Lease – Residential property – Term of acquisition – Solicitor’s undertaking – Claimant serving notice on first defendant freeholder of claim to new lease – Defendant serving counter-notice with counter-proposal – Claimant seeking to enforce grant of new lease and undertaking of second defendant solicitor to complete grant of new lease – Whether requirement for foreign lawyer’s opinion was “term of acquisition” – Whether statement by second defendant in course of pre-completion correspondence amounting to solicitor’s undertaking to complete – Claims dismissed
The claimant, a British Virgin Islands (BVI) registered company, held two underleases of flat 12 and garage 22 at 30 Harley Street, London for terms of 75 years. The first defendant was the freehold owner. The claimant served on the defendant a notice of claim to a new lease pursuant to section 42 of the Leasehold Reform, Housing and Urban Development Act 1993. The first defendant served on the claimant a counter-notice pursuant to section 45 of the 1993 Act which admitted the claimant’s right to a new lease but made a counter-proposal.
During negotiations the defendant stated that, as the claimant was a company incorporated in the British Virgin Islands, it required, before completion of the new leases, an original legal opinion from a duly qualified lawyer in the British Virgin Islands confirming the claimant’s status, capacity and financial solvency. Draft leases were approved, terms agreed and the lawyer’s opinion received. The claimant had applied to the First-tier Tribunal under section 48(1) of the 1993 Act to have disputed terms of the acquisition determined but the defendant asked the tribunal to vacate the hearing on the basis that everything was agreed.
The claimant sought to enforce the grant of the new lease and a professional undertaking allegedly given by the second defendant solicitors to complete the grant of the new lease upon receipt of funds. A dispute arose whether the proceedings had been issued within the time required by section 48(1). The lawyer’s opinion had been requested after the two-month period specified in that provision but within the six-month period in section 48(2). The defendant contended that it was a “term of acquisition” within section 48(7) and that the claimant was out of time to enforce the statutory contract for the new lease because it had failed to apply to the court by the requisite deadline.
The issues were: (i) whether the requirement for a foreign lawyer’s opinion was a “term of acquisition”; and (ii) whether a statement made by the second defendant in the course of pre-completion exchanges of correspondence amounted to a solicitor’s undertaking to complete upon receipt of funds.
Held: The claims were dismissed.
(1) The 1993 Act did not expressly state how and when to identify terms of acquisition. In the context of the statutory scheme, such terms were the proposals contained in a tenant’s notice and a landlord’s counter-notice at the relevant time. That interpretation made obvious sense and was neither impractical nor onerous on either party. It did not prevent them from agreeing additional or different terms, nor from later contesting the drafting of a new lease under section 57. However, it meant that the time limit for applying to enforce or discharge the statutory contract ran from the time, as defined in section 48(6), when the terms of acquisition (not other terms or requirements) had been agreed or determined by the tribunal.
The words “or otherwise” in section 48(7) did not qualify the phrase “the terms on which the tenant is to acquire a new lease of his flat”; they were intended to prevent the phrase starting “whether they relate to …” from defining exclusively what terms were “terms of acquisition”. The central concept was that the terms of acquisition were the terms arising from the statutory contract. The majority of those would be within the terms of the new lease and payment arrangements, but there might be others.
(2) There was no jurisdiction, other than in limited circumstances specified in paragraph 9 of Schedule 12 to the 1993 Act, to amend the terms of a notice or counter-notice. It therefore made obvious sense of the statutory scheme that the terms of acquisition (which were not the same as the exact wording of the new lease) were defined by the notice and counter-notice against the backdrop of section 57 of the Act, which provided that the new lease would otherwise be on the same terms as the existing lease, subject to specified changes. If they were not so defined, it was difficult to see how all the terms of acquisition were identifiable as such, rather than as issues to be dealt with in the drafting of the new lease, and what (if any) time limit there was on raising further terms of acquisition before the tribunal had finally determined the matters in dispute: Cawthorne v Hamdan [2006] 3 EGLR 183, Oakwood Court (Holland Park) Ltd v Daejan Properties Ltd [2007] 1 EGLR 121 and Westminster City Council v CH2006 Ltd [2009] UKUT 174 (LC) applied. Bolton v Godwin-Austen [2014] EWCA Civ 37; [2014] HLR 15 considered.
Reading section 48 as a whole, and in the context of the statutory scheme, the terms of acquisition to be agreed or determined by the tribunal were the proposals contained in the respective notices that remained in dispute at the relevant time. Assuming that a term of acquisition could be raised after the date of the counter-notice, but before all terms of acquisition had been agreed or determined, the lawyer’s opinion in the instant case was a “term of acquisition”. The fact that the defendant freeholder had no statutory entitlement to require one did not mean that it could not be a disputed term of the acquisition but the claimant’s failure to dispute that the opinion was required amounted to a final and unconditional agreement to provide one.
(3) The enforcement of an undertaking was a quasi-disciplinary matter, so it was appropriate to take the definition of “undertaking” from the glossary in the Solicitors Regulation Authority Handbook (2012). The question was how the tenant would reasonably have understood the second defendant’s statement in the context in which it was given. Neither party had been in default and there had been no particular pressure to complete. The solicitor had merely been responding to an enquiry about appropriate dates for completion. The tenant would not have been expecting a solicitor’s undertaking in response. The solicitor’s use of the word “will” did not change what was otherwise an indication of the time for completion into an undertaking to complete. Therefore, the second defendant’s statement did not have the character of an undertaking: Udall v Capri Lighting Ltd [1988] QB 907, Fox v Bannister, King & Rigbeys [1988] 1 QB 925 and Reddy v Lachlan [2000] Lloyds Rep PN 858 considered.
Ellodie Gibbons (instructed by Bilmes Solicitors) appeared for the claimant; Mark Loveday (instructed by Charles Russell Speechleys LLP) appeared for the defendants.
Eileen O’Grady, barrister
