Leasehold enfranchisement — Leasehold Reform Act 1967 — Desire notice — Validity — Notice failing to mention earlier lease — Whether two leases constituting single tenancy under section 3(3) of 1967 Act — Whether failure to refer to earlier lease constituting an inaccuracy in particulars saved by para 6(3) of Part II of Schedule 3 to the 1967 Act — Whether desire notice invalid — Whether tenancy at a low rent under section 4A(1) — Whether rent payable under later lease of garden relevant to rent payable during first year of term of single hypothetical tenancy
The appellant landlords owned the freehold to a house and garden let to the respondent tenant under two leases dated 12 April 1983. Each lease was for a term of 65 years from 25 December 1982. The lease of the house was subject to a rent of £1,000 pa and that of the garden to a rent of £600 pa. The house and garden had been subject to two earlier leases that were granted in 1972, but which had been surrendered at the time of the grant of the 1983 leases. The 1972 lease of the house was for a term of 50-and-a-quarter years at an annual rent of £250, payable quarterly in arrears, and the 1972 lease of the garden was for a term of 20 years at an annual rent of £600, payable quarterly in advance.
In June 1996, the tenant’s solicitor served on his client’s behalf a notice of desire to acquire the freehold to the house and garden, under the Leasehold Reform Act 1967; that notice referred to the 1983 leases, but not to the 1972 leases. In August 1996, the landlords refused to admit the tenant’s claim on the ground that the tenancy was not a tenancy at a low rent for the purposes of the Act because the rent payable during the first year of the tenancy (in 1983) exceeded two-thirds of the rateable value of the property on the relevant date; section 4A(1) of the Act had not therefore been satisfied.
In proceedings by the landlords, the tenant contended that, by reason of the 1972 lease of the house, a single tenancy existed by virtue of section 3(3) of the 1967 Act, and that, during the initial year of that single tenancy (1972), the rent had been less than two-thirds of the rateable value on the relevant date. The landlords argued that the desire notice was invalid because it did not refer to the 1972 leases and that, in any event, the rent payable during the initial year of the tenancy, whether in 1972 or 1983, exceeded two-thirds of the rateable value. The landlords’ arguments were dismissed by the county court judge. The landlords appealed.
Held: The appeal was dismissed. The relevant tenancy was the hypothetical single tenancy that commenced in 1972: see section 3(3) and (6) of the 1967 Act. The defect in the desire notice, in failing to refer to the 1972 lease of the house, was an “inaccuracy in the particulars” required by para 6 in Part II of Schedule 3 to the 1967 Act, but was saved by para 6(3), rendering the notice valid. For the purposes of section 4A(1), the rent payable during the first year of that single tenancy was less than two-thirds of the rateable value at the relevant date. The 1967 Act did not permit the rent payable for the garden under the 1983 lease to be added to the rent payable in 1972 for the purposes of the low-rent test.
The following cases are referred to in this report.
Cresswell v Duke of Westminster [1985] 2 EGLR 151; (1985) 275 EG 461; [1985] RVR 144, CA
Speedwell Estates Ltd v Dalziel [2001] EWCA Civ 1277; [2002] 1 EGLR 55; [2002] 02 EG 104, CA
This was an appeal by the landlords, Earl Cadogan and Cadogan Holdings Ltd, from a decision of Judge Cotran, sitting at Shoreditch County Court, dismissing their claim for declaratory relief against the tenant, Denis Mark Strauss.
Anthony Radevsky (instructed by Pemberton Greenish) appeared for the appellants; Simon Berry QC and Simon Burrell (instructed by Bircham Dyson Bell) represented the respondent.
Giving the first judgment,
[1] This is an appeal from an order made on 22 May 2003 by Judge Cotran, sitting at Shoreditch County Court, in proceedings brought under the Leasehold Reform Act 1967. The appeal raises the question of whether a notice given by the leasehold owner of his desire to enfranchise is a valid notice having regard to the requirements in para 6 of Schedule 3 to the 1967 Act.
[2] The respondent to this appeal, Mr Denis Strauss (the tenant), is the leasehold owner of a house and garden at 21 Cheyne Walk, London SW3. The house is held for a term of 65 years from 25 December 1982 under a lease dated 12 April 1983. The rent reserved under that lease is £1,000 pa. The garden is held for the same term but under a separate lease, also dated 12 April 1983. The rent reserved under the garden lease is £600 pa. The two parts of the property — the house and the garden — are registered under separate leasehold titles at Her Majesty’s Land Registry.
[3] The appellants, Earl Cadogan and Cadogan Holdings Ltd, are, between them, the freehold owners of the house and garden and the persons immediately entitled in reversion on determination of the leasehold interests vested in the tenant. For convenience, I shall refer to the appellants together as “the landlord”.
