Cadogan & Anor v Search Guarantees Plc

Section 1(1ZB) of the Leasehold Reform Act 1967 addresses competing enfranchisement rights between different tenants. It does not apply where the tenant of the house and the qualifying tenant of the relevant flat are the same person. The provision must be construed consistently with the legislative purpose of removing residence requirements so that company tenants can generally enfranchise. A construction which would prevent enfranchisement of the house while permitting extensions of the individual flat leases would produce an irrational result. A landlord cannot ordinarily raise a wholly new objection for the first time on appeal where the tenant has consequently had no opportunity to adduce relevant evidence.

Search Guarantees Plc held the registered leasehold interest in premises comprising several flats and a caretaker’s flat. The freehold was owned by Earl Cadogan and Cadogan Estates Ltd. The company applied under section 1 of the Leasehold Reform Act 1967 to acquire the freehold. The landlords objected under section 1(1ZB), contending that the company was both tenant of the house and qualifying tenant of flats forming part of it, and could not satisfy the statutory residence requirement.

The Central London County Court granted the landlords a declaration that the company was not entitled to enfranchise. On appeal, the landlords also sought to rely for the first time on section 1(1B), based on Part 2 of the Landlord and Tenant Act 1954. The issues were the construction of section 1(1ZB) and whether the new objection could be raised at the appellate stage.

1. Appeal allowed. The declaration made by the Central London County Court was set aside. The appellant was declared entitled to acquire the freehold under the Leasehold Reform Act 1967.
2. Section 1(1ZB) was construed in the light of the legislative changes made by the Commonhold and Leasehold Reform Act 2002. Those changes largely removed residence requirements and enabled company tenants to enfranchise. Section 1(1ZA) was intended to resolve conflicts between tenants at different levels in a chain of tenancies, and section 1(1ZB) served a similar purpose.
3. The reference in section 1(1ZB) to a flat being let to a qualifying tenant means a tenant other than the tenant of the house. It did not apply where the appellant was both tenant of the house and qualifying tenant of the flats. The contrary construction would produce the anomalous result that the company could extend the leases of the flats but could not enfranchise the common parts and the remainder of the house.
4. The respondents’ reliance on section 1(1B) was raised only shortly before the appeal. The court declined to permit it to be argued for the first time on appeal. The appellant had been deprived of the opportunity to investigate and adduce evidence on whether the statutory condition concerning business occupation was met. Only exceptional circumstances would justify remitting the matter to the trial judge, and none was shown.
5. The respondents were ordered to pay the appellant’s costs of the appeal and the hearing below, with £10,000 payable on account.

• Court of Appeal (Civil Division): The appeal from the Central London County Court was allowed. The order of 9 January 2004 was set aside, and a declaration was granted that the appellant was entitled to acquire the freehold under the Leasehold Reform Act 1967.
• Central London County Court: His Honour Judge Levy QC granted the respondents a declaration that the appellant was not entitled to enfranchise.