Cawthorne v Hamdan
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Rix,Lord Justice Mummery |
| Judgment Date | 24 January 2007 |
| Neutral Citation | [2007] EWCA Civ 6 |
| Docket Number | Case No: C3 2006/0959 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 January 2007 |
[2007] EWCA Civ 6
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
HIS HONOUR JUDGE HUSKINSON
LRA/22/2003
ON APPEAL FROM THE LEASEHOLD VALUATION TRIBUNAL
FOR THE SOUTHERN RENT ASSESSMENT PANEL
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Rix and
Lord Justice Lloyd
Case No: C3 2006/0959
Nicholas Berry (instructed by OJS Law) for the Appellant
Stan Gallagher (instructed by Osler Donegan Taylor) for the Respondents
Introduction
This appeal from the Lands Tribunal requires the court to consider provisions in Chapter I of Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) concerning the procedure whereby qualifying tenants of flats in premises to which the Act applies can have the freehold of the premises acquired on their behalf by a nominee purchaser. This is described in the Act as a right to collective enfranchisement: section 1(1). The Act has been amended by the Commonhold and Leasehold Reform Act 2002, but these amendments had not come into effect at the date material for the present case, and I ignore them.
It is common ground that the premises, 6 Palmeira Square, Hove, East Sussex, comprising 6 flats, came within the relevant provisions. On 25 July 2001 the six flats were subject to different tenancies. Five tenancies were such that the tenant was a qualifying tenant. The sixth was not. Under section 5 of the Act, subject to other provisions, a person is a qualifying tenant for this purpose if he is tenant of a flat under a long lease. There are some exclusions from that (such as business tenancies) but they do not matter for present purposes. A long lease is defined by section 7. The main case is a lease granted for a term of years certain exceeding 21 years.
On 25 July 2001 four of the qualifying tenants gave notice to the reversioner, the Appellant, under section 13 of the Act, claiming to exercise the right to collective enfranchisement with respect to the premises. The fifth qualifying tenant did not participate in this process. On 27 September 2001 the Appellant served a counternotice under section 21 of the Act. The form used included a paragraph referring to additional leaseback proposals. The Appellant completed this saying that there were no such proposals.
The parties did not agree on the terms of the acquisition of the freehold, and in due time the question of what those terms should be was referred to the Leasehold Valuation Tribunal, under section 24. On 22 July 2002 the LVT determined that the price payable was £182,190. A major element in this figure was the value of the fourth floor flat, which was treated as subject to an assured shorthold tenancy. The reversioner would be able to gain possession of this flat and sell it on a long lease, at a premium, hence the substantial capital value.
On 6 January 2003 an order was made in the Brighton County Court which, among other things, required the Appellant to transfer the freehold to the Respondents upon payment of £182,190. This has not yet happened, not least because the Respondents appealed against the decision of the LVT. The reason for this appeal was that they discovered that the flat was subject to an agreement between the Appellant and a Mr Lloyd dated 23 March 2000 for the grant of a tenancy for 5 years with an option to renew for a further 10 years. This would have affected the price payable for the freehold.
On 22 February 2006, almost on the eve of the hearing of the appeal by the Lands Tribunal, the Appellant served a leaseback notice, under section 36 of the Act, and paragraph 5 of Schedule 9. If this was valid, it entitled the Appellant to a long lease at a peppercorn rent of the top floor flat, so that he would be in a position to obtain for himself whatever economic value that flat represented. Clearly it would have undermined the LVT's determination of the price. In those circumstances the Lands Tribunal considered as a preliminary issue the question whether the leaseback notice was valid. The Tribunal held that it was not valid, and that the Appellant was therefore not entitled to a leaseback of the top flat. That left the remainder of the Respondents' appeal, as to the appropriateness of the valuation in the light of the memorandum of agreement. The Tribunal gave directions as to the determination of that issue, but the Appellant obtained permission to appeal, and no doubt the proceedings in the Tribunal remain pending, awaiting the result of this appeal.
