Leasehold enfranchisement — Leasehold Reform, Housing and Urban Development Act 1993 — Collective enfranchisement — Determination of price — Valuation date — County court consent order that nominee purchaser entitled to collective enfranchisement — Whether valuation as at date of first consent order or date of LVT hearing
The appellant company was the nominee purchaser set up by three of the lessees of a block of flats for the purposes of acquiring the freehold reversion under the Leasehold Reform, Housing and Urban Development Act 1993. The leasehold valuation tribunal determined the price payable for the freehold at £450,000, based upon a valuation date of 22 February 2000, being the date when the LVT determined |page:56| whether there should be any leasebacks. Before the LVT, the nominee purchaser had sought a determination of £390,000, based upon a valuation date of 5 May 1999, the date when a consent order was made in the county court that the nominee purchaser was entitled to acquire the freehold. The respondent landlord had sought a price of £605,000, based upon a valuation date of 22 February 2000; it was on that date that the terms of the leasebacks of two flats were agreed. The Lands Tribunal dismissed the nominee purchaser’s appeal and allowed the landlord’s cross-appeal to the extent of determining the price at £519,000; it decided, inter alia, that the valuation date was 22 February 2000. The nominee purchaser appealed, contending for a valuation date of 5 May 1999.
Held: The appeal was dismissed. Paragraph 1 of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993 defines the valuation date as the date upon which it is determined by agreement, or by the leasehold valuations tribunal, what freehold interest in the specified premises is to be acquired; freehold interest means the quality of the freehold interest, and includes such questions as to whether it is encumbered or not. An agreement on what freehold interest was to be acquired could take place at the time of any consent order in any earlier county court proceedings. There had been no agreement until the LVT hearing on 22 February 2000, and that was the valuation date.
The following cases are referred to in this report.
Mutual Open Property Management Ltd v Cadogan (Ref no LON/ENF/463/00) unreported 21 June 2001, LVT
Templeco 474 Ltd v Trustees of the Brompton Settled Estates (Ref no LON/ENF/582/01) unreported 30 October 2001, LVT
This was an appeal by the nominee purchaser, West Hampstead Management Co Ltd, from a decision of the Lands Tribunal dismissing an appeal by the nominee purchaser and allowing a cross-appeal by the landlord, Pearl Property Ltd, from a decision of the London Leasehold Valuation Tribunal under the Leasehold Reform, Housing and Urban Development Act 1993.
Jonathan Gavaghan (instructed by Piper Smith & Basham) appeared for the appellant; Anthony Radevsky (instructed by Marshall Ross & Prevezer) represented the respondent.
PETER GIBSON LJ said:
[1] I will ask Arden LJ to give the first judgment.
Giving the first judgment, ARDEN LJ said:
[2] This is an appeal from the Lands Tribunal (Mr Paul Francis FRICS) dated 19 November 2001, dismissing an appeal from a decision dated 23 August 2000 of the London Leasehold Valuation Tribunal, and allowing a cross-appeal to the extent that the enfranchisement price should be £519,000. This appeal is concerned with one point only, namely, the question whether the Lands Tribunal was correct in fixing the valuation date at 22 February 2000 pursuant to para 1(1) of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). That paragraph defines “valuation date” as follows:
“The valuation date” means —
(a) The date when it is determined, either by agreement or by a leasehold valuation tribunal under this Chapter, what freehold interest in the specified premises is to be acquired by the nominee purchaser, or
(b) if there are different determinations relating to different freehold interests in the specified premises, the date when determinations have been made in relation to all the freehold interests in the premises.
[3] The appellant contends that the Lands Tribunal should have fixed the valuation date at 5 May 1999. It contends that if the appeal succeeds, the case should be remitted back to the Lands Tribunal for a further valuation.
