Ensure any Property Deals are Put in Writing

Entering into property deals without legal advice is like trying to run before you can walk and can lead to untold heartache and financial loss. That was certainly so in the case of a man who invested a six-figure sum in refurbishing a country cottage and barn for the holiday letting market, although he had no long-term security of tenure.

The man believed that he had spotted a business opportunity after coming across the property, which was in a derelict condition. Without taking professional advice, he agreed to lease it from the farmer who owned it for a fixed term of 15 years at a rent of £400 per annum. There was, however, no evidence that the farmer had signed the lease agreement and it was thus of no legal effect.

However, the man and the farmer continued to treat the tenancy as valid and, after the expiry of the 15-year term, the man remained in possession for a further six years at an increased annual rent of £1,000. He spent over £200,000 on renovating the property and, by his efforts, increased its value from at most £190,000 to about £375,000.

After the farmer’s son, to whom the property’s freehold had by then been transferred, served him with notice to quit, the man launched proceedings. Amongst other things, he sought declarations that he had an equitable interest in the property and was entitled to a new lease by virtue of the Agricultural Holdings Act 1986.

Rejecting the man’s arguments, however, the Court found that the property was not an agricultural holding. There had also never been a common understanding that he would be able to retain possession of the property indefinitely. Neither the farmer nor his son had given him any promise or assurance to that effect.

Given the insecurity of his position, the man had invested in the property at his own risk and, if he had failed to recoup his expenditure by subletting it to tourists, that was because he had made a bad bargain. The Court’s ruling opened the way for the farmer’s son to seek possession of the property.

Smyth-Tyrrell & Anr v Bowden