MR RECORDER MH ROSEN QC:
Introduction
1. This case concerns the validity of a claim to a new lease of Flat B, 3
2. The Wellcome Trust issued a claim form under CPR Part 8 on 15 November 2007, seeking an order under section 46 of the 1993 Act declaring that as at the relevant date when Miss McLaughlan served her notice, namely 5 July 2007, she had no right to a new lease, essentially because she was not a qualified tenant for the purposes of the 1993 Act. The Wellcome Trust served a counter notice essentially to that effect on 26 September 2007.
Brief Facts
3. The relevant facts are set out in witness statements from Mr Charnock on behalf of the claimant and Miss Baulackey, the defendant, herself. The facts are not in dispute and there has been no oral evidence and no cross-examination before me.
4. The timetable, which is all that is needed essentially for present purposes, is as follows. Miss McLaughlan was registered as the lessee of the flat on 8 September 2005, having completed her purchase of the flat from an unknown predecessor more than three months earlier on 3 June 2005. She contracted to sell the leasehold interest to Miss Baulackey by exchange on 27 June 2007. The sale and purchase was completed quickly on 6 July 2007. Just before completion, Miss McLaughlan served the notice now in issue under section 42. She had contracted to do that and the notice was in a satisfactory form as far as Miss Baulackey was concerned. The registration of Miss Baulackey’s leasehold acquisition was effected on 16 August 2007.
5. The crucial point as far as that chronology is concerned is that the notice now in issue served by Miss McLaughlan on 5 July 2007 was more than two years after she had purchased the leasehold on 3 June 2005 but less than two years before her leasehold interest was registered on 8 September 2005. I ought to mention that the lease in question was a lease dated 25 June 1986, for 32 years less ten days from 25 September 1982 and so expires in September 2014.
The 1993 Act
6. The relevant provisions of the 1993 Act are scattered throughout it. The logical place to start is section 39, which is the first section in chapter II, the chapter entitled “Individual Right of Tenant of Flat to Acquire New Lease”.
7. Section 39 itself is headed “Right of Qualifying Tenant of Flat to Acquire New Lease”
and subsection (1) provides that:
“This Chapter [that is chapter II] has effect for the purpose of conferring on a tenant of a flat, in the circumstances mentioned in subsection (2), the right, exercisable subject to and in accordance with this Chapter, to acquire a new lease of the flat on payment of a premium determined in accordance with this Chapter.”
8. Subsection (2) provides that:
“Those circumstances are that on the relevant date for the purposes of this Chapter
(a) the tenant has for the last two years been a qualifying tenant of the flat.”
9. Subsection (3) provides that:
“References in this Chapter to a qualifying tenant of a flat shall accordingly be construed by reference to [the] provisions [of Chapter I].”
10. I will come back to those subsections shortly. Subsection (8) provides that:
“In this Chapter ‘the relevant date’, in relation to a claim by a tenant under this Chapter, means the date on which notice of the claim is given to the landlord under section 42.”
That is, in the present case and for present purposes, 5 July 2007.
11. There are two sections in Chapter I that are pertinent. First, in section 5, which is headed “Qualifying Tenants”, there is a definition reading as follows in subsection (1):
“Subject to the following provisions of this section, a person is a qualifying tenant of a flat for the purposes of this Chapter [I would add in parentheses and for chapter II, as we have seen] if he is a tenant of the flat under a long lease.”
12. Subsection (3) of section 5 provides that: “No flat shall have more than one qualifying tenant at any one time.” That subsection has a crucial role in the argument, as I shall explain soon.
13. Subsection (4) fills that out by beginning “accordingly” and subsection (4)(a) reads:
“Where a flat is for the time being let under two or more leases to which subsection (1) applies, any tenant under any of those leases which is superior to that held by any other such tenant shall not be a qualifying tenant of the flat for the purposes of this Chapter.”
14. That too has a role in the argument, as I shall explain, in particular in the distinction to be drawn between (a) a vertical hierarchy under which there may be leases and subleases or agreements for leases and subleases between a freeholder, a head tenant and a subtenant, to be contrasted with (b) what I would call the horizontal hierarchy, in which a leasehold interest or sub-leasehold interest might be transferred by assignment between one tenant and a successor tenant, or one subtenant and a successor subtenant.
