A court should only exercise its discretion under paragraph 3 of schedule 1 to the Leasehold Reform Housing and Urban Development Act 1993 to substitute a reversioner where there are cogent and good reasons for doing so.
In Airspace Developments Ltd and another v Bennets Courtyard Freehold Ltd, Central London County Court, 21 February 2023, Saggerson HHJ; [2023] PLSCS 65, the court was asked to determine a contested application to substitute a reversioner under paragraph 3 of schedule 1.
The proceedings arose from a collective enfranchisement claim in respect of a block of flats situated at 1-52 Bennett’s Courtyard, Watermill Way, London, SW19.
In September 2022 the lessees of the flats had acquired the freehold of the building under the Act. They deliberately chose not to acquire a lease of the roof space at the material time of their claim for collective enfranchisement.
The first claimant acquired a lease of the roof space in April 2019 for a term of 999 years. Planning permission was subsequently granted to build an additional on top of the roof space.
Accordingly, the roof space lease was valuable. A professional commercial valuation valued the roof space lease at £1,800,000.
The first claimant subsequently assigned the lease to the second claimant, but the Land Registry had yet to complete the registration of the assignment by the time the claim was heard.
In December 2022, a group of the lessees served notice under section 13 seeking to acquire the roof space lease at a price of £1,000.
The section 13 notice was served on the defendant company who had acquired the freehold only months earlier and was the reversioner. The defendant was also the nominee purchaser under the earlier 2022 enfranchisement claim.
A counter-notice was required to be served in response to the section 13 notice by 6 March 2023. The first claimant asked the defendant to consent to it being substituted as the reversioner given the potential value of the roof space lease.
The defendant declined. The claimants obtained an injunction to prevent the defendant from serving a counter-notice until their application was determined.
The court was satisfied that an order pursuant to paragraph 3 of schedule 1 could be made in light of the special circumstances of the claim.
The discrepancy in potential valuation and the resulting competing interest of the parties were such that there were cogent and good reasons for the court to exercise its discretion and allow the substitution to be made.
Elizabeth Dwomoh is a barrister at Lamb Chambers
