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UPPER TRIBUNAL
(LANDS CHAMBER)
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UT Neutral citation number: [2011] UKUT 346 (LC)
UTLC
Case Number: LP/18/2009
TRIBUNALS,
COURTS AND ENFORCEMENT ACT 2007
RESTRICTIVE
COVENANT – modification - leasehold interest – holiday chalet park –
restriction in leases of chalets – use restricted to 10 months of year – chalet
lessees seeking modification to permit 12-month use – lessors objecting –
application refused – Law of Property Act 1925 s 84(1)(a), (aa) and (c)
IN
THE MATTER OF AN APPLICATION UNDER SECTION 84 OF THE
LAW
OF PROPERTY ACT 1925
BY
DENNIS
PHILLIPS
AND
ROYNA
GODDARD AND OTHERS
Re: Holiday Chalets at Point Curlew
St
Merryn
Padstow
Cornwall
Before:
The President
Sitting
at Plymouth District Magistrate Court,
St
Andrew Street, Plymouth, Devon PL1 2DP
on
10 and 11 May 2011
Rawdon Crozier instructed
by Wolferstons, solicitors of Plymouth, for the applicants
Ewan Paton instructed by
Meade King, solicitors of Bristol, for the objectors
The
following cases are referred to in this decision:
Re Truman, Hanbury Buxton
& Co Ltd [1956] 1 QB 261
The following further cases were
referred to in argument
Phillips v Francis [2010] 24 EG 118
Re Bass Ltd (1973) 26 P
& CR 95
Stockport MBC v
Alwiyah Developments (1986) 56 P & CR 278
Re Bennett and Tamarlin Ltd(1987)
54 P & CR 578
Cadogan v Guinness [1936]
Ch 515
Re Abbey Homesteads (Developments)
Ltd 53 P & CR 1
Re Martin (1988) 57 P
& CR 119
Re SJC Construction Co Ltd (1974)
28 P & CR 200
Re Quartley (1989) 58 P
& CR 518
Re Lloyds Bank Ltd (1976)
35 P & CR 128
Ridley v Taylor [1965] 1
WLR 611
DECISION
Introduction
1.
This is an application made by a group of lessees of holiday chalets at
Atlantic Bays Holiday Park (formerly called Point Curlew Holiday Park and,
before that, Wardles Leisure Estate), near St Merryn, Padstow, Cornwall, under
section 84(1) of the Law of Property Act 1925 for the modification or discharge
of the following restrictive covenant contained in each of their leases:
“(o) Not to use the demised premises
nor the Estate for any purpose other than that of a holiday chalet and not to
occupy or permit the demised premises to be lived in or occupied between the
Second Day of January and the Twenty Eighth day or Twenty Ninth day of February
in each year PROVIDED HOWEVER that nothing herein contained shall preclude the
Lessee from leaving furniture and other effects therein during the period
aforesaid”
The
application seeks the deletion of the words after “holiday chalet”, removing
therefore the exclusion of occupation during January and February. The
objectors are Martin Francis and Rebekah Katherine Francis, who acquired the
freehold of the park on 22 April 2008.
2.
There were 85 applicants, claiming to be the lessees of 93 chalets that
were listed in a schedule to the application. The objectors asserted that 20
of these applicants (the lessees of 26 chalets) did not have the requisite
interest to apply to the Tribunal under section 84, and, following an order of
the Tribunal that their entitlement to apply should be determined as a
preliminary issue, these 20 applicants withdrew, leaving 64 applicants in
relation to 66 chalets. These are listed in the schedule to this decision.
The objectors had asked for proof of title of these remaining applicants, and
the Tribunal ordered that each of these applicants should provide the objectors
with proof of their title. It appears that this was not done, or was not done
to the satisfaction of the objectors, so that at the hearing there was no
agreement between the parties as to who should be treated as applicants. At
the hearing I directed the applicants, to the extent that they had not already
done so, to provide the objectors with proof of title. Following the hearing correspondence
between the parties between 16 May 2011 and 16 June 2011 failed to resolve the
differences. In the event, because I have decided that the application must
fail, it is not necessary for me to determine which of the applicants, if any,
are not entitled to apply or to order that they should not be admitted.
3.
