Leasehold Reform Act 1967 — Whether landlords entitled to recover from tenant surveyor’s fee incurred for valuation of freehold
On April 8
1992 the respondent tenant served a notice seeking to acquire the freehold of
the house of which he held a tenancy. The landlords instructed a surveyor to
set the matter down for a hearing immediately before the leasehold valuation
tribunal; this was done. Subsequently the parties agreed a price for
enfranchisement of £5,000. The landlords’ demand, that the tenant should pay
the fee of £249 they had incurred to their surveyor for a valuation, was
dismissed by the court below. The landlords appealed.
the work carried out by the surveyor was in connection with the reference to the
tribunal and the fee was irrecoverable by virtue of para 5 of Schedule 22 to
the Housing Act 1980. The landlords were not entitled to the fee under section
9(4)(e) of the Leasehold Valuation Act 1967.
No cases are
referred to in this report.
This was an appeal
by the appellant landlords, the freeholder Covent Garden Group Ltd and the
headlessor, Cressingham Ltd, from the decision of Mr Recorder Barker QC, who
had dismissed the appellants’ claim for fees incurred following the service of
a notice of enfranchisement by the respondent, Mr Naiva, under the Leasehold
Reform Act 1967.
David
Stockhill (instructed by Harris Cooper, of Solihull) appeared for the
appellants; Guy Fetherstonhaugh (instructed by Margetts & Ritchie, of
Birmingham) represented the respondent.
Giving the
first judgment at the invitation of Butler-Sloss LJ, Steyn LJ said: On September 23 1993 Mr Recorder Barker
QC, was asked to rule whether a tenant, who was entitled to enfranchisement
under section 9 of the Leasehold Reform Act 1967, was obliged to pay to her
landlords a surveyor’s fee of £249, which had been incurred by the landlords.
The judge ruled in favour of the tenant. This appeal seeks to challenge the
judge’s conclusions both as to the law and the primary facts.
In order to
make intelligible the issue that arises it is necessary first to set out the
relevant statutory provisions. Section 9(4) of the Leasehold Reform Act 1967
provides:
Where a
person gives notice of his desire to have the freehold of a house and premises
… there shall be borne by him … the reasonable costs of or incidental to any of
the following matters: …
(e)
any valuation of the house and premises …
Para 5 of
Schedule 22 of the Housing Act 1980 provides that:
The costs
which a person may be required to bear under Section 9(4) … of the 1967 Act
(matters the costs of which are to be borne by the person giving notice of his
desire to have the freehold or an extended lease) do not include costs incurred
by a landlord in connection with a reference to a Leasehold Valuation Tribunal.
Mr Naiva was
the tenant of a house in Birmingham. Covent Garden Group Ltd and Cressingham
Ltd were respectively the freeholder and the holder of the headlease of the
property. For convenience I will call these companies the ‘the landlords’. On
April 8 1992 the tenant served a notice under the Leasehold Reform Act 1967
seeking to acquire the property. There was no dispute as to the tenant’s
entitlement to obtain enfranchisement. On June 30 1992 the landlords instructed
a surveyor, a Mr A I Shepherd [frics]
of Bigwood Associates Ltd, to ‘set the matter down for hearing immediately’.
That was intended and understood to relate to a reference to a leasehold
valuation tribunal. On the same day the landlords informed the tenant by letter
that:
We have asked
our agents, Bigwood, to apply to the Local Lands Tribunal for an immediate
hearing.
On July 6 1992
Mr Shepherd completed and submitted to the tribunal an application for the
determination of the price. Subsequently, negotiations between the surveyors of
the parties resulted in an agreement on a price of £5,000. The landlords
demanded that the tenant should pay the fees of Mr Shepherd. The tenant
declined to do so. That is the dispute on which the judge ruled and which we
must now consider.
Surprisingly,
there was an issue before the judge, and before us, about the meaning of the
statutory language which seems simple and straightforward. Counsel for the
landlords submitted that under the statutory provisions the landlords are
entitled to the reasonable cost of ‘any’ valuation. That is a reference to the
language of section 9(4) of the 1967 Act. He submitted that the purpose of para
5 of Schedule 22 to the Housing Act 1980 was to ensure that, by a side wind,
the tenant of property seeking to enfranchise was not compelled to fund
litigation in the tribunal against himself. He argued that a reasonable
valuation fee incurred by a landlord would not fall foul of this principle.
