The Leasehold Reform, Housing and Urban Development Act 1993 increased leaseholders’ rights in two respects. Chapter I of the Act confers rights of collective enfranchisement on qualifying tenants. Chapter II confers additional rights enabling qualifying tenants to extend their leases for 90 years.
The legislation was amended in 2002 and it is no longer necessary to satisfy a residency condition to take advantage of the 1993 Act. This opened the door to claims by intermediate landlords for extensions to leases of flats that had not already been sublet to qualifying tenants: Maurice v Hollow-Ware Products Ltd [2005] EWHC 815.
The Leasehold Reform, Housing and Urban Development Act 1993 increased leaseholders’ rights in two respects. Chapter I of the Act confers rights of collective enfranchisement on qualifying tenants. Chapter II confers additional rights enabling qualifying tenants to extend their leases for 90 years. The legislation was amended in 2002 and it is no longer necessary to satisfy a residency condition to take advantage of the 1993 Act. This opened the door to claims by intermediate landlords for extensions to leases of flats that had not already been sublet to qualifying tenants: Maurice v Hollow-Ware Products Ltd [2005] EWHC 815. The Court of Appeal overturned that decision in Howard de Walden Estates Ltd v Aggio; Earl Cadogan v 26 Cadogan Square Ltd [2007] EWCA Civ 499; [2007] 23 EG 165 (CS). However, the House of Lords has overturned both these rulings: Howard de Walden Estates Ltd v Aggio; Earl Cadogan v 26 Cadogan Square Ltd [2008] UKHL 44; [2008] PLSCS 180. The Lords’ decision confirms that an intermediate landlord of a building, comprising flats and common parts, is entitled to invoke Chapter II to obtain extended leases of individual flats in the building. The Lords ruled that, according to ordinary principles of interpretation, a tenant under a lease of a flat and other premises (whatever their nature or extent) is “a tenant of a flat” for the purposes of Chapter II. As a matter of language or legal concept, there was no basis for treating a lease of a block of flats as a special type of lease that was excluded from Chapter II. In addition, there were no policy reasons to prevent property investors from benefiting from the rights conferred by Chapter II. The notion that the legislation was intended to benefit residents was unjustifiable, as the residency requirement previously imposed by the statute has been abolished. In addition, the Act specifies that Chapter I does not apply to tenants with three or more flats. There are no such restrictions on the number of flats that a tenant may own for the purposes of Chapter II. The Lords went on to consider whether there were any operational reasons for interpreting the statute restrictively, by limiting the class of persons who could benefit from Chapter II. They considered the practical difficulties that could arise when separating the flats from the common areas, and the landlords’ arguments that the leases would have to be substantially rewritten. They ruled that the Act included machinery to deal with this and that none of these difficulties were insuperable. In addition, the leasehold valuation tribunal had the ability, experience, and qualifications to consider and determine such issues. The court also rejected arguments that the legislation infringed the European Convention on Human Rights. The legislation was sufficiently certain to enable those affected to foresee the consequences. Furthermore, freeholders were entitled to compensation at least equal to their financial loss on the grant of an extended lease. Allyson Colby is a property law consultant
