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The Jersey Law Review - June 2004

THE NATURE OF TENANCIES UNDER GUERNSEY LAW

Simon Howitt

Introduction

1       Those familiar with English law will be aware of the concept of the “term of years absolute”, the technical term for tenancy,[1] which creates a legal estate in English land[2]. The purpose of this article is to investigate the status of tenancies under Guernsey law and, in particular, whether, and in what circumstances, they create any right in rem[3] in the land to which they relate.

2       At first sight, this question might appear to be of passing interest only, but it is fundamental. If a tenancy does not create a right in rem, a right in respect of the tenanted property itself, but only creates personal rights as between the tenant and the landlord who initially rents the land to him, how is the tenancy binding as between the tenant and any subsequent owner of the property? There is no contractual nexus between them.

3       A tenancy creates a bundle of rights and obligations. From the viewpoint of the original landlord of tenanted property, he will have certain rights (typically, the right to receive rent and the benefit of the tenant’s covenants) and certain obligations (typically, amongst others, the obligation to permit the tenant to enjoy the property). Leaving aside, for the time being, the rights, where a property has been rented out and then changes hands, either by sale, by inheritance or by means of enforced expropriation by a creditor, how, if at all, do the obligations of the original landlord attach to the property so as to be enforceable by the tenant?

4       The burden of an obligation such as that of the landlord cannot prima facie be assigned;[4] only the benefit of an obligation can be assigned and so, at first sight at least, it would appear that, if a tenancy creates no right in rem in the tenanted property, the tenant cannot enforce the right to enjoy the property against a successor in title to the original landlord. If no such right is created, then the new owner of the property can rightly claim that, not being a party to the tenancy agreement, he is not bound by the landlord’s obligations, which are enforceable, unless the contract is novated, only against the original landlord.

Selwood  v Madeley

5       The status of Guernsey tenancies was recently considered (at first instance and obiter) in the cases of Selwood v Madeley and McCormack v Waterman,[5] where Deputy Bailiff Day, dealt with the matter as follows -

“The proposition which I put before Counsel I would state in this way.  A lets a property to B. The lease is not registered. Subsequently, A borrows from X Bank Ltd., the debt being secured by a charge against A’s property. A later defaults and X Bank Ltd institutes saisie proceedings. Because at the time of the registration of the bond there was no prior notice on the public records of the existence of the lease between A and B, B’s security of tenure is destroyed by the effect of the saisie proceedings. It would be otherwise if the lease had been registered on the public records prior to the registration of the bond.

6       Advocate van Leuven argued against the correctness of that proposition. A lease, he argued, does not require registration to be effective as between the parties, as it is not a charge on the real property. If A sells a property already leased to B, the property remains subject to the lease whether or not it has been registered. The only remedy of an uninformed purchaser would be in damages, resulting from breach of the vendor’s covenant to give vacant possession, or (perhaps) pursuant to the vendor’s title indemnity in respect of encumbrances. Further, heirs inherit subject to a lease, whether registered or not, or to any prior interest which can subsist in the land (for example douaire). If the proposition which I had advanced was correct, then the creditors would have greater rights than purchasers, or heirs, which cannot be right. Mr van Leuven cautioned against equating lenders with other types of creditors. He gave a further example, of A letting a property in good faith to B (the lease being unregistered), and A subsequently incurring a liability to C arising from a road traffic accident. In order to satisfy his judgment C institutes saisie proceedings. If the proposition was correct, then C would thereby acquire greater rights than if he had been a purchaser from A. And, in both instances, the effect would be to expropriate B. He emphasised that the purpose of a saisie was to ascertain the claims of creditors against real property of the debtor, thereafter to marshal such claims, (and, I would add, to effect vesting of the property in someone free of all such claims). The procedure did not involve in any way the marshalling of third party interests, only those with claims against that real property. Accordingly, interests which currently exist would be protected. (The decision in Stanbury v Wincy[6] would appear to support that view).

7       The proposition is not only wrong in principle, Mr van Leuven submitted; it is also wrong on authority, for which he referred me to the relevant passages of Article IV of Chapter III of Gallienne[7] – entitled “Louer les Propriétés de la Saisie” (pp. 124 – 135). I do not propose to cite those passages in detail. What emerges, clearly in my view, is that leases may have an impact in saisie proceedings whether or not those leases are registered – Gallienne making no reference whatsoever to registration, which is probably hardly surprising as I suspect that in those times the practice had rarely, if ever, been thought of. The intricate procedure which a saisi hérédital had to follow is set out by Gallienne, which necessarily led to an examination of the question of leases which had already been granted by the debtor “avant sa renonciation”. It is clear that the Court considered that it had the authority, and exercised that authority, to investigate (and alter or even extinguish) the terms of the leases which had already been granted. As Gallienne commented (at p. 130, final paragraph):

“Ici, l’on doit examiner non-seulement le temps porté au louage, mais aussi le prix accordé entre les parties; l’objet du saisi n’étant pas de priver une personne de ses justes droits, mais de prévenir des frauds et empêcher que les intéréts de la saisie ne soient lésés par un louage frauduleux”[8].

