[2025] UKUT 64 (LC)

The consensus between the parties was that the effect of the 1994 Deed of Variation was to incorporate the extension into the demise of Flat 1, but to cause the structure and exterior of the extension, including the roof, to become part of the Reserved Property. I have doubts about both elements of that consensus.

The Premises comprised in the original Lease included the area of garden on which the extension was constructed a few years later. Leasehold ownership of the garden carried with it ownership of the airspace above the garden and the soil below the garden. The extension itself was therefore wholly within the demise from the moment of its construction.

The question then arises who, before the Deed of Variation of 1994, was obliged to keep the extension in repair? The applicable principle is stated in Woodfall: Landlord and Tenant, at 13.061, as follows:

“Covenants to repair and leave in repair will generally extend to all buildings erected during the term. Each case depends, however, on the terms of the particular covenant. ‘Where there is a general covenant to repair and keep and leave in repair, the proper inference from that is that the party undertakes to repair newly erected buildings; on the other hand where there is a particular covenant to repair demised buildings, then no such liability arises.’”

The passage quoted by the authors is from Cornish v Cleife [1864] 3 H. & C. 446 in which three houses were demised together with a field and the tenant agreed to repair the houses. Bramwell B held that while the tenant’s covenant would oblige him to repair any extension to the houses themselves, it did not require him to repair new houses built on the field. The new houses had become part of the demised property, but as a matter of construction the repairing covenant was held not to extend to wholly new buildings.

The answer in this case begins in clause 3(d) of the Lease, by which the Lessee covenanted to repair “the whole of the Premises and all fixtures and fittings therein and additions thereto” subject to the qualification excluding liability to carry out any repair referred to in the Sixth Schedule. The obligation to repair the whole of the Premises and additions thereto meant that the Lessee was required to repair the extension, which was an addition to the Premises. But what about the exclusion of repairs referred to in the Sixth Schedule? The Sixth Schedule contains covenants by the Management Company i.e. the appellant. Does the Sixth Schedule oblige the Management Company to repair any part of the extension? If it does, it would exclude that part from the Lessee’s obligation under clause 3(d).

There are two important preliminary points about the repairing obligations of the Management Company in the Sixth Schedule. First, those obligations were expressed to be in respect of the Reserved Property; and secondly, in 1959 the Reserved Property was demised to the Management Company. The 1959 demise is recited in the third recital at the beginning of the Lease: “the Lessor demised the Reserved Property to the Management Company for a term co-terminous with the term created by this present Lease”. No copy of the lease of the Reserved Property is available, but it may be assumed from the recital that the property demised by it was the same property as is defined as the Reserved Property in the Second Schedule to the Lease of Flat 1, namely, the internal common parts and “the external common parts of the Building forming part of the Property including the roofs foundations and external parts thereof … and the joists or beams to which are attached any ceiling except where the said joists or beams also support the floor of a Flat.”

The relevant parts of the Sixth Schedule are paragraphs 1 and 6. Paragraph 1 obliges the Management Company:

“To keep the structure of the Property in such state of repair as shall be consistent with the due fulfilment of the terms of this Lease in that respect including external painting cleaning of the stonework and cleaning and re-pointing of the external brickwork and otherwise perform and observe the covenants in the Lease of the Reserved Property as far as they relate to those matters.”

So far as relevant, paragraph 6 of the Sixth Schedule obliges the Management Company:

“To keep the Reserved Property and all fixtures and fittings therein and additions thereto respectively in a good and tenantable state of repair decoration and condition including the renewal and replacement of worn or damaged parts […]”

The requirement for two separate covenants is presumably because the Reserved Property includes more than just the structure of the Property and extends to non-structural elements of the common parts.

