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 wife and back to appellant – Whether initial notice thereby ceasing to have effect so that first-tier tribunal having no jurisdiction to determine remaining terms of acquisition – Appeal allowed
The respondents were the long leaseholders of four of 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. 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. An appeal against that decision was withdrawn and it only remained for the respondents’ claim to be remitted to the first-tier tribunal (FTT), as successor to the LVT, to settle the form of the transfer of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, amongst other things, that the initial notice had ceased to have effect by reason of the intervening transfers of the freehold. The FTT held that the initial notice remained effective, such that it retained jurisdiction to determine the terms of the transfer of the freehold: The Upper Tribunal upheld that decision: [2015] UKUT 173 (LC); [2015] PLSCS 122.
The appellant appealed contending that the tribunal had erred in failing to conclude that the section 13 notice ceased to have effect for all purposes on the transfer of the freehold reversion by virtue of section 19 of the 1993 Act.
Held: The appeal was allowed.
(1) Both the Upper Tribunal and FTT before it erred in law in determining that the section 13 notice was enforceable against the appellant once the freehold reversion was re-transferred to him. The FTT did not have jurisdiction to determine the terms of the transfer of the freehold and should have dismissed the respondents’ application.
It was not in dispute that, despite the fact that there was no express reference in section 19(3), the statutory rights created by the service of an initial notice were not binding upon the transferee of the freehold reversion unless those rights were protected in accordance with section 97(1) of the 1993 Act. If one considered the statutory regime as a whole, it was clear that in the simplest of cases, the relevant parties to the enfranchisement process were the “participating tenants” who acted through the “nominee purchaser” and the “reversioner”. Once the freehold reversion had been transferred to a third party, the original reversioner who received the initial notice, by definition, ceased to be “the reversioner” within the meaning of section 9 and could no longer be the relevant party with whom to engage in the enfranchisement process or against whom to make an application. He was no longer the owner of the freehold reversion and would be unable to convey the freehold under the terms of the 1993 Act were a vesting order made. The proper analysis upon the true construction of the statutory regime could be no different if the reversion was subsequently re-transferred to the original recipient of the initial notice. The definition of “reversioner” in section 9 could not be construed as if it contained a temporal limit and referred only to the reversioner at the time when the first or the original claim was made. Such a limitation was not a legitimate means by which to resurrect the initial notice on the re-transfer of the freehold reversion.
(2) Further, the Upper Tribunal erred in concluding that section 13(11) was intended comprehensively to describe all of the circumstances in which an initial notice ceased to have effect. It did not say so expressly, nor was it to be construed as if it did. The tribunal’s analysis of the circumstances in which proceedings concerning such a notice were dismissed was tainted, perhaps by a desire to avoid injustice in this particular case. There were circumstances in which an initial notice ceased to have effect which were not referred to expressly in section 13(11). Even if section 13(11) was exhaustive, the circumstances of this case would fall within section 13(11)(c) in any event, as a result of a combination of sections 19(2) and (3) and 97(1). Although section 97 did not fall within Chapter I of the 1993 Act, its heading referred back to Chapters I and II, related directly to initial notices amongst other things and supplemented the provisions of those Chapters. Further, it was implicit in section 19(3) that where the statutory fiction did not apply in order to put the transferee in the position as if he/she had received the initial notice, the notice was of no effect whether or not the reversion was subsequently re-transferred.
Adam Rosenthal (instructed by Rice-Jones & Smiths) appeared for the appellant; Stan Gallagher (instructed by Butters David Grey LLP, of Hastings) appeared for the respondents.
Eileen O’Grady, barrister
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