[4] On 6 June 1996, the solicitor instructed by the tenant served notice on his behalf of his desire to have the freehold house and garden comprised in the two leases of 12 April 1983. The landlord’s response was to serve a notice in reply, dated 28 August 1996, refusing to admit the tenant’s claim on the ground that the tenancy was not a tenancy at a low rent for the purposes of the 1967 Act.
[5] The basis upon which that notice was served is set out in a letter dated 29 August 1996 from the landlord’s solicitor:
We think it is common ground that the tenancy does not fulfil the low rent test as set out in section 4(1) of the 1967 Act. We assume therefore that your client is seeking to rely on section 4A(1)(b) of the 1967 Act introduced by section 65 of the Leasehold Reform, Housing and Urban Development Act 1993. We think you will agree therefore that the test is whether the aggregate amount of rent payable during the year commencing 12 April 1983 exceeded two thirds of the rateable value of the property on that date. |page:70|
It is agreed between us that the rateable value on 12 April 1983 was £2,472. It is our case that the aggregate amount of rent payable during the year commencing 12 April 1983 was £2,400 being the payment of £800 due on 12 April 1983 together with the four equal quarterly payments of £400 each on each of the four quarter days; 24 June 1983, 29 September 1983, 25 December 1983 and 25 March 1984. It follows that the aggregate amount of rent payable during the initial year of the term was in excess of two thirds of the rateable value of the property on the relevant date.
[6] A word of explanation is required. Section 4(1) of the 1967 Act defines low rent in terms that exclude tenancies where the rent exceeded two-thirds of the rateable value on 23 March 1965, and, also, tenancies where the yearly rent exceeded £1,000. Section 1A(2) of the 1967 Act was introduced by amendment in 1993. It provided an alternative to section 4(1) in cases where the tenant sought to acquire the freehold but not an extended lease. The alternative was available if the tenancy fell within section 4A(1). The requirement under that section was that the aggregate amount of rent payable under the tenancy during the initial year did not exceed two-thirds of the rateable value of the property on the relevant date. The relevant date was the date of the commencement of the tenancy. The effect of that change in the law was to bring into the scope and ambit of the 1967 Act long leases in the more affluent parts of London that had previously been excluded by the rateable value limit.
[7] The initial year was defined, for the purposes of section 4A, to mean the period of one year beginning with the date of the commencement of the tenancy. Each of the 1983 leases in this case required payment of rent in advance on the usual quarter days, but provided that a first payment of rent “in respect of the period from 25 December 1982 to the quarter day immediately following the date of the lease” was to be made on the date of the lease. That had the effect that two quarters’ rents were payable on 12 April 1983 and a further four quarters’ rents were payable on the four quarter days from 24 June 1983 to 25 March 1984, making the total amount of the rent payable during the year commencing 12 April 1983 equal to one-and-a-half times the annual rent of £1,600, that is to say, £2,400.
[8] The response to that letter — in a letter dated 17 September 1996 — was to assert that, although the leases were dated 12 April 1983, the term had commenced on 25 December 1982. So, it was said, the year from 25 December 1982 to 24 December 1983 was the initial year for the purposes of section 4A. It was the rent payable in the period of that initial year that was to be taken into account for determining whether the tenancy was a tenancy at a low rent. If that were right, then the rent actually payable before 25 December 1983 — or £1,600 — was a low rent on the alternative basis as set out in section 4A(1) of the Act.
[9] That view of the position was rejected by the landlord’s solicitor. But, by a letter of 11 November 1996, the tenant’s solicitor took a further point:
You may or may not be aware that the lease of the house (this may also apply to the garden, but we cannot yet ascertain this) was granted in consideration partly of cash and partly of the surrender of a prior lease dated 5 December 1972. Assuming that you accept that the prior lease was surrendered simultaneously with the grant of the new lease, on 12 April 1983, would you please be kind enough to confirm for us under which document rent was paid for the period 25 December 1982 to 12 April 1983. This will, it seems to us, clarify significantly the commencement date of the new tenancy.
[10] That gave rise to a letter from the landlord’s solicitor dated 21 November 1996, in which what has come to be accepted as the factual position is set out:
The house was previously subject to a lease dated 5 December 1972 granted for a term of 50 and a quarter years from 29 September 1972 at an annual ground rent of £250 payable quarterly in arrears. The garden ground was previously subject to a lease dated 13 August 1979 for a term of 20 years from 29 September 1978 at an annual rent of £600 payable quarterly in advance. It would appear that both these leases were surrendered.
[11] The parties were unable to reach agreement as to the legal effect of the factual circumstances in which the two leases of 12 April 1983 had been granted. But neither seems to have been in any hurry to resolve the position. It was not until 30 July 2002 that these proceedings were commenced by the issue of a claim form under CPR Part 8 in West London County Court. By that claim, the landlord sought a declaration that the tenant was not entitled to have the freehold of 21 Cheyne Walk under the 1967 Act.
