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Proprietary Estoppel

Had the Landlord Assured the Tenant of a property interest, for tenants’ costly renovation works?

The High Court has recently considered the case of Smyth-Tyrrell and another v Bowden [2018] EWHC 106 (Ch) which considered the matter of Proprietary Estoppel.

What is Proprietary Estoppel?

Proprietary estoppel operates to modify rights over property and is capable of giving rise to new rights.

Proprietary Estoppel has three vital components:

  • A representation, promise, assurance or other encouragement by the defendant giving rise to an expectation by the claimant that it would have a certain proprietary interest.
  • Reliance by the claimant upon that expectation.
  • Detriment to the claimant in consequence of its reasonable reliance

 Background of the Case

In 1993, the relevant plot of land comprised a derelict house and barn, and overgrown land that was too steep to be farmable. The tenants requested a 15 year lease from the freeholder, with rent to be based on woodland value, to enable the tenants (but not require them) to restore the buildings and rent them out. The tenants signed a 15-year lease however the freeholder did not.

Conclusion of the Case

The High Court held that the lease was invalid for not meeting the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. However, given the tenants took possession and paid rent quarterly, they had a periodic tenancy.
The tenants claimed that they had an agricultural tenancy, were entitled to a new lease under the Landlord and Tenant Act 1954 or had an interest by way of proprietary estoppel. The High Court dismissed all three of the tenants’ claims.

The High Court held that the:

  • Letting enabled the tenants to consider restoring the ruined buildings for tourism. The letting was not for agricultural purposes and therefore not protected under the Agricultural Holdings Act 1986. The claim for an agricultural tenancy therefore failed.
  • Tenants were not entitled to an LTA 1954 lease renewal, as the freeholder intended to occupy for the purpose of its own business (section 30(1)(g), LTA 1954). The claim for a new lease under the LTA 1954 also failed.
  • Although the tenants believed they could remain indefinitely and eventually acquire the freehold, the freeholder did not know this and gave no notice or assurance. There had also not been sufficient detrimental reliance: the tenants’ expenditure was contemplated in the original deal (and there was no obligation to renovate). It would also not have been unconscionable for the freeholder to give notice to quit. The tenants had played a long game to acquire the freehold, without letting on that this was what they were trying to do. Therefore the claim for proprietary estoppel also failed.

It is therefore imperative that tenants in a similar situation seek advice and consider seeking an option agreement, before carrying out works on their landlord’s property.

If you need any advice call our Specialist Team on 0800 088 6004.