An easement or a lease - the court decides

The High Court has decided that a document purporting to grant a lease of a right of way in fact created an easement.

Background

An easement is a right over one property that benefits another property, such as a right of way or a right to use a drain. The right can be granted so that it continues indefinitely (a freehold easement) or for a fixed period of time (an easement for a term of years).

An easement for a term of years is often called a lease of easements, which leads to muddled thinking.

A person drafting a lease of easements begins with a lease of land and adapts it to grant a lease of rights. The resulting document may include a demise, forfeiture provisions, reserve a rent and include assignment provisions. Trying to interpret it can be difficult. Does it grant a lease or create an easement for a term of years? This was one of the questions that the court had to answer in the case of De La Cuona v Big Apple Marketing Limited. The decision dates back to April last year, but the transcript has only recently become available.

Facts

Big Apple Marketing Limited (the "beneficiary") had the benefit a lease of easements allowing it to park two cars in a small car park owned by Bernadette De La Cuona (the "owner"). The owner argued that the lease of easements created a lease that was void for non-registration at the Land Registry and that, even if the document created an easement, a right to park was not capable of being an easement. If the owner was correct in either assertion, the beneficiary no longer had a right to park on the owner's land.

The lease of easements

The judge analysed the terms of the document. The lease of easements contained a large number of terms that were consistent with the document being a lease. It used the terms landlord and tenant, purported to create a demise and reserve a rent and contained restrictions on use, a quiet enjoyment covenant and forfeiture provisions. All of these were provisions that would be expected in a lease.

However, the judge held that there were contrary indications that led to his conclusion that the document created an easement, not a lease. The crucial provisions were that the document only demised the right to use the parking spaces (not the spaces themselves) and did not grant the beneficiary exclusive possession of them; the owner could reallocate the spaces that the beneficiary could use. Also the rights were expressly stated to be appurtenant to the land owned by the beneficiary, which was another indication that the document created an easement.

Can a right to park be an easement?

Historically, the courts have been reluctant to hold that a right to park can be an easement. However, in recent years, a number of cases have upheld the principle that a right to park can, in some cases, be an easement. The issue is whether the grant of the right to park leaves the grantor without any reasonable use of the land over which the rights are granted. This is sometimes referred to as the ouster principle.

If the grant of a right ousts the grantor from any reasonable use of the land, it cannot be an easement. In certain cases, the extent of the ouster may be sufficient to grant the person with the benefit of the rights, title to the land itself - for example a right to build into airspace or the right to excavate and use a railway tunnel.

The judge reviewed the cases where rights to park have been held to create easements and concluded that the owner retained sufficient rights over the parking spaces so that the ouster principle did not apply. The document created an easement and therefore the beneficiary retained the benefit of its parking rights.

Conclusion

It is all too easy to draft an easement for a term of years as if it were a lease of property. In the De La Cuona case, the beneficiary was lucky that the judge interpreted the document as an easement. However, it is unsatisfactory that the parties had to go to court to establish the true legal effect of the document.

A number of problems can arise where the grant of an easement is made in the form of a lease with "landlord" and "tenant" covenants, particularly if the ouster principle applies. If, on its true construction, it is a lease, it may have the protection of the Landlord and Tenant Act 1954.

Even if it creates an easement, positive obligations may not bind successors in title as they will not be landlord and tenant covenants that pass automatically. Rents cannot be reserved out of an easement, only out of land, and assignment provisions are inappropriate given that the rights are appurtenant to land and not capable of being severed from it. Getting the terms wrong could be costly.

From these limited examples, it can be seen that drafting an easement for a term of years as if it were a lease can lead to complications. Drafting the easement correctly at the outset can prevent future problems when the legal effect of the document comes under scrutiny.

De La Cuona v Big Apple Marketing Limited [2017] EWHC 3783 (Ch)