Collective enfranchisement – Claim for acquisition of freehold by nominee purchaser on behalf of qualifying tenants – Landlord making no proposals for leaseback in counternotice – Later leaseback notice held to be invalid – Whether permissible to require leaseback by later notice where none proposed in counternotice – Appeal dismissed
The respondents gave notice to the appellant landlord to exercise their right, as qualifying tenants, to collective enfranchisement of a property comprising six flats, pursuant to Part I of the Leasehold Reform, Housing and Urban Development Act 1993. The appellant served a counternotice under section 21 in which it made no proposals for any leaseback. Since the parties did not agree upon the terms of acquisition, the matter was referred to the leasehold valuation tribunal (LVT) pursuant to section 24 of the Act. The respondents appealed against the decision of the LVT regarding the price payable for the acquisition.
Shortly before the hearing of the respondents’ appeal, the appellant served a leaseback notice, claiming a long lease of the top-floor flat at a peppercorn rent, pursuant to section 36 of, and para 5 of Schedule 9 to, the Act. Those provisions enabled a landlord to require a leaseback of any unit that was not, immediately before the “appropriate time”, let to a qualifying tenant. The “appropriate time” was the time of acquisition of the freehold by the qualifying tenants’ nominee purchaser. At the appeal hearing the Lands Tribunal considered the validity of the leaseback notice and concluded that it was not valid. Its decision rested on a finding that the notice had been given too late in the circumstances of the case. On an appeal by the appellant, the respondents raised the question of whether it was ever possible to require a leaseback by a later notice where the section 21 counternotice had not specified any intention to require one. The appellant submitted that the reference in the leaseback provisions to the “appropriate time”, and thereby to the moment before acquisition, showed that a leaseback notice could be served at any time up to that moment.
Held: The appeal was dismissed.
Section 21(3) of the Act imposed mandatory requirements with regard to the landlord’s leaseback proposals. If a landlord wanted a leaseback of a flat in respect of which, at the time of the counternotice, there was no qualifying tenant, it had to say so in its counternotice. If it did, it would then be entitled to the leaseback so long as there was still no qualifying tenant immediately before the acquisition by the nominee purchaser. The reference to the “appropriate time” did not extend to that moment the opportunity for the landlord to serve a leaseback notice if it had not made proposals to that effect in the counternotice. Instead, it imposed a condition subsequent on the entitlement of the landlord to a leaseback that was mentioned in the counternotice, such that the landlord could not have the leaseback if, immediately before the acquisition by the nominee purchaser, the relevant flat did have a qualifying tenant: West Hampstead Management Co Ltd v Pearl Property Ltd [2002] EWCA Civ 1372; [2002] 3 EGLR 55; [2002] 45 EG 155 considered. It was unlikely, in practice, that a situation would arise in which a flat had a qualifying tenant at the date of the counternotice but ceased to have one before the date of acquisition.
Nicholas Berry (instructed by Blount Petre Kramer) appeared for the appellant; Stanley Gallagher (instructed by Osler Donegan Taylor, of Brighton) appeared for the respondents.
Sally Dobson, barrister