8       From all of which I conclude that Mr van Leuven is correct in his submission with regard to the necessity to register a lease or otherwise. Registration might be desirable, but not necessary to protect the tenant’s rights. Which means, accordingly, that that which is registered on the public records is not alone determinative of full possessory title. I would also add, for completeness, that it would not matter whether the lease in question was in writing or merely oral. The point, as illustrated by Gallienne, is that the Court was entitled to investigate the existence and terms of any alleged lease, and to hear evidence thereon as necessary (as re-affirmed by paragraph 2(7) of the Simplification Order[9]). Even more forceful would be such an argument in relation to protecting the interest of those who had undertaken the lease for a number of years at a premium.”

Analysis of the decision

9       The Deputy Bailiff’s conclusion was, in effect, that in all circumstances (barring, presumably, a tenancy created with a view to defrauding a purchaser from or a creditor of the original landlord) a tenancy, whether verbal or in writing and whether registered or unregistered, and no matter how long the term of the tenancy,[10] would be treated as binding the landlord’s successors in title except, perhaps, a successor whose title arises as a result of a charge which has already been registered against the demised property prior to entry into the tenancy agreement.

10     It is worth noting, at this stage, some of the points raised by this passage from Selwood v Madeley.  First, there is Advocate van Leuven’s contention that a lease “does not require registration to be effective as between the parties, and it is not a charge on the real property”. It is undoubtedly the case that a lease is binding between the parties without registration, but quite how it comes to be binding on another party (the original landlord’s successors in title) without registration and without being “a charge on the real property” is not explained.

11     Secondly, there is Advocate van Leuven’s contention that property which is sold remains subject to a pre-existing lease whether or not it has been registered. This appears to have been accepted by the Deputy Bailiff without further analysis. However, as will be seen from the remainder of this article, it is by no means unarguable in the light of authority.

12     Thirdly, there is the Deputy Bailiff’s conclusion that “that which is registered on the public records is not alone determinative of full possessory title”. This appears to suggest that a tenant has some form of “title” to the property demised to him. However, the basis for this suggestion, and the nature of the tenant’s “title” is not clear.

13     Fourthly, it is worth mentioning that the proposition which the Deputy Bailiff put to counsel in Selwood v Madley involved a tenancy agreement entered into before a debt was incurred by the landlord. It is not clear what conclusion the Deputy Bailiff would have reached in relation to a situation where a debt was incurred and registered as a charge against the debtor’s immovable property, and a tenancy agreement, whereby the debtor’s immovable property was let to a tenant, was entered into thereafter.

14     The discussion of tenancies in Selwood v Madeley arose in the context of a discussion as to whether the public registers at the Greffe are determinative of title to property. Whether they are or not is outside the scope of this article. However, it is clear that, for several hundred years, it has been a requirement to register documents which create rights in immovable property in order for successors in title to the original parties to be bound by the obligations created by such documents. To suggest that the law has developed differently in the context of tenancies, and that the requirements for formality and registration can be side-stepped by the use of tenancy agreements, appears to be a surprising and questionable conclusion.

15     The passage from Selwood v Madeley quoted above reflects what might be described as the “accepted view” on this subject: the view which most practitioners would come out with if asked for an answer on the spot.  It also represents what appears, at first sight, to be fair and reasonable. Why should a tenant be dispossessed simply because the property demised to him has changed hands? However, a slightly closer examination of the issue elicits potential circumstances where it would be neither fair nor reasonable.

16     For example, A might borrow from B on the security of A’s real property having already  let it to C for 99 years at a premium with only a nominal annual rent payable.[11] Assume that C has not registered the lease when A borrows from B.  If Deputy Bailiff Day’s conclusions are correct then, if B were to take saisie proceedings against A, and A’s real property were to become vested in B, B would obtain the property subject to a long lease with no income worth having, notwithstanding that, because the lease was not registered, B may have had no practical means of knowing about it when lending to A. This could potentially reduce the value of the property in the hands of B to a tiny fraction of the amount lent by B to A. It would surely be reasonable, in these circumstances, to say that B should take the property free of C’s tenancy, and that if C suffers as a result, it is his fault for not registering the lease so that any creditors of the landlord who might register subsequent charges over the property would be aware of, and subject to, the terms of the lease. If the Deputy Bailiff’s statement as to the law in Selwood v Madeley is correct, it is serious cause for concern[12] for those who lend on the security of immovable property in Guernsey.

The other authorities

17     Having briefly considered the issues, and the most modern authority on them, we turn to the older authorities. These are divided into those which deal with the status of a tenant following a voluntary transfer of demised property inter vivos, those which deal with a transfer on a forced expropriation of such property by saisie proceedings and those which deal with a transfer of such property on the death of the landlord. The authorities are fairly sparse, although, as will be seen, some are very clear[13].

