REF/2014/0312

PROPERTY CHAMBER, LAND REGISTRATION DIVISION
FIRST-TIER TRIBUNAL

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

BETWEEN
SHAUN NOBES

APPLICANT

and

LLOYDS TSB BANK PLC 

RESPONDENT

Property Address: 97 Lynchford Road, Farnborough GU14 6ET
Title Number: HP499841

Before: Judge Michell 

Sitting at: Field House, Breams Buildings, London
On: 11th April 2016

Applicant Representation: Mr Billal Malik, counsel, instructed by Fulchers solicitors 
Respondent Representation: Mr Ross Fentem, counsel, instructed by Lyons Davidson 

___________________________________________________________________________

DECISION
___________________________________________________________________________

APPLICATION TO ALTER REGISTER – REGISTERED PROPRIETOR OF FREEHOLD TITLE ACQUIRING LEASES TO WHICH THE FREEHOLD WAS THE IMMEDIATE REVERSION- REGISTERED LEASEHOLD TITLE CANCELLED AND NOTICES OF LEASES DELETED FROM FREEHOLD TITLE- FREEHOLD PROPRIETOR SUBSEQUENTLY ALLEGING THAT THE LEASES WERE NOT DETERMINED AND THAT THE CANCELLATION OF THE LEASEHOLD TITLE AND THE REMOVAL OF THE NOTICES OF THE LEASES FROM THE FREEHOLD TITLE WAS A MISTAKE- FREEHOLDER PROPRIETOR APPLYING TO CORRECT THE MISTAKE- RECEIEVRS APPOINTED UNDER MORTGAGE OF FREEHOLD ALLEGING THERE WAS NO MISTAKE   

Cases referred to

Barrett v. Morgan [2000] 2 AC 264 
EDF Energy Networks (EPN) Plc v. BOH Ltd [2011] EWCA Civ 19

Hill and Redman’s Law of Landlord and Tenant Vol. 1
Woodfall’s Law of Landlord and Tenant
Megarry and Wade The Law of Real Property 8th ed

1.	Mr Nobes applied to alter the register to correct a mistake by reinstating the leasehold title to flat 1, 97 Lynchford Road and noted on the freehold title to 97 Lynchford Road, being title number HP499841 and also to have an unregistered lease of flat 2, 97 Lynchford Road, noted on the title.  The Respondent, Lloyds TSB Bank Plc (“Lloyds”) is the proprietor of a registered charge dated 24 October 2008 and registered on 28 November 2008 affecting the freehold title HP499841.  Lloyds objected to Mr Nobes’s application.  The matter was referred to the Tribunal for determination.

2.	97 Lynchford Road is a three storey building, consisting of commercial premises on the ground floor, a flat (97A) on the first floor and a flat (97B) on the second floor.  Mr Nobes purchased the freehold title to 97 Lynchford Road on the 24th October 2008 for £185,000, using the name “Hugh Martins”.  He purchased with the assistance of monies loaned on mortgage by Lloyds.  At the time Mr Nobes purchased the freehold, it was subject to a long lease of 97A and a long lease of 97B.  The lease of 97A was dated 20th December 1978 and was for a term of 99 years from 25th December 1978.  The lease of 97B was similarly dated and was for the same term. The lease of 97A was registered under title number HP356543 and noted on the title of the freehold.  The lease of 97B was not registered but was noted on the freehold title.  A ground rent of £37 and a service charge of £263 per annum was payable under each lease. 

3.	The mortgage deed between Mr Nobes (using the name High Martins) and Lloyds included at paragraph 9 a clause prohibiting Mr Nobes as mortgagor from accepting or agreeing to accept any surrenders of leases without the consent of Lloyds.     

4.	On 11th February 2009 Mr Nobes (using the name High Martins) purchased the leasehold interest in 97A from the then registered proprietor, Mr David Adams for £60,000.  The solicitors who acted for Mr Nobes on the purchase of the freehold and leasehold interests were Herrington and Carmichael. Lloyds did not advance money specifically for this purchase, although Herrington and Carmichael stated in a letter to Mr Nobes dated 11th December 2008 that they understood the money might be coming from Lloyds.  On 24th February 2009 Mr Nobes (using the name Hugh Martins) purchased the leasehold interest in 97B for £60,000 and as with the purchase of 97B, it was made without recourse to money lent for the specific purpose.

5.	Prior to the purchase, on 11th December 2008 Herrington & Carmichael wrote to Mr Nobes enclosing a Lease Report on 97B.  In the Summary at section 12 of the Report, the authors wrote “This lease will fall away as previously stated…” and went on to say 
	“Should you wish to sell the flat you can do so under a new long lease but that lease 	will have to make appropriate provisions to fit in with the other floors”.  
 
