2.1.4.2. Privileges and no-rights, and powers and liabilities

What we mean by ‘property’ 23

is no: an important point for property lawyers is that the two do not necessarily co-exist. This enables us to understand what happens when a restriction is imposed on the inherent ‘right’ to alienate a property interest. As we noted in Chapter 1, most private property interests are alienable – in fact alienability is such a common feature of private property interests that it is tempting (but wrong, as we see in Chapter 5) to regard it as a necessary criterion for a private property interest. The holder of an alienable property interest can, however, contract not to alienate it. If she does so, she loses the privilege of alienating the interest as against the person entitled to enforce the contract (in the sense that that person now has the right that she should not alienate, and she owes a duty to that person not to alienate). Nevertheless, she retains the power to do so (in the sense that, if she nevertheless goes ahead and alienates, she will succeed in extinguishing her own interest in the thing and vesting a corresponding interest in the transferee).

This is illustrated by contractual restrictions on a tenant’s right to transfer the lease. Suppose L, the owner of a flat, wants to grant a ten-year lease of the flat to T, at a rent of £10,000 per year. The interest that T would acquire in the flat – a tenyear lease – is a property interest and it is inherently alienable. In other words, T would have the privilege of transferring it to anyone she wants at any time (no one would have a right that she should not) and she would also have the power to do so (she would have the ability, by entering into a deed of transfer, to extinguish her own interest in the flat and vest a corresponding interest in any transferee). However, L will probably not be very happy with that state of affairs. He is willing to give up possession of the flat to T for ten years because (having taken up references etc.) he is reasonably confident that she will pay the rent promptly and not wreck the flat. But he does not want to run the risk that she will transfer it to someone less trustworthy. So, in practice, L may well insist on making it a term of the lease (i.e. L and T will make a binding agreement, as part of the lease agreement) that T will not transfer the lease to anyone without first obtaining L’s consent. The effect of this is to remove T’s privilege to transfer as against L (L now has a right that T should not transfer the lease, and T has the correlative duty to L not to transfer). However, it has not affected her power to do so (because section 52 of the Law of Property Act 1925 says that a deed of transfer of a legal interest in land will operate to transfer that interest). If, therefore, notwithstanding this term in the lease, T goes ahead and enters into a deed of transfer with X, the transfer will be effective to pass the lease to X: X will now hold the lease and T will no longer do so. However, T’s duty not to transfer the lease will have been broken. One of the remedies that a landlord has if a duty imposed on a tenant is broken is to cancel the lease (by the process of forfeiture), and this can be done whether the lease is still held by the tenant who breached the duty or now held by an assignee. The effect of the unauthorised transfer to X will therefore be to give L the power to extinguish the lease by forfeiture (i.e. L will have the ability to alter X’s relation to the flat by extinguishing the lease interest in the flat now held by X, and also the ability to alter his, L’s, own legal relation to the flat by, in effect, taking back that interest).