Leasehold enfranchisement – Collective enfranchisement — Leasehold Reform, Housing and Urban Development Act 1993 – Respondents giving notice under section 13 of 1993 Act to acquire freehold of building – Notice not protected by registration against freehold title under section 97(1) – Agreement reached with appellant freeholder on price payable for freehold – Transfer of freehold from appellant to his wife and back to appellant again – Whether initial noticed thereby ceasing to have effect so that first-tier tribunal having no jurisdiction to determine remaining terms of acquisition – Whether appellant entitled to resile from agreement on purchase price – Appeal dismissed
The respondents were the long leaseholders of four of the six flats in a terraced property in St Leonards-on-Sea, East Sussex. In 2004, they gave notice to the appellant freeholder, under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993, to exercise their right to acquire the freehold of the building by collective enfranchisement under Chapter I of Part I of that Act. By his counternotice, the appellant admitted the respondents’ right but disputed the proposed purchase price and required a leaseback of one flat and the garden.
The respondents applied to the leasehold valuation tribunal (LVT) for a determination of the terms of acquisition. In July 2006, the parties agreed in writing on a purchase price of £6,330 but reserved the right to apply for a determination of any remaining disputed terms.
Meanwhile, in October 2012, the appellant effected a transfer of the freehold for £1 to his wife, who, after being registered as proprietor, transferred it back to him by way of gift so that the appellant again became the registered proprietor. At the time of those transfers, the respondents had not protected their interest by noting the initial notice against the registered freehold title pursuant to section 97(1) of the 1993 Act.
In July 2013, the LVT determined the disputed terms of the leaseback substantially in accordance with the proposals put forward by the respondents. An appeal against that decision was withdrawn and it only remained for the respondents’ claim to be remitted to the first-tier tribunal (FTT), as successor to the LVT, to settle the form of the transfer of the freehold. However, the appellant disputed the FTT’s jurisdiction to make a determination, arguing that the initial notice had ceased to have effect by reason of the intervening transfers of the freehold. He also sought to resile from the agreement on the purchase price.
The FTT held that: (i) the initial notice remained effective, such that it retained jurisdiction to determine the terms of the transfer of the freehold; but (ii) the purchase price having been agreed by the parties, it was not open to either of them to seek a reconsideration of that price by the FTT. The appellant appealed.
Held: The appeal was dismissed.
(1) Once qualifying tenants served an initial notice to exercise the rights conferred by Chapter I of Part I of the 1993 Act, those rights were enforceable against the recipient of that notice in accordance with the provisions of Chapter I. The failure of the respondents to protect the initial notice on the land register meant that the appellant’s wife took the freehold unencumbered by the rights of the respondents under Chapter I of the 1993 Act but it did not mean that the initial notice ceased to have any effect. Section 13(11) of the 1993 Act comprehensively described the circumstances in which an initial notice would cease to have effect. Once an initial notice had been given, it remained in force until the occurrence of one of the three events described in section 13(11), namely entry into a contract or the making of a vesting order giving effect to the right of acquisition, an actual or deemed withdrawal of the notice at the election of the nominee purchaser, or the occurrence of circumstances outside the control of the nominee purchaser which defeated the right of acquisition and required that the initial notice cease to have effect. An unprotected initial notice would only cease to have effect if the circumstances brought it within one of the categories described in section 13(11). None of those categories was engaged in the instant case.
The rights conferred by Chapter I were not proprietary rights but conferred a personal entitlement to acquire all the interest in the specified premises belonging to the recipient of the notice. They were enforceable by the giver of the notice only against the original recipient unless protected by registration. Although they could, in practice, be defeated by a transfer to a third party if not so protected, if circumstances occurred in which the rights once again became capable of practical enforcement there was nothing in the 1993 Act to prevent them from being enforced. It followed that the respondents’ initial notice remained enforceable against the appellant after he transferred the freehold of the premises to his wife and that the FTT retained jurisdiction to determine the disputed terms of the transfer. Once the appellant’s wife returned the freehold to the appellant, during the currency of the application for determination of the terms of acquisition, there was no longer any obstacle to giving effect to the respondents’ rights.
(2) The appellant was not entitled to resile from his earlier agreement on the purchase price for the freehold. A party could only apply to the appropriate tribunal for a determination of terms which remained in dispute, with the tribunal able to make a determination of those terms “in default of agreement”: see sections 24(1) and section 91(1). Although, by section 38(4), agreement meant agreement “subject to contract”, the purpose of that provision was not to indicate that the agreed terms were not binding but rather to make clear that terms agreed on that basis were nonetheless treated as agreed for the purpose of the statutory scheme. While the concept of a binding agreement subject to contract was a curious one, it was a concept which the 1993 Act required to be acknowledged. Terms which had been agreed were not binding or irrevocable in a contractual sense: thus, a nominee purchaser could decline to proceed with the proposed acquisition if it was dissatisfied with the best terms it had been able to agree, or either party could seek modification of those terms under section 24(4)(b) on the ground of a change of circumstances since the particular terms were agreed, or seek an order under section 24(4)(c) that, despite all the terms being agreed or determined, the initial notice should be deemed to have been withdrawn. Otherwise, however, terms could be agreed or determined at different times and it was not the case that, until all terms were agreed or determined, a party was free to re-open any term previously agreed. It would render the scheme of the Act incoherent and open to abuse if terms which had been agreed could be revisited: City of Westminster v CH2006 Ltd [2009] UKUT 174 (LC); [2010] PLSCS 13 applied; Penman v Upavon Enterprises Ltd [2001] EWCA Civ 956; [2001] PLSCS 135, Sinclair Gardens Investments Ltd v Eardley Crescent No 75 Ltd LRA/77/2005 and Goldeagle Properties Ltd v Thornbury Court Ltd [2008] EWCA Civ 864; [2008] 3 EGLR 69; [2008] 45 EG 102 distinguished.
Paul Letman (instructed by Rice-Jones & Smiths) appeared for the appellant; Stan Gallagher (instructed by Butters David Grey LLP, of Hastings) appeared for the respondents.
Sally Dobson, barrister
