Leasehold enfranchisement – Lease extension – Chapter II of Part I of Leasehold Reform, Housing and Urban Development Act 1993 – First respondent claiming lease extension – Appellant freeholder agreeing terms with first respondent and granting new lease –Whether agreement binding second respondent as intermediate landlord notwithstanding service of notice seeking separate representation under para 7(1) – Leasehold valuation tribunal holding that agreement not binding on second respondent where such notice served and second respondent objecting to manner of apportionment of premium – Appeal allowed
The first respondent was the long leaseholder of a flat and garage in London W1. The appellant owned the freehold of the property while the second respondent held a long lease of the immediate reversion. The first respondent’s predecessor in title had served a notice under section 42 of the Leasehold Reform Housing and Urban Development Act 1993, seeking to acquire new extended leases of the flat and garage under Chapter II of Part I of that Act. The appellant, as the “competent landlord” for the purposes of the Act, served a counternotice admitting the right to new leases but disputing the proposed terms of acquisition. The second respondent, as the “other landlord”, served notice of her intention to be separately represented in any legal proceedings pursuant to para 7(1) of Schedule 11.
The appellant applied to the leasehold valuation tribunal (LVT), under section 48(1) of the Act, to determine the premium to be paid for the new leases. It subsequently accepted the first respondent’s offer of £269,000 and apportioned that sum as to £265,600 for itself and £3,400 for the second respondent. By that stage, all the other terms of the new leases had been agreed. The appellant and the first respondent therefore wrote to the LVT to request that the hearing date be vacated. The appellant then granted the new leases on the agreed terms.
Meanwhile, the second respondent had also written to the LVT, informing it that she did not agree with the apportionment or consent to the vacation of the hearing. The LVT proceeded with the hearing and decided that the agreement between the appellant and the first respondent did not bind the second respondent; it held that the value of her intermediate issue remained in issue and it therefore had jurisdiction to determine the issue of apportionment.
The appellant appealed, contending that it had authority to agree the terms of the new leases with the tenant so as to bind the “other landlord” notwithstanding that the latter had served notice of intention to be separately represented.
Held: The appeal was allowed.
The purpose of the 1993 Act was to confer on a tenant a right to acquire or extend a new lease of the flat on payment of a premium, and its provisions should be construed in that light: Cadogan v McGirk (1996) 29 HLR 294; [1996] 2 EGLR 75 and Day v Hosebay Ltd [2012] UKSC 41; [2012] 1 WLR 2884; [2012] 3 EGLR 31; [2012] 43 EG 116 considered. The points of contact for agreement and dispute resolution were the competent landlord and the tenant, who were vested with the authority to make decisions and reach agreement. The Act was intended, so far as possible, to operate simply, swiftly and efficiently with minimum intervention of other parties and the involvement of the court. Once agreement was reached, the lease was granted, at which point in time the section 42 notice was spent. The tenant was not to be embroiled in multi-party negotiations, but was entitled to negotiate and reach agreement direct with the competent landlord, who, by section 40(2), had a statutory power to act on behalf of all the other landlords. Para 6(1) of schedule 11 specifically made binding on an intermediate landlord any agreement that was reached between the competent landlord and the tenant.
As with any other agent, the competent landlord would be liable in the event of a failure to act in good faith or act with reasonable care and diligence. If it ran rough-shod over any known observations of the intermediate landlord and reached agreement with the tenant simply ignoring those observations, it ran the risk of incurring liability in damages unless it could avail itself of the statutory defence, provided by para 6(4), that it had acted in good faith and with reasonable care and diligence. Viewed from a practical perspective, the competent landlord would wish to engage with any intermediate landlord and, implicitly, had to do so in order to discharge its duty to act in good faith with reasonable care and diligence. However, the competent landlord was vested with a discretion to decide whether to go ahead regardless of the position of the intermediate landlord and reach agreement with the tenant.
The service by an intermediate landlord of a notice of intention to be separately represented under para 7(1) did not curtail or qualify the absolute authority of the competent landlord to reach agreement with the tenant and so bind all intermediate landlords pursuant to section 40(2) and para 6 of Schedule 11. Para 7(1) was tightly worded and conferred a very narrow right to be separately represented. It was confined to giving to an intermediate landlord the right to separate representation in legal proceedings relating to the title to property or any amount payable to that intermediate landlord by virtue of Schedule 13. Service of such a notice did not make the intermediate landlord a party to those legal proceedings or confer any right to be separately represented in relation to other terms or matters in dispute. The para 7(1) notice would only qualify or defeat the competent landlord’s authority once legal proceedings were in train and, if there were no legal proceedings, then the entitlement to be represented evaporated. Had the service of a para 7(1) notice been intended to confer on the intermediate landlord the right to participate in negotiations between the competent landlord and the tenant, and indeed to be a required party to any agreement between them, it would have so provided. It gave no indication that such a notice gave to the intermediate landlord a right to be involved in negotiations or agreement.
It followed that the grant of the leases by the appellant to the first respondent had the effect of completing or determining the force of the section 42 notice, after which the LVT, and its successor the first-tier tribunal, had no jurisdiction to determine any matter in relation to that notice.
That conclusion did not involve any breach of the second respondent’s rights under the European Convention on Human Rights. Granting authority to the competent landlord to reach agreement on behalf of itself and others did not interfere with the second respondent’s right to a fair trial under Article 6 of the Convention. Nor was there any breach of the second respondent’s right to peaceful enjoyment of her possessions under Article 1 of the First Protocol to the Convention, since, in substitution for her property rights, she was granted statutory compensation in effect for the grant of a new lease: Earl Cadagon v Sportelli 2008] UKHL 71; [2010] 1 AC 226; [2009] 1 EGLR 153 applied.
Anthony Radevsky (instructed by Speechly Bircham LLP) appeared for the appellant; James Fieldsend (instructed by Wallace LLP) appeared for the respondents.
Sally Dobson, barrister
Read the transcript: Howard de Walden Estates Ltd v Accordway Ltd and another
