Successive Acts of parliaments have increased rights of long leaseholders against their landlords. The Leasehold Reform, Housing and Urban Development Act 1993 enlarged leaseholders’ rights in two important respects: it conferred rights of collective enfranchisement on qualifying tenants, together with individual rights enabling qualifying tenants to extend their leases for 90 years.
The legislation was amended in 2002 and it is now no longer necessary to satisfy a residency condition in order to take advantage of the 1993 Act. This opened the door to claims by intermediate landlords for extensions to leases of flats that had not been sublet to qualifying tenants. In Maurice v Hollow-Ware Products Ltd [2005] EWHC 815 (Ch); [2005] 2 EGLR 71; [2005] 26 EG 132, the High Court ruled that an intermediate landlord could claim extended leases of the flats in its building, despite the risk that the landlord would sell the extended leases, leaving the common parts in the hands of a company that would have no further interest in maintaining them.
The Court of Appeal has overturned that decision: see Howard de Walden Estates Ltd v Aggio; Earl Cadogan v 26 Cadogan Square Ltd [2007] EWCA Civ 499; [2007] 23 EG 165 (CS). The judgment confirms that an intermediate landlord of a building that comprises flats and common parts, is not entitled to use the 1993 Act to extend the leases of individual flats in its building.
The court considered the difficulties that would arise when separating the flats from the common areas. The legislation did not contain any provisions to deal with this and the leases would have to be substantially rewritten – in the absence of any statutory guidelines or solutions – to create a new scheme for use of the common areas. In addition, once the headlease fell in, the freeholder would become responsible for the common areas. The freeholder would also end up with a patchwork of relationships with its tenants; some indirect, through the intermediate landlord, and some direct, as a result of extended leases.
The failure to address these difficulties, in what was otherwise very detailed legislation, was so remarkable that the proper inference was that the Act was not applicable in such circumstances. The burdens that would be imposed on freeholders were so striking that intermediate landlords should not be entitled to extend their leases unless parliament had clearly stated that they could do so. The Act was ambiguous, and the more a statute intrudes on the rights of citizens, the clearer the wording must be to authorise that intrusion.
Finally, although it did not decide the point, the court doubted whether the provisions in the 1993 Act satisfied the requirements of the European Convention on Human Rights as to quality of law, as far as freeholders were concerned, because restrictions on individual rights and freedoms must be prescribed in terms that are sufficiently accessible and precise to enable those affected to foresee the consequences. Lawyers will surely pounce on these comments for use in future cases where similar difficulties arise.
Allyson Colby is a property law consultant
