9 Cornwall Crescent London Ltd v Kensington and Chelsea

A landlord’s counter-notice under section 21 of the Leasehold Reform, Housing and Urban Development Act 1993 is valid if it specifies a counter-proposal for each proposal which the landlord rejects. The counter-proposed price need not be realistic, genuine or supported by valuation evidence.

The statutory context is decisive. Unlike a tenant’s initial notice, the landlord’s counter-proposal cannot become the acquisition price by default. A disputed price is determined by the leasehold valuation tribunal. The requirement derived from Cadogan v Morris for tenants’ notices therefore does not apply to landlords’ counter-notices.

The nominee purchaser for tenants claiming collective enfranchisement served an initial notice under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993. It proposed a purchase price of £210. The landlord admitted the right to enfranchisement but served a section 21 counter-notice proposing £130,000.

The landlord’s valuer later accepted that £130,000 exceeded the bracket of possible valuations. The nominee purchaser sought a declaration in the Central London County Court that the counter-notice was invalid. Success would have enabled the tenants to acquire the freehold for £210 under the default mechanism in section 25.

His Honour Judge Rich QC rejected the claim. The Court of Appeal had to decide whether an unrealistically high counter-proposal invalidated a section 21 counter-notice and, alternatively, whether bona fide reliance on professional valuation advice preserved its validity.

1. Appeal dismissed unanimously. A landlord’s counter-notice under section 21 of the Leasehold Reform, Housing and Urban Development Act 1993 does not become invalid because its counter-proposed price is excessive, unrealistic or unsupported by valuation evidence. The landlord need only specify the price put forward for the tenant’s consideration.
2. Per Auld LJ, with whom Wilson J agreed on the decisive issue, the requirement derived from Cadogan v Morris [1999] 1 EGLR 59 for a tenant’s initial notice does not extend to a landlord’s counter-notice. A tenant’s proposed price can become binding under section 25 when the landlord fails to serve a valid counter-notice. No corresponding default advantage can accrue to the landlord. That contextual difference justified different constructions of the statutory language.
3. The notice and counter-notice ordinarily open negotiations and identify matters potentially requiring resolution. They do not operate as pleadings or conclusively define the issues for adjudication. If the parties cannot agree the price, section 24 provides for its determination by a leasehold valuation tribunal. Preliminary county court litigation over whether a negotiating figure falls within a permissible valuation bracket would duplicate the statutory valuation process.
4. Arden LJ reached the same result by construing “counter-proposal” in its legislative context. It means a proposal put forward by the landlord, in opposition to the tenant’s proposal, for consideration. There is no overarching judge-made requirement that every statutory proposal be realistic or reflect a genuine intention. Subject to the reserved possibility of fraudulent misstatement, even a figure selected without valuation justification satisfies section 21(3)(a)(i) when specified as the landlord’s counter-proposal.
5. Auld LJ added obiter that, if the Cadogan v Morris criterion did apply, lack of good faith would be the sole necessary condition for invalidity. Objective unreality would ordinarily matter only as evidence bearing on genuineness. Wilson J expressly declined to resolve the content of that criterion.

1. Court of Appeal (Civil Division): The appeal was dismissed. The court held that the landlord’s section 21 counter-notice remained valid despite its excessive counter-proposed price.
2. Central London County Court: His Honour Judge Rich QC rejected the nominee purchaser’s challenge to the counter-notice. His conclusion was upheld, although his ruling that the Cadogan v Morris criterion applied to a landlord’s counter-notice was reversed.