Collective enfranchisement – Leasehold Reform, Housing and Urban Development Act 1993 – Appellant landlord proposing to retain part of property while offering rights over it to comply with section 1(4)(a) – Appellant proposing to retain right to build pursuant to section 21(3)(d) – Leasehold valuation tribunal (LVT) determining that entire property to be transferred – Whether LVT entitled to consider section 21(3)(d) proposals when determining adequacy of rights offered for purpose of section 1(4)(a) – Whether LVT erring in applying deferment rate of 7% in determination of premium – Appeal dismissed
The appellant owned the freehold of a block of flats in Reading, which was set in large grounds. The tenants of the flats served a notice, under the collective enfranchisement provisions of the Leasehold Reform, Housing and Urban Development Act 1993, seeking to acquire the freehold of the property through the respondent company. By clause 5 of its counternotice, the appellant proposed to limit the extent of the property to be purchased to specified premises comprising the buildings containing the flats, together with garages and a refuse area. It offered certain rights over the remainder in order to comply with section 1(4)(a) of the Act, by which a freeholder was entitled to retain land to which the enfranchisement rights would otherwise apply provided that it granted permanent rights sufficient to ensure that the occupiers of the flats enjoyed, as nearly as may be, the same rights as those enjoyed under their leases. In addition, clause 6 of the counternotice set out rights that the appellant wished to retain for itself over the specified premises, pursuant to section 21(3)(d). These included a right to “rebuild build on or alter buildings or land forming any part of the retained land”.
The leasehold valuation tribunal (LVT) determined issues including: (i) the extent of the land to be enfranchised; and (ii) the premium to be paid on enfranchisement. It found that the rights offered under clause 5 of the counternotice would place the leaseholders in practically the same position as that already enjoyed. However, it held that the appellant was effectively taking back those rights, or modifying them to an unacceptable extent, by proposing to retain building rights under section 21(3)(d), so that the requirements of section 1(4)(a) were not met and the transfer should include the entire property. In determining the enfranchisement premium, it applied a deferment rate of 7%.
On appeal, the appellant submitted that: (i) once the LVT had found that the rights offered to the tenants met the section 1(4)(a) test, it should have permitted the appellant to retain the land in question and had erred in considering the effect of the rights that the appellant proposed to retain for itself under section 21(3)(d); and (ii) the LVT should have applied the deferment rate of 5% laid down by the Lands Tribunal (LT) in Earl Cadogan v Sportelli [2007] 1 EGLR 153 and since confirmed by the Court of Appeal: see [2007] EWCA Civ 1042; [2007] 44 EG 180 (CS).
Held: The appeal was dismissed.
(1) The LVT had been correct not to look at clause 5 of the counternotice in isolation. Its task had been to construe the permanent rights offered to satisfy section 1(4)(a) in the context of the appellant’s proposals as a whole. The rights that the appellant proposed to retain under section 21(3)(d) affected the rights offered so as to create a significant difference from the current position. Accordingly, section 1(4)(a) was not satisfied. A landlord could not claim to have satisfied that provision if it proposed to grant rights with one hand and took them back with the other, which is what the LVT had found in the instance case.
(2) The LT could not properly assume, from the decisions in Sportelli, that the LVT had been wrong in its conclusion as to the deferment rate to be applied. Sportelli was the starting point; it was not necessarily the correct finishing point in the instant case. The LVT had reached its conclusion on the basis of the evidence that it had heard. The LT could not, on an appeal by way of review and without the benefit of fresh evidence, overturn that decision and instead adopt as correct for the present case the expressions of expert opinion accepted in another case.
Stephen Murch (instructed by Rokeby Johnson Baars LLP) appeared for the appellant; the respondent did not appear and was not represented.
Sally Dobson, barrister