[12] The grounds upon which that declaration was sought were those that had been advanced in the correspondence some five-and-a-half years earlier, namely that the tenancy was not a tenancy at a low rent under either the primary test in section 4 of the 1967 Act or the alternative test provided by section 4A of that Act. The application was supported by a witness statement made by a solicitor for the landlord on 29 July 2002. I should, for completeness, read the final paragraph of that witness statement:
Finally, I should point out that section 1AA of the 1967 Act is now in force and would allow the defendant to enfranchise even though neither low rent test is satisfied. This would involve him in confirming that his existing notice is ineffective, and serving a fresh notice. The valuation date for claims under the 1967 Act is the date when the notice of claim is served. The claimants are understandably anxious that the defendant acquires the freehold at an up-to-date, rather than historic price, and so would respectfully ask the court to grant the relief sought in this claim.
It is that last sentence that discloses what these proceedings are really about.
[13] A defence and counterclaim were served on or about 18 September 2002. In that pleading, the tenant took a point that had not been taken in the earlier correspondence. After referring to the 1972 lease of the house — that is to say, the lease granted for 50-and-a-quarter years from 29 September 1972 — the pleading went on to assert, in paras 12-16:
12. In the premises Part I of the 1967 Act applies to the House as if there had been a single tenancy granted for a term beginning at the same time as the term under the 1972 Lease and expiring at the same time as the term under the 1983 Lease by virtue of sub-section 3(3) of the said Act.
13. It is the defendant’s primary case that the “initial year” for the purposes of sub-section 4A(1) of the 1967 Act is the period of one year beginning with the date of the commencement of the term of the 1972 Lease, ie 29 September 1972.
14. During the said initial year the rent payable under the 1972 Lease was £250.
15. The rateable value of the House as at 29 September 1972 was £930.
16. Accordingly, the rent payable under the 1972 Lease during the initial year did not exceed two thirds of the rateable value on the relevant date with the result that the tenancy of the property falls within Section 4A of the 1967 Act and is to be treated as a tenancy at a low rent.
[14] The secondary case advanced in that defence and counterclaim was that which had been put forward earlier, in 1996, namely that the initial year for the purposes of the 1967 Act was the first year of the term granted by the 1983 leases, that is to say, the year ending 24 December 1983.
[15] The primary point now before this court was first taken by the landlord in its reply dated 29 October 2002 — more than six years since the notice was served on it. The point appears at para 4 of the reply and defence to counterclaim served on behalf of the landlord:
by his notice of Leaseholder’s Claim dated 6 June 1996, the defendant referred only to the 1983 House Lease and the 1983 Garden Lease. By reason of the said Notice’s failure to refer to the 1972 Lease, the same is invalid. The claimants will rely on the 1967 Act and the Regulations made thereunder.
[16] At para 8 of that pleading the landlord took a second point also not taken in the earlier correspondence:
If, which is denied, the defendant is entitled to rely upon any earlier leases, by reason of the proviso to section 3(6) of the 1967 Act, it would be necessary to add the rent payable in the initial year of the 1983 Garden Lease (£600) to the rent payable in the initial year under the 1972 Lease (£250). The total rent, £850, exceeded two thirds of the rateable value of the house as at 29 September 1972 (£930) and so the tenancy of the property does not fall within Section 4A of the 1967 Act.
And further, the reply took the point that had been taken from the outset, namely that the initial year in the context of a claim under the |page:71| 1983 leases was the year commencing 12 April 1983 — a year during which the aggregate payable by way of rent was £2,400.
[17] The issues for decision at the hearing before Judge Cotran are conveniently summarised in para 4 of the case summary prepared for that hearing:
The issues are as follows:
(i) Is the defendant’s Notice of Leaseholder’s Claim invalid by reason of its failure to refer to the 1972 Lease and the low rent test now relied upon?
(ii) Is the defendant entitled to rely upon section 3(3) of the 1967 Act notwithstanding the Notice’s failure to refer to the 1972 Lease?
(iii) Is the defendant estopped from relying on the 1972 Lease?
(iv) If the defendant is entitled to rely on section 3(3), what rent should be compared with the rateable value of the House as at 29 September 1972?
(v) Does the defendant satisfy the alternative low rent test in Section 4A of the 1967 Act? In particular, what was the rent payable during the initial year of the tenancy within the meaning of section 4A(1)?
[18] The judge decided each of those issues against the landlord. His conclusions are summarised in para 39 of the judgment that he delivered on 22 May 2003:
I have come to the following conclusions on the pleadings in this case. (1) The notice of 6 June 1996 is not invalid; (2) the defendant was entitled to rely, as he did in his defence and counterclaim to this action, on 1983 house and garden leases and on its predecessor 1972 house lease and garden lease; (3) in the case of the 1972 lease the initial year for the purposes of sub-section 4A(1) of the 1967 Act is one year from 29 September 1972, ie £250 at the rateable value of £930; (4) the initial year for the purposes of the 1983 leases commenced on 25 December 1982 was £600, the rateable value was £2,472; (5) in either event the initial year’s rent did not exceed two thirds of the rateable value. I hold that the declaration sought by the claimants is dismissed. I grant a declaration that the defendant is entitled to have the freehold of the property of 21 Cheyne Walk, London SW3 pursuant to his notice of claim dated 6 June 1996.