15. Also in chapter I is section 7, headed “Meaning of ‘Long Lease’”, which says in subsection (1) that:
“In this Chapter ‘long lease’ means (subject to the following provisions of this section) —
(a) a lease granted for a term of years certain exceeding 21 years, whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenant or by re-entry, forfeiture or otherwise.”
The lease in this case, as I have mentioned, was just under 32 years when granted in 1986 and therefore substantially more than the 21 years limit in section 7.
16. I ought to mention a few other provisions of the 1993 Act. First of all, there is section 40(1), part of Chapter II, which defines a landlord:
“In this Chapter ‘the landlord’, in relation to the lease held by a qualifying tenant of a flat, means the person who is the owner of that interest in the flat which for the time being fulfils the following conditions, namely —
(a) it is an interest in reversion expectant (whether immediately or not) on the termination of the tenant’s lease, and
(b) it is either a freehold interest or a leasehold interest whose duration is such as to enable that person to grant a new lease of that flat in accordance with this Chapter,
and is not itself expectant (whether immediately or not) on an interest which fulfils those conditions.”
17. That sort of definition is found in other statutes, in particular the 1954 Landlord and Tenant Act, which is the subject of a number of the authorities cited before me. Of course, in contrast with the way that the statute defines a landlord in relation to a lease held by a qualifying tenant of a flat, there is no definition of what constitutes a tenant who qualifies under section 31.
18. Section 42 of the Act in Chapter II is headed “Notice by Qualifying Tenant of Claim to Exercise Right” and begins:
“(1) A claim by a qualifying tenant of a flat to exercise the right to acquire a new lease of the flat is made by the giving of the notice of the claim under this section.”
The section goes on to specify to whom the notice must be given, including the landlord, and what the notice must contain.
19. Section 46 is headed “Proceedings Relating to Validity of Tenant’s Notice” and provides in subsection (1) that:
“Where —
(a) the landlord has given the tenant a counter-notice under section 45 which … contains such a statement as is mentioned in subsection (2)(b) of that section, and
(b) the court is satisfied, on an application made by the landlord, that on the relevant date the tenant had no right under this Chapter to acquire a new lease of his flat,
the court shall by order make a declaration to that effect.”
That is the provision upon which the claimant, Wellcome Trust, relies to give this court power to make the declarations sought by it.
20. Finally, I would set out part of section 101, which deals with the general interpretation of Part I of the 1993 Act, which includes both Chapter I and Chapter II, and subsection (2) of which states that:
“In this Part ‘lease’ and ‘tenancy’ have the same meaning, and both expressions include (where the context so permits) —
(a) a sub-lease or sub-tenancy, and
(b) an agreement for a lease or tenancy (or for a sub-lease or sub-tenancy),
but do not include a tenancy at will or at sufferance [et cetera].”
The Argument
21. I am very grateful indeed to the parties and in particular counsel, Mr Radevsky for the Wellcome Trust and Mr Skelly for Miss Baulackey, for their very concise and helpful presentation of the matter before me. The argument concentrated on the issue of whether or not Miss McLaughlan became a tenant for the purposes of the Act, and in particular section 39 of the Act, when she acquired the lease from her predecessor or whether she became tenant only on registration of her title as obtained some four months or so later in 2005.
22. Miss Baulackey did not raise any issue based on her having been treated as a matter of fact as a tenant by her exclusive occupation of the flat and payment of rent or service charge or any other matters or conduct that would give rise to an estoppel on the part of the landlord, preventing Wellcome from denying that she had become a tenant on her acquisition of the lease prior to registration. I therefore summarise the arguments on the limited legal issue which I bear in mind.
23. On behalf of the claimant, the Wellcome Trust, the submission was made that Miss McLaughlan did not become a qualifying tenant on the assignment of the lease from her predecessor unless and until she became the registered proprietor. This was a case of registered land and section 27 of the Land Registration Act 2002 applies.