On 28 June 2011 the applicants wrote asking me to postpone my decision
until after judgment had been given and the transcript of the judgment approved
in a county court action between certain of the applicants and the objectors.
As it appeared that this request was not opposed by the objectors I agreed to
it, but on 4 August 2011 the objectors wrote saying that they had not been
informed of the request of the applicants and asking that my decision should
not be further postponed.
4.
I inspected the holiday park during the course of the hearing. On the
basis of that and the evidence before me, I find the following facts. The park
(or estate as it is otherwise referred to) extends to about 25 acres. Mr and
Mrs Francis acquired it from the former owner St Merryn Holiday Estate
Management Company Limited (which I will refer to as the company), in which
each chalet owner had a share. The park includes:
(a) A chalet
park area of about 12 acres. There are now 160 chalets, 7 of which have been
constructed since the objectors acquired the site. The applicants own 67 of
the chalets. The objectors own 16 chalets, including the 7 constructed since
they acquired the site.
(b) A 5 acre touring
caravan park.
(c) A large
amenity building that is currently closed, except for a temporary bar situated
in a conservatory.
(d) A central area,
in which there are two recently constructed buildings, one an
office/reception/shop and the other a launderette and staff building.
(e) An area
where some holiday lodges have been constructed and the bases of others have
been laid.
At the time the applicants’ leases were granted, the park
comprised the first four of these areas, which together constitute the “estate”
for the purpose of the restrictive covenant. Area (e) was added after the
leases had been granted. The area on which the chalets stand is grassed, and
the park contains internal roadways, car parking areas, pathways and drains and
(among other features) a sewage pumphouse and a children’s play area.
5.
The standard form lease under which all of the applicants hold their
chalets is for 999 years at a yearly rent of £10. Rights of way and easements
of passage for services across the estate are granted, together with car
parking rights and the right to use areas of the estate designated by the lessor
for purposes in connection with the use and enjoyment of the chalet. The lease
contains at clause 2 the usual tenant’s covenants. Covenant (q) is to pay a
service rent, defined in clause 4 as a fair and equitable proportion of the
sums actually incurred by the lessor in connection with the management and
maintenance of the estate and the provision of services, including but not
limited to the matters referred to in Schedule 3. Schedule 3 specifies the
services that the lessor is obliged by clause 2 to provide. They include the
maintenance of soil and drainage pipes and pumps relating thereto, the mowing
of grass and pruning of trees, the management of the estate, including staff
costs, and the repair and maintenance of those parts of the estate used in
common with other lessees.
6.
Before the applicants acquired the freehold the park was operated and
maintained by the company, operating as a tenants’ management organisation. It
ran into financial difficulties and in consequence of this the decision was taken
to sell the estate. Following the purchase of the freehold, the applicants
thus became responsible under the terms of the leases for the maintenance of
the estate. Since they acquired it they have constructed the
office/reception/shop building and the launderette and staff building; they
have removed a number of bunds, which, it appears, had been created when the
footings of the chalets were excavated; they have extended the tarmac parking
areas; they have closed one entrance to the park; and they have done other
works. They have plans to do other things, including the provision of a
surface water drainage system to take rainwater from the roofs of the chalets
to reduce flooding of the site and the replacement of the sewage pumping plant,
which has inadequate capacity. As is perhaps inevitable among such a large
number of chalet owners, some of whom have been tenants for many years, there
are differences of opinion about the appropriateness of some of the things that
Mr and Mrs Francis have done and plan to do, and in the short time of their
ownership there has been extensive litigation. Currently there is a dispute
about the service charge, which is before the county court.
7.
Outline planning permission for erection of 220 holiday bungalow units
and 5 staff units had been granted on 23 September 1974. It contained the
following condition among others:
“7. The development
hereby permitted shall not be occupied during the period from the 2nd
January to the 28th or 29th February in each year.”
The reason for the
condition was stated to be:
“To ensure that the development is not
used for permanent residential accommodation.”
8.
On 11 May 2006 on the application of the company planning permission was
granted lifting condition 7 and adding a new condition:
“The development hereby permitted
shall be used for holiday accommodation only and for no other purpose including
any other purpose in Class C3 of the Schedule to the Town and Country Planning
(Use Classes) Order 1987, or in any provision equivalent to that class in any
statutory instrument revoking and re-enacting that Order. Reason: The
site is not within an area where residential development would normally be
permitted, therefore any such use, other than the proposed holiday use, would
be contrary to the policies of the Cornwall Structure Plan and the District
Local Plan in respect of such development.”