Voluntary transfers inter vivos

19     Terrien[14] deals generally with tenancies in the chapter entitled “De ferme ou louage d’heritage[15]” which is within Livre VII of his commentaries, entitled “D’obligations et contracts”.[16] On the subject of whether a purchaser is bound by a tenancy agreement whereby the property purchased has been let by the purchaser’s predecessor in title, Terrien refers to a judgment given on 26th April 1526 by the Court of the Bailiwick of Caen whereby a purchaser was bound by a lease entered into before he purchased but only, it appears, because the vendor, and original landlord, had entered into the lease before Tabellions[17]and obliged himself on the security of all of his moveable and immovable proprerty.[18]

20     L’Approbation[19] simply states that, in Guernsey, we follow Terrien’s chapter on tenancies.[20] Le Marchant’s[21] commentary on L’Approbation deals with the question of whether a tenancy remains binding on a purchaser from the original landlord as follows[22] -

“A lease made by contract devant justice[23] of a house or other land subsequently sold by the landlord is binding notwithstanding the sale or other transfer of the said land if the landlord has, before the transfer, obliged himself to be bound by the lease on the security of all of his immovable property, or specifically the property transferred.”[24]

21     These passages appear to suggest that a tenancy agreement will only be binding on a purchaser from the original landlord where the lease has been consented to devant justice. The words “sur tous ses biens et heritages” used by Terrien and “obligé….tous ses heritages, ou spéciallement celui allienné”[25] used by Le Marchant are words which, where used in a contract which is consented to devant justice,  create a charge[26] over the relevant immoveable property of the obligor.[27] The wording of a typical modern charge document is to the effect that the debtor consents to the obligations contained in the document “on the security of all his real and personal property”. It appears that what both Terrien and Le Marchant were saying was that a tenancy agreement would be binding on a purchaser from the original landlord only if the obligations of the original landlord were charged on the property demised.

22     The only other authority from the 17th century, and one of great relevance, is an Ordinance made by the Court of Chief Pleas on 1st October 1638,[28] which states its purpose to be -

“to give order to the great abuses and frauds which daily occur between the inhabitants of this Island in connection with leases, after the grant of which leases the owners of the houses and lands demised sell them and by this means deprive their tenants of the benefit of their said leases…”

23     The Ordinance goes on to provide that -

“…from now on all those who are deprived of their tenancies shall be duly compensated at the discretion of justice”.[29]

24     Whilst the Ordinance is fairly vague, in that it does not, for example, state by whom compensation should be paid, it puts the ability of the purchaser of tenanted property to oust the tenant of the former owner[30] at the time when this Ordinance was passed beyond doubt.

25     The author has found references[31] to a number of cases heard by the Royal Court in the 18th century which appear to contradict the earlier authorities. First there are a number of cases[32] which appear to have found that -

“A lease of a house and lands made before a sale of the said houses and lands was found to be valid and the purchaser was awarded damages against the vendor.[33]

26     Presumably damages were awarded because the vendor had not made the purchaser aware of the tenancy before the property was sold. It is, of course, not clear whether the leases in question had been consented to devant justice with the landlord’s performance being secured on the security of tous ses heritages, ou spéciallement celui allienné. However, it seems unlikely, as this does not appear to have been the practice in the period in question.

27     In another case[34] it was found that -

“immovable property having been sold without the purchaser being aware that it had a tenant, the vendor was obliged to compensate the purchaser, the former not being able to put the latter into possession before the expiration of the lease, on the action[35] to deliver the keys.[36]

28     This case appears not to have involved the tenant in the proceedings. It is arguable that it is not inconsistent with the earlier authorities, in that it simply shows that a purchaser to whom a vendor has undertaken to give vacant possession will be compensated if the vendor fails to give it, which he would clearly not be in a position to do if he has let the property prior to the sale. However, it can perhaps be inferred that the Court took the view that the purchaser was not in a position to evict the tenant.

29     These cases are, it is submitted, of limited authority given that they appear to contradict earlier authority and, perhaps more importantly, that they will have been decided entirely by the Jurats, who were then judges of both fact and law.[37]  None of them is likely to have had any legal qualification, and there are a number of statements[38] to the effect that they rarely took the law into account when coming to decisions and simply decided cases on the basis of what they considered to be fair in the circumstances.

30     Since these cases, there appears to be almost no authority dealing with the status of a tenant after a transfer inter vivos of the demised property. The “Law giving the Court increased power to stay execution in actions for eviction” of 1946[39] gives the Royal Court a discretionary power to stay the eviction of a tenant whose tenancy has come to an end, but this statute clearly has no effect on the nature of a tenancy.

31     The conclusion which we can reach at this stage is that Advocate van Leuven’s contention in Selwood v Madeley that if “A sells property already leased to B, the property remains subject to the lease whether or not it has been registered”, which appears to have been accepted by the Deputy Bailiff without discussion, is not supported by the weight of authority. The only authorities, in the context of voluntary transfers inter vivos, are a few 18th century cases. The weighty authority of Terrien and Le Marchant, and the Ordinance of 1638, suggest the opposite.

