Enfranchisement – getting the Initial Notice right
The Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002) (“the Act”) allows the right tenants to force the sale of the freehold to them.
The first step is that the qualifying tenants must serve an Initial Notice under section 13 of the Act. Although there is no standard precedent, statute dictates that it must contain, amongst other things:
- Details of the property to be acquired, including a plan
- A statement of grounds on which is it is claimed the specified premises qualifies for collective enfranchisement
- The price proposed
- Names and addresses of qualifying tenants
- Name and address of the Nominee Purchaser (either the qualifying tenants or a company they have set up for the purpose of collective enfranchisement)
- The date by which the freeholder is to provide the Counter-Notice (being at least two months after service of the Initial Notice)
The Initial Notice must be signed by or on behalf of all participating tenants.
It must be served on the freeholder and any other ‘relevant landlord’.
Although the requirements sound fairly straight forward, the wealth of cases relating to collective enfranchisement and in particular Initial Notices, show how easy and often it is to fall foul of the statutory requirement. We take a look at a few of them.
The plan accompany the Initial Notice should show three things:
a) The premises of which the freehold is to be acquired – this is simply the building containing the flats
b) Any property which the freehold is claimed, which includes
i) Appurtenant property demised by a qualifying tenant’s lease (e.g. private garden garage or parking space)
ii) Property used in common (e.g. communal gardens)
iii) Any property over which it is claimed rights such as easements should be granted
In Mutual Place Property Management v Blaquiere (1996) 2 EGLR 78 C.C it was held that the lack of a plan will invalidate an Initial Notice completely
In Crean Davidson Investments Limited v Earl Cadogan and another (1998) 2 EGLR 96, it was alleged that the plan was invalid because the appurtenant property was not in a difference colour and the properties over which rights were to be acquired was not marked out with precision. It was decided that this in itself did not invalidate the plan and accordingly the Initial Notice; the errors were not misleading but merely omissions or inaccuracies.
In Natt and another v Osman and another (2014) EWCA 1520 Civ, the Initial Notice had omitted the name of one of the qualifying tenants, the address of their flat and details of their lease. The landlord was aware of who the qualifying tenants participating in the collective enfranchisement so there was no prejudice by this omission. However, the Court of Appeal took a very strict view of the information required by statute and held that the Initial Notice was invalid. They also relied on the ability to serve a fresh Initial Notice in coming to their decision.
Finally in the latest case of Curzon v Wolstenholme and others (2015) UKUT 73 (LC), whilst the Initial Notice was valid, it had not been protected by registration against the freehold title. The first freeholder then transferred to his wife, who then gifted it back to him. The question was whether, without registration, the right of enfranchisement was binding on the first freeholder. The Upper Tribunal decided that the Initial Notice remained in force after the transfer although it was not binding on the wife. However, once it was gifted back to the first freeholder, it could bind him.
Given that there is no restriction on serving a fresh Initial Notice, if in doubt, why is this so highly contested in the courts/tribunals? The reason is largely because the date of an Initial Notice will fix the date of the ‘valuation’ for the purpose of working out the purchase price. In a rising property market, even months will therefore have an adverse effect on the delay in serving a fresh Initial Notice.
Also if the property is subsequently sold, the tenant(s) will have to wait at least two years to be able to collectively enfranchise as the requirement is