Aldford House Freehold Ltd v (1) Grosvenor (Mayfair) Estate (2) K Group Holding Inc (2018)
Whether premises comprised a "flat" within the Leasehold Reform, Housing and Urban Development Act 1993 s.101 depended on whether they had been constructed or adapted for use for the purposes of a dwelling. The test was not whether the premises had reached such an extent of fitting out, or remained in such good condition, that they could actually be used for living in.
The claimant claimed entitlement under the Leasehold Reform, Housing and Urban Development Act 1993 Pt I Ch.I to acquire the freehold of a building.
The claimant was the nominee purchasing company of a number of participating tenants. Section 13 of the Act required an initial notice to be given by a number of qualifying tenants that was at least half the number of flats in the building. The parties disputed whether, at the relevant date for asserting entitlement to the freehold within Pt 1 Ch.1, there had been 26 residential flats or 30. The landlords considered that there were two flats each on the sixth and seventh floors, where work was being undertaken to divide previously existing flats in two and new underleases had been granted. The claimant purportedly gave an initial notice on behalf of 17 tenants. The landlords considered that three asserted tenants had not validly given authority to their solicitor to sign the notice. The third of those tenants had not validly given authority at the time of the notice but purportedly ratified the giving of authority retrospectively. The initial notice was given on the basis that there were 26 flats. The claimant gave a second notice on the same day on the basis that there were 30. The landlords gave counter-notices, both asserting 30 flats. Under s.22, the claimant then had to issue an application to court to preserve the tenants' claim. Its claim form referred to the initial notice and stated that there were 26 flats and 17 tenants. it advanced an alternative case that there were 14 qualifying tenants, as the landlords had also disputed whether three of the tenants were qualifying tenants.
Number of flats - The relevant test was whether each part of each floor was physically separate and to be regarded as a single unit. Each part of each floor, as separately demised on the relevant date, was a separate set of premises. Each part was given separate identity not just by being enclosed, but was given functional identity by the new underleases, Merie Bin Mahfouz Co (UK) Ltd v Barrie House (Freehold) Ltd  UKUT 390 (LC) considered. Each demised area had been separated from the other by a dividing wall with doors in it. The doors had been there only to facilitate the fitting out of the flats, not so that the demised areas could be used together. It had been intended that they would later be removed and the wall fully built (see paras 26-28 of judgment). The statutory definition of "flat" in s.101 was concerned with the purpose for which premises had been constructed or subsequently adapted. The question was whether they had been constructed or adapted for use for the purposes of a dwelling or for some other purposes. The test was not whether the premises had reached such an extent of fitting out, or remained in such good condition, that they could actually be used for living in on the relevant date, Boss Holdings Ltd v Grosvenor West End Properties Ltd  UKHL 5 and Day v Hosebay Ltd  UKSC 41 applied. Each of the sixth- and seventh-floor premises had been constructed for residential purposes, even though their condition at the time precluded actual use for such purposes (paras 34-36). Accordingly, there had been 30 flats on the relevant date. The initial notice had to be signed on behalf of at least 15 qualifying tenants and had to identify all the qualifying tenants in the building. The initial notice had not named the qualifying tenants of the sixth- and seventh-floor flats. It was therefore void, Natt v Osman  EWCA Civ 1520 followed. The claimant therefore had to rely on the second notice (para.37).
Reliance on second notice - Although all s.22 required was for an application to be made by the correct person in relation to the premises, the application could not by its terms exclude reliance on a given initial notice. It had to be at least capable of relating to that notice. The claim form placed reliance on the initial notice only and was therefore, as regards the second notice, not an application within s.22. Reliance, on the alternative case, on 14 qualifying tenants was inconsistent with reliance on the second notice. So was the absence of the second notice from the exhibit to the witness statement in support of the claim. There was no valid initial notice on which the claimant could rely. The claim would be dismissed. The court considered the solicitor's authority to give the notices in case it was wrong on the previous issues (paras 45-52).
Authority to give initial notice - The solicitor had been given valid authority to sign the initial notice and second notice on behalf of the first and second tenant pursuant to board resolutions passed by those tenants. However, that was not the case for the third tenant. The structure of Pt 1 Ch.1 was inconsistent with an invalid initial notice subsequently becoming valid by ratification. An initial notice had immediate proprietary effect and specified time limits ran from the giving of the notice, Ainsworth v Creeke (1868-69) L.R. 4 C.P. 476 applied. An initial notice was either valid or invalid when it was given. The Act specified that the notice was only valid if given by a requisite number of qualifying tenants. If it was not so given because of want of authority, it was not given in accordance with the Act. Only 16, not 17, participating tenants had given the notices (paras 63, 81, 98-101).
Judgment for defendants
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14 Dec 2018
LTL 17/12/2018 :  12 WLUK 264
Edwin Johnson QC