Transfers by forced expropriation

32     The modern procedure to be followed in saisie[40] proceedings is to be found in the Saisie Procedure (Simplification) (Bailiwick) Order 1952, as amended. However, this Order only changed the procedure followed in such proceedings (in particular, by making the process considerably shorter than it had been). It did not alter the substantive law, and many of the pre-1952 authorities remain relevant.

33     Modern day saisie proceedings are divided into three stages (as, indeed, were saisie proceedings before 1952). The first stage is for a creditor of the owner of real property to obtain a preliminary vesting order. The equivalent stage in the pre-1952 procedure was for such a creditor to become saisi mobilier of the debtor’s real property. At this stage the debtor remains the owner of the property but the creditor who has obtained the preliminary vesting order is entitled to any income arising from the property, such as the rent payable by a tenant of the property. If the property is occupied by the debtor, the creditor can obtain an eviction order against the debtor, who will be treated as an occupier, such that the maximum stay of eviction which the Court can award is six months.[41]

34     After certain procedural requirements have been complied with, the next stage is for the creditor to obtain an interim vesting order in respect of the property. The equivalent stage in pre-1952 saisie proceedings was for the creditor to become the saisi hérédital of the debtor’s real property. At this stage, the debtor loses ownership of the property and the creditor who has obtained the interim vesting order acquires ownership but holds it as trustee for the claimants against the real property.[42]

35     The creditor who has acquired an interim vesting order then opens a register at the Greffe of claims against the debtor’s real property. Once the register is closed, the creditors who have registered their claims are summoned to appear before a Commissioner of the Court who marshals their claims in the order of registration and produces a report. At the next sitting of the Royal Court en Plaids d’Héritage (or a later sitting, if the Commissioner so decides) the creditor who has obtained the interim vesting order tables a cause against each of the other creditors listed in the Commissioner’s report requiring him to declare whether or not he elects to have the real property of the debtor vested in him subject to assuming liability for all claims ranking in priority to his own. Each cause is read in inverse order of priority, so that the last to register is offered the property first, subject to paying off all the claims in priority to his own. If that creditor declines to take the property it is offered to the next to last, and so on. The person who ultimately elects to take the property has it vested in him by virtue of a final vesting order. In saisie proceedings before 1952 that person was described as the saisi proprietaire.[43]

36     Gallienne makes it clear that the saisi mobilier was entitled to let the property of his debtor but that, having become saisi hérédital, he was obliged to let it. The procedure involved the making of an application to the court for permission to let the property (which appears to have been granted automatically) and the publication of notices of the intention to let the property. At this stage, a person wishing to oppose the letting, typically an existing tenant of the debtor, could do so, and the matter was referred to the Court for a decision. Typically, it appears that the Court would support the opposition of the existing tenant. Gallienne states[44] that, in such cases, the contractual tenancy was converted into a judicial tenancy -

“thenceforth the tenancy changes its nature and the contract formed between the saisi[45] and the tenant becomes a judicial tenancy in place of a tenancy by agreement.”[46]

37     Gallienne also makes it clear that the Court was at liberty to reduce the term of the lease, referring to a case heard on 21st August 1839 where a lease for fifteen years (two of which had already elapsed) was reduced to three years. It also appears that the Court could nullify a lease in its entirety. Gallienne refers to two cases in this context, the first being that of the saisie of William Mitchell, where a Mr Baker opposed a proposed letting by the saisi on the basis that he had a nine year lease of the premises. The lease was “cassé en entier”.[47] The other case referred to is the saisie of Jean Jehan during which, on 24th February 1787, the Court annulled a lease made between the debtor and Guillaume Sarchet for a term of twelve years. However, in this case, it is clear that the Court found that Jehan had entered into the lease with a view to defrauding his creditors. It is not clear whether the Court made such a finding in the case of the Mitchell saisie.  Gallienne goes on to state, with regard to the rent agreed between a debtor and his tenant, that the Court has power, upon the tenant opposing the saisi’s proposal to let the property, to reduce it, or even to annul the lease if the rent is “trouvé vile”.[48]

38     There is another, less well known, work from the nineteenth century which deals with saisie, Jean Jeremie’s “Traité sur la Saisie Mobilière et la Renonciation”, published in 1815.  Jeremie recites a similar procedure to that outlined in Gallienne, namely that the saisi can seek to let the debtor’s property but that this can be opposed by an existing tenant of the debtor. Jean Jeremie does not refer to the Court’s ability to reduce the term of the tenant’s lease nor to increase the rent payable but simply states that -

“If there is no appearance of fraud in the leases made by the debtor, the Court grants the application of those opposing [the proposed letting], who thenceforth become tenants of the saisi”.[49]