[4] This case concerns the exercise of the right of collective enfranchisement. I need to describe in broad terms the procedure laid down in the Act. The right itself is conferred by section 1, which provides:
(1) This Chapter has effect for the purpose of conferring on qualifying tenants of flats contained in premises to which this Chapter applies on the relevant date the right, exercisable subject to and in accordance with this Chapter, to have the freehold of those premises acquired on their behalf —
(a) by a person or persons appointed by them for the purpose, and
(b) at a price determined in accordance with this Chapter.
and that right is referred to in this Chapter as “the right to collective enfranchisement”.
(2) Where the right to collective enfranchisement is exercised in relation to any such premises (“the relevant premises”) —
(a) the qualifying tenants by whom the right is exercised shall be entitled, subject to and in accordance with this Chapter, to have acquired, in like manner, the freehold of any property which is not comprised in the relevant premises but to which this paragraph applies by virtue of subsection (3).
I need not read para (b). Subsection (3) provides in the relevant part:
Subsection (2)(a) applies to any property if… at the relevant date either —
(a) it is appurtenant property which is demised by the lease held by a qualifying tenant of a flat contained in the relevant premises; or
(b) it is property which any such tenant is entitled under the terms of his flat to use in common with the occupiers of other premises (whether those premises are contained in the relevant premises or not).
[5] Accordingly, there is a right to acquire appurtenant property and property used in common.
[6] “Appurtenant property” is defined by section 1(7) as:
in relation to a flat… any garage, outhouse, garden yard or appurtenances belonging to, or usually enjoyed with, the flat.
[7] I go now to section 13, which deals with the notice that tenants must serve if they wish to exercise the right of collective enfranchisement:
(1) A claim to exercise the right to collective enfranchisement with respect to any premises is made by the giving of notice of the claim under this section.
[8] Subsection (2) provides for the notice to be given to the reversioner. For the purposes of this case, the critical part of the subsection is that which deals with the contents of the notice, which I must now read in material part:
(3) The initial notice must —
(a) specify and be accompanied by a plan showing —
(i) the premises of which the freehold is proposed to be acquired by virtue of subsection (1)(1),
(ii) any property of which the freehold is proposed to be acquired by virtue of section 1(2)(a), and
(iii) any property… over which it is proposed that rights (specified in the notice) should be granted… in connection with the acquisition of the freehold [interest] of the specified premises or of any such property so far as falling within section 1(3)(a);
…
(c) specify —
(i) any leasehold interest proposed to be acquired under or by virtue of section 2(1)(a) or (b), and
(ii) any flats or other units contained in the specified premises in relation to which it is considered that any of the requirements in Part II of Schedule 9 to this Act are applicable;…
[9] I interpose that Part II of Schedule 9 deals with the mandatory leaseback of flats that do not qualify for acquisition by the tenants under their right of collective enfranchisement.
[10] It will be seen from those paragraphs that the notice draws a distinction between the premises that are acquired by virtue of the right of collective enfranchisement and other premises, such as appurtenances that are sought to be acquired.
[11] Subsection (12) of section 13 defines “the specified premises”. “The specified premises” is an expression used in the definition of “valuation date”, which I have already read: |page:57|
(12) In this Chapter “the specified premises”, in relation to a claim under this Chapter, means —
(a) the premises specified in the initial notice under subsection 3(a)(i), or
(b) if it is subsequently agreed or determined under this Chapter that any less extensive premises should be acquired in pursuance of the notice in satisfaction of the claim, those premises;
and similarly references to any property or interest specified in the initial notice under subsection (3)(a)(ii) or (c)(i) shall, if it is subsequently agreed or determined under this Chapter that any less extensive property or interest should be acquired in pursuance of the notice, be read as references to that property or interest.
[12] Accordingly, “the specified premises”, when that expression is used in the Act, means the premises of which the tenants desire to acquire the freehold in exercise of their right to collective enfranchisement.
[13] I next turn to section 21, which deals with the reversioner’s counternotice:
(1) The reversioner in respect of the specified premises shall give a counter-notice under this section to the nominee purchaser by the date specified in the initial notice in pursuit of section 13(3)(g).
