Leasehold enfranchisement — Leasehold Reform, Housing and Urban Development Act 1993 — Collective enfranchisement — Application to acquire part of building containing 20 flats — That part divisible into two sets of 10 flats — Whether property a “self-contained part of a building” within section 3 — Whether that term denoting part incapable of further subdivision into smaller self-contained parts
The respondent was the nominee purchaser acting in a collective enfranchisement claim by the tenants of 10 flats under the Leasehold Reform, Housing and Urban Development Act 1993. The flats formed part of a five-storey, terraced building. The tenants’ initial notice, served on the appellant freeholder under section 13, sought to acquire the freehold of that part of the building containing flats 41-60. This consisted of a vertically divided section of the building, itself divided into a left- and right-hand half, each containing 10 flats, with separate entrances and common parts for each half. The flats of three of the participating tenants were in the left-hand half while the remainder were located in the other half.
The appellant did not serve a counternotice. However, it disputed the right to enfranchise on the ground 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. It contended that the statutory right to collective enfranchisement was exercisable only in respect of a part of a building that could not be further subdivided into smaller self-contained parts and that each half of the property, containing flats 41-50 and 51-60 respectively, itself qualified as a self-contained part.
The county court judge rejected that contention and made an order, under section 25(1) of the Act, that the participating tenants were entitled to enfranchise the entire property specified in the initial notice on the terms therein proposed. The appellant appealed. It argued that the literal interpretation of section 3, with no requirement that the property to be enfranchised should be incapable of further subdivision, produced anomalous results that parliament could not have intended and that recourse should be had to ministerial statements to resolve ambiguity as to the intended meaning.
Held: The appeal was dismissed. The point in issue fell to be determined by reference to the clear language of section 3 of the Act; no relevant authority had determined the matter. Section 3 does not, either expressly or by necessary implication, require that a self-contained part of a building should be indivisible into smaller self-contained parts. Where a property satisfies the statutory definition of a self-contained part of a building, and none of the exclusions in section 4 applies, that is the end of the matter and the property qualifies for enfranchisement. There is no gap in the legislation; the literal construction of section 3 is not contrary to the statutory purpose and does not produce absurd or anomalous results so as to require the court to adopt a more purposive construction. Other provisions of the Act support the conclusion that an initial notice may relate to a self-contained part of a building that is capable of further subdivision: see sections 4(3A) and 13(8) to (10). Since the legislation is not ambiguous or obscure, there is no need or justification to have recourse to Hansard to consider ministerial statements made during debate on the legislation.
The following cases are referred to in this report.
Attorney-General v Lamplough (1878) LR 3 Ex D 214
Denetower Ltd v Toop [1991] 1 WLR 945; [1991] 3 All ER 661; [1991] 1 EGLR 84; [1991] 20 EG 194, CA
Holding & Management (Solitaire) Ltd v Finland Street 1-16 RTM Co Ltd [2008] 1 EGLR 107; [2008] 02 EG 152, LT
Howard de Walden Estates Ltd v Aggio; Earl Cadogan v 26 Cadogan Square Ltd; sub nom Earl Cadogan v 26 Cadogan Square Ltd [2008] UKHL 44; [2009] 1 AC 39; [2008] 3 WLR 244; [2008] 4 All ER 382; [2008] 2 P&CR 19; [2008] 2 EGLR 57; [2008] 34 EG 94; [2008] RVR 236
Kay-Green v Twinsectra Ltd (No 1) [1996] 1 WLR 1587; [1996] 4 All ER 546; [1996] 2 EGLR 43; [1996] 38 EG 136, CA
Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch); [2005] Ch 61; [2004] 3 WLR 866; [2005] 4 All ER 413; [2004] 2 EGLR 121
Majorstake Ltd v Curtis [2008] UKHL 10; [2008] 1 AC 787; [2008] 2 WLR 338; [2008] 2 All ER 303; [2008] 2 P&CR 2; [2008] 1 EGLR 44; [2008] 14 EG 102
Oakwood Court (Holland Park) Ltd v Daejan Properties Ltd [2007] 1 EGLR 121, CLCC
Pepper (Inspector of Taxes) v Hart [1993] AC 593; [1992] 3 WLR 1032; [1993] 1 All ER 42, HL
This was an appeal by the appellant, Craftrule Ltd, from a decision of HH Judge Madge, sitting in Central London County Court, allowing a claim by the respondent, 41-60 Albert Place Mansions (Freehold) Ltd, for collective enfranchisement of a property under the Leasehold Reform, Housing and Urban Development Act 1993.
