Roundlistic Limited v Jones & Seymour [2016]:

Is estoppel by convention affected by correspondence between the parties?

The background

The respondents were tenants of a maisonette under a lease which contained the following covenant that tenants were:

“Not to use the premises…or permit the same to be used for any purpose whatsoever other than as a single private dwelling house in the occupation of the Lessee and his family.”

The respondents had let the lower maisonette to a third party under an Assured Shorthold Tenancy. The lease did not exclude subletting other than by way of the above term. Before the subletting was granted, the respondents had communicated with the appellant by telephone, referencing the above provision and claiming that this did not prevent them from granting the AST. The appellant disagreed and advised that it would seek an order for possession if the AST proceeded. The appellant offered a lease variation but the terms of this, and the premium payable, were difficult to conclude as the respondents’ calls and messages were left unreturned. Formal notification of their intention to sublet was sent by letter.

The claim was brought in the First-tier Tribunal, which held that the lease terminology prevented the subletting as argued by the appellant, but that the appellant was estopped from relying on this provision by virtue of its correspondence. Further, the FTT held that the lease term was an ‘unfair term’ and was therefore not binding.

The appellant took the matter to the Upper Tribunal.

The law

The Upper Tribunal considered the possibility of estoppel by convention having occurred at a number of points during the course of dealing between the parties, and throughout the letting history of the property.

Although referencing Burchell v Raj Properties and concluding that the lease terms did prevent subletting of the property, the UT concluded that nothing had occurred which could have given rise to estoppel by convention preventing reliance by the appellant on the lease terms.

When considering the ‘unfair term’ argument in the context of the service of notice requiring the grant of a new lease, the UT determined that there was no relevant ‘contract’ made between the parties which could be affected by the Unfair Terms in Consumer Contracts Regulations 1999. The appellant could not be considered a ‘supplier’ given that the transaction was compulsory, and therefore the UTCCR did not apply.

The decision

The Upper Tribunal overturned the decision of the FTT and held that the appellant had not been estopped from relying on correspondence and the FTT was wrong to conclude that estoppel by convention, and a waiver of the lease terms, had taken place.

Further, the lease terms could not be held to be ‘unfair contract terms’ and were therefore deemed to be enforceable. The appeal was allowed.

JB Leitch’s Stuart Miles comments on the decision:

“This case has a very specific set of facts, but it is worth noting that the Upper Tribunal made it abundantly clear that estoppel by convention will not apply where a landlord has indicated unambiguously throughout correspondence that it considers its tenant to be in breach of a particular clause in a lease. It is therefore important for landlords to voice their disapproval of the tenant’s breach of a particular clause in a lease, once they are aware of the breach, so that they cannot be seen to be waiving their right to enforce the covenant. Writing to the tenant and making it clear that legal action will be taken should assist with avoiding an estoppel and/or waiver of the right to enforce the covenant.

"Roundlistic also makes it clear that terms in a lease will not be considered to be “unfair contract terms” where the landlord was under an obligation to extend the lease, which will be useful for landlords confronted by such a defence after the statutory process has been followed.”