Reiner v Triplark Ltd [2016]:

Did the fact that the Land Registry had not registered the purported sale of a lease prevent the seller from being in breach of the alienation provisions contained in the lease?

The background

The Appellant occupied a flat under a long lease, granted by the Respondent freeholder. The building within which the flat was situated was managed by a Right to Manage company. The Appellant intended to assign the lease of the flat; under the terms of her lease, she was required to obtain the consent of the RTM company to the assignment. The RTM company should grant the consent, but notification of the request must also be given by it to the Respondent.

The proposed assignment was to be made to Mr Wismayer, who was also the sole director of the RTM company; under the terms of the lease, Mr Wismayer was to obtain the RTM company’s consent.

Mr Wismayer, due to relationship difficulties, made the decision not to notify the Respondent on the basis that he suspected an objection would be raised to the assignment. This would have caused delay whilst the matter potentially progressed to tribunal. When Mr Wismayer came to register the assignment, an objection lodged by the Respondent with the Land Registry prevented him from doing so.

The Appellant retained legal ownership of the property, holding it on trust for Mr Wismayer. The assignment had not been completed as a result of the lack of registration. The Respondent made an application with the First-tier Tribunal, seeking a determination that the Appellant had breached the alienation provisions contained within the lease, having parted with possession of the property.

The law

The FTT concluded that the Appellant had breached the terms of her lease by parting with possession of the flat; the RTM company had neither granted consent to the assignment, nor unreasonably withheld it.

On appeal, the Appellant argued that she had not parted with possession as the assignment had not been registered; she was therefore still the registered proprietor with legal possession. However, regardless of a decision on this point, she also argued that the RTM company had unreasonably withheld consent.

No formal application for consent had been made by the Appellant because of Mr Wismayer’s position within the RTM company but nevertheless Mr Wismayer had intentionally not approached the Respondent. The Appellant argued that she had not breached the lease terms, as a reasonable period of time had passed since she had informally requested consent and she was entitled to proceed with the transaction.

The Respondent countered this with an argument that the Appellant had given up possession of the property, even though she retained legal possession as the registered proprietor. She became a trustee on completion of the transfer, transferring with vacant possession and holding the property on trust for Mr Wismayer, who was the party entitled to enjoyment of it. The Respondent continued that the RTM company was unable to grant consent until it had served notice on the Respondent; Mr Wismayer’s intentional lack of notification could not result in an unreasonable withholding of consent which would benefit the Appellant and Mr Wismayer.

The decision

The Upper Tribunal held that the Appellant had parted with possession, and had breached the alienation provisions of her lease referencing Clarence House Ltd v National Westminster Bank plc [2009]:

“The hallmark of the right to possession is the right to exclude all others from the property in question. That is the ordinary and normal sense of the word…”

The Appellant enjoyed all rights as an owner of the property but only as a trustee for Mr Wismayer. She was not able to exercise her rights as an owner; therefore, she could not enjoy possession of the property without the consent of Mr Wismayer.

Further, the UT concluded that the RTM company had not withheld consent unreasonably. Mr Wismayer had intentionally avoided notification to the Respondent and was unable to benefit from that.

J B Leitch comments on the decision:

“RTM companies should note the important reinforcement in Reiner that they are under a statutory duty to notify landlords of proposed transactions. Where they fail to do so, the transaction may be delayed and tenants may be entitled to damages from the RTM company. The decision is also interesting on a practical point, where purported assignments can still breach alienation provisions even where the transaction has not been registered at the Land Registry.”