Kenneth Munro (instructed by Olswang LLP) appeared for the appellant; Philip Rainey (instructed by Butcher Burns LLP) appeared for the respondent.
Giving judgment, Henderson J said:
Introduction
[1] This appeal raises a short point of statutory construction concerning the meaning of the phrase “a self-contained part of a building” in sections 3 and 4 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act).
[2] The question arises in the context of a claim to exercise the right to collective enfranchisement conferred on qualifying tenants of flats by section 1(1) of the 1993 Act. The premises specified in the initial notice served on the freeholder under section 13 consisted of 20 flats (nos 41-60) forming part of a terrace known as Albert Palace Mansions, Lurline Gardens, London SW11. Subject to the point in issue on this appeal, it is common ground that flats 41-60 (referred to in the statement of facts agreed between the parties and in the judgment below as “the property”) constituted a self-contained part of a building within the meaning of section 3, and that all other conditions required for service of a valid initial notice were satisfied. The respondent company, 41-60 Albert Palace Mansions (Freehold) Ltd, is the nominee purchaser appointed to act on behalf of the participating tenants under section 15.
[3] The only point taken by the appellant freeholder, Craftrule Ltd, in resisting the enfranchisement claim is that the property comprises two parts, consisting of flats 41-50 and 51-60 respectively, each of which (as is also common ground) would itself qualify as a self-contained part of a building within the meaning of section 3, and could not be further subdivided into smaller self-contained parts. Craftrule’s contention is that a notice may validly be given only in respect of premises that cannot be so subdivided, or in other words that the statutory right to collective enfranchisement is exercisable only in respect of a self-contained part of a building that does not itself comprise two or more such self-contained parts.
[4] Although it does not arise on the facts of the present case, a similar question would I think arise if the premises specified in the notice could not themselves be subdivided into two or more self-contained parts of buildings, but nevertheless a smaller single self-contained part of a building could somehow be carved out of the |page:46| premises. In other words, is it a requirement of the statutory scheme not only (as Craftrule submits) that adjoining self-contained parts of a building cannot be aggregated to form a larger such part but also that the single such part in respect of which the right to enfranchisement may be exercised must be as small as possible. This further question was not the subject of argument before me or the court below, and I mention it only for the sake of completeness. I also recognise that it may be hard to envisage cases where it would arise in practice, but such is the diversity of residential building types and structures in England and Wales (the territorial scope of Part I of the 1993 Act) that it would be rash to rule out the possibility.
[5] The issue was argued on the basis of a Part 8 claim form and agreed facts before HH Judge Madge in Central London County Court on 30 July 2009. Both sides were represented by the same counsel who have appeared on the appeal, namely Mr Philip Rainey, for the respondent nominee purchaser, and Mr Kenneth Munro, for the freeholder. In a clear and comprehensive unreserved judgment, the judge found in favour of the respondent. He granted a declaration that the participating tenants by whom the initial notice had been served were entitled to enfranchise the whole of the property and (in the absence of any counternotice given by Craftrule) made an order, under section 25(1) of the 1993 Act, that the respondent was entitled to acquire the whole of the freehold interest in the property on the terms proposed in the initial notice.
[6] The judge refused Craftrule permission to appeal but, on 31 July 2009, I granted permission on paper. The reasons that I gave were that the issue of whether a self-contained part of a building within the meaning of section 3 can itself consist of two or more such self-contained parts is an important one, on which there is no existing authority, and although the judge had given cogent reasons for saying that this question should be answered in the affirmative, I was satisfied that the counter-arguments outlined in Mr Munro’s skeleton argument in support of the appeal were strong enough to justify at least a first appeal to the High Court.
