Periodic Tenancies And Proprietary Estoppel: Not All Smoke And Mirrors

• Published date: 12 May 2021
• Subject Matter: Real Estate and Construction, Landlord & Tenant - Leases
• Law Firm: Bryan Cave Leighton Paisner LLP
• Author: Rebecca Campbell, Lauren King and Naomi Hoggett (Trainee Solicitor)

Summary

In Smoke Club Ltd and others v Network Rail Infrastructure Limited, the Upper Tribunal held that the claimants had an inferred periodic tenancy but no claim under proprietary estoppel. A lease of any kind was never agreed. However on the facts, none of the parties involved in negotiations had an objection on principle to a periodic tenancy and the tenants were clear that they would not accept a tenancy at will.

Background

The case concerned an arch beneath London Bridge railway station that operated as Cable nightclub from 2009. The nightclub operators - Smoke Club - had entered occupation of the arch on an informal basis, following discussions and with the knowledge of the freeholder and head tenant, without a formal lease or licence in place. When Network Rail exercised its powers of compulsory purchase and took possession of the arch in May 2013 for the Thames Link project, Smoke Club (now in administration) and its creditors argued that they could claim compensation on the basis that (1) Smoke Club had acquired a 20 year lease of the arches under the doctrine of proprietary estoppel or constructive trust, alternatively, (2) it had acquired an annual periodic tenancy of the site, with rights under the Landlord and Tenant Act 1954 (1954 Act), on the basis of its occupation and payment of rent.

Network Rail disputed Smoke Club's assertion that it had any compensatable interest in the site, arguing that it had merely occupied the arch as a tenant at will during negotiations for a longer lease that never completed.

The Upper Tribunal had to decide the basis upon which Smoke Club had occupied the arch - whether as a tenant at will (with no right to compensation); as a tenant with a 20-year lease of the site,; or alternatively as a tenant with an annual periodic tenancy with 1954 Act rights.

Proprietary Estoppel

Smoke Club argued that at a November 2008 meeting between all the parties, a binding agreement had been made, that Smoke Club would be granted a lease of the site for a term of at least 20 years at a rent not exceeding '50,000 pa. On the faith of that agreement, with the knowledge of the landlord and head tenant, Smoke Club spent in excess of '1.2 million fitting out and improving the premises, and then opened Cable nightclub towards the end of May 2009. This, Smoke Club claimed, gave rise to a proprietary estoppel or constructive trust, entitling it to a lease of the arch for a term of 20 years or more from the date of occupation.

On the...