Property Law uk

Maintained by Gary Webber

Terms of the transfer

This page contains details of cases relating to:
  • Acquisition of part - what the nominee requires
  • Appurtenant rights - garden - licence to use converted to irrevocable right
  • Common parts - caretaker's flat - prohibited disposal
  • Leaseback
  • Sub-letting not allowed

Acquisition of leasehold interests

Which bits are included?

Hemphurst Limited v Durrels House Limited
[2011] UKUT 6 (LC)

Summary

On a collective enfranchisement claim, can the nominee purchaser claim to acquire only those parts of the roof as are necessary to maintain the rest of the building or is he obliged to acquire the whole roof? The Upper Tribunal held that the nominee purchaser can purchase only the parts needed.

Facts

The freeholder had granted to a company G, a 999 year lease of the surface and air space on the roof of the block, including the right to build a flat or flats on the roof. G had planning permission to build a penthouse flat with a substantial terrace.

On a collective enfranchisement claim, the nominee purchaser argued that s2 of the 1993 Act should be construed so as to allow the nominee purchaser to acquire only those parts of the roof which were not required for the implementation of the planning consent but which would be required for the proper maintenance of the rest of the block, such as the remaining parts of the roof and the ventilation shaft outlets. The freeholder argued that the nominee purchaser was obliged to seek to acquire the whole of the roof lease or nothing and in this case it should be nothing at all. The LVT ruled that there could not be piecemeal acquisition and that the nominee purchaser could purchase the whole roof space. The nominee purchaser appealed against the conclusion that that there could not be piecemeal acquisition. The freeholder appealed against the conclusion that the whole lease fell to be acquired.

Decision

HHJ Mole QC (Upper Tribunal) held that there was no persuasive reason to construe s2 as requiring the nominee purchaser to acquire all or nothing:
    “It does seem to me that to read s2 as enabling the nominee purchaser to acquire as much of the leasehold interest as is needed and wanted but not insisting that all of it would be acquired, is much more consistent with the purpose of conferring on the tenants those advantages Parliament must have intended them to enjoy. Instead of a rigidity that seems to me to be pointless, such an interpretation produces a sensible flexibility, no more likely to create difficulties in practice then the interpretation of the Act that HL advances."
Comment

As pointed out by counsel for the nominated purchaser the House of Lords in Howard de Walden Estates Ltd v Aggio [2009] 1 AC 39, held that if the proper construction of the Act required severance of the freeholder’s interest, that was of little significance. Lord Neuberger commenting (at paragraph 48), that tribunal members are “frequently faced with ticklish conveyancing and valuation problems.” This decision is in my view consistent with that view. The judge’s construction of s2 allows flexibility but as we all know flexibility in the law can encourage litigation. That is one aspect of the decision we, as lawyers, will have to live with!

Appurtenant rights

Access to adjoining garden – licence turned into irrevocable right

Corp of Trinity House of Deptford Strond v 4-6 Trinity Church Square Freehold Ltd
[2018] EWCA Civ 764

Summary

A nominee purchaser acquiring the freehold interest of three adjoining London townhouses under collective enfranchisement legislation also obtained irrevocable rights of access to an adjoining garden retained by the freeholder, notwithstanding that the tenants had previously held only revocable rights to use it.

Facts

Trinity Church Square is a garden square in Southwark. At 4 - 6 Trinity Church Square comprises three adjoining townhouses which have been converted into flats, the freehold of which is owned by the Appellant, the Corporation of Trinity House of Deptford Strond. The tenants of the flats within the Building who are "qualifying tenants" have the right to collective enfranchisement in relation to the freehold of the Building (section 1(1) of the 1993 Act). The Respondent, 4-6 Trinity Church Square Freehold Limited was the nominee purchaser appointed by a number of those qualifying tenants to acquire the freehold on their behalf.

Each of the tenants of the flats in the Building were entitled to use the Garden, in common with others, under a licence contained in their respective leases. It is an express term of the licence that it may be revoked in writing by the Corporation at any time. The licence had not been revoked at the "relevant date" for the purposes of section 1 of the Act, being the date of the initial notice to exercise the right to collective enfranchisement served pursuant to section 13 of the 1993 Act, although it was so revoked subsequently.