Relevant statutory provisions
[7] The argument centres around section 3 of the 1993 Act, which provides as follows:
3 Premises to which this Chapter applies
(1) Subject to section 4, this Chapter applies to any premises if
(a) they consist of a self-contained building or part of a building…;
(b) they contain two or more flats held by qualifying tenants; and
(c) the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises.
(2) For the purposes of this section a building is a self-contained building if it is structurally detached, and a part of a building is a self-contained part of a building if
(a) it constitutes a vertical division of the building and the structure of the building is such that that part could be redeveloped independently of the remainder of the building; and
(b) the relevant services provided for occupiers of that part either
(i) are provided independently of the relevant services provided for occupiers of the remainder of the building, or
(ii) could be so provided without involving the carrying out of any works likely to result in a significant interruption in the provision of any such services for occupiers of the remainder of the building;
and for this purpose “relevant services” means services provided by means of pipes, cables or other fixed installations.
[8] Prior to amendment by the Housing Act 1996, subsection (1)(a) contained a further requirement that the freehold of the whole of the building or self-contained part thereof should be owned by the same person. This provision was open to abuse by unscrupulous landlords, which could take steps to fragment the freehold of premises that would otherwise be eligible for enfranchisement, for example by vesting a lift shaft in an associated company. Accordingly, this further requirement was repealed in 1996, but at the same time a new exception was inserted into section 4:
4 Premises excluded from right
…
(3A) Where different persons own the freehold of different parts of premises within subsection (1) of section 3, this Chapter does not apply to the premises if any of those parts is a self-contained part of a building for the purposes of that section.
None of the other exceptions in section 4 is relevant for present purposes.
[9] Section 13(1) provides that a claim to exercise the right to collective enfranchisement with respect to any premises is made by the giving of notice of the claim under that section (the initial notice). By virtue of subsection (2)(b), the initial notice must be given by a number of qualifying tenants of flats contained in the premises as at the relevant date, which:
(ii) is not less than one-half of the total number of flats so contained.
By virtue of section 5, a person is a qualifying tenant of a flat if he is a tenant of the flat under a long lease, defined in section 7 as meaning a lease granted for a term of years certain exceeding 21 years and some other categories of lease, subject to various immaterial points of detail. Broadly speaking, therefore, the right to give notice of enfranchisement is conferred on long leaseholders who between them are tenants of 50% or more of the total number of flats in the specified premises. Section 13(3) then sets out the matters that must be contained in the initial notice, starting with a plan showing the premises of which the freehold is proposed to be acquired and including a statement of the grounds relied on in support of the claim, the proposed purchase price and the full names and particulars of all the qualifying tenants of flats contained in the specified premises.
[10] Also of relevance are subsections 13(8), (9) and (10), which provide as follows:
(8) Where any premises have been specified in a notice under this section, no subsequent notice which specifies the whole or part of those premises may be given under this section so long as the earlier notice continues in force.
(9) Where any premises have been specified in a notice under this section and
(a) that notice has been withdrawn, or is deemed to have been withdrawn, under or by virtue of any provision of this Chapter or under section 74(3), or
(b) in response to that notice, an order has been applied for and obtained under section 23(1),
no subsequent notice which specifies the whole or part of those premises may be given under this section within the period of twelve months beginning with the date of the withdrawal or deemed withdrawal of the earlier notice or with the time when the order under section 23(1) becomes final (as the case may be).
(10) In subsections (8) and (9) any reference to a notice which specifies the whole or part of any premises includes a reference to a notice which specifies any premises which contain the whole or part of those premises; and in those subsections and this “specifies” means specifies under subsection (3)(a)(i).
Facts in more detail
[11] The relevant facts are set out by the judge in [3] to [7] of his judgment. These paragraphs were largely based on the agreed statement of facts placed before the court, and the judge heard no oral evidence. The paragraphs read as follows:
3. The property forms part of a terrace known as Albert Palace Mansions, which is built along one side of Lurline Gardens. The Mansions are a late Victorian/early Edwardian building, consisting of five floors. They are of traditional construction. The mansions are arranged in “handed” pairs of 20 flats. The property comprises such a pair of 20 flats, numbered 41-60. [The judge then refers to a plan, and photographs in the bundle, which show the location of the property and its external appearance.]
