Procter & Anor v Procter & Ors

A tenancy may be created where the landlords and tenants overlap only partially. Joint tenants of the leasehold estate may enjoy exclusive possession against a smaller group holding the freehold, including where the tenancy is inferred from conduct.

An informal agricultural tenancy which takes effect only as a tenancy at will because statutory formalities are unmet is nevertheless an interest below a yearly tenancy. Where it is a genuine landlord-and-tenant transaction, Agricultural Holdings Act 1986, section 2 converts it into a tenancy from year to year.

Whether the land forms an agricultural holding requires a broad evaluation of the tenancy’s character and all relevant circumstances. An appellate court should respect the trial judge’s evaluative balance unless affected by error.

Most of a Yorkshire family farm was held by will trustees. Farming was conducted through a partnership whose membership partially overlapped with the trustees. After earlier written tenancies ended, the trial judge found that intention, rent accounting and exclusive possession would ordinarily have established a tenancy by conduct. He nevertheless held that the overlapping identities made a tenancy legally impossible. His decision was reported at [2019] EWHC 1199 (Ch).

The judge alternatively concluded that the informal arrangement could take effect only as a tenancy at will because it was not granted at the best rent reasonably obtainable. The appeal therefore concerned whether a tenancy could exist despite partial overlap, whether a tenancy at will was converted by section 2 of the Agricultural Holdings Act 1986, and whether the farm remained an agricultural holding despite a golf course occupying a substantial part.

1. Appeal allowed. A tenancy was not legally incapable of creation merely because some persons were both freeholders and members of the tenant partnership. The authorities did not establish an absolute common-law prohibition against a grant by A to A and B, or by A and B to A, B and C. Rye v Rye concerned complete identity between landlords and tenants. Its objections did not govern a partial overlap: paras [35], [54]–[58], [78]–[88].
2. A lease combines proprietary and contractual aspects. A leasehold joint tenancy vested in A, B and C does not merge in a freehold joint tenancy vested in A and B because the legal interests do not coincide. Equity also determines merger by intention; the partners’ duty of good faith would preclude merger where the tenancy served the partnership business: para [55]. Section 82 of the Law of Property Act 1925 makes the partially overlapping agreement enforceable at least by A and B against C and by C against A and B: paras [66]–[67].
3. Exclusive possession could exist and could be inferred from conduct. A, B and C possessed jointly as a single owner against A and B. The overlapping persons held different rights in different capacities: symbolic possession through rents and profits as landlords, and physical possession jointly with C as tenants. The distinction between trustee and partner capacities was legally effective: paras [68]–[77].
4. The judge’s unchallenged finding that the informal tenancy was outside section 54(2) of the Law of Property Act 1925 meant that it took effect as a tenancy at will. It could not operate as an equitable periodic tenancy because the writing requirements in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 were not satisfied: paras [89]–[95].
5. A tenancy at will is a letting for an interest below a tenancy from year to year within section 2 of the Agricultural Holdings Act 1986. It therefore becomes a yearly tenancy where, as here, it is a genuine landlord-and-tenant transaction and is not merely ancillary to another legal relationship: paras [96]–[105].
6. The judge permissibly found an agricultural holding under section 1 of the 1986 Act. The statutory inquiry concerns the tenancy’s overall character and all relevant circumstances. The loss-making golf course arose from farm diversification and largely occupied set-aside land, while most land and partnership profit remained agricultural. The respondent’s notice was rejected because the judge’s evaluative balance disclosed no appellate error: paras [107]–[117]. Arnold and Nugee LJJ agreed with Lewison LJ.

• Court of Appeal (Civil Division): By [2021] EWCA Civ 167, unanimously allowed the appeal and rejected the first respondent’s notice. The court held that the partially overlapping parties could create a tenancy, which took effect as a tenancy at will and was converted by section 2 of the Agricultural Holdings Act 1986.
• High Court: By [2019] EWHC 1199 (Ch), HHJ Davis-White QC found facts which would ordinarily establish a tenancy by conduct but held that the overlap between landlords and tenants made its creation legally impossible. He alternatively treated any interest as a tenancy at will and found that the land would have retained the character of an agricultural holding.