The reference there to the initial rent for the purposes of the 1983 leases commenced on 25 December 1982 being £600 is, I think, a mistake; the judge must have intended to say that the rent for the initial year for the purposes of the 1983 leases was £1,600.
[19] The landlord appeals to this court with the permission granted by Arden LJ on 10 July 2003. The principal ground taken in the appellant’s notice is that the judge ought to have held that the notice dated 6 June 1996 was invalid. In the alternative, the landlord takes the point that, if the notice were valid, the judge should have found that the alternative low-rent test under section 4A(1) of the 1967 Act would not be satisfied.
[20] By a respondent’s notice, the tenant seeks to uphold the judge’s decision on the additional ground that the tenant was not required to refer to the 1972 lease in his notice of June 1996 under the 1967 Act because he did not then know about the 1972 lease.
[21] I turn, therefore, to the relevant statutory provisions. The 1967 Act confers on the tenant of a leasehold house, occupying the house as his residence, the right to acquire, on fair terms, the freehold or an extended lease where two conditions are satisfied:
(a) The tenancy is a long tenancy at a low rent; and
(b) at the time when he gave notice of his desire to have the freehold or an extended lease as the case may be, he has been a tenant under a long tenancy at a low rent and has been occupying the house as his residence for the last three years or for periods amounting to three years in the last 10 years.
For that purpose, the premises that may be enfranchised include any garage, garden or appurtenance that, at the relevant time, is let with the house and occupied with, and used for, the purposes of a house: see section 2(3) of the 1967 Act.
[22] It is not in dispute in the present case that the tenancy under which the tenant is in occupation is a long tenancy and that he has been in occupation for the requisite period. Nevertheless, the provisions of section 3 of the Act — which define long tenancy — are material. By section 3(1), a long tenancy means a tenancy granted for a term of years certain exceeding 21 years, notwithstanding that it may be terminable by re-entry or forfeiture. Section 3(3) addresses the position where there have been successive tenancies. It is in these terms:
Where the tenant of any property under a long tenancy, on the coming to an end of that tenancy, becomes or has become a tenant of the property or part of it under another long tenancy, then in relation to the property or that part of it this Part of this Act shall apply as if there had been a single tenancy granted for a term beginning at the same time as the term under the earlier tenancy and expiring at the same time as the term under the later tenancy.
[23] Section 3(6) is directed to the case in which there is more than one concurrent tenancy of the premises that the tenant seeks to enfranchise. It is in these terms:
Where at any time there are separate tenancies, with the same landlord and the same tenant, of two or more parts of a house, or of a house or part of it and land or other premises occupied therewith, then in relation to the property comprised in such of those tenancies as are long tenancies this Part of this Act shall apply as it would if at that time there were a single tenancy of that property and the tenancy were a long tenancy, and for that purpose references in this part of this Act to the commencement of the term or to the term date shall, if the separate tenancies commenced at different dates or have different term dates, have effect as references to the commencement or term date, as the case may be, of the tenancy comprising the house (or the earliest commencement or earliest term date of the tenancies comprising it):
Provided that this subsection shall have effect subject to the operation of subsections (2) to (5) above in relation to any of the separate tenancies.
Before examining the further provisions of the Act, it is convenient to explain the effect of sections 3(3) and 3(6) in this case. Following 12 April 1983, there were two separate tenancies — one of the house and one of the garden — each of which were long tenancies. So, section 3(6) was engaged. But before section 3(6) was given effect, it was necessary to have regard to section 3(3). That is what the proviso to section 3(6) requires. Section 3(3) applied in the case of the house because the 1983 tenancy of the house had been granted to a tenant who had been the tenant of the house under the 1972 tenancy referred to in the letters of 11 and 21 November 1996, and the 1972 tenancy of the house had itself been a long tenancy. So, in relation to the house, section 3(3) required Part I of the 1967 Act to be applied as if there had been a single tenancy granted on 5 December 1972 for a term that commenced on 29 September 1972 and ended on 25 December 2047. But section 3(3) did not have effect in relation to the tenancy of the garden. That was because the previous garden lease granted in 1979, and a lease granted in 1972, which has preceded that 1979 lease, were not long tenancies. The 1979 lease of the garden was for a term of 20 years only. The position, therefore, in 1996, when the notice that is the subject of these proceedings had been served, was that there were two separate tenancies: one of the house, which, by virtue of section 3(3), was to be treated as having commenced on 29 September 1972, and the other of the garden, which, because section 3(3) had had no application to the garden, was for a term commencing on 25 December 1982.
