Hollington v Rhodes

Hollington v Rhodes [1951] 2 All E.R. 578

ESTATE CONTRACTS – LAND CHARGES – UNDERLEASES – GRANT OF HEADLEASE

Facts

In 1945 a draft underlease for a fixed term of seven years was agreed between the claimants (C) and the defendants (D), although D failed to complete their counterpart to the estate contract. In 1947 D sold the head lease to a third party, with notice that C held an underlease for seven years. The third party served a notice to quit on C, on the grounds that C were yearly tenants only, and did not enjoy the benefit of a fixed term. C brought an action against D for breach of contract.

Issues

The facts of Hollington raised several issues, namely: Whether or not an estate contract which had not been registered as a land charge would bind a purchaser with notice; whether a vendor who contracts to grant an underlease but sells before completion is liable for breach of contract; whether there is a duty to register an estate contract so as to preclude any action for breach of contract.

Decision/Outcome

An estate contract could not bind a purchaser unless registered, even where a purchaser has actual notice of it; s.13(2) Land Charges Act 1925 and s.199(1)(i) Law of Property Act 1925 applying. However, the fact that such a contract was not registered would not prevent an action for breach of contract where the headlessor had sold the headlease prior to completion. In the circumstances, the court found that no such contract existed between C and D but, if it had, D would have been in breach and C would have been entitled to substantial damages.