All of the terms in relation to the acquisition of the freehold of the Building were agreed between the parties. It was also agreed that upon the transfer of the freehold of the Building to Freehold Limited, the Corporation will retain the freehold of the Garden. The only remaining issue was the nature of the rights over the Garden which must be granted to satisfy the requirements of section 1(4) of the 1993 Act. This was the subject of this case.

Issues

The issue was whether the right to acquire the garden should be taken to be satisfied by the revocable licence offered under s 1(4)(a), or whether only an irrevocable right would suffice.

The Court of Appeal considered the proper construction of s 1(4) of the Leasehold Reform, Housing and Urban Development Act 1993 for the first time in this case.

Section 1(4) of the 1993 Act provides that:
    "The right of acquisition in respect of the freehold of any such property as is mentioned in subsection 3(b) shall, however, be taken to be satisfied with respect to that property if… either -
      (a) there are granted by the person who owns the freehold of that property –
        (i) over that property, or
        (ii) over any other property,

      such permanent rights as will ensure that thereafter the occupier of the flat referred to in that provision has as nearly as may be the same rights as those enjoyed in relation to that property on the relevant date by the qualifying tenant under the terms of his lease;"
The Freeholder argued that “such permanent rights” should be considered in the context of s1(4)(a) and that the reference to “permanent rights” was to cater for the fact that the enfranchisement process required rights to be converted from leasehold rights to freehold rights which must be capable of lasting as long as any new long lease granted in the future.

The Nominee Purchaser emphasised that s 1(4) must be interpreted in the context of collective enfranchisement process and Chapter 1 of the Act as a whole. At the end of the process the participating tenants have the ability to grant themselves leases of indefinite length and the Upper Tribunal was correct to find that formerly temporary rights should be replaced, on enfranchisement, by perpetual rights and that this was not an improbable result.

The Upper Tribunal (Lands Chamber) held that the nominee purchaser would also obtain irrevocable rights of access to an adjoining garden retained by the freeholder. The freeholder appealed to the Court of Appeal.

Decision on appeal

The Court of Appeal dismissed the appeal and agreed with the reasoning of the Upper Tribunal that the “requirement of permanence” imposed by s 1(4) required the freeholder to convert the flat owners revocable licence to use a communal garden to an irrevocable right on the completion of the acquisition.

Although there appeared to be a tension between the words "permanent" and "as nearly as may be the same” in relation to the rights acquired by tenants after enfranchisement, s 1(4)(a) had to be construed in the light of Chapter I and s1 as a whole. The primary position in relation to additional land over which qualifying tenants exercised rights in common with others was that they were entitled under s1(2)(a) and s1(3)(b) to have the freehold of that land acquired for them.

Section 1(4) allowed the freeholder to provide an alternative to that default right of acquisition. In that context, it would not be surprising for revocable rights to be replaced with irrevocable ones. Additionally, the words ”thereafter" and ”ensure" in s 1(4)(a) required more than the continuation of the same revocable rights for the period of any new long lease and indicated a continuing, or perpetual state of affairs with the creation of irrevocable rights.

The Court also held that the Upper Tribunal had been correct to employ in support of its conclusion the fact that, had the freeholder not revoked the rights, Sch 7 para 2(1) of the 1993 Act and the Law of Property Act 1925 s 62 would have deemed on a conveyance that all existing rights enjoyed with the premises were transferred and converted to irrevocable rights.


Common parts

Caretaker's flat - prohibited disposal

The Earl Cadogan v Panagopoulos
[2010] EWCA Civ 1259

Summary

Where the freeholder had granted a new lease of a caretaker’s flat in the basement of a building after the service of an initial notice, the lease was void as the flat formed part of the “common parts” of the building and was therefore liable to acquisition.

Facts

In this case three of five qualifying tenants at 51 Cadogan Square had commenced a claim for collective enfranchisement during the course of which the freeholder (Cadogan) granted to an associated company a 999 year lease of property comprising a caretaker’s flat and a light-well. The leaseholders argued that the disposal was caught by s19 of the 1993 Act and was accordingly void. In the county court the leaseholder had succeeded in this argument. On appeal to the High Court Roth J dismissed the appeal. The second appeal to the Court of Appeal has now been dismissed.

Issue

Readers will remember this case from the June update when I reported the result of the appeal to the High Court. There were three issues at the High Court stage but only one issue was appealed to the Court of Appeal. That was whether the grant of the Lease was contrary to section 19(1)(a)(ii) because it was a lease of or including "common parts" which it was reasonably necessary for the participating tenants to have acquired as set out in section 2(1)(b) and (3)(a), on the grounds that the caretaker's flat constituted common parts.

