Palmer v Plymouth: chalet leaseholders lose challenge to assignment premium clauses

A High Court judge has dismissed a claim by 89 leaseholders of cliff-top chalets in Cornwall seeking to invalidate provisions requiring them to pay substantial premiums to their council landlords upon assigning their leases, in a judgement with significant implications for the construction of alienation covenants in non-standard residential tenancies.

HHJ Paul Matthews, sitting as a judge of the High Court in the Business and Property Courts in Bristol, handed down his judgement on 28 May 2026 in Landy Palmer & Ors v The Council of the City of Plymouth & Anor [2026] EWHC 1262 (Ch), following a hearing in January of this year.

The claimants held 21-year leases of plots at Treninnow and Wiggle Cliffs on the Rame Peninsula, granted in 2022 by Plymouth City Council and Cornwall Council jointly. The leases contained a provision, clause 3.9.4, requiring tenants to pay 75% of the higher of the sale price or market value to the landlords on a first assignment, and 20% on subsequent assignments. The councils justified the terms by reference to their statutory obligation under section 123(2) of the Local Government Act 1972 to obtain the best consideration reasonably obtainable on disposal of local authority land.

The statutory battleground

The central dispute required the court to resolve the relationship between two long-standing statutory provisions: section 144 of the Law of Property Act 1925, which implies a term into leases that no premium shall be payable for consent to assignment unless the lease expressly provides otherwise, and section 19 of the Landlord and Tenant Act 1927, which subjects alienation covenants to an implied proviso that consent shall not be unreasonably withheld.

The defendants argued that section 144 created a "carve-out" from section 19, permitting premium conditions where they were expressly reserved in the lease. The claimants contended that section 19 applied across the board and rendered any premium condition subject to a reasonableness test.

The judge declined to find an implied repeal of section 144 by section 19, applying the high threshold established in O'Byrne v Secretary of State for Environment, Transport and the Regions [2002] HLR 30. The two provisions were not inescapably inconsistent. However, drawing on the Pepper v Hart conditions, HHJ Matthews admitted a statement by Viscount Cave LC at second reading of the 1927 Bill, which indicated that Parliament intended the reasonableness requirement to apply across all alienation covenants, including those involving premiums. Section 19 accordingly applied in addition to, not instead of, section 144.

The residential lease question

The more consequential finding concerned whether the leases qualified as "residential leases" under section 19(1E) of the 1927 Act, which would exclude the application of section 19(1A) and its mechanism for pre-agreed consent conditions to be deemed reasonable.

The councils advanced seven arguments that the leases fell outside the definition, which requires that a building be let "wholly or mainly as a single private residence". The judge rejected each in turn. Although the leases prohibited use of the chalets as an occupant's "only or main" residence, and permitted short-term holiday subletting for up to five months annually, he found that such occupation remained incidental to the primary residential purpose. The leases were, over their 21-year term and considered as a whole, "mainly" let as a single private residence.

That conclusion proved fatal to the councils' reliance on section 19(1A), which is disapplied to residential leases. The premium provisions in clause 3.9.4 therefore cannot be treated as automatically reasonable by virtue of their express inclusion in the leases.

The claim nonetheless failed at the final stage. The judge declined to declare that the premium provisions were void or that the councils were categorically disentitled from imposing them. No assignment had yet occurred, no evidence had been adduced as to individual circumstances, and the question of whether a demand for a premium in any given case would constitute an unreasonable withholding of consent under section 19(1) remained unresolved. The declarations sought were, to that extent, premature.

The judgement leaves the practical position in equipoise: the leases stand, the premium clauses remain operative, and the councils' ability to enforce them will fall to be assessed against the reasonableness standard when any individual assignment arises.