Landlord and tenant — Landlord and Tenant Act 1987 — Determination of purchase price and terms of conveyance
1990 the respondent landlord, Allan Stone, purchased two properties, one of
which was the subject property at 54 Hogarth Road, London SW5, at auction for
£5,000 subject to special condition 7 that the purchaser pay the vendor for any
arrears of rent and service charges then outstanding by the tenants of each
property — Completion took place on January 22 1991 when the respondent paid
the vendor £8,889.27 in satisfaction of special condition 7 and £4,500 for the
subject premises — The subject property consisted of 11 flats, 10 of which were
let on long leases — The applicant tenant, Mr Evan Davis, was nominated by the
tenants in accordance with section 12 of the Landlord and Tenant Act 1987 and
sought a determination of the consideration to be payable and the terms of the
conveyance — He contended that the proper consideration was £2,720, being eight
years’ purchase of the ground rents — The respondents spoke to £13,389, being
the sum of £4,500 and £8,889.27
consideration to be paid by the applicant should be £4,500 and the other terms
of the conveyance should be the same as those contained in the conveyance of
January 22 1991 to the respondent — The £8,889 did not form part of the
consideration paid by the respondent for the property but was merely the
consideration for the assignment of a debt intended to be recoverable in full from
the tenants — The tribunal had no jurisdiction under section 13 of the Act to
consider the value of the premises de novo the tenants having only the right to
require a new landlord to dispose of the reversionary interest upon the same
terms, including those relating to consideration, as those when the new
landlord acquired the interest
No cases are
referred to in this report.
The applicant
tenant, the nominated person, appeared in person; D C Major, solicitor, of Guy
Clapham & Co, appeared for the landlord.
Giving their
decision, THE TRIBUNAL said: This decision is made following the
application, under section 13 of the Landlord and Tenant Act 1987 (‘the Act’),
by Mr Evan Davis (‘the applicant’), the nominated person within the meaning of
section 13 of the Act, for determination of the price to be paid for the legal
estate of Allan Gordon John Stone (‘the respondent’) in the land and premises
known as 54 Hogarth Road, London SW5 (‘the subject premises’), and to settle
the terms of the conveyance thereof consequent on the service on the respondent
of a purchase notice dated June 17 1991 (‘the purchase notice’) under section
12 of the Act on behalf of the lessees of seven flats within the subject
premises.
The following
facts were not in dispute between the parties:
(i) Part 1 of the Act applied to the subject
premises.
(ii) The subject premises are divided into 11
flats comprising a basement flat numbered 54A and 10 flats numbered 1 to 10
respectively.
(iii) At the date of the purchase notice the said
flats, except flat 5, were let on leases, in substantially similar forms, for
terms of 99 years from March 25 1978.
(iv) The seven tenants, whose names and flats
numbers are appended to the purchase notice, were qualifying tenants under
section 3 of the Act and they comprised the requisite majority of such tenants.
(v) The applicant had been duly nominated by the
said tenants in accordance with section 12 of the Act.
(vi) The previous landlord, Chalebrow Ltd, on
January 21 1991 sold the freehold estate in the subject premises, registered at
HM Land Registry under Title No 303394, for a consideration stated to be
£4,500, to the respondent and this was a relevant disposal under section 4 of
the Act.
(vii) The purchase notice was validly served upon the
respondent.
At the hearing
the applicant appeared in person and the respondent was represented by Mr D C
Major LLB, a partner in Guy Clapham & Co, solicitors.
Mr Major
stated that in December 1990 the respondent had bid £5,000 at auction for the
properties comprised in lot 126 subject to a number of special conditions of
sale. The said properties were 23 Gipsy Road, West Norwood, SE27, and the
subject premises and both were sold (inter alia) subject to and with the
benefit of subsisting leases.