9.
It was in
consequence of this change in the planning condition that the present
applicants made their application seeking the removal of the restriction that
prevents occupation of their chalets during January and February. The
application was made on grounds (a), (aa), (b) and (c) of section 84(1), but ground
(b) was withdrawn at the hearing.
10.
In relation to
ground (a) the applicants rely on three matters in contending that there have
been changes in the character of the property and the neighbourhood and other
material circumstances by reason of which the restriction ought to be deemed to
be obsolete. They are:
(i)
The
failure of the company to enforce the restriction.
(ii)
The
terms of condition (o), which showed that it was imposed solely for the purpose
of ensuring compliance with the planning condition preventing occupation during
January and February.
(iii)
The
removal by the 2006 planning permission of the restriction and the
circumstances in which that occurred.
8A In relation to grounds (aa) and (c)
reliance is placed on the same matters and in addition to the following:
(iv)
The
absence of evidence that not enforcing the restriction caused any problems
prior to the purchase of the park by the objectors.
(v)
The
offering by the objectors in letters dated 29 December 2008 of a new lease
which would have allowed 12 month occupancy, and the grant of one new lease
(the Lyden lease) in January 2009 that did not contain the restriction.
(vi)
The
entitlement of the tenants to carry out maintenance work on their chalets
during January and February and the consequence of this that the park could
never be closed during those months.
(vii)
The fact
that only a small percentage of the amount spent on works in 2009 by Mr and Mrs
Francis related to works carried out during January and February, showing, it
is said, that there is no need to prevent occupation during those months in
order to facilitate the carrying out of works on the park.
Evidence
11.
Evidence for the applicants was given by John Walpole, Dennis Phillips, John Sandoz and Frances Stephens. The objectors, Martin Francis and Rebekah Katherine
Francis, both gave evidence.
12.
Mr Walpole said that he had owned two chalets, which he had built himself.
He sold one in 2005 and another in 2007. As a building contractor he had
worked on between 12 and 18 chalets over about 8 years. He had worked on
chalets during the winter months and had always stayed on site. People would
often work on their chalets during January and February. In 2005 the then
chairman of the management company, Mr Curson, sought to police the
restriction, and initially owners would ask before using their chalets during
the restricted period. He himself asked, but he never applied in writing, and
the restriction was not in the event policed.
13.
In his witness statement Mr Phillips said that he had been the owner of
a chalet since November 2004. It had previously been owned by his parents and
he had in effect been involved with the park since December 1975. Over the
years, he said, more and more people were occupying chalets all the year
round. On the basis of information with which, he said, other chalet owners
had provided him, he identified 12 such chalets, plus a further two that had
been used as staff accommodation. In the early years of his ownership the
restriction was virtually ignored and no steps were taken to either to enforce
the covenant or to regularise the position. Eventually in 2005 the company
decided that it needed to deal with the problem, and the board resolved with
the consent of the members to apply to the planning authority for the removal
of the restriction. It was only after Mr and Mrs Francis bought the site in
April 2008 that the covenant was again enforced. In cross-examination he said
that there had been mixed views about whether the restriction should be
maintained, but in 2005 the shareholders were making clear that they were not
happy with the situation. Those lessees who were there in January and February
were those doing work to their chalets, although there might have been some who
were on holiday. The site was always open, and the gates were never barred.
14.
Mr Sandoz’s witness statement, apart from personal details, was for the
most part word-for-word the same as Mr Phillips, although he said in
cross-examination that he had drafted it himself. He said that he had been the
owner of a chalet since 1991 and had sat on the board of directors from August
1994 to April 2003 and again from June 2007 to February 2009. In
cross-examination he said that the concern of Mr Curson, the chairman of the
management company, had been that the local planning authority might come down
on them. That was the official line, although unofficially it was “if you let
us know, you can use the site.”
15.
Mrs Stephens said that she had been the owner of a chalet since December
2003, and she identified 8 chalets that, she said, had been occupied in the
winters of 2006 and 2007, and she gave the names of their owners. She and her
husband used occasionally to use their chalet during January and February to do
maintenance work.
