By Ana Kandri – Solicitor (Legal Adviser)
October 2020
When leaseholders wish to purchase the freehold to their building, under the law they have to serve an initial notice. This is a notice given to a freeholder by leaseholders of flats in a building informing the freeholder they wish to purchase the freehold.
Background
Palgrave Gardens is a development comprising five residential blocks of varying heights, a single-storey commercial unit and a single-storey leisure centre. There is a single basement car park running underneath all of the blocks and, importantly for the purposes of the dispute, extends underground beyond the ground level footprint of the blocks, covering most but not all of the remainder of the site.
The leaseholders sought to acquire the freehold of the residential blocks using the rights given to them by the Leasehold Reform, Housing and Urban Development Act 1993 (the Act) and served their landlord, Consensus Business Group (Ground Rents) Ltd (CBG), with the ‘Initial Notice’ required by the law. Section 1 of the Act contains the primary basis for the property to be acquired by the leaseholders; and section 2 anything else that cannot be claimed under section 1.
In this case, the Initial Notice, for practical purposes, included both the ground floor and the car park; but, technically, claimed the car park under the wrong part of the Act, section 2. CBG challenged the notice and the matter was considered in the County Court.
The County Court proceedings
The judge in the County Court, agreed then notice was in error, and permitted the leaseholders to amend it and declared that they had the right to purchase the freehold. CBG appealed to the High Court to decide:
- Could the court amend the Initial Notice for the purchase of the freehold; and
- Whether the building was ‘self-contained’ as required by the law in order for the leaseholders to buy the freehold.
Did the court have the power to amend the Initial Notice?
The High Court held that the notice was in error, but the role of the court is to interpret the notice from the view of the reasonable recipient landlord. The primary specification of the property in this case was by reference to the plan accompanying the notice and a reasonable landlord would focus on the plan.
It should be noted that the law provides that the Initial Notice is not to be invalidated by any misdescription. The question was whether the text in the notice affected its clarity to such an extent as to render it invalid. In this case it did not. The court has power to amend the notice to include optional property that was omitted, in the same way as it is open to the court to amend a notice to include property over which there is no element of choice.
Was the building self-contained?
CBG argued that Palgrave Gardens comprises more than one block and the Act requires a claim for freehold purchase to be made for no more than one self-contained building. In any event, even if the block comprised a single self-contained building, the car park could not be claimed as it extended beyond the footprint of the blocks.
The High Court decided that the issue of whether the blocks were structurally detached was not simply a question for the structural engineers. The fact that there is no visible gap between the blocks is not sufficient. The judge took account of the existence, nature, and the extent of the basement car park, as well as the position above the ground. It was clear to the court that the area of the building was not limited to the built structure above ground level. It included other parts below each block such as the car park immediately below the blocks and the subsoil underneath.
The blocks were not structurally detached at basement level. A single built structure extended under each one of the blocks and as a matter of common sense the development is constructed as a single unit. The car park serves all the blocks and there is direct access to each of these. The question is whether or not the structure in question is structurally detached from the premises that is said to constitute the relevant premises. The court held that if the structure is not structurally detached then it is part of the building and the right to acquire the premises includes it together with the airspace and the subsoil above and below it.
The judge concluded that the blocks constitute a single self-contained building capable of being enfranchised. This produces a clear and workable solution conferring on the leaseholders the advantages that Parliament intended.
Takeaway
Leaseholders intending to start a claim for freehold purchase should be cautious in serving the notice to ensure that it correctly describes the property to be acquired, and under the right provision of the Act. To avoid any potential challenges by the landlord. Leaseholders in the case of Palgrave Gardens had sent the Initial Notice using forms obtained from legal stationers. The best way to avoid any challenge by the landlord is to obtain specialist solicitor advice at the start of a claim for freehold purchase.
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