Landlord granting tenant lease upon completion of obligation to build houses – Landlord granting subsequent lease of one house to G – Appellant succeeding in title to G – Appellant claiming transference of freehold title pursuant to Leasehold Reform Act 1967 – Whether original building of house constituting improvement within section 9(1A) of the Act – Appeal dismissed
In January 1850 the Trustees of the Camden Charities put up the site of the Kensington Workhouse for sale by auction. The successful bidder, I, undertook to construct 29 houses on the site, upon the completion of which he would be granted a 99-year lease by the trustees, starting from December 1849. The trustees duly granted the lease to I in October 1852. By a lease of April 1937 (the 1937 lease), the trustees demised 25 Kensington Gore, one of the houses that had been built on the site, to G for 66 years from September 1936. The appellant was the successor in title to that lease.
The appellant claimed entitlement to have the freehold title of the property transferred to him by the trustees, pursuant to the provisions of the Leasehold Reform Act Act 1967, under a notice of claim assigned to him by his predecessor in July 1994. The amount payable by the enfranchising tenant, as consideration for the freehold, fell to be calculated under the provisions of section 9(1A) of the Act. That section provided for payment of the sum that the premises might be expected to realise upon a sale in the open market by a willing seller, subject to the proviso “(d)… that the price be diminished by the extent to which the value of the house and premises has been increased by any improvement carried out by the tenant or his predecessors in title at their own expense”.
The Lands Tribunal allowed the appellant’s appeal against the price determined by London Leasehold Valuation Tribunal (reducing the price from £729,400 to £696,000) but dismissed his contention that the building of the house itself should be treated as a tenant’s improvement and the enfranchisement price therefore should be determined based on the site value at the date of the notice of claim. On appeal against the Lands Tribunal’s decision, the issue was whether the original construction of the property by I, before the grant of the 1852 lease, was an “improvement carried out by the tenant or his predecessors in title at their own expense”, so that the price payable by the tenant was to be reduced to the extent that the value of the “house and premises” had been increased by the original construction. The appellant contended that the words “house and premises” in section 9(1A)(d) were to be read as simply describing the premises let, which might originally have consisted of open land, or land with buildings upon it, unconverted to any sort of habitation. In the appellant’s submission, it followed that the construction of the house by I had been an “improvement” to that land within section 9(1A)(d). It was common ground that if it did, the enfranchisement price was £417,000, and that if it did not, the price was £696,000.
Held: The appeal was dismissed.
1. The 1967 Act was concerned with the position of tenants who occupied houses under long tenancies at low rents, and the purpose of section 9(1A)(d) was to guide a valuer in determining the price payable by an enfranchising tenant. The words “diminished by the extent to which the value… has been increased by any improvement carried out by the tenant or his predecessors in title at their own expense”, when considered in the context of the provisions of the 1967 Act as a whole, could not be taken to contemplate a situation where a tenant under a long lease had expended money on the relevant property but had received equivalent value from the landlord in exchange, such as by way of a valuable lease. It followed that the building lease that I had taken from the trustees was the original bargain between I and the trustees, performance of which on I’s part could not be treated as an “improvement” within section 9(1A)(d). Accordingly, the original construction of the house in question was not an improvement within the subsection.
2. That conclusion was not affected by the fact that the term of the 1852 lease was expressed to commence in December 1849, before the house was built, and indeed before the auction. A lease took effect from the time of grant, notwithstanding that it might contain provisions for the backdating of rent payments.
Simon Berry QC and Edwin Johnson (instructed by David Conway & Co) appeared for the appellant; Jonathan Gaunt QC (instructed by Lee Bolton & Lee) appeared for the respondent.
Thomas Elliott, barrister
