Leasing of land: Get your affairs in order to avoid a legal quagmire

The recent High Court case of Smyth-Tyrrell v Bowden [2018] EWHC 106 (Ch) illustrates the perils of what can happen otherwise. The case concerns land which was part of a farm, with the following background history:

1990’s: there was a derelict house and barn on land which was owned by the Bowden family (the defendants), and the land was overgrown.

1993 – 2008: the adjoining farmers (the claimants) proposed to the defendants that they take a lease of the land in order to renovate the house, which the claimants intended to use in order to run a holiday letting business. The claimants signed a 15 year lease, but the defendants did not. The claimants then went into occupation and spent money renovating the house. Once the renovations were complete, the claimants granted a sub-tenancy of the house to a company which had been set up by the claimants to run the holiday letting business.

2008 – 2014: at the end of 15 years, the claimants remained in occupation and carried on paying the rent. There were various discussions between the claimants and the defendants about the land, including discussions about the claimants buying the land.  However, no sale was ever concluded.

2014: the defendants served Notices to Quit on the claimants, requiring them to vacate the land by the end of 2014.

2015: the claimants issued proceedings, asking the court to show that the claimants were entitled to remain in occupation of the land.

2017 – 2018: the trial took place and the claimants lost.

The claimants tried to persuade the court that they should remain in occupation of the land by relying on three different and ultimately unsuccessful grounds:

Agricultural Holdings Act 1986 tenancy

The claimants argued that they had a tenancy under the AHA 1986, based on the fact that the land was agricultural land, and they had gone into occupation of the land and paid rent. This ground failed because the court found that the land was in fact unfarmable, and that the 1993 letting had not been for the purpose of carrying out an agricultural activity, but rather for the purposes of tourism.

Landlord & Tenant Act 1954 business tenancy

The claimants said that they had a right to a new tenancy under the 1954 Act, this being an automatic right to renew a tenancy, which many business tenants have. However, the claim under this ground failed owing to very technical arguments on the interpretation of various provisions in the 1954 Act.

The Doctrine of Promissory estoppel

This doctrine provides that where a promise is made to a party, and that party acts on the promise to their detriment, then the person who made the promise is “estopped” or prevented from going back on that promise.  However, reliance on this doctrine can, as the claimants found out, be problematical where there is no actual promise which is made, but where one party simply lets a state of affairs continue. The defendants never actually promised the claimants that they could remain in occupation of the land indefinitely if they renovated the house.

If the claimants had put their affairs in order, and a clear agreement had been entered into with the defendants at the start, then this unsuccessful outcome could have been avoided – namely:

• the claimants could have renovated the house knowing that they would be able to run the holiday let business from it for as long as they wanted to
• the claimants would not have lost their investment in renovating the house
• everyone involved would not have suffered years of uncertainty and stress, fighting complex, lengthy and costly legal proceedings.

The case is a sobering reminder of the need to sort out matters clearly at the outset, and as soon as an arrangement or agreement comes to an end. If not, you risk facing years of uncertainty and getting bogged down in a complex legal quagmire.

Before entering into an agreement such as a lease of land, you should seek legal advice to ensure that you are protected in the event of any future dispute.

This article first appeared in the April 2018 edition of South East Farmer magazine.