Landlord and Tenant Act 1987 — Whether landlord obliged to comply with purchase notice — Whether individual buildings or complex of buildings ‘premises’ for purposes of determining majority of qualifying tenants — Whether purchase notice invalid by including buildings or parts of buildings tenants not entitled to acquire
L & C, who were the owners of three
properties consisting of let flats, bungalows and terrace houses, sold the
properties to the respondents in February 1992 without serving notices under section
5 of the Landlord and Tenant Act 1987 on the tenants. On July 20 1992 a
purchase notice under section 12 was served on behalf of the tenants requiring
the respondents to dispose of a number of units in two of the properties, Tudor
House and Tudor Court, but not the third, Parr Court, to the nominated
purchaser. Tudor Court consists of four buildings; two of the buildings consist
of terrace houses and bungalows and two contain flats. Tudor House contains a
number of flats. There were two separate registered titles covering parts of
both properties. The respondents failed to comply with the purchase notice and
contended that the purchase notice was invalid as the ‘premises’ for the
purposes of the Act included all three properties and the notice had not been
served by a majority of qualifying tenants of those three properties. The
tenants appealed the decision of the county court judge refusing their
application for a declaration as to the validity of the purchase notice; the
tenants sought declarations that they were entitled to acquire the buildings
containing flats.
served with a section 12 purchase notice is required to comply with it. The
question whether a relevant disposal of premises has been made has to be
considered on a building by building basis. Thus, when considering whether the
applicants were a requisite majority of qualifying tenants, it was not
appropriate to take into account the third property, Parr Court. The purchase
notice was served by a requisite majority of tenants. Although the purchase
notice included extra property, that did not invalidate the notice as a whole.
The requirements of section 12(3)(a)(i) relating to the premises to be
identified in a purchase notice were directory only not mandatory.
The following cases are referred to in
this report.
Belvedere Court Management Ltd v Frogmore Developments Ltd
[1996] 1 All ER 312; [1996] 1 EGLR 59; [1996] 05 EG 131
Denetower Ltd v Toop [1991] 1 WLR
945; [1991] 3 All ER 661; [1991] 1 EGLR 84; [1991] 20 EG 194, CA
Howard v Bodington (1877) 2 PD 203
Howard v Secretary of State for the
Environment [1975] QB 235; [1974] 2 WLR 459; [1974] 1 All ER 644; 73 LGR
325, CA
Inland Revenue Commissioners v Ayrshire Employers Mutual
Insurance Association Ltd [1946] 1 All ER 637
This was an appeal by John Lowick
Kay-Green and others against the decision of Judge Hull QC, who had dismissed
an application by the appellants for declarations in an originating application
seeking relief against the respondent, Twinsectra Ltd, under the Landlord and
Tenant Act 1987.
David Neuberger QC and Edward Denehan
(instructed by JE Kennedy & Co, of Harrow on the Hill, Middlesex) appeared
for the appellants; Kim Lewison QC and Simon Brilliant (instructed by Wallace
& Partners) represented the respondent.
Giving the first judgment at the
invitation of Staughton LJ, Aldous LJ
said: This is an appeal from the decision of Judge Hull QC which
dismissed the applicants’ request for declarations that Twinsectra Ltd, the
respondent, was in default in not complying with a notice served pursuant to
the Landlord and Tenant Act 1987 and therefore the applicants were entitled to
require Twinsectra to transfer the reversionary interest in certain property to
them.
The appeal is concerned with the application
and provisions of Part I of the Landlord and Tenant Act 1987. That Act, as
stated in the title, was passed, inter alia, ‘to confer on tenants of
flats rights with respect to the acquisition by them of their landlord’s
reversion’. In outline Part I of the Act gives to certain tenants the right of
first refusal to acquire the landlord’s reversion. Section l states that a
landlord shall not make a ‘relevant disposal’ affecting any premises to which
Part I of the Act applies without serving a notice in accordance with section 5
of the Act. The premises are defined as those which consist of the whole or
part of a building and contain two or more flats held by qualifying tenants and
the number of the flats held by such tenants exceeds 50% of the total number of
flats contained in the premises. Sections 2 to 4 define who are relevant
landlords and qualifying tenants and what is a relevant disposal. Section 5
requires a landlord who proposes to make a relevant disposal to serve a notice
in accordance with the section on the qualifying tenants, thereby giving the
tenants first refusal. Sections 6 to 10 are concerned with what happens after
the notice has been served.
Sections 11 to 17 come into effect when
the original landlord has, in breach of his obligations, disposed of his
reversion to a new landlord. Section ll requires the new landlord to comply
with a notice served by the requisite majority of qualifying tenants requiring
him to supply particulars of the terms on which the original disposal was made.
Section 12 gives the requisite majority of qualifying tenants the right to
serve a ‘purchase notice’ on the new landlord requiring him to dispose of the
estate or interest that was the subject of the original disposal on terms on
which it was made to a person or persons nominated by them for that purpose.
Section l3 gives to a rent assessment committee, called a leasehold valuation
tribunal (LVT), the jurisdiction to hear and determine questions arising in
relation to any matters specified in the purchase notice, the identity of the
property or relating to other terms on which the disposal is to be made and any
question arising for determination in consequence of the provision in a
purchase notice such as is mentioned in section 12(3)(b). Sections l4 to l7 are
concerned with eventualities that may arise after service of a purchase notice
pursuant to section 12.
Section l9 deals with enforcement of
obligations under Part I of the Act. It provides that the court may, on the
application of any person interested, make an order requiring any person who
has made default in complying with any duty imposed by any provision of Part I
of the Act to make good the default within an appropriate time. That
application cannot be made unless a notice has previously been served on the
person in question requiring him to make good the default and more than l4 days
have elapsed since the date of service of the notice.