24. Section 27 of the 2002 Act provides that:
“(1) If a disposition of a registered estate or registered charge is required to be completed by registration, it does not operate in law until the relevant registration requirements are met.
“(2) In the case of a registered estate, the following are the dispositions which are required to be completed by registration —
(a) a transfer [et cetera].”
25. The claimants’ submission was that until registration took place Miss McLaughlan was the equitable owner, that she acquired that equitable status on exchange of contracts and that as between her and her predecessor there was a relationship of trustee and beneficiary. But in law, the completion of her purchase and the execution of the transfer by her predecessor made no difference to her status. She remained no more than an equitable owner and it was only upon registration that a change in legal ownership was effected.
26. It was next submitted that the tenant would not be concerned for the purposes of the 1993 Act, and indeed other Acts, with any beneficial ownership of the landlord’s interest but would only deal with the legal owner, the legal owner, that is the registered landlord, being the only person who can serve notices and otherwise effect statutory rights. And the same should apply as regards the tenant, the landlord not being concerned with beneficial ownership of a tenant’s interest but only with the legal ownership of that interest. So whilst between the lessee and her predecessor there would be an equitable assignment on exchange of contracts or execution of a transfer, only registration effects the legal interest and their relationships with third parties.
27. It was suggested that that was emphatically highlighted by cases such as Gentle v Faulkner [1900] 2 QB 267, which led complainants and others subsequently to make sure that equitable assignments would be treated in the same way as parting with possession. Absent some express reference in equitable assignments, they would not be treated as having legal effect for the purposes of general covenants.
28. A number of other cases were cited as examples of this principle, largely in the context of who is to constitute a landlord for the purposes of the 1954 Act — for example, Biles v Caesar [1957] 1 WLR 156, Pearson v Alyo [1991] EGLR 114. Other cases appear to support a similar line of reasoning, at least as concerns landlords: see in particular Smith v Express Dairy [1954] JPL 45 and Brown and Root Technology [2001] Ch 733, which concerned the lessee executing a transfer of the lease but that transfer not being registered at the Land Registry.
29. Finally in relation to the arguments as laid out by the claimant, Wellcome Trust, they drew attention to section 101(2) of the 1993 Act, which I have rehearsed, suggesting that that constitutes an exception to what it would submit was the general rule requiring the registration of the tenant’s interest in order to constitute its qualification as a tenant. That exception would allow a tenant who becomes a tenant in equity under a specifically enforceable provision of a lease to count as a qualifying tenant under the Act, reflecting the principle in Walsh v Lonsdale [1882].
30. The point that was made on behalf of the claimant was that that is an exception to the generality as set out in the specific statutory provision at section 101(2) and was an exception which merely reflected established law to the effect that an agreement for a lease was as good as a lease, and did not give rise to any conflict with section 5(3) of the 1993 Act because it did not give rise to the risk that there might be two people simultaneously regarded as a qualifying tenant. In contrast, the claimant says, if the assignment of a lease without or prior to registration was to be treated as giving rise to a tenancy for this purpose as far as the assignee was concerned, then that problem would arise. So too would it arise if, for example, a registered tenant was an express trustee not by virtue of the sale and assignment of the lease but simply under a trust holding for the benefit of another.
31. So it is said by the claimant that, by contrast with 101(2), where the disposal of vertical interests would not give rise to a conflict with section 5(3), a horizontal transaction between a registered tenant and either a purchaser or some other beneficiary would give rise to such a problem, were the statute to be construed such as to allow a purchaser to qualify as a tenant following mere purchase rather than registration.
32. On behalf of the defendant the starting point for the submissions was, as one might expect, entirely different. What was said was that the 1993 Act did not give any special definition to the word “tenant” or “tenancy” so as to limit those who would count as such a person to registered owners. Attention was drawn to the fact that the requirement for the tenant to have been for the last two years prior to the relevant date of giving notice a qualifying tenant of the flat, suggested that there had to be a continuous period during which the tenant counted as such and that it might well be that there would be a delay or registration gap during which the successor tenant had done everything by way of taking an agreement of sale and purchase of the lease and pay the price but prior to registration; and it was suggested that there was no reason at all why, as regards that period, that same person should not be treated as having qualified.
