In Metropolitan Housing Trust Limited v. RMC FH Co Limited  EWHC 2609 (Ch) the High Court looked at the issue of whether a long leaseholder had the right to release a development site from a right to light. The court held that the long leaseholder was prevented by the terms of the lease from granting the release. The case marks a controversial change in the approach to considering a tenant's ability to release its rights in respect of its leasehold interest in premises and will prompt developers to think very carefully about who needs to be party to any releases.
RMC owns the freehold of a property on Royal Mint Street in east London (the Property). Metropolitan is the long leaseholder of the Property by virtue of a lease granted in 1987 (the Lease). Shortly after the Lease was granted, Metropolitan constructed a block of flats on the Property.
The dispute in this case arose out of proposals by a third party to develop a site on the opposite side of the road to the Property (the Development Site). Both RMC and Metropolitan anticipated that the development would interfere with a right to light enjoyed by the Property over the Development Site (and which had been acquired after the grant of the lease to Metropolitan). Metropolitan, however, in exchange for monetary compensation, wanted to release to the owners of the Development Site the right to light appurtenant to Metropolitan's leasehold interest.
RMC did not want Metropolitan to grant the release.
RMC's principal argument was that Metropolitan was prevented from granting the release by clause 3(12) in the Lease:
"Not to give permission for any new window light opening doorway path passage drain or other encroachment to be made nor to permit any easement to be acquired upon or against the demised premises which might be or grow to the damage annoyance or inconvenience of the Landlord and in case any such encroachment or easement shall be made or attempted to be made or acquired or attempted to be acquired to give immediate notice in writing to the Landlord and at the request and cost of the Landlord to adopt such means as may be reasonably required or deemed proper for preventing the making of such encroachment or the acquisition of such easement".
The court held that Metropolitan was indeed prevented from granting the release by virtue of clause 3(12) for the following reasons:
Did the right of light form part of the demised premises? Yes
At the time the lease was granted, the right to light did not exist (because the building on the Property had yet to be constructed). However, it was agreed between the parties that a right to light could have subsequently arisen for the benefit of the Property by virtue of long use pursuant to s.3 of the Prescription Act 1832.
There is clear authority that, where the acts of a tenant are used to support a claim to an easement acquired by prescription, any resulting easement so acquired will belong to the freehold interest. In this case the court went further and, taking inspiration from adverse possession cases, reluctantly accepted that such an easement would be treated as the subject of the demise to the tenant. As such, there was a right to light attaching to both the freehold and the leasehold interests.
It was clear that the definition of "demised premises" in the lease included both corporeal and incorporeal hereditaments. Accordingly, the right to light formed part of the demised premises.
The court rejected the notion that for there to be an encroachment there had to be some form of physical entry upon the Property. The ordinary meaning of encroachment extends to include an interference with a right. Since "demised premises" included the right to light, any interference with that right would be an encroachment upon or against the demised premises. If Metropolitan were to grant a release, that would amount to permitting the encroachment and so would fall foul of clause 3(12).
Would it cause damage, annoyance or inconvenience to the landlord? Possibly
The issue was not whether the release of the right to light appurtenant to the Lease might grow to the damage of RMC as freeholder, not least because that would not release the right to light insofar as it was appurtenant to the freehold interest. Rather, the question was whether the infringement of that right to light as permitted by the release might grow to the damage of RMC. The court felt it might.
As a consequence of granting the release, the right to light to the Property would be diminished. If allowed to continue for a year or more it would result in any claim by the freeholder being limited to that lesser right to light. Accordingly, RMC would potentially, as a result of the release and consequent infringement, have to take action sooner (within a year) to protect its position than if no infringement had been allowed. In addition, the relief available to RMC as freeholder, taking action in its own right, could also be potentially different given its lack of occupation (and lack of any prospect of occupation for the foreseeable future).
Consequently the court refused to grant Metropolitan a declaration that it was entitled to grant the release to the owner of the Development Site of the right to light.
This decision will be of interest to those involved in, or affected by, development. Landlords and tenants alike will want to check the terms of any leases where a right to light issue arises to determine who, if anyone, has an unfettered right to release a right to light. Going forward, tenants will be much more anxious, and potentially reluctant, to enter into rights of light deeds without their landlords' consent. Equally, developers are also likely to be more careful when negotiating releases to ensure that they are negotiating with the right parties.
Key to this decision was the drafting in the lease. Going forward, parties may want to pay extra attention to the definition of demised premises particularly where there is an 'anti-encroachment' clause such as clause 3(12) in this case.
The judgment also creates some uncertainty. Given the concerns the court had as to how a right to light, acquired after the lease was granted, came to be demised to the tenant, it would be unsurprising if this part of the decision were to be overturned either on appeal or in another case. Further, the judgment could be clearer as to whether or not only one right to light had been acquired, or two (one in respect of the freehold and the other in respect of the Lease).
It is likely that this case will result in making the resolution of already complicated rights of light disputes with multiple parties even harder. The case raises interesting questions that may well end up being subject to further judicial scrutiny at some point in the future.