Sale of individual dwellings not caught by requirement to procure third-party undertaking

A dispute on the meaning of a particular clause engages the general principles of construction. The words used must be interpreted in their context. The High Court has considered this principle in London Borough of Bexley v London & Quadrant Housing Trust [2024] EWHC 3295 (Ch). The case concerned the construction of a Nomination Rights Deed (NRD) entered into on the sale by the claimant council of half of its housing stock in the southern part of the London Borough of Bexley – around 4,123 residential dwellings (the property) – to London & Quadrant Bexley Housing Association Ltd in February 1998. The claimant was subject to duties in relation to the provision of housing, particularly for the homeless. Those duties could be discharged by arranging for third parties to provide suitable accommodation. The NRD effectively gave the claimant the ability to allocate housing accommodation to those to whom it owed housing duties by nominating persons to be assured tenants of the housing association as a registered social landlord. Clause 6.1 of the NRD provided that “any merger amalgamation transfer of engagements or any other transaction” which would cause or require the transfer or disposal of the property to a third party required the housing association not to proceed until it had procured that the third party undertook directly with the claimant to comply with its covenants and obligations under the NRD. The defendant was successor in title to the housing association. Following the removal of restrictions on disposals of property by a registered social landlord under the Housing Acts 1988 and 1996 and their statutory successors in the Housing and Regeneration Act 2008 with effect from 6 April 2017, the defendant sold individual dwellings from the property to private buyers on the open market. The claimant argued that individual sales were caught by clause 6.1 of the NRD, which required the defendant to procure a direct undertaking to the claimant by each purchaser. The defendant disagreed and sought determination of the issue. The court decided that “any merger amalgamation transfer of engagements” constituted a class or type of transactions which shared a common characteristic, and “any other transaction” referred only to transactions of the same class or category which would cause or require the transfer or disposal of the property to a third party. Treating the sale of a single dwelling to a private purchaser as falling within this category was an odd reading of the clause and not one that the parties intended. The defendant succeeded on the construction issue. Louise Clark is a property law consultant and mediator