39     However, Jeremie adds to this a footnote, referring to Pothier’s Traité de procédure civile et criminelle[50] -

“…where the author clearly establishes that it is by a temperance of equity[51] that one converts a tenancy by agreement into a judicial tenancy, the creditor taking saisie proceedings, whom one supposes always to be a creditor with his debt charged on the land, not being in any way bound by the personal obligations of the debtor”.[52]

40     It is clear from this that, in Jeremie’s view at least, a tenant of a debtor whose land was the subject of saisie proceedings had no right, in the sense of a right in rem, in the land demised to him, but simply a right to be treated fairly and to continue with his tenancy in circumstances where the land had, in any event, to be let during saisie proceedings which were destined to last several years. It would have been irrational, where premises were to be let, to evict the existing tenant simply to install a new one.

41     Before turning to the modern case law relating to the status of tenants of a debtor who is the subject of saisie proceedings, it is worth mentioning passages from two other books published during the 19th century. The first is called “The Channel Islands”.[53] The chapter of this book entitled “Constitution and laws” contains the following passage[54] -

“…in the event of a lease being granted, if the lessee[55] should afterwards become insolvent, the creditors can dispossess the tenant notwithstanding the covenant in the lease.”

42     Whilst this passage has little authoritative value, it seems unlikely that the authors would have pulled this statement out of thin air.

43     Of perhaps greater interest is the Guernsey Almanack for 1870.[56] This includes a passage headed “Law memorandum for the information of strangers”[57] which includes the following passage[58] -

“…caution should be used in taking property on lease for a term of years, for should such property, through the insolvency of the landlord, be seized by his (the landlord’s) creditors, and these should find it to their advantage to dispossess the tenant, they can restrict the said tenant’s further occupancy to the term of three years, notwithstanding that he may have expended much money in improvements.”

44     The memorandum bears all the hallmarks of having been written by someone legally qualified.[59] It is of particular interest because of the reference to the term of a tenant’s occupation being limited to three years, the same period as the maximum period during which the Court would give permission to let during saisie proceedings. It is also interesting that the author felt it appropriate to include this passage in a very short memorandum, of just over one page, addressed to persons not familiar with the way things worked in Guernsey, which suggests that the author felt that this was an area of Guernsey law which differed from English law[60] sufficiently to make it worth highlighting.

45     In the context of modern saisie proceedings, it is clear that a person who has obtained either a preliminary vesting order or an interim vesting order may let the debtor’s property,[61] the only substantive difference between the procedures for letting before and after 1952 being that since 1952 it has no longer been necessary to apply to the Court separately for permission to let the property, such permission being deemed to be granted by the making of the preliminary vesting order or interim vesting order.

46     If a creditor who had instituted saisie proceedings wished to let the property, then the procedure, in terms of the publication of notices and the putting forward of opposition to the letting on the part of any existing tenant of the property, would be substantively the same as it was before 1952. However, no creditor has sought to invoke this procedure for many years. In the days of Gallienne and Jean Jeremie saisie was a lengthy procedure which lasted several years. Nowadays, using the shortened procedure contained in the 1952 Order, it typically takes about six months for a final vesting order to be obtained.  It was clearly in the interests of all of the creditors of a debtor that his property be let in circumstances where, if it was not, it would remain unoccupied, and earning no income, for a period of several years; hence the obligation on the saisi hérédital before 1952 to let the property and to hold the rent received as trustee for the claimants against the property generally.[62] Nowadays, there is clearly no obligation on the creditor who has obtained an interim vesting order to let the property. To do so would generally not be in the best interests of the creditors. Typically, it is in the best interests of whoever eventually obtains a final vesting order in relation to a property that it be vacant when, or shortly after, the order is obtained.

47     The only two cases heard since 1952 of which the author is aware which considered the status of a tenant of a debtor after saisie proceedings in relation to the debtor had been commenced were both heard summarily, and neither is reported.  They are perhaps of limited authority. The first is Barclays Bank plc v Kirk-Davies.[63] In that case the plaintiff had obtained a final vesting order in respect of the real property of Freehold and Leasehold Mortgage Company (C.I.) Limited and sought to evict the defendant, who claimed to have had a verbal tenancy agreement with Freehold and Leasehold Mortgage Company (C.I.) Limited in respect of part of its property. The plaintiff sought to evict the defendant as a mere occupier. Her counsel argued that she should be treated as a tenant. The Court clearly found as a matter of fact that there was a verbal tenancy agreement between the debtor in the saisie proceedings and the defendant in the eviction proceedings. In those circumstances the Court dismissed the application for an eviction, on the basis that the defendant should be treated as a tenant, rather than as an occupier. According to the report of the case in the Guernsey Evening Press[64] Deputy Bailiff Dorey “advised the Court that if [the defendant] was found to be a tenant, the bank would have to proceed in a different way to evict her. He told the Jurats that he could see no reason why [the defendant’s] status should have changed when the bank took over the property”.