Before us, therefore, as before the Tribunal, the question is whether, not having specified in the counternotice that he would require a leaseback of the top flat, it was still open to the Appellant to obtain such a leaseback by serving a leaseback notice on 22 February 2006.
The statutory provisions
In order to consider that point it is necessary first to refer to some, and to set out others, of the provisions of the Act.
The process is started by a tenants' notice under section 13. That notice must, among other things:
“(c) specify
(i) …
(ii) any flats or other units contained in the specified premises in relation to which it is considered that any of the requirements in Part II of Schedule 9 to this Act are applicable;”
There were none in this case.
Within a time specified in the tenants' notice, the reversioner must serve a counternotice, in accordance with section 21. The notice in the present case complied with the section in stating that the right of the participating tenants to exercise the right to collective enfranchisement was admitted. In that case, subsection (3) applies, as follows:
“(3) If the counter-notice complies with the requirement set out in subsection (2)(a), it must in addition
(a) state which (if any) of the proposals contained in the initial notice are accepted by the reversioner and which (if any) of those proposals are not so accepted, and specify
(i) in relation to any proposal which is not so accepted, the reversioner's counter-proposal, and
(ii) any additional leaseback proposals by the reversioner;”
The meaning of “additional leaseback proposals” is given by sub-section (7):
“(7) The reference in subsection (3)(a)(ii) to additional leaseback proposals is a reference to proposals which relate to the leasing back, in accordance with section 36 and Schedule 9, of flats or other units contained in the specified premises and which are made either
(a) in respect of flats or other units in relation to which Part II of that Schedule is applicable but which were not specified in the initial notice under section 13(3)(c)(ii), or
(b) in respect of flats or other units in relation to which Part III of that Schedule is applicable.”
Section 36, to which reference is made above, is as follows:
“36(1) In connection with the acquisition by him of the freehold of the specified premises, the nominee purchaser shall grant to the person from whom the freehold is acquired such leases of flats or other units contained in those premises as are required to be so granted by virtue of Part II or III of Schedule 9.
(2) Any such lease shall be granted so as to take effect immediately after the acquisition by the nominee purchaser of the freehold of the specified premises.
(3) …
(4) Part IV of Schedule 9 has effect with respect to the terms of a lease granted in pursuance of Part II or III of that Schedule.”
Schedule 9 deals with the grant of leases back to the former freeholder. Part I, paragraph 1, is general and contains definitions, of which one is important:
““the appropriate time” means the time when the freehold of the specified premises is acquired by the nominee purchaser;”
Part II, containing paragraphs 2 to 4, deals with mandatory leasebacks. These are not relevant on the facts. They arise where a relevant flat is subject to a secure tenancy or an introductory tenancy, or a flat is let by a housing association under a tenancy which is not a secure tenancy. Because a leaseback is obligatory in those circumstances, it is understandable that the tenants' notice should have to specify any flats to which these provisions would apply, and that the counternotice should also have to specify any additional flats which the landlord considers are in this category.
Part III gives the reversioner the option to require a leaseback. For this reason it is not relevant in the case of the tenants' notice, but relevant proposals are required to be set out in the counternotice. The principal case is dealt with in paragraph 5:
“5(1) Subject to sub-paragraph (3), this paragraph applies to any unit contained in the specified premises which is not immediately before the appropriate time a flat let to a person who is a qualifying tenant of it.
(2) Where this paragraph applies, the nominee purchaser shall, if the freeholder by notice requires him to do so, grant to the freeholder a lease of the unit in accordance with section 36 and paragraph 7 below.
(3) This paragraph does not apply to a flat or other unit to which paragraph 2 or 3 applies.”
Paragraph 6 deals with a less common case where the freeholder is a qualifying tenant of a flat and is in occupation of that flat. The terms of any lease to be granted under paragraphs 5 or 6 are governed by paragraph 7. Any such lease must conform with the provisions of Part IV except to the extent that any departure from those provisions is agreed to...
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