[24] The two leases were coterminous, each ending on 25 December 2047. Section 3(6) required that Part I of the 1967 Act be applied as if the house and garden were comprised in a single tenancy, which was itself a long tenancy, and required that the Act be applied as if the term of that single tenancy had commenced on 29 September 1972, that being both the earliest commencement date and the commencement date of the tenancy comprising the house (which, for the purposes of section 3(6), is treated as the dominant tenancy).
[25] I return, therefore, to the further provisions of the 1967 Act. As I have said, section 4A provides alternative rent limits for the purposes of section 1A(2); that is to say, alternative limits where the tenancy of the property is not a tenancy at a low rent in accordance with the test in section 4(1).
[26] It is common ground that if the relevant tenancy in the present case were the 1983 tenancy, it would not fall within section 4(1). It is common ground also that if the relevant tenancy is the 1972 single tenancy, as it is, it also will not fall within section 4(1). Section 4A(1) and (2) is in these terms:
(1) For the purposes of section 1A(2) above a tenancy of any property falls within this subsection if either no rent was payable under it in respect of the property during the initial year or the aggregate amount of rent so payable during that year did not exceed the following amount, namely — |page:72|
(a)…
(b) where —
(i) the tenancy was entered into either on or after 1st April 1963 but before 1st April 1990… and
(ii) the property had a rateable value other than nil at the date of the commencement of the tenancy or else at any time before 1st April 1990, two thirds of the rateable value of the property on the relevant date.
…
(2) For the purposes of subsection (1) above —
(a) “the initial year” in relation to any tenancy, means the period of one year beginning with the date of the commencement of the tenancy;
(b) “the relevant date” means the date of the commencement of the tenancy or, if the property did not have a rateable value, or had a rateable value of nil, on that date, the date on which it first had a rateable value other than nil;…
[27] Section 5 of the Act prescribes how the right to acquire the freehold, conferred by section 1 in conjunction with section 1A and section 4A if the conditions as to long tenancy and low rent are satisfied, is to be exercised and given effect:
(1) Where under this Part of this Act a tenant of a house has the right to acquire the freehold or an extended lease and gives notice of his desire to have it, the rights and obligations of the landlord and the tenant arising from the notice shall inure for the benefit of and be enforceable against them, their executors, administrators and assigns to the like extent (but no further) as rights and obligations arising under a contract for a sale or lease freely entered into between the landlord and the tenant;…
[28] That deemed contract is commonly referred to as “the statutory contract”. The obligations under the statutory contract (in a case where the tenant desires to have the freehold) are set out in section 8(1):
Where a tenant of a house has under this Part of this Act the right to acquire the freehold, and gives to the landlord written notice of his desire to have the freehold, then except as provided by this Part of this Act the landlord shall be bound to make to the tenant, and the tenant to accept, (at the price and on the conditions so provided) a grant of the house and premises for an estate in fee simple absolute, subject to the tenancy and to tenant’s incumbrances, but otherwise free of incumbrances.
[29] Section 9 of the 1967 Act provides for the determination of the price to be paid under the statutory contract. In the present context, it is necessary to note only that the price is fixed by reference to the open market at “the relevant time”, and that the relevant time for that purpose is the time when notice is given by the tenant of his desire to have the freehold: see section 37(1)(d).
[30] Those provisions identify and emphasise the importance of giving a notice exercising the statutory right to acquire the freehold. The notice gives rise to the statutory contract, which imposes the obligations upon the landlord to grant the freehold, and it defines the date by reference to which the valuation is to be made.
[31] Part II of Schedule 3 to the 1967 Act, which has effect by reason of section 23(1)(d), sets out the procedural provisions in relation to the content and service of notices. Paragraph 6(1) is in these terms, so far as material:
.–(1) A tenant’s notice under Part I of this Act of his desire to have the freehold or an extended lease of the house and premises shall be in the prescribed form, and shall contain the following particulars: —
(a) the address of the house, and sufficient particulars of the house and premises to identify the property to which the claim extends;
(b) such particulars of the tenancy and… of the rateable value of the house and premises as serve to identify the instrument creating the tenancy and show that (i) (apart from the operation, if any, of the proviso to section 4(1) of this Act) the tenancy is and has at the material times been a long tenancy at a low rent;
…
(d) the periods for which since the beginning of the preceding ten years and since acquiring the tenancy the tenant has and has not occupied the house as his residence, together with the following additional particulars about the periods for which during that time he has so occupied the house, that is to say,–
(i) what parts, if any, of the house have not been in his own occupation and for what periods; and
(ii) what other residence, if any, he has had for what periods, and which was his main residence.