Facts
The named applicant is Mr John Kay-Green,
who is the nominated representative of l7 tenants of Tudor Court and Tudor
House, Castle Way, Hanworth, in the London Borough of Hounslow. I will refer to
them as the applicants.
London & City Westcliffe Properties
Ltd were the owners of Tudor Court, Tudor House and Parr Court of Castle Way,
Hanworth, in the London Borough of Hounslow. Those properties consist of flats,
bungalows and terrace houses which are let. London & City decided to
dispose of the freeholds, but failed to serve a section 5 notice on the tenants
of the properties. Instead the freeholds, which were registered at the London
Registry under titles MX420465 and MX304042, were put up for auction as one lot
with the particulars of sale drawing attention to the fact that no section 5
notice had been served. They were purchased on February 25 l992 by Twinsectra
for £240,000 and it was registered as proprietor of the freehold interest in
the properties on
of the applicants, served on Twinsectra a section ll notice requiring it to
supply particulars of the terms upon which the disposal was made. Solicitors
acting on behalf of Twinsectra replied to that notice giving the information
required by the Act, but stating that it was given without prejudice to
Twinsectra’s contentions that the notice was not a valid notice under section
ll of the Act and the premises were not premises to which Part I of the Act
applied.
On July 20 l992, a section 12 notice (the
purchase notice) was served on Twinsectra by solicitors acting on behalf of Mr
Kay-Green and on behalf of the l7 other long lease tenants in Tudor Court and
Tudor House whose names and addresses were given in the notice. I shall have to
come back to the terms of that notice, but in effect it required Twinsectra to
dispose of the freehold of a number of units within Tudor House and Tudor Court
to Mr Kay-Green, who was the nominated person as required by the section. An
immaterial amendment was made nine days later. Twinsectra failed to comply with
the notice and these proceeding were started on November 12 l992.
Tudor Court consists of four buildings
which I will refer to as buildings 1, 2, 3 and 4. Building 1 is the main
building. It is an attractive 16th-century domestic dwelling with the main part
running north/south and attached to it two wings protruding in a westerly
direction to form three sides of a courtyard, now a garden. It has been
converted so that it now contains seven flats and three terrace houses which
are included in title MX304042.
Building 2 is situated to the west of the
main part of building 1 and faces across the courtyard. It is a later addition
to the complex and consists of two semi-detached bungalows. It is included in
titles MX304042 and MX420465.
Building 3 appears to have been built as
servants’ cottages. It is adjacent, but not attached, to the northern wing of
Tudor Court. As let, it contains two terrace houses and two bungalows. It is
also included in both titles.
Building 4 is adjacent to the southern
wing of Tudor Court. It is a modern purpose-built block of five flats, which is
contained within title MX420465.
Around the buildings comprising Tudor
Court is a garden and what was called the amenity land comprising ponds and
trees. That garden abuts the garden of Tudor House, which is situated to the
west. It is a 19th-century mansion, which has been divided into seven flats
with its own drive passing to the north of Tudor Court and terminating in
Castle Way. It is within title MX420465.
Parr Court is a modern building consisting
of about 44 flats, which is built around three sides of a court with lawns and
ponds. It is situated to the north-west of Tudor House and its grounds are
separated from those of Tudor House by a wall. It is included within title
MX420465.
With three exceptions, all the flats and
houses in Tudor Court and all the flats in Tudor House are occupied under long
leases at low rents on substantially the same terms. The leases gave access to
the garden, but did not include the amenity land.
Parr Court was let differently and some
of the tenancies were regulated tenancies.
Proceedings
Before the judge the applicants sought
declarations that Twinsectra was in default in failing to comply with the
provisions of the section 12 notice. It followed, they alleged, that they were
entitled to acquire the freehold of the seven flats in Tudor House and the
buildings which comprised Tudor Court. On this appeal, they only challenged the
judge’s decision in respect of Tudor House and buildings 1 and 4 of Tudor
Court. They were also concerned to ensure that this court decided the essential
issues between the parties. They therefore applied to amend their pleading and
notice of appeal so as to seek declarations:
(i) that the purchase notice, dated July
27 l992, served on the respondent by the applicants is an effective notice
under section 12 of the Landlord and Tenant Act l987;
(ii) that the respondent is in default in
compliance with the purchase notice dated July 27 l992 served on it by the
applicants pursuant to section 12 of the Landlord and Tenant Act l987; and
(iii) the applicants are therefore
entitled to require the respondent to transfer the reversionary interest in
that part of building 1 Tudor Court, or in the alternative the reversionary
interest in that part of building 1 Tudor Court, save for those parts of
building 1 which do not comprise ‘flats’ within the meaning of section 60 of
the said Act of l987, the reversionary interest in building 4 Tudor Court, and
the reversionary interest in Tudor House with all appurtenances to such
buildings.
As the respondents did not object, the
court allowed the amendments leaving to be decided the question of costs.
The judge dismissed the applicants’ claim
for declarations. He held that the notice had not been served by a nominee of
the requisite majority of tenants because the applicants could not sever Parr
Court from the application. He also held that the purchase notice was invalid
for a number of reasons to which I have to come. However, it is convenient at
this stage of my judgment to set out the relevant parts of the purchase notice:
Flats 1, 1A, 1B, 2, 2A, 3, 3A, 4,
4A, 4B, 5, 5A, 6, 6A, 7, 8, 9, 10, 11, 12 Tudor Court, and
1, 2, 3, 4, 5 & 6 Tudor House
Castle Way, Hanworth, Middlesex.