4. Within a pair, there are separate entrances to the left and right half, giving access to separate common parts and separate staircases which serve each half of the 20 flats. The premises at 41-50 and 51-60 comprises such halves. Each half has a separate entry phone system. There is a dividing wall between each half, which is vertically continuous from the parapet wall above roof level. There is no communal hot water or space heating system. Each flat has its own gas supply. Each half has its own mains water riser. Each half has its own main electricity supply. Each half has its own drainage within the building itself. The drain at the front of 41-50 may connect externally into the manhole and drains serving 51-60. The flats have cable TV as well as telephone lines. Each flat’s telephone line or TV cable is a separate cable leading into the building. |page:47|
5. The entirety of Albert Palace Mansions may be considered to be a self-contained building for the purposes of section 3(1)(a) of the Act. The property is not structurally detached. 41-50 and 51-60 are not structurally detached. The property constitutes a vertical division of the building and the structure of the building is such that the property could be developed independently of the remainder of the building. The relevant services provided for occupiers of the property are provided independently of the relevant services provided for occupiers of the remainder of the building. The premises at 41-50 constitute a vertical division of the building and the structure of the building is such that 41-50 could be redeveloped independently of the remainder of the building. The relevant services provided for occupiers of 41-50 are provided independently of the relevant services provided for occupiers of the remainder of this building. The premises at 51-60 constitute a vertical division of the building and the structure of the building is such that 51-60 could be redeveloped independently of the remainder of the building. The relevant services provided for occupiers of 51-60 are provided independently of the relevant services provided to occupiers of the remainder of the building.
6. Turning to the leases of the flats, all of the flats in the property are demised under long residential leases for a term certain of more than 21 years. They are registered at HM Land Registry. The tenants of flats 42-49 inclusive and 51-60 inclusive are qualifying tenants as defined by section 5 of the Act, by reason of their respective flats being let under long residential leases, for terms certain of more than 21 years. The service charge provisions in the long leases are defined by reference to the property, which is treated as a single unit with a single service charge regime. The property accordingly comprises 20 flats, of which 18 are let to qualifying tenants.
7. On 20 March 2008, the initial notice dated… 17 March 2008 was given to the Defendant. There is no other landlord to whom the initial notice was required to be given. The initial notice was served by the qualifying tenants of 10 of the flats in the property, namely the qualifying tenants of flat[s] 45, 48, 49, 52, 54, 55, 56, 57, 59 and 60. The claimants seek to acquire the freehold reversionary interest in the whole of the property. The initial notice was served by the qualifying tenants of not less than half of the flats contained in the property. The property is a set of premises to which none of the exclusions contained in section 4 applies. If the property constitutes premises to which Chapter I of the 1993 Act applies, as defined by section 3, then the initial notice was served by a sufficient number of qualifying tenants to constitute a valid and effective notice for the purposes of section 13. The initial notice specified 27 May 2008 as the date by which the Defendant was required to serve a counter-notice pursuant to section 21. The Defendant failed to serve a counter-notice, whether by the specified date or at all. If the property constitutes premises to which Chapter I of the Act applies, as defined by section 3, then in the circumstances the Claimant is entitled, pursuant to section 25(1), to acquire the whole of the Defendant’s interest in the property in accordance with the proposals contained in the initial notice, including those as to price.
[12] It will be noted that although the initial notice was served by the qualifying tenants of 10 of the flats in the property, and thus satisfied the 50% requirement in section 13(2) of the 1993 Act, those tenants were not equally divided between the two halves of the property. Only three of them were tenants of flats in 41-50, while seven were tenants of flats in 51-60. Accordingly, it would not have been possible for the three participating tenants in 41-50 to have served an initial notice in respect of that half of the property alone because they would not have represented the necessary 50% in number of the 10 flats contained in that half. There are eight qualifying tenants in 41-50, and although the attitude of the five of them who did not join in the service of the initial notice is not known, it is certainly possible that they were all opposed to it. Thus, if the respondent’s argument is correct and a valid notice can be served in respect of the property as a whole, it is possible for a combined majority of qualifying tenants in both halves to override the wishes of a dissentient minority in one half, even though that minority would be able to prevent the enfranchisement of its own half independently.
