Key points
• The consequence of a mistake in a claim notice should be determined as an ordinary issue of statutory interpretation
• Failure to include details of all leases in a notice goes to the heart of an enfranchisement claim and renders it invalid
For leases of flats, the procedures for claiming the freehold or a new lease (under Part I of the Leasehold Reform, Housing and Urban Development Act 1993) are, on the face of it, fairly straightforward. In a collective enfranchisement claim, the leaseholders have to give a claim notice to the landlord. There is no prescribed form, but the notice must comply with section 13 of the 1993 Act. Challenges to the validity of notices in enfranchisement and new lease cases are, however, quite common. If the notice is invalid, the leaseholders can give another notice immediately but they will have to pay the freeholder’s costs. This is in contrast to cases where leaseholders have to withdraw or are treated as if they had withdrawn, when another claim cannot be made for 12 months.
Osman
A recent Court of Appeal decision which shows what can go wrong is Osman and anr v Natt and anr [2014] EWCA Civ 1520; [2015] EGILR 11. It concerned a block of four flats where two of the flat owners (father and daughter – the “nominee purchasers”), who had qualifying leases of their flats, claimed the freehold to the building. Both of the other two flats were held on long leases but the nominee purchasers contended that one of them, a flat in the attic (owned by the freeholders’ daughter), was not a lease of a “flat”. According to them, the staircase to it had been constructed on the landing that formed part of the demise of one of the nominee purchasers’ flats and was, therefore, a trespass. In their claim notice they stated that there were three (not four) flats held on qualifying leases. This claim was rejected by the freeholders, who argued that the notice was invalid as it omitted to specify one of the leases (as required by section 13(3)(c)).
Was the attic unit a flat?
In the county court proceedings commenced by the freeholders, the court found that the landing was not part of the demise of another flat so the attic flat was lawfully held on a qualifying lease. As a result, the court also decided that the omission of the details of the lease of the attic flat invalidated the claim notice.
In their appeal against this ruling the nominee purchasers contended that the failure to include these details should not invalidate the notice, as the consequences of non-compliance were not significant and caused no prejudice to the freeholders. They did not challenge the finding that the landing formed part of the demise of the other flat. Thus the appeal was mounted solely on the basis that although the attic flat is a ‘flat’, the failure to refer to it in the notice did not invalidate the notice. They contended that the freeholders were well aware of the internal configuration of the building and did not question in principle the right of the nominee purchasers to acquire the freehold.
Was the claim notice valid?
The Court of Appeal noted that statutes often fail to specify the consequences of failing to comply with a statutory requirement. Previously, the courts drew a distinction between statutory provisions which are “mandatory” or “directory”, but this approach is no longer regarded as satisfactory, the court noted, as it states a conclusion as to the consequences of non-compliance rather than deciding which consequence the legislature intended. In contrast, the modern approach is to use the ordinary principles of construction and assess the importance of the particular requirement in the context of the statute
as a whole. Has the notice complied with the statutory requirements or not? If it has, the notice is valid; if not, it is invalid. The outcome does not depend on the particular circumstances, the actual parties or the actual prejudice caused in the particular case.
The court stated that one should take account of the fact that such notices affect property rights. If non-compliance relates to a matter that is integral to the workings of the scheme the notice is invalid. In Burman v Mount Cook Land Ltd [2001] EWCA Civ 1712; [2002] 1 EGLR 61 it was held that the landlord’s counter-notice is integral to the scheme, so failure to state whether it accepted the claim or not invalidated it. In contrast, where the information missing from the statutory notice is of secondary importance or merely ancillary (such as in the case of 7 Strathway Gardens Ltd v Pointstar Shipping & Finance Ltd and anr [2004] EWCA Civ 1669; [2005] 1 EGLR 53), the notice was valid.
The decision
Applying this analysis to the facts of this case, the Court of Appeal concluded that the failure to include in the section 13 claim notice the identity and the address of all of the leaseholders pointed clearly to the invalidity of the notice.
There were three reasons for this. First, these matters go to the heart of the enfranchisement claim, since the notice must state the number of qualifying leaseholders; whether the total number is not less than two-thirds of the total number of flats in the building; and whether the claim notice has been given by not less than half of the number of flats in the premises. Second, paragraph 15 of Schedule 3 to the Act provides that a notice is not to be invalidated by certain inaccuracies and provides for notices to be varied in those circumstances. The court interpreted this as meaning that other errors invalidate the notice. Third, there is no restriction on giving a fresh notice at any time after giving an invalid notice.
If the nominee purchasers wish to pursue their claim, they will have to give a fresh – and, importantly, valid – notice.
James Driscoll is a solicitor, a writer and a freelance lecturer