A short note on an Upper Tribunal appeal that may have broader consequences.

Avon Ground Rents Ltd v Canary Gateway (Block A) RTM Company Ltd & Anor (2020) UKUT 358 (LC)

This was an appeal on whether the leaseholders of two block were entitled to acquire the right to manage. I don’t propose to go into detail on two of the issues (the status of a Housing Association as head lessee of a number of flats – was it a qualifying tenant, and whether the notice of claim was invalidated by not serving notice on the HA as a qualifying tenant), but there was one key issue which is likely to have broader importance.

The question was whether shared ownership leaseholders of various flats counted as qualifying tenants for the Right to Manage application where they hd less than 100% interest.

Section 76(2) Commonhold and Leasehold Reform Act 2002 sets out the definition of long lease for the purposes of being a qualifying tenancy.

(2) Subject to section 77, a lease is a long lease if –

(a) it is granted for a term of years certain exceeding 21 years, whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenant, by re-entry or forfeiture or otherwise,

(b) it is for a term fixed by law under a grant with a covenant or obligation for perpetual renewal (but is not a lease by sub-demise from one which is not a long lease),

(c) it takes effect under section 149(6) of the Law of Property Act 1925 (c.20) (leases terminable after a death or marriage or the formation of a civil partnership,

(d) it was granted in pursuance of the right to buy conferred by Part 5 of the Housing Act 1985 (c.68) or in pursuance of the right to acquire rent to mortgage terms conferred by that Part of that Act,

(e) it is a shared ownership lease, whether granted in pursuance of that Part of that Act or otherwise, where the tenant’s share is 100 per cent., or

(f) it was granted in pursuance of that Part of that Act as it has effect by virtue of section 17 of the Housing Act 1996 (c.52) (the right to acquire).

(3) “Shared ownership lease” means a lease –

(a) granted on payment of a premium calculated by reference to a percentage of the value of the demised premises or the cost of providing, or

(b) under which the tenant (or his personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of those premises.

(4) “Total share”, in relation to the interest of a tenant under a shared ownership lease, means his initial share plus any additional share or shares in the demised premises which he has acquired.”

The landlord argued that section 76(2)(e) meant that shared ownership with less than 100% share were excluded. The Upper Tribunal held that the list was not to be read as if subsequent sub sections restricted 76(2)(a), but rather as a cumulative set of qualifications, as it was entirely technically possible that there might be a shared ownership lease of lease than 21 years, which would then be included if at 100% share. But any shared ownership lease of more than 21 years fell under s.76(2)(a) regardless of share held. Therefore shared ownership leases where qualifying tenants.

(In passing, we should note that that UT also held that the Housing Association head lessor was a qualifying tenant of all flats let to social housing tenants and should have been served with notices. This was indeed how the landlord won)

Comment

While this point was addressed in Corscombe Close Block 8 RTM Co Ltd v Roseleb Ltd (2013) UKUT 81 (LC) it has to be noted that that was an appeal without argument or appearance by the landlord respondent. This appeal was fully argued and, unless and until decision of a higher court (which won’t be in this case, as the appellant won, albeit not on this issue), must be regarded as definitive.

Moreover, the Upper Tribunal draws explicit parallels between s.76 CLRA 2002 and section 7 Leasehold Reform, Housing and Urban Development Act 1993, as being substantially the same wording. While no findings are made in this regard – as not the subject of the appeal – this would mean that shared ownership leaseholders (of over 21 years term) are qualifying tenants for the purposes of statutory lease extensions and also the right to enfranchisement.

Of course, there is nothing in LRHUDA 1993 on how to approach valuation for an extension or enfranchisement for shared ownership at less than 100% share. Does Schedule 13 apply straightforwardly for example?  And I have little doubt that there would be further litigation over both extensions and enfranchisement. But this is a very interesting development…