[13] Albert Palace Mansions as a whole consists of eight “handed” pairs of 20 flats each, but the freehold reversion is no longer in single ownership. Craftrule is the registered proprietor of the freehold title to the property and to flats 141-150, but no more. However, it is of course possible that this or a similar, block of 160 flats consisting of 16 potentially self-contained sections of 10 flats each could be owned by a single freeholder. In those circumstances, there would be considerable scope, if the respondent’s argument is correct, for the tenants to pick and choose the number of adjacent 10-flat sections that they wanted to enfranchise and to impose their wishes on dissentient minorities in particular sections. In the most extreme scenario, the tenants of flats 1-80 could join together to enfranchise the entire block, even if all the tenants of flats 81-160 were opposed to the proposal.
Rival arguments
[14] In support of Craftrule’s appeal, Mr Munro repeated the arguments that he had unsuccessfully urged on the judge. Those arguments may conveniently be grouped under the following headings:
(a) decisions on section 3 of the 1993 Act;
(b) decisions on Part I of the Landlord and Tenant Act 1987 (the 1987 Act);
(c) ministerial statements said to be admissible under the rule in Pepper (Inspector of Taxes) v Hart [1993] AC 593;
(d) subsections 4(3A) and 13(8) to (10) of the 1993 Act; and
(e) the implications of the construction contended for by the respondent.
[15] In my judgment, the arguments based on existing decisions (headings (a) and (b) above) may be rapidly disposed of. There is no authority, at any level, on the point in issue in the present case. The decisions that Mr Munro cited on section 3 of the 1993 Act and on the similarly worded provisions (modelled on those of the 1993 Act) in the Commonhold and Leasehold Reform Act 2002, which give tenants of blocks of flats the right to manage the block, were decisions of the county court or the Lands Tribunal and related to different issues. They throw no light on the present question. For the record, the decisions were: Oakwood Court (Holland Park) Ltd v Daejan Properties Ltd [2007] 1 EGLR 121 (HH Judge Hazel Marshall QC, sitting in Central London County Court) and Holding & Management (Solitaire) Ltd v Finland Street 1-16 RTM Co Ltd [2008] 1 EGLR 107 (Mr George Bartlett QC, president of the Lands Tribunal).
[16] The decisions cited by Mr Munro on Part I of the 1987 Act relate to the limited right of first refusal thereby conferred on tenants of flats to purchase the freehold of their block if the landlord proposes to sell the freehold or certain other interests in the block. Those provisions are notoriously ill drafted and have been the subject of much judicial criticism. Furthermore, the statutory structure is different in many important respects from that of the 1993 Act, reflecting the obvious distinctions between a right of first refusal triggered by a landlord, which selects the premises to be included in a statutory notice that it serves on the tenants, and a right of collective enfranchisement triggered by tenants, who select the premises to be included in a notice that they serve on the landlord. Section 1(2) of the 1987 Act applies Part I to “the whole or part of a building”, but there is no definition of “building” nor is there any requirement that a part of a building should be “self-contained”. Section 5(3), as substituted by the Housing Act 1996, requires a landlord wanting to dispose of more than one building (undefined) to deal with each building separately. There is no similar provision requiring severance of parts of buildings. These and other major differences from the scheme of the later 1993 Act mean, in my judgment, that no useful assistance can be gained from decisions on the 1987 Act, as the judge rightly held in [21] of his judgment. Again for the record, the decisions cited by Mr Munro were: Denetower Ltd v Toop [1991] 1 WLR 945*, Kay-Green v Twinsectra Ltd [1996] 1 WLR 1587† and Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch); [2005] Ch 61‡ (Mr Geoffrey Vos QC, sitting as a deputy High Court judge).
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* Editor’s note: Also reported at [1991] 1 EGLR 84
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† Editor’s note: Also reported at [1996] 2 EGLR 43
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‡ Editor’s note: Also reported at [2004] 2 EGLR 121
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[17] I will postpone consideration of Mr Munro’s Hansard argument, because it can arise only if the stringent Pepper v Hart criteria of admissibility are satisfied. The basic rule, stated by Lord Browne-Wilkinson, at p640C, and often since repeated, is that reference to parliamentary materials is permissible only: |page:48|
where (a) legislation is ambiguous or obscure, or leads to an absurdity; (b) the material relied upon consists of one or more statements by a Minister or other promoter of the Bill together if necessary with such other Parliamentary material as is necessary to understand such statements and their effect; (c) the statements relied upon are clear.
