Right to acquire new lease – Qualifying tenant – Tenants’ notices claiming lease extensions – Whether head lessees entitled to individual lease extensions – Appeals allowed
Both appeals concerned premises comprising flats, internal common parts and external areas for parking. The respondent head lessees had served notice on the appellant landlords claiming to exercise a right of individual lease extension under the Leasehold Reform, Housing and Urban Development Act 1993.
In each case, the appellants denied the respondents’ claim. However, different judges in the county court found in favour of the respondents. In reaching their conclusions, both judges followed the decision of the Chancery Division in Maurice v Hollow-Ware Products Ltd [2005] EWHC 815 (Ch); [2005] 2 EGLR 71; [2005] 26 EG 132. In that case, the judge had relied upon section 56(1) of the 1993 Act, which granted to a qualifying tenant the right to acquire a new lease of his or her flat. He had rejected arguments that: (i) a head lessee could not exercise the right of individual lease extension because the existing lease would be left in place in respect of the common parts and that existing lease did not provide for the covenants to be modified; and (ii) if the leases were separately extended, they were likely to be sold and the owner was at risk that the common parts would be left with a company that would fail to perform the covenants for their maintenance. He had held that if difficulties arose with the covenants, they could be avoided by negotiation and the rent could be apportioned at common law.
The judges in the present appeals decided that since the Chancery Division and the county court were courts of co-ordinate jurisdiction when hearing applications under Part 1 of the 1993 Act, they were not bound by Maurice, but that they should follow that decision unless they were satisfied that it was wrong.
The appellants appealed, contending, inter alia, that the 1993 Act did not provide for the separation of the existing lease into several different parts. It would have to be substantially rewritten to create a new scheme of covenants for the use of the common parts, which indicated that parliament could not have intended to give a head lessee the right of individual lease extension.
Held: The appeals were allowed.
Head lessees did not have the right of individual lease extension conferred by Chapter II of Part 1 of the 1993 Act.
Although there was clear statutory recognition that the lease held by a tenant exercising that statutory right might include property other than a flat, that other property did not include the common parts held by the head lessee. Although, in practice, it might be possible successfully to negotiate the covenants over the common parts in the new lease for the remainder of the term of the headlease, it could not be assumed that parliament would have legislated on that basis.
The 1993 Act lacked any clear and detailed provision or conveyancing mechanism that might reasonably be expected to cover the grant of a new long lease of a flat to the long lessee of a building that included both flats and common parts and the knock-on effect of such a grant on the existing lease of and rights over the common parts in the leased building, the apportionment of the rent under the headlease and the modification of the applicable scheme of covenants. Those practical considerations supported the conclusion that parliament could not have intended that the lessee of a long lease of a building, which included multiple flats and common parts, would fall within the expression “a qualifying tenant of a flat” for the purposes of acquiring a new long lease under Part 1 of the 1993 Act: Maurice overruled.
Per curiam: The county court was a lower court than the High Court in the legal system of England and Wales. The Chancery Division of the High Court did not cease to be a higher court when it exercised the same first instance jurisdiction as had been conferred on the county court by the Leasehold Reform Acts.
Judith Jackson QC and Katherine Holland (instructed by Speechly Bircham LLP) appeared for the appellant in the first appeal; Anthony Radevsky (instructed by Forsters LLP) appeared for the respondents in the first appeal; Philip Rainey (instructed by Pemberton Greenish) appeared for the appellants in the second appeal; Edwin Johnson QC (instructed by Bircham Dyson Bell) appeared for the respondent in the second appeal.
Eileen O’Grady, barrister