Discussion

Carnwarth LJ pointed out that in construing the provisions of the Act it was not only the interests of the freeholder and participating tenants which were relevant:
    “It should also be borne in mind that the issues are not only of concern to the participating tenants, on the one hand, and the freeholder on the other. The interests of the other tenants (whether qualifying or not) cannot be ignored. As the law stands at present (and as it appears likely to remain), the other tenants, even if they are 'qualifying', have no right to participate in the acquisition. However, they have a right to the protection of their own property interests, one aspect of which may be the need for the new freeholder to obtain the rights necessary to secure their own continued use and enjoyment of the building as they were before the transfer.”
He upheld Roth J's conclusion that the existence of a legal entitlement to a common facility was not critical. He said:
    “45. Moreover, I do not think that to satisfy the definition the part must be devoted to this purpose as a matter of obligation in the residents' leases. For example, Mr Munro gave the example of a gym as something that would constitute a 'common facility', and I agree. But if the freeholder has devoted, say, a large room in the basement to serve as a gym and placed exercise machinery there, to which any resident may have access, I consider that this constitutes a common facility (and thus a ‘common part’) even if there is no covenant in the leases to provide such a facility. The test is applied as at the ‘relevant date’, which is the date of the tenants' section 13 notice.”
Cadogan’s main argument turned on a relatively narrow interpretation of the statutory definition. It was submitted:
    “that ‘common parts' of the building are parts to which the lessees have access and ‘common facilities' are facilities within the building to which the lessees have access … A caretaker's flat to which tenants have no rights and over they have no access cannot be part of the common parts for the purposes of s 2 and 19.”
Carnwarth LJ rejected this as an unjustified restriction on the natural meaning of the definition:
    ““Access”, as such, is not a necessary part of it. It is sufficient in my view that the lessees share the benefit of the caretaker's flat, by enjoying the services for the purposes of which it was provided.”
The second question was, is it reasonably necessary for the Respondents to acquire the caretaker’s flat “for the proper management or maintenance of those common parts”.

Roth J had held that it was on the basis that if the Lease remained in force, the basement flat would not be maintained as a common part at all. Carnwarth LJ agreed. Counsel for Cadogan argued that statutory acquisition of the flat was not necessary for this purpose, either because Cadogan had indicated a willingness to negotiate terms to make it available or because it could have been provided in another flat. Carnwarth LJ dismissed this:
    “I see nothing in either point. First, the willingness of the freeholders to negotiate alternative terms cannot be relevant in determining the extent of the statutory right. Secondly, once the existing caretaker's flat has been identified as “common parts” the only issue is whether acquisition of that part is necessary for its management. The fact that the service might be provided elsewhere is irrelevant.”
Comment

There is nothing terribly surprising in the result. Caretakers’ flats are a sore point for the large estates as they perceive that tenants will often get to acquire them cheaply on the basis that they will be used as a caretaker’s flat, when in reality the tenants intend to sell them at a later date. The other tactic often adopted by landlords in this situation is to contend for a restriction in the transfer to the effect that the flat has to be used as a caretaker’s flat and then to seek a premium for a release of the covenant at a later date. There are cases going either way in the LVT on the issue of whether such a covenant should be included. Given the sums at stake tenants would always be well advised to oppose such a restriction.

The other interesting point in this case did not reach the Court of Appeal. That was the decision of Roth J that in certain circumstances the grant of a 999-year lease could be regarded as a severance of the freehold on the grounds that the tenant could invoke s153 LPA 1925 to unilaterally convert the lease into a freehold. It did not go to the Court of Appeal as on the facts of this case the lease did not comply with s153 LPA. I would not, however, be surprised if Roth J’s decision crops up again. For instance the grant of a long lease of a single flat is exempt from the right of first refusal provision of the LTA 1987 – but what about a long lease which complies with s153? If it is properly to be regarded as a severance of the freehold then perhaps it is not an exempt disposal? That would be an uncomfortable decision for many as use of the exemption is common.


Retained land

Ulterra Limited v Glenbarr (Rte) Company Limited
13 November 2007
LRA/149/2006

Introduction

Under s1 (4) (a) of the 1993 Act a freeholder is entitled to retain land which the tenant might otherwise be able to acquire under the Act if he grants the tenant rights over the land which replicate the rights enjoyed under his lease. Thus if the land is a garden the freeholder may retain the land and grant a right to use the land as a garden. Or if the land is used as an accessway to a garage he may retain the land and grant a right of way over it.