[18] Craftrule’s arguments based on other provisions of the 1993 Act and the implications of the respondent’s construction are of more substance, but since they are essentially responsive to the arguments advanced by the respondent I will first turn to those arguments.
[19] The respondent, through Mr Rainey, submits that the correct approach is as follows. First, it is necessary to look at the premises specified by the section 13 notice and consider whether they satisfy the test in section 3, which in the present case means the definition of a self-contained part of a building in section 3(2). It is common ground that the property cannot qualify as a self-contained building within the meaning of section 3(2) because it is not “structurally detached”, forming as it does part of a continuous mansion block. Second, if the section 3(2) definition is satisfied, it is then necessary to ask whether any of the exclusions in section 4 applies. If none of them does, it follows that the premises are ones to which the right of collective enfranchisement applies. In the present case, said Mr Rainey, the relevant section 3 definition is admittedly satisfied, if one is permitted to look at the property as a whole, and none of the exceptions in section 4 applies. That is therefore the end of the matter. The statutory test is framed in clear and simple language and there is no ambiguity. The intention of parliament has to be found in the statutory language; if parliament had intended to oblige tenants to claim the smallest part of a building that satisfies section 3(2) it would have said so. The fact that some lesser part of the property would also satisfy the qualifying test as a self-contained part of a building is neither here nor there, and Craftrule’s approach is fundamentally flawed because it presupposes an ambiguity where none exists.
[20] Mr Rainey sought to derive further support for this approach from the decision of the House of Lords in Howard de Walden Estates Ltd v Aggio [2008] UKHL 44; [2009] 1 AC 39*, and from certain other provisions of the 1993 Act.
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* Editor’s note: Also reported at [2008] 2 EGLR 57
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[21] In Howard de Walden, two head lessees claimed the right to be granted new long leases of flats contained within the premises demised to them pursuant to Chapter II of Part I of the 1993 Act. In one case, the demised premises consisted of a single building with five residential flats, and in the other case of a single maisonette and offices in a five-storey building, both buildings having internal common parts and external parking areas. The claims related, in the first case, to two of the flats and, in the second, to the maisonette, each of which had become vacant. The issue in each case was whether the head lessee was a qualifying “tenant of a flat” within the meaning of section 39 of the 1993 Act, and as such entitled to a new lease. The Court of Appeal, dismissing the claims, held that parliament had not intended that Chapter II of Part I of the 1993 Act should enable a head lessee of a building that included multiple flats and common parts to exercise the right to acquire a new long lease of an individual flat. However, that conclusion was unanimously reversed by the House of Lords, which held that the application of the ordinary principles of statutory construction led to the conclusion that a head lessee was included within the term “a tenant of a flat”, and that such a construction was consistent with the policy of the 1993 Act to provide a statutory remedy for the problem caused by a lease becoming a wasting asset, which applied to all lessees and not only resident occupiers. The only reasoned opinion was that of Lord Neuberger, with whom Lord Hoffmann, Lord Scott, Lord Walker and Baroness Hale agreed.
[22] Mr Rainey relied on this authority, although it is not directly concerned with Chapter I of Part I of the 1993 Act, for the general approach adopted by their lordships to the question of construction, for their rejection of the approach of the Court of Appeal, which Lord Neuberger characterised as “inventing a gap where none exists” ([33]), and for Baroness Hale’s identification of the policy behind Part I of the 1993 Act in Majorstake Ltd v Curtis [2008] UKHL 19; [2008] 1 AC 787*, in [21] and [23] in the following terms (quoted in [36] of Lord Neuberger’s opinion):
21. … unless the lease has been granted for hundreds of years, it eventually becomes a wasting asset. The capital originally invested in it dwindles away. Eventually the lease becomes unmortgageable and unmarketable. The leaseholder therefore needs to negotiate the purchase of the freehold or a lease extension from the landlord. But, as the authors of Hague on Leasehold Enfranchisement 4th ed (2003), para 1-14 observe, “there are few comparable situations where the bargaining positions are quite so unequal”. There is also a positive disincentive to the leaseholder to spend any more money than absolutely necessary in maintaining or improving the flat.
