A recent case in the High Court, London Tara Hotel Limited v Kensington Close Hotel Limited, underlines the importance of careful management and monitoring of property interests, especially when rights are granted by licence, to avoid the accidental grant of easements in perpetuity.

The Tara Hotel (‘Tara’) and the Kensington Close Hotel (‘Kensington’) are next door to one another, just off Kensington High Street. Access to the service entrance of the Kensington is via a ring road circling the Tara.. The Tara owns the ring road. In 1970, the then owners of the Kensington were granted a personal licence by the Tara to use the ring road for one year. The licence was to continue until terminated by breach or by four weeks’ notice. It was granted for an annual fee of just £1.

The Kensington subsequently changed hands a number of times. Throughout this period, there was a good relationship between the management of the two hotels, and the Kensington openly continued to use the ring road.

In 2007, following the breakdown of negotiations regarding the possible combined redevelopment of the hotels, the owner of the Tara served a notice to terminate the 1970 Licence and started proceedings on the basis that the owner of the Kensington was trespassing on the ring road.

The question was, therefore, did the owner of the Kensington have a right to use the ring road, and, if so, on what basis? The owners of the Tara were arguing that the Kensington used the ring road under a licence, which could be terminated. If the current owners of the Kensington could show that the ring road had been used as of right for at least 20 years, then they could have acquired an easement which would allow them to continue their use of it.

On the facts, the Court held that the licence was personal to a previous owner of the Kensington, and so didn’t apply to subsequent owners. The owners of the Kensington had therefore acquired an easement over the ring road, on the basis of 20 years’ continuous use. They concluded that a property transfer at some point within the 20 year period was something which should have been within the reasonable contemplation of the owner of the Tara and, if they had been diligent in the protection of their interests, they should have checked this. Further, if the Tara was concerned to maintain the permissive nature of the licence, it could have claimed the £1 annual fee, but they did not do so.

It is therefore important that those managing property interests take steps to monitor the nature of any rights they have granted – a change of ownership should be regarded as something which is likely to take place; it should not be ignored. When you see lawyers reserving a fee for something it may be worth a lot more than the sum involved to collect it (or just check why it is there).