Update | Residential property: parking easements, insurance rent, basement excavation

Car parking easements

Car parking is a valuable right which is keenly protected, if threatened. There are several different ways that a right to park can be granted, for example under a lease, by way of a licence or even as an easement. Until the Scottish Moncrieff case in the House of Lords in 2007 it was not clear that a right to park in a designated space was capable of being an easement and, although not binding as a Scottish judgment, it has the persuasive weight of the House of Lords behind it.

The right to park as an easement was explored again in the recent case of Kettel and Ors v Bloomfold Ltd [2012] EWHC 1422 (Ch) where the landlord had granted long leases of flats in a residential development and each flat had been granted a right to use a designated parking space on the estate. Within each lease the landlord had reserved the usual right to develop neighbouring land notwithstanding any diminishing of light or air or that the developer might 'obstruct, affect or interfere with the amenity of or access to' the flats. The landlord wanted to build on the common parts of the estate, which included the eight parking spaces that had been designated for the tenants' use. The landlord assumed that the wording of the lease entitled it to relocate the tenants' parking spaces. The landlord wrote to the tenants informing them that their parking spaces were to be relocated and asked them to get in contact with the landlord. The landlord's contractors then fenced off the parking spaces.

The first issue before the court was the nature of the tenants' right to park. The tenants claimed the spaces had been demised to them under the lease, but the judge did not agree. The individual tenants had not been granted exclusive use of a parking space, they had simply been granted a sole right to park. The right did not prevent the landlord from doing anything with the parking space, save to the extent that it would be inconsistent with the tenant's ability to park on it. There was no exclusive possession.

The court then looked at whether the tenants' rights to use their designated spaces were easements. An easement cannot exist where it leaves the servient landowner with no use or merely 'illusory' use of the land. The court considered that the tenants' rights to park did not deprive the landlord of all reasonable use of the land and as a consequence did not make the landlord's ownership of the land 'illusory'. The landlord 'may pass on foot or by vehicle across the space freely if there is no vehicle parked on it'. The landlord 'may choose to change and repair the surface'¦ or may lay pipes or other service media under it, '¦ may in principle build above it.'

The landlord argued that the reservations allowing building on its neighbouring property gave it a right to move the designated parking spaces. The court did not agree and stated that the 'alleged lack of inconvenience to the dominant landowner is not a reason to imply a right to change what has been granted to him.' Generally 'a servient landowner has no right unilaterally to extinguish an easement over one area of land on provision of an equivalent easement over another.' An easement may be granted in terms that permit a servient landowner to change the land affected by the easement, but the right here had not been drafted so as to allow this. The tenants were granted an injunction.

The Law Commission has considered the difficulties surrounding the validity of car parking rights. It does not propose a change to the existing law whereby rights that grant exclusive possession cannot be easements. It has, however, concluded that 'an easement that stops short of exclusive possession, even if it deprives the owner of much of the use of his land, or indeed of all reasonable use of it, is valid'. This would result in an exclusive right to park being an easement, provided that the servient landowner could gain access to the burdened land, notwithstanding the extremely limited nature of such access.

Buyers of flats, particularly those in a development, should be warned very clearly about the landlord's rights in the lease to develop other parts of the estate. Such further development may not be limited to external areas, such as gardens and car parks, but might also involve spacious foyer areas or leisure space.

Insurance rent recovery

The recent case of Green v 180 Archway Road Management Co Ltd [2012] UKUT 245(LC) serves as a timely reminder to landlords and tenants managing their own properties that the recovery of insurance premium from tenants requires the landlord's strict compliance with the insurance obligations in the lease. In this case the lease required the landlord 'To insure and keep insured with a reputable insurance company in the joint names of the Lessor and the Lessee each and every part of the Building '¦'.

