Judgments - Earl Cadogan and others (Respondents) v 26 Cadogan Square Limited (Appellants)Howard de Walden Estates Limited (Respondents) v Aggio and others (Appellants)

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61.  As to impracticality, the freeholder would often have no rights, whether under the head lease or otherwise, to obtain access to carry out repairs to the structure or exterior. It would also seem a little unreal for the freeholder to take on liability to the head lessee, as lessee under the new lease, to repair the whole or any part of the structure and exterior, while he still retains the benefit of a covenant from the head lessee under the head lease to do precisely that work. If the structure and exterior fell out of repair, and the head lessee, in his capacity as lessee under the new lease, could sue the freeholder, the freeholder could meet the claim by countersuing the head lessee for failing to keep the structure and exterior in repair pursuant to the terms of the head lease.

62.  However, while I believe that what I have suggested in para 60 above would generally be the right course, there could no doubt be circumstances where the freeholder was prepared, or even keen, to take on immediate repairing obligations under the new lease, or where, because of special facts, the LVT considered it appropriate that the new lease contained such obligations on the part of the freeholder. As I have already mentioned, the factual circumstances which can arise in relation to claims under the 1993 Act are multifarious and unpredictable, and LVT members have proved themselves expert and adept at dealing with those problems. A wide discretion has been accorded to the LVT by the legislature under provisions such as section 57, and it seems to me, in agreement with what was said during argument by my noble and learned friend Lord Walker of Gestingthorpe, that it would be wrong to suggest that there is a single principle of general application on this issue.

63.  (Having said that, it is right to add that what I have suggested as the generally correct approach assumes that the extent of the demise under the new lease will not include the structure or external walls of the flat, as otherwise they would be taken out of the head lease, and hence, I think, out of the head lessee’s obligations to the freeholder. This would not of course prevent the internal skin of those walls, and appropriate rights, such as affixing of picture hooks, light-fittings etc, on those walls, being included in the new lease. If the new lease included the external and structural walls of the flat, the consequence would appear to be that the head lessee was no longer responsible for the repair of the external and structural walls so far as they were included in the flat. This would be inconvenient, particularly to the freeholder, but I do not believe that it need prove a real problem. The new lease could impose the liability for the external walls and structure of the flat on the lessee until the head lease expires. This would mean that the head lessee was responsible to the freeholder for the repair of all the external walls and structure, albeit under a combination of the head lease and any new lease.)

64.  A seventh argument raised by the respondents is that difficulties could arise if a new lease were granted in cases, such as the present, where the premises demised by the head lease include an area for parking. Where the lessee of a single flat seeks a new lease, the parking rights granted in the new lease would, at least in the absence of agreement to the contrary or special facts justifying a departure, be the same as those contained in his current lease. However, it cannot be right that, on exercising his Chapter II rights in respect of a single flat, a head lessee could obtain the same right over the car parking area as he has under the head lease, namely inclusion of that area in his demise.

65.  In my judgment, this argument raises no insuperable problem. The rights to be granted under any new lease include any “appurtenances belonging to, or usually enjoyed with, the flat and let to the tenant with the flat” - see section 62(2), quoted in para 18 above. If the person concerned is the lessee of a block of flats, then, where the parking area is used by the occupiers of flats in the block (as would usually be the case), it will be necessary to inquire what rights the particular flat enjoys in respect of that area. Sometimes, the area will be marked out so that each flat has its own particular allotted space, in which case the right to park in that space would no doubt, at least frequently, be granted with the new lease. In other cases, there may be a more informal arrangement such as a right for the occupier of each flat to park a vehicle within the area. In such a case, the new lease would carry a right to park in the area (no doubt subject to appropriate limitations and qualifications as the LVT thought fit). As Millett LJ said in Cadogan v McGirk [1996] 4 All ER 643, 651j, “Parliament cannot sensibly have intended to distinguish between a right to make use of a storage or other space and an actual demise of the space".

