Regency Villas Title Ltd and others v Diamond Resorts Ltd and others [2018] UKSC 57

“In my view this court should affirm the lead given by the principled analysis of the Court of Appeal in Re Ellenborough Park, by a clear statement that the grant of purely recreational (including sporting) rights over land which genuinely accommodate adjacent land may be the subject matter of an easement, provided always that they satisfy the four well-settled conditions [derived from Re Ellenborough Park] which I have described.

…

Whatever may have been the attitude in the past to ‘mere recreation or amusement’, recreational and sporting activity of the type exemplified by the facilities at Broome Park is so clearly a beneficial part of modern life that the common law should support structures which promote and encourage it, rather than treat it as devoid of practical utility or benefit.”

Lord Briggs (paragraph 81)

The Supreme Court handed down its judgment in Regency Villas Title Ltd and others v Diamond Resorts Ltd and others on 14 November 2018. The case gave the Court its first opportunity to consider whether the right to use sporting and recreational facilities can be an easement. By a majority of 4:1 it was held that the right to use sporting and recreational facilities could in fact be an easement, provided the four requirements set down in Re Ellenborough Park [1956] Ch 131were met (Lord Carnwath dissenting).

The facts of the case, as well as a detailed consideration of the Court of Appeal decision, can be found here.

Supreme Court

 Should recreational easements be recognised?

Prior to Regency Villas, it was settled law that the right to use a land in such a way that it became a communal garden could amount to an easement (Re Ellenborough Park). However, the rights claimed in Regency Villas went above and beyond those claimed in Re Ellenborough Park. Lord Briggs, with whom Lady Hale, Lord Kerr and Lord Sumption agreed, noted, at paragraph 75 of the judgment, that there were three reasons why Regency Villas should be treated as breaking new ground. First, the nature and extent of the facilities in Regency Villaswas much greater than that in Re Ellenborough Park. Second, the facilities in Re Ellenborough Park were available to a small pool of people, whereas in Regency Villas the facilities were open to three groups of timeshare owners and the paying public. Third, the cost of maintaining the facilities in Re Ellenborough Park was shared amongst the owners of the dominant tenement, but in Regency Villas it was expected that the burden would fall on the owner of the servient tenement. Furthermore, in a previous blog post it was argued that the presence of a covenant preventing any building on the land in Re Ellenborough Park, and the consequent preservation of the land for its use as a garden, should also be treated as a factor distinguishing that case from Regency Villas.

Many arguments can be made both for and against the recognition of sporting and recreational rights as easements, some of which are summarised by Lord Briggs at paragraphs 76-80 of his judgment. Having considered the arguments presented, his Lordship was sympathetic to the view that the common law should accommodate new types of property ownership and ways of enjoying and using land, whilst also being alert to the fact that recreational easements have become widely recognised in the common law world. Consequently, his Lordship took the view that sporting and recreational rights can, in principle, be the subject matter of an easement, provided that the four well-established requirements found in Re Ellenborough Park are met.

The Re Ellenborough Park requirements and recreational rights

Two of the four Re Ellenborough Park requirements are contentious in the context of recreational easements: the requirement that the right must accommodate the dominant tenement, and that a right cannot amount to an easement unless it is capable of forming the subject matter of a grant.

For a right to accommodate a dominant tenement it must be of some practical importance to the benefitted land in the sense that it is necessary for the better enjoyment of that land. In essence, the right must give the dominant tenement a benefit or utility. To that end, two points are of particular note. First, easements generally serve or accommodate the use and enjoyment of the land by human beings, with the notable exception of easements of support, which do benefit the land itself (paragraph 39). Second, recreational easements are particularly contentious as they are often enjoyed for their own sake, rather than as a means to some end that directly benefits the use of the dominant tenement (paragraph 44).

In reaching their decision, the majority appeared to place great weight on the fact that the dominant tenement consisted of timeshare units typically occupied for holidays and by those seeking recreation and relaxation. Given that context, the use of the recreational facilities would be of utility and benefit to the dominant tenement (paragraph 53). It is also immaterial that the recreational rights over the servient tenement are likely to be the primary reason why persons are attracted to acquiring the dominant tenement (paragraph 57).

The requirement that an easement must be capable of forming the subject matter of a grant is an umbrella for many miscellaneous requirements for a valid easement. Of those miscellaneous requirements, the ouster principle is of particular concern in the context of recreational easements. Specifically, the concern in Regency Villas was that, if the servient owner failed to maintain the facilities, and the dominant owners were forced to step-in, the servient owner may be deprived of possession and control of the land.

Factually, it was held that, even if the dominant owners did step in, the test for the ouster principle would not be met. Both the majority and Lord Carnwath went further and held that ouster should not be tested against the step-in rights that may be exercised by the dominant owners, but against the against the expectations of the parties at the time of the grant as to who would maintain and control the servient tenement (paragraphs 64 and 101). Therefore, as the servient owners were understood to be responsible for the maintenance and control of the servient tenement, the grant of rights to use the recreational facilities in Regency Villas did not amount to an ouster of the servient owner.

