Relevant Disposals and the Right of First Refusal under the Landlord and Tenant Act 1987 – defeating Collective Enfanchisement

House in the UK countryside

The High Court was, in August 2019, called upon to consider the provisions s1(1) of the Landlord and Tenant Act 1987 in the recently reported case of York House (Chelsea) Limited v Thompson. Under this section of the Act a landlord shall not make a “relevant disposal affecting any premises to which at the time of the disposal this Part applies” unless it has previously served notice in accordance with s5 on “the qualifying tenants of the flats contained in those premises” and the disposal is made in accordance with the requirements of ss6-10. The 1987 Act gives “leaseholders of residential flats in a block of flats improved rights to control the upkeep and maintenance of the block as a whole, by conferring on the tenants a right of first refusal when the landlord is proposing to dispose of his reversion”.

The freehold of York House, a block of 42 flats in Chelsea, was held by Mr and Mrs Thompson, the defendants in the case. 41 of the flats were demised on long leases and some of the long lessees were planning to claim the freehold under the Leasehold Reform, Housing and Urban Development Act 1993. The defendants were concerned that the price payable under the 1993 Act would not properly reflect the development value.  In order to preserve the development value in various parts of the premises, they granted 14 leases to one or other of themselves. No premium was payable and the rent was a peppercorn in each case. No offer notices under s.5 of the 1987 Act were served.

A majority of the flat lessees claimed that the leases were relevant disposals and sought to acquire them by serving s. 12B notices under the 1987 Act.

Mr Justice Zacaroli rejected the lessees’ claim. He held that each lease was a disposal by way of gift to a member of the landlord’s family, and so was excluded from the definition of ‘relevant disposal’ by s. 4(2)(e) of the Act.  Alternatively, he held that each lease was a disposal consisting of a transfer by two or more persons who are members of the same family to fewer of their number, and so fell within the exclusion in s. 4(2)(h) of the Act.  This is the first case in which those provisions have been considered.

For further information on Landlord and Tenant Law and the Tenant’s right of first refusal under section 5 of the Landlord and Tenant Act, collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act or any other area of conveyancing why not contact Alexander JLO’s expert property lawyers to see what we can do for you?

This blog was prepared by Alexander JLO’s senior partner, Peter Johnson on the 31st March 2020 and is correct at the time of publication. With decades of experience in almost all areas of law, Peter is happy to assist with any legal issue that you have. His profile on the independent Review Solicitor website can be found Here

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