Leasehold enfranchisement — Long lease at low rent — Definition of “low rent” — Reference to rateable value — Covenant in lease requiring conversion from two cottages to single dwelling — Whether rateable value that of two cottages or single dwelling once created — Judge ruling tenant entitled to enfranchise — Appeal allowed
The respondent occupied a property under a 51-year lease dating from 1965, at an initial annual rent of £100. The appellants were the trustees of the estate that owned the reversion. The property had originally been two separate cottages; the lease contained a covenant obliging the tenant to convert them into a single modernised dwelling within one year of the commencement of the tenancy. That had been done in 1966, and the respondent had acquired the property in 1987. She claimed entitlement to buy the freehold of the property under the provisions of the Leasehold Reform Act 1967, which conferred that right in respect of property held on a long lease at a low rent. The respondent argued that her tenancy qualified as being at a low rent because it fulfilled the requirements of section 4A(1) of the Act, including that the property had had a rateable value other than nil at the commencement of the tenancy and the aggregate of the rent payable during the initial year had not exceeded two-thirds of the rateable value of the property on the “relevant date”. The “relevant date” was defined in section 4A(2) as the date of commencement of the tenancy or, if at that date the property had no rateable value or a rateable value of nil, the date when the property first had a rateable value other than nil.
An issue arose as to whether “the property” meant the property as let under the tenancy, namely the land and two cottages, or the property once the required conversion had taken place. If the first alternative applied, the “relevant date” was the date of commencement of the tenancy, and the property did not qualify for enfranchisement because the initial rent of £100 had been more than two-thirds of the aggregate rateable value of the two cottages. The respondent contended that “the property” must logically be that described in the valuation list for the first time following its creation, namely the converted single dwelling. Ruling in her favour, the judge found that the property subject to the tenancy had always been the single dwelling that the tenant had been obliged to construct in the first year. The appellants appealed.
Held: The appeal was allowed.
Section 25(1) of the Rent Act 1977 applied to the ascertainment of the rateable value of the property. Its effect was to direct attention to the hereditament or hereditaments whose rateable value was shown in the valuation list. The rateable value was that of “the property”, not the house or house and premises. At the date of the commencement of the tenancy, the property had consisted of “more than one such hereditament” within the meaning of section 25(1)(b), namely the two cottages that had been entered separately on the valuation list. Accordingly, the rateable value was the aggregate of the rateable values of the two hereditaments then shown in the valuation list. Since the initial rent was not less than two-thirds of that rateable value, the property did not qualify for leasehold enfranchisement under section 4A of the 1967 Act. The fact that the eventual converted dwelling had not then existed did not affect that analysis: Dixon v Allgood [1988] 1 EGLR 85; [1988] 02 EG 59 considered. The statute did not distinguish between contractually obligatory and voluntary conversions, and the construction for which the respondent contended could result, unfairly to the appellants, in a comparison between an original rent and a much later rateable value when the tenant had been under no obligation to effect the conversion that gave rise to that value.
Matthew Hutchings (instructed by Thomas Eggar, of Crawley) appeared for the appellants; Joanne Moss (instructed by James Debenham, of Dorchester) appeared for the respondent.
Sally Dobson, barrister
