Georgia Horrocks, Trainee Solicitor in Gateley’s Residential Development Unit, looks at how the recent Supreme Court decision in Regency Villas Title Ltd and Others v Diamond Resorts (Europe) Ltd and Another [2018] has confirmed that recreational rights can be classed as easements and can therefore be binding on successors in title.

The Facts

Part of the extensive estate of Broome Park, including Elham House, was sold in 1967. The remainder of Broome Park, including a mansion house, was acquired by Gulf Investments in 1979 and developed into a timeshare and leisure complex.

The complex consisted of 18 timeshare apartments within the upper floors of the mansion house and a number of sporting and leisure facilities within the lower floors and surrounding grounds, including a golf course and outdoor swimming pool. These timeshares were provided via a 35-year lease granted by Gulf Investments which included a right for the owners to the free and communal use of the facilities (the 1980 Lease). Gulf Investments covenanted to maintain as landlord.

Elham House and the surrounding areas were then acquired by Gulf Investments in 1980 for the development of a further timeshare complex. 26 apartments were developed, collectively known as Regency Villas.

The ownership of the timeshare properties in Elham House were dealt with by a freehold structure. On 11 December 1981 Regency Villas was sold to an associated company of Gulf Investments, which was sold the following day to Barclays Bank Trust Co Ltd (Barclays), who would hold Regency Villas on trust for the benefit of the incoming timeshare owners.

The 1981 Transfer granted to Barclays and “successors in title its lessees and occupiers from time to time” a number of rights, including the right “to use the swimming pool, golf course, squash courts, tennis courts, the ground and basement floor of the Broome Park Mansion House, gardens, and any other sporting or recreational facilities on the transferor’s adjoining estate”.

By 1981 the majority of the facilities listed had been constructed together with additional facilities. The facilities were also open to the public, who paid to use them. It was envisaged that these payments alone would fund the maintenance costs. However, by 2000 a number of the facilities had come into disrepair due to lack of investment. The swimming pool was filled, which breached the landlord’s covenants within the 1980 Lease, and so a new indoor pool was constructed within the mansion house. Other facilities were also eventually closed or demolished.

Regency Villas’ freehold owner occasionally made voluntary payments on behalf of the timeshare owners to the cost and upkeep of the facilities, under a reservation of rights.

The current case centres around Regency Villas and its timeshare owners claiming that they were entitled, under the easement granted within the 1981 Transfer, to use all of the facilities in the leisure park as they existed from time to time.

High Court and Court of Appeal Ruling

The High Court found in favour of Regency Villas, ruling that the right to use the facilities was granted as an easement.

The Court of Appeal upheld the decision but limited the easements to the facilities that existed at the time of the 1981 Transfer, and so did not extend to the new swimming pool (or any future facilities). The Court of Appeal also refused the new grant of an easement to use the indoor facilities because such areas could not provide use and benefit to Regency Villas or its occupiers without the chattels and services being provided.

Supreme Court Decision

The Supreme Court upheld the High Court judgment, ruling that the sporting and recreational facilities as a whole would be bound to undergo significant alterations during its business life to suit customer demand, and so the original 1981 easement was granted over any new facilities as well as those existing at the time of the transfer.

The Supreme Court used Re Ellenborough Park [1955] as the authority for ascertaining whether the rights granted were easements. Using the four-pronged test:

  1. There must be a dominant tenement (Regency Villas) and servient tenement (the mansion house and surrounding areas).
  2. The easement must accommodate (benefit) the dominant tenement. The recreational rights were held to be within the normal enjoyment of the dominant tenement, as timeshares are typically occupied by holiday goers seeking recreation, just as in Re Ellenborough Park, where the use of a communal garden was undoubtedly connected to the normal enjoyment of the houses. If the claimants were occupiers of houses attempting to enforce the recreational rights as an easement, the outcome may be different.
  3. The dominant and servient owners must be different persons.
  4. It must form the subject matter of a grant. The right had to be not so extensive as to oust the servient owner from the enjoyment or control of the servient land (ouster) – it was held that the timeshare owners were able to use the facilities without taking control of the leisure park, and so ouster did not apply. The right also could not require anything further than mere passivity – whilst there may be a commercial expectation to maintain the facilities, there was no legal obligation.

Conclusion

Leading judge Lord Briggs ruled that the common law “should accommodate itself to new types of property ownership and new ways of enjoying the use of land”. Recreational and sporting activities were so clearly a beneficial part of modern life and the use and enjoyment of timeshare apartments that the common law should support structures which encourage it.

The ruling is much more extensive than that in Re Ellenborough Park and confirms that the categories of easements are not closed. Owners of private leisure and sporting facilities should, therefore, be mindful of this new characteristic and ensure that maintenance costs are provided for, whilst always considering that each case will depend on its own facts.

This post was edited by Georgia Horrocks