…
23. The 1993 Act was passed to remedy the problems arising from long leaseholds of flats by enabling leaseholders to acquire either the whole premises or a new lease at a price which the legislators thought fair.
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* Editor’s note: Also reported at [2008] 1 EGLR 44
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[23] Turning to other provisions in Part I of the 1993 Act, Mr Rainey’s simple point on section 4(3A), which as I have said was inserted in 1996, is that it would be wholly unnecessary if a valid notice could be served only in respect of an indivisible self-contained part of a building. The clear implication of the subsection, he submitted, is that a self-contained part of a building is normally capable of comprising two or more such parts, and this general rule is restricted only in the specific case where the freehold is not in single ownership. He makes a similar point in respect of subsections (8), (9) and (10) of section 13, which form part of the original text of the 1993 Act and were not introduced by amendment. The general purpose of those subsections is to prevent overlapping claims being made and to introduce a 12-month moratorium after a notice has been withdrawn. The provisions expressly envisage that a subsequent notice may specify “the whole or part” of the premises specified in the first notice. The natural inference to draw from this language, submitted Mr Rainey, is again that a notice may in principle be given in respect of premises that comprise more than a single self-contained part of the relevant building.
[24] In response to these submissions, Mr Munro argued that it was illegitimate to have regard to section 4(3A) in construing the original provisions of the 1993 Act, referring to the decision of the Court of Appeal in Attorney-General v Lamplough (1878) LR 3 Ex D 214 and Bennion on Statutory Interpretation (5th ed), section 78, to the effect that unless the contrary intention appears from the amending Act, an amendment cannot affect the construction of the Act as originally enacted. If that is wrong, Mr Munro submitted that section 4(3A) shows no more than that parliament thought it wise to clarify the position in respect of blocks with more than one owner of the freehold, and it throws no light on the position where the freehold is in single ownership. With regard to section 13(8) to (10), Mr Munro accepted that the references to specified premises were to the physical structure of the premises specified in the notice, but argued that the references to “part” of those premises in a subsequent notice were explicable on the basis that there might be minor variations in the curtilage of the specified premises in the two notices, such as the exclusion of an external staircase or walkway.
[25] More generally, Mr Munro argued that the respondent’s construction led to anomalous results that parliament could not have intended. He relied here on the potential implications that I have mentioned in [12] and [13] above, and emphasised the scope, if the respondent is right, for tenants to enfranchise a part of a building in which they have no direct financial stake or interest. In an extreme case, 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 had no interest in acquiring their freehold.
Conclusions
[26] These submissions were attractively advanced by Mr Munro but, in the end, I have little hesitation in rejecting them. Like the judge, I can see no answer to the simple point that the language of section 3 is clear, and neither expressly nor by implication does it require that |page:49| a self-contained part of a building should be indivisible into smaller such parts. I accept Mr Rainey’s submissions on the correct approach to construction of the section, and since it is common ground that the property satisfies the statutory definition and that none of the exclusions in section 4 applies, that is indeed the end of the matter. As with the judgment of the Court of Appeal in Howard de Walden, Mr Munro’s argument seeks to invent a gap where none exists.
[27] Of course, if the literal construction advanced by Mr Rainey were at odds with the statutory purpose or if it led to consequences that were genuinely absurd or anomalous, the court would strive to adopt a more purposive construction that fitted better with the statutory scheme. However, I am wholly unpersuaded that the respondent’s construction is in any way contrary to the policy of the 1993 Act, which was identified by Baroness Hale in Majorstake as being to enable leaseholders to acquire either the entire premises or a new lease at a price that the legislature thought fair: see [22] above. The 50% requirement in section 13(2) of the 1993 Act is an integral part of the statutory scheme, and the so-called anomalies relied on by Mr Munro seem to me to be no more than rather extreme and improbable examples of the potential consequences of a system that expressly enables a bare half in number of the qualifying tenants in the relevant premises to serve the initial notice. “Majority rule” is thus an inherent part of the statutory scheme, and parliament must be taken to have intended that the wishes of individual tenants should be capable of being overridden in the interests of providing workable machinery to implement the wider statutory purpose.
