West Hampstead Management Company Ltd v Pearl Property Ltd

For collective enfranchisement, the valuation date is fixed when it is determined, by agreement or by a leasehold valuation tribunal, what freehold interest in the specified premises is to be acquired. The expression concerns the quality of the freehold interest, including encumbrances, and not merely the physical extent of the premises.

The Act distinguishes the interest acquired from the extent of the property and rights to be granted. Practical concerns about delay, market movement, certainty or tactical manoeuvring cannot control the statutory construction. An eligibility declaration is not itself an agreement as to the freehold interest.

The appellant, a nominee purchaser for residential tenants, exercised the statutory right of collective enfranchisement. The landlord initially challenged the tenants’ entitlement. A consent order dated 5 May 1999 declared that entitlement, but did not settle the terms or quality of the freehold interest to be acquired.

The London Leasehold Valuation Tribunal later determined the terms of acquisition and selected 22 February 2000 as the valuation date. The Lands Tribunal dismissed the appellant’s appeal and allowed a cross-appeal concerning the enfranchisement price. The appellant appealed to the Court of Appeal on the single issue whether 5 May 1999, rather than 22 February 2000, was the correct valuation date.

The appeal was dismissed unanimously. Arden LJ gave the leading judgment, with which Peter Gibson LJ and Cresswell J agreed. The appeal was dismissed with costs summarily assessed at £7,000, and permission to appeal to the House of Lords was refused.

1. Meaning of the valuation date. Under Schedule 6, paragraph 1(1) of the Leasehold Reform, Housing and Urban Development Act 1993, the reference to what freehold interest is to be acquired concerns the quality of the freehold interest, including whether it is subject to encumbrances. It does not refer merely to the physical premises.
2. Relevant determination. The valuation date is the date on which that freehold interest is determined by agreement or by a leasehold valuation tribunal. A consent order could constitute an agreement, but the order of 5 May 1999 only established the tenants’ entitlement to enfranchise. It did not agree the freehold interest or its relevant terms. The landlord’s counter-notice likewise did not amount to agreement on that issue.
3. Interest distinguished from extent. Section 24(8) distinguishes the interest to be acquired from the extent of the property to which it relates and from rights to be granted over property. The wider expression terms of acquisition therefore does not mean that every unresolved acquisition term forms part of the determination of what freehold interest is to be acquired.
4. Leasebacks and comparative provisions. The apparent possibility of an optional leaseback being required before completion did not determine the construction of the valuation-date provision. Leaseback terms were not finalised until agreement was communicated or, absent agreement, until determined by the tribunal. The different wording in Schedule 13 did not require a different construction. The complementary nature of the statutory rights supported consistency, while comparison with the Leasehold Reform Act 1967 was unhelpful.
5. Practical considerations. Possible market movement, greater certainty, and the prevention of tactical manoeuvring could not control the statutory meaning. Those matters were for the leasehold valuation tribunal to manage in exercising its jurisdiction.

• Court of Appeal (Civil Division): By [2002] EWCA Civ 1372, the appeal on the valuation date was dismissed.
• Lands Tribunal: On 19 November 2001, the Tribunal dismissed an appeal from the London Leasehold Valuation Tribunal and allowed a cross-appeal to the extent that the enfranchisement price should be £519,000. It held that the valuation date arose only after the extent of the premises and the terms of acquisition had been determined.
• London Leasehold Valuation Tribunal: On 23 August 2000, the Tribunal determined the terms of acquisition and selected 22 February 2000, the date of the first hearing, as the valuation date. It rejected the contention that the date was 5 May 1999.