York House (Chelsea) Ltd v Edward Allen Victor Thompson
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli |
| Judgment Date | 15 August 2019 |
| Neutral Citation | [2019] EWHC 2203 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PT-2018-000320 |
| Date | 15 August 2019 |
[2019] EWHC 2203 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES (ChD)
PROPERTY TRUSTS AND PROBATE LIST
Royal Courts of Justice
Strand, London
WC2A 2LL
THE HONOURABLE Mr Justice Zacaroli
Case No: PT-2018-000320
Thomas Jefferies and Kimberley Ziya (instructed by Forsters LLP) for the Claimant
Stephen Jourdan QC and Anthony Radevsky (instructed by Brethertons LLP) for the Defendants
Hearing dates: 16, 17, 18 and 19 July 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
A. Introduction
York House is a purpose-built block of 42 flats in Chelsea close to Sloane Square. Built in the 1930s, after a period of time when it was used for military purposes, it reverted to being used as flats occupied as private residences. Built in a T shape and surrounded by a courtyard at the back and sides, it comprises a basement, ground floor and eight upper floors.
The first defendant, Mr Thompson, acquired the freehold of York House in August 2010. He subsequently transferred the freehold into the joint names of himself and the second defendant, Mrs Thompson, in June 2012. They were registered as proprietors of the freehold on 9 October 2012.
Of the 42 flats, one is occupied by a caretaker and the other 41 are demised on long leases. In 2013 the defendants sold Flat 23 on the fourth floor and purchased Flat 38 on the eighth floor.
In 2017 the defendants became aware that some of the other lessees of York House were planning on claiming the freehold under the Leasehold Reform, Housing and Urban Development Act 1993 (the “1993 Act”). They were concerned that the price payable under the 1993 Act would not properly reflect a number of development opportunities in relation to York House. Accordingly, in June 2017 they granted 14 leases of various parts of York House and its surrounding area to one or other of themselves (the “Leases”).
I will consider the details of what was demised by each Lease in section E4 of this judgment. Some of them (such as Lease 1 and Lease 8) demised discrete parts of the existing building. Leases 2 to 6 demised various external areas including parts of the courtyard and/or subsoil and/or parts of the airspace, with the intention of enabling the tenant to build a new structure in those areas. Those Leases were for a period of 20 years and gave rights to build on the premises, with an option for a 999-year lease of the completed structure. Leases 9 to 14 were of discrete parts of the internal corridors, being in each case a part of the corridor that led solely to the front door of one or other individual flat.
There was no premium payable under any of the Leases, and the rent reserved was in each case a peppercorn.
Prior to the grant of the Leases, the defendants did not serve notices pursuant to s.5 of the Landlord and Tenant Act 1987 (the “1987 Act”) on the qualifying tenants of York House.
On 12 July 2017 a notice (“the s.13 Notice”) was given under s.13 of the 1993 Act by 28 qualifying tenants to claim the freehold of York House. Since, at that time, the Leases had not been registered and the qualifying participating tenants were unaware that they had been granted, the s.13 Notice did not propose the acquisition of any of the Leases. No application was subsequently made to amend it to claim any of them.
On 14 September 2017 the defendants served a counter-notice admitting the claim for the freehold but disputing the proposed terms of acquisition.
Under cover of letters dated 31 January 2018, Forsters LLP, the solicitors acting for a requisite majority of the qualifying tenants in York House, served notices pursuant to s.12B of the 1987 Act on each of the defendants requiring them to dispose of the interests which were the subject matter of the disposals to the claimant. The claimant is the person nominated for the purposes of s.12B of the Act by the requisite majority of qualifying tenants in York House. The defendants failed to comply with these notices.
Default notices were served on the defendants pursuant to s.19(2) of the 1987 Act under cover of letters from Forsters dated 8 February 2018 and 29 March 2018. The defendants did not make good the default.
This claim was issued on 25 April 2018. It seeks an order under s.19 of the 1987 Act that the defendants transfer the Leases to the claimant.
