Metropolitan Housing Trust Ltd v RMC FH Co. Ltd

Factual and Procedural Background

The Defendant is the freeholder and the Appellant is the headlessee of premises comprising a block of 20 flats known as 1-20 Royal Mint Street, London E1. The north elevation of this block has windows benefiting from light passing over land to the north of Royal Mint Street and across the street itself. Opposite the block is a development site where owners have obtained planning permission for a mixed-use development including residential units, a hotel, serviced apartments, and other uses. The development has commenced.

Both the freeholder and the headlessee assert they enjoy rights of light to the north elevation windows of the block in relation to light passing over the development site. They contend that the development will cause actionable interference with these rights. The owners of the development site are not parties to the proceedings, and no findings are made as to the existence or extent of the rights of light or the impact of the proposed development.

The headlessee initiated proceedings seeking a declaration that it may release its rights of light to the development site owners in exchange for monetary compensation. The freeholder contends that such release would breach clause 3(12) of the headlease, while the headlessee argues no such restriction exists.

The headlease was granted in 1987 for a term of 127 years and included the land on which the block stands. The lease contains various clauses, notably clause 3(12), which restricts permission for encroachments or easements that might damage or inconvenience the landlord. The parties dispute the interpretation and application of this clause in relation to the rights of light and the proposed development.

The proceedings were conducted under CPR Part 8, focusing on a narrow legal issue about the interpretation of clause 3(12) of the headlease. Both parties filed evidence and skeleton arguments, though factual evidence on certain points was lacking. The court identified that some issues involved mixed questions of law and fact, which it could not fully resolve on the material before it.

Legal Issues Presented

1. Whether the right of light enjoyed by the headlessee and freeholder in relation to the north elevation windows of 1-20 Royal Mint Street forms part of "the demised premises" under the headlease.
2. Whether a release by the headlessee of its right of light would constitute permitting an "encroachment" upon or against the demised premises in breach of clause 3(12).
3. Whether such an encroachment "might be or grow to the damage annoyance or inconvenience" of the freeholder, triggering the clause 3(12) prohibition.
4. Whether the freeholder can require the headlessee to take reasonable action, including bringing proceedings, to prevent or restrain such encroachments or easements.
5. Whether a release of rights of light by the headlessee would amount to permission to the developer to open new windows on the development site, potentially acquiring new rights of light.

Arguments of the Parties

Freeholder's Arguments

• The right of light is part of "the demised premises" under the headlease.
• An interference with the right of light by the developer would be an "encroachment" upon or against the demised premises.
• Such encroachment might cause damage, annoyance, or inconvenience to the freeholder.
• The headlessee has covenanted under clause 3(12) not to permit such encroachments.
• The headlessee's intended release of its right of light would amount to permission of such an encroachment, breaching clause 3(12).
• The headlessee must, at the freeholder's request and cost, take reasonable steps to prevent such encroachments, potentially including bringing proceedings against the developer.
• The opening of new windows by the developer on the development site would also be subject to clause 3(12), and permission for such could lead to acquisition of new easements detrimental to the freeholder.

Headlessee's Arguments

• The right of light is not part of "the demised premises".
• An interference with the right of light by the developer would not constitute an "encroachment" upon or against the demised premises.
• Even if there were an encroachment, it would not cause damage, annoyance, or inconvenience to the freeholder.
• The intended release of the right of light is therefore not contrary to clause 3(12).
• The headlessee is not obliged under clause 3(12) to take any action, including bringing proceedings.
• A release of rights of light does not amount to permission for the developer to open new windows on the development site.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first considered whether the right of light enjoyed by the headlessee and freeholder was part of "the demised premises" under the headlease. It accepted the submission that easements acquired by prescription after the grant of the lease, including rights of light under section 3 of the Prescription Act 1832, are treated as appurtenant to the freehold and thereby demised to the lessee. Thus, the right of light forms part of "the demised premises".

Regarding the meaning of "encroachment" in clause 3(12), the court rejected the narrower interpretation that it only referred to physical entry upon the land. It held that the ordinary meaning of "encroachment" includes interference with rights, such as a right of light. Since the right of light is part of the demised premises, an actionable interference with it amounts to an encroachment upon or against the demised premises. Therefore, a release of the right of light would be permitting such an encroachment.

The court then addressed whether such an encroachment "might be or grow to the damage annoyance or inconvenience" of the freeholder, a necessary condition for breach of clause 3(12). It found that an interruption of the right of light could be submitted to or acquiesced in by the headlessee, thereby satisfying this condition. Furthermore, interruption could reduce or extinguish the freeholder's ability to enforce the right in the future, constituting damage or inconvenience.

The court noted it could not determine on the evidence whether the development would indeed cause such interference or whether the headlessee's release would amount to permission of encroachment. It also acknowledged that if the freeholder had released its own right of light before the headlessee, the headlessee would not breach clause 3(12) by releasing its rights.

On the issue of whether the freeholder can require the headlessee to take action to prevent encroachment, the court recognized that clause 3(12) obliges the headlessee, at the freeholder's request and cost, to adopt reasonable means to prevent encroachments. However, the court could not conclusively rule on the reasonableness of such a requirement without further factual evidence. It also noted uncertainty regarding the headlessee's possession status and the potential effectiveness or detriment of bringing proceedings.

Regarding new windows to be created by the developer, the court found that opening new windows on the development site could constitute a "new window ... upon or against the demised premises" under clause 3(12), potentially leading to acquisition of new easements of light detrimental to the freeholder. However, a release of rights of light by the headlessee would not necessarily amount to permission for the developer to open new windows, as such permission could be separately granted or withheld.

Finally, the court emphasized that many factual issues remain unresolved due to lack of evidence, including the existence and location of windows, the impact of the development, the terms of underleases, and the nature of discussions with the developer.

Holding and Implications

The court declined to grant a declaration that the headlessee is entitled to release the right of light appurtenant to the headlease.

The court recognized that the right of light is part of the demised premises and that releasing it would amount to permitting an encroachment contrary to clause 3(12) if the encroachment might cause damage, annoyance, or inconvenience to the freeholder. However, the absence of sufficient factual evidence prevented a definitive ruling on whether such damage or inconvenience would arise or whether the headlessee could be required to take action to prevent encroachment.

No broader precedent was established. The decision leaves open factual determinations necessary to resolve the dispute fully and allows for further discussion on the form of declarations appropriate to the matters decided.