Included in
the said special conditions of sale were the following:
7. Should any
arrears of ground rent interim charge or service charge or any other monies due
from the lessees be outstanding on the Property (including on account
instalments of such charges) at the Date of Completion the Purchaser shall pay
to the Vendor the amount of such arrears and shall recover the same from the
Lessees direct and the Vendor shall at the request and cost of the Purchaser
assign the benefit of such arrears to the Purchaser. A statement from the
Vendor’s Managing Agents as to any such arrears shall be conclusive in respect
of any period prior to the Date of Actual Completion which has not been paid to
the Vendor.
. . .
11. No
Notices have been served by the Vendor on the Lessees at the Property pursuant
to the provisions of the Landlord & Tenant Act 1987. The Vendor will not
serve any such Notices and the Purchaser shall not be entitled to require the
Vendor to serve any such Notices or otherwise comply with the provisions of the
said Act in respect of the Property and the Purchaser shall not be entitled to
delay Completion as a result of the provisions of this clause and in respect of
which the Purchaser including its assigns and successors shall not be entitled
to raise any requisition thereon or objection thereto nor shall the Purchaser
as aforesaid be entitled to make or join with any other party in any claim for
costs damages or other compensation against the Vendor in the event that all or
any of the Lessees at the Property exercise or seek to exercise their rights
under the said Act.
. . .
13. The
Assurance of the Property shall contain a Covenant given by the Purchaser with
the Vendor that the Purchaser and the persons deriving Title under the
Purchaser will at all times thenceforth fully observe and perform the various
covenants conditions restrictions agreements stipulations and other matters
specified on the Registers of the said Registered Title and/or otherwise
affecting the Property and also on the part of the Vendor in its capacity as
Landlord as specified in the Subsisting Leases and other documents and will
fully and effectively indemnify at all times thenceforth and keep fully and
effectively indemnified the Vendor from and against all proceedings costs
claims demands losses liabilities and expenses whatsoever on account of any breach
or non-performance or non-observance of any of the said covenants conditions
restrictions agreements stipulations and other
other documents.
14. On
Completion the Purchaser shall grant and the Vendor shall take a Lease of Flat
5 Hogarth Road for a term of 125 years from 25th March 1978 at a ground rent of
£50.00 per annum in the form of the Lease produced by the Vendor’s Solicitors.
Completion of
these purchases took place on or about January 22 1991, when the respondent
paid to Chalebrow Ltd, in respect of the subject premises, £4,500, the
consideration stated in the Land Registry Transfer, and, in satisfaction of
special condition of sale no 7 (ante), the additional sum of £8,889.27.
Mr Major
stated that the purchase of the subject premises by the respondent was a
genuine arm’s length transaction with Chalebrow Ltd. He denied that the payment
made under special condition 7 was to be regarded as an ancillary transaction
and claimed that the true purchase price which had been paid by the respondent
was £13,389, the sum of £4,500 mentioned in the Land Registry Transfer and
£8,889 paid under special condition 7. In this regard, he added that the
apportionment of the auction bid as to £500 to 23 Gipsy Road and £4,500 to the
subject premises had been made for conveyancing purposes and was not a formal
valuation of each interest being purchased.
The applicant,
on the other hand, disagreed with the respondent’s suggestion that £13,389 was
the consideration paid by the respondent upon his acquisition of the subject
property and disputed also that the sum of £4,500, given as the consideration
in the Land Registry Transfer, was a true valuation thereof. In his opinion,
the correct amount, which he had offered to the respondent, was £2,720
representing eight years’ purchase of the total ground rent income of the
subject property amounting to £340 pa. Another matter which he mentioned
affecting the value of the subject premises is the respondent’s continuing
liability under the leases of flats 4 and 7 for 20 years from the date of grant
for the treatment and repair of woodworm and dry rot outbreaks affecting the
said two flats, a liability which will continue for a further period of eight
years.
