Aldford House Freehold Limited v Grosvenor (Mayfair) Estate (1) and K Group Holding Inc (2)  EWHC 3430 (Ch)
29th March 2019
The Claimant failed in its claim for a declaration that it was entitled
to acquire the freehold of a building under Chapter 1 of Part 1 of the
Leasehold, Reform, Housing and Urban Development Act 1993 (“the Act”). The
Second Defendant had taken various steps to prevent the building being
collectively enfranchised, including transferring the titles to various
underleases of its flats.
This case concerned the proposed collective enfranchisement of a 7-floor building. It was accepted that there were 26 flats on floors 1-5. There was however a dispute as to the 6th and 7th floors. Planning permission had been granted to construct 2 flats on each floor respectively, but at the time the notices had been served only work to the structure of these had been completed.
C served 2 notices to enfranchise the building, both given on 23 July 2015. In the first (“the Initial Notice”), it was contended that there were 26 flats in the Building and the leaseholders of the contested premises were not named as QTs. The Second, served without prejudice to the primary position, was served protectively in the event that there were 30 flats, and naming the potential QTs of the further flats. A preliminary issue was therefore whether the Building contained 26 or 30 flats. The Initial Notice had been given purportedly on behalf of 17 QTs, but the landlord contended that in respect of 3, notices had been given without authority, and 3 were not QTs in any event because each held their respective interests under two separate underleases from different landlords. If correct, the initial notice would be invalid for failing to be given on behalf of a sufficient number of QTs.
1) (a) How many flats were there in the Building per Part 1 of LRHUDA93
and (b) If there were 30 flats, could
the Claimant rely on the Second Notice given that it was not referred to in the
2) Was the participating tenants’ solicitor given valid authority to
serve Initial and Second Notices on the behalf of 3 particular QTs which were
3) Were 3 tenants holding 2 separate underleases from different
landlords ‘qualifying tenants’, and was the Claimant entitled to assert that
overriding underleases were unlawfully granted;
4) Did the premises qualify for enfranchisement at all by virtue of the
floor space within that was neither common parts or intended to be occupied for
residential purposes (D2 applying for permission to adduce evidence of this);
5) Was the Initial Notice invalid if there were more than 26 flats in
the Building at the relevant date (C applying to amend the claim form to plead
6) Was the Initial Notice otherwise invalid per para 16 schedule 3 of the Act due to its being given by fewer than 2/3 of the total number of QTs in the Building.
Mr Justice Fancourt found that
the Initial Notice was invalid as it did not include the details of the QTs of
the 6th and 7th floor flats as required by s.13 of the
Act. The Second Notice was deemed withdrawn as no application relating to it
had been made to the court in time. As such there was no valid application on
the basis of which the court could make a declaration, and the claim was
dismissed. The decision on the particular issues above were as follows:
1) J agreed with D2 that each part of the 6th and 7th floors
was a separate flat both due to being enclosed by dividing walls but also as
they had been given functional identities by terms of new underleases. Although
not yet inhabitable, the premises had been constructed or adapted for the
purposes of a dwelling. As such there were 30 flats in the Building at the
relevant time and the First Notice was invalid.
C contended that it had met the 2 month time limit under s.22(1) of the
Act by issuing a claim form, and that this was an application even though the
claim form appeared to refer only to the First and not the Second Notice. Fancourt
J found against C on this point because reliance on 14 QTs in Claim Form, and
failure to attached the Second Notice, was inconsistent with reliance on the
Second Notice (48).
2) One party, Leclipse, had failed to give valid authority to their
solicitor to serve the Notices in issue. J ruled that subsequent ratification
of a Notice could not render it valid at the time it was ‘given’ as this would
be inconsistent with the whole structure of Chapter 1 of Part 1 of the 1993
Act. The retrospective ratification of a proxy signatory’s authorisation
permitted by Panamanian law was ultimately ineffective because an initial
notice under the 1993 Act could not be retrospectively ratified as a matter of Englishlaw.
3) 3 tenants (MBOSE, Aweer and Kirama) were not QTs because each tenant
held two separate underleases of part of their flats with different landlords
of each. Fancourt J refused to reach a decision on whether the leases were
granted unlawfully pursuant to Part 1 of the Landlord and Tenant Act 1987, as
this allegation had not been pleaded and was not merely a point of law,
evidence being required.
J found it unnecessary to reach a decision on points 4), 5) and 6) in light of the conclusions reached on the other issues.
The decision that each of the partially finished flats had been
constructed for use for residential purposes even though their condition
precluded actual use for those purposes is both controversial and of wider
It is controversial because the statutory requirement that a flat should
be “constructed or adapted for use for the purposes of a dwelling” suggests one
should have regard to the physical characteristics of the flat.
As to the wider import, lawyers are in the habit of advising developers
that Part I LTA 1987 does not apply to a block of flats until there are a
sufficient number of qualifying tenants of “flats”. Conventional wisdom has
always been that a flat is not a flat for the purposes of that Act until
practical completion. Given the similarity in the definition of “flat” under
the 1987 Act and the 1993 Act the decision in this case that a unit in a shell
state could be a flat should sound alarm bells.
This case serves as a stark reminder to tenants of the importance of
getting an Initial Notice right the first time around. Invalid notices had been
served by some of the tenants in the Building back in 2014, leading D2 to seek
legal advice . D2 then had time to close off the incoming claim before it
had even begun, constructing the contested flats in a certain way and transferring
ownership of the reversion to their underleases before C could serve new Initial
notices in 2015.
The case also highlights that all the issues in a claim must be
correctly identified as soon as possible:
a) The question of whether the Second Notice was invalid had not
appeared on the list of issues. Fancourt J ruled however that it would not be
right to stop the Defendants from relying on it at trial as it was a pure
question of law;
b) There was a dispute as to whether or not C had made clear the basis
of its argument on issue 3). Fancourt J ruled that C should have applied to for
permission to rely on a new allegation of unlawfulness, given that, if correct,
D2 would perhaps have committed a criminal offence. J suggested it would have
been prudent to direct for statements of case to be formally drafted in early
directions, notwithstanding this case having been issued under Part 8 of the
Lastly, the discussion at paragraphs 53 to 101 of the judgment illustrate
the difficulties that may be involved in assuring a solicitor is properly
authorised to sign an Initial Notice on behalf of a tenant, particularly one
which is a foreign domiciled company. The Claimant was obliged to rely on the
evidence of separate experts on the company law of Jersey, the Bahamas and
Panama. Those acting for foreign domiciled companies ought to seek confirmation
from a lawyer in the relevant jurisdiction that proper authorization has been