A recent case from the High Court of Justice has clarified an interesting point of enfranchisement law.
The case concerned Barrie House, a block of 37 flats in West London, opposite Kensington Gardens. The lessee claimants had served an Initial Notice under the Leasehold Reform Housing and Urban Development Act 1993 seeking to exercise their right to collectively enfranchise the freehold of the building as well as the gardens and driveway to the property. The defendant freeholder accepted that the participating tenants had a right to enfranchise the building, but not the gardens and the driveway.
Whilst matters concerning the substantive enfranchisement rumbled on, the freeholder obtained planning permission to undertake some development work to the building. This was to create two lightwells at the front of the building to two basement units - a flat (presently occupied by a porter) and a space to be used as an office.
The lessee claimants sought an injunction to prevent the landlord continuing with these development works on the basis that (a) there would be a substantial interference with the easement to use the front gardens and (b) that the work amounted to an implied breach of statutory duty by the freeholder under the 1993 Act as an Initial Notice had been served. Their concern was the work would interfere with the character of the property they sought to acquire such that its value would diminish by the time of acquisition. As the purchase price is determined by law by reference to the date of the Notice, this could mean the price they pay would be unfairly high. They argued that to protect the leaseholders’ interests the 1993 Act implies a duty on the freeholder not to carry out any material alteration to the premises after the initial notice, unless expresssly permitted or reserved in the lease. Such a duty could freeze any development of the building for the duration of the enfranchisement proceedings even though the leaseholders may never actually acquire the freehold.
In his judgement, Mr Justice Roth decided in favour of the landlord on both grounds and said that no such implied duty exists. The Court decided that Section 19 and Paragraph 6 of Schedule 3 of the 1993 Act already provide sufficient anti-avoidance protection for the leaseholders. Further, even if the value of the property diminished, the leaseholders could withdraw their claim if they were unwilling to pay the price for the freehold of the building. Finally, on the particular facts, the Court found “no suggestion the freehold...would be worth less that it is in the present state without the lightwells” and even suggested the value of the freehold may be enhanced after the works were completed.
John Midgley is a Partner at Seddons and a member of the Advisory Committee of the Association of Leasehold Enfranchisement Practitioners.
