Key points
• Enfranchisement notices should be protected by registration, otherwise an assignee of the freehold takes free of the claim
• What happens to an unprotected claim notice if an assignment takes place?
• The tribunal has no jurisdiction to revisit an unconditional agreement on premium
Enfranchisement claim notices should be protected by registration against the freehold title. This prevents the landlord transferring or dealing with the premises to frustrate the claim. If the landlord disposes of its interest, and the claim notice has not been registered, the recipient is not bound by it. But what effect does this failure have on the notice itself?
This was one issue explored in Curzon v Wolstenholme and others [2015] UKUT 173 (LC); [2015] PLSCS 122. The case also raised a second point: if the premium to be paid has been agreed, is it possible for either party to resile from the agreement?
Convoluted history
The claim, relating to a building which has six self-contained flats, has been rumbling along now for 10 years. A previous appeal involving the parties was considered by the Upper Tribunal (“the UT”) in Curzon v Hobbs and others [2013] UKUT 419 (LC).
The landlord had granted a lease of the basement flat to his wife and a separate lease of another flat to himself and his wife. The other four leaseholders, acting together as nominee purchasers, gave the landlord a claim notice, under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”), as long ago as November 2004. Although the landlord’s counter-notice admitted the claim, the parties have yet to reach final agreement. During protracted tribunal proceedings, it emerged that the landlord had sold the freehold to his wife for the sum of £1. A few months later she transferred it back to him as a gift.
The landlord then decided to raise the issue of jurisdiction and also sought to reopen the agreed premium. The First-tier Tribunal “the F-tT”) decided that it still had jurisdiction over the original claim but had no jurisdiction over the premium as this had been agreed by the parties. The landlord appealed to the UT.
The unprotected notice
What was the effect of the transfer of the freehold? Dismissing the landlord’s appeal on this point, the UT referred to section 13(11) of the 1993 Act which provides that the claim notice continues in force until: (i) a binding contract is entered into (or a vesting order is made); or (ii) the notice is withdrawn (or is deemed to have been withdrawn); or (iii) any other time when the notice ceases to have effect under the Act. This, concluded the UT, is an exhaustive statement and none of those circumstances applied to this claim. As a result, the claim notice remained in effect and could be enforced against the landlord once his wife passed the freehold back to him. The F-tT had correctly concluded that it had jurisdiction under the 1993 Act to decide any issues which remained in dispute.
The premium agreement
The parties agreed on the premium to be paid back in July 2006, even though they had not reached agreement on either the terms of the leaseback of the landlord’s flat or the terms on which the freehold would eventually be transferred. Some eight years later, the landlord sought to resile from this agreement.
In City of Westminster v CH2006 Ltd [2009] UKUT 174 (LC); [2010] PLSCS, the UT decided that once a term of acquisition had been agreed unconditionally (the price in that case) it was not open to a party to depart from that agreement.
Here, the UT rejected the landlord’s submission that the Westminster case was wrongly decided. The landlord had submitted that a term only becomes binding once all the acquisition terms have been agreed. In making these submissions the landlord cited various authorities. However, the UT decided the authorities relied on by the landlord were on different points. In Penman v Upavon Enterprises Ltd [2001] EWCA Civ 956; [2001] PLSCS 135, the Court of Appeal decided a vesting order could not be granted until all of the terms of the acquisition had been agreed or determined. It did not decide that an agreed term could subsequently be departed from. In Sinclair Gardens Investments v Eardly Crescent LRA/77/2005, the Lands Tribunal ruled that if, after a hearing, further unresolved issues existed, the tribunal retained jurisdiction to deal with them. Nothing was said about agreed terms. Similarly, in Goldeagle Properties v Thornbury Court [2008] EWCA Civ 864; [2008] 3 EGLR 69, the Court of Appeal rejected the argument that only one application could be made to the tribunal, or that additional terms could not be determined once the price had been settled. Again, nothing was said about reopening terms that had been agreed.
In short, the structure of the 1993 Act requires that the terms of the acquisition be agreed, or, in default of agreement, determined by an application to the tribunal. If a term has been unconditionally agreed, the tribunal has no jurisdiction to make a determination. The landlord’s appeal on this point was also dismissed.
Subject to any appeal from this decision, the claimant leaseholders can apply to the county court for a vesting order if the landlord refuses to complete. Although the landlord reminded the UT that an application could be made to modify terms to take account of a change in circumstances, it was pointed out by the UT that the price is fixed at the valuation date (when the notice was given back in 2004). The UT added that it is “difficult to conceive” how a change of circumstances since the price was agreed could justify a modification to it.
Professor James Driscoll is a solicitor, a writer and an editor of the Handbook of Residential Tenancies
