Lease extension – Head lessees – Chapter II of Leasehold Reform, Housing and Urban Development Act 1993 – Buildings incorporating flats and common parts – Whether head lessees entitled to individual lease extension in respect of flat within the building – Appeals allowed
In both appeals, the appellants were the head lessees of a building divided into self-contained units, some of which were let on underleases. The building in the first appeal was concerned contained residential flats, while the building in the second appeal comprised offices with a residential maisonette on the upper floors. Both incorporated internal common parts and external areas for parking, which remained under the appellants’ control and were not included in the underleases, although the underleases conferred certain rights over them. The appellants served notice on the respondent landlords seeking a lease extension under Chapter II of the Leasehold Reform, Housing and Urban Development Act 1993. The respondents resisted the appellants’ claims on the ground that the head lessee of a building that contained a number of flats was not a “qualifying tenant” entitled to an individual lease extension under those provisions.
In each case, the county court judge held that such a head lessee was a qualifying tenant entitled to exercise the right of individual lease extension. However, those decisions were reversed on appeals by the respondents. The Court of Appeal held that the right of an individual lease extension did not apply to the head lessee of a building that contained a number of flats since the legislative scheme lacked any detailed provision or conveyancing mechanism of the kind that would be needed in such cases to deal with the knock-on effect of such a grant on the existing lease and matters such as rights over common parts, the apportionment of the rent under the headlease and the modification of the applicable scheme of covenants. The appellants appealed. In its response, the respondents raised a further point that Article 1 of the First Protocol to the European Convention on Human Rights would be infringed if a head lessee could be a qualifying tenant for the purposes of Chapter II.
Held: The appeals were allowed.
As a matter of statutory language, a lessee under a lease of property that included, but was not confined to, a flat could be a “tenant” of that flat for the purposes of Chapter II of the 1993 Act, irrespective of the nature or extent of the other property included in the demise. That was the natural meaning of the phrase “tenant of a flat” in section 39(1) of the 1993 Act, and that interpretation was reinforced by other provisions of the 1993 Act: see the unqualified reference in section 101(3) to “demised premises” that “consist of or include the flat” and the reference in section 57(1)(a) to “property” that was “included in the existing lease but not comprised in the flat”.
There was no policy reason why head lessees of such properties should be excluded from the right to individual lease extension. There was no need to exclude commercial property investors from the benefits of Chapter II, and the notion that the 1993 Act was intended to benefit only resident occupiers could not be justified since the original residence requirement had been removed by the Commonhold and Leasehold Reform Act 2002. If that meant that a head lessee of a block containing several flats, none of which were underlet on long leases, could claim a lease extension of each of the individual flats at the same time, that was not objectionable but was simply the consequence of the 2002 amendment: Maurice v Hollow-Ware Products Ltd [2005] EWHC 815 (Ch); [2005] 2 EGLR 71; [2005] 26 EG 132 considered. Any loss that a freeholder might suffer as a result of a head lessee acquiring a new lease would be compensated under Schedule 13 to the 1993 Act.
Where no restriction upon the persons entitled to benefit from a statute could be gathered from the provisions that directly related to the identification of such persons, no such restriction could be implied by reference to the operational provisions of the statute unless the restriction was plainly justified by the operational provisions and its nature was clear. No such restriction could be implied into Chapter II. The alleged practical difficulties, inconsistencies and oddities resulting from allowing head lessees to exercise the Chapter II right either did not arise or could be overcome. For example, section 57 could be applied to cover the precise identification of the premises to be comprised in the new lease, and to resolve issues over repairing obligations. Section 57 conferred a wide discretion upon the leasehold valuation tribunal; the factual circumstances that could arise in relation to claims under the 1993 Act were multifarious and unpredictable and the LVT had the ability, experience and qualifications to consider and determine such issues.
There was no breach of Article 1 of the First Protocol to the European Convention on Human Rights either on the ground of inadequacy of compensation to the freeholder or lack of certainty.
Edwin Johnson QC and Adam Smith (instructed by Bircham Dyson Bell) appeared for the appellant in the first appeal; Philip Rainey (instructed by Pemberton Greenish) appeared for the respondents in the first appeal; Anthony Radevsky (instructed by Forsters LLP) appeared for the appellant in the second appeal; Judith Jackson QC and Katherine Holland (instructed by Speechly Bircham LLP) appeared for the respondents in the second appeal.
Sally Dobson, barrister