6.	On 17 February 2009 the solicitors wrote to Mr Nobes, calling him “Dear Shaun” and addressing the letter to “Mr. S Martins, 17 High Street, Camberley, Surrey”.  Although the client care letter sent when Herrington & Carmichael was first instructed on the purchase of the freehold is addressed to Mr SM Nobes, Herrington & Carmichael appear to have addressed all letters to Mr Nobes as “”H Martins” or “S Martin” at 17 High Street, Camberley.  In the letter of 1`7th February they confirmed completion of the purchase of 97A and stated
	“The effect of course will be that you will become both the freehold and the leasehold 	owner so the Lease will effectively fall by the wayside”.  

7.	On 24th February 2009 Herrington and Carmichael wrote to HM Land Registry enclosing a copy of the TR1 transferring the leasehold title of 97A.  The letter stated that a form AP1 was enclosed but it appears that no such form was in fact enclosed.  The letter stated as follows
	“You will note that the purchaser of this long lease is also the freehold owner so the 	Lease can be merged with the freehold and fall away on registration”. 

8.	HM Land Registry treated the letter from Herrington and Carmichael as an application to cancel leasehold title HP356543.  The leasehold title was then cancelled. On 27 February 2009 Land Registry wrote to Herrington & Carmichael saying that their application had been completed and enclosing an official copy of the register edition date 27 February 2009.  In that edition, the schedule of notices of leases included only the lease of 97B.  
 
9.	 On 4th March 2009 Herrington & Carmichael wrote to Mr Nobes as follows
	“Registration of flat 97a has been completed.  I am attaching the freehold title and if 	you look at the last entry you will note that the only Lease in respect of which the 	freehold is subject is the Jones’ Lease.  I am dealing with the registration there so you 	should receive the further documents shortly showing that you own the whole freehold 	unencumbered except, of course, for the Lloyds Bank mortgage”.    	
Mr and Mrs Jones were the lessees of 97B.  

10.	On about 11th March 2009 HM Land Registry removed the note of the lease of 97B from the freehold title.  An explanation for this was given in a letter from Mr Tom Moran, Assistant Land Registrar at Land Registry Weymouth Office dated 18 September 2012.  Mr Moran wrote
	“On 11 March 2009 we received an application from Herrington and Carmichael to 	remove the notice of the second floor lease.  We do not appear to have retained a copy 	of the application but it was recorded on our data system as coming from Herrington 	& Carmichael … The application was completed as soon as it was received, which 	suggests that it was in order and no enquiries or requisitions were required.” 

11.	On 26th March 2009 Herrington & Carmichael wrote to Mr Nobes attaching a “bundle of deeds” received on the freehold and leasehold purchases at 97 Lynchford Road and stating
	“Now that the properties are registered, none of these documents are particularly 	relevant and of course the Leases have all been determined”   

12.	Mr Nobes was convicted of criminal offences on … and sentenced to a term of imprisonment.

13.	97B was let to Benjamin Lee and Debbie Roche under an assured shorthold tenancy beginning on 28th May 2010. 

14.	On 7th April 2011 Lloyds appointed receivers of 97 Lynchford Road under the |Law of Property Act 1925.   By August 2011 it was clear to Mr Nobes, if not before, that the leases had ceased to exist.  In his witness statement, he said that the receivers notified him in or around May 2001 that the two “leasehold titles” (there was in fact, only one leasehold title as one lease was not registered) had “merged with the Freehold” but the introduction to the Report of the Legal Services Ombudsman dated 17th August 2012 states that it was in August 2011 that Mr Nobes discovered that there were not two leases attached to the freehold title.  Mr Nobes says that he was advised by Herrington & Carmichael that the leases would have “merged by a natural registration process” and directed to the Solicitors Complaints Procedure.   Mr Nobes made a complaint to the Legal Services Ombudsman.  The full report is not in evidence but only the introduction, which contains the recommendation that “the firm should carry out rectification work in contacting Land Registry to surrender the existing lease and then register the leases separately for 97a and 97b”.  I do not understand the reference to surrendering “the existing lease”.    

15. 	On 21st September 2012 Mr Nobes applied to Land Registry to alter the register to reinstate the leasehold title to 97A and the notices of 97A and 97B on the freehold title.  

