Court of Appeal underlines strictness of collective enfranchisement rules in loss for leaseholders

When

This part is not controversial. On serving its counter notice in response to the leaseholders claim notice, the landlord triggers a 6-month window within which:

1. The price payable for the freehold must be agreed; or
2. Failing agreement, an application must be made for price payable to be determined by the ‘relevant Tribunal’.

If neither of these events take place, the claim notice is withdrawn at the end of the six-month period. The consequences of this are that lessees must start the freehold enfranchisement process again and cannot do so for 12 months. The freeholder’s reasonable legal and valuation costs will also be payable up to the point of withdrawal.

Where

The 1993 Act provides that the application must be made to the ‘appropriate tribunal’, which varies depending on what is in dispute. The ‘appropriate tribunal’ is either the First-tier Property Tribunal or the County Court.

In this case, the leaseholders made an application to the County Court to amend the claim notice, which was correct. They became unstuck however by joining an application for the price of the freehold to be determined by the Court.

The 1993 Act makes clear that matters such as the price of the freehold, are for the Tribunal alone to decide. An application should therefore have also been issued in the Tribunal to deal with this element of the claim.

Decision

The Court of Appeal found that the 1993 Act was clear with regards to both the procedure and the consequences of the failure to follow it. No application was made to the Tribunal within six months and the claim notice was deemed withdrawn by the Court.

Takeaway points

If the price is not agreed, the Tribunal is the appropriate forum and care must be taken when deciding where an application is to be made, and in deciding if more than one application to different forums is required to deal with different elements of the claim.

From a commercial point of view, the whole debacle could have been avoided in this case if, where there is any doubt, the lessees’ solicitors had made an application to the Tribunal, at a cost of £100 in issue fees. The County Court claim would have run its course, with the outstanding matters being dealt with by the Tribunal.  

In the leading Judgment, it was noted that the 1993 Act contains “pitfalls for the unwary”; and so this case serves as a timely reminder that the 1993 Act can trip up those it was designed to help.

Ricky Coleman

Associate Solicitor

Mayo Wynne Baxter Solicitors