Landlord and tenant — Leasehold enfranchisement — Leasehold Reform, Housing and Urban Development Act 1993 — Collective enfranchisement — Whether initial notice valid — Whether headlessee qualifying tenant
By a lease
dated September 13 1957 a six-storey terrace house was let to Mrs P for a term
of 38 years. The house was then converted into three self-contained maisonettes
and these were sublet. The headlease restricted the use of part of the basement
to quarters of a caretaker on a service basis only. The caretaker’s flat is
occupied by the widower of Mrs P. A notice of claim was given under section 13
of the Leasehold Reform, Housing and Urban Development Act 1993 on August 16
1995 on behalf of two of the three sublessees; the third sublessee not wishing
to participate. The respondent landlords did not accept that the notice of
claim was valid because: (1) the plan accompanying the notice was not marked
with precision, and the notice did not specify a proposed purchase price for
the appurtenant property proposed to be purchased under section 1(2)(a) of the
Act or for the reversionary interest in the headlease; one price was proposed
for the freehold interest; and (2) by reason of section 101(3) of the 1993 Act
the headlessee was a qualifying tenant and the initial notice was not served by
the requisite two-thirds majority of qualifying tenants.
plan were not misleading and the notice was not invalidated by the plan
supplied. There was nothing misleading in proposing the total sum on offer. (2)
The rent of the caretaker’s flat was less than two-thirds of the letting value
of the premises in 1957. It had a letting value notwithstanding the restriction
to use by a caretaker.
The following
cases are referred to in this report.
Cresswell v Duke of Westminster [1985] 2 EGLR 151; (1985) 275 EG 461;
25 RVR 144, CA
Johnston v Duke of Westminster [1986] AC 839; [1986] 3 WLR 18; [1986]
2 All ER 613; [1986] 2 EGLR 87; (1986) 279 EG 501, HL
Mutual
Place Property Management Ltd v Blaquiere
[1996] 2 EGLR 78; [1996] 28 EG 143
This was an
application by Crean Davidson Investments Ltd, the nominee purchaser, to
determine the validity of a notice under section 13 of the Leasehold Reform,
Housing and Urban Development Act 1993 served on the respondent landlords, Earl
Cadogan and Cadogan Estates Ltd.
Nicholas
Taggart (instructed by Winward Fearon) appeared for the applicant; Anthony
Radevsky (instructed by Lee & Pembertons) represented the respondents.
Giving
judgment, JUDGE WHITE said: This is the trial of two preliminary issues
following upon a claim for collective enfranchisement under the provisions of
the Leasehold Reform, Housing and Urban Development Act 1993.
The applicant
is a nominee company formed by two lessees of premises known as 54 Cadogan
Place, London SW1. The notice of claim under section 13 was given to the
respondent freeholders on August 16 1995. The respondents dispute the validity
of the notice, raising the first preliminary issue the court has to resolve.
The
respondents, in any event, further contend that the participating tenants do
not, in the particular circumstances of the case, constitute the necessary
two-thirds of qualifying tenants, and accordingly do not have a right to
collective enfranchisement. This is the second issue now before the court, the
respondents’ contention being disputed by the applicant.
I note that if
the applicant succeeds on both these issues, the respondents do not admit that
the participating tenants meet the residential conditions under section 6. If
this remains in issue, it would be tried separately.
54 Cadogan
Place is a six-storey mid-terrace house built in the first half of the last
century and typical of the period.
An earlier
lease having expired in September 1954, the property was by a lease dated
September 13 1957 granted by the respondents to a Mrs Margaret Priestley for a
term of 38 years commencing on September 29 1957. This was in consideration of
a premium of £3,500, the fixed rent being set at £50 pa.
It appears
that the lessee had, prior to entering into the lease, agreed with the
respondents to carry out work to the property, converting it into three
self-contained maisonettes plus a caretaker’s flat, and generally to refurbish
the building.
The
maisonettes were on the third and fourth floors, the first and second and the
ground and rear part of the basement respectively. The caretaker’s flat was in
the front of the basement.
The lease
reflected the conversion restricting the maisonettes to one-family occupation,
but also restricting the use of the front part of the basement ‘as the quarters
of a caretaker for the premises on a service basis only’: clause 10.
The cost of
the conversion and improvements were the lessee’s burden, but the three
maisonettes were sublet, two in September and one in December 1957, at premiums
in excess of that paid under the headlease.
The qualifying
tenants are two in number and occupy the top- and ground-floor maisonettes
respectively, holding underleases, one dated September 20 1957 and the other
December 18 1957.
The third
occupant, the underlessee of the first-floor maisonette, did not agree to
participate.
The
caretaker’s flat is, I am told, currently empty, but at the time of the
application was occupied by the widower of Mrs Priestley, the headlessee, who
was acting as caretaker.