The first
matter which required to be considered by us was the respondent’s assertion
that £8,889.27 paid by him under special condition of sale no 7 in respect of
ground rent, interim charge, service charge etc, stated to be due and payable
by the several lessees of the subject premises at the date of completion of the
purchase, forms part of the ‘consideration’ paid by him. We concluded that this
could not be so because it was clearly the assignment of a debt by the original
landlord to the respondent intended to be recoverable in full by the respondent
from the individual lessees by action or otherwise after completion. We
consider, therefore, that, although related to the land transaction, the said
sum of £8,889.27 was the consideration for the assignment of a debt and does
not form part of the consideration passing upon the sale of the freehold estate
in the subject premises by the former landlord to the respondent.
We are
therefore of the opinion that the consideration passing on the sale of the
subject premises to the respondent on January 21 1991 was £4,500.
Although we
were supplied with only a copy of the draft transfer of the subject premises,
which had not been made-up, it was drafted as a deed to be executed by both
parties under seal and contained a covenant on the part of the respondent in
compliance with special condition of sale no 13 previously referred to.
Furthermore, in a letter dated January 15 1991 from Guy Clapham & Co, the
respondent’s solicitors, acknowledging the return of draft transfers by Garner
Weller, the former landlord’s solicitors, the respondent’s solicitors stated:
‘We are engrossing in readiness for execution by our client tomorrow’.
In these
circumstances, we consider that we are entitled to assume that both parties to
the transfer of the premises executed the deed under seal, so that, whatever
the method employed to apportion the auction bid of £5,000, both parties
thereto are now estopped from questioning the consideration of £4,500
attributed to the purchase by the respondent of the subject premises.
There remains
to be considered the question as to whether the tribunal is able to determine a
value for the subject premises de novo as desired by the applicant, who
is unaffected by the doctrine of estoppel by deed previously referred to.
In our
opinion, the tribunal has no such jurisdiction under section 13 of the Act.
Section 12(1) clearly demonstrates that, in serving a purchase notice,
qualifying tenants have the right to require the new landlord ‘to dispose of
the estate or interest that was the subject-matter of the original disposal on
the terms on which it was made (including those relating to the consideration
payable)’. It is significant that the section refers to ‘consideration’ not to
‘value’, so that the sum referred to in the Act is the actual amount paid by
the respondent even though it may be thought that he paid too much for the
estate or interest which he acquired. Furthermore, consideration of the wording
employed in section 13, relative to the tribunal’s jurisdiction, particularly
in subsection (1)(a) thereof, in accordance with the ejusdem generis rule
of construction, demonstrates that none of the particular words ‘. . . relating
to the nature of the estate or interest, or the identity of the property, to be
disposed of . . .’ is capable of sustaining within the scope of the general
words employed ‘. . . or relating to any other terms on which the disposal by
the new landlord is to be made . . .’ jurisdiction for the tribunal to value
the estate or interest to be transferred.
It is clear,
therefore, from the evidence which we received, that the consideration paid by
the respondent in this case for the subject premises was £4,500 and that this
is the amount which the applicant must pay to the respondent when he acquires
the subject premises from him. In this case there was no suggestion that the
purchase of the subject premises by the respondent was other than a genuine
arm’s length open-market transaction at a public auction, but, even if this had
not been accepted by the applicant, there appears to be no power for the
tribunal to enquire into the circumstances of such a sale.
We now turn to
that part of the application which requests us to settle the terms of the
conveyance by the respondent to the qualifying tenants. We were not supplied
with particulars of the Land Registry Title and, apart from price, neither
party put forward any proposed terms of conveyance. It appears that the subject
premises are registered at HM Land Registry under freehold Title No 303394 and
that any transfer would be by Land Registry transfer. In these circumstances,
the parties agreed that the prospect of dispute as to the terms of the transfer
appeared to be unlikely and, with their agreement, we adjourned generally this
part of the application.
We accordingly
determined that the respondent, Mr Allan Gordon John Stone, is required, in
accordance with the purchase notice and section 12 of the Act, to transfer to
the applicant, Mr Evan Davis, the freehold estate in the subject premises for
the consideration of £4,500 and upon the other terms as to title upon which the
original disposal thereof was made by Chalebrow Ltd to Allan Gordon John Stone
on January 21 1991.
