Leasehold Reform, Housing and Urban Development Act 1993 – Collective enfranchisement – Block of flats – Purchase price – Whether positive value to be applied to caretaker’s flat – Whether service charge payable by underlessees to include loss of rack-rent from caretaker’s flat in circumstances where first appellant obliged by headlease to provide such flat rent-free – Appeal allowed
The second appellant company was the nominee purchaser for the purpose of an application by qualifying tenants of three flats in a block to acquire the freehold under section 24 of the Leasehold Reform, Housing and Urban Development Act 1993. The block contained five flats that were let on long underleases and a caretaker’s flat. The participating tenants were two long leaseholders and the first appellant, who held the headlease of the block and was a qualifying tenant of the caretaker’s flat. That flat was referred to in a schedule to the headlease and in drawings incorporated into that lease. The headlease contained covenants obliging the first appellant to use his best endeavours to provide a resident caretaker, who was to reside in the caretaker’s flat rent-free on a service basis. The underleases required the lessees to contribute to the first appellant’s expenses and outgoings in respect of “the costs of employing a housekeeper and… the accommodation (if any) to be provided for such housekeeper” together with “the cost to the Lessor of outgoings for such accommodation (including loss of rack-rent thereon)”.
The leasehold valuation tribunal (LVT) determined the enfranchisement price at £770,940. In doing so, it: (i) assessed the value of the participating tenants’ interests, for the purpose of calculating the marriage value, on the assumption, in para 3(1) of Schedule 6 to the Act, that there were no rights of collective enfranchisement or lease extension under the Act; and (ii) determined the lease value of the caretaker’s flat for that purpose as nil on the ground that the first appellant had no power, under the terms of the headlease or underleases, to charge a rent for that flat. That decision was upheld by the Lands Tribunal, which held, with regard to the caretaker’s flat, that there could be no “loss of rack-rent” to which underlessees could be required to contribute where the first appellant was required by the terms of his headlease to provide a caretaker’s flat rent-free: see [2008] PLSCS 298. The appellant appealed. A hearing was held to determine point (ii); point (i) was adjourned for a separate hearing.
