The Court of Appeal has rejected a landlord’s bid to prevent collective enfranchisement by 10 tenants of 20 flats in
The Chancellor of the High Court, sitting with Smith and Black LJJ dismissed the appeal brought by Craftrule, the freeholder of flats 41-60 Albert Palace Mansions, against a High Court ruling in favour of the tenants, who formed 41-60 Albert Palace Mansions (Freehold) to act as nominee purchaser.
The 10 tenants served a notice, under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993, to acquire by collective enfranchisement the freehold of that part of the five-storey mansion block comprising flats 41-60, which consists of a vertically divided section of the building, itself divided into two parts, each containing 10 flats.
Craftrule served no counternotice, but disputed the tenants’ right to enfranchise on the basis that the property did not qualify as a “self-contained part of a building” for the purposes of sections 3 and 4 of the Act, because each half constituted a “self-contained part”.
Its case was rejected by Judge Madge in Central London County Court in July 2009, and by Henderson J at the High Court in May 2010.
At the Court of Appeal today, Kenneth Munro, counsel for Craftrule, argued that the High Court judge should have held that a part of a building cannot be self-contained for the purposes of the Act if it can be subdivided into more than one self-contained part.
He claimed that flats 41-50 comprise a self-contained part of the building as do flats 51-60. As a result, the section 13 notice was invalid.
He also argued that only three of the participating tenants that lived in flats 41-50 and that the majority of tenants in that part of the building were presumably not interested in acquiring the freehold.
Contending that it was wrong to allow tenants to enfranchise a part of a building in which they have no direct financial stake or interest, he pointed to a possible extreme case in which the tenants in one part of a self-contained building could force themselves as new landlords on tenants of another part, even if the tenants of that part have no interest in acquiring the freehold.
However, Philip Rainey, for the tenants, argued that Craftrule had mistakenly failed to serve a counternotice and had consequently lost the right to contest the proposed terms of acquisition or to seek a leaseback of two flats.
The ruling paves the way for the participating tenants to enfranchise both blocks of flats identified in their notice and, in the absence of a counternotice from the landlord, to acquire the freehold interest on the terms proposed in their initial notice, including those relating to price.