West Law Report

EARL CADOGAN & OTHERS v 26 CADOGAN SQUARE LTD; HOWARD DE WALDEN ESTATES LTD v AGGIO & OTHERS

Posted in House of Lords (case), Westlaw Reports by mrkooenglish on July 2, 2008

Last Updated: 5:34PM BST 02/07/2008
House of Lords Lord Hoffmann, Lord Scott of Foscote, Lord Walker of Gestingthorpe, Baroness Hale of Richmond, Lord Neuberger of Abbotsbury June 25, 2008
Extension of leases – Flats – Leases – Statutory interpretation – Subtenancies – Tenants’ rights – Head lessee’s right of individual lease extension – Proper construction of Part I Chapter II Leasehold Reform, Housing and Urban Development Act 1993 – Meaning of “a tenant of a flat” for purposes of s. 39(1) Leasehold Reform, Housing and Urban Development Act 1993 – Leasehold Reform, Housing and Urban Development Act 1993 – s. 39(1) Leasehold Reform, Housing and Urban Development Act 1993 – s. 39(4) Leasehold Reform, Housing and Urban Development Act 1993 – s. 101(3) Leasehold Reform, Housing and Urban Development Act 1993 – s. 57(1)(a) Leasehold Reform, Housing and Urban Development Act 1993 – s. 5 Leasehold Reform, Housing and Urban Development Act 1993 – s. 39(2)(b) Leasehold Reform, Housing and Urban Development Act 1993 s. 57(2) Leasehold Reform, Housing and Urban Development Act 1993 – s. 57(6) Leasehold Reform, Housing and Urban Development Act 1993 – s. 91(2)(e) Leasehold Reform, Housing and Urban Development Act 1993

FACTS

The appellant head lessees in two conjoined cases appealed against a decision ([2007] EWCA 499) that the true interpretation of the Leasehold Reform, Housing and Urban Development Act 1993 did not confer on them the right of individual lease extension. The appellant in the first case was the head lessee of a lease granted by the freehold owner of a five-storey building. The appellant in the second case was the head lessee of two residential flats in a single building containing five flats who had made a claim for individual lease extension. In both cases there were internal common parts and external areas for parking, all of which were included in the head lease. In each case the landlord had served counter-notices disputing the validity of the head lessees’ notice to extend their leases on the grounds that a head lessee was not a qualifying tenant for the purpose of Part 1 Chapter II of the Act. In county court proceedings, it had been held that the head lessee was “a qualifying tenant” of the relevant flats, but that decision had been overturned on appeal. The appellants submitted that a lessee under a long lease of any property that included a flat could be a qualifying tenant of that flat unless there was an under lessee who was himself a qualifying tenant. The respondents maintained that it was clear that the legislature had not intended or envisaged property investors as being “qualifying tenants” for the purposes of Chapter II of the Act and that a lessee could not be a “qualifying tenant of a flat” if the demised premises consisted of a building that included a number of flats or property other than flats.

ISSUE

Whether the true interpretation of the Leasehold Reform, Housing and Urban Development Act 1993 did confer on the head lessees the right of individual lease extension.

HELD (appeals allowed)

(1) As a matter of statutory language, a lessee under a lease of property that included a flat could be a “tenant” of that flat for the purposes of Part I Chapter II of the Act, irrespective of the nature or extent of the other property included in the demise. In the absence of any further indication, that was the natural meaning of the phrase “a tenant of a flat” in s. 39(1) of the Act. In particular, there was no reason to exclude a lessee under a lease of a block of flats that included property other than the flats, from being a “tenant of a flat”. Section 39(4) was not concerned with the definition of “a tenant of a flat”, but with who could be a “qualifying tenant of a flat”. It followed, as a matter of logic and according to ordinary principles of interpretation, that the lessee of any property which included one or more flats was, in relation to each such flat, “a tenant of a flat” for the purposes of Chapter II of the Act. That view was strongly reinforced by s. 101(3) of the Act and by the reference to “property” in s. 57(1)(a) of the Act. The Court of Appeal, in finding that the Act did not apply because there was “no express statutory reference to head leases in Chapter II”, had invented a gap where none existed.

(2) There was no good argument based on the policy of the Act, for not applying the Act in accordance with its natural statutory interpretation. The policy described by Baroness Hale of Richmond in Majorstake Ltd v Curtis [2008] UKHL 10, [2008] 2 WLR 338 applied equally to lessees who were commercial investors as to those who were residents of the property. By virtue of s. 5 of the Act, it had always been envisaged that a lessee of a lease comprising a number of flats could claim the benefit of Chapter II. The logical conclusion was that, especially since the removal of the residence requirement in s. 39(2)(b) of the Act, a lessee under a long lease of a block of flats, none of which was subject to long underleases, was entitled to claim the benefit of Chaper II in relation to each of the flats at the same time, Maurice v Hollow-Ware Products Ltd [2005] EWHC 815, [2005] 2 EGLR 71 approved.

(3) There was no good argument based on alleged practical difficulties, inconsistencies or oddities, for not applying the Act in accordance with its natural statutory interpretation. The provisions of s. 57(1)(a) were perfectly well able to cover the precise identification of the premises to be comprised in a new lease if protection under Chapter II applied to premises consisting of a number of flats. The leasehold valuation tribunal members had the ability, experience and qualifications to address those issues and also matters concerning modification, covenants and alterations, in addition to the specific powers granted to them in s. 57(2) and s. 57(6). The court responded to technical arguments led by the respondents concerning access to services, service charges, apportionment of covenants, treatment of common parts, parking rights and anomalies in the application of Chapter I of the Act.

(4) (Obiter) Where it was established that there was a surrender of part of the property comprised in the headlease, there should be an apportionment of the rent. In most cases under Chapter II the apportionment should be agreed, but if not agreed, it could probably be decided by the leasehold valuation tribunal under s. 91(2)(e).

Edwin Johnson QC and Adam Smith (instructed by Bircham Dyson Bell LLP) for the first appellant. Anthony Radevsky (instructed by Forsters LLP) for the second appellant. Philip Rainey (instructed by Pemberton Greenish) for the first respondents. Judith Jackson QC and Katharine Holland (instructed by Speechily Bircham LLP) for the second respondents.

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