In Shortdean Place (Eastbourne) Residents Association v Lynari Properties [2003] 3 EGLR 147 (LT), the LT held that where the rights offered satisfy the test in s. 1 (4) (a) of the 1993 Act then the right of acquisition of the freehold "shall, however, be taken to be satisfied" by the grant of those rights i.e. the freeholder gets to keep the land.

This case

In this case the freeholder had sought to retain land by offering suitable rights over the land. The LVT expressly found that the rights offered would, with some differences in the wording, "in all practical effect render the leaseholders in the same or nearly the same position as they are currently enjoying".

However, elsewhere in its counter notice the landlord had sought to retain a right to "rebuild build on or alter buildings or land forming any part of the retained land". The exercise of such rights would, or may, substantially interfere with the rights granted over the retained land. The freeholder claimed the right to insert such rights under s21(3)(d) of the Act.

That subsection allows the freeholder to seek rights over the land which he is transferring to the nominee purchaser e.g. a right of access over the transferred land to his retained land. The section was inapposite to allow the freeholder to claim further rights over land which he was retaining.

Comment

One might have thought that these facts would result in the freeholder getting to keep the disputed land, as the rights offered to the tenants were apposite to protect the tenants' existing rights and that the LVT would have disallowed the rights claimed under s21 (3) (d). In fact the LVT transferred the disputed land to the tenants. Surprisingly the LT upheld the decision although one senses it might have reached a different conclusion if it had been the court of first instance.


Leaseback

Terms – content of notice

Tibber v Buckley
[2015] EWCA Civ 1294

Summary

In the context of a collective enfranchisement claim a reversioner has only one chance of claiming a leaseback, namely in his counter-notice. However, beyond identifying the flat or other unit that is sought to be the subject of a leaseback, there is no need for a reversioner also to spell out in the counter-notice any of his proposed terms of the leaseback.

Facts

A landlord claimed a leaseback in the counter notice but later sought to increase the area included in the leaseback. The main issue of note in this case was the extent to which a landlord must set out the terms of a leaseback in the counter notice.

At first instance the Upper Tribunal determined the case on the basis that the landlord should have set out the terms of the leaseback in the counter notice. The landlord appealed to the Court of Appeal.

Decision

The Court of Appeal allowed the appeal in part. It was critical of the judgments of both the LVT and the Upper Tribunal. The court held that beyond identifying the flat or other unit that is sought to be the subject of a leaseback, there is no need for a reversioner also to spell out in the counter-notice any of his proposed terms of the leaseback.


Subletting not allowed

Flat to be used as a private dwelling

Burchell v Raj Properties Ltd
[2013] UKUT 443 (LC)

Summary

A tenant covenant to use a flat as a private dwelling for himself and his family and for no other purpose could not be varied so as to allow him to sub-let the flat to a person who is not a member of his own family. There was no power in the circumstances of the case to vary the covenant in a new lease to be granted pursuant to Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”).

Facts

The case concerned a lease extension under Chapter II of the Leasehold Reform and Urban Development Act 1993. The existing lease included a covenant by the tenant in the following terms: “To use the flat as a private dwelling for the lessee and his family and for no other purpose”.

Issues

The issues for the tribunal were:
  • If a tenant covenants to use a flat as a private dwelling for himself and his family and for no other purpose, is he thereby precluded from sub-letting the flat to a person who is not a member of his own family?
  • Has a leasehold valuation tribunal the power to vary such a covenant so as to permit the sub-letting of the flat under the terms of a new lease to be granted pursuant to Part I of the Leasehold Reform, Housing and Urban Development Act 1993?
Decision

The Tribunal found for the landlord and held that there was no right to delete the user clause. The natural and ordinary meaning of the use clause was its literal meaning, namely that only the tenant i.e. the person in whom the lease is vested for the time being, and his family, may use the flat and that their use must be as a private dwelling. The words “for the lessee and his family” in the clause are additional words of limitation which cannot simply be ignored.

There was no defect in the lease or any change of circumstance which would warrant modification of the lease under the statutory powers containing in s57 of the Leasehold Reform, Housing and Urban Development Act 1993.

Back to top