(2) The counter-notice must comply with one of the following requirements, namely —
(a) state that the reversioner admits that the participating tenants were on the relevant date entitled to exercise the right to collective enfranchisement in relation to the specified premises;
(b) state that, for such reasons as are specified in the counter-notice, the reversioner does not admit that the participating tenants were so entitled;
(c) contain such a statement as is mentioned in paragraph (a) or (b) above but state that an application for an order under subsection (1) of section 23 is to be made by such appropriate landlord (within the meaning of that section) as is specified in the counter-notice, on the grounds that he intends to redevelop the whole or a substantial part of the specified premises.
(3) If the counter-notice complies with the requirement set out in subsection 2(a), it must in addition —
(a) state which (if any) of the proposals contained the initial notice are accepted by the reversioner and which (if any) of those proposals are not so accepted, and specify —
(i) in relation to any proposal which is not so accepted, the reversioner’s counter-proposal, and
(ii) any additional leaseback proposals by the reversioner.
[14] I interpose to say that those leaseback proposals can include proposals for optional leaseback in pursuance of Part III of Schedule 9:
(b) if (in any case where any property specified in the initial notice under section 13(3)(a)(ii) is property falling within section 1(3)(b)) any such counter-proposal relates to the grant of rights or the disposal of any freehold interest in pursuance of section 1(4), specify —
(i) the nature of those rights and the property over which it is proposed to grant them, or
(ii) the property in respect of which it is proposed to dispose of any such interest,
as the case may be.
[15] I need not read further from subsection (3), and I can go to subsection (4):
The nominee purchaser may be required to acquire on behalf of the participating tenants the interest in any property of [any] relevant landlord, if the property —
(a) would for all practical purposes cease to be of use and benefit to him, or
(b) would cease to be capable of being reasonably managed or maintained by him,
in the event of his interest in the specified premises or (as the case may be) in any other property being acquired by the nominee purchaser under this Chapter.
…
(7) The reference in subsection (3)(a)(ii) to additional leaseback proposals is a reference to proposals which relate to the leasing back, in accordance with section 36 and Schedule 9, of flats or other units contained in the specified premises and which are made either —
(a) in respect of flats or other units in relation to which Part II of that Schedule is applicable but which were not specified in the initial notice under section 13(3)(c)(ii), or
(b) in respect of flats or other units in relation to which Part III of that Schedule is applicable.
[16] So it appears from section 21 that the reversioner’s notice must go into considerable detail, and deal with outstanding matters that have to be agreed or determined, before the acquisition can be completed.
[17] Obviously, disputes can arise as to the acquisition by the tenants of property over which they have sought to exercise their right of collective enfranchisement. Sections 90 and 91 divide the jurisdiction conferred by the Act between the county court and leasehold valuation tribunals. Section 90(1) provides that:
Any jurisdiction expressed to be conferred on the court by this Part shall be exercised by a county court.
[18] Section 91 provides that:
(1) Any jurisdiction expressed to be conferred on a leasehold valuation tribunal by the provisions of this Part… shall be exercised by a rent assessment committee constituted for the purposes of this section; and any question arising in relation to any of the matters specified in subsection (2) shall, in default of agreement, be determined by such a rent assessment committee.
(2) Those matters are —
(a) the terms of acquisition relating to —
(i) any interest which is to be acquired by a nominee purchaser in pursuance of Chapter 1, or
…
(ii) including in particular any matter which needs to be determined for the purposes of any provision of Schedule 6 or 13.
[19] Section 22 enables the tenants to go to the county court for a declaration if the reversioner does not accept that they qualify for the purpose of exercising the right of collective enfranchisement. Under subsection (3), if, upon any such application, the court makes an order making the appropriate declaration, the court must also make an order that declares that the reversioner’s counternotice is of no effect and requires the reversioner to give a further counternotice to the nominee purchaser by such date as is specified in the order.
[20] Subsection (5) provides that subsections (3) to (5) of section 21 shall apply to any further counternotice required to be given by the reversioner under subsection (3) as if it were a counternotice under that section complying with the requirement set out in subsection (2)(a) of that section.