[32] Paragraph 6(3) of Schedule 3 provides that a notice exercising the right to acquire the freehold shall not be invalidated by any inaccuracy in the particulars required:
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; and where the claim extends to property not properly included in the house and premises, or does not extend to property that ought to be so included, the notice may with the leave of the court, and on such terms as the court may see fit to impose, be amended so as to exclude or include that property.
[33] I turn now to the notices given in the present case. They were in forms 1 and 2, respectively, annexed to the Leasehold Reform Notices (Amendment) Regulations 1993. It is not suggested that either notice was not in the prescribed form. The criticism is of the particulars included in the notices.
[34] The notice of 6 June 1996 begins, at para 1, by requiring the landlord to take notice that the tenant, as tenant of the house and premises described in the schedule, desires to have the freehold of the said house and premises, and that the tenant is making the claim in exercise of his rights under the 1967 Act. Paragraph 1 contains the statements that the particulars upon which he relies are set out in the schedule to the notice. Paragraph 2 requires the landlord to give the tenant, within two months of the service of the notice, a notice in the prescribed form stating whether the right to have the freehold is admitted, subject to any question as to the correctness of the particulars of the house and premises given in the notice, and, if not admitted, stating the grounds upon which it is not admitted.
[35] In the schedule to the notice, the address of the house, 21 Cheyne Walk, London SW3, appears at para 1. Paragraphs 2, 3 and 4 are in these terms:
2. Particulars of the house and premises sufficient to identify the property to which the claim extends:
21 Cheyne Walk, London, SW3 being the whole of the property comprised in two Leases, each dated 12 April 1983 and made between the Right Honourable William Gerald Charles Earl Cadogan (1) Cadogan Holdings Company (2) and Marcus Stuart Turnbull and Victoria Hoskins Turnbull (3).
3. Particulars of the tenancy of the house and premises sufficient to identify the instrument creating the tenancy and to show that the tenancy is and has at the material times been a long tenancy or treated as a long tenancy:
Both the leases mentioned at paragraph 2 above create a term of 65 years from 25 December 1982.
4. Particulars of the tenancy of the house and premises sufficient to show that the tenancy is and has at the material times been a tenancy at a low rent or treated as a tenancy at a low rent:
The initial aggregate rent payable under the two Leases mentioned at paragraph 2 above, namely £1,600, is less than two thirds of the rateable value of the property on 12 April 1983, namely £2,472.
[36] The landlord’s notice in response, dated 28 August 1996, acknowledged receipt of that notice of 6 June and stated:
I do not admit you are right on the following ground: your tenancy is not at a low rent.
[37] The first issue raised on the appeal is whether the tenant’s notice of 6 June 1996 was a valid notice, having regard to the requirements in para 6 of Schedule 3 to the 1967 Act. As I have said, for the purposes of the application of Part I of the 1967 Act, the house and garden at 21 Cheyne Walk have to be treated as held under a single tenancy granted on 5 December 1972 for a term commencing on 29 September 1972. It is said, on behalf of the landlord, that the notice of 6 June 1996 does not identify the instrument creating that tenancy — as it should, under para 3 of the schedule to the notice — and that it does not give sufficient particulars of the tenancy to show that the tenancy is and has, at the material times, been a tenancy at a low rent, or is to be treated as a tenancy at a low rent.
[38] What is required under para 3 of the schedule to the notice are “particulars sufficient to identify the instrument creating the tenancy”. It is submitted on behalf of the landlord that, although two leases are identified under that paragraph, being the two leases of 12 April 1983 |page:73| referred to in para 2 of the schedule, there is no reference to the lease of 5 December 1972, which is one of the instruments creating the relevant tenancy. It is pointed out, correctly, that, against para 3 of the schedule, there is a reference to note 7 of the prescribed form, which begins with this sentence:
Where there have been successive tenancies particulars should be given of each tenancy.
So, it is said, para 3 gives insufficient particulars, in that it fails to identify each of the three instruments that are relevant in this context.
[39] Further, it is said that para 4, which contains the assertion (in support of the contention that the tenancy is a tenancy at a low rent) that the rent is £1,600 at a time when the rateable value of £2,472 is wholly wrong. Although there is a dispute as to what the initial rent under the single tenancy commencing in 1972 would be, it is said that the tenant, in order to state his case, should have claimed that the initial aggregate rent payable under the relevant leases was £250, which was less than two-thirds of the rateable value of the property on 29 September 1972 or 5 December 1972, being £930.
[40] The short question on this first issue is whether the defects in the notice to which I have just referred are properly to be regarded as “inaccuracies in the particulars” as required by para 6 of Part II of Schedule 3 to the 1967 Act, so as to be saved by para 6(3). That paragraph, as I have indicated, provides that the notice shall not be invalidated by any inaccuracy in the particulars required by, inter alia, para 6(1).
