The House of Lords allowed an appeal by the London Residuary Body, in whom the rights of the original landlord - London County Council - had become vested, reversed the decision of the Court of Appeal (The Independent, 3 January 1992) and restored the decision of Mr Justice Millett, upholding the validity of a notice to quit served by the LRB on the tenant, Prudential Assurance Co Ltd.
The lease, dating from 1930, concerned a strip of land fronting Walworth Road, Southwark, and provided by clause 1 for an annual rent of pounds 30, and by clause 6 that the tenancy should continue until the land was required by the council to widen the road.
The Court of Appeal held, following Lace v Chantler (1944) KB 368 and Re Midland Railway Co's Agreement (1971) 1 Ch 725, that the grant of the tenancy was bad for uncertainty as to its maximum duration, but it took effect as a yearly tenancy under which the landlord could only serve notice to quit if the land was required for road widening purposes.
The present landlords, having bought the property from the LRB, have no road-widening powers.
David Neuberger QC and Paul de la Piquerie (Berwin Leighton) for the tenant; Alan Steinfeld QC and Stephen Lloyd (Clifford Watts Compton) for the landlord. LORD TEMPLEMAN said the term expressed to be granted by the agreement did not fall within the definition of a 'term of years absolute' in section 205(1)(xxvii) of the Law of Property Act 1925 and therefore failed to grant an estate in land under section 1(1)(b).
But the tenant, entering under a void lease, became, by virtue of possession and the payment of a yearly rent, a yearly tenant holding on the terms of the agreement so far as they were consistent with the yearly tenancy.
A yearly tenancy was determinable by the landlord or tenant, at the end of the first or any subsequent year of the tenancy, by six months' notice, unless the agreement provided otherwise.
The idea that the tenant became a yearly tenant on terms which prevented the landlord giving notice unless the land was needed to widen the road made a nonsense of the rule that a grant for an uncertain term did not create a lease. The principle in Lace v Chantler, reaffirming 500 years of judicial acceptance of the requirement that a term must be certain, applied to all leases and tenancy agreements.
A yearly tenancy was saved from being uncertain because each party had power by notice to determine at the end of any year.
The term continued until determined as if both parties made a new agreement at the end of each year for a new term for the ensuing year.
A power for nobody to determine or for one party only to be able to determine was inconsistent with the concept of a term from year to year.
The decision in Re Midland Railway Co's Agreement, by which the Court of Appeal had been bound, was wrong.
LORD GRIFFITHS, LORD GOFF, LORD BROWNE-WILKINSON and LORD MUSTILL agreed.