Re Leeds and Bately Breweries and Bradburys Lease [1920] 2 Ch 548

Principle: An option to purchase the reversion contained in a lease is wholly

outside the relation of landlord and tenant, and, therefore, is not one of the terms of
the lease which is incorporated in a tenancy from year to year created by the tenant
holding over and paying rent after the expiry of the lease, and so is no longer
exercisable by a tenant who is so holding over.

Facts:

The Leeds and Batley Breweries, Ltd ( "the lessors") demised to the appellant,
William Bradbury (trading as A Bradbury & Co) certain premises, including a
brewery, for the term of seven years from 1 June 1903, at the rent and subject to
the covenants and stipulations contained in the underlease dated and made on 19
May 1903 .

Originally, the premises were vested to the lessors for a term of 999 years from 25
December 1886, and the underlease contained the following proviso:

"if the lessee shall be desirous of purchasing the unexpired residue of the
term of years granted in the said premises by the said indenture dated May
16, 1893 [being the original lease], subject to the lessees' covenants
reserved by and contained in the said indenture, at the price of 3,000
pounds, and shall at any time six calendar months before the determination
of this lease give to the lessors or their secretary or leave at their registered
offices aforesaid a notice in writing to that effect, then and in such case the
person giving or leaving such notice shall be the purchaser of the unexpired
residue of the said term subject as aforesaid at the price of 3,000 pounds as
from the date of such notice, subject to certain conditions as to the
completion of the purchase.

The appellant occupied the premises for the duration of the lease and was granted
an extension of the term for one year from 1 June 1910. After the termination of the
extended lease, the appellant became a tenant at sufferance by continuing his
possession of the premises and subsequently became as tenant from year to year
by paying rent.

On 1 May 1919, the lessors entered into a contract to sell the premises to the
respondents for the residue of the term. On 15 July 1919, the lessors by their agents
gave the plaintiff notice to quit the premises, which would take effect on 1 June
1920. However, on 12 November 1919, the appellant gave the lessors notice in
writing in order to exercise the option to purchase the unexpired residue of the term
of 999 years at the price of 3,000 pounds which was contained within the
underlease. He also served a copy of this notice on the respondents on 25
November 1919.
On the other hand, on 29 December 1919, the lessors by deed assigned the
premises for the residue of the term of 999 years to the respondents. Consequently,
the appellant called upon the lessors to give effect to the notice which he had
served on them, by assigning their interest to him. The lessors subsequently
refused and argued that the notice was ineffective and that the option to purchase
was not exercisable after the expiration of the underlease, or alternatively of the
extension thereof for twelve months, which was subsequently granted to him.

Issue: Whether in these circumstances the option to purchase subsisted, and

entitled the appellant to exercise it?

Judgment: Peterson J stated that : In my opinion the option in this case is a

matter which is wholly outside the relation of landlord and tenant, and
therefore is not one of the terms of the original tenancy on which the
lessee held the property when he became tenant from year to year. The
result, therefore, is that this option is not now exercisable.