48     It is not clear, either from the Act of Court or the report in the Guernsey Evening Press, whether the finding of the Court was that the verbal tenancy pre-dated the charge given by Leasehold Mortgage Company (C.I.) Limited in favour of the plaintiff. It seems likely that this issue was not addressed. The case can be interpreted in two different ways. First, it could simply support Deputy Bailiff Day’s conclusion in Selwood v Madeley that a tenancy entered into before a sale of the demised property or the creation of a charge over the property was binding on the purchaser or the holder of the charge without any requirement of formality or registration. Alternatively, it could simply be viewed as giving an extended interpretation to the word “tenant” as it is used in the “Law Giving the Court increased power to stay execution in actions for eviction” of 1946. That statute gives the Court power to suspend an eviction “during such time and upon such conditions as the Court may deem reasonable”[65] where the person who is the subject of the eviction proceedings is a “tenant”. It is very clear that the “tenant” for these purposes includes someone who is, strictly speaking, no longer a tenant, because the tenancy has expired. It may be that, in referring to “the defendant’s status” being unaffected in Barclays Bank plc v Kirk-Davies the Deputy Bailiff was simply saying that, for the purposes of the 1946 Law, the word “tenant” should be given a wide interpretation so as to include a tenant of a predecessor in title to the current owner. Of these two interpretations, the second appears to be more in keeping with the other authorities than the first.

49     The other case of relevance is Hanson Bank Ltd. v Jersey and Guernsey Holidays Ltd.[66] The plaintiff had obtained an interim vesting order in respect of the real property of Le Douit Flats Ltd. The shares of Jersey and Guernsey Holidays Ltd. were owned by the same individual as owned the shares of Le Douits Flats Ltd. Le Douit Flats Ltd. had let the whole of its property to Jersey and Guernsey Holidays Ltd. for a term of 15 years at what was apparently a market rent but with provision in the lease to the effect that the rent should be payable not to the landlord but to another company, Milvus Holdings Ltd., the shares of which were also owned by the same individual. The evidence was that no payment had ever been made under the lease; rent due was simply treated as a debt due by the tenant to Milvus Holdings Ltd. The lease had been entered into after the date on which Le Douit Flats Ltd. became indebted to the plaintiff. The effect of the stipulation in the lease that the rent should be payable to a third party was that the plaintiff could not appropriate the rent towards the satisfaction of its debt, as the rent was due to a third party. The result of this, without the intervention of the Court, was to leave the plaintiff in a position where the value of the freehold in respect of which it had security was very significantly reduced.

50     The plaintiff alleged that the lease had been entered into fraudulently for the purpose of defeating the claims of the creditors of Le Douit Flats Ltd. The defendant denied this. The plaintiff conceded that, unless fraud could be shown, the plaintiff would be bound by the terms of the lease.[67] The Court found that the high standard of proof necessary to prove fraud had not been met and refused to evict the defendant, although the Court did require that an undertaking be given by counsel for the defendant to the effect that thereafter the rent due under the lease would be payable to the plaintiff, rather than to the other company by which it was stipulated to be receivable under the terms of the lease.

51     By way of conclusion to this section, all that is clear is that the law in relation to the position of a tenant upon the forced expropriation of the property rented by him is unclear. In the days when saisie proceedings took several years to complete, the Court would permit an existing tenant of the debtor to remain in situ. However, what is clear is that the Court would interfere with the term of a tenancy and the rent payable where it felt that it was appropriate to do so. It is also clear that the tenant’s favoured position in a saisie arose by virtue of a “temperance of equity” rather than by virtue of any right which the tenant had in the property itself.

52     There appears to be no good reason, in circumstances where saisie proceedings can now be completed in a considerably shorter period of time, and it is generally in the interests of creditors that the debtor’s property should be vacant at the end of the proceedings, why the same “temperance of equity” should be applied in modern saisie proceedings.

Transfers on death

53     There appears to be almost no direct authority on the subject of whether the obligations of a landlord under a lease of immoveable property are binding on the heirs to the relevant property on the death of the landlord. The only text of relevance which the author has been able to find is an exchange of correspondence between Ambrose Sherwill (later to become Bailiff of Guernsey) and Dame Sibyl Hathaway, the Dame of Sark, in relation to the question of whether long leases of land in Sark were valid. Much of this discussion revolved around matters peculiar to Sark, but in a letter dated 28th February 1928 Advocate Sherwill wrote that -

“….in Guernsey, the country people have an expression “mort et mariage cassent tout louage”[68] but there is abundant proof that as a general maxim that is quite incorrect. It is merely true in the case of a lease by an “usufruitier”[69] holding for life or until remarriage. I think according to our law and custom a lease made by the owner of land even for a long period is valid and must be respected by the heirs of such owner.”

