Craftrule Ltd.v 41-60 Albert Palace Mansions (Freehold) Ltd

The statutory definition of a self-contained part of a building does not require that the premises be incapable of further subdivision. Where the premises specified in an initial notice satisfy Leasehold Reform, Housing and Urban Development Act 1993, section 3, and no exclusion in section 4 applies, the right to collective enfranchisement is available in respect of those premises.

Sections 4(3A) and 13(8)–(10) confirm that premises may comprise more than one self-contained part. The statutory requirement that at least half of the qualifying tenants participate reflects an intended system of majority rule. Recourse to Parliamentary materials is unavailable where the legislation is clear and does not produce absurdity.

The claimant nominee purchaser sought collective enfranchisement of 20 flats forming part of Albert Palace Mansions. The flats constituted a self-contained part of a building under section 3 of the Leasehold Reform, Housing and Urban Development Act 1993. Two groups of ten flats within the premises were also separately self-contained.

The defendant freeholder argued that the initial notice was invalid because it covered premises capable of subdivision into smaller self-contained parts. The Central London County Court rejected that argument, granted declaratory relief and ordered acquisition of the freehold under section 25(1). Permission to appeal was granted to determine whether the statutory right could be exercised only over the smallest qualifying unit.

1. Appeal dismissed. The premises specified in the initial notice satisfied the definition of a self-contained part of a building in section 3(2) of the Leasehold Reform, Housing and Urban Development Act 1993. None of the exclusions in section 4 applied. That was sufficient to bring the premises within the statutory right.
2. Section 3 neither expressly nor impliedly requires a self-contained part of a building to be indivisible into smaller self-contained parts. The court should begin with the statutory language. It should adