Howard de Walden Estates Ltd v Broome and another

Leasehold Reform, Housing and Urban Development Act 1993 – Lease renewal – Flat – Defendants holding flat under two separate leases – Claim for lease renewal under 1993 Act made shortly after grant of second lease – Claimant freeholders seeking declaration that defendants having no right to acquire new lease – Whether defendants qualifying tenants of entire flat for necessary two-year period – Claim allowedIn 2007, the defendants acquired an underlease, for a term of 75 years from 2000, of premises on the sixth floor of a block of flats. The freehold of the block was vested in the claimant, subject to a headlease. Although the premises demised by the 2000 underlease were described as a “Penthouse Flat”, they were an uninhabitable shell until extensive works of development and refurbishment were carried out pursuant to a licence for alterations granted in 2009. Those works extended beyond the demise so that the finished flat incorporated certain areas that did not fall within the 2000 underlease. Those additional areas did not constitute a significant proportion of the flat but improved its layout and appearance and enabled better use to be made of the existing space. They were later the subject of a further underlease granted by the headlessee in July 2010.Also in July 2010, the defendants served a notice on the claimant, under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993, seeking to exercise the right to a lease extension under Chapter II of the Act. By its counternotice, the claimant disputed the defendants’ right to a new lease of the flat. It contended that the only relevant “flat”, in the sense of a separate set of premises within section 101(1), incorporated the demises under both the 2000 and 2010 underleases, such that the defendants could not claim to have been qualifying tenants of the whole flat for the two-year period required by section 39(2)(a). The claimant sought declaratory relief to that effect.The defendants submitted that, inter alia: (i) the premises demised by the 2000 underlease still satisfied the definition of a “flat”; (ii) any dispute about the extent of the property to be demised under the new lease was a question concerning the terms of the new tenancy that fell to be resolved by the leasehold valuation tribunal rather than the court; and (iii) since the flat was held on two leases between the same landlord and tenant, there should be deemed to be a single composite tenancy of the whole flat pursuant to section 7(6) of the Act.Held: The claim was allowed.(1) The starting point was to look at the notice of claim to determine what were the premises of which the defendants sought a new tenancy. The defendants sought a new tenancy of the whole of the premises demised by the two underleases, not of any individual part or parts of them. Those premises together constituted a flat in accordance with the definition in section 101(1) of the 1993 Act. The areas demised by the 2010 underlease formed an integral part of the premises such that they could not be effectively partitioned off, removed or sold without considerable inconvenience. Their removal would involve the defendants in significant works of alteration to the remaining premises to render the rooms fully useable again. If they were removed, what would be left would not be a separate set of premises that could be regarded as a unit. Accordingly, the demise under the 2000 underlease was no longer a separate set of premises: Cadogan v McGirk [1996] 2 EGLR 75; [1996] 39 EG 175 applied.(2) Although, on a lease extension claim, the leasehold valuation tribunal could define the boundaries and modify the terms of the existing lease or leases pursuant to section 57(1), that did not overcome the preliminary problem that the defendants needed to rely on both leases in order to make their claim under the Act in the first place. In the absence of the 2010 lease, they were not qualifying tenants of a “flat”: Howard de Walden v Aggio [2008] UKHL 44; [2008] 2 EGLR 57; [2008] 34 EG 94 distinguished.(3) Section 7(6) of the Act did not assist the defendants. It applied only from the date when the flat was held on two separate leases between the same parties and, accordingly, the composite tenancy on which the defendants relied could only have come into existence on the grant of the 2010 underlease. It followed that the defendants had not have been the qualifying tenants of the whole flat for the previous two years as at the date of their notice of claim, which was invalid accordingly.Mark Loveday (instructed by Speechly Bircham) appeared for the claimant; Stan Gallagher (instructed by Richard Howard & Co) appeared for the defendants.Sally Dobson, barrister