Court of Appeal rules on rights of intermediate landlords in lease extension claims
On 29 November 2016 the Court of Appeal handed down an important ruling concerning lease extension claims under the Leasehold Reform, Housing and Urban Development Act 1993 and the extent to which a competent landlord can bind an intermediate landlord by an agreement reached with the enfranchising tenant. This involved consideration of the statutory right of the intermediate landlord to be separately represented in proceedings relating to the claim.
In Kateb v. Howard de Walden Estates Limited and Accordway Limited  EWCA Civ 1176, Charles Russell Speechlys represented the freeholder Howard de Walden. The case concerned a flat in Harley Street, London, let on a long lease. The tenant sought a 90-year extension of that lease under the Act. The intermediate landlord of the block Ms Kateb served notice of separate representation under paragraph 7 of Schedule 11 to the Act. The freeholder and the claimant tenant eventually agreed the amount of the premium payable to the freeholder and the intermediate landlord respectively, but the intermediate landlord disputed that apportionment. She asserted that, having elected to be separately represented, and absent her agreement to the figure, the First-tier Tribunal retained jurisdiction to decide the issue, and a Tribunal hearing listed for the case could not be vacated.
The Tribunal agreed, but this decision was reversed by the Upper Tribunal. The Court of Appeal held that the UT was right to do so, concluding that the service by an intermediate landlord of a notice of intention to be separately represented did not qualify the absolute authority of the competent landlord to reach agreement with the tenant and so to bind all intermediate landlords, conferred by section 42 and paragraph 6 of Schedule 11 to the Act. In the Court's view there was a valid policy objective in having one landlord conducting negotiations with the tenant, while allowing other landlords to have their say in the event of a Tribunal hearing. The protection for an intermediate landlord is a right to apply to Court for directions in the event of a dispute with the competent landlord, and also a right to seek damages from him if he fails to discharge his duty of care.
On this point of statutory interpretation the Court took note of the contrasting provisions of the Act relating to collective enfranchisement. These entitle an intermediate landlord to give notice to deal directly with the nominee purchaser, as well as to be separately represented in proceedings. Furthermore, an agreement in a collective claim as to the terms of acquisition has to be an agreement of all the parties. There is no corresponding provision for lease extensions, which indicates that Parliament intended the competent landlord's authority to be unrestricted.
The intermediate landlord also argued that this interpretation of the statute would infringe her human right to a fair hearing. The Court of Appeal disagreed, concluding that the limitation on her right of direct access to court was proportionate and fell well within the margin of appreciation.
This decision clarifies once and for all the limited nature of an intermediate landlord’s right to be separately represented. It will be of interest to those in the real estate sector concerned with leasehold enfranchisement claims. The decision also clarifies the position for Tribunals concerned about their jurisdiction to hear an intermediate landlord's challenge to an agreement reached by the other parties.
News & Insights
Property Professionals: Strategic Land Tax Time Bomb
This episode looks at all things tax.
Do all roads lead to commonhold?
The Law Commission says that adopting its proposed changes will make commonhold not only a viable alternative, but a preferable one.