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Local government

Human Rights

The applicant was granted a building lease in 1969. In 1990 he gave notice to the local authority that had granted the lease that he wished to exercise the option to renew which had been granted to him in the lease. The authority refused arguing that the original grant was ultra vires. The applicant's contention in the domestic courts that the authority had power to grant the option to renew under s164 was rejected so he applied to the European Court of Human Rights.

Held: The application was successful. The local authority's actions frustrated his legitimate expectation and deprived him of part of the consideration that he had given when entering into the agreement. This amounted to an interference with the peaceful enjoyment of his possessions that was disproportionate.
    Although it is true that, under English law, the option was rendered invalid due to the operation of the doctrine of ultra vires, the court observes that the applicant had entered into the agreement with Dorchester on the basis that he would have the possibility of extending the term of the lease. Neither party had been aware that there was any legal obstacle to this term forming part of the applicants consideration for agreeing to the contract. The applicant proceeded to build on the land, pay ground rent to the local authority and enter into subleases with other persons who conducted business in the premises that he had constructed. He clearly expected to be able to renew the option and continue to obtain the benefit of rent from the occupation of those premises that he had sublet. He reached, in negotiations with the local authority, the stage of prepared a draft renewal lease with an agreed increased ground rent, already signed on his side, and had proceeded to entered into agreements with his sublessees. The local authority .. themselves raised the problem of invalidity only at a very late stage The court considers that in the circumstance of this case, that the applicant must be regarded as having at least a legitimate expectation of exercising the option to renew, and that this may be regarded, for the purpose of Article 1 of Protocol 1, as attached to the property rights granted to him by Dorchester under the lease. The government argued that, since the local authority .. were not obliged, under law, to renew the lease, the refusal to do so could not amount to an interference with the applicants possession. Given, however, the terms of the agreement entered into by West Dorsets predecessors with the applicant, the court is of the view that West Dorsets actions may be regarded as a frustration the applicants legitimate expectation under the lease and depriving him, in part, of the consideration that he gave in entering into the agreement. (Paragraphs 34-36 of the judgement of the court).
Stretch v United Kingdom 44277/98 (Estates Gazette, 17 January 2004).

Section 123

When deciding whether or not to sell land a council may take into account the social value of the sale on job creation. However, section 123(2) of the Local Government Act 1972 provides:
    Except with the consent of the Secretary of State a council shall not dispose of land under this section otherwise than by way of a short tenancy for a consideration less than the best that can reasonably be obtained.
Hackney LBC proposed selling a development site to the London Development Agency, at a substantial undervalue, to enable it to generate employment opportunities. The sale was challenged by a private developer, which had offered a full value price. The council gave a financial value to each of the jobs that was to be created and argued that the resultant figure was to regarded as part of the consideration received within s123(2). The argument was rejected.
    Section 123(2) requires the council to obtain the highest price that can be got for the land: less can only be accepted, however meritorious the reason for accepting less, if the Secretary of State accepts the political responsibility for the decision by giving his consent.

R (on the application of Lemon Land Ltd) v Hackney LBC [2001] EWHC Admin 336; [2002] EG 128. Lightman J.

An informal offer to sell unwanted public land to a residents association on a first refusal basis did not constitute a disposal within the meaning of s123 of the Local Government Act 1972.

R (on the application of Ise Lodge Amenity Land Committee) v Kettering Borough Council [2002] 24 EG 148 (CS).

  • All things considered by Keith Wilkinson, Eversheds Describes the requirement imposed on authorities by s123 of the Local Government Act 1972 to obtain best consideration on sale of their properties unless the Secretary of State gives his consent to a disposal for a consideration that is less than can be obtained (Estates Gazette, 14 September 2002).
  • First consideration by Keith Wilkinson, Eversheds A second article considers the matters developers need to consider by reason of s123 (Estates Gazette, 21 September 2002).
  • Surplus land by David Danskin, Fennemores Explanation of the General Disposal Consent 2003, which gives local authorities far greater flexibility in dealing with disposal of excess land. The general consent for disposal of land applies where the undervalue does not exceed 2m, subject to various restrictions. Order took effect on 4 August 2003. (Solicitors Journal, 28 November, p 1354).

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