Section 13 of
the 1993 Act requires a notice of application to set out certain basic facts
and for it to be accompanied by a plan. By subsection 3(a) the notice must
specify and be accompanied by a plan showing not only the main premises (the
‘specified premises’), but appurtenant property to be acquired; here the garden
qualifies as such, and any property owned by the freeholder over which it is
proposed rights (specified in the notice) should be granted in connection with
the acquisition. The freeholds of the two adjacent properties, nos 53 and 55,
over which rights were sought, are also held by the respondents.
Section 13
further, inter alia, provides that the notice must specify the proposed
purchase price for each of the freehold and leasehold interests sought to be
acquired — in this case, therefore, the specified and appurtenant premises. The
standard form of application makes provision for these separate figures.
The provisions
of section 13 are mandatory, as are the similar provisions that, in the
Leasehold Reform Act 1967, govern the form of notice by tenants entitled to
enfranchisement under that Act, must replacing shall as the
demanding word. In both Acts there is, however, a saving clause for
inaccuracies or misdescriptions in the notice.
By para 15 of
Schedule 3 to the 1993 Act it is provided that:
The initial
notice shall not be invalidated by any inaccuracy in any of the particulars
required by section 13(3) …
In the 1967
Act the equivalent provision reads (para 6 of Schedule 3):
The notice
shall not be invalidated by any inaccuracy in the particulars required by this
paragraph or any misdescription of the property to which the claim extends.
The wording of
the two statutory provisions is not identical. In the 1993 Act there is an
additional word ‘any’:
The initial
notice shall not be invalidated by any inaccuracy in any of the particulars …
It is argued
by counsel for the respondents that this is a material difference.
I have been
referred, in the course of the applicant’s arguments, to passages in the
judgment of Sir John Donaldson MR in Cresswell v Duke of Westminster
[1985] 2 EGLR 151, at p152, a decision under the 1967 Act.
I have no
hesitation in rejecting that particular argument. Each case, whether an
omission is an inaccuracy or not, has to be judged on the particular facts,
whether the focus is a broad one — the particulars as a whole — or upon any of
the individual particulars that have to be given.
The
broad-brush guidance that Sir John Donaldson MR gave is, in my judgment, valid.
The court has to ask itself, looking at the facts as they were and what was
stated in the notice, can this fairly be said to be an inaccuracy or is it
simply a notice that does not, on a fair view, relate to the facts? He
continued, at p152F:
Where we draw
the line I do not know, and I doubt whether it is in anybody’s interests that I
should attempt to draw that line. Many cases will answer the question
themselves on their own facts.
I would merely
add that the line should not be drawn so tightly that it thwarts parliament’s
plain intention that notices should not be invalidated simply by inaccuracies
or misdescriptions in their completion. The spirit of the provision is plain.
It is not disputed that the plan does not strictly comply with the requirements
of section 13(3). The plan does not show with clarity, for example by the use
of different colourings, the additional freeholds, ie the garden and possibly
the vaults, not forming part of the specified premises that it sought to
acquire, and the adjacent properties, nos 53 and 55, over which rights are to
be granted, although differently coloured, are not marked out with precision.
However, this is not a case in which there was a failure to provide a plan at
all, as in Mutual Place Property Management Ltd v Blaquiere
[1996] 2 EGLR 78 from which for this reason it can be distinguished.
Looking at the
map in the context of the notice itself, whether the errors were omissions or
inaccuracies, the errors can be fairly described using either term. They were
not misleading. They related to the facts and I have no hesitation in
concluding that the notice was not invalidated by the plan supplied. The
defects were not so fundamental they cannot be classified as inaccuracies.
The
respondents, however, further point to the fact that the notice did not specify
a proposed purchase price for the appurtenant property proposed to be purchased
by virtue of section 1(2)(a) of the Act, or for the reversionary leasehold
interest of the headlease specified in para 6. In para 8 one price, £188,500,
was proposed ‘for the freehold interest in the specified premises’. A short
line was drawn through the other two subheadings. It is argued that these are
omissions, but not inaccuracies, saved by Schedule 3. If the intention was that
the figure was an all round sum for all three interests, this should, it is
argued, have been made clear. If it had been made clear, the point would, I
understand, not be pressed. Again I conclude there is nothing misleading. The
inference is obvious. The sum quoted is the total sum on offer and I do not
accept that the casting of this part of the notice in this way invalidates it
in the particular circumstances, having regard to the interlocking nature of
the two interests which were not separately valued.
I therefore
reject the respondents’ contention that the applicant’s notice was invalid.
Of more
substance is the respondents’ submission that the application must fail as it
does not meet the essential qualifying condition that the notice must be given
by not less than two-thirds of the total number of qualifying tenants in the
premises.
