Howard de Walden Estates Ltd v Aggio
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Mummery,Lord Justice Jacob |
| Judgment Date | 25 June 2008 |
| Neutral Citation | [2007] EWCA Civ 499 |
| Date | 25 June 2008 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2006/2707 & 1757 |
[2007] EWCA Civ 499
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(1) HHJ COLLINS CBE (2) HHJ CRAWFORD LINDSAY QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lady Justice Arden and
Lord Justice Jacob
Case No: B2/2006/2707 & 1757
Judith Jackson QC & Katharine Holland (instructed by Speechly Bircham) for the (1) Appellant
Anthony Radevsky (instructed by Forsters) for the (1) Respondents
Philip Rainey (instructed by Pemberton Greenish) for the (2) Appellants
Edwin Johnson QC (instructed by Bircham Dyson Bell) for the (2) Respondent
Hearing dates: 27–28 February 2007
The terms on which people rent their homes raise important issues of social policy. Some occupiers are holders of long leases, which are often expensive to buy. Long leases are by their nature always wasting assets. Successive Acts of Parliaments have increased the rights of holders of long leases as against their landlords. Thus, the Leasehold Reform Act 1967 gave owners of houses the right to purchase the freehold (the right of leasehold enfranchisement) and the right to extend their leases for fifty years. The Landlord and Tenant Act 1987 gave tenants in blocks of flats the right to acquire their landlord's interest if he wished to sell. The Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) enlarged the protection for holders of long leases in respect of two very important rights: the right of collective enfranchisement, where the qualifying majority of holders of leases in a block of flats wish to buy out the landlord's interest collectively and the right of individual lease renewal.
Individual lease renewal enables the holder of long leasehold of a flat to be granted a new lease of his flat by the reversioner. When originally enacted, the 1993 Act contained a residence condition, that is to say that the long leaseholder had to show that he had occupied the flat as his only or principal home for the last three years or for periods amounting to three years in the last ten years. However, s 130 of the Commonhold and Leasehold Reform Act 2002 removed this condition. That amendment has opened the door to the exercise of the right of individual lease extension by landlords, often intermediate landlords in a chain of landlords, who hold head leases of premises comprising or including a flat which is not sub-let (other than short term) and common parts. The essence of the principal issue in this case is whether that is the effect of the 1993 Act, as now in force.
That question is essentially one of interpretation of the 1993 Act, but before I set out the critical provisions it would be convenient to describe the system of individual lease renewal in outline. That will provide the legislative context to the critical provisions. I will then set out the background to the appeals in this case. The 1993 Act has been amended on several occasions, but references in this judgment to the 1993 Act are to that Act as now in force, unless otherwise stated. There is one subsidiary issue (which I will call “the deposit issue”) as to whether the judge in the Howard de Walden case should have ordered the tenants to provide a deposit for the grant of the lease extension even though their right to that extension was disputed by the landlord, but I will deal with that matter separately at the end of this judgment.
The system for individual lease renewal
The statutory right of individual lease renewal is a right possessed by a “qualifying tenant” to be granted, on payment of a premium calculated in accordance with sch 13 of the 1993 Act and in substitution for his existing lease, a new lease of his flat at a peppercorn rent for a term expiring 90 years after the term date of the existing lease (see s 56(1)). The meaning of the phrase “qualifying tenant” is a matter which I will need to consider in detail below. A qualifying tenant may be a tenant of two or more flats at the same time (s 39(4)). To exercise the right of individual lease extension, the tenant must give an initial notice in accordance with s 42 of the 1993 Act. The notice must be given to the landlord and any third party in the tenant's lease. The notice must give details of the tenant's claim, and in particular it must specify the premises, the premium which the tenant proposes to pay in respect of the new lease and the terms of the new lease.
The landlord, on whom the notice must be served, is defined as the person who holds an interest in the flat which satisfies the condition that it is an interest in reversion expectant on termination of the tenant's lease and is either a freehold or leasehold interest whose duration is such as to enable a person to grant a new long lease (s 40(1)). If there are two or more persons who satisfy these conditions, “the landlord” will be the landlord lowest down in the chain of landlords (s 40(2)).
The procedure following the service of the tenant's notice is set out in ss 45 to 49 of the 1993 Act. On receipt of the tenant's notice, the landlord can either admit the tenant's right to a new lease, or deny that right (s 45(2)). He can also state in his counter-notice that he intends to make an application to the court for an order that the right of individual lease extension should not be exercisable because he intends to redevelop the premises. If the landlord admits the claim, he must identify which of the proposals in the tenant's notice he does not accept and set out counter-proposals. If within a period of two months from the date of the landlord's counter-notice admitting the claim, the parties cannot come to an agreement, either party may apply to a leasehold valuation tribunal to have the terms determined. Such an application must be made within six months of the date of the counter-notice. If the landlord does not admit the right of individual lease extension, he must apply to the court for an order that the tenant has no such right. Such application must be made within two months of the counter-notice. If the court dismisses the landlord's application, it will make an order that the landlord's counter-notice is of no effect and requiring the landlord to serve a further counter-notice. If it accedes to the application, the tenant's notice will cease to have effect. The 1993 Act also contains provision for the situation where a landlord fails to give a counter-notice, and the situation where a party fails to complete his obligations following service of the tenant's notice.
Background to these appeals
The appeal in the Cadogan case is concerned with the lease of 26 Cadogan Place, London SW1X OJP. The appellants in that appeal are the freehold owners of the premises, which is a five storey building. The premises, excluding the basement and part of the ground floor, were let pursuant to a head lease dated 26 August 1976 for a term of 65 years from 25 March 1976. The respondent in the Cadogan appeal, 26, Cadogan Square Ltd (“26 CSL”), is now the head lessee. The third to fifth floors are a single flat and the remainder of the premises within the head lease is used as offices. The flat is currently unoccupied. At the date of the notice it was let on an assured shorthold tenancy. There are internal common parts and external areas for parking. These areas are within the head lease. The tenant's notice was served by Vanmour Ltd (“VL”), then the head lessee of the property but that company has assigned its rights to 26 CSL. When the tenant's initial notice was served, the offices were either sublet to third parties or vacant and so VL was not in occupation of the commercial portion of the premises for the purposes of its business. Accordingly it did not have the protection of Part II of the Landlord and Tenant Act 1954. Accordingly, the lease was not a “business lease” for the purpose of s 5(2) of the 1993 Act (set out below). The appellant served a counter-notice informing VL that it did not admit that it was entitled to exercise the right of individual lease extension in respect of the flat forming part of the premises.
The appeal in the Howard de Walden case concerns 19 Upper Wimpole Street, London W1G 6LY. This is a single building with five residential flats of which three are let on long leases. The head lease was executed on 6 July 1950 for a term of 62 years. The claim for individual lease extension is made by the head lessee in respect of the raised ground floor flat and subsequently the basement flat, which are not currently sublet. Again there are internal common parts and external areas for parking all of which are included in the head lease. As in the Cadogan case, the landlord has served counter-notices disputing the validity of the tenant's notice on the grounds that a head lessee is not a qualifying tenant for the purpose of Chapter II of Part 1of the 1993 Act.
In neither case did the head lessee, when serving notice on the owners of the properties of their claim to exercise their asserted rights of individual lease extension, specify precisely what covenants would be required to be given in the new lease.
Relevant provisions of the 1993 Act
The 1993 Act sets out the provisions about individual lease extension in Chapter II of Part 1. The starting point is the statutory statement of the right of individual lease extension in s 56(1) of the 1993 Act, which provides:
“56 Obligation to grant new lease
(1) Where a qualifying tenant of a flat has under...
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