16.
In addition to this evidence Mr Rawdon Crozier for the applicants relied
in particular on the contents of two letters written to leaseholders on 29
November 2008 and 29 December 2008. The first letter, which covered a range of
matters following a meeting between Mr and Mrs Francis and chalet owners on 25
October 2008, included the following paragraph:
“We spoke to all Chalet/Lodge
owners to advise that with immediate effect we are intending to revert back to
the terms of your lease i.e.; Clause 2 (O)…This is so that any works which we
may need to carry out that may cause problems to your access to the site i.e.
new speed humps or the new barrier system can be actioned at this time. If you
have made any arrangements to occupy the premise next January of February
please send a request in writing advising us of the dates etc and we will see
if it will be possible for you to be allowed to stay at this time. This
permission will be treated as a one off arrangement and you must have written
authority from Mr and Mrs Francis to attend the site during this time.”
17.
The letter of 29 December 2008 enclosed the maintenance/service charge
for 2009, and it required each leaseholder to send a cheque for £1250 within 21
days and said that the remainder could be spread over 11 months by monthly
standing order. It went on:
“We would like to advise that there is also a second
option available to all leaseholders with regards to your future
maintenance/Service charge that option is a new lease. The lease we are
offering will have a fixed service charge/ground rent of £2350 per annum, fixed
for 5 years then increasing in line with RPI annually, plus there would be a 5%
uplift to Point Curlew Holiday Park upon resale. It will be able to be paid as
above £1250 in January the remainder spread over the next 11 months
The new lease will have 12 months
holiday use written into it allowing you to use or let your chalet/lodges for a
full 12 months in any year. This will enable you to get a further 8 weeks of
lets should you wish each year plus when the facilities on site are better it
would encourage a more sustainable letting period in winter and summer.”
18.
The letter went on to point out other advantages that it suggested such
a new lease would have, and it said that the site had been badly neglected for
many years and that it was proposed to spend £1.5-2 million in the next 5 years
“to get the site up to a good level”. There was also the following paragraph:
“In order to implement the new
lease we would require at least 50% uptake, therefore we will go on your
response to decide if it is a feasible option.”
19.
In the event there was one new lease that was granted that did not
contain the prohibition on occupation during January and February. That was a
lease dated 11 February 2009 of chalet H7 to Julian Lyden and Shirley-Ann
Lyden. Under covenant (O) they covenanted to use the chalet only as holiday
accommodation and not to occupy it or permit it to be lived in or occupied as a
permanent or only home. The applicants rely on this.
20.
Both Mr Francis and Mrs Francis gave evidence. Mr Francis said that
when he and his wife acquired the park it was clear that wholly inadequate
amounts had been obtained from lessees on account of urgent expenditure, so
that they had to spend significant amounts out of their own pocket to finance
works that were immediately necessary. There were banks that had been formed
from excavations when the estate had been laid out, and there were blocked
drains and flooding problems. They undertook immediate works to deal with
these problems, but it was clear that there was a need for much increased
expenditure in future to carry out the necessary works of repair. At the end
of the calendar year 2008 they requested an amount on account from the lessees
for the calendar year 2009, an amount which was in excess of the amounts that
the company had demanded in previous years but which, as a significant number
of lessees appreciated, was necessary to do works that had been neglected by
the previous owners. The issue of an on-account service charge, however, was
not well received by other lessees, who formed themselves into an association,
withheld the amount sought and issued county court proceedings seeking an
injunction preventing forfeiture.
21.
One of the matters relied on by the applicants, Mr Francis noted, was the
offer in the letter sent to lessees on 29 December 2008 of a new lease that
would have permitted occupation during January and February. The letter made
clear, he said, that the offer was subject to specific conditions: that there
would be a fixed service charge/ ground rent of £2,350 pa for five years,
increasing thereafter in line with the RPI; that the lessors would be entitled
to 5% of the net proceeds on any chalet sale; and that at least 50% of lessees
must agree to take new leases on these terms. In the event there was
insufficient enthusiasm on the part of lessees to enter into such new leases,
and accordingly the plan was aborted.
22.