As I have
indicated, at the relevant date the three maisonettes were occupied by
underlessees who were qualifying tenants, but only two of those agreed to the
application being made on their behalf. The remaining accommodation, the
caretaker’s flat, was subject to the headlease, a long lease. If it was at a
low rent then clearly the two-thirds condition is not satisfied. This is not in
dispute. But what the applicant contends is that the court should treat the
remaining flat as not having a rent at all. The headlessee is not therefore a
qualifying tenant and as there are only three to be accounted for, the
two-thirds requirement is met.
The
applicant’s case was at first based on three distinct arguments. First, as a
matter of figures, with a fair apportionment, a low rent, it was said, could
not be attributed to the accommodation. Accepting that letting value is usually
determined where a premium has been paid by taking the aggregate of the ground
rent payable and the decapitalisation of the premium, Mr Anthony Griffiths [bsc frics],
the applicant’s valuer, calculated a letting value for the front basement flat
of £34.32, which he concluded was not less than two-thirds of the letting
value. This proved in the hearing to be in error and it is not now in dispute
that the rent did not exceed two-thirds of the letting value in 1957. The
relevant figures are those of Mr Gibbs.
The second
argument is that the caretaker’s flat has no letting value at all. The
restriction under the lease of the use of the accommodation, save as to the
quarters of a caretaker for the demised premises on a service basis only, it is
contended means that it has not got letting value because (I quote from the
applicant’s skeleton argument): ‘It could only be let to a caretaker, who would
not pay rent’. There is no evidence before the court, he adds, that a caretaker
would be prepared to pay rent or, if so, what rent.
Lord
Griffiths, in his speech in Johnston v Duke of Westminster [1986]
AC 839*, stated that the combination of rent and premium will be a very strong prima
facie evidence of the open market letting value, but did go on to say —
‘There may be exceptional cases in which the rent and premium does not reflect
the true letting value’.
*Editor’s
note: Also reported at [1986] 2 EGLR 87
It is
contended that this is such an exceptional case and the caretaker’s flat has no
letting value, as a consequence of which the headlessee cannot be a qualifying
tenant.
I reject this
submission. The accommodation clearly has a value, which would be reflected in
the conditions upon which a caretaker would occupy it, either as rent or by way
of an equivalent allowance against the remuneration he would be paid. It is
unreal to suggest that it has no letting value and I am not satisfied that the
rent plus premium, as apportioned, is not a fair assessment of it, so that a
low rent calculation is inevitable.
The third
argument that has been put to the court is that at least a portion of the
premium should be attributed to the risk that the headlessee was taking and/or
as consideration for her right under the lease to underlet and thus recoup, and
by inference make a profit on the premiums that she would obtain.
I found this
argument, as indeed counsel for the respondents did, difficult to follow. As
the respondents pointed out, it could equally be argued that the premium was,
if anything, conservative, as it would have taken the fact that the headlessee
undertook the substantial burden of conversion and renovation into account. I
reject that argument and conclude that the applicant is not entitled to pursue
the application, there not being two-thirds of the qualifying tenants
supporting it.
After a
discussion on costs, JUDGE WHITE said: I deal finally with the costs,
which on behalf of the respondents it is argued should follow
applicant contends that the normal order should not be made and it bases its
argument on a late amendment by the respondents.
The matter was
originally listed for hearing on August 11, the only issue on the pleadings, as
they then stood, being as to the validity of the notice. Very shortly before
that appointed day, on August 7, the respondents amended their reasons for
objecting to the application by seeking to contend not only that the notice was
invalid, but that there was not the necessary two-thirds’ support for the
application under the Act. In the event, it was the new issue raised which has
proved successful, the contention that the notice was invalid being rejected by
me in the judgment that I have just given.
At the hearing
on August 11 it was plain that with the new issue raised, the court could not
deal with the matter. Not sufficient time had been allocated to it. An
adjournment was granted.
The learned
recorder who dealt with the matter on that day made the following order as
regards the costs. He ordered that the costs of the amendment should be paid by
the respondents, but the costs of the hearing on August 11 should be in cause.
I was told when seeking to understand that order, that there may well have been
another factor in his mind, as well as the late amendment, namely that there
would not in any event have been sufficient time for the case to be heard
before him, but that was the order he made. It was not appealed and I cannot
deal with that order as an appeal. I have to accept it.
It is argued
nevertheless by the applicant that, having regard to the late amendment, the
fair and just order should be that it has the costs up to August 7 and, subject
to the order that I have just indicated made on August 11, the costs thereafter
should follow the event.
I understand
the concern of the applicant, but I have concluded that the learned recorder,
having dealt with the late amendments and the costs incurred at that stage, the
court should go no further and the proper order here remains that the costs
follow the event. Apart from the costs incurred in the late amendment, the
applicant will be ordered to pay the respondents’ costs. The costs will be
taxed on scale 2 if not agreed.