Landlord
and Tenant Act 1987
As solicitor for John Kay-Green of Flat 8 Tudor Court, the duly appointed
nominee for the purposes of the above mentioned Act, on his own behalf and on
behalf of the l9 other Long Lease Tenants whose names and addresses are
specified at the foot of this notice
Notice is hereby
given pursuant to
Section 12 of the above mentioned enactment that you are required to dispose of
the estate or interest that you hold in the above mentioned premises (that
estate or interest being part of the subject matter of the original disposal
thereof by instrument of transfer dated 25 February 1992 and made between
London City & Westcliffe Properties Limited (1) and Twinsectra Limited (2))
to the above named John Kay-Green he
being the person nominated for the purposes of the said Section 12 by the
majority of the qualifying tenants of Tudor
Court and Tudor House flats
whose names and addresses are specified at the foot of this Notice
And Further Take
Notice that the
terms on which the above said estate or interest to them are (1) the same terms
on which the said estate or interest was disposed of to Twinsectra Limited; or
(2) alternatively on such terms as may be determined by a rent assessment
committee pursuant to Section 12(3)(b) of the above mentioned enactment.
At the foot of the notice was listed the
flats referred to at the start together with the names and addresses of the
tenants. They include all but one of the flats in Tudor House; all but two of
the flats in building 1 and one house; one of the bungalows in building 2; two
houses and one bungalow in building 3 and all but one flat in building 4.
The Act
Although it will be necessary for me to
refer to other sections of the Act, it is convenient to set out the most
relevant parts of the sections at the heart of this case.
Qualifying tenants to have rights of
first refusal on disposals by landlord
1.–(1) A landlord shall not make a relevant
disposal affecting any premises to which at the time of the disposal this Part
applies unless —
(a) he has in accordance with section 5 previously
served a notice under that section with respect to the disposal on the
qualifying tenants of the flats contained in those premises (being a notice by
virtue of which rights of first refusal are conferred on those tenants); and
(b) the disposal is made in accordance
with the requirements of section 6 to l0.
(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.
(3) This Part does not apply to premises
falling within subsection (2) if —
(a) any part or parts of the premises is
or are occupied or intended to be occupied otherwise than for residential
purposes; and
(b) the internal floor area of that part
or those parts (taken together) exceeds 50 per cent of the internal floor area
of the premises (taken as a whole);
and for purposes of this subsection the
internal floor area of any common parts shall be disregarded… .
Requirement to serve notice conferring
rights of first refusal
5.–(1) Where, in the case of any premises to
which this Part applies, the landlord proposes to make a relevant disposal
affecting the premises, he shall serve a notice under this section on the
qualifying tenants of the flats contained in the premises.
(2) A notice under this section must —
(a) contain particulars of the principal
terms of the disposal proposed by the landlord, including in particular —
(i) the
property to which it relates and the estate or interest in that property
proposed to be disposed of, and
(ii) the
consideration required by the landlord for making the disposal;
(b) state that the notice 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;
(c) specify a period within which that
offer may be so accepted, being a period of not less than two months which is
to begin with the date of service of the notice; and
(d) specify a further period within which
a person or persons may be nominated for the purposes of section 6, being a
period of not less than two months which is to begin with the end of the period
specified under paragraph (c).
(3) Where, as the result of a notice
under this section being served on different tenants on different dates, the
period specified in the notice under subsection (2)(c) would, apart from this
subsection, end on different dates —
(a) the notice shall have effect in
relation to all the qualifying tenants on whom it is served as if it provided
for that period to end with the latest of those dates, and for the period
specified in the notice under subsection (2)(d) to begin with the end of that
period and
(b) references in this Part to the period
specified in the notice under subsection (2)(c) or (as the case may be)
subsection (2)(d) shall be construed accordingly.
(4) Where a landlord has not served a notice
under this section on all of the qualifying tenants on whom it was required to
be served by virtue of subsection (1), he shall nevertheless be treated as
having complied with that subsection if —
(a) he has served such a notice on not
less than 90 per cent of the qualifying tenants on whom it was so required to
be served, or
(b) where the qualifying tenants on whom
it was so required to be served number less than ten, he has served such a
notice on all but one of them.
(5) Where a landlord proposes to effect a
transaction that would involve both —
(a) a disposal of an estate or interest
in the whole or part of a building constituting a relevant disposal affecting
any premises to which this Part applies, and
(b) a disposal of an estate or interest
in the whole or part of another building (whether or not constituting a
relevant disposal affecting any premises to which this Part applies) or more
than one such disposal,
the landlord shall, for the purpose of
complying with this section in relation to any relevant disposal falling within
paragraph (a) or (b) above, sever the transaction in such a way as to secure
that, in the notice served by him under this section with respect to that
disposal, the terms specified in pursuance of subsection (2)(a) are the terms
on which he is willing to make that disposal …
Duty of new landlord to furnish
particulars of disposal made in contravention of Part I
11.–(1) Where —
(a) a landlord has made a relevant
disposal affecting any premises to which at the time of the disposal this Part
applied (‘the original disposal’), and
(b) either no notice was served by the
landlord under section 5 with respect to that disposal or it was made in
contravention of any provision of sections 6 to l0, and
(c) those premises are still premises to
which this Part applies,
the requisite majority of qualifying
tenants of the constituent flats may, before the end of the period specified in
subsection (2) below, serve a notice on the transferee under the original disposal
requiring him to furnish a person (whose name and address are specified for the
purpose in the notice) with particulars of the terms on which the original
disposal was made (including those relating to the consideration payable) and
the date on which it was made; and in the following provisions of this Part the
transferee under that disposal is referred to as ‘the new landlord’.
