerned an interest reversionary on that lease.
3. The later deed therefore created a new title. The respondent was not a successor in title to the original lessee in respect of the same lease. The fact that the deed described itself as a variation, preserved the other terms of the lease and added only a roof terrace could not alter the construction of the option or the statutory provision.
4. Snape v Snape (1959) 173 EGLR 697 supported the distinction between occupation and title. The majority reasoning in WEG Motors Ltd v Hales [1962] Ch.49 was binding and pointed to the same conclusion.
5. Since the respondent was not entitled to exercise the option, the court allowed the appeal, set aside the High Court order and dismissed the claim. The court did not determine the separate assignment issue. It added, obiter, that where the grantor of an option is also the lessor, there may be scope to argue that a later regrant included a regrant of the option.

• Court of Appeal (Civil Division): In [2012] EWCA Civ 1546, the appeal was allowed, the High Court order was set aside and the claim was dismissed.
• High Court of Justice, Chancery Division: In [2012] EWHC 561 (Ch), the court held that the option was not void for perpetuity, was transferable, was not rendered nugatory by the later deed and ordered specific performance.