Decision Nº LRA 8 2013. Upper Tribunal (Lands Chamber), 06-10-2014
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 06 October 2014 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 8 2013 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2014] UKUT 0437 (LC)
UTLC Case Number: LRA/73/2013 & LRA/8/2013
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
Leasehold enfranchisement - collective enfranchisement - leaseback - effect of grant of new leases by freeholder after determination of disputed terms of leaseback by LVT - whether nominee purchaser entitled to insist on leasebacks - ss.24 and 35 and Schedule 9, Leasehold Reform, Housing and Urban Development Act 1993.
IN THE MATTER OF AN APPEAL FROM A DECISION OF THE
LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN:
QUEENSBRIDGE INVESTMENT LIMITED Appellant
AND
61 QUEENS GATE FREEHOLD LIMITED Respondent
Re: 61 Queens Gate,
London
SW7 5JP
Before: Martin Rodger QC, Deputy President
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on
15 September 2014
Stephen Jourdan QC, instructed by Forsters LLP, on behalf of the appellant
Carl Fain, instructed by Swabey & Co, on behalf of respondent
© CROWN COPYRIGHT 2014
The following cases are referred to in this decision:
Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd [2001] Ch 733
Barrie House Freehold Ltd v Merie Bin Mahfouz [2012] EWHC 353 (Ch)
Cawthorne v Hamdan [2006] 3 EGLR 183 (LT)
Cawthorne v Hamdan [2007] Ch 187 (CA)
Introduction
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This appeal is against two decisions of a Leasehold Valuation Tribunal (“the LVT”) given on 29 October 2012 and 28 March 2013 concerning a claim by the Respondent, as nominee purchaser, to acquire the freehold of 61 Queens Gate, London SW7 under the collective enfranchisement provisions of Chapter I, Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”).
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In its first decision the LVT determined the disputed terms of the acquisition, before going on in its second decision to determined the price payable in light of those terms. Amongst the disputed terms was the form of the leases of three flats in the building which it was then common ground were to be granted back to the Appellant immediately upon completion by the Respondent of its acquisition of the freehold.
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The Appellant was dissatisfied with the leaseback terms and the price determined by the LVT, and appealed both decisions to this Tribunal. Before the appeal came on for hearing the Appellant informed the Respondent that it intended to grant long leases of the three flats on the terms which it had previously proposed but which had already been rejected by the LVT. The Appellant subsequently granted those leases and now asserts that the effect of s. 36 and paragraph 5 of Schedule 9 to the 1993 Act is that it is under no obligation to enter into leasebacks on the terms determined by the LVT.
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The appeal therefore concerns the entitlement of a freeholder of a block of flats to circumvent a determination by a first tier tribunal of the terms of a leaseback of one or more of those flats, by granting new leases of the same flats on terms more favourable to it than those which had already been determined.
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The Appellant was represented before the Tribunal by Stephen Jourdan QC, and the Respondent by Carl Fain, both of whom had also appeared before the LVT. I am grateful to them both for their helpful submissions.
The relevant statutory provisions
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The general operation of the collective enfranchisement regime under Chapter I of Part I of the 1993 Act is well known. In outline the right to acquire the freehold and certain leasehold interests is exercisable collectively by the tenants of flats in a self contained building containing two or more flats held on long leases. Those eligible to exercise the right are referred to as “qualifying tenants”, while those who choose to do so (who must comprise the tenants of at least half of the flats in the building held on long leases) are referred to as “participating tenants”.
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The 1993 Act makes specific provision in s. 36 and Schedule 9 for the reversioner to be granted leases of certain flats or other units in the premises immediately after the acquisition of the freehold on behalf of the participating tenants. Referred to in Schedule 9 as a “leaseback”, such leases enable the reversioner to retain control of empty flats, flats let under tenancies which are not long leases, shops and other commercial units within the premises.
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The enfranchisement process is commenced by the giving of an initial notice by the participating tenants to the reversioner under s. 13. The initial notice must identify the nominee purchaser whom the participating tenants wish to acquire the freehold on their behalf, it must specify any leasehold interest proposed to be acquired and any leasebacks which it is considered the reversioner is obliged to acquire, and must provide certain other information including the proposed purchase price. The reversioner is required to give a counter-notice under s. 21 stating whether it accepts the right of the participating tenants to acquire the freehold and whether it disputes the proposed terms.
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Where an initial notice has been given s. 97(1) of the 1993 Act enables it to be protected by registration under the Lands Charges Act 1972 or by a notice under the Land Registration Act 2002 as if it were an estate contract. If an initial notice has been registered in that way, s. 19 of the 1993 Act imposes restrictions on the entitlement of the freeholder to enter into certain transactions. In particular, so long as the initial notice remains in force s. 19(1) provides that:
“(a) any person who owns the freehold of the whole or any part of the specified premises or the freehold of any property specified in the notice under s. 13(3)(a)(ii) shall not—
(i) make any disposal severing his interest in those premises or in that property, or
(ii) grant out of that interest any lease under which, if it had been granted before the relevant date, the interest of the tenant would to any extent have been liable on that date to acquisition by virtue of s. 2(1)(a) or (b); and
(b) no other relevant landlord shall grant out of his interest in the specified premises or in any property so specified any such lease as is mentioned in paragraph (a)(ii);
and any transaction shall be void to the extent that it purports to effect any such disposal or any such grant of a lease as is mentioned in paragraph (a) or (b).”
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Turning to the leaseback provisions themselves, s. 36 (1) provides that:
“In connection with the acquisition by him of a freehold interest in specified premises, the nominee purchaser shall grant to the person from whom the interest 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.”
By s. 36(2) any such lease “shall be granted so as to take effect immediately after the acquisition by the nominee purchaser of the freehold interest concerned”.
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Schedule 9 deals in detail with the grant of leases back to the former freeholder. It focuses attention on the circumstances which exist at “the appropriate time”, an expression defined in paragraph 1(1) of Schedule 9 as follows:
““The appropriate time” in relation to a flat or other unit contained in the specified premises means the time when the freehold of the flat or other unit is acquired by the nominee purchaser”
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Part II of Schedule 9 is concerned with mandatory leasebacks. These are required where a flat is let under a secure tenancy or an introductory tenancy (both of which are tenancies granted by a local housing authority or other public sector landlord under the Housing Act 1980). Paragraph 2 applies where immediately before the “appropriate time” a flat is let under a secure tenancy or an introductory tenancy, and either the freeholder is the tenant’s immediate landlord, or the freeholder is a public sector landlord and every intermediate landlord of the flat is also a public sector landlord. Paragraph 3 has effect where immediately before the “appropriate time” a flat is let by a housing association under a tenancy other than a secure tenancy. In any case where paragraphs 2 or 3 apply, it is provided that the nominee purchaser “shall grant” a leaseback of the flat to the freeholder in accordance with s. 36.
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Part III of Schedule 9 makes provision for the freeholder to have the right to take a leaseback in certain circumstances. So far as is relevant to this appeal, those circumstances...
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