(2) The period referred to in subsection
(1) is the period of two months beginning with the date by which —
(a) notices under section 3 of the
Landlord and Tenant Act 1985 (in this Act referred to as ‘the l985 Act’)
relating to the original disposal, or
(b) documents of any other description
indicating that the original disposal has taken place,
have been served on the requisite
majority of qualifying tenants of the constituent flats.
(3) Any person served with a notice in
accordance with subsection (1) shall comply with the notice within the period
of one month beginning with the date on which it is served on him.
Right of qualifying tenants to compel
sale etc by new landlord
12.–(1) Where —
(a) paragraphs (a) and (b) of section
11(1) apply to a relevant disposal affecting any premises to which at the time
of the disposal this Part applied (other than a disposal consisting of such a
surrender as is mentioned in section l5(1)(b)), and
(b) those premises are still premises to
which this Part applies,
the requisite majority of qualifying
tenants of the constituent flats may, before the end of the period specified in
subsection (2), serve a notice (‘a purchase notice’) on the new landlord
requiring him (except as provided by the following provisions of this Part) to
dispose of the estate or interest that was the subject-matter of the original
disposal, on terms on which it was made (including those relating to the
consideration payable), to a person or persons nominated for the purposes of
this section by any such majority of qualifying tenants of those flats.
(2) The period referred to in subsection
(1) is —
(a) in a case where a notice has been
served on the new landlord under section 11(1), the period of three months
beginning with the date on which a notice is served by him under section 11(3);
and
(b) in any other case, the period of
three months beginning with the date mentioned in section 11(2).
(3) A purchase notice —
(a) shall, where the estate or interest
that was the subject-matter of the original disposal related to any property in
addition to the premises to which this Part applied at the time of the disposal
—
(i) require
the new landlord to dispose of that estate or interest only so far as relating
to those premises, and
(ii) require
him to do so on the terms referred to in subsection (1) subject to such
modifications as are necessary or expedient in the circumstances;
(b) may, instead of specifying the estate
or interest to be disposed of or any particular terms on which the disposal is
to be made by the new landlord (whether doing so expressly or by reference to
the original disposal), provide for that estate or interest, or (as the case
may be) for any such terms, to be determined by a rent assessment committee in
accordance with section 13.
(4) Where the property which the new
landlord is required to dispose of in pursuance of the purchase notice has at
any time since the original disposal become subject to any charge or other
incumbrance, then, unless the court by order directs otherwise —
(a) in the case of a charge to secure the
payment of money or the performance of any other obligation by the new landlord
or any other person, the instrument by virtue of which the property is disposed
of by the new landlord to the person or persons nominated for the purposes of
this section shall (subject to the provisions of Part I of Schedule 1) operate
to discharge the property from that charge; and
(b) in the case of any other incumbrance,
the property shall be so disposed of subject to the incumbrance but with a
reduction in the consideration payable to the new landlord corresponding to the
amount by which the existence of the incumbrance reduces the value of the
property.
First issue
Twinsectra in its skeleton argument
submitted that, even if, it be assumed that a landlord had a duty to comply
with a purchase notice, the county court in this case did not have jurisdiction
to grant the declarations because the declarations sought in the pleadings were
said to be ‘in aid of’ an enforcement order and as no default notice had been
served, an enforcement notice could not be made so as to trigger the court’s
powers under section l9 of the Act. That was a pleading point and was one
reason why the applicants requested the amendment to which I have referred. It
was not pressed at the hearing before us. However, the amendment did not solve
the question as to whether it would be right to grant the declarations
originally sought, even if the purchase notice was a valid notice. Twinsectra
submitted that even if it had been served with a valid notice, it was not under
an obligation to comply with it. If that is right there would be no purpose in
granting those declarations.
Thus the first question for decision is —
does a landlord, upon whom a valid purchase notice has been served, have to
give effect to it? Mr Kim Lewison QC submitted that the Act did not contain any
requirement that a landlord, who was served with a section l2 purchase notice,
need comply with it. All that the section did was to provide for service of a
notice in a particular form. That, he submitted, was to be contrasted with the
effect of service of a section 5 notice. That constituted an offer which could
be accepted by a nominated person in accordance with the provisions of section
6. He also drew attention to section 19 which empowers the court to ‘make an
order requiring any person who has made default in complying with any duty
imposed on him by any provision of this part to make good the default within
such time as specified in the order’. He submitted that the Act did impose
duties as could be seen, for example in section 1 (‘a landlord shall not
make’), section 5 (‘he shall serve a notice’), section 5 (5) (‘the landlord
shall, for the purpose …’) and section 11(3) (‘shall comply with the notice’).
In contrast section 12, he submitted, contained no such duty upon a landlord to
comply with the notice when served.
Mr Lewison referred us to the criticisms
of the Act made by this court in Belvedere Court Management Ltd v Frogmore
Developments Ltd [1996] 1 All ER 312*. In that case landlords had sold
flats to Frogmore without serving a section 5 notice. Prior to receipt of a purchase
notice, Frogmore granted certain leases in the block of flats to another party.
Sir Thomas Bingham MR said, at p330h:
*Editor’s note: Also reported at [1996] 1
EGLR 59
In Denetower Ltd v Toop …
[1991] 1 WLR 945 at 952 Browne-Wilkinson V-C sitting in this court described
the l987 Act as ‘ill-drafted, complicated and confused’. The argument in this
case has given new force to this under-stated criticism. Some anomalies have
already been mentioned. There are others. Nothing in s 12 imposes on the new
landlord a duty not to dispose of his interest, such as is imposed on the
original landlord by s 6(1). It is unclear why not. There is nothing in s 12
which gives the tenants a right to require a subsequent purchaser from the new
landlord to dispose of his interest to the tenants’ nominees. A limited right
is given by s 16, but it is not equivalent to the right given by s 12(1)
against the new landlord. It is again unclear why not. Counsel discounted the
suggestion that an acceptance notice under s 6(1)(b) or a purchase notice under
s 12(1) might create an equitable interest in the land capable of registration
as a land charge or protection by a caution, and I am not inclined to disagree.
