A Notice to acquire the freehold collectively under the enfranchisement legislation is likely to be held to be invalid if it does not contain the information required by the statutory provisions, even if the recipient of the Notice has all of the relevant information and suffers no prejudice. Care should therefore be taken to ensure that a Notice includes the information required by the legislation. Laura Bushaway examines the recent Court of Appeal decision in Natt and another v. Osman and another
The Court of Appeal held that a Notice served by tenants under Section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) claiming a right to acquire the freehold of the building (known as collective enfranchisement) was invalid because the Notice did not contain the information prescribed by Section 13(3)(e) of the 1993 Act. The Notice omitted the name of one of the qualifying tenants, the address of the flat and details of the lease as specified in Section 13(3)(e) of the 1993 Act.
The tenants argued that the failure to specify the relevant details caused no prejudice to the landlords as they were well aware of the identities of the qualifying tenants in the building.
The Court of Appeal examined the consequences of non-compliance with statutory requirements and decided that, as the statute did not expressly state the consequences of failing to comply in this case, it was necessary to look at the statutory scheme as a whole to determine the outcome. They took the view that:-
- the information required by Section 13(3)(e) goes to the very heart of the right to collective enfranchisement since it is intended to disclose on the face of the Notice whether the qualifying criteria have been met by there being a sufficient number of qualifying tenants to enable a claim to be made;
- as the 1993 Act contains a provision that certain inaccuracies do not invalidate the Section 13 Notice, Parliament must have intended other errors to render the Notice invalid; and
- tenants are able to serve a new Notice where an earlier Notice is invalid.
The Notice was therefore held to be invalid for failing to comply with Section 13(3)(e).
This decision is likely to apply both to collective enfranchisement Notices and to Notices concerning claims for lease extensions of flats. As tenants are able to serve a fresh Notice where an earlier Notice is invalid, the defect can usually be remedied. Prejudice may however be suffered in terms of an increase in the price payable by reason of the time interval between the first and second Notices, although depending on lease lengths that could potentially work in the tenants’ favour were values to fall during that period. In a rising market the sooner a fresh Notice is served generally the better and unless circumstances dictate otherwise, litigation regarding the validity of Notices should be avoided by tenants.
Such circumstances are most likely to arise where a tenant purchases a flat together with the benefit of a Notice to acquire an extended lease served by his Seller (who had met the requisite two-year qualifying period), but it subsequently transpires that the Notice is invalid. The consequence is that a fresh Notice cannot be served until the buyer himself has owned the flat for two years, by which time the combined effect of a shorter lease and a rising market may result in a very significant increase in the price payable for the extended lease. To avoid this potential loss care should be taken when drafting Notices to ensure that they contain all of the information required by statute.
If you wish to discuss any of the issues arising out of this article or if you require any specialist advice in connection with collective enfranchisement or lease extensions, please do not hesitate to contact Laura Bushaway or Jim McKeever.
