Landlords who are unable to resist claims for leasehold enfranchisement will be keen to extract every last penny for their properties. The litigation in Wiggins v Regent Wealth Ltd [2014] EWCA Civ 1078; [2014] PLSCS 230 concerned a collective enfranchisement claim in which the tenants of flats in Mayfair were seeking to acquire new intermediate leases, granted by their landlords to each other, following the service of a notice initiating the enfranchisement process.
The tenants’ notice could have been registered against the landlords’ titles in accordance with section 97(1) of the Leasehold Reform, Housing and Urban Development Act 1993, as if it were an estate contract. If it had been registered, section 19 of the 1993 Act would then have restricted the landlords’ ability to grant further leases, which, if they had been granted before the tenants’ notice, would also have been liable to acquisition. Registration of the tenants’ notice would also have rendered void any transaction purporting to grant such lease(s).
Unfortunately, the notice was not registered and, since section 19 of the 1993 Act therefore did not apply, it was common ground that the new leases were valid. It was also common ground that the tenants would be entitled to compel the landlords to sell them the new leases by completing their current acquisition and then serving a further notice in respect of the new leases. However, the new leases would have to be valued at the date of the further notice.
So the tenants applied for an order under paragraph 15 of schedule 3 of the 1993 Act permitting them to amend their notice to include the newly granted leases. The landlords argued that paragraph 15 enables the court to correct inaccuracies or misdescriptions in tenants’ notices. However, the new leases were not in existence as at the date of the tenants’ notice. As a result, there was no inaccuracy or misdescription in the tenants’ notice when it was given and, because the notice was never registered, the landlords claimed that they took free of it by virtue of the provisions of the Land Registration Act 2002.
The Court of Appeal refused to allow the tenants to rectify their failure to register their notice by the back door in order to subject the newly registered titles to their claim. The legislation does not permit a right to collective enfranchisement to be exercised in relation to non-existent leases and it was impossible to see how the tenants could have included them in their notice. Therefore, there was no inaccuracy or misdescription to correct.
Section 97(1) of the 1993 Act makes it clear that rights arising from collective enfranchisement notices are not capable of constituting overriding interests for the purposes of the Land Registration Act 2002 and are, instead, registrable as if they were estate contracts. Therefore, for land registration purposes, the rules determining priority under section 29 of the 2002 Act apply and the failure to register the tenants’ notice was fatal. In the absence of registration, a disponee who gives valuable consideration for an interest takes free of an unregistered interest, irrespective of actual notice: Midland Bank Trust Co Limited v Green [1981] AC 573.
The moral of the story is that collective enfranchisement notices should be registered immediately. On a different tack, so too, perhaps, should 1954 Act proceedings: see http://www.estatesgazette.co.uk/Articles/Article.aspx?liArticleID=604475&NavigationID=466
Allyson Colby is a property law consultant
