The Leasehold Reform, Housing and Urban Development Act 1993 confers rights of collective enfranchisement on qualifying tenants. The legislation applies to premises that consist of a self-contained building or part of a building.
Section 3 of the 1993 Act provides that an area will qualify as a self-contained part of a building if: (i) it is vertically divided from the rest of the building; (ii) it can be redeveloped independently of the rest of the building; and (iii) it is independently serviced (or could be without causing any significant disruption to the services to the rest of the building).
The Leasehold Reform, Housing and Urban Development Act 1993 confers rights of collective enfranchisement on qualifying tenants. The legislation applies to premises that consist of a self-contained building or part of a building.
Section 3 of the 1993 Act provides that an area will qualify as a self-contained part of a building if: (i) it is vertically divided from the rest of the building; (ii) it can be redeveloped independently of the rest of the building; and (iii) it is independently serviced (or could be without causing any significant disruption to the services to the rest of the building).
41-60 Albert Palace Mansions (Freehold) Ltd v Craftrule Ltd [2010] EWHC 1230 (Ch); [2010] PLSCS 149 raised the important question of whether a self-contained part of a building can consist of two or more self-contained parts of a larger building. In other words, are tenants entitled to enfranchise only in respect of premises that cannot be further subdivided?
The area that the tenants sought to enfranchise was divided into two self-contained blocks of flats, comprising part of a series of mansion blocks. Importantly, the numbers of qualifying tenants in each block were unequal. The court had therefore to decide whether a majority of qualifying tenants in both blocks could override the wishes of a dissentient minority in one block (even though that minority would be entitled to prevent the enfranchisement within their own block).
The landlord argued that it would not be right to allow tenants to enfranchise a part of a building in which they have no direct financial stake or interest. In an extreme case, the tenants in one part of a self-contained building could force themselves as new landlords on tenants of another part, even if the tenants of that part have no interest in acquiring the freehold.
The tenants argued that: (i) had parliament had intended to require leaseholders to claim the smallest part of a building that satisfies the statutory tests, it would have said so; and (ii) the 1993 Act did not expressly or impliedly require that a self-contained part of a building must be indivisible into smaller such parts.
The court upheld the tenants’ claim. The judge reminded the parties that parliament enacted the 1993 Act to enable leaseholders to acquire the freehold of their premises at a price that the legislature thought fair. “Majority rule” is an inherent part of the statutory scheme. Consequently, parliament must have intended that the wishes of individual tenants could be overridden in the interests of providing workable machinery to implement the wider statutory purpose.
The ruling paves the way for the participating tenants to enfranchise both blocks of flats identified in their notice and – in the absence of any counternotice from the landlord – to acquire the freehold interest on the terms proposed in the tenants’ initial notice, including those as to price.
Allyson Colby is a property law consultant
