28th November 2014
After the LVT had determined in respect of certain flat the terms of leasebacks which the freeholder had sought in his counter notice, the freeholder granted new leases of the those flats on different terms. The Upper Tribunal held that those new leases were effective.
Facts
This case involved a collective enfranchisement where after the terms were determined by the then Leasehold Valuation Tribunal including the terms of leasebacks of three flats (which included a service charge percentage collectively of 33.69%), the reversioner during the appeal to the Upper Tribunal of the LVT’s decision granted long leases of the three flats to companies connected with the reversioner on terms different to the leasebacks that the LVT had determined (in particular the collective service charge contribution of the flats were 8.23%) and argued that the reversioner was not now entitled to leasebacks and there was no obligation on the reversioner to take the previously determined leasebacks and that the terms of acquisition should be modified accordingly and premium lowered to the figure that the LVT determined without the leasebacks. The grant of the new leases were not s.19 void disposals.
Issues
The nominee purchaser argued that the Upper Tribunal had no jurisdiction to decide upon the effect of the new leases because:
Decision on Appeal
The UT held that it did have jurisdiction. It held that the UT has the power to consider the terms of acquisition including whether there should be leasebacks, in light of the current circumstances. The parties expectation that there would be leasebacks was not contractual and the reversioner has a right to receive leasebacks rather than an obligation to accept them, it would take more than a non-contractual consensus to deprive the UT of jurisdiction under s.24(1). Further the UT held that the three reasons why the UT had jurisdiction given in Cawthorne v Hamdan [2006] 3 EGLR 183 at paras 23-25 were correct.
As for the grant of the new leases, the UT held that:
Notwithstanding the extreme circumstances of this case, the Upper Tribunal held that the reversioner was not required to take the leasebacks that had been determined by the LVT and the terms of acquisition would be modified accordingly.
(Thanks to Carl Fain, who was counsel for the nominee purchaser for this summary.)
Comment
The Tribunal recognised that the participating tenants had incurred substantial expenditure arguing about the terms of the leasebacks in the LVT and that they were without a remedy in that respect. The Tribunal took the view that despite that expenditure it was not inequitable for the landlord to resile from the position in the counter notice that it sought a leaseback. The judge opined the risk of such expenditure was simply a risk which the nominee purchaser and the participating tenants must take to obtain the freehold.
The case has wider application as it would apply equally to the situation where the landlord had not sought leasebacks but, unhappy with the valuation arrived at by the tribunal, grants long leases of flats which were in hand.
The UT held that it did have jurisdiction. It held that the UT has the power to consider the terms of acquisition including whether there should be leasebacks, in light of the current circumstances. The parties expectation that there would be leasebacks was not contractual and the reversioner has a right to receive leasebacks rather than an obligation to accept them, it would take more than a non contractual consensus to deprive the UT of jurisdiction under s.24(1). Further the UT held that the three reasons why the UT had jurisdiction given in Cawthorne v Hamdan [2006] 3 EGLR 183 at paras 23-25 were correct.
As for the grant of the new leases, the UT held that:
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