Residential Leasehold

Case Name, Reference and Bailii Link

Summary

Given the recent guidance and wording for contractual provisions to deal with leasehold management issues during the registration gap provided by the City of London Law Society this case highlights the problem which the wording can alleviate. 

An equitable owner cannot be classified as the “landlord” during the gap between legal completion and the registration of the equitable owner as registered proprietor for the purposes of sections 79(6)(a) and 88 of the Commonhold and Leasehold Reform Act 2002 as the legal interest in the property is still vested in seller pending completion of the registration.

Facts

On 10 October 2019, Assethold Ltd purchased from Millcastle Properties Ltd and Millcastle (POFW) Ltd respectively the freehold and a 999-year lease of
a property situated in North London. 

In June 2022, Assethold subsequently became the registered owner of the freehold interest in the property after an application made to HM Land Registry.  

The tenants of the property subsequently sought to acquire the right to manage the property. Through their RTM company, 159–167 Prince of Wales Road RTM Company Ltd (POW), a claim notice was given both to Assethold and MP Ltd in June 2021.  

Assethold served a counter-notice on POW disputing its right to acquire the right to manage on the basis that it had failed to meet the statutory requirements. POW applied to the First-Tier Tribunal  

for a determination that it had in fact satisfied the same. On the eve of the hearing, POW withdrew its application. Assethold subsequently made an application for its costs under Section 88. 

First Instance

The tenants contended that Assethold was not a “landlord,” because at the material time it was given the claim notice under section 79(6) had no legal interest in the property. Consequently, Assethold had no standing to serve a counter-notice or seek its costs under Section 88.  

The FTT agreed. 

Additionally, the FTT determined that the mere fact that the tenants had served a claim notice on Assethold and made it a party to its application for a determination to the FTT did not give rise to an estoppel. Assethold appealed to the Upper Tribunal (Lands Chamber).  

The UT set aside the FTT’s determination on the basis that an estoppel had been created either by representation or convention. In respect of detrimental reliance, the UT relied on as evidence of the same the fact that the tenants had named Assethold as the landlord in its application to the FTT and that Assethold had incurred costs as a consequence of engaging in the proceedings. 

The tenants appealed.  

Decision

Decision On Appeal

The Court of Appeal held in allowing the appeal the natural meaning of the phrase “landlord under a lease” used in sections 79(6) and 88, the Court of Appeal determined meant the landlord as a matter of law.  

Both the freehold and the headlease were existing registered estate and, at the material time the claim notice was given, Assethold was not the registered legal owner of either interest.  

It was settled law under section 27(1) of the Land Registration Act 2002, the transfers did not operate at law until they were registered. Assethold was therefore not the landlord under any lease of the premises when the claim notice was given.  

In addition, the Court of Appeal also found on the facts that an estoppel either by representation or convention did not arise. In particular, an estoppel by representation required a causal connection between the representation and the action that caused a detriment.  

It was Assethold that chose to incur legal costs in responding to the notice and proceeding, in circumstances where it knew it was not the registered legal owner of either the freehold or headlease.