Guy Fetherstonhaugh KC makes his annual attempt to discern the legal matters and cases that will affect the real estate world over the coming year.
2023 was a busy year in the world of property litigation, with our legislators rather more active in our field than usual, with predictably litigious results.
In the usual way, I set out the results of my discussions in Chambers as to what will be happening in 2024. As always, that seems to me to be a pretty good basis for a survey of the property litigation market. The results range across the whole real estate field – commercial, residential and agricultural leasing disputes, lots of real property conflicts involving restrictive covenants and easements, and the usual range of arguments about charging orders, adverse possession and telecoms. And the new(ish) kids on the block – the Building Safety Act 2022 and the Minimum Environmental Efficiency Standard – are going to be responsible for a fair degree of the litigation we will see this year.
Let me start with landlord and tenant disputes, where the field of battle encompasses service charge and use disputes, lease renewals, forfeiture and enfranchisement.
Commercial
In a good example of how tried and tested formulae are being applied to changed circumstances, the High Court is due to hear a case in February concerning the interpretation of a use clause in a shop lease. The lease restricts use to A1 – retail sales to visiting members of the public. The tenant uses the very large basement of the shop to store goods which are sold in the shop, but are also delivered to customers who order online and never come to the shop. The landlord contends that this is not permitted. This is a problem that is frequently encountered in the modern retail world, and it will be interesting to see how the court deals with it.
At the other end of the year, in Crown Estate v International Students House, the court will hear a claim for possession based on forfeiture for breach of the use covenant in a lease, which the tenant defends on the basis of alleged acquiescence and waiver of the covenants. These issues will be familiar to many, and the outcome will be useful to those of us who frequently have to advise in such circumstances.
Landlord and Tenant Act 1954 renewals will receive attention again next year. It is worth mentioning in particular Sainsbury’s Supermarkets Ltd v Medley Assets Ltd, which is up for trial at the end of January in Central London County Court. The issues raised concern the genuineness of the landlord’s ground of opposition under section 30(1)(f), in circumstances where it has proposed two different redevelopment schemes.
Before leaving commercial disputes, I should add that those of us with an interest in the arbitration of such disputes will be waiting for the decision of the Court of Appeal in Osler v Osler, to be heard on 30 April, concerning the correct procedure for the court to follow on a section 69 Arbitration Act 1996 appeal.
Residential
The residential leasing field will also be busy, with a number of cases heading for court raising issues under the enfranchisement legislation, the Landlord and Tenant Act 1987, service charges and negligence.
At the end of January, in Callow v Fortune Dollar Investments, the First-tier Tribunal will consider in the context of a Leasehold Reform, Housing and Urban Development Act 1993 lease extension, whether and how much discount should be made to the premium to account for the possibility of holding over rights under Schedule 10 of the Local Government and Housing Act 1989.
In July, the long-running dispute involving R (on the application of Annington Property Ltd and others) v Secretary of State for Defence; Annington Property Ltd v Secretary of State for Defence [2023] EWHC 1155 (Ch); [2023] EWHC 1154 (Admin), which moved last year from arbitration to litigation, will be aired in the Court of Appeal, on the question whether the Ministry of Defence is entitled to re-nationalise the married quarters estate using the enfranchisement legislation.
The meaning and effect of that unloved statute, the 1987 Act, will be probed in two appeals. In the first, this month, Tower Hamlets Community Housing Ltd v Various leaseholders, a landlord’s attempt to vary 24 leases, on the basis that there is a shortfall in service charge recovery, is opposed by the lessees on the footing that the amount in question is meant to be met by the landlord, which occupies the ground-floor commercial unit. The appeal in the Upper Tribunal (Lands Chamber) will involve, among other things, a consideration of the question whether the service charge percentages in the leases must all be expressed as numerical figures, in order to engage section 35(2)(f).
Secondly, in Prescott Place Freeholder Ltd and others v Batin and another [2023] EWHC 1445 (Ch), the Court of Appeal will consider various novel issues arising in a claim under Part I of the 1987 Act, including whether an order made under section 19(1) compelling the transfer of the freehold of a block creates an interest in land and whether, if it does, two equitable leases created after the section 19(1) order was made would be defeated by the registered transfer of the freehold even if they had previously been protected by means of notices in the register of the freehold title.
Service charge recovery will come under the microscope in a number of cases, of which it is worth mentioning in particular Docklock Ltd v Christo & Co Ltd [2021] EWHC 308 (Ch), in which the Court of Appeal will consider in January a long-running claim for an account against a property portfolio manager. The appeal involves consideration of the scope of the account, whether it is properly regarded as a running account and the relevance or application of the rule of appropriation in Re Clayton’s Case (1816) 35 AER 767.
And so to negligence: in Shamsan v 44-49 Lowndes, the court will hear an appeal concerning the alleged theft of £7m of jewellery from the claimant’s flat, said to be due to the porters in the building having wrongly handed over the keys to a thief. The issue for the court is whether the defendant landlord owed a duty of care to a sub-tenant for the negligent acts of porters, even though they were not the defendant’s employees and the imposition of a duty of care would seemingly be inconsistent with the provisions of the lease granted by the defendant to the claimant’s landlord.