[21] Section 24 refers to the jurisdiction of the leasehold valuation tribunal. Subsection (1) provides:
Where the reversioner in respect of the specified premises has given the nominee purchaser —
(a) a counter-notice under section 21 complying with the requirement set in subsection (2)(a) of that section, or
(b) a further counter-notice required by or by virtue of section 22(3) or section 23(5) or (6),
but any of the terms of acquisition remain in dispute at the end of the period of two months beginning with the date on which the counter-notice or further counter-notice was so given, a leasehold valuation tribunal may, on the application of either the nominee purchaser or the reversioner, determine the matters in dispute.
Then, going to subsection 8, I next read the definition in that section of “the terms of acquisition”:
(8) In this Chapter “the terms of acquisition”, in relation to a claim made under this Chapter, means the terms of the proposed acquisition by the nominee purchaser, whether relating to —
(a) the interests to be acquired,
(b) the extent of the property to which those interests relate or the rights to be granted over any property,
(c) the amounts payable as the purchase price for such interests,
(d) the apportionment of conditions or other matters in connection with the severance of any reversionary interest, or
(e) the provisions to be contained in the conveyance,
or otherwise, and includes any such terms in respect of any interest to be acquired in pursuance of section 1(4) or section 21(4). |page:58|
[22] Section 34 deals with the terms of the conveyance to the nominee purchaser, and provides that:
(1) Any conveyance executed for the purposes of [Chapter 1], being a conveyance to the nominee purchaser of the freehold specified premises… shall grant to the nominee purchaser an estate in fee simple absolute in those premises… subject only to such encumbrances as may have been agreed or determined under this Chapter to be incumbrances subject to which that estate should be granted, having regard to the following provisions of this Chapter.
[23] Subsection (9) of section 34 then provides:
Except to the extent that any departure is agreed to by the nominee purchaser and the person whose interest is to be conveyed, any conveyance executed for the purposes of this Chapter shall —
(a) as respects the conveyance of any freehold interest, conform with the provisions of Schedule 7.
[24] Schedule 7 deals with a large number of matters, such as rights of way and support, and so on, and particularly covenants.
[25] I now turn to the essential factual background, which is as follows. The appellant is a nominee purchaser on behalf of a number of tenants in a block of flats at 41 Priory Road, London NW6. Those tenants, on 3 December 1996, gave notice, pursuant to section 13 in Chapter 1 of the 1993 Act, to acquire the freehold of those premises collectively.
[26] On 19 May 1997, the landlord issued a counternotice challenging the tenants’ right to serve this notice. On 17 July 1997, the appellant started proceedings in the county court for a declaration that the tenants were so entitled. On 5 May 1999, an order was made in those proceedings, by consent, declaring the right of the tenants to enfranchisement. No provision was made in the order for the landlord to serve a counternotice, as required by section 22(3)(b). On 26 November 1999, the order of 5 May 1999 was amended by consent, so as to require the service of a further counternotice by the landlord by 14 January 2000. On 12 January 2000, the respondent landlord served a fresh counternotice, following inspection by its valuers. In that counternotice, it sought the leaseback of the two empty flats of the property. In February and March 2000, there were hearings before the London Leasehold Valuation Tribunal. By its order dated 23 August 2000, the tribunal determined the terms of acquisition and rejected the appellant’s contention that the appropriate date of valuation was 5 May 1999. The tribunal held that the date was no earlier than 22 February 2000, and it selected that date as being the first date of the hearing before it.
[27] Both sides then appealed to the Lands Tribunal. The Lands Tribunal referred to Hague on Leasehold Enfranchisement (3rd ed) 1999, para 27/02. That passage distinguishes between the wording used in para 1(1) of Schedule 6, in relation to the valuation date, and the wording “when it is determined what are the premises the freehold in which is to be acquired”. In the opinion of the editors of Hague, the expression “what freehold interest” has a wider meaning. The editors also state that, since the valuation depends upon the terms, it would be surprising if the date of valuation could arise before those terms had been determined. Moreover, to construe subpara 1(1) of Schedule 6 as meaning that the valuation date occurred when the terms of acquisition of the freehold interest had been determined would make Chapter 1 consistent with Chapter 2 of the 1993 Act, which provides for tenants who require a new lease. If, however, the counternotice made it clear that no further terms of the acquisition remained to be agreed, then the valuation date would be the date of the counternotice.
