Hemphurst Ltd v Durrels House Ltd

Collective enfranchisement – Leasehold interests – Section 2 of Leasehold Reform, Housing and Urban Development Act 1993 – Nominee purchaser acquiring block of flats – Roof of flat and airspace above subject to lease and benefiting from planning permission to construct penthouse flat – Whether nominee purchaser entitled to acquire part only of that leasehold interest and to exclude the part covered by the planning permission – Whether leasehold valuation tribunal wrongly finding entitled to acquire entirety of roof lease – Appeals of nominee purchaser and freeholder allowedThe leasehold valuation tribunal (LVT) had to determine matters relating to an application by a nominee purchaser to acquire the freehold of a block of flats from the freeholder under the collective enfranchisement provisions of the Leasehold Reform, Housing and Urban Development Act 1993. The block had a flat roof on which were positioned structures that housed ventilation shafts and machinery. The lessee of the ground floor also held a lease of the surface of the roof and the airspace above, for which planning permission had been granted for a four-bedroom penthouse flat there with a substantial terrace.One of the issues before the LVT was whether the nominee purchaser could, when exercising its right to acquire leasehold interests under section 2 of the Act, exclude those parts of the roof that were required for the implementation of the planning permission and acquire only those parts that were necessary for the proper maintenance of the rest of the block. The LVT decided that it was not possible, under section 2, to acquire only specified parts of premises demised by a single leasehold interest. The nominee purchaser appealed. The freeholder also appealed against the LVT’s finding that the nominee purchaser was entitled to acquire the entire leasehold interest under the roof lease; it contended that since the nominee purchaser was not claiming the right to acquire the entire roof, the LVT had no jurisdiction to decide that point.Decision: The appeals were allowed.Where section 2 entitled a nominee purchaser to acquire leasehold interests that related to the premises of which the freehold was to be acquired, the nominee purchaser was not limited to acquiring either all or none of the leasehold interest, but could acquire only those parts that it needed. Although every leasehold interest superior to those of the qualifying tenants had to be acquired under section 2(1)(a), since every leasehold reversion had to be eliminated in order to make the scheme work, the same was not true of the category of leasehold interests dealt with under section 2(1)(b), namely interests under which the demised premises consisted of or included relevant premises, appurtenant property or common parts.The nominee purchaser could acquire “any interest” in that category, subject only to the overriding condition that the acquisition of the tenant’s interest under the lease was reasonably necessary for the proper management or maintenance of the property to be acquired. The phrases “any interest” and “the interest of the tenant under any lease” were equally apt to describe an interest carved from the original leasehold interest as they were to describe the whole of that interest. The fact that section 2(4) specifically excluded certain parts of leasehold premises that had nothing to do with the property to be acquired did not mean that, in the absence of the statutory exclusion, only the totality of the leasehold interest could be acquired. It was possible to contemplate circumstances in which the leasehold interest included common parts or appurtenant property that were not excluded by section 2(4) but where it was not reasonably necessary to acquire them for the proper management or maintenance of those common parts or appurtenant property under section 2(3)(b). No purpose would be served by compelling the nominee purchaser to take more of the leasehold interest that it wanted or needed. The tenor of section 2 was that the right to acquire leasehold rights was tightly limited and it did not shrink from severing those leasehold rights to achieve those limits. Moreover, it would normally be in the interests of the leaseholder and the nominee purchaser that no more of its interest was acquired than was necessary.A construction that entitled a nominee purchaser to acquire only part of a leasehold interest under section 2(1)(b) would not result in an unmanageable “patchwork quilt” of rights. No greater difficulty would be caused by an interpretation that acknowledged such “elective severance” than were created by the “mandatory severance” imposed by section 2(4).Since the language of the Act was not conclusive, an interpretation that allowed the nominee purchaser to acquire as much of the leasehold interest as it needed and wanted but no more should be adopted as being more consistent with the legislative purpose of conferring on tenants those advantages that parliament had intended them to enjoy. The nominee purchaser’s appeal was therefore allowed. The freeholder’s appeal should also be allowed because the question of whether there was a right to acquire the entire roof was not a point that was properly before the LVT and, so far as it had purported to decide it, it had lacked the jurisdiction to do so.Edwin Johnson (instructed by Pemberton Greenish LLP) appeared for the appellant; Philip Rainey QC (instructed by Cripps Harries Hall, of Tunbridge Wells) appeared for the respondent.Sally Dobson, barrister