James Driscoll reviews a recent decision that raises the question, when are the terms of a new lease agreed?
Key points
- Disputes over acquisition terms can be referred to the First-tier Tribunal
- Once terms have been agreed, application should be made to the county court if the new lease is not granted
- There are strict time limits for such applications
If a landlord and a leaseholder agree the terms on which a new flat lease will be acquired there should be few problems in completing the matter, correct? “Acquisition terms” means the price to be paid and the terms of the new lease and nothing more, do they not? A related question – if a party wants to challenge a term, is it confined to the terms proposed or referred to in the claim notice and the landlord’s counter-notice?
Not so simple
These issues were considered by the High Court in Greenpine Investment Holding Ltd v Howard de Walden Estates Ltd and another [2016] EWHC 1923 (Ch); [2016] PLSCS 221. Greenpine claimed a new lease of its flat (and garage) by giving a notice under Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”). The De Walden estate gave a counter-notice admitting the claim (and attached a draft lease). The proposals and counter-proposals were limited to the price and lease terms (as is, apparently, usually the case).
Any unresolved disputed terms must be referred to the First-tier Tribunal (Property Chamber) for a determination. Once terms are agreed (or determined) either party can apply to the county court if the lease is not granted. Failure to make either of these applications in time results in the claim being treated as withdrawn. This leaves the claimant leaseholder with the prospect of waiting for 12 months before a fresh claim can be made.
Greenpine applied to the tribunal for a determination, though later the tribunal was informed that, as the acquisition terms (and the landlord’s costs) had been agreed, the hearing of the application could be vacated. This took place in January 2015. The tribunal was informed of this by the solicitors acting for the parties.
After the exchange of notices, De Walden’s solicitors asked for an expert opinion on the status of Greenpine, a company incorporated in the British Virgin Islands, including the following questions: Did it have the capacity to take a new lease? Was it solvent? Greenpine’s advisers agreed in principle to arrange this and eventually an opinion was provided. Several months passed as drafts of the new lease were exchanged and the wording of the expert opinion was negotiated. By May 2015 the parties were on the verge of completion. But this changed when De Walden’s solicitors asked for confirmation that an application had been made to the court under section 48 of the 1993 Act (as the new lease had not been granted).
They contended that the application should have been made by 7 May 2015, which was within four months of terms having been agreed. In response, Greenpine argued that all the terms were not agreed back in January as it had to continue negotiating the expert opinion and this acquisition term was not agreed until 27 April 2015. Consequently it was able to then make an application in time. It was also claimed that De Walden’s solicitors had given an enforceable undertaking to complete. This, it was suggested, was the result of a response to Greenpine asking for possible completion dates, which evinced the reply “we will complete on receipt of funds”.
Deciding the matter
The High Court therefore had to consider two separate claims: the application for an order that a new lease should be granted and a claim that De Walden’s solicitors should discharge their undertaking.
Having reviewed the history of the new lease claim, the court concluded that agreement on the terms on which the new lease would be granted (that is on the price and terms of the new lease) was reached in January 2015, so the county court application was not made in time and the claim was automatically treated as withdrawn under the 1993 Act.
It did not rule on whether a party to such claims is limited in its challenge to the issues raised in the claim and counter-claim notices. It tentatively stated that the acquisition terms to be agreed or determined are any disputes over the terms expressed in the notices. However, this does not prevent the parties agreeing on other terms. In this case Greenpine had agreed in principle (by January 2015) to giving the expert opinion; later exchanges on this were over its wording.
Questions remain
It would have been useful to have had a ruling on whether a party that wishes to question any aspect of the claim is limited to the issues raised in its notices. Under section 48(7) of the 1993 Act, the terms of acquisition means the terms on which the tenant is to acquire a new lease of its flat, whether they relate to the terms to be contained in the lease or to the premium or any other amount payable, “or otherwise”. Is the provision of an expert opinion such a term? If it is, or can be, how would a dispute over it be resolved?
On the undertaking claim (made under section 50(2) of the Solicitors Act 1974) the court concluded that the recipient of the e-mail from the landlord’s solicitors would not have understood it to mean that it was an undertaking to complete: it was given as a response to an enquiry on the date completion could take place.
So, the leaseholder, which has been treated as having withdrawn its claim, will, under the 1993 Act, have to wait for a year before making another claim for a new lease (and, presumably will have to pay the landlord’s costs of dealing with the abortive claim (under section 60 of the 1993 Act)).
James Driscoll is a solicitor and a writer
