The Leasehold Reform (Housing and Urban Development) Act 1993 (1993 Act) enables leaseholders who meet certain qualifying criteria to acquire the freehold of their building. The legislation operates to dispossess landlords of their property against their wishes. Consequently, the legislation includes anti-avoidance provisions to prevent landlords from disposing of premises in order to deprive enfranchising tenants of their rights after a collective enfranchisement claim is made and registered.
The litigation in Panagopoulos v Earl Cadogan [2009] PLSCS 159 concerned a grant of a lease of a caretaker’s flat, which had fallen vacant, for a term of 999 years, at a peppercorn rent. The tenants challenged the lease, which was granted to a company connected with the landlord, on the ground that the landlord had “severed” part of its interest in the building in breach of the anti-avoidance provisions in section 19 of the 1993 Act. They also argued that the lease was void because the premises formed part of the common parts of the building, or that they were entitled to acquire the lease of the flat along with the freehold. The county court judge upheld all the tenants’ claims.
The Leasehold Reform (Housing and Urban Development) Act 1993 (1993 Act) enables leaseholders who meet certain qualifying criteria to acquire the freehold of their building. The legislation operates to dispossess landlords of their property against their wishes. Consequently, the legislation includes anti-avoidance provisions to prevent landlords from disposing of premises in order to deprive enfranchising tenants of their rights after a collective enfranchisement claim is made and registered. The litigation in Panagopoulos v Earl Cadogan [2009] PLSCS 159 concerned a grant of a lease of a caretaker’s flat, which had fallen vacant, for a term of 999 years, at a peppercorn rent. The tenants challenged the lease, which was granted to a company connected with the landlord, on the ground that the landlord had “severed” part of its interest in the building in breach of the anti-avoidance provisions in section 19 of the 1993 Act. They also argued that the lease was void because the premises formed part of the common parts of the building, or that they were entitled to acquire the lease of the flat along with the freehold. The county court judge upheld all the tenants’ claims. Conveyancers will be interested in the judge’s ruling that the landlord had severed part of its interest in the building. The decision turned on the interpretation of section 153 of the Law of Property Act 1925, which empowers tenants to “enlarge” certain long leases and convert them into freehold estates in land. Tenants invoking section 153 need to merely record that their lease has been enlarged. To be capable of enlargement, a lease must satisfy several conditions. In particular: (i) the lease must have been granted for a term of at least 300 years, of which at least 200 years are left to run; (ii) the lease must not contain any forfeiture provisions; and (iii) the rent reserved by the lease must be no greater than a peppercorn rent, or must have ceased to be payable. (A rent of no more than £1 a year, which has not been collected or paid for 20 years or more, is deemed to have ceased to be payable.) On enlargement, the land remains subject to the same covenants that affected the lease. In this case, the covenants were skeletal. The judge ruled that the landlord had attempted to sever part of its reversion by granting a lease that was the equivalent of a freehold interest because it was capable of enlargement. Consequently, the lease was void. Interestingly, the judge could find no reason to exclude premises that are horizontally severed from other parts of a building from the provisions of section 153, and dismissed the landlord’s arguments that the section does not apply to premises that, on enlargement, would become “flying freeholds” against which positive covenants are unenforceable. Specialists in leasehold enfranchisement will also be interested in the judge’s conclusions on various aspects of the 1993 Act, which are beyond the scope of this note, but which have important implications for leasehold enfranchisement law and practice. Allyson Colby is a property law consultant
