Landlord and tenant – Reversionary interest – First refusal – Landlord giving respondent tenants first refusal to purchase reversionary interest in flats – Landlord completing sale to appellants before respondents accepting offer – Respondents serving notice on appellants requiring disposal of freehold interest to them – Respondents serving default notice and obtaining court order requiring appellants to transfer freehold – Appellants serving notice under section 17(4) of Landlord and Tenant Act 1987 – Whether notice effective to discharge appellants from obligation to comply with court order – Appeal dismissed
Part 1 of the Landlord and Tenant Act 1987 gave tenants of flats a right of first refusal where their landlord wished to dispose of his reversionary interest. The landlord had to give the tenant notice of the terms on which the disposal was to take place and offer to enter into a contract with the tenant on those terms. The tenants then had two months in which to accept the offer.
In the present case, the landlord gave such notice to the respondent tenants of flats at 28 Red Lion Street, London WC1. Before the two-month period had expired the landlord completed the sale of the reversion to the appellants, one of whom was the tenant of a commercial unit on the ground floor of the building. The respondents served a purchase notice on the appellants pursuant to section 12B of the 1987 Act requiring them to dispose of their interest in the flats to the respondents on the same terms as those on which they had acquired that interest. However, the appellants ignored the notice.
The respondents served a default notice under section 19(2) of the Act, and obtained an order on 29 October 2013, requiring the appellants to transfer the freehold to them. The appellants failed to comply with the order and later served a notice under section 17(4) of the Act seeking to terminate the respondents’ rights. A question arose whether that notice was effective to discharge the appellants from any obligation to comply with the court order and to relieve them from any further obligation to transfer the freehold to the respondents. The District Judge held that the appellants were not entitled to serve a section 17(4) notice and ordered the transfer in favour of the respondents. That decision was upheld on appeal. Permission was granted for a second appeal.
Held: The appeal was dismissed.
(1) An application under section 19 was an application of the kind contemplated by section 17. But the main thrust of those provisions was that the 1987 Act contemplated two ways in which the tenants’ rights might be vindicated: either by the parties voluntarily entering into a contract following the establishment of the tenants’ rights or by the court making an order. Thus, the scheme of the Act was that the court’s order requiring the reversioner to comply with his obligations was the equivalent of a contract voluntarily made. Once parties had entered into a contract the enforcement of that contract in case of default was via the court, usually by specific performance. Once the court had made an order for specific performance it was the provisions of the order rather than the terms of the contract that governed the way in which the contract was to be executed: Singh v Nazeer [1979] Ch 474 and Johnson v Agnew [1979] 2 EGLR 146 considered.
(2) Although an order made under section 19 was not an order for specific performance, it was an order enforcing non-consensual statutory rights and was very similar to the sort of order that would have been made if there had been a binding contract which the court decided ought to be enforced by specific performance. It would be surprising if a reversioner had different entitlements to serve notice under section 17(4), following a court order requiring compliance with the obligations arising under the Landlord and Tenant Act 1987, depending on whether the court order was enforcing a contractual obligation or a statutory one. Section 19(1) allowed the court to specify such period as it thought fit; which meant that the court was in control of the timetable. In addition, the decision in Johnson v Agnew showed that, where the court had made an order for specific performance which did not result in an actual transfer of the property, the party in whose favour the order was made might go back to the court for an order discharging the order for specific performance and awarding damages instead. While the order of 29 October 2013 remained to be worked out, the application had not been determined for the purposes of section 17, although it would have been open to the appellants to apply to the court to discharge the order if there had been culpable delay on the part of the respondents in complying with it: Boyle v Hallstate Ltd [2002] EWHC 972 (Ch) considered.
(3) By disobeying the mandatory order to execute the transfer and deliver it to the respondents on 19 December 2013, the appellants were in contempt of court. As a general rule, it was unacceptable if a person could enforce a right to require property by deliberately doing something which was necessary to enforce that right but which was wrongful as between him and the person against whom he sought to enforce it. Where a conduct would on public policy grounds disentitle a person from relying upon an apparently unqualified statutory provision, that had to be considered in context and with regard to any nexus existing between the contract and the statutory purpose. In the present case, the purpose of the Act would have been frustrated if by refusing to comply with the mandatory order of the court the appellants could put themselves into a position in which they were entitled to give notice under section 17(4) whereas if they had complied with the order that ability would not have arisen: Welwyn Hatfield Borough Council v Secretary of State for Communities and Local Government [2011] UKSC 15, [2011] 2 EGLR 151 applied. Henley v Cohen [2013] EWCA 480; [2013] PLSCS 91; [2013] L & TR 28 considered.
Ulick Staunton (instructed by Bowling & Co) appeared for the appellants; Anthony Radevsky (instructed by (Monro Wright & Wasbrough LLP) appeared for the respondents.
Eileen O’Grady, barrister
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