16.	On 3rd August 2012 the receiver commenced possession proceedings against Benjamin Lee and Debbie Roche for possession of 97B on the grounds of arrears of rent.  On 18th March 2013 a possession order was made    

17.	Both parties agreed at the hearing that although “merger” was the term that had been used in correspondence with Land Registry, the issue was whether there had been an express surrender or a surrender by operation of law on the acquisition of the leasehold interest by Mr Nobes.

18.	Counsel for Lloyds submitted that both the leases were surrendered by being transferred to the immediate landlord in February 2009 and that the question of Mr Nobes’s intentions is irrelevant to the issue of whether the leases were surrendered.  In the alternative, he submitted that Mr Nobes intended that the leasehold interests should fall away such that the freehold interest would be encumbered only by the mortgage to Lloyds.  He submits that Land Registry was therefore correct to close the leasehold title of 97A and to remove the notices of the leases of 97A and 97B from the freehold title.

19.	The term “surrender” was explained by Lord Millett in Barrett v. Morgan [2000] 2 AC 264 at 270F
	“A surrender is simply an assurance by which a lesser estate is yielded up to the 	greater, and the term is usually applied to the giving up of a lease or tenancy before its 	expiration.  If a tenant surrenders his tenancy to his immediate landlord, who accepts 	the surrender, the tenancy is absorbed by the landlord’s reversion and is extinguished 	by operation of law.   
	 A surrender is ineffective unless the landlord consents to accept it, and is 	therefore 	consensual in the fullest sense of the term.  In Coke’s Commentary upon 	Littleton 	(1832), vol II, s.636, p.337b the nature of a surrender is described as follows:
“Surrender, sursum redditio, properly is the yielding up of an estate for life or yeares to him that hath an iimediate estate in reversion or remainder, wherein the estate for life or yeares may drowne by mutuall agreement between them”. 
Lord Millet went on to state
	“The destruction of the tenancy by surrender reflects the principle that a person cannot 	at the same time be both landlord and tenant of the same premises.  Nemo potest esse 	tenens et dominus: see Rye v Rye [1962] AC 496,513, per Lord Denning.”  	

20.	A “merger” can be contrasted with a surrender as appears from the following passage in Woodfall’s Law of Landlord and Tenant (Vol 1) para 17.008:
	“A surrender differs from a merger in that a surrender operates by the inferior interest 	being acquired by the holder of a superior interest, whereas a merger operates by the 	holder of the inferior interest acquiring the superior interest”.    		
The editors of Megarry and Wade The Law of Real Property 8th ed. say at 18-090
	“Merger is the converse of surrender.  A surrender occurs where the landlord acquires 	the lease; merger occurs where the tenant acquires the reversion (or a third party 	acquires both the lease and the reversion).  The underlying principle is the same in 	both; the lease is absorbed by the reversion and destroyed.”   

21.	The effect at common law of a merger is the same as the effect of a surrender, namely that lesser interest ceases to exist. However, there is a different principle in equity.  That principle was described as follows by Rimer LJ in EDF Energy Networks (EPN) Plc v. BOH Ltd [2011] EWCA Civ 19 at para 30, 
	“The rule of equity was that there would only be a merger if the party in whom the 	two estates vested intended a merger”.    
The equitable rule now prevails by reason of section 185 of the Law of Property Act 1925, which provides that there is not to be any merger by operation of law only of an estate the beneficial interest in which would not be deemed to be merged or extinguished in equity.  Counsel for Lloyds submits that the equitable rule applies only where the party in whom the two estates vests is the owner of the lesser interest and not where he is the owner of the greater interest.   

22.	I have been taken to no authority to show that the equitable rule applying in the case of a merger also applied in the case of a surrender.  The textbooks to which I was referred, being Megarry and Wade, Woodfall, Hill and Redman’s Law of Landlord and Tenant and Halsbury’s Laws of England Vol. 47 all discuss the equitable rule applying in the case of a merger but do not state that there is any similar rule in the case of a surrender.  Barrett v. Morgan is clear authority that on a tenant giving up his lease to his landlord, the tenancy is absorbed into the landlord’s interest and is extinguished by operation of law.

23.	In this case there was an express surrender of the leases.  What is required for an express surrender is that there be a writing which purports to re-vest the estate of the lessee in the reversioner.  No technical words are necessary – see Hill and Redman’s Law of Landlord and Tenant Vol. 1 [4287].  In this case, the owners of the leases executed transfers to transfer their estates to the reversioner, Mr Nobes.  Those transfers effected an express surrender of the leases.  If there had been no express surrender, there would have been a surrender by operation of law.  The giving up of possession by the tenant and the acceptance of possession by the landlord is a clear case of surrender by operation of law – see Megarry & Wade The Law of Real Property 8th ed. at 18-088.  Here, following the making of the transfers, the transferors went out of possession and Mr Nobes went into possession.