[28] Accordingly, the Lands Tribunal held that the valuation date did not, in the present case, occur until both the extent of the premises and the terms of acquisition had been determined.
[29] I now turn to the parties’ submissions.
[30] Mr Jonathan Gavaghan, for the appellant, submits that the valuation date could logically precede the date upon which all the terms are ascertained with a view to the valuation being carried out later, as at that earlier date. Mr Gavaghan also submits that the Leasehold Reform Act 1967, dealing with an individual’s right of enfranchisement or right to a new lease, deals with similar subject matter. Section 37(1)(d) of that Act makes it clear that it is the date of the tenant’s notice that is the valuation date. He submits that there is there is no issue in the present case as to the terms of the leaseback. The present case was a situation in which, by virtue of para 5 of Schedule 9 to the 1993 Act, the leaseback had to be given.
[31] Mr Gavaghan further submits that the tribunal was incorrect in expressing the view that the object was to produce consistency between Chapter 1 and Chapter 2 of the 1993 Act. If that had been the object of parliament, the same wording would have been used, whereas, in relation to Chapter 2, the wording used in Schedule 13 makes it clear that all the terms of acquisition have to be agreed. If the same meaning was intended in Chapter 1, the same words would have been used. In any event, as already submitted, overall consistency would not be achieved because the result would be inconsistent with the 1967 Act. Paragraph 1 of Schedule 6 requires identification of the physical property only. The reason for this is that the extent of the physical property is not as clear in relation to collective enfranchisement as it is under the 1967 Act or Chapter 2 of the 1993 Act. Under Chapter 1, a freehold interest is a freehold interest. There is nothing more that needs to be done before valuation, whereas, in relation to the grant of a new lease, there is nothing that can be done until the lease itself has been created.
[32] Mr Gavaghan submits that there can be no gradation in relation to a freehold interest: either it is acquired or it is not acquired.
[33] Mr Gavaghan further submits that the appellant’s construction is consistent with the natural meaning of the words in para 1(1) of Schedule 6. Counsel relies upon the reasons that were given by the leasehold valuation tribunal in Mutual Open Property Management Ltd v Cadogan unreported 21 June 2001*. The leasehold valuation tribunal in that case, whose chairman was Mr PD Wulwik LLB, heard arguments from three sets of counsel, including two leading counsel, as to the date that ought to be the valuation date for the purpose of Chapter 1 of the 1993 Act. The decision very helpfully sets out all the arguments that were raised on either side. I need only refer to the reasons which the tribunal gives, and I do so because Mr Gavaghan relied upon those reasons and incorporated them into his argument.
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* Editor’s note: LVT ref LON/ENF/463/00
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[34] Before I do, I would draw attention to one of the preliminary observations that the tribunal made in para 23, where it observed that concern that the landlord’s argument would result in the fluctuation of the valuation date in the event of an appeal is not justified, in view of the fact that, under Schedule 6(1), the valuation date is the date of the party’s agreement or the determination by the leasehold valuation tribunal, not of any appellate tribunal.
[35] In Mutual Open, the tribunal held that the valuation date was the date of the service of the landlord’s counternotice. That notice admitted that the tenants were entitled to exercise the right of collective enfranchisement, and added that, save where otherwise indicated, the proposals in the tenant’s section 13 notice were acceptable. Only extracts of the decision are available to us, but we are informed by counsel that the reservations that the landlord indicated went to such matters as rights of way, although from recollection, counsel did not think those matters went to valuation.
