Kensington Heights Commercial Company Ltd v Campden Hill Developments Ltd

Under Part I of the Landlord and Tenant Act 1987, an agreement by an immediate landlord to surrender a headlease in return for a longer replacement lease is a relevant disposal. The statutory purchase-notice procedure in section 12B does not apply to a surrender, including a contract to surrender, because the surrendered lease no longer exists and cannot be disposed of on the original terms. Section 12C supplies the appropriate remedy: a new tenancy from the superior landlord on the terms of the surrendered tenancy. A later replacement lease is not the same estate or interest as the surrendered lease, so section 16 cannot require its transfer by the intermediate landlord. The court cannot order that landlord to grant the surrendered lease anew.

Kensington, nominated by qualifying flat tenants, sought relief under Part I of the Landlord and Tenant Act 1987 concerning Campden’s 2000 replacement headlease. Campden had agreed with Kennet, the freehold owner, to surrender its 1973 headlease and receive a longer lease. No section 5 offer notice was served.

Following notices under sections 11A and 12B, the Central London County Court ordered Campden to transfer the 2000 lease to Kensington, subject to a Vodafone sub-underlease. Campden appealed. Kensington cross-appealed on the sub-underlease and sought alternative relief. The central issue was how the 1987 Act applied to an agreement to surrender a headlease in return for a longer term.

Lord Justice Lawrence Collins gave the judgment, with Sir Martin Nourse and Lord Justice Longmore agreeing. The appeal was allowed and the cross-appeal was dismissed.

1. Relevant disposal. Sections 4(1), 4(2)(i), 4(3) and 4A(1) had to be read together. The 2000 Agreement, which included an agreement to surrender Campden’s headlease, was a relevant disposal. Campden was therefore required to serve an offer notice under section 5, including the statutory provisions concerning non-monetary consideration.
2. Applicable remedy. Section 12A addressed an uncompleted contract and did not apply. Although section 12B(1)(a) could literally include a contract to surrender, the rest of section 12B was incompatible with surrender. Its requirement that the purchaser dispose of the estate or interest comprising the original subject matter could not operate after the lease had been extinguished. The provision concerning later incumbrances also assumed that the relevant property continued to exist.
3. Section 12C applied to a contract to surrender, by virtue of section 4A(1) and, in any event, as the only sensible construction. It provided for a new tenancy from the superior landlord on the same terms and with the same expiry date as the surrendered tenancy.
4. Notice and section 16. Kensington’s notice was expressly a section 12B notice. Its wording tracked section 12B(2), not section 12C, and there was no basis for treating it as a section 12C notice. Section 16 applied only where the subsequent purchaser held the same estate or interest that was the subject matter of the original disposal. The 1973 Lease had been extinguished, while the 2000 Lease was a different lease on different terms. Section 16 therefore could not require Campden to transfer the 2000 Lease.
5. The tenants were seeking what Campden had acquired rather than what it had surrendered. The court had no power in these proceedings to order Campden to grant a new lease on the terms of the surrendered 1973 Lease. A section 12C remedy could have been pursued against Kennet, but the requested declaration could not be granted in this appeal because Kennet was not a party and the relief had not been sought below. The cross-appeal concerning the Vodafone sub-underlease did not arise.

• Court of Appeal (Civil Division) — [2007] EWCA Civ 245: Campden’s appeal was allowed and Kensington’s cross-appeal was dismissed.
• Central London County Court — On 20 June 2006, His Honour Judge Levy QC ordered Campden to transfer the 2000 Lease to Kensington, subject to the Vodafone sub-underlease.