24.	In case I am wrong in finding that the equitable rule applying in the case of mergers does not apply in the case of a surrender, I shall consider the intention of Mr Nobes at the time of the transfers of the leases to him. 

25.	On the evidence I do not accept that it was the intention of Mr Nobes that the leases be kept in existence.  On the contrary, I find that it was his intention that the leases should be absorbed in the freehold estate.  Herrington & Carmichael wrote to Mr Nobes on 5 occasions informing him that the effect of his acquiring the leases was to determine the leases. The information was set out in the following documents
(i) the Lease Report sent on 11th December 2008;
(ii) the letter of 17th February 2009;
(iii) the letter of 4th March 2009;
(iv) the letter of 12th March 2009; and
(v) the letter of 26th March 2009.
At no time did Mr Nobes write to Herrington & Carmichael in response to these documents to state that he did not want the leases to determine and there is no indication in the evidence that he told them in a meeting or by telephone that he did not want the leases to determine. If Mr Nobes had not wanted the leases to determine, he would have told the solicitors.
 
26.	Mr Nobes said in his oral evidence that he received the letter of 17th February 2009.  He said he understood it to mean that the transferor’s lease fell away and that “his lease” took over.  He said that he did not receive the letter of 12th March 2009.  In cross-examination, he accepted that he did receive some letters sent to him at the High Street, Camberley address. He said that he did not recall receiving the Lease Report.  Asked about the terms of the Lease Report, Mr Nobes said that the solicitors were saying that the transferor’s lease would not exist but that he would be the new leaseholder. Asked about the letter of 4th March 2009, Mr Nobes said that he could not recall having seen it at the time.     

27.	I am satisfied on the evidence that Mr Nobes was told by his solicitors at the time of the purchase of the leases that the leases would come to an end on completion of the purchase of the leases by him.  Mr Nobes accepted that he received the letter of 17th February 2009. I find on the balance of probabilities that Mr Nobes did receive the Lease Report and the letter of 4th March 2009.  These were both addressed to him at an address at which he had received other letters from the solicitors.  Mr Nobes himself could not say for certain that he had not received them.  Both those documents indicate that the effect of Mr Nobes acquiring the leases is to bring them to an end.  Mr Nobes’s evidence that he thought he was being told that the leases would be replaced by new leases in his favour springing up on the completion of the transfer makes no sense and is not supported by the documents.  In particular, it is not consistent with the reference in the Lease Report to how Mr Nobes could sell the flat at 97B if he wished to do so.  It is clear that the author of the report is talking about the option for Mr Nobes to create a new lease in the future and for that lease to be drafted to include provisions about rights and obligations in respect of other parts of the building.  The author was plainly not referring to some lease to arise automatically in Mr Nobes’s favour on completion of the transfer.         	

28.	Counsel for Mr Nobes submitted that the Ombudsman’s report showed that Mr Nobes did not intend that the leases should be absorbed in the freehold.  I do not accept that submission.  The complaint to the Ombudsman and all Mr Nobes’s assertions that he intended that the leases should remain in existence happened after the appointment of the Law of Property Act receivers.  It may be that Mr Nobes did not think about the fact that acquiring the leases might benefit Lloyds by increasing the value of the property over which they had security, by giving them a charge over an unencumbered freehold rather than over a ground floor shop with vacant possession and a reversionary interest in the two flats on the upper floors.  However, it does not follow that he did not intend at the time of the purchase of the leases that the leases should come to an end.

Conclusions
29.	The leases came to an end by surrender.  That was the inevitable result of the acquisition of the leases by Mr Nobes at a time when he was the registered proprietor of the freehold reversionary interest. It follows that there is no mistake on the register and so Mr Nobes’s application for alteration of the register must be cancelled.  If, contrary to my decision, whether or not the leases came to an end depends on the intention of Mr Nobes, I find that Mr Nobes did not intend that the leases should continue but rather that they should be determined.  Accordingly, there is no mistake on the register and nothing to be corrected by alteration of the register.

Costs
30.	My preliminary view is that Mr Nobes must pay Lloyds’s costs of the proceedings
The usual rule in the Land Registration Division of the Property Chamber is that the unsuccessful party is ordered to pay the costs of the successful party.  I can see no reason why the usual rule should not apply.  Any party who wishes to submit that some different order ought to be made as to costs should serve written submissions on the Tribunal and on the other party by 5pm on 10th June 2016.       
  
BY ORDER OF THE TRIBUNAL

DATED THIS 20TH DAY OF MAY 2016