[41] What amounts to an “inaccuracy” in this context has been considered by this court on two occasions within the past 20 years. First, in Cresswell v Duke of Westminster [1985] 2 EGLR 151, and, second, and more recently, in Speedwell Estates Ltd v Dalziel [2002] EWCA Civ 1277; [2002] 1 EGLR 55. The common thread in those decisions is that whether or not a defect in a Leasehold Reform Act notice is to be regarded as an inaccuracy is essentially a matter to be decided on the facts of each case. In the former case, Cresswell, Sir John Donaldson MR said, at p152D-F:
All we do know is that the notice did not represent the facts in the respect which I have mentioned. The learned county court judge said that this was an inaccuracy within the meaning of the paragraph and should not invalidate the notice. For my part, I entirely agree with that view. It may be that there is a line to be drawn, but I would hesitate to define it. During the argument, Neill LJ drew my attention to the fact that the words “any inaccuracy in the particulars required by this paragraph” are followed by “any misdescription of the property”, and I would agree with the suggestion that both phrases are concerned with the same degree of deviation from full accuracy.
In the end I suspect that a 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 which does not on a fair view relate to the facts?” 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. In my judgment this case answers itself on its own facts, the answer being that given by the county court judge.
[42] It is perhaps pertinent to note that the dichotomy in para 6(3) of the Schedule to the 1967 Act is between “any inaccuracy in the particulars required by this paragraph” and “any misdescription of the property to which the claim extends”. Paragraph 6(3) goes on to provide that, in relation to misdescription of the property, the notice can be amended with the leave of the court so as to include or exclude property that should or should not have been the subject of the claim. The legislature has not thought it necessary to provide for an amendment to the notice to correct “inaccuracy in particulars” as distinct from “misdescription of the property”. The reason is obvious. The notice gives rise to the formation of a statutory contract. It is obviously essential that the property that is the subject of that contract should be defined with sufficient precision to enable it to be the subject of a grant under section 8 of the Act. So if the contract is to be carried into effect, it is necessary that the notice should be amended so as to describe the property accurately. But, in relation to the particulars required by para 6 other than the identity of the property, the position is different. Whether the notice has effect to create a statutory contract depends not upon what is in the notice, but upon whether the statutory conditions that confer on the tenant the right to acquire the freehold on fair terms have been met; and if that is a matter of dispute following the service by the landlord of a notice not admitting the claim, that dispute may be expected to be resolved by the court. Once the court has decided whether there is or is not a right to acquire the freehold, the particulars in the notice cease to be of importance.
[43] The purpose — and, if I may say so, the obvious purpose — of the particulars set out in para 6(1) of Schedule 3 to the 1967 Act, is to enable the landlord to decide whether or not to admit the claim. But, as para 7(1) of the Schedule itself makes clear (and is reflected in the prescribed form of the landlord’s notice), any admission of the claim is subject to the correctness of the particulars. So a landlord who admits a claim on the basis of particulars that are subsequently shown to be incorrect is not bound to a statutory contract. A landlord who does not admit the claim will be inviting the tenant, in effect, to proceed to establish the claim in proceedings in court. In those proceedings, there is, as it seems to me, no reason in principle why the tenant should be bound by the matters set out in the notice. If those matters are inaccurate, there is no reason why he should not rely upon the true facts.
[44] In Speedwell Estates, Rimer J, giving the main judgment, made the point that a notice of this kind has to be construed against the background and purpose for which it has been given. He identified the possibility, inherent in the judgments in Cresswell, that there might be a degree of inaccuracy so fundamental as to lead to the conclusion that the particulars did not fairly reflect the true facts. In such a case, para 6(3) of Schedule 3 would be of no assistance. But, subject to that, if the matter were properly regarded as inaccuracy rather than failure to comply with the requirements, the notice could be saved.
[45] The judgment in Speedwell Estates is illuminating. Rimer J went through the many and varied criticisms of the notices given in that case. He took the view, with which the other members of the court agreed, that there was really only one defect that could be regarded as going beyond mere inaccuracy. That was the tenants’ failure to give any information as to their occupancy and residence, a matter that para 6(1)(b) requires. In Speedwell Estates, the tenants had written against box 6, either “not applicable”, or “N/A”. Rimer J commented in these terms in [39] of his judgment:
The information sought by box 6 is among the most important the tenant has to provide. It is essential to his right to enfranchise that he should have occupied the house as his main residence for the three years preceding his notice, or for periods amounting to three years in the last 10: see section 1(1)(b) and (2) of the 1967 Act. Unlike much of the other information asked for in the prescribed form, information about this will relate to factual matters that, in many cases, will not be within the landlord’s knowledge. Box 6 therefore requires the tenant to set out the facts by which he claims to make out his case under section 1(1)(b) and (2), and the purpose of this is so that the landlords can consider those facts, and investigate them and, if so advised, challenge them.
