The head lease holder of a Chelsea block of flats has lost an appeal against an acquisition order made in favour of 11 of the residents.
Judge Geraldine Andrews QC rejected the appeal by Arrowgame Ltd, head lessee of the 12 flats at Colebrook Court, Sloane Avenue, London SW3, against the order made under Part III of the Landlord and Tenant Act 1987 by Judge Cowell at the Central London County Court in October 2011.
Ruling in what she said was the first contested case on the interpretation of s.27 of the 1987 Act, she found that the judge was entitled to make the acquisition order, despite Arrowgame’s hopes of raising £4m from the property’s development potential.
The effect of the decision is that Arrowgame will be obliged to convey all its interest in the property to a company set up by the 11 residents when a price is agreed or determined by the Leasehold Valuation Tribunal, based on the market value.
The long lessees of flats 1-10 and flat 12 took action to obtain the reversionary interest – the head lease granted by Shellmex and BP Limited for a term of 99 years on 21 September 1966 – in all 12 flats from Arrowgame, as a result of problems they claim to have experienced with their landlord and the property manager.
Former manager David Goodman, the long leaseholder of flat 11, was replaced as manager by the LVT in February 2006, but the other residents claim that the appointment of the new manager, Bruce Maunder Taylor, has not cured the problems.
The judge said that they allege that Arrowgame has “failed to co-operate with the manager to an exceptional extent”, unprecedented in Mr Maunder Taylor’s considerable experience.
But she continued: “The main reason why Arrowgame opposed the application was that it did not wish to lose the opportunity of realising the development potential of the Property.”
Arrowgame – which bought the head lease for £5,500 in 1993 as a long term investment opportunity – had hoped to secure a more lucrative £4m sale to developer Landgate (New Homes) Ltd.
It argued that an application for planning permission was submitted in July and that there were real prospects that developer would obtain consent for a scheme to build a further three storeys of flats immediately above the existing third floor.
It claimed that the notice served by the residents under section 27 of the Act seeking an acquisition order was not valid, and that Judge Cowell wrongly exercised his discretion to make the order notwithstanding defects in the notice.
However, rejecting its appeal, the judge said that, to be valid, the notice had to explain the reason why the lessees were seeking an acquisition order – because the appointment of the manager had not been enough to address or cure the problems that they have been experiencing with the landlord – and spell out the nature of any ongoing difficulties.
She said: “The notice in the present case does so. It sets out a number of complaints in sufficient detail for Mr Goodman and Arrowgame to be able to address them.”
In case she is later found to be wrong that the notice was valid, she went on to consider Judge Cowell’s exercise of his discretion to make the acquisition order and his refusal to suspend it.
Ruling that he was entitled to do so, she said: “The onus is on the applicants to establish that there are grounds for making the order and that it is ‘appropriate’ to do so. If those grounds can be addressed by some steps short of an acquisition order then it would plainly be inappropriate to make one. If they cannot, then the court still has to weigh up all the relevant factors before exercising its discretion. That is what the Judge did.
“The judge did take into account all the relevant factors. As to the argument that almost all the matters complained of had been cured by the time the matter came to court, the judge made it clear that this was not an answer, because the delay in addressing them was a legitimate concern.”
As an example, she said that it took four years to comply with an order of the LVT that required them to provide books and records within 14 days.
She said: “Having considered all the evidence the judge found almost all the grounds had been established. Looking at the overall picture, as he pit it, ‘there has been obstruction and litigation conducted in a way that the claimants simply cannot be expected properly to put up with’. He concluded that an acquisition order was the only remedy which could be given to them to remove Arrowgame and Mr Goodman from the scene.
She said that the judge had, rightly, taken into account the fact that the property had real development potential.
But she continued: “However, this was not a case in which it would have been appropriate for the court to conclude that the applicants should not have an order because the landlord decided it wanted to realise the development value and had taken steps very late in the day to start doing so. The development potential of the property was a factor to which the Judge was entitled to afford less weight than all the powerful factors adumbrated in his judgment pointing towards the making of an order. For those reasons there is no justification for the challenge to the exercise of the judge’s discretion to make the acquisition order.
“For the avoidance of doubt, I should make it clear that even if I had been satisfied that there were grounds for interference with the judge’s decision, I would have exercised my discretion in exactly the same way.”
She added that the fact that planning permission was not sought until July 2012 – approximately nine months after the decision under challenge – “does not inspire confidence that the proposed development would be completed in the reasonably foreseeable future”.
Wildsmith and ors v Arrowgame Ltd Chancery (Judge Geraldine Andrews QC) 22 November 2012
Mark Warwick (instructed by David Goodman & Co) for the appellant (Arrowgame)
Anthony Radevsky (instructed by John May Law) for the respondents
Piers Harrison (instructed by Ashley Wilson) for the intervener (Landgate (New Homes) Ltd)
