Right to manage – Commonhold and Leasehold Reform Act 2002 – Qualifying tenants – Meaning of “long lease” – Appellant seeking to acquire right to manage block of flats – Four flats held by tenants under shared ownership leases from housing association – Appellant serving notice to participate on those tenants – Whether notice instead to be served on housing association as qualifying tenant of those flats – Whether tenants holding “long lease” within section 76(2) where having less than 100% ownership – Appeal allowed
The appellant RTM company applied to the leasehold valuation tribunal (LVT) for a determination, under section 84(3) of the Commonhold and Leasehold Reform Act 2002, that it was entitled to acquire the right to manage a block of 15 flats of which the respondent owned the freehold. There was an issue as to whether the appellant had served the requisite notice to participate on all “qualifying tenants” in the block. The issue arose because four flats were held under “shared ownership” arrangements, whereby a housing association had acquired a 125-year lease of the flat from the respondent and granted a term of 125 years less three days to a tenant, on terms that identified an agreed capital value on the starting date, a tenant’s percentage share, a first premium and a rent, with provision for the tenant to acquire increasing proportions of the ownership of the flat in steps of 10% up to 100%.
The LVT held that, where none of the shared ownership tenants had yet acquired 100% ownership, they did not hold under a “long lease” within the meaning of section 76 of the 2002 Act and accordingly were not qualifying tenants as defined in section 75(2). It considered that the position was governed by section 76(2)(e), so far as it included within the definition of a long lease a “shared ownership lease… where the tenant’s total share is 100%”. The LVT held that the qualifying tenant of the four shared ownership flats was the housing association, on which the appellant had not served notice to participate, such that the appellant was not entitled to acquire the right to manage at the relevant date. The appellant appealed. The respondent filed no respondent’s notice and did not participate in the appeal.
Held: The appeal was allowed.
The tenants of the four shared ownership flats held leases for a term of years certain exceeding 21 years so as to fall within the definition of long leases in section 76(2)(a). The various definitions of a long lease contained in section 76(2)(a) to (f) were most naturally read as providing a series of gateways, such that it was enough to pass through any gate to qualify as a long lease. The definitions in section 76(2)(a) to (f) were additive and a lease would qualify if it fell within any one of them. It did not matter that shared ownership leases were dealt with specifically under section 76(2)(e), under which they would only qualify where the tenant’s total share was 100%. If a shared ownership lease were granted for a term of years certain exceeding 21 years so as to come within section 76(2)(a), then it did not also have to qualify under section 76(2)(e). Section 76(2)(e) did not operate so as to exclude a shared ownership lease that would otherwise have qualified under section 76(2)(a). Parliament could not intended to restrict the unqualified ambit of one paragraph by adding another paragraph that purported to widen rather than to narrow the definition of “long lease”: Brick Farm Management Ltd v Richmond Housing Partnership [2005] EWHC 1650 (QB); [2005] 3 EGLR 57; [2005] 48 EG 224 (dealing with the similar provisions of sections 5 and 7(1) of the Leasehold Reform, Housing and Urban Development Act 1993) applied.
Accordingly, the tenants under the four shared ownership leases held “long leases” under section 76(2)(a) and were the qualifying tenants on whom notice to participate needed to be served.
Andrew Sheftel (instructed by Nantes Solicitors, of Weymouth) appeared for the appellant; the respondent did not appear and was not represented.
Sally Dobson, barrister