54     This statement appears to be rational and in keeping with generally accepted legal theory. Liabilities incurred by an individual generally become liabilities of his heirs following his death. Admittedly, the general rule is that such liabilities should be borne out of the moveable property of the deceased.[70] However, it would not make sense for a lease entered into by a landlord before his death but, in relation to the term of the lease un-expired at his death, to be performed after his death, not to pass to the heir who inherits the demised property, as it is only that heir who can perform those obligations.

System of registration of leases

55     It is worth considering the system of registration of leases which has developed in Guernsey. It is relatively unusual for leases of residential property to be registered. However, many leases of commercial property are registered.

56     Deputy Bailiff Day, in Selwood v Madeley, suggested that the practice of registering leases had rarely, if ever, been used in the days of James Gallienne, that is during the early to middle part of the 18th century. That may be so, but it is certainly not a modern practice. A lease of part of the Oatlands Estate in St. Sampson’s between Arthur Dorey and Thomas Robin Ogier for a term of five, seven or ten years (at the option of the tenant) was registered  at the Greffe on 30th September 1905, having been consented to devant justice on 29th September.[71] It seems unlikely that this was the first lease ever to be registered.[72]

57     If we accept that leases have been registered for some time, the question arises as to why the practice arose. If Deputy Bailiff Day’s finding in Selwood v Madeley, to the effect that any lease, registered or unregistered is, in effect, binding on the successors in title to the original landlord, there would be no need for leases to be registered.

58     The current system of registration of documents, and the effects of registration in terms of creating priority as between competing claimants, derives from an Ordinance made on 3rd October 1631,[73] although it is clear from both the text of this Ordinance and the fact that there are documents registered at the Greffe which pre-date it that a facility for registration had been provided before that date.[74] The material part of the Ordinance states that -

“…it is ordained that henceforth all sales, contracts, transfers, exchanges, variations and charges over immovable property, of whatever nature, and similarly all mobiliary obligations, charges and contracts shall be registered at the Greffe by the party who holds the contract within two months after the passing of the same, in default of which that party shall lose the preference which he otherwise would have had over subsequent acquirors and creditors who register their contracts, who are from the present time declared to have preference over those who have neglected the registration required by the present Ordinance…”[75]

59     An amending Ordinance of 1724,[76] which refers to the term of two months specified in the 1631 Ordinance but erroneously refers to it being dated 3rd October 1681,[77] provides that -

“in the future all obligations and transactions shall only have priority from the date on which they are left at the Greffe”.[78]

60     It is submitted that these Ordinances are both still in force.[79] Without them, the system of registration of documents in Guernsey would exist in a vacuum, as there is no other legislation which deals with the effects of registration.

61     These two Ordinances, read together, can only be interpreted in one way: if someone has a right in property but fails to register the document which creates that right, anyone subsequently registering a document which creates a right (or transfers ownership) in that property will take free of the right created by the unregistered document.[80] It is extremely difficult to see, in the light of these Ordinances, how the Deputy Bailiff’s conclusion in Selwood v Madeley can be sustained.[81] Even if, prior to these Ordinances being made, a tenancy created without formality created a right in rem in the demised property (which, from the authorities referred to above, does not appear to be the case) then, after the making of these Ordinances, if the document creating the tenancy was not registered, anyone registering a document whereby the property, or an interest in it, was subsequently acquired would take the property, or interest, free from the tenancy. A fortiori, if a tenancy was created after a charge over land had been created and the document creating it had been registered, the owner of the charge, if he came, as a result of saisie proceedings, to be the owner of the property, would not take subject to the tenancy.[82]

62     Some guidance as to the thinking of practitioners in the early part of the 20th century in connection with registration of leases may again be found in the exchange of correspondence between Ambrose Sherwill and Dame Sibyl Hathaway.[83] In his letter to Dame Sibyl, Advocate Sherwill wrote that -

“the object of registering a lease is to protect the tenant against the possibility of eviction by a purchaser who has not assented to the lease….”

63     It seems clear that, at the time that this letter was written, it was perceived[84] as being necessary to register a lease in order to protect the tenant against the original landlord’s successors in title.

64     The current system of registering leases is worth considering. Unlike most other documents which are registered, leases are almost never consented to by the parties to them devant justice. They are simply executed by the parties without formality. The procedure followed by someone seeking to register a lease following its execution is to apply to the Royal Court for permission to register. Leases typically contain a provision to the effect that either party may apply to the Court ex parte to register a copy of the lease on the public records.[85] Following the grant of permission (which is in practice automatic provided that the applicant is a party to the lease and the lease contains a provision to the effect referred to above), the party who has applied to the Court registers the lease at the Greffe.

65     If we accept that the purpose of registering a lease is to create a charge over the demised property, we need to consider the formalities necessary for creating a charge, and whether the present system of registering leases complies with those formalities.

66     There are three types of charge: (1) the legal charge[86] (2) the conventional (in the French sense of convention or agreement) charge[87] and (3) the judicial charge.[88] The first of these is a charge created by operation of law, and is outside the scope of this article.[89] The second is a charge created by agreement between the parties, a typical example being a “bond” to which a borrower consents to secure payment of monies borrowed. The third is a charge created by judicial act. Where a person sues another and obtains judgment, the successful plaintiff can register the Act of Court recording the judgment, and thereby obtains a charge over the property of the defendant.