33. The defendants’ submission was that a tenant for this purpose should be treated as any person with exclusive possession or occupation of the flat dealing with the normal incidents of tenancy, such as the payment of ground rent, and so on.
34. Some authority was relied upon to suggest that this was right, in particular Scribes West [2004] EWCA Civ 1744 and Roberts v Church Commissioners for England [1971] 3 WLR. It was suggested that Brown and Root Technology [2001] Ch 733 was to be
distinguished and Scribes was to be preferred, even though Scribes appeared to turn simply on the interpretation of a statutory phrase, section 151(2) of the Law of Property Act, which provided that covenants might be enforced by “a person entitled to income”: note the emphasis there on persons entitled, as opposed to persons who have their status by ownership, whether legal or otherwise.
35. As regards Roberts, it was suggested that this case is helpful in showing what is required to constitute a long tenancy “in law or equity”, notwithstanding again that that case was concerned with a statutory definition in which again the phrase “in law or in equity” specifically appears.
Conclusions
36. Although I have been attracted by some aspects of the arguments on both sides, in the end I consider that the right answer in this matter is clear. I accept the submissions of the claimant, Wellcome Trust. Looking at the statute and the statutory provisions on their face, it appears to me that the system set out in the 1993 Act, Chapter II, is one which (a) depends very much on the requirement that there be only a single qualifying tenant at any one time and (b) suggests very strongly that it is the legal owners on both sides, landlord and tenant (subject of course to specific explanations, exceptions or provisos), who are those who are to take part in the process and have the rights and concomitant obligations under the process.
37. I am not impressed by the suggestion made at one stage on behalf of the defendant, that the record of Parliamentary debates indicated that the 1993 Act would replace residential requirements for tenants seeking an enfranchisement, or rather new leases, with the qualification of a two years ownership condition in order to address the danger from short-term speculators and therefore, the defendant would infer, was not intended to distinguish between those who had had two years since they purchased the flat and those who had been legal owners of the flat for two years. I do not consider that that purpose, if it was a purpose, is needed to resolve any ambiguity in the 1993 Act is or was the subject of a clear expression by the promoter of the 1993 Act. I am not persuaded that any debate as regards the purpose of the 1993 Act assists in any way as regards the relevant issue.
38. What assists more, in my judgment, are two things: first, the analogies with landlord and other rights as regards transfers and transferees, in the various cases to which I have very briefly referred, and, secondly, the good sense of equating the system under the 1993 Act with other statutory regimes in which notification between legal owners gives rise to rights.
39. As regards the section 101(2) point, I am entirely satisfied that the fact that the 1993 Act provides for agreements for leases or subleases does not in any way derogate from the general principle that a tenant only becomes a tenant on acquiring the legal ownership of the lease, that is, on registration. I consider that to construe otherwise would actually damage the overall structure of the 1993 Act in giving rise to a risk that there would be more than one qualifying tenant under section 5(3). The distinction, as I have sought to
adumbrate it, between vertical transactions and horizontal transactions can I think be well explained and maintained in that context.
40. There was some debate as to whether or not what mattered by way of (a) continuity of ownership over the two years and (b) service of notices, could be dealt with by some construction of the Act which required the tenant to be registered at the time of serving the notice, even though not necessarily registered for the whole of the previous two years — if, for example, for some small part of that period, the tenant had completed his or her purchase but there was a small registration gap before becoming the legal owner.
41. For my part however, again, I do not consider that that sort of debate assists. At the end of the day the tenant has to be a qualifying tenant for a period of two years prior to the relevant date. That seems to me a very simple test, or at least intended to be a very simple test, and it is one which is met with sufficient clarity, in my judgment, if registration is required throughout that period.
42. For those reasons, without I fear doing justice to some of the more subtle points that were made in the submissions before me, I am minded to grant the declaration sought. I will hear counsel as to the precise form of order and with any other arguments consequential upon that decision.
