The Leasehold Reform, Housing and Urban Development Act 1993 enables qualifying tenants of flats to acquire the freehold of their premises at a price determined in accordance with the legislation. If the right to collective enfranchisement is exercised, the nominee purchaser is also entitled to acquire any property used in common with the occupiers of other premises: section 1(2). Alternatively, section 1(4) enables the landlord to grant “permanent rights” instead, conferring “as nearly as may be the same rights as those enjoyed in relation to that property” on the date on which notice of the claim for collective enfranchisement is given.
In 4-6 Trinity Church Square Freehold Ltd v Corporation of Trinity House of Deptford Strond [2018] EWCA Civ 764; [2018] PLSCS 71 the tenants’ leases granted them a licence to use an adjoining garden. It was an express term of that licence that it could be revoked in writing at any time. The tenants served a collective enfranchisement notice on the landlord. The licence had not been revoked when the notice was served, but was revoked afterwards.
All the terms relating to the acquisition of the freehold of the building were agreed. It was also agreed that the freeholder would retain the freehold of the garden. But were the tenants entitled only to a revocable licence to use it? Or was the legislation wide enough to require the landlord to grant the tenants an irrevocable easement instead?
The Court of Appeal has upheld the Upper Tribunal’s decision that, in order to avoid transferring the freehold of the garden to the tenants, the freeholder must offer the tenants an irrevocable easement. Lady Justice Asplin, who spoke for the court, noted that section 1(4) was an alternative to section 1(2). And, if the freeholder’s argument that the tenants were entitled to a revocable licence were correct, the freeholder would be able to revoke the licence immediately after completion of the transfer, even though this would not be possible if the tenants were to acquire the freehold of the garden instead. In other words, the outcome under section 1(4) would be entirely different to the primary position under section 1(2), which it was intended to satisfy.
The power to revoke a right altogether would also be inconsistent with the requirement of permanence in section 1(4). Therefore, the revocable right to use the garden must be converted into an irrevocable right on completion of the transfer of the freehold of the building.
Furthermore, paragraph 2(1) of Schedule 7 of the 1993 Act provides that the conveyance shall not exclude or restrict the general words implied in conveyances by section 62 of the Law of Property Act 1925. Section 62 operates to convey, along with a freehold, any easements appurtenant to it and, as a result, on the conveyance to a tenant of its freehold, any property rights annexed to the leasehold estate or informal arrangements are converted into freehold easements. So, had the licence to use the garden not been revoked, the transfer of the freehold would have passed with it all the rights enjoyed with the building, including the rights over the garden, converting them into rights that were irrevocable.
Allyson Colby is a property law consultant
