The Corporation of Trinity House of Deptford Strond v 4-6 Trinity Church Square Freehold Ltd

Under section 1(4)(a) of the Leasehold Reform, Housing and Urban Development Act 1993, “permanent rights” means continuing and irrevocable rights. Revocable rights lasting only for the term of a new long lease are insufficient. The requirement that rights be “as nearly as may be the same” permits modifications needed to achieve permanence, including conversion of a revocable licence into an irrevocable right. A power to regulate use may continue where consistent with permanence, but a power to terminate cannot. Under section 1(4)(b), substitute property must be capable of supporting equivalent permanent rights.

The appellant owned the freehold of three converted townhouses and retained the freehold of a rear garden used by the tenants under revocable licences. The respondent was the nominee purchaser for qualifying tenants exercising collective enfranchisement. The Upper Tribunal (Lands Chamber), in [2016] UKUT 484 (LC), held that section 1(4) required the revocable garden rights to become irrevocable on transfer of the building’s freehold. The appeal concerned the proper construction of “such permanent rights” and the equivalence requirement in section 1(4)(a), including whether the rights could remain revocable but last for the duration of a new long lease.

1. Appeal dismissed. Lady Justice Asplin gave the leading judgment, with Moylan LJ and McCombe LJ agreeing.
2. Section 1(4) must be construed in the context of Chapter I of Part I of the Leasehold Reform, Housing and Urban Development Act 1993. The primary position under section 1(2)(a), in respect of additional property falling within section 1(3)(b), is acquisition of that property’s freehold. The alternatives in section 1(4) are treated as satisfying that entitlement only where they provide the statutory substitute required.
3. Read with “thereafter” and “ensure”, “such permanent rights” denotes a continuing or perpetual state of affairs. It requires irrevocable rights, rather than revocable rights lasting only for the term of a new long lease. The decision in Henriksen v Grafton Hotel Ltd [1942] 2 KB 184, concerning the very different context of income tax, provided no assistance.
4. The phrase “as nearly as may be the same rights” is an equivalence requirement. It does not require identical rights where modification is necessary because rights are granted over different property or because permanence is inconsistent with the original formulation. A revocable garden licence could therefore be converted into an irrevocable right.
5. The court endorsed the distinction between a power to regulate rights and a power to terminate them. A power to revoke or terminate is inconsistent with permanence. A power to make reasonable security regulations, if sufficiently limited, forms part of the leasehold rights and should be replicated in the transfer even if it had not been exercised at the relevant date.
6. Section 62 of the Law of Property Act 1925 and Schedule 7 paragraph 2(1) provided further support: the conveyance would pass rights enjoyed with the premises and convert the precarious licence into an irrevocable right. The Upper Tribunal’s decision was upheld.

• Court of Appeal (Civil Division): appeal dismissed.
• Upper Tribunal (Lands Chamber): decision dated 7 November 2016, [2016] UKUT 484 (LC), holding that revocable rights had to become irrevocable under section 1(4).