But one could wish that the Act provided as many answers as it raised problems.
Hobhouse LJ made a similar criticism. He
said at p331E:
The Act imposes certain obligations on
landlords but does not match them with adequately expressed rights for the
tenants. In some respects the drafting is extremely detailed, in others obvious
situations have not been provided for. In places restrictive expressions are
used — s 16 provides examples — but the reasons for the restrictions are not
clear and the Act does not deal with the lacunae that result. Overall the
drafting does not disclose a clear and consistent policy and it falls between
the two stools of being both excessively and inadequately detailed.
After referring to two cases he went on
at p331g:
The legislature does not seem to have
appreciated what was involved in making the rights sought to be conferred on
tenants effective. Whilst the drafting of fully effective provisions would not
be unduly difficult (and has been achieved in other legislation covering
similar matters), it is not the role of the court to construct such provisions
if they are not to be found expressly or implicitly in the Act as drafted. The
ease of the legislative task does not mean that the distinction between the
roles of the courts and the legislature can be disregarded. The solutions to
the problems posed have to be found, if at all, within the scope of the
interpretative tools open to the courts to uncover and give effect to the
statutory intention.
Mr Lewison submitted that the words of
Hobhouse LJ were applicable to the facts of this case and the court should not
construct a duty which was not there. If there was a lacuna, as he submitted
there was, it should be remedied by parliament and not by the court.
Mr David Neuberger QC, who appeared for
the applicants, submitted that a landlord who was served with a purchase notice
had to give effect to it. Although there was no section of the Act which so
stated the requirement was, in the words of Hobhouse LJ, ‘found expressly or
implicitly in the Act’. I believe he is right.
I have already set out part of the long
title to the Act. It is an Act ‘to confer on tenants of flats rights with
respect to the acquisition by them of their landlord’s reversion’.
To give effect to that, it is necessary
that a landlord should, when served with a purchase notice, comply with it and
to decide to the contrary would be failing to comply with the stated intention
of the legislature. In any case, I believe that the words of section 12 are
such as to require a landlord to give effect to the notice. Section 12(1)
enables qualifying tenants to serve a purchase notice on the new landlord,
‘requiring him … to dispose of the estate or interest that was the subject
matter of the original disposal’; and subsection 12 (4) refers to ‘where the
property which the new landlord is required to dispose of in pursuance of the
purchase notice …’. It goes on to state that: ‘The property shall be so
disposed of …’. Thus the section assumes that the purchase notice operates so
as to require disposal and provides a duty as to the way the property has to be
disposed. Further, to accept the submission of Twinsectra would mean that
sections 12 to 17 had no purpose as a landlord could refuse to comply with a
purchase notice which had been served. That is unreal.
I have not found it necessary, when
concluding that there was a duty upon a landlord to give effect to a purchase
notice, to rely upon the heading of section 12 which makes it clear that such a
duty exists. Even so, I believe it clear that the section is concerned with the
right of tenants to compel a sale by a new landlord. That appears to have been
the view of the Master of the Rolls in Belvedere when he said in the
passage that I have quoted
A limited right is given by section 16,
but it is not equivalent to the right given by section 12(1) against the new
landlord.
The conclusion I have reached is
consistent with the decision of the court in Denetower Ltd v Toop*
to grant the declarations which they did. If the judges had believed that the
landlord did not have to give effect to the purchase notice, they would not
have granted the declarations which they did as to do so would not have
resolved the essential issue between the parties.
*Editor’s note: Reported at [1991] 1 EGLR
84
Second issue
Was the purchase notice served by the
requisite majority of qualifying tenants?
Mr Lewison submitted that the notice was
not served by the requisite majority of tenants of the relevant premises. He
drew our attention to the way that the Act enables qualifying tenants to serve
notices. Section 3 defines a qualifying tenant as a tenant of a flat under a
tenancy other than certain tenancies such as protected shorthold tenancies. He
accepted that those of the applicants who were tenants of flats were qualifying
tenants within the definition, if they were tenants of the relevant premises. He
pointed out that a purchase notice could only be served by qualifying tenants
where:
paragraphs (a) and (b) of section 11(1)
apply to a relevant disposal affecting any person to which … this part applied.
Section 11(1)(a) was concerned with
relevant disposals affecting any premises which at the time of the disposal
Part I applied and section 1(2) defined the premises to which Part I of the Act
applied in this way.
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.
Mr Lewison submitted that the word
‘premises’ in section 1 meant, in this case, the complex as a whole meaning
Tudor Court, Tudor
defined in section 5(6). He also submitted that ‘premises’ to which Part I
applied had to be comprised within one registered title. There were, he
submitted, two estates in land capable of subsisting or of being conveyed,
namely an estate in fee simple absolute in possession or a term of years
absolute and that, by virtue of section 69 of the Land Registration Act 1925
each separate registered title was a separate estate in land. Therefore the
‘premises’ could not comprise more than one estate. Thus, he submitted, the
premises must be encompassed within one land registration title.