[36] The reasons given by the tribunal are in para 24, and I will summarise them. First, the tribunal said that the words “what freehold interest” were not apt to include restrictive covenants and easements, and that, on the ordinary and natural meaning of the words, those words meant “the physical property”, whereas restrictive covenants were part of the terms. Second, the tribunal drew attention to the fact that there were two limbs to the definitions of “the valuation date”, and that the antithesis was in terms of the physical property being acquired. Third, the tribunal drew attention to para 3(1) of Schedule 6, which requires assumptions to be made as to rights and burdens when the freehold interest is being valued, and which treats those rights and burdens as |page:59| separate from the freehold interest. Fourth, the tribunal said that the expression “the terms of acquisition”, in section 24(8), extended beyond the freehold interest in the specified premises. I would add that it could not, for instance, include the price. Fifth, the tribunal drew attention to the fact that the wording of Schedule 13 was different. Schedule 13 provides for “the valuation date” to mean in relation to Chapter II:
the date when all of the terms of acquisition (apart from those relating to the premium and any other amounts payable by virtue of this Schedule in connection with the grants of the new lease) have been determined either by agreement or by a leasehold valuation tribunal under this Chapter.
[37] Six, the tribunal held that there was no practical difficulty in the valuation date being at a date earlier than all the terms of acquisition had been agreed, because the valuation could be done at a later date, as at an earlier date.
[38] In addition to those six reasons, the tribunal gave as a policy reason that the valuation date, as it held it to be, would be conducive to greater certainty and reduce the scope for tactical manoeuvring.
[39] Mr Gavaghan, too, relied upon the impracticality of the decision of the Lands Tribunal in this case, since it meant that the valuers had to come prepared to value the property as at the date of the hearing before the Lands Tribunal itself, not as at a prior date.
[40] Finally, Mr Gavaghan submitted that the Lands Tribunal in this case was, in any event, incorrect in the last sentence of para 59 of its decision. It said this:
Since the value of the freehold interest may depend upon the terms of acquisition (as in the present case, it does depend on the leasebacks of flats 2 and 3), it would be surprising if the date of the valuation could ante-date the determination of those terms.
[41] The Lands Tribunal failed to appreciate, submits Mr Gavaghan, that the expression “terms of acquisition” can encompass matters that are wider than those that relate to the freehold interest itself.
[42] I now turn to the respondent’s submissions.
[43] Mr Anthony Radevsky, for the respondent, submits that the jurisdiction of the leasehold valuation tribunal under the 1993 Act determined the terms of acquisition that had not been agreed, and that this could only arise once a counternotice had been served by the landlord. Accordingly, on his submission, where there was no agreement as to the terms of acquisition, the valuation date could not logically be at a date before the jurisdiction of the leasehold valuation tribunal had arisen under section 24(1), which I have read.
[44] Mr Radevsky submits that, in this case, the counternotice sought two leasebacks. It was not known until the hearing before the leasehold valuation tribunal that the appellant had agreed to the terms of those leasebacks.
[45] Mr Radevsky also relies upon the reasoning of the leasehold valuation tribunal in another case, namely Templeco 474 Ltd v Trustees of the Brompton Settled Estates, a decision dated 30 October 2001*. The chairman in that case, was Professor JT Farrand QC. In that case the tribunal expressed the view that the expression “freehold interest” ordinarily and naturally referred, not to the physical extent of the premises, but to the legal estate to be transferred. Moreover, since only one sort of leasehold interest could now subsist in land, the word “what” in the definition of valuation date necessarily involved determining whether or not the freehold interest is to be subject to any encumbrances, including covenants, exceptions and reservations. In the view of the tribunal, that interpretation was directly supported by section 34(1) and section 24(9)(a) of the 1993 Act, to which I have already referred.
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* Editor’s note: LVT ref LON/ENF/582/01
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[46] The tribunal also expressed the view that the legal, rather than the physical, approach was consistent with para 3(1) of Schedule 6, which requires the assumption to be made that:
the vendor is selling with and subject to the rights and burdens with and subject to which the conveyance to the nominee purchaser of the freeholder’s interest is to be made, and in particular with and subject to such permanent or extended rights and burdens as are to be created in order to give an effect to Schedule 7.
