In Metropolitan Housing Trust Ltd v RMC FH Co. Ltd [2017] EWHC 2609 (Ch), the High Court considered whether a long leaseholder was permitted under its lease to release its rights to a neighbouring developer.

1. Background

RMC FH Co. Ltd (“Landlord”) owns the freehold of a block of flats (“Property”). Metropolitan Housing Trust Ltd (“Tenant”) is the long leaseholder of the Property.

The Landlord and the Tenant both claimed rights of light in favour of their respective titles to the Property over a neighbouring development site (“Site”). The parties agreed that:

1.         The rights had been acquired by long use under section 3 Prescription Act 1832 (“section 3”) after the grant of the Tenant’s lease

2.         If the owners of the Site (“Developers”) completed the development, it would substantially interfere with any rights of light.

The Tenant wished to release its right to the Developers for money. The Landlord opposed this, relying on a covenant in the Tenant’s lease that the Tenant must not permit an encroachment on the demised premises so as to cause damage, annoyance or inconvenience to the Landlord (“Permission Covenant”).

If the Tenant released its right, the Landlord claimed that:

1.         The Landlord’s right would be damaged because the Tenant’s release would interrupt the Landlord’s enjoyment of the right, risking a potential reduction in the light the Property was entitled to receive

2.         New windows would be opened on the new building on the Site which might, in time, acquire a right of light burdening the Landlord’s title to the Property.

The Tenant claimed a declaration that it was free to release its rights of light. The Landlord opposed this, relying on the Permission Covenant.

2. Decision

Was the Tenant’s right of light part of the “demised premises”?

1.         Yes. The court applied the rule that a landlord can acquire an easement based on enjoyment of its tenant of a particular right and held that the Landlord’s freehold benefitted from a right on the basis of the Tenant’s enjoyment.

2.         Section 3 can allow tenants to acquire easements for their own legal title rather than just for the benefit of their Landlord’s title. The court considered that in this case the Tenant would not acquire a freestanding legal right. The court accepted with some reservation an analogy with some adverse possession cases where the tenant’s adverse possession added land to the landlord’s title rather than its own.

3.         In light of this, and noting that the meaning of “demised premises” in the lease included incorporeal rights, the court held that the Tenant’s right was part of the demised premises.

Would the Tenant’s release of its right amount to an encroachment that would breach the Permission Covenant?

1.         Yes. The court held that the ordinary meaning of encroachment included infringing a person’s rights as well as their physical property and so the Tenant permitting an interference with its right would encroach on the demised premises.

2.         The court held that the Tenant’s release would damage the Landlord’s interest because it would interrupt the enjoyment of the Landlord’s right, requiring the Landlord to issue its own claim within a year and potentially restricting it to fewer remedies than the Tenant.

Would a release by the Tenant amount to a permission to the owners of the Site to create new windows in its new building?

1.         Not necessarily. The court felt that it ought to be possible to draft a release only releasing the Tenant’s rights.

2.         Further, the giving of such permission will normally prevent the acquisition of right of light by long use so the opening of the windows might not damage the Landlord’s rights.

3. Practice points

This case should encourage those working with rights of light to look more closely at their property documents to see who enjoys unfettered rights of light and what restrictions on the acquisition or release of those rights there may be (if any).

Developers may wish to more carefully consider who needs to be a party to any releases of those rights, bearing in mind that the court seemed to suggest (although not very clearly) that the Landlord and the Tenant enjoyed separate legal rights.

Landlords and tenants may wish to review the drafting of their current or renewal leases and examine the definition of “demised premises”, what it includes, and provisions for the enjoyment or release of rights of light.

The court’s ruling that the Tenant’s right should be included in its demise from the Landlord (rather than being a freestanding right) was subject to reservations and unsupported by a direct precedent, so it could be open to appeal or later challenge.