Those latter submissions found favour
with the judge. He said:
In addition, it appears to me that the
word ‘premises’ imports a requirement that the building or buildings or parts
of buildings constituting the premises to which Part I applies must be held by
the same title. ‘Premises’ meant originally the commencement of a deed, setting
out particulars of the property intended to be transferred thereby; hence it
has come to mean the lands granted by a particular deed. If ‘premises’ means
something more than a building or part of a building, then I do not think it
should be extended to include all the buildings held by a particular landlord,
by whatever title they are held. The Act is ex proprietary and the court should
not be ‘too ready to give it to liberal a construction’ — see per Goff LJ in Methuin-Campbell
v Walters [1979] 2 WLR 113, CA at page 117 D dealing of course with the
Leasehold Reform Act l967.
I cannot accept the conclusion of the
judge that title is relevant. The premises must consist of whole or part of a
building which, as was made clear in Belvedere, could include a garden.
The word ‘premises’ does not have a special meaning. It is a word which over
the years has been applied to houses, land, shops and the like with the result
that it has come to mean real property of some kind. Thus the Act states that a
landlord should not make a relevant disposal affecting any real property
without serving a section 5 notice, if it consists of the whole or part of a
building and it contains two or more flats held by qualifying tenants and the
number of those flats exceeds 50% of the total. The fact that the building is
included within one or more titles is irrelevant. It follows that the question
of whether a relevant disposal of premises has been made has to be considered
on a building by building basis. Thus when ascertaining whether the applicants
were a requisite majority, it is not appropriate to take into account Parr
Court. Each building must be considered separately.
In this case we are only concerned with
Tudor House, and buildings 1 and 4 of Tudor Court and in each case the relevant
applicants constituted the requisite majority of tenants in the building. Parr
Court was a different building. If the tenants wished to purchase the freehold
of that building, the question of whether they could do so would be for them to
decide. Any decision they took could not affect the rights of the tenants of
the other buildings. The contrary conclusion would be surprising. If the
original landlord had complied with his duty under section 5, he would, under
section 5(5), have had to sever each building from the others. Thus it would be
surprising if the procedure laid down after transfer to a new landlord, placed
the tenants of Tudor House in the position of being governed by the decisions
of the tenants of Parr Court.
It follows that the purchase notice was
served by the requisite majority of tenants of Tudor House and buildings 1 and
4 of Tudor Court.
Third issue
A number of attacks were advanced against
the content of the purchase notice which, it was submitted, rendered it
invalid. Each needs consideration.
The purpose of Part I of the Act was to
give qualifying tenants a right of first refusal. To achieve that, section 1
placed a duty upon a landlord not to make a relevant disposal without serving a
section 5 notice giving to the tenants a right to acquire the relevant estate
or interest. Section 5 sets out in detail the form of the notice which the
landlord has to serve. The offer made in the notice can be accepted by the
tenants by serving an acceptance notice as provided for in section 6. In
general, such difficulties in procedure which arise are borne by the landlord
as he has to draft the relevant section 5 notice.
If the original landlord is in breach of
his obligations under sections 1 and 5, the qualifying tenants have the right
to acquire the estate from the new landlord by serving a section 12 notice. In
this case, it is said that the content of that notice was not in accordance
with section 12 and as a result it was invalid. If that be right, then the
failure of the original landlord to serve a section 5 notice placed the tenants
in a position in which they should not have been put.
I shall come to section 12, but it is
important to bear in mind that the purpose of a purchase notice is to give to
the new landlord adequate notice that the qualifying tenants of the building
wish to acquire the freehold upon the terms of the original disposal or upon
terms to be decided by the LVT. That was the view of the Vice-Chancellor in Denetower,
which was a case where it was alleged that the purchase notice was invalid as
it failed to define the property adequately. He said at p953H:
Given the complexity of the Act, a
draftsman of a notice would be presented with an impossible task in seeking to
specify in detail the exact property to be acquired. A notice in terms such as
those contained in the present notice gives to the new landlords adequate
notice of the claim. Details of the property to be acquired and the terms of
the acquisition can in default of agreement be sorted out by the rent
assessment committee on an application under section 13(1).
A purchase notice must give adequate
notice to the new landlord of the qualifying tenants desire to purchase the
estate or interest that they should have been offered by the original landlord.
That is imperative, in the sense that it must be followed to the letter, but
some of the other requirements of section 12 are only directory. That
difference can arise as was made clear in Howard v Secretary of State
for the Environment [1975] QB 235. In that case, the Secretary of State
contended that a notice of appeal was invalid as it failed to comply with the
statutory obligation that it ‘shall be made by notice in writing to the
Minister, which shall indicate the Grounds of Appeal and state the facts upon
which it is based’. The Secretary of State contended that the notice was
invalid as it failed to provide details of the facts relied on. The court held
that it was imperative to serve a notice of appeal in writing, but it was only
directory that the notice of appeal had to contain the facts. Thus the notice
of appeal was not invalid because it did not include all the facts which were
going to be relied on. Lord Denning MR cited this passage from the speech of
Lord Penzance in Howard v Bodington (1877) 2 PD 203 at p210:
Now the distinction between matters that
are directory and matters that are imperative is well-known to us all in the
common language of the courts at Westminster … A thing has been ordered by the
legislature to be done. What is the consequence if it is not done? In the case
of statutes that are said to be imperative, the courts have decided that if it
is not done the whole thing fails, and the proceedings that follow upon it are all
void. On the other hand, when the courts hold a provision to be mandatory or
directory, they say that, although such provision may not have been complied
with, the subsequent proceedings do not fail.
Later he said at p242E:
The section is no doubt imperative in
that the notice of appeal must be in writing and must be made within the
specified time. But I think it is only directory as to the contents. Take first
the requirement as to the ‘grounds’ of appeal. The section is either imperative
in requiring ‘the grounds’ to be indicated or it is not. That must mean all or
none. I cannot see any justification for the view that it is imperative as to
one ground and not imperative as to the rest. If one was all that was
necessary, an appellant would only have to put in one frivolous or hopeless
ground and then amend later to add his real grounds. That would be a futile
exercise. Then as to ‘stating the facts’. It cannot be supposed that the
appellant must at all costs state all the facts on which he bases his appeal.