The tenant argued that she was not liable to pay her designated proportion of the insurance premium because the landlord had failed to comply with the terms of the lease. It had not insured in joint names, but had simply relied on what is commonly known as a general interest clause in the insurance policy stating that the interest of the tenants and mortgagees 'in the individual portions of the Property Insured to which the interest applies is noted '¦'

On appeal to the Lands Chamber the judge agreed with the tenant as 'the question was not whether insurance had been placed which, on the balance of probabilities, would have been sufficient for the [tenant] if she had made a claim'. The question was whether the landlord had complied with its obligations under the lease. The tenant's covenant was to pay a quarter of the sum expended for insuring the building 'in accordance with clause 4(ii)' of the lease.

Accordingly, in order to recover the insurance rent under the tenant's covenant the landlord must show that it has placed 'insurance in accordance with clause 4(ii)' which required the insurance to be in joint names. For assistance the judge turned to Woodfall Landlord and Tenant (paragraph 11.093) which states that 'a covenant by the tenant to insure in the names of the landlords is broken if the insurance is ?made in their names jointly with that of ?the tenant.

Similarly a covenant to insure in the joint names of the landlord and tenant is broken if the tenant insures in his name alone, but not if the tenant insures in the name of the landlord alone, for the addition of the tenant's name is purely for his benefit.'

It should be borne in mind that this is a Lands Chamber decision and the tribunal received no expert evidence on the usual practice in the insurance market, which the landlord had suggested was no longer to insure in joint names.

It is a useful reminder, however, to those managing property that insurance obligations must be strictly adhered to and that close attention should be paid to the insurance provisions when negotiating a lease, so that they are workable under current insurance market practice.

Leasehold basement excavation

With the ever growing appetite for the excavation of basements, the question has arisen of when, if ever, can ground floor tenants extend downwards.

In the recent case of Lejonvarn v Cromwell Mansions Management Company Limited [2011] EWHC 3838 (Ch) this issue was explored. In this case the tenant owned the ground floor flat in a house converted into three flats. The description of the demise in the lease was 'all that the Ground Floor and Basement and Cellar Flat '¦ being on the Ground Floor and Basement and Cellar of the Building '¦ together with the land being the garden '¦'.

The tenant had applied for a licence to carry out substantial development works, which included excavation, and the question before the court was whether the sub-soil beneath the basement and garden of the flat was included within the demise.

The court's view was that the wording of the lease suggested rooms rather than land, although land was referred to in the description of the garden, the judge placed little significance on this.

The ground floor tenant argued that the tenant of the second floor flat could develop the roof space, as it was specifically demised with that flat, which suggested that the freeholder had intended to dispose of everything when granting the leases. The court was not persuaded by this argument as in 1975, when the lease was granted, no landlord would have contemplated the possibility of a tenant wishing to carry out a basement excavation.

Not unusually the lease provided for the landlord to maintain and repair the structure and exterior of the building, including the foundations and roof. Although elements of the structure were clearly within the individual flats, the court considered that the foundations were 'in a class of their own' and that there was 'a world of difference' between developing upwards and 'digging under and into the foundations'. The lease also granted rights to the tenants for the passage of utilities through the service media 'in or under or passing through the building '¦' The judge considered that the use of the word 'under' clearly suggested that the sub-soil was not included within the demise as if it had been the right granted 'would have been completely unnecessary'.

The ground floor tenant then argued that the sub-soil was included in the demise following the old legal presumption that a grant includes everything above and beneath the property.

This presumption, although qualified over time, was successfully utilised in a recent case of Bocardo SA v Star Energy UK Onshore Limited [2011] 1 AC where the Supreme Court held that the 'owner of the surface is the owner of the strata beneath it '¦ unless there has been an alienation '¦' There have been cases where this principle had been applied to leasehold property, but in the Lejonvarn case the judge was firmly of the view that 'the principle cannot be applied blindly in the case of leases and it must depend on looking at the particular circumstances of the lease within the context of the whole property in which that leasehold has been carved out.' In this case the court considered that the leases formed 'a carefully devised structure of rights and obligations' and the structure did 'not naturally lend itself' to the presumption being applied to it.

This case emphasises the importance of carefully defining the extent of the property demised by a lease to reduce the possibility of lawful 'encroachment' outside the intended demise. Also conveyancers should be alert to their client's plans for alterations formulated prior to purchase, to ensure that they have an accurate idea of what is possible under the terms of the lease.