In Kateb v de Walden Estate and another [2016] EWCA Civ 1176 the Court of Appeal has decided that an agreement between a landlord and a claimant leaseholder on the premium binds an intermediate landlord.
It is often the case in flat enfranchisement and new lease claims that there are one or more superior leases between the flat underlease and the freehold. Enfranchising leaseholders will usually acquire the freehold free of any such leases. But when a leaseholder acquires a new lease the intermediate lease continues. As its value is reduced that landlord is entitled to a share of the premium.
Under the relevant statutory provisions (Part I of the Leasehold Reform, Housing and Urban Development Act 1993) either party may apply to the First-tier Tribunal (Property Chamber) (‘FTT’) to determine an unresolved dispute over the amounts to be paid.
In a new lease claim an intermediate leaseholder has the right to be separately represented in tribunal proceedings. Are there any limitations on this? This is how the issue unfolded in the Kateb case where a leaseholder claimed a new lease from the de Walden estate. New lease claims must be made of the ‘competent landlord’. That is the person who has an interest in the premises sufficient to allow them to grant the claimant a new lease which will be for a term 90 years longer than the current lease. It is commonly the case that the intermediate landlord does not have such a sufficiently long term. The claim must be made of a superior interest. This is often the freeholder as it was in this case.
A claimant leaseholder must pay a premium to the competent landlord. The intermediate landlord is entitled to a share of it. Here the de Walden estate, having applied to the FTT for the premium to be determined, agreed the amounts payable to it and the intermediate landlord prior to the hearing. Mrs Kateb objected and insisted on the matter proceeding to a hearing. The FTT decided that the agreement did not bind her and that it had jurisdiction to make a determination. This decision was overturned by the Upper Tribunal and Mrs Kateb’s appeal against that decision has just been dismissed by the Court of Appeal.
Schedule 11 of the Act deals with the way in which proceedings are to be conducted by the competent landlord. It must conduct proceedings on behalf of all of the landlords; its decisions bind all of them. An intermediate landlord has the right to be represented in any proceedings affecting title and in proceedings to determine the amounts payable. Did the agreement reached deprive Mrs Kateb of the right to contest the amounts agreed between the landlord and the claimant in the tribunal? Yes, answered the Court: the competent landlord is invested with the authority to deal with claims and its decisions bind all landlords. It may be liable if it does not act in good faith and with reasonable care, but this does not prevent it reaching binding decisions. Its agreement with the claimant leaseholder bound Mrs Kateb. Nor did her inability to challenge the premium agreed amount to a breach of convention rights as the statutory provisions represented a fair balance between the competing interests.
James Driscoll is a writer and a solicitor