Agriculture
In May, the High Court will hear an agricultural partnership dispute, where the central issue is whether a farm should be sold on the open market or whether a Syers v Syers (1876) 1 App Cas 174 order should be made, allowing one of the partners to buy the farm at a figure determined by the court.
Building Safety Act 2022
Claims concerning the 2022 Act are mounting, with three decisions expected early in the new year. Later this month, we expect to receive what will be a landmark decision by the President and the Deputy President of the Upper Tribunal in Triathlon Homes v Stratford Village Development Partnership, concerning remediation contribution orders under section 124 of the 2022 Act. Not only is the decision likely to provide key guidance on the application of the “just and equitable” test under the 2022 Act (relevant also to insolvent landlord applications under section 125 and building liability orders under section 131), but it will also determine the extent to which section 124 can be used to recover service charges incurred prior to commencement of the Act. It should also decide the scope of the words “in remedying relevant defects” and, therefore, whether section 124 applies to interim remedial measures, such as waking watches, and their replacement by the installation of fire and smoke alarms. Given the complexity and number of ongoing debates as to the remediation measures required to satisfy the fire risk appraisal code of practice, the tribunal’s conclusions are likely to be of critical and wide-ranging significance.
And then, in February 2024, in the context of a remediation order application, the First-tier Tribunal will be examining what actually amounts to a “building safety risk” for the purposes of the definition of a relevant defect under section 120 of the Act. The case may also resolve various issues over which landlord or superior landlord can properly be made the subject of such an application; in particular, where the superior landlord only has step-in rights in default of performance by any inferior landlord or management company. Again, this decision is likely to be another important step in the development of the law relating to the 2022 Act, with obvious implications for other applications under Part 5 of the Act.
The following month, in one of a number of similar cases brought by the government against freeholders relating to unsafe cladding (in this case, concerning Vista Tower in Stevenage), the First-tier Tribunal will consider the scope and extent of the remediation order jurisdiction under section 123 of the Act.
Real property
Restrictive covenants continue to be a fertile source of litigation, with a number of cases heading for hearings in 2024, of which special mention should be made of a section 84 application to modify a building scheme to permit ground and second-floor extensions to a terrace of houses, which will be considered by the Upper Tribunal in January.
Easements are also back in focus, with the courts set to consider two old chestnuts. This month, in Merlin Real Estate Ltd v Balaam, Cambridge County Court will consider whether a further housing development on dominant land would amount to excessive use of an express right of way across a long single-track road, albeit with passing places.
Perhaps a little more exotically, in Cayman Shores Development Ltd v The Registrar of Land, the Privy Council will consider an appeal from the Cayman Islands concerning recreational easements, restrictive covenants and the operation and rectification of the Cayman Islands Land Registry under the Registered Land Act 1971.
Back to these shores, in March the court will hear Maitland Court Ltd v Gulshan, in which the issue is the extent to which the management company of a Hyde Park mansion block can maintain a locked electric gate at the entrance to the private parking area of the block against the wishes of the owners of mews houses to the rear, in circumstances where a porter is elsewhere on site, and all car park users have been issued with remote-control devices to open the gate.
Adverse possession
In Maitland Court (above), the court will also consider the scope of the third of the conditions in paragraph 6 of Schedule 5 to the Land Registration Act 2002, under which a squatter may still be registered if they have been in adverse possession of land adjacent to their own for at least 10 years “under the mistaken but reasonable belief” that they are the owner of it: and, in particular, the extent to which clear title plans might preclude an occupier from holding such a belief.
A linked issue arises in the appeal in Ridley v Brown (heard in 2023, with the decision expected early this year), in which the Upper Tribunal is to decide whether, in order to satisfy the third condition in paragraph 5(4), the reasonable belief that the squatter owns the land has to last until shortly before the application is made, or whether having that belief for any 10 years will do.
In February, in Malik and another v Malik [2023] EWHC 59 (Ch); [2023] PLSCS 18, the Court of Appeal will hear an appeal in another adverse possession case, raising complex issues in a dispute concerning ownership of a flat in Knightsbridge.
Charging orders
In a case that is likely to be of significant interest to the conveyancing community, the High Court will consider whether a conveyancer is liable to a judgment creditor with a charging order over a beneficial interest in a property, protected by a standard restriction on the title, if, on a sale of that property, the proceeds of sale are paid to the legal owners without the relevant share of the proceeds being paid to the judgment creditor.
Telecoms
I wrote last year that telecoms law continues to develop, although the overall sense is that the “big” questions have been largely resolved. Well, the Electronic Communications Code continued to produce cases. Although the bulk of first-instance cases are now dealt with in the First-tier Tribunal in Birmingham, it would appear some of them are now coming back to the Upper Tribunal on appeal. Likely highlights are On Tower v Gravesham, on whether or not an operator at risk of removal under Part 6 of the Code can regularise its position by making a Part 4 application; and a number of cases considering the venerable lease/licence distinction in the context of code agreements. It is also expected that the valuation of code consideration will come under fresh scrutiny, with site aggregators seeking to improve on the general guidance given by the Upper Tribunal in previous cases.
These are just a selection of the cases in which I and members of my Chambers are principally involved. There are many others. 2024 will be another interesting year.
Guy Fetherstonhaugh KC is a barrister at Falcon Chambers