66.  Eighthly, the respondents argued that it would lead to anomalies under Chapter I if a lessee of a block of flats could be a “qualifying tenant", given that the definition appears to be the same for both Chapters. On the basis of the arguments presented in this case, it appears to me that there is at least a real possibility that anomalies could arise under Chapter I whether or not such a lessee can be a qualifying tenant of a flat. In summary, the possible anomalies are these. If a lessee of the block cannot be a qualifying tenant, then, on a collective enfranchisement, there could be severance of the head lease in respect of flats not subject to qualifying underleases, and exclusion of any caretaker’s flat from the collective purchase. On the other hand, if such a lessee can be a qualifying tenant, there is the possible anomaly identified in Hague on Leasehold Enfranchisement, 4th ed (2007), para 20-08.

67.  I am reluctant to add to what is already a long and technical opinion by discussing issues which do not need to be decided, and which would be more appropriately resolved when they arise directly. If the appellants’ case led to startling consequences in relation to Chapter I, and that of the respondents did not, that would be a point worth considering even in a case purely concerned with Chapter II. However, I do not consider that these competing anomalies need further consideration in this case. Having briefly identified the alleged anomalies, it suffices for present purposes to say that I am satisfied that the balance of alleged anomaly in relation to Chapter I does not lie in favour, let alone strongly in favour, of the respondents’ case.

68.  Finally, the respondents argue that article 1 of the First Protocol to the European Convention of Human Rights would be infringed if a head lessee could be a “qualifying tenant” of a flat for the purposes of Chapter II. I am wholly unpersuaded by that point, which has two limbs, compensation and certainty.

69.  As to compensation, it is clear that, whatever loss the freeholder may suffer as a result of a head lessee being able to acquire a new lease should be close to fully compensated under Schedule 13, referred to in para 21 above. In particular, insofar as the interest of the freeholder is diminished due to the sorts of factors which I have been considering, it seems clear that he would be entitled to compensation in accordance with the provisions of para 5(2) of the Schedule. Given the decision of the Strasbourg Court in James v United Kingdom (1986) 8 EHRR 123, the respondents rightly accept that there is no basis for complaining about the statutory measure of compensation.

70.  However, it is said that a freeholder might not be able to assess with any precision the amount of compensation which he should be accorded, particularly if he did not know the terms of the new lease, when he serves his counter-notice, for which he has two months under section 42(3)(f) - see para 12 above. Given that he has to include a proposed figure for compensation in his counter-notice, this is said to be unfair, or at least an indication that the appellants’ case is wrong. I do not think that there is anything in this point. It is quite plain that, in his counter-notice, a landlord does not have to include a precise figure as to the level of compensation he is seeking. It is very common, to say the least, for a party who has to specify a figure in a notice to quote something more favourable then he expects to get. It is true that, in Cadogan Estates LA v Morris [1998] EWCA Civ 1671, [1999] 1 EGLR 59, the Court of Appeal held that, where a tenant had included a figure that he could not reasonably have expected to achieve in his notice under section 42, the notice was invalid. Assuming that that decision was correct, it seems to me plainly distinguishable, as was recognised in the subsequent Court of Appeal decision of 9 Cornwall Crescent London Ltd v Kensington and Chelsea RLBC [2005] EWCA Civ 324, [2006] 1 WLR 1186. Unlike in the case of a landlord’s counter-notice under section 45, the terms proposed in a tenant’s notice under section 42 can, if the landlord fails to serve a counter-notice, become binding - see section 49(1), referred to in para 13 above.

71.  It was also suggested that the terms of section 57 are too vague to satisfy the requirement of legality in article 1 of the First Protocol. At para 62 in the Court of Appeal, Arden LJ expressed some doubt on this point, in the light of the principle enunciated by Lord Hope of Craighead in R (Gillan) v Comr of Police of the Metropolis [2006] 2 AC 307, para 52, namely that “any restrictions on the rights and freedoms of the individual must be prescribed by law in a way that is sufficiently accessible and sufficiently precise to enable the individual to foresee the consequences".

72.  In my judgment, the provisions of section 57 fully satisfy the requirement. It is inevitable that provisions of this sort are expressed in relatively general terms, because, as already mentioned, they have to apply in all sorts of different circumstances, many of which are very difficult, and even impossible, to foresee. The obviously sensible course, which has been adopted by the legislature, is to leave the sort of issues with which section 57 is concerned to the good sense of the LVT, always remembering that whatever loss a freeholder or other lessor suffers as a result of a lessee exercising his Chapter II right, is liable to be compensated pursuant to the provisions of Schedule 13.

Conclusion

 
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