He has to state the facts, not the evidence; and the facts may depend on
evidence yet to be obtained, and may not be fully or sufficiently known at the
time the notice of appeal is given.
All things considered, it seems to me
that the section, insofar as the ‘grounds’ and ‘facts’ are concerned, must be
construed as directory only: that is, as desiring information to be given about
them. It is not to be supposed that an appeal should fail altogether simply
because the grounds are not indicated, or the facts stated. Even if it is
wanting in not giving them, it is not fatal. The defects can be remedied later,
either before or at the hearing of the appeal, so long as an opportunity is
afforded of dealing with them.
In Belvedere, Hobhouse LJ
expressed his views as to the way that the 1987 Act should be construed using
different language, but I believe arriving at the same result. He said at
p335d:
By way of final comment I would add that
I am strongly attracted to the view that legislation of the present kind should
be evaluated and construed on an analytical basis. It should be considered
which of the provisions are substantive and which are secondary, that is,
simply part of the machinery of the legislation. Further, the provisions which
fall into the latter category should be examined to assess whether they are
essential parts of the mechanics or merely supportive of the other provisions
so that they need not be insisted on regardless of the circumstances. In other
words, as in the construction of contractual and similar documents, the status
and effect of the provision has to be assessed having regard to the scheme of
the legislation as a whole and the role of that provision in that scheme — for
example, whether some provision confers an option properly so called, whether
some provision is equivalent to a condition precedent, whether some requirement
can be fulfilled in some other way or waived. Such an approach when applied to
legislation such as the present would assist to enable the substantive rights
to be given effect to and would help to avoid absurdities or unjustified
lacunae.
A section 12 notice must be in writing
and served upon the new landlord in time. Further, it must give adequate notice
of the requirement of the qualifying tenants to have the estate or interest in
the premises, as defined in section 1, to be transferred to a nominated person.
Those requirements are, in my view, imperative.
The first complaint as to the form of the
notice made by Twinsectra was a failure to include flat 7, Tudor House, in the
notice. It was said that that failure was fatal to the validity of the purchase
notice as a whole. That was accepted to be a valid complaint by the judge.
It is correct that flat 7, Tudor House,
is not included in the heading of the notice and therefore it is possible to
read the notice as only relating to six flats in Tudor House. That, to my mind,
would not give full effect to the notice that was given. The notice required
Twinsectra to dispose of the freehold interest that Twinsectra held in ‘the
above-mentioned premises’. Given that what was being referred to was a freehold
interest in Tudor House, it would be absurd to understand the notice as only
requiring part of that freehold interest to be transferred. Further, if there
was doubt, the letter sent with the notice made it clear that what was being
referred to was the whole of the freehold interest in Tudor House. I therefore
conclude that the notice was not invalid on this ground.
Second, Twinsectra drew attention to
section 12(3) which is concerned with an acquisition where the original
disposal included property in addition to premises to which Part I of the Act
applied. In such a case, the subsection states that the purchase notice should
require the new landlord to dispose of the estate or interest ‘only’ so far as
relating to the particular premises and upon terms of the original disposal
subject to such modifications as are necessary or expedient.
Twinsectra submitted that the purchase
notice required transfer of all Tudor Court, whether or not the buildings
contained houses or bungalows and that the inclusion of such units in the
notice was a clear breach of section 12(3)(a)(i). That the judge held to be
correct.
The applicants accept that the purchase
notice could advantageously have been drafted in different terms. However, I
believe that the requirements in section 12(3)(a)(i) are only directory. In
this case, the purchase notice included extra property, but that did not
invalidate the notice as a whole. It gave adequate notice of the requirement of
the qualifying tenants that the landlord should transfer buildings 1 and 4 of
Tudor Court and Tudor House. Further, it was clear that Parr Court was not
included. The notice also stated that in the alternative to disposal to them on
the original terms, the terms were to be determined by a LVT. Thus the landlord
was given adequate notice that the tenants of buildings 1 and 4 of Tudor Court
and Tudor House wished to acquire the freehold interest in them. That was, in
my view, sufficient.
Third, Twinsectra submitted that section
12(3)(a)(ii) stated that the purchase notice should require the terms of the
original disposal to be modified. That the notice did not do. The notice
required Twinsectra to ‘dispose of the said estate or interest to them on (i)
the same terms on which the said estate or interest was disposed of to
Twinsectra Ltd; or (ii) alternatively on such terms as may be determined by a
Rent Assessment Committee pursuant to section 12(3)(b) of the above-mentioned
enactment’.
Although the notice could have been
worded so as to refer to the words of section 12(3)(a)(ii), there was, in my
view, no need for it to do so. For practical purposes, it was sufficient to
make it clear to the landlord that the qualifying tenants wished to have the
estate conveyed to them upon the same terms with such appropriate modifications
as would be agreed or settled by a LVT. That I believe was the effect of the
notice which was served. It follows that for practical purposes Twinsectra
could have been in no doubt, after receipt of the notice, that the terms would
have to be settled, in default of agreement, by a LVT.
It is an imperative requirement of
section 12(3) that the qualifying tenants should inform the new landlord of the
property to be acquired, thereby informing him that the qualifying tenants
desire to acquire the estate or interest in that property which was transferred
to the new landlord in breach of the original landlord’s obligations under
section 1. The provisions of sections 12(3)(a) and (b) allowing the qualifying
tenants to either acquire the whole of the property or sever and to leave it to
a LVT to sort out the estate or interest or terms, are in my view directory. I
therefore conclude that this objection also fails.