[47] The tribunal expressed the view that it would be improbable that parliament contemplated a valuation date pre-dating the ascertainment of all the rights and the burdens that might affect the value of the freehold interest in the specified premises. Moreover, the tribunal’s interpretation would be consistent with the definition of “valuation date” in Schedule 13(1). Although different wording is used, there is no persuasive reason for having such a significant difference within one statute, whereas comparisons with the 1967 Act were not helpful.
[48] Likewise, Mr Radevsky submits, in this case, that reference to the 1967 Act is not helpful.
[49] I now turn to my conclusions.
[50] In order to put one point to one side, I will deal first with a point that I have not mentioned, but that both counsel addressed: the question of optional leasebacks.
[51] This is a point that Mr Gavaghan put at the forefront of his submissions. He cited para 5 of Part III of Schedule 9, which I will now read:
5(1) Subject to sub-paragraph (3), this paragraph applies to any unit falling within sub-paragraph (1A) which is not immediately before the appropriate time a flat let to a person who is a qualifying tenant of it.
(1A) A unit falls within this sub-paragraph if —
(a) the freehold of the whole of it is owned by the same person, and
(b) it is contained in the specified premises.
(2) Where this paragraph applies, the nominee purchaser shall, if the freeholder by notice requires him to do so, grant to the freeholder a lease of the unit in accordance with section 36 and paragraph 7 below.
(3) This paragraph does not apply to a flat or other unit to which paragraph (2) or (3) applies.
[52] Mr Gavaghan submitted that the requirement for leasebacks could not delay the valuation date, because, under the Act, a situation could arise in which the landlord acquires a leaseback at any time prior to the acquisition, pursuant to the right to collective enfranchisement. Accordingly, the fact that, in this case, the landlord required leasebacks was not a matter upon which the landlord could rely as being a matter that had to be resolved before the valuation date was fixed, because the Act itself provided, in effect, that a further requirement for a leaseback could be made at any time down to completion of the transaction. This was a point that Mr Radevsky also addressed in his submissions. He accepted that it appeared to be the case that a leaseback could be required at any time prior to completion. He submits that that point is supported by Leasehold Enfranchisement: The New Law by Professor DN Clarke (Jordans 1994, para 9.5.5). He drew our attention to footnote 90, which states that, in this particular instance, Schedule 9 appears to allow for a notice to require a leaseback even after the contract stage and at any time prior to completion. As this would necessitate a complete readjustment of the price payable, it is suggested that this point is the result of a statutory oversight. Mr Radevsky submits that, prior to exchange of contracts, the nominee purchaser could seek a variation in the price by making an application under section 24(4), but he accepted that there was a difficulty if the requirement arose only after the date of exchange of contracts. But he submits, in my view correctly, that the court would bend over backwards, if this situation ever arose, to ensure that the tenant was not prejudiced by a requirement in this manner.
[53] In my judgment, the apparent problem here is not a matter that should drive the true construction of the definition of “valuation date”. I would observe that Mr Radevsky also took us to the provisions of para 7 of Part III of Schedule 9, which provides for the terms of any lease that is necessary for the purpose of a leaseback to be in a particular form, except to the extent that any departure was agreed between the nominee purchaser and freeholder, or is directed by the leasehold valuation tribunal on the application of either of those persons.
[54] In the present case, the terms of the leasebacks were not agreed until the first day of the hearing before the leasehold valuation tribunal. |page:60| Accordingly, Mr Radevsky submits, in my view rightly, that the terms of the leasebacks could not be said to be finalised until that agreement was communicated and, if there had been no such agreement, the leasehold valuation tribunal would have had to determine the terms.
[55] Accordingly, while appreciating that there would appear to be some difficulty in this point arising on optional leasebacks, it is a point that, in my judgment, should be put to one side for the purpose of construing the definition of “valuation date” in Schedule 6.
