Gorst & Anor v Knight

A lease of a horizontally divided building does not include the subsoil merely because the freeholder owned it or because the demise includes the cellar and foundations. The extent of the demise is determined by construing the words of the grant in their contractual and physical context. The presumption that ownership of land extends upwards and downwards assists in identifying what the freeholder could grant, but does not determine the extent of a particular leasehold demise. The stability, accessibility and function of subsoil and foundations may distinguish subsoil cases from cases concerning roof space or airspace. Reasonable economic use of the property cannot override the rights deliberately created by the lease.

The appellants were the long leaseholders of Flat 1, a ground-floor maisonette with a cellar at 88 Tunis Road. They wished to excavate approximately four feet of subsoil beneath the cellar to create habitable accommodation. The freeholder, who also held the lease of the upper maisonette, disputed that the subsoil formed part of the demise. Master Price declared that it did not. The appellants appealed. The High Court had to decide whether the 1992 lease, carried forward into a 2016 statutory lease extension, demised the subsoil beneath the building.

The appeal was dismissed. The judge reviewed Master Price’s decision under CPR rule 52.21(1), rather than rehearing the case. Under CPR rule 52.21(3), an appeal succeeds where the decision was wrong in law, fact or the exercise of discretion, or unjust because of serious procedural or other irregularity.

1. Construction of the leases. The principles governing commercial contracts also apply to leases. The court must ascertain the objective meaning of the language used, reading the lease as a whole and considering the relevant context, commercial consequences and quality of drafting. The 2016 lease referred back to the premises demised by the 1992 lease, so the relevant contemplation was principally that existing in 1992.
2. Extent of the freeholder’s title. The principle expressed in Bocardo SA v Star Energy UK Onshore Ltd [2011] 1 AC 380 established, for present purposes, that the surface owner’s title prima facie extends below the surface. That principle identified what the freeholder was competent to demise. It did not determine the extent of the particular demise.
3. Subsoil beneath a divided building. Authorities concerning roof space and airspace, including Davies v Yadegar (1989) 22 HLR 232, could not be applied automatically to subsoil. Subsoil is integral to the stability of the whole building, access commonly requires passage through the lowest demise, and defects may be difficult to detect. Lejonvarn v Cromwell Mansions Management Co Ltd [2012] L & TR 31 provided a materially relevant comparison.
4. The lease demised the ground-floor maisonette, the cellar, the foundations and the relevant parts of the building below the midway line. The subsoil was not part of the Building. The references to services under the demised premises, the landlord’s control and repair rights concerning the foundations, and the express inclusion of the cellar and foundations supported the conclusion that the subsoil was excluded.
5. The reasonableness of excavating to create additional living space could not alter the property rights created by the lease. The freeholder therefore retained control of whether the project proceeded.

1. High Court (Chancery Division): Master Price declared on 28 June 2017 that the lease of Flat 1 did not extend to the subsoil beneath 88 Tunis Road. Permission to appeal was refused by the Master and granted by Morgan J on 24 October 2017.
2. High Court (Chancery Division): appeal dismissed on 28 March 2018. The Master’s conclusion was upheld, although the reasons were expressed somewhat differently.