Mr Francis identified two disadvantages that, he said, the lessors would
suffer if the restriction was removed. Firstly it would mean additional office
and administration expenses. Currently there were up to two full-time and two
part-time employees, responsible for the administration of the estate. The
intention was that they should take their holidays during January and February
when the site was closed to occupation. It would not be possible to make such
arrangements if the site had to be kept open for occupation during those
months.
23.
The second disadvantage was that it would make it very difficult to
undertake the essential repair and remedial works. The scale of the works was
far in excess of those they had understood to be necessary when they suggested
the modification of leases. They included in particular a new drainage system
to deal with the rainwater from the chalet roofs, which as things were gave
rise to flooding, and a replacement of the sewage pumping station. It would
not be possible to complete these works within a two-month period, and it would
be necessary to stage it over a number of years. The replacement of the sewage
pumping station would require the closure of the site.
24.
Mr Francis said that other holiday parks operated a period of winter
closure, and he identified seven of these within the local area.
25.
It was put to Mr Francis in cross-examination that the accounts showed
that in 2009 only 7% of the expenditure on the site was incurred during January
and February. Mr Francis said that this was because lessees were withholding
the service charges that had been sought from them at the end of 2008. It was
suggested to him that it would be possible through the site rules to achieve
such non-occupation as was necessary to permit the carrying out of works, but
he said that there were all sorts of problems that might arise and it was
important to have January and February available to catch up. He said that the
offer of new 12-month leases was made at an early stage when they were naïve
about the problems of running the site.
26.
Mrs Francis said that she handled the book-keeping side of the business.
About the Lyden lease she said that the Lydens were existing owners who had
lost their lease and required a new one because they were selling. The lease
was prepared by Mr Andrews, their property consultant, who had prepared a
number of drafts before the end of 2008. They never offered new leases as such
because there was insufficient uptake of the offer in the letter of 29 December
2008. The inclusion of the modified covenant (O) was an error. As to the
works, Mrs Francis said that
Conclusions
27.
Applications to the Tribunal to modify or discharge restrictions
contained in a lease are a comparative rarity, and in approaching an
application by tenants it is important to take note of and to bear in mind the
nature of the landlord’s interest on the facts of the particular case. Here Mr
and Mrs Francis have not only the reversionary interest in each of the chalets
that are the subject of this application but also a reversionary interest in
each of the other chalets and an interest in possession in the rest of the
park. As landlords they have obligations under each lease to maintain the
estate, including drainage, the extensive areas of grass, the footpaths,
roadways and car parks and any amenity centre. As freehold proprietors they
have an interest in ensuring that the park is well maintained and operated so
that they can maximise the value of any new lodges or chalets that may be built
and also the value of existing chalets the leases of which might become liable
to forfeiture. All these features of their interest are to be borne in mind
when considering the grounds on which the application is made.
28.
The application is advanced on grounds (a), (aa) and (c). It is
convenient that I consider first the fundamental criterion in ground (aa) –
whether the restriction confers any practical benefit of substantial value or
advantage to the landlords. The contention on the part of the objectors is
that to have a two-month winter shutdown is of advantage to them as landlords
because it permits the carrying out of maintenance and improvement works more
conveniently and economically; and because it enables other savings to be made in
respect of staff and other costs. The applicants said that the evidence belied
the claimed benefits. There had never been a complete exclusion of tenants
during the two-month period (and there could not be: covenant (o) only
prevented occupation and not access for maintenance); and only 7% of the
expenditure in 2009 related to that period. Site rules were sufficient to
limit access during the carrying out of works. Moreover Mr and Mrs Francis had
been prepared to offer new leases for 12-month occupation, and had in fact
granted one such lease to the Lydens. It was contended that the real reason
for their wish to retain the existing restrictions was so that they could
extract money from lessees through the grant of new leases.
29.
I accept the Francises’ explanation for the small amount of work carried
out during January and February 2009, and it appears to me probable, as they
claimed, that the covenant in the lease granted to the Lydens was an error.