[28] I also agree with Mr Rainey that both section 4(3A) and section 13(8) to (10) of the 1993 Act provide significant confirmation of the respondent’s construction. The natural implication of both sets of provisions is that, in the absence of special provision to the contrary, an initial notice may relate to a self-contained part of a building that is capable of further subdivision. Nor, in my judgment, is it impermissible to have regard to section 4(3A) for this purpose because the point of so doing is not to modify or contradict the meaning of section 3(2) as originally enacted, but merely to provide confirmation that parliament in 1996 intended section 3(2) to bear the same meaning as it always had.
[29] In these circumstances, no question of recourse to Hansard can arise because the legislation is neither ambiguous nor obscure in respect of the point in issue, nor does it lead to an absurdity. The first of the Pepper v Hart criteria is therefore unsatisfied: see [17] above. In any event, even if it were permissible to have recourse to Hansard, I do not consider that the passages on which Mr Munro relied would be sufficient to resolve any ambiguity or obscurity in the appellant’s favour. The passages come from the debate in Committee in the House of Lords on the Housing and Urban Development Bill on 9 March 1993, when the government minister, Lord Strathclyde, at Parliamentary Debates (HL) 543, responded to three proposed amendments of a technical nature designed to give greater precision to the definition of premises in section 3.
[30] In respect of the first amendment, which would prevent separate parts of a building being enfranchised unless a separation of services could be achieved without significant costs, Lord Strathclyde said, at cd 970-971:
I am sure the Committee will agree that enfranchisement needs to relate to self-contained units to ensure that the premises for enfranchisement are viable and that any remaining part of the block which is not enfranchised is also viable. We have provided the smallest viable units able to be enfranchised separately, because the aim of enfranchisement is to give long leaseholders the right to control just the immediate premises in which they have a financial stake. They should also make a block simpler to manage after enfranchisement.
I consider that this amendment would frustrate the aim of ensuring that enfranchisement is exercisable over the smallest viable unit. The effect might be to require a larger unit to be purchased, possibly at greater expense to individual tenants than the cost of separating a smaller block.
[31] The second and third proposed amendments raised the question of the interests of tenants who did not want to join in an enfranchisement claim. Lord Strathclyde said, at cd 971-972:
In [these amendments], the concern is about the effective enfranchisement of those tenants who do not wish to enfranchise when part of the block has been separated. It is right that the Committee should be assured that they can continue to maintain their block and not be adversely affected by the enfranchisement. I share that concern and perhaps it might help the Committee if I explain how our provisions ensure that the interests of all parties are maintained.
We have provided that the smallest viable unit should be able to be enfranchised. That will ensure that leaseholders may only enfranchise the property in which they have an immediate financial interest and should ensure that the block enfranchised will be simpler to maintain. We have also ensured that separation of a block can be achieved only where services are separate or where the separation of services does not result in significant disruption. Both these provisions ensure that leaseholders who do not wish to enfranchise are not unduly affected. There is a balance to be struck here. Clearly enfranchisement may have some impact upon leaseholders who remain in a block. Their interests must be balanced against the aim of giving leaseholders control of their own property, and we consider that we have got that balance about right.
…
I consider it important to ensure that the right to enfranchise should relate just to the immediate property in which long leaseholders have a financial stake. I consider that in achieving this aim there is sufficient protection for other parties.
In the light of these assurances, none of the three amendments was moved.
[32] In my judgment, these passages would not go far enough to resolve any ambiguity in the appellant’s favour because (as the judge rightly recognised in [24] of his judgment) they do not clearly relate to the specific issue of severance. Although it is true that the minister placed emphasis on the right to enfranchise the smallest viable unit in a block, he also recognised that there was a balance to be struck between the interests of leaseholders who wanted to enfranchise and those who did not. He nowhere said in terms that a majority of leaseholders would be prevented from enfranchising if the premises in question did not constitute the smallest viable unit in the block.
[33] For all these reasons, which are essentially the same as those given by the judge in his admirable judgment, this appeal will be dismissed.
Appeal dismissed.