67     It seems that, in order for a conventional charge to be created (1) the document creating it must be consented to devant justice (2) the document must contain words which make clear the intention to charge the obligation contained or referred to in the document[90] and (3) the document creating the charge must be registered. However, it is equally clear that the first two of these requirements do not apply to a judicial charge; all that is required is that an Act of Court is obtained and registered. The effect of this is, without more, to create a charge.[91]

68     Clearly, the procedure which is currently followed for the registration of leases is insufficient to create a conventional charge, as it does not involve the lease being consented to devant justice, and leases do not contain any words (other than the stipulation that either party may apply to the Court for permission to register) which indicate an intention that the obligations created by them should form a charge over the obligor’s property.[92] However, it appears that the effect of the process of applying to the Court for permission to register, of that permission being granted and the lease thereafter being registered is to create a judicial charge over the property demised.[93]

Conclusion

69     Plainly, the law in this area is not entirely clear, and it would undoubtedly benefit from statutory reform, or at least clarification. The author’s conclusion is that, unless the document whereby a tenancy is created is registered[94] so as to create a charge, it will not create any right in rem in the demised property and that, with respect, the conclusion reached by the Deputy Bailiff in Selwood   v Madeley is wrong. Most of the authorities of significance suggest that a lease must form a charge over property in order to create a right in rem in relation to that property. The only authorities giving any indication to the contrary, other than the modern cases where the Court does not appear to have had all the authorities put before it, and a handful of 18th century cases decided by Jurats without legal qualification, are those relating to saisie proceedings. It is clear that, in the context of saisie, where property was to be let for the duration of the proceedings in any event, the Court would substitute a judicial tenancy for the conventional tenancy between the debtor and his tenant. It is, however, also clear from the works of Jean Jeremie that this substitution occurred as a result of the Court applying a “tempérament d’equité”. There appears to be no reason why the Court should do the same in modern saisie proceedings, which are considerably shorter than they were in the days of Gallienne and Jean Jeremie and there are few circumstances where it would be appropriate to let the debtor’s property during the course of the proceedings.

70     If the author’s conclusion is correct, what practical difficulties arise? In the context of a tenancy of property which is subsequently sold, the agreement creating the tenancy will not, unless the lease has been registered prior to the sale (the permission of the Court to register having first been obtained or the lease having been executed devant justice), be binding as between the tenant and the new owner, even where the lease creating the tenancy is expressed as binding the landlord’s successors in title and where, in the conveyance of the property, the usual wording is included whereby the purchaser is expressed as being entitled to possession of the property immediately but “subject to the existing tenancy”, as neither of these devices is sufficient to transfer the burden of the original landlord’s obligations unless they are charged against the property.

71     The lack of a binding agreement between the current owner and the tenant may not create  much difficulty in practice. In the case of a periodic tenancy, if the new owner accepts rent from the tenant, a new periodic tenancy will be created between the new owner and the tenant. Even if a new tenancy is not created, the new owner may not, if possession has been expressed in the conveyance as being given “subject to the existing tenancy” be in a position to evict the tenant. It is arguable that the new owner can only evict if he has a current right to possession which, arguably, he has not, because his right is subject to the existing tenancy. In effect, it can be argued, where such words are used, that the right to possession is retained by the original landlord, so as to enable him to perform his obligation under the tenancy agreement to which he is a party. The original landlord cannot evict the tenant because he remains bound by the tenancy agreement.[95]

72     The conclusion that an un-registered lease creates no right in rem has perhaps more practical effect in the context of saisie proceedings. It is submitted that there is no reason whatever why a creditor who takes saisie proceedings, and who has a charge over the property of his debtor, should, if he acquires ownership of the property at the termination of the proceedings, take it subject to a tenancy created by an agreement between the debtor and a tenant unless either (1) the document creating the tenancy was registered before the charge of the creditor or (2) it was registered after the charge of the creditor, but the creditor has agreed that the document creating the tenancy will rank prior to, and have preference over, his charge. Unless one of these conditions is satisfied, it is submitted that the creditor in whom property is vested as a result of saisie proceedings has the right to evict the tenant, no matter how long the un-expired term of his tenancy and no matter what premium he may have paid when entering into the lease, albeit that it seems appropriate, in any such proceedings, for the tenant to be afforded that status for the purpose of the proceedings, so as to invoke the Court’s unlimited jurisdiction to stay any eviction order.

74     The lesson from this is clear. Anyone entering into a valuable tenancy should both register his lease and (before entering into the proposed lease) procure the agreement of the holder of any charge registered prior to the registration of the lease to the effect that the lease will rank prior to, and have preference over, the prior registered charge.

Advocate Simon Howitt is a partner of Babbe Le Pelley Tostevin, Guernsey.

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