Further he said that para 5 was not intended to amend section 9 of the 1967 Act
since it appears in that part of Schedule 22 to the Housing Act 1980 headed
‘Supplementary Provisions’, not in that part headed ‘Amendments of the 1967
Act’.
Like the
judge, regard this as an impossible construction. Para 5 of Schedule 22 to the
Housing Act 1980 is primary legislation. The words must be given their ordinary
meaning and effect. Para 5 expressly refers to section 9(4) of the Leasehold
Reform Act 1967. It is an exclusionary provision. By the plainest of language
para 5 makes clear that the ‘costs incurred by a landlord in connection with a
reference to a Leasehold Valuation Tribunal’ are not recoverable from the
tenant. I will not struggle further with an obvious point. The words are
incapable of bearing the construction put forward by the landlords.
Counsel had
alternative submissions about the construction of the statutory provisions.
First, he submitted that the landlords are only disentitled from claiming a
valuation fee if the tenant can show that the landlords are claiming a
valuation fee ‘in order to side step’ the costs provision of para 5. This
submission contemplates an inquiry as
requires an objective inquiry, namely whether the ‘costs were incurred by a
landlord in connection with a reference to a Leasehold Valuation Tribunal’. In
any event, the argument of counsel envisages that reasonable costs incurred by
the landlords in connection with a reference to a tribunal are recoverable.
That involves reading words of qualification into the statute. There is no
warrant for such an implication. I would reject this argument. By way of
further alternative counsel for the landlords submitted that it is only where a
tenant can show that the sole reason for incurring the costs was in connection
with a reference to the tribunal that the landlords are disentitled from
claiming the valuation fee. This is not an argument that was put before the
judge at first instance and it is, therefore, not surprising that it was not
discussed by him. There plainly needs to be shown a link between the costs and
the reference to the tribunal. But I would decline to put the suggested gloss
on the statutory language. I would simply go by the words of the statute.
Counsel for
the landlords had one further argument about the meaning of para 5. He said
that the costs in this case were incurred before the reference to the tribunal
came into existence on July 6. Factually, that is right. He then submitted that
para 5 only covers costs incurred after a reference has come into existence.
This argument was not put to the judge. It does not appear in the notice of
appeal or in the skeleton argument. It is also hopeless. The wording of para 5
is general: it refers to costs incurred in connection with a reference.
Moreover, it would be absurd to exclude, for example, the costs of drafting the
application launching the reference. There is nothing in the language of the
statute to compel such an unreasonable construction.
That brings me
to the submission that the judge erred in his findings of fact. The judge had
before him all the relevant correspondence. He further heard the oral evidence
of Mr Shepherd. The judge posed the following question:
Whether Mr
Shepherd’s involvement is caught by para 5 to Schedule 22 to the 1980 Housing
Act in that his costs were incurred by a landlord in connection with a
reference to a leasehold valuation tribunal.
The judge had
already observed:
So, from all
those various documents, it seems plain that what was being said at the time,
particularly on June 30, was that the respondents had asked their agents,
Bigwood, for whom Mr Shepherd is a principal, to apply to the local land
tribunal. There is no material there to justify the view on the evidence that
what Mr Shepherd was being asked to do was to confirm or to discuss with Mr
Fell, on behalf of the landlords, the valuation of the property with a view to
evaluating their position. The correspondence is unequivocal and that what was
happening at that time was that Bigwoods were being brought in to apply to what
was called the local land tribunal, although more popularly described as the
leasehold valuation tribunal.
The judge
finally concluded:
… on the
contemporary material from the letters that were written both to Mr Shepherd
and to the applicant [the tenant] it is plain that the respondent [the
landlords] at that time was instructing him to apply to the local land
tribunal, as they call it.
These findings
are now challenged. Counsel for the landlords submitted that the natural
inference is that the landlords wanted a valuation in order to assess their
position. I would reject this submission. The landlords did not need a
valuation. The landlords gave Mr Shepherd the price they were contending for.
The reality is that it would have been beyond Mr Shepherd’s brief to substitute
his own figure. And he specified the figure in the application which he had
been given. Such work as he carried out was, in any event, done in connection
with the impending reference to the tribunal.
For these
reasons, and the reasons given by the judge, I would dismiss the submission
that the judge erred on the facts.
I would
dismiss the appeal.
Butler-Sloss LJ
agreed and did not add anything.
Appeal
dismissed with costs.
