Maurice & Ors v Holloware Products

Where a tenant holds several flats under one lease of a building, that arrangement does not prevent the tenant from being a qualifying tenant under the Leasehold Reform, Housing and Urban Development Act 1993. The statutory definition expressly permits one person to qualify in respect of two or more flats, whether held under one lease or several. It also covers a lease of a building which includes the flats and common parts. On the grant of new leases, “substitution” of the existing lease operates to the extent of the premises comprised in the new leases. Any resulting adjustment of rent can be achieved through common-law apportionment. The statutory scheme therefore applies even where the existing lease continues in relation to retained common parts.

The claimants, trustees and freehold owners of a block containing 28 flats, held the building under an existing long lease. The defendants occupied all the flats under that single lease and served notices seeking new long leases under the Leasehold Reform, Housing and Urban Development Act 1993.

The claimants disputed the defendants’ entitlement on the ground that the defendants were not qualifying tenants because the flats and the building’s common parts were held under one lease, and because the existing lease would continue in relation to retained premises after the new leases were granted. The central issue was whether the statutory scheme covered that arrangement.

1. Entitlement. The defendants were qualifying tenants of each flat and were entitled to the grant of new leases.
2. Section 39(1), incorporating section 5(1), confers the right on a person who has been a qualifying tenant for the required period. Section 7(1)(a) defines a long lease as one granted for a term exceeding 21 years. The defendants satisfied those requirements.
3. Section 39(4) expressly provides that a person may be the qualifying tenant of two or more flats at the same time, whether the flats are held under one lease or under separate leases. Section 101(3) further confirms that the relevant lease may include the flat together with other flats and other parts of the building.
4. The reference in section 56(1) to a new lease being granted “in substitution for” the existing lease does not require the entire existing lease to disappear. It operates in relation to the premises comprised in the new lease or leases. That construction gives effect to the express statutory definition of qualifying tenant.
5. The continuation of the existing lease over retained premises creates no legal gap. Any reduction or division of the rent is capable of being dealt with by common-law principles of apportionment. The court therefore rejected the argument that the Act lacked a mechanism for modifying the rent.
6. The possible future sale of the new leases and resulting management difficulties did not alter the conclusion. The parties could provide appropriate service-charge and maintenance terms in the new leases. If agreement proved impossible, the leasehold valuation tribunal had sufficient powers under section 91(2) to secure appropriate terms. The statutory wording nevertheless independently covered the defendants’ position.

Not stated in the judgment.