41-60 Albert Palace Mansions (Freehold) Ltd v Craftrule Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 27 May 2010 |
| Neutral Citation | [2010] EWHC 1230 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CC/2009/PTA/0514 |
| Date | 27 May 2010 |
[2010] EWHC 1230 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Henderson
Case No: CC/2009/PTA/0514
Mr Kenneth Munro (instructed by Olswang) for the Appellant
Mr Philip Rainey (instructed by Butcher Burns) for the Respondent
Hearing date: 3 March 2010
Mr Justice Henderson:
Introduction
This appeal raises a short point of statutory construction about the meaning of the phrase “a self-contained part of a building” in sections 3 and 4 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”).
The question arises in the context of a claim to exercise the right to collective enfranchisement conferred on qualifying tenants of flats by section 1(1) of the 1993 Act. The premises specified in the initial notice served on the freeholder under section 13 consisted of 20 flats (numbers 41–60) forming part of a terrace known as Albert Palace Mansions, Lurline Gardens, London SW11. Subject to the point in issue on this appeal, it is common ground that flats 41–60 (referred to in the statement of facts agreed between the parties, and in the judgment below, as “the Property”) constituted a self-contained part of a building within the meaning of section 3, and that all the other conditions required for service of a valid initial notice were satisfied. The claimant company, 41–60 Albert Palace Mansions (Freehold) Ltd, is the nominee purchaser appointed to act on behalf of the participating tenants under section 15.
The only point taken by the defendant freeholder, Craftrule Ltd (“Craftrule”), in resisting the enfranchisement claim is that the Property comprises two parts, consisting of flats 41–50 and flats 51–60 respectively, each of which (as is also common ground) would itself qualify as a self-contained part of a building within the meaning of section 3, and could not be further sub-divided into smaller self-contained parts. Craftrule's contention is that a notice may only validly be given in respect of premises which cannot be so sub-divided, or in other words that the statutory right to collective enfranchisement is exercisable only in relation to a self-contained part of a building which does not itself comprise two or more such self-contained parts.
Although it does not arise on the facts of the present case, a similar question would I think arise if the premises specified in the notice could not themselves be sub-divided into two or more self-contained parts of buildings, but nevertheless a smaller single self-contained part of a building could somehow be carved out of the premises. In other words, is it a requirement of the statutory scheme not only (as Craftrule submits) that adjoining self-contained parts of a building cannot be aggregated to form a larger such part, but also that the single such part in respect of which the right to enfranchisement may be exercised must be as small as possible. This further question was not the subject of argument before me or the court below, and I mention it only for the sake of completeness. I also recognise that it may be hard to envisage cases where it would arise in practice, but such is the diversity of residential building types and structures in England and Wales (the territorial scope of Part I of the 1993 Act) that it would be rash to rule out the possibility.
The issue was argued on the basis of a Part 8 claim form and agreed facts before His Honour Judge Madge in the Central London County Court on 30 July 2009. Both sides were represented by the same counsel who have appeared on the appeal, Mr Philip Rainey for the claimant nominee purchaser and Mr Kenneth Munro for the freeholder. In a clear and comprehensive unreserved judgment, the judge found in favour of the claimant. He granted a declaration that the participating tenants by whom the initial notice had been served were entitled to enfranchise the whole of the Property, and (in the absence of any counter-notice given by Craftrule) made an order under section 25(1) of the 1993 Act that the claimant was entitled to acquire the whole of the freehold interest in the Property on the terms proposed in the initial notice.
The judge refused Craftrule permission to appeal, but on 31 July 2009 I granted permission on paper. The reasons which I gave were that the issue whether a self-contained part of a building within the meaning of section 3 can itself consist of two or more such self-contained parts is an important one, on which there is no existing authority, and although the judge had given cogent reasons for saying that this question should be answered in the affirmative, I was satisfied that the counter-arguments outlined in Mr Munro's skeleton argument in support of the appeal were strong enough to justify at least a first appeal to the High Court.
The relevant statutory provisions
The argument centres around section 3 of the 1993 Act, which provides as follows:
“ 3 Premises to which this Chapter applies
(1) Subject to section 4, this Chapter applies to any premises if—
(a) they consist of a self-contained building or part of a building …;
(b) they contain two or more flats held by qualifying tenants; and
(c) the total number of flats held by such tenants is not less than two thirds of the total number of flats contained in the premises.
(2) For the purposes of this section a building is a self-contained building if it is structurally detached, and a part of a building is a self-contained part of a building if –
(a) it constitutes a vertical division of the building and the structure of the building is such that that part could be redeveloped independently of the remainder of the building; and
(b) the relevant services provided for occupiers of that part either –
(i) are provided independently of the relevant services provided for occupiers of the remainder of the building, or
(ii) could be so provided without involving the carrying out of any works likely to result in a significant interruption in the provision of any such services for occupiers of the remainder of the building;
and for this purpose “relevant services” means services provided by means of pipes, cables or other fixed installations.”
Prior to amendment by the Housing Act 1996, subsection (1)(a) contained a further requirement that the freehold of the whole of the building or self-contained part thereof should be owned by the same person. This provision was open to abuse by unscrupulous landlords, who took steps to fragment the freehold of premises which would otherwise be eligible for enfranchisement, for example by vesting a lift shaft in an associated company. Accordingly this further requirement was repealed in 1996, but at the same time a new exception was inserted into section 4:
“ 4 Premises excluded from right
…
(3A) Where different persons own the freehold of different parts of premises within subsection (1) of section 3, this Chapter does not apply to the premises if any of those parts is a self-contained part of a building for the purposes of that section.
…”
None of the other exceptions in section 4 is relevant for present purposes.
Section 13(1) provides that a claim to exercise the right to collective enfranchisement with respect to any premises is made by the giving of notice of the claim under that section (“the initial notice”). By virtue of subsection (2)(b), the initial notice must be given by a number of qualifying tenants of flats contained in the premises as at the relevant date which
“(ii) is not less than one half of the total number of flats so contained.”
By virtue of section 5, a person is a qualifying tenant of a flat if he is tenant of the flat under a long lease, defined in section 7 as meaning a lease granted for a term of years certain exceeding 21 years and some other categories of lease, subject to various immaterial points of detail. Broadly speaking, therefore, the right to give notice of enfranchisement is conferred on long leaseholders who between them are tenants of 50% or more of the total number of flats in the specified premises. Section 13(3) then sets out the matters that must be contained in the initial notice, starting with a plan showing the premises of which the freehold is proposed to be acquired, and including a statement of the grounds relied upon in support of the claim, the proposed purchase price, and the full names and particulars of all the qualifying tenants of flats contained in the specified premises.
Also of relevance are subsections 13(8),(9) and (10) which provide as follows:
“(8) Where any premises have been specified in a notice under this section, no subsequent notice which specifies the whole or part of those premises may be given under this section so long as the earlier notice continues in force.
(9) Where any premises have been specified in a notice under this section and –
(a) that notice has been withdrawn, or is deemed to have been withdrawn, under or by virtue of any provision of this Chapter or under section 74(3), or
(b) in response to that notice, an order has been applied for and obtained under section 23(1),
no subsequent notice which specifies the whole or part of those premises may be given under this section within the period of twelve months beginning with the date of the withdrawal or deemed withdrawal of the earlier notice or with the time when the order under section 23(1) becomes final (as the case may be).
(10) In subsections (8) and (9) any reference to a notice which specifies the whole or part of any premises includes a reference to a notice which specifies any premises which contain the whole or part of those premises; and in those subsections and this “specifies” means specifies under...
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