Chapter 1 of the Leasehold Reform, Housing and Urban Development
Act 1993 gave tenants of long leasehold flats acting together the
right to purchase the freehold of their building. In the recent
case of Smith & Another -v- Jafton Properties Limited (2
November 2011) the Court of Appeal had to consider whether a clever
arrangement to create a sufficient number of qualifying tenancies
to establish the right of collective enfranchisement had been
successful.
Two individuals (A and B) used a company of which they were the
only directors to acquire the lease of a dilapidated property in
Newbury Street, London EC1. The company carried out substantial
works of refurbishment and created four separate flats. On
completion of the works the company executed three transfers of the
property purporting to assign the property comprised in the lease
in three parts, a transfer of Flats 1 and 2 to A, a transfer of
flats 3 and 4 to B and a transfer of the common parts to A and B
jointly. The transfers also purported to apportion, without the
consent of the landlord, the yearly rent payable under the lease.
The landlord was not consulted about the assignment nor consented
to it. A and B were subsequently registered at HM Land Registry as
proprietors of the leasehold interests which had been transferred
to them. A and B then served an initial notice under Section 13 of
the 1993 Act claiming the right of collective enfranchisement of
the whole of the property. They named themselves jointly as the
nominee purchaser and asserted that the qualifying conditions had
been met:
(a) that the premises consisted of a self-contained building or
part of a building;
(b) contained two or more flats held by qualifying tenants;
and
(c) the total number of flats held by such tenants was not less
than two-thirds of the total number comprised in the
premises.
They claimed that as the premises contained four flats and A was
the qualifying tenant of two of them and B the qualifying tenant of
the remainder the qualifying conditions had been met. The landlord
disputed this and served a counter-notice denying the claim. The
first ground, that A and B were not qualifying tenants for the
purposes of the 1993 Act, was tried as a preliminary issue by His
Honour Judge Dight who decided in the landlord's favour.
On appeal to the Court of Appeal Lord Justice Lewison gave the
principal judgment. He first considered the position at common law
when a tenant assigns part of demised premises and then whether
there was anything in the 1993 Act which would displace the common
law position. He found at common law that an assignment of part of
a leased property by which all of the leased property is physically
severed has the effect that the holder of each severed part is the
tenant of the severed part only. It followed that A was the tenant
of Flats 1 and 2 and B the tenant of Flats 3 and 4. He then
considered the terms of the 1993 Act but found nothing in it to
displace his common law conclusion. He accepted that Parliament in
enacting the 1993 Act did not expressly contemplate this rather
unusual factual situation however this was by no means an uncommon
occurrence. Accordingly A and B were qualifying tenants and
entitled in principle to exercise the right of collective
enfranchisement.
Comment
As Lewison L J accepted this is an unusual set of facts and the
case may not have wider implications however it is another example,
a successful one in this instance, of the lengths to which some
will go to use the enfranchisement legislation to their advantage
when they may have no obvious entitlement to do so.
Law: Smith & Another -v- Jafton Properties Limited [2011] EWCA
Civ 1251
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 15/11/2011.
