Avon Ground Rents Ltd v Canary Gateway (Block A) RTM Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lady Justice Elisabeth Laing,Lady Justice King |
| Judgment Date | 30 May 2023 |
| Neutral Citation | [2023] EWCA Civ 616 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-001754 |
[2023] EWCA Civ 616
Lady Justice King
Lord Justice Newey
and
Lady Justice Elisabeth Laing
Case No: CA-2022-001754
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Martin Rodger KC, Deputy Chamber President
LC-2022199
Royal Courts of Justice
Strand, London, WC2A 2LL
Justin Bates and Katherine Traynor (instructed by Scott Cohen Solicitors Ltd) for the Appellant
Mark Loveday and James Castle (instructed by Jobsons Solicitors Ltd) for the Respondent
Hearing date: 11 May 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 30 May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The question raised by this appeal is whether a “shared ownership lease” granted for a term of more than 21 years is a “long lease” for the purposes of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) regardless of whether the tenant's share is 100%. The point turns on the construction of section 76 of the 2002 Act.
The appeal is nominally from a decision of Martin Rodger KC, the Deputy President of the Upper Tribunal (Lands Chamber). In practice, however, what is at issue is whether Fancourt J (“the Judge”), the then Chamber President, was right to conclude in a decision dated 26 November 2020 ( [2020] UKUT 358 (LC), “the Decision”) that shared ownership leases for terms exceeding 21 years were “long leases” even where the tenants had not “staircased” (i.e. increased their shares) to 100%.
The appellant, Avon Ground Rents Limited (“Avon”), is the freehold owner of a development known as Canary Gateway in St Anne Street, London E14. The development comprises two blocks, Blocks A and B, each of which contains a number of flats. In the case of Block A, there are 97 flats. 17 of these are the subject of a head lease in favour of a housing association, Metropolitan Housing Trust Limited (“Metropolitan”), and underlet on separate shared ownership leases for terms greater than 21 years. Five of the shared ownership tenants have staircased to 100%, but the others have not. The other 80 flats in Block A are either leased to Metropolitan and underlet to social rent tenants or leased under conventional long residential leases.
As its name suggests, the respondent, Canary Gateway (Block A) RTM Company Ltd (“the Company”), is an “RTM company” established with a view to acquiring the right to manage Block A pursuant to the 2002 Act. It first gave notice of such a claim in 2019, but Avon opposed it on, among others, the ground that “notice of invitation to participate” ought to have been given to Metropolitan but had not been. More specifically, Avon contended that Metropolitan should have received such a notice both because tenants with shared ownership leases who had interests of less than 100% were not “qualifying tenants” for the purposes of the 2002 Act and because Metropolitan was in any event the qualifying tenant of the flats underlet to social rent tenants.
The dispute came before the Judge on appeal from the First-tier Tribunal (Property Chamber) (“the FTT”) and was the subject of the Decision. The Judge decided that the shared ownership tenants were “qualifying tenants” whether or not they had staircased to 100%, but he also held that Metropolitan should have been given notice of invitation to participate as the head lessee of the flats occupied by social rent tenants and that the failure to do so invalidated the Company's claim.
On the basis of the Decision, the Company gave notices of invitation to participate both to every tenant with a shared ownership lease and to Metropolitan and, by a claim notice dated 9 March 2021, again claimed the right to manage Block A. Once more, however, Avon has opposed the claim. One of the points it has taken has been that, contrary to the views expressed by the Judge in the Decision, tenants with shared ownership leases who had not staircased to 100% were not “qualifying tenants” with the result that, in respect of those flats, notice of invitation to participate should instead have been given to Metropolitan.
The Company's claim was upheld by the FTT in a decision dated 2 March 2022. Unsurprisingly, Avon accepted before the FTT that it could not succeed on the issue of whether all those with shared ownership leases were “qualifying tenants”, but it reserved its position for a possible appeal. The Deputy President granted Avon permission to appeal to the Upper Tribunal (Lands Chamber), but on the footing that, having regard to the Decision, the appeal would be dismissed. That, the Deputy President pointed out, would enable Avon to seek to appeal to this Court, as it since has.
