Prudential Assurance v London Residuary Body

Legal Case Summary

Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386

Landlord and tenant; whether land held on yearly tenancy; whether agreement terminable by successor

Facts

A strip of land adjacent to a highway was sold to the council. The council leased the land back to the seller and the agreement stated the grant was to last until the council required the land for road widening purposes. The land was not so required. A notice to quit was served to recover possession of the land, and Prudential argued the notice was void because the land was not being recovered for road widening purposes.

Issues

The landlords argued the original agreement was void because it created a term which was of uncertain duration and such tenancies are invalid under the rule in Lace v Chantler [1944] KB 368. Since the tenants had gone into possession and were paying rent, a legal periodic tenancy had been created, and the landlords could terminate the tenancy after having given the tenants appropriate notice. The tenants argued the parties should be bound by contractual agreements they had freely entered. The original land owner was only willing to allow the council to take the freehold on the basis that he could continue to remain in occupation until it was required for road widening.

Decision/Outcome

The original agreement was void because it purported to grant the land for an indeterminate term. The tenants had gone into possession and paid rent and this had created a legal periodic tenancy. Periodic tenancies are saved from being of indeterminate duration because both parties can terminate the agreement on notice expiring at the end of each period. The landlord could, therefore, terminate the lease by giving notice.