[56] I now turn to para (1) of Schedule 6 and the definition of “valuation date”.
[57] In my judgment, it is an important point that, in this definition, the date under para (a) is the date upon which it is determined by agreement, or by the leasehold valuation tribunal, what freehold interest in the specified premises is to be acquired. If it was simply a question of determining the physical premises, then the word “what freehold interest in”, appearing in para (a), would not have been inserted. Accordingly, in my judgment, it must be the quality of the freehold interest that is being referred to, and such questions as whether it is encumbered or not. Moreover, the determination is to take place either by agreement or by the leasehold valuation tribunal.
[58] In my judgment, an agreement could take place at the time of a consent order in county court proceedings. But that did not occur in the present case, and it could not be said that the form of the counternotice that the landlord served contained the landlord’s agreement to the freehold interest. That matter was not agreed and had to be determined by the leasehold valuation tribunal.
[59] When one examines the powers of the leasehold valuation tribunal under section 24, it is important to note that a clear distinction is drawn in the definition of “terms of acquisition” between (a) the interest to be acquired, and (b) the extent of the property to which those interests relate or the rights to be granted over any property. So the Act recognises there, and it seems to me consistently throughout, a clear distinction between physical property and the quality of the interests in the property.
[60] Accordingly, I am in agreement with the decision and reasons given by the leasehold valuation tribunal chaired by Professor Farrand QC. I have borne in mind the practicalities of the definition of “valuation date”, but, as it seems to me, since property markets can go down as well as up, there is a risk that either way, whichever way the definition of “valuation date” goes, the parties could be prejudiced or assisted by further delay in the final determination of the terms of acquisition. But that is a matter over which the tribunal should exercise control and, as I see it, is not a factor that can drive construction.
[61] Finally, I should say that I obtain great assistance from reading the decision of the leasehold valuation tribunal in Mutual Open, which contains a very thorough and helpful examination, examining the words “valuation date”. I would make the following observations as to its reasons. As to its first reason, in my judgment, the Act, read as a whole, draws a distinction between freehold interest and rights, but, when referring to “what freehold interest” in the definition of “valuation date”, is referring to the quality of the interest. Moreover — and this really goes to the third reason — para (3) of Schedule 6 is really addressing assumptions to be made for valuation purposes. Therefore, these factors, too, cannot, in my judgment, control the definition of “valuation date”.
[62] As regards the second point on the two limbs of the definition of “valuation date”, it seems to me that those paragraphs have been drafted in that way in order to make it clear that, when there is more than one piece of property in question, it is the last date of determination that is the critical date for valuation purposes.
[63] As regards the fourth reason that it gave, that the terms of acquisition in section 24(8) were wider than those that related to the freehold interest itself, that was a point accepted by Mr Radevsky. It may be a point that answers the fifth reason given by the tribunal, that is the reason for a difference in wording between Schedule 13 and Schedule 6 in relation to valuation date. Schedule 13 is dealing with the valuation of a lease; and, in relation to a lease, there is unlikely to be any question of appurtenant property, or property other than the specified premises. Thus, agreement of the terms of acquisition is a trigger point that can be appropriately used in the definition of valuation date. It seems to me that there is a strong argument that Chapter 1 and Chapter 2 ought to be construed consistently, since they deal with rights that are complementary: in the first place, the right of collective enfranchisement, and, in the second case, the right to require a new lease.
[64] As regards the sixth point, on practicalities, I have already given my views on this point. As I see it, the practicalities, while obviously points that should be considered, cannot control construction.
[65] Likewise, I have already dealt with the policy reason that the tribunal helpfully gave. Manoeuvring can still occur on either construction of “the valuation date”. It is a matter for the leasehold valuation tribunal to ensure that parties do not use it improperly, so far as it can, when the matter is brought before it.
[66] For all these reasons, I would dismiss the appeal.
PETER GIBSON LJ and CRESSWELL J agreed and did not add anything.
Appeal dismissed.