The sole issue raised by Avon's appeal is thus whether a shared ownership lease can be a “long lease” within the meaning of section 76 of the 2002 Act if the tenant has not acquired a 100% interest. By a respondent's notice, the Company contends that any failure to give notice of invitation to participate to Metropolitan would not in any event have invalidated its claim for the right to manage. In this respect, the Company takes issue with the Decision.
The statutory framework
The 2002 Act entitles leaseholders, subject to various conditions, to assume the management of their building. There had previously been an entitlement under the Landlord and Tenant Act 1987 (“the 1987 Act”) to ask for management rights to be transferred to a manager, but such an appointment depended on establishing fault on the landlord's part: see section 24 of the 1987 Act. In 2000, the Government published a consultation paper, Commonhold and Leasehold Reform, Draft Bill and Consultation Paper (Cm 4843) (“the Consultation Paper”), in which it was proposed that people with leases of flats should be given “a new right to take over the management of their building without having to prove shortcomings on the part of the landlord and without payment of compensation”: see section 2.1. The 2002 Act carried that proposal into effect.
The relevant provisions are to be found in chapter 1 of part 2 of the 2002 Act, comprising sections 71 to 113. Section 71 explains that the chapter makes provision for the acquisition and exercise by an “RTM company” of “rights in relation to the management of premises” which are termed “the right to manage”. For the 2002 Act to apply, the premises in question must “consist of a self-contained building or part of a building” and contain two or more flats at least two-thirds of which are held by “qualifying tenants”: see section 72. The concept of a “qualifying tenant” also features in relation to RTM companies. An “RTM company” must have as its object, or one of its objects, “the acquisition and exercise of the right to manage the premises” and its articles are required to take the form set out in the schedule to the RTM Companies (Model Articles) (England) Regulations 2009 (“the 2009 Regulations”): see sections 73 and 74 of the 2002 Act and regulation 2 of the 2009 Regulations. It is further provided, by section 74 of the 2002 Act, that the persons who are entitled to be members of an RTM company are “qualifying tenants of flats contained in the premises” and, once the RTM company has acquired the right to manage, the landlord(s).
As subsection (1) states, section 75 of the 2002 Act “specifies whether there is a qualifying tenant of a flat … and, if so, who it is”. By subsection (2), subject to exceptions which are not material to this appeal, “a person is the qualifying tenant of a flat if he is tenant of the flat under a long lease”.
Sections 76 and 77 of the 2002 Act “specify what is a long lease for the purposes of [chapter 1 of part 2 of the 2002 Act]”: see section 76(1). Section 76 goes on to say:
“(2) Subject to section 77, a lease is a long lease if—
(a) it is granted for a term of years certain exceeding 21 years, whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenant, by re-entry or forfeiture or otherwise,
(b) it is for a term fixed by law under a grant with a covenant or obligation for perpetual renewal (but is not a lease by sub-demise from one which is not a long lease),
(c) it takes effect under section 149(6) of the Law of Property Act 1925 (c. 20) (leases terminable after a death or marriage or the formation of a civil partnership),
(d) it was granted in pursuance of the right to buy conferred by Part 5 of the Housing Act 1985 (c. 68) or in pursuance of the right to acquire on rent to mortgage terms conferred by that Part of that Act,
(e) it is a shared ownership lease, whether granted in pursuance of that Part of that Act or otherwise, where the tenant's total share is 100 per cent., or
(f) it was granted in pursuance of that Part of that Act as it has effect by virtue of section 17 of the Housing Act 1996 (c. 52) (the right to acquire).
(3) ‘Shared ownership lease’ means a lease—
(a) granted on payment of a premium calculated by reference to a percentage of the value of the demised premises or the cost of providing them, or
(b) under which the tenant (or his personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of those premises.
(4) ‘Total share’, in relation to the interest of a tenant under a shared ownership lease, means his initial share plus any additional share or shares in the demised premises which he has acquired.”
These subsections are central to the present appeal.
Section 78 of the 2002 Act provides that an RTM company must, before making a claim to acquire the right to manage any premises, give notice (by a “notice of invitation to participate”) to each person who is at the time the...
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