Elizabeth Dwomoh considers an unusual county court case on enfranchisement notices.
Key point
- A freeholder of a building who grants an overriding lease of a flat severs the reversion so that the tenant of the flat has two landlords
The case of Lupin Ltd v 7-11 Princes Gate Ltd and another [2020] PLSCS 62 raises interesting questions as to who is the landlord for the purpose of serving a notice under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 where an overriding lease exists.
The background
Lupin was the lessee of a top floor flat in a residential block situated at 7-11 Princes Gate, Kensington, SW7. In 1989, Lupin was granted a lease of the flat, excluding the roof (the original lease). Easements over other parts of the building were also included in the demise. Additionally, the original lease contained a restrictive covenant prohibiting the freeholder and its successors from building or erecting any structure on the roof (the restrictive covenant).
In August 2010, 7-11 Princes Gate (PG) acquired the freehold of the building. It subsequently granted Princes Gate Partnership LLP (PGP) a 999-year overriding lease of the flat (the overriding lease). The overriding lease did not include a covenant that was equivalent to the restrictive covenant, but it granted all the same easements over the building as found in the original lease.
In April 2018, Lupin served notice on PGP under section 42 of the 1993 Act claiming a new lease of the flat, which would also include the restrictive covenant. PGP admitted the claim to a new lease but disputed the inclusion of the restrictive covenant.
In October 2018, Lupin served two additional notices. The first notice identified PG and PGP together as “the landlord”. The second notice identified PG as “landlord” and PGP as the “third party”. Lupin sought a declaration that the first October notice was valid, or alternatively that either the second October notice or the April notice was valid. PG and PGP served counter-notices admitting Lupin’s right to a new lease under the April notice only. Specifically, they challenged the validity of the first October notice by arguing that PG was not a “landlord” as defined by section 40 of the 1993 Act.
The landlord
Lupin argued that both PG and PGP were together the “landlord” within the meaning of section 40(1) of the 1993 Act and the first October notice was valid. Judge Hellman agreed, finding that PG’s grant of the overriding lease to PGP severed the reversion on the original lease. PG retained the reversionary estate in respect of the building other than the flat.
Under section 140 of the Law of Property Act 1925, where the reversionary estate was severed in a lease, the conditions had to be apportioned to the severed parts. Accordingly, those covenants relating to the building, including the restrictive covenant, were apportioned to PG. It therefore satisfied the definition of “the landlord” under section 40(1) of the 1993 Act because it had an interest in reversion expectant on the termination of the original lease such as to enable it to grant a new lease.
Further, the court determined that the restrictive covenant should be apportioned to the reversion to the building because it touched and concerned the building. Under section 142 of the 1925 Act, the obligations contained in a lessor’s covenant had to be annexed to the severed part of the reversion, and was enforceable by the lessee. PG, therefore, remained bound by the restrictive covenant pursuant to that section. This was an additional reason as to why PG was the landlord. Judge Hellman expressly commented that the “intention of the legislature would be defeated if a landlord could evade an inconvenient covenant by the simple expedient of giving an overriding lease of the flat which benefited from the covenant to another vehicle which the landlord owned and controlled”.
Judge Hellman’s primary reason in finding that PG was a landlord was influenced by the existence of the easements rather than Lupin’s argument about the split reversion and the need to apportion the covenants. Applying Cardwell v Walker [2003] EWHC 3117; [2004] PLSCS 9 he found that, as freeholder of the building, PG was the owner of the reversion expectant on the termination of the easements over the building granted by the original lease. It followed that PG, as owner of the reversion expectant on the termination of the easements over the building, and PGP, as owner of the reversion expectant on the termination of the original lease of the flat itself, were together “the landlord” for purposes of giving notice under the 1993 Act.
The consequences
The consequences of the decision in Lupin have been hotly debated among practitioners, including solicitor Alan Riley. The decision has added a layer of complexity to claims for a new lease where overriding leases exist.
It appears that, when the terms of the lease are finally determined, Lupin will be granted a new lease which will include the restrictive covenant. It raises the question: why? The restrictive covenant is not binding on PG. As noted by Judge Hellman, when PG purchased the building in 2010, the original lease had already been registered against the freehold title. This did not protect Lupin’s right to enforce the restrictive covenant against PG as the particulars of the restrictive covenant had not been registered on the freehold title.
Elizabeth Dwomoh is a barrister at Lamb Chambers