Finally, the miscellaneous requirement that an easement should not impose a positive burden on the servient owner was also held not to be in issue in Regency Villas. Whilst it was understood that the servient owner would maintain the facilities, there was no legal obligation enforceable by the dominant owner that it do so, and the easements claimed did not fall foul of the requirement (paragraphs 69-70).

Construction of the grant

The Court of Appeal took narrower interpretation of the grant than the trial judge. In particular, the Court of Appeal dissected the grant and treated each facility as the subject of a separate grant of rights. Furthermore, the grant was only extended to those facilities in place or contemplated at the time the grant was made, or to those later facilities that were constructed as a direct substitution.

The Supreme Court instead treated the grant as a single comprehensive right to use a complex of facilities (paragraph 26). Furthermore, it was a grant to use the facilities that were located on the servient tenement from time to time, and was not restricted to the facilities in existence or contemplated at the time of the grant. Finally, as the grant was immediately effective in enabling the dominant owners to use the facilities located on the land at that time, the grant would not be void for perpetuity, notwithstanding that the facilities located on the land may change (paragraph 29).

Comment

 Addressing the Court of Appeal’s approach

In a previous blog post I criticised the Court of Appeal for distinguishing between the indoor and outdoor recreational facilities, and for finding that the use of the facilities on the ground floor and basement of the Mansion House could not be subject to an easement. By taking the approach that the grant is a single comprehensive right to use all of the facilities, the Supreme Court has not followed the Court of Appeal, and does not engage in the same value judgment concerning the utility and benefit of indoor pursuits as compared to outdoor ones.

Furthermore, the Supreme Court drew on authority and held that an easement may be granted even if it involves the use of structures, fixtures or chattels on the servient tenement (paragraph 67). The Court of Appeal had discounted the ground floor and basement facilities as being the subject of an easement as effective use of those spaces relied on the presence of chattels (again, this was apparently distinguishable from the outdoor facilities, such as the tennis courts, which seemed less than convincing). However, the Supreme Court held that the only relevant consideration was that there was no legal obligation on the servient owner to manage or maintain those structures, fixtures and chattels. As no such positive obligation existed, the right to use all of the sporting and recreational facilities could take effect as an easement.

My suggestion is that the approach taken by the Supreme Court is far more satisfactory than that taken by the Court of Appeal; there should have been no distinction made between the indoor and outdoor facilities, and the fixation with the use of chattels on the land led the Court of Appeal astray in its decision.

Wider consequences of Regency Villas

As a general principle, the approval of recreational easements may be of great importance.It is government policy to pursue a programme of high-density house building, especially in urban areas, to make the most efficient use of land in meeting the current housing need (see the Department for Communities and Local Government, Fixing our Broken Housing Market (February 2017) at page 32). Maximising housing density in this way will likely be at the expense of the amenity space attached to each housing unit, and recreational easements could prove useful in mitigating the shortfall in private amenity space.

The limits on the extension of Re Ellenborough Park in Regency Villas will only be understood fully once the courts have determined a case in which the rights claimed are similar to those in Regency Villas, but where the dominant tenement is not land that is primarily used for the purposes of holidays and recreation itself. The law as set down in Re Ellenborough Park would have been sufficient to secure rights over outdoor spaces so as to transform them into communal gardens. Regency Villas goes much further than Re Ellenborough Park, and allows for the grant of proprietary rights over facilities that would unlikely be labelled as a ‘necessity’, and may even be labelled as ‘luxuries’. It will be interesting to see how the courts treat such grants where the dominant tenement is purely residential, and especially where it is not located in a luxury development.

 Better mechanisms

There are better mechanisms that could be used to secure the recreational rights claimed in Regency Villas, and which could also impose maintenance obligations on the servient owners. Indeed, other timeshare owners in the same complex benefitted from covenants in a leasehold structure that secured their rights to use the facilities, and even enabled them to compel the servient owners to construct a new swimming pool when the original pool was filled in (paragraph 80). Perhaps the practical lesson to be learned from Regency Villas is that conveyancers should look outside of the law of freehold covenants and easements to secure rights and obligations of the sort claimed in the case.

Law of Property Act 1925, s84

Finally, the recognition of sporting or recreational rights as easements further pushes the case for the extension of the Law of Property Act 1925, s84 to cover the modification or discharge of easements (as proposed by the Law Commission). An easement attached to freehold land is indeterminate in length and, as Lord Briggs noted at paragraph 79 of the judgment, would likely burden the servient land long after the leisure complex had outlived its natural life. Therefore, it would be desirable for there to be a mechanism by which the easement may be modified or discharged to reflect the reality on the ground when the timeshare and leisure complex arrangement comes to an end.

On the whole, recreational easements are likely to be a significant burden on land; they will likely convey the right to use large portions of land for a wide range of activities. Furthermore, as Lord Briggs suggests, as society and practical realities change, the rights conferred will likely outlive their use. It is foreseeable that there may come a time when the rights prevent the servient tenement being put to reasonable use, notwithstanding that they are no longer exercised. As such, where the rights cease to be exercised, but the test for the abandonment of an easement is not met (which is also subject to proposals for reform by the Law Commission), a statutory mechanism such as section 84 would be useful; the owner of the servient tenement could discharge the easement and put the land to good use, without the threat of liability for interference with an easement.