But even if the applicants were factually correct on these matters, those and
the further fact that there has been some limited amount of chalet occupation
during the winter months, would be insufficient in my judgment to show that the
restriction is not of substantial value or advantage to the objectors. I am
satisfied that the ability on the part of the landlords to have a winter
shutdown is at the very least of real potential benefit, and that landlords in
their position could well wish to be able to do this in order to achieve
economies in staffing and other costs and to simplify the carrying out of
maintenance and other works, for which the site rules might well not be
adequate. It is significant, in my view, that Mr and Mrs Francis were only
ready to grant new leases for 12-month occupancy provided that at least 50% of
lessees wished to take up the offer of this and in return for a set annual
charge. Ground (aa) is not made out, in my judgment.
30.
There were two basic contentions that Mr Crozier advanced on ground
(a). The first was that the reason for the inclusion of the January and
February limitation in covenant (o) was simply to provide for compliance on the
part of the tenant with the limitation that appeared in condition 7 of the
planning permission; so that, once that limitation was removed by the 2006
planning permission, the purpose of this part of covenant (o) disappeared and the
restriction became obsolete in the terms of ground (a). I accept for present
purposes that the test of obsoleteness is whether the purpose for which the
restriction was imposed is still capable of achievement (see Re Truman,
Hanbury Buxton & Co Ltd [1956] 1 QB 261 at 272, per Romer LJ). It is
to be noted, however, that the covenant does not incorporate the precise words
of the planning condition, referring as it does to “lived in or occupied”
rather than “occupied” and incorporating a proviso about the storage of
furniture. If the purpose had simply been to ensure compliance with the
planning condition one might have expected instead that it would incorporate
just the words of the planning condition. Moreover I can see no reason for
thinking that the benefits that, as I have concluded, the landlord might derive
from being able to have a winter shutdown would not have been equally
perceptible to the landlord from 1974 (when the planning permission was
granted) onwards. In consequence I find myself unable to accept the
applicants’ contention that the reason for inclusion of the words in covenant
(o) was simply to ensure compliance with the planning condition. In my judgment,
therefore, the 2006 planning permission has not rendered the restriction
obsolete.
31.
Mr Crozier’s second contention was that the failure of the company to
enforce the winter occupation restriction and the circumstances under which the
planning condition came to be varied showed that the restriction had become
obsolete. As to this, I have already concluded that the restriction continues
to confer benefits of substantial value or advantage to Mr and Mrs Francis,
and, since those benefits are ones that existed at the time the covenant was
imposed it follows that the restriction has not become obsolete. I conclude,
therefore, that ground (a) has not been made out.
32.
Since I have concluded in relation to ground (aa) that the restriction
does confer substantial value or advantage on the objectors it follows that they
would be injured by its removal; and accordingly ground (c) is not made out.
The application is refused.
Dated
5 September 2011
George
Bartlett QC, President
Schedule
of Applicants
Dennis and
Iris Phillips
Royna and
Seymore Goddard
Raymond
Afshar-Rad
Robert &
Linda Archibald
Keith Bailey
Hazel and Mike
Bale
Peter Bentham
Jackie Bewley
Doreen Brady
Robert Cardall
Les Clarke
Yvonne and
Arthur Deeley
Lionel and
Shirley Dunn
Anne Easter
David Easter
Anita and John
Edhouse
Ivor Evans
Carol Evered
Kevin Fagan
Nicola
Finnegan
Julie Foster
Pamela and
Colin George
Gordon Goddard
Elaine and
Ross Hanger
Jean Harris
Mick Haynes
Mike Haynes
Steven and
Sandra Heath
David Hickman
Roger and
Carol Hopkins
Mark Hughes
Ernie Hughes
Jarvis Graham
Adrian Jones
Jeffrey Jones
Elizabeth
Kerry
Janet and Dave
Kindred
Richard Larson
Karen Low
Gary Maher
Kathleen
Marriot
Dana and Steve
Mansfield
Steve and
Natalie McCausland
Hannah
McDonald
Lesley and
Adrian Pattendon
Helen
Pattelton
Sandra and
Tony Piddock
Derek and
Stephanie Rayson
Wendy and
David Rioch
Matthew Sandoz
John and Susan
Sandoz
Ian Sargeant
Hilda Mary
Jean Sinnett
Penny
Sutcliffe
David Turner
Sam and Kevin
Viant
David Walch
Mark Williams
Kelvin Wheeler
John White
James White
John White
June and Derek
White
Callie
Wray-McCann
Martin and
Catherine Young and Clinton