[46] That purpose was frustrated by the answers that the appellants had given to the information sought under box 6 in the notices under consideration in Speedwell Estates. In those circumstances, it is not at all surprising that the court came to the conclusion that the failure was not merely an inaccuracy: it was a failure to provide, or attempt to provide, the information that the statute required. The notices were not notices under the statute that contained inaccuracies in the particulars; they were not notices under the statute at all because they made no attempt to provide particulars in respect of an essential matter of fact.
[47] By contrast, in the present case, there has been no failure to provide information. The failure is to appreciate that the information provided is not complete, and, because not complete, not accurate. The information is incomplete because the tenant, or his adviser, when completing the schedule to the notice, did not appreciate that there had been a lease granted in 1972. If he had appreciated that, it should have been included under para 3 of the schedule to the notice, and the appropriate figures as to rent and rateable value should have been included under para 4 of the schedule. But what is intended represents |page:74| a proper attempt, albeit an inaccurate attempt, to meet the requirements of the Schedule to the 1967 Act. In my view, that defect is properly to be regarded as an inaccuracy within para 6(3) of Schedule 3 to the Act. Because the defect is within para 6(3) of the Schedule, the notice is saved from invalidity.
[48] I should add two further points. First, that the information that has not been provided, but should have been provided, is information that would be known to the landlord if the landlord had investigated its own register of leases. The existence of the 1972 lease could come as no surprise to this landlord, which was the grantor. Second, that when the 1972 lease had been brought to the landlord’s attention on 11 November 1996, that is to say, some five months after the notice, the landlord’s reaction was not to assert that the notice was invalid; the landlord’s reaction was to provide a comprehensive statement of what the information should have been. In those circumstances, it does not lie in the mouth of this landlord to assert that the failure to include in the notice information that should have been there has led to any prejudice in its consideration of whether to admit or reject the claim for enfranchisement.
[49] I would reject the landlord’s contention that the notice of 6 June 1996 was not a valid notice under the 1967 Act.
[50] That leads to the second issue. If this is a valid notice, is the tenancy in respect of which the tenant relies, and is bound to rely, a tenancy at a low rent for the purposes of section 4A(1)? The relevant tenancy, for the reasons that I have set out, is the hypothetical single tenancy granted on 5 December 1972 for a term commencing on 29 September 1972. That is what section 3(3) and (6) of the 1967 Act requires. The single tenancy must be treated as having a commencement date in 1972 for, among other purposes, the application of section 4A(1) and (2).
[51] In relation to this single tenancy, “the relevant date” means either 29 September 1972 or 5 December 1972, and “the initial year” means the period of one year beginning with that date. It is not necessary to decide whether the date of commencement of that tenancy is, as the tenant would assert, 29 September 1972 (that is to say, the date from which the term commences) or the date of the grant of the lease, 5 December 1972, for which the landlord would contend. It is not necessary to determine that question because, whichever date is taken, the rent payable under that tenancy in respect of the property was less than two-thirds of the rateable value at the relevant date.
52. It was submitted on behalf of the landlord that, in some way, there was to be added to the rent payable in 1972 rent that first became payable under the garden lease in 1983. In my view, the statute does not permit that. The relevant inquiry is: what rent was payable in respect of the property during the initial year? The answer to that is the rent payable under the 1972 lease in the year 1972/73. Applying that test, the relevant tenancy is a tenancy at a low rent for the purposes of section 4A(1).
[53] For those reasons, I would dismiss this appeal.
[54] I agree.
Also agreeing,
[55] I also agree, and I wish only to add a few words in relation to Mr Anthony Radevsky’s alternative ground of appeal. Section 3(6) of the 1967 Act provides tidy arrangements whereby if there are at any time separate long tenancies with the same landlord and the same tenant of a house and of land occupied therewith, then Part I of the Act is to apply as it would if at that time there was a single long tenancy with the same commencement and term date of a tenancy comprising the house.
[56] Parliament did not, however, provide any legislative formula by which one could identify the rent payable under this hypothetical single long tenancy for the purposes of the calculations as required by the 1967 Act. In this case, the relevant long tenancy of a house commenced in 1972 and the relevant long tenancy of the garden commenced in 1983. It is well known that the value of money changed significantly between those two years.
[57] In the absence of any parliamentary guidance, I do not consider that we should invent a rent attributable to the garden in 1972 to be added to the known rent attributable to the house. Still less do I consider that we should follow the demonstrably unreasonable course suggested by Mr Radevsky of treating the 1983 rent of the garden as if it were the 1972 rent. If there is a lacuna in the parliamentary scheme that needs to be filled somehow or other, I do not consider that the court is at all well qualified to give it. This must be a matter for parliament, which will no doubt wish to consider the likely number of cases in which a new formula will make a significant result to the outcome before deciding whether the game of taking up parliamentary time for this purpose is worth the gamble.
Appeal dismissed.
