Protective enfranchisement

Leaseholders seeking to enfranchise should protect their claim by arranging for a notice to be entered on the Land Register. This protects them against the landlord disposing of the property. Conversely, if they fail to do so, and the landlord disposes of the property, the new landlord is not bound by the claim. But what is the position if the new landlord transfers the property back to the original landlord? Does this revive the claim? This was the main issue for the Court of Appeal in Curzon v Wolstenholme and others [2017] EWCA Civ 1098; [2017] PLSCS 158. The facts The landlord owned the freehold of a house that included six flats, four of which were let on long leases to the claimant leaseholders. One of the other two flats was owned by his wife and the sixth was jointly owned. The claimant leaseholders appointed themselves as nominee purchasers to pursue their claim. Key points Enfranchisement claim notices must be protected at the Land Registry Otherwise a landlord can dispose of the property and defeat the claim When are transfer terms agreed? As long ago as 2004, the leaseholders gave an initial notice under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) seeking to acquire the freehold by collective enfranchisement. The landlord served a counter-notice admitting their right but he disputed the terms proposed. He also asked for leasebacks of one of the flats and the garden. At this point the claim notice had not been registered. In passing, it is noted that the valuation date was the 2004 date. Tribunal applications In 2005 the leaseholders applied to the leasehold valuation tribunal (LVT) to determine the premium to be paid and the terms of the leasebacks. Chartered surveyors instructed by the parties reached agreement on the premium payable. The following year the remaining terms which had not been agreed were determined by the LVT substantially in accordance with the leaseholders’ proposals. At this point the leaseholders had not applied for an entry of a unilateral notice of their claim on the Land Register. In fact, they did not do this until 2013. By that time there had been hearings at the LVT on the terms of the leasebacks, with the LVT deciding the issues mainly in the leaseholders’ favour. The landlord’s appeal against that decision to the Upper Tribunal (UT) was dismissed and the UT remitted the matter to the LVT to settle the form of the transfer of the freehold title to the leaseholders. It informed the parties that it would consider this without a hearing. But, by then, in 2012, the landlord had transferred the freehold reversion to his wife for £1. The following year she transferred it back to him by way of a gift. When the LVT came to settle the form of the transfer in 2014, the landlord objected on several grounds. First, he argued that the LVT lacked jurisdiction as the claim notice ceased to have effect by reason of the disposal of the freehold (“the notice issue”) and, secondly, the agreed price substantially under-valued the freehold reversion and the landlord was entitled to resile from its agreement and require the LVT to determine the price (“the disputed price issue”). The LVT rejected those submissions and the landlord’s appeal to the UT was unsuccessful. He appealed to the Court of Appeal. The notice issue Section 13(11) of the 1993 Act sets out how the claim notice continues or ceases to have effect, including the case where the notice ceases to have effect “by virtue of any provision” of the Act. What was the effect of failing to protect the notice? Here the court concluded that once the freehold was transferred, the landlord ceased to be the landlord (or the “reversioner” to the claim) for the purposes of the claim. The transferee took free of the notice as it had not been protected when the transfer was made. Nor could the participating leaseholders withdraw the notice as there was no longer a reversioner to serve the notice on. The result is no different if the freehold is subsequently re-transferred to the original recipient of the initial notice. Both the LVT and the UT were wrong in law, the court concluded, to decide that the claim notice was “reactivated” when the freehold was transferred back to the landlord. This meant that the LVT did not have jurisdiction to determine the terms of the transfer and it should have dismissed the leaseholders’ application. Following these conclusions, the landlord’s appeal was allowed, “despite what may seem to be the harshness of the result” (Asplin J at paragraph 39). The disputed price issue Given the decision on the LVT’s lack of jurisdiction, the premium issue did not really arise in the appeal. But given its importance the court considered it “in brief”. The price payable for the freehold had been “agreed” by the parties back in July 2006. The landlord’s submission that the LVT retained jurisdiction until all the terms of the acquisition are agreed was rejected. Unless there has been a change in the circumstances, the agreement is binding unless the parties had specified that nothing is agreed until everything was agreed, but they had not done so in this case. The landlord’s appeal on this issue did not succeed. So, after some 13 years and several hearings, it appears that the leaseholders’ enfranchisement claim has come to an end. Perhaps they will consider a fresh claim – though this will have a new valuation date. James Driscoll is a solicitor and a writer