B. The Statutory Framework
By s.1(1) of the 1987 Act, a landlord (defined by s.2(1)(a) as the immediate landlord of the qualifying tenants) shall not make a “relevant disposal affecting any premises to which at the time of the disposal this Part applies” unless it has previously served notice in accordance with s.5 on “the qualifying tenants of the flats contained in those premises” and the disposal is made in accordance with the requirements of ss.6 to 10.
The premises to which the 1987 Act applies are defined by s.1(2):
“Subject to subsections (3) and (4), this Part applies to premises if— (a) they consist of the whole or part of a building; and (b) they contain two or more flats held by qualifying tenants; and (c) the number of flats held by such tenants exceeds 50 per cent. of the total number of flats contained in the premises.”
“Qualifying tenants” are defined by s.3 as a tenant of the flat save under certain excluded types of tenancy, none of which is relevant here.
A “relevant disposal affecting premises” is defined by s.4(1) of the 1987 Act:
“In this Part references to a relevant disposal affecting any premises to which this Part applies are references to the disposal by the landlord of any estate or interest (whether legal or equitable) in any such premises, including the disposal of any such estate or interest in any common parts of any such premises but excluding— (a) the grant of any tenancy under which the demised premises consist of a single flat (whether with or without any appurtenant premises); and (b) any of the disposals falling within subsection (2).”
“Common parts”, by s.60(1) of the 1987 Act “…in relation to any building or part of a building, includes the structure and exterior of that building or part and any common facilities within it”.
Subsection (2) of s.4 sets out the types of disposal which are excluded. These include a number of involuntary disposals, such as to a trustee in bankruptcy or liquidator or one made under various provisions relating to matrimonial proceedings.
Of direct relevance to this case are the exclusions provided for by sub-paragraph (e):
“a disposal by way of gift to a member of the landlord's family or to a charity”;
and sub-paragraph (h),
“a disposal consisting of a transfer by two or more persons who are members of the same family either – (i) to fewer of their number, or (ii) to a different combination of members of the family (but one that includes at least one of the transferors)”
Section 4(3) defines “disposal” as
“a disposal whether by the creation or the transfer of an estate or interest and (a) includes the surrender of any tenancy and the grant of an option or right of pre-emption, but (b) excludes a disposal under the terms of a will or under the law relating to intestacy”.
The precise nature of the notice to be served by the landlord under s.5 depends on the nature of the disposal (for example, whether it consists of a contract, to be completed by conveyance, or is a sale at auction). In this case, the relevant form of notice is that referred to in s.5D. The notice must contain particulars of the principal terms of the proposed disposal by the landlord, including the property to which it relates and the consideration required by the landlord for making the disposal. The notice must also state that it constitutes an offer by the landlord to dispose of the property on those terms, which may be accepted by the requisite majority of qualifying tenants of the constituent flats.
Sections 6 to 10 set out the procedure to be followed for disposals following service of a s.5 notice. They provide time limits for acceptance of the offer, and preclude the landlord from otherwise disposing of the relevant interest in the meantime. By s.8 and s.9B, upon acceptance of the offer, the landlord has the choice to abandon the proposed disposal altogether or to proceed to effect the disposal to the person nominated by the qualifying tenants.
By section 10A, failure by a landlord to comply with Part 1 of the 1987 Act is an offence.
By s.11 and s.12B, where a landlord has made a relevant disposal without serving notice under s.5, or has done so in contravention of ss.6 to 10, the requisite majority of qualifying tenants may compel a purchaser from the landlord to dispose of the relevant estate or interest, on the terms it was made, to a person or persons nominated for that purpose.
The court may, on an application pursuant to s.19 of any person interested, make an order requiring any person who has defaulted in complying with any duty imposed by Part 1 of the 1987 Act to make good that default.
C. The Issues
It is common ground that the requirements of s.1(2) of the 1987 Act apply to York House: it consists of the whole of a building which contains more than two flats held by qualifying tenants, and the number of such flats exceeds 50% of the total number of flats contained in York House. It is also common ground that the premises do not fall within the exclusions in s.1(3) or s.1(4) of the 1987 Act.
The first issue is whether the disposals effected by the Leases fall within one or other of the exclusions in s.4(2)(e) or (h). The defendants...
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