Leasehold valuation tribunals do not have to settle all aspects of an enfranchisement dispute at one sitting, rules the Court of Appeal
? The jurisdiction of a leasehold valuation tribunal to settle the terms of an enfranchisement can be exercised in stages and does not need to be a single once-and-for-all decision ? The power to make a vesting order cannot be exercised until all the terms of the enfranchisement have been agreed or determined by the tribunal |
The Leasehold Reform, Housing and Urban Development Act 1993 has become one of the most litigated statutes in the landlord and tenant field. The number of cases going to court has increased in the past couple of years and there is little sign of the flood abating.
Many of the disputes involve procedural issues and this is equally true of Goldeagle Properties Ltd v Thornbury Court Ltd [2008] EWCA Civ 864; [2008] 45 EG 102 (see p102), the Court of Appeal’s most recent embarkation into these troubled waters.
Here, the respondent was the nominee purchaser of a block of flats owned by the appellant. It was seeking to acquire the freehold under the collective enfranchisement provisions of Part 1 of the 1993 Act and had applied for a vesting order under section 24. The issue for the court was whether that application had been made within the statutory time limit. If not, the respondent would be deemed to have withdrawn its initial notice and the tenants would have to wait a further 12 months before being able to restart the process.
Although this might have been thought to be advantageous to them in a period of falling prices, the reality was that any such benefit would be more than offset by the effects of Earl Cadogan v Sportelli [2007] EWCA Civ 1042; [2008] 1 EGLR 137 as it stands (it has been appealed to the House of Lords and judgment is expected to be given before the end of the year).
Statutory procedure
The 1993 Act requires the process of collective enfranchisement to be started by the service of an initial notice this must specify a date for a response by the landlord that is not less than two months later. The landlord must respond with a counternotice by that date. Where this admits the right to collective enfranchisement, it must state which of the tenants’ proposals are accepted and which are not it must also include counter-proposals for those that are not accepted. If, after a further two months, there is no agreement either side can apply to the leasehold valuation tribunal (LVT) to determine the matters in dispute.
Once the LVT has so determined, the parties would normally enter into a binding contract. If this is not the case, either side can apply to court for a vesting order within two months of the end of the “appropriate period”. That period is a period of two months commencing either on the date upon which all the terms were agreed or, where all or any of the terms are determined by the LVT, on the date upon which the decision of the LVT becomes final.
In Goldeagle, the initial notice was served on 7 February 2005. The appellant landlord served its counternotice on 15 April 2005. This admitted the right to enfranchise and agreed the proposed prices of some of the interests. It disputed the price of others and made counter-proposals. It also enclosed draft transfers, the terms of which were not explicitly accepted or rejected by the respondent nominee purchaser.
The appellant applied to the LVT on 11 July 2005 asking for the price of the disputed interests to be settled. The LVT’s decision became final on 14 September 2006. Further correspondence ensued between the parties and, on 13 November 2006, the respondent’s solicitor wrote to the appellant to say that its client had signed the contract this was the first explicit indication that the terms of the transfer originally set out in the appellant’s counternotice had been accepted.
A binding contract was not entered into and, on 9 February 2007, the respondent applied for a vesting order. The trial judge held that the terms were not finally agreed until the letter of 13 November this marked the beginning of the appropriate period. The application for the vesting order had therefore been made in time.
The appellant appealed. It claimed that the appropriate period had begun when the LVT decision became final, namely on 14 September. The application for a vesting order was therefore out of time and the tenants must wait another year before making a fresh application to enfranchise.
Court of Appeal’s view
The appellant’s first argument was that, in the present circumstances, the LVT must be taken to have determined all the outstanding issues, even though the terms of the transfer had not been the subject of an explicit dispute. Once the parties dispute all or some items and an application to the LVT is made, the LVT will determine all the disputed matters in one go.
Its alternative argument was that the parties had proceeded before the LVT as though the terms of the transfer had been agreed. Their explicit dispute concerned the price and since that issue cannot be settled until the terms of the transfer are agreed, the parties must be taken to have reached agreement at that stage.
Jacob LJ was not persuaded by either argument. He was satisfied that section 24 does not require a single once-and-for-all decision it does not therefore preclude a series of applications to resolve a succession of disputes.
This view was supported by previous authority Penman v Upavon Enterprises Ltd [2001] EWCA Civ 956; [2002] L&TR 10 could not be distinguished in the way suggested by the appellant. It is irrelevant whether all the disputed matters are put before the LVT in a single application, with the LVT deciding them in succession, or whether they come before the LVT in a succession of separate applications.
His lordship was more sympathetic to the landlord’s second argument because it is clear that, in principle, the terms of a transfer must be known before the price can be fixed. However, he concluded that, in a case like Goldeagle, where what was outstanding were the routine terms of the transfer, the price would not have been affected by their precise detail.
He finished by making the following recommendation:
“Where a party makes a reference it should ensure that all points not agreed are put before the LVT for determination at the outset… even seemingly minor [routine] matters… Such points will normally go away by agreement but if they do not and the LVT is not asked… the result is likely to be delay, extra cost and this sort of case.”
Sandi Murdoch, honorary fellow, Reading University