I conclude that the notice served was a
valid notice by the qualifying tenants of buildings 1 and 4 of Tudor Court and
of Tudor House. In those circumstances I would allow this appeal in so far as
it relates to the tenants of those buildings and grant declarations appropriate
to the conclusion I have reached.
Agreeing, Sir John May said: I have had the opportunity of reading
both my lords’ judgments in draft and I agree with them. Although we are
differing from the decision of the learned judge below, I do not think it
necessary to add anything on my own account. I, too, would allow this appeal
and grant the declarations to which my Lords have referred.
Also agreeing, Staughton LJ said: This is the most remarkable case of
statutory interpretation that I have ever seen. It is as plain as can be what
the purpose of Part I of the Landlord and Tenant Act 1987 was — to enable
tenants of flats to buy their landlord’s interest in the building if the
landlord proposed to sell it to someone else, and to buy it from the purchaser
if the landlord had actually done so. But nowhere does the statute say
expressly that the tenants shall have that right against the new landlord. If
that omission is fatal, Part I of the Act is not worth the paper which it is
written on. One can compare what Lord Simonds said in Inland Revenue
Commissioners v Ayrshire Employers Mutual Insurance Association Ltd
[1946] 1 All ER 637 at p641:
The case is an unusual one. The section
under discussion, section 31 of the Finance Act 1933, is clearly a remedial
section, if that is a proper description of a section intended to bring further
subject-matter within the ambit of taxation. It is at least clear what is the
gap that is intended to be filled and hardly less clear how it is intended to fill
that gap. Yet I can come to no other conclusion than that the language of the
section fails to achieve its apparent purpose and I must decline to insert
words or phrases which might succeed where the draftsman failed.
We are not left in such a state of impotence
in this day and age, or with this statute. As Aldous LJ has pointed out, the
long title of the Act suggests that it confers on tenants rights with respect
to the acquisition of their landlord’s reversion. And section 12(1), which
allows the tenants to serve a notice requiring the new landlord to dispose of
his estate or interest to their nominee, by implication enacts that the
landlord shall be obliged to comply with the requirement. If this be
constructive judicial legislation, then it is an example of what Sir Thomas
Bingham MR considered (in the Belvedere Court case) to be called for.
It seems to me that this conclusion is
supported by the marginal note to section 12:
Right of qualifying tenants to compel
sale etc. by new landlord.
See also the marginal note to section 17:
Termination of rights against new
landlord or subsequent purchaser.
There is a strong argument for paying
some attention to the marginal notes, while not allowing them to be decisive.
After all, they are included in the copy of the Bill that is before parliament,
although not susceptible to alteration by vote of the members but only by
officials: see Bennion on Statutory Interpretation 2nd ed pp486,
512–514. However, reliance on marginal notes in a statute for the present has
to be regarded as controversial.
The other problems in this appeal relate
to the content and extent of the purchase notice which the tenants gave. First
it is essential to decide what is meant by the provision in section 1(2):
… this Part applies to premises if —
(a) they consist of the whole or part of
a building …
Although a different view seems to have
been common ground before the judge, in my opinion, more than one building
cannot, in the ordinary way, be treated as comprised in premises for the
purposes of the Act. There may be an exception for outhouses and the like; but
in general I consider that separate buildings must be treated separately.
Otherwise there is very likely to be absurdity; the judge doubted whether the
Act could then be made to work.
It follows that there could be no
objection to the omission of Parr Court from the tenants’ purchase notice,
although (i) it was transferred to Twinsectra Ltd by a conveyance which
included other buildings which featured in the purchase notice, and (ii) it was
registered in the same title as Tudor House and parts of Tudor Court. If Parr
Court was properly omitted from the purchase notice, there was no lack of a
qualifying majority of tenants for each of the buildings to which Part I of the
Act applied.
However, the inclusion of buildings 2 and
3 of Tudor Court in the purchase notice was an infringement of section
12(3)(a)(i). That provides that where the original landlord’s disposal included
property in addition to the premises which the Act applied to, the notice must
require the landlord to dispose of his estate or interest only so far as
relating to those premises.
I cannot regard this defect in the
tenants’ purchase notice as so significant as to render it altogether invalid,
for three reasons. In the first place, it was in all probability caused by the
original landlord’s failure to serve a notice under section 5 and in doing so
to sever the transaction as required by subsection (5) of that section. Second,
it must have been perfectly obvious to the new landlord which parts of Tudor
Court could, and which could not, qualify under Part I of the Act. And third,
the purchase notice allowed as an alternative that the terms might be
determined by a rent assessment committee, which would have jurisdiction under
section 13(1)(a) to determine ‘the identity of the property to be disposed of’.
I would therefore conclude that the purchase notice did not fail to comply with
section 12 in any respect that was imperative or mandatory, but at most where
it was directory: see Howard v Secretary of State for the Environment
[1975] QB 235, and the judgment of Hobhouse LJ in the Belvedere Court
case at p335.
It may be that there should strictly have
been not one purchase notice served by the tenants but three, relating to the
three buildings to which Part I of the Act applied. However, I did not
understand Mr Lewison to insist that there should have been three separate
pieces of paper; and if he pressed the point, I would not have held that any
such requirement was imperative or mandatory.
Finally, there was a complaint that the
purchase notice, by reason of the way it was drafted, referred only to flats 1
to 6 in Tudor House and not to flat 7. I would reject that argument for the
reason given by Aldous LJ. All told, I would allow this appeal, and grant
declarations as he proposes.
Appeal allowed.