I read paragraph 1 of the Sixth Schedule as applying only to the Reserved Property as it was demised in 1959. It is true that the opening words refer in general terms to “the structure of the Property” but the clause continues, after identifying specific items, with the words “and otherwise perform and observe the covenants in the Lease of the Reserved Property”. Those words suggest that the obligation was intended to duplicate the covenants in the lease of the Reserved Property and did not extend their scope. The Management Company was assuming the same obligations to the Lessee as it had already assumed to the Lessor through the covenants in the lease of the Reserved Property. The covenants in that lease may be assumed to apply only to the Reserved Property as demised to the Management Company. The purpose of demising part of the building to a Management Company, and then having it covenant to keep that part in repair, was presumably to give the Management Company possession of those parts of the building for which it was to be responsible, and, just as importantly, to make it clear that the Lessor was not in possession and therefore could not be responsible for the consequences of any defect in those parts. I do not therefore consider that before 1994 paragraph 1 of the Sixth Schedule required the Management Company to repair the structure of the extension which had not existed at the time of the original demise.

Paragraph 6 is less clear, in that as well as covering the Reserved Property as defined in Schedule 2 it also obliges the Management Company to keep in repair any “additions” to the Reserved Property. But it is difficult to see how additions to the Reserved Property are capable of including additions to parts of the building which were not demised to the Management Company. The extension constructed in the 1960s was an addition to the building, and an addition to Flat 1, but it was not an addition to the property demised by the 1959 Lease of the Reserved Property. The whole of the space occupied by the extension, and the new structure created there, remained part of the premises demised by the Lease of Flat 1.

It is not known whether the lease of the Reserved Property imposed any obligation on the Management Company to repair any additions or alterations to the Reserved Property. It would be inconsistent with the original pattern that the Management Company was responsible for parts of the building demised to it to suppose that it might become liable to repair some future addition to the building which was not demised to it. It is not impossible that the Reserved Property includes such an obligation, but it cannot be assumed that it does. Nor do I think it follows from the general principle that anything attached to the building becomes part of the building that the structure of an extension built by one tenant should be added to and treated as part of the structure of the building which had previously been demised to a different tenant.

It is not known whether anything was agreed about who should repair it the extension at the time it was built in the 1960s. In the absence of a licence for alterations or other similar agreement it cannot be assumed that the Management Company was consulted about the alteration or agreed to assume responsibility for it or that any other any change was made to the responsibilities described in the Lease.

It therefore seems to me that the better view is likely to be that nothing in the Sixth Schedule obliged the Management Company to repair parts of Flat 1 which did not exist in 1959 and which were subsequently created by alterations carried out wholly within the Premises demised by the Lease of Flat 1. On that assumption, the Lessee’s repairing obligation in clause 3(d) of the Lease extended to the whole of the extension, because it was an addition to the premises within clause 3(d) and because no part of it was within the obligations of the Management Company in paragraphs 1 or 6 of the Sixth Schedule.

The next question is whether the obligations of the parties change in 1994 when the Deed of Variation was executed. That depends on the legal doctrine of implied surrender and re-grant and on the terms of the 1994 Deed of Variation.

Both parties recognised the principle that a purported variation of a lease by extending the term operates as a surrender of the original lease and the grant of a new lease. It is not possible to convert an existing estate in land into a different estate by adding more years to it, so the effect of an agreement to that effect is the implied surrender of the existing lease and the grant of a new lease for the longer term (Jenkin R Lewis v Kerman [1971] Ch. 477; Woodfall: Landlord and Tenant 17.026).

An implied surrender and regrant does not depend on the actual intention of the parties, it takes place independently of their intention. But the law only goes further than the parties’ intention where there is no other way of achieving the object of the transaction they have entered into. In Friends Provident Life Office v British Railways Board [1996] 1 All ER 336 the Court of Appeal held that a deed which substantially varied the terms of a lease so as to increase the rent and alter the covenants concerning use and alienation did not have the effect of a surrender and re-grant. As Sir Christopher Slade explained at 350d:

“… the authorities establish that where a landlord and tenant enter into an agreement which varies the terms of the subsisting tenancy but shows a clear intention not to create a new tenancy, the court will give effect to such intention, unless the only way by which the law can give effect to the arrangements made between the parties is to imply the surrender of the old tenancy and the creation of a new one.”

It follows from the respect which the law affords to the parties’ intention that an implied surrender and regrant will not change any other aspect of their relationship, or any other terms of their agreement, unless it is necessary to do so to achieve the variation they wish to bring about.

The Deed of Variation of 31 December 1994 was made between the appellant, as Landlord, and the original tenant, Mr Entwistle, and is expressed to be supplemental to the Lease. The substance of the agreement is contained in clause 2.3 which provides:

“The Landlord and Tenant agreed that the Lease shall be extended and varied in manner hereinafter appearing and shall henceforth take effect and be read and construed as if the intended provisions had been contained in the Lease and that save as hereby modified the Lease shall be treated as continuing in full force and effect in all respects.”

The only variations identified in the Schedule of “intended provisions” were the extension of the term and an increase in the ground rent. As clause 2.3 made clear, the parties intended that in all other respects the Lease was to be treated as continuing in full force and effect. Those other respects included the allocation of responsibility for repairing the Premises.

Nothing in the Deed of Variation suggests that the parties intended any change in their respective repairing obligations. No reference was made to the Management Company’s obligations, to the Lease of the Reserved Property, or to the extension. There was no need to add the extension to the demised premises, since it was already included within them. The Deed of Variation does not provide for the surrender of any part of the Premises to the appellant; specifically, it does not contemplate a surrender of the external structure or roof of the extension.

In my judgment, therefore, the twin propositions relied on by Mr Mullin and acquiesced in by Mr Clarke, namely, that the extension became part of the Premises in 1994 and at the same time the structure of the extension and its roof became part of the Reserved Property, cannot be stated with any confidence. If they are true statements, it is because of something in the lease of the Reserved Property or in a licence for alterations, but the 1959 Lease is not available and it is not known if any licence was ever executed. On the basis of the information which is available, both propositions appear to be wrong. The extension has always been part of the Premises and its walls, roof, joists and beams remained outside the Reserved Property, at all times both before and since 1994.

This is not how the parties have understood their rights and obligations, nor is it how the FTT analysed the effect of Lease or the Deed of Variation. But the scope for uncertainty over the true position was at the heart of the FTT’s decision, and the availability of an entirely different analysis simply lends further support to its determination.

Like the FTT, I have no doubt that this is a case in which the Lease can clearly be said not to make satisfactory provision with respect to the repair of Flat 1. I can summarise my own reasons briefly.

First, for the reasons I have given it is not clear on the face of the documents whether the appellant or the respondent is responsible for keeping the structure of the extension in repair. The better view is likely to be that the respondents are responsible, but documents which are not currently available (in particular, a licence for alterations) may place responsibility on the appellant.

Secondly, the Lease does not clearly allocate responsibility for repairing the structure of the extension in the way the parties have now agreed it should be allocated; since the parties’ interpretation of the Lease cannot currently be shown to be correct, and is probably wrong, the only way responsibility can be conferred on the appellant as the parties would like it to be, is for the Lease to be varied.

Thirdly, the lack of clarity over ownership of the extension and responsibility for its repair has been a source of dispute between the parties and might be again in future.

Fourthly, if the respondents are liable to repair the structure of the extension, that would be inconsistent with the pattern of liability for the rest of the building, which lies with the appellant as Management Company. That would not ordinarily be a significant consideration but, in this case, the poor relationship between the parties and the possibility that access might be required through Flat 5 to carry out work to the roof mean that some weight should be given to it.

In agreement with the FTT, though not for identical reasons, I have therefore concluded that the Lease fails to make satisfactory provision for the repair of Flat 1. The FTT considered that, if the threshold condition was satisfied, the case for exercising its discretion in favour of making the proposed variation was strong. There has been no criticism of that conclusion.

The FTT made the variations requested by the respondents but those variations are not entirely consistent with the conclusion I have reached about the effect of the Lease and the Deed of variation. In particular, they proceed on the basis that no part of the Reserved Property is also part of a Flat which, in the case of the extension, is not the case since the whole is within the demise of Flat 1. I would direct that the Lease be varied as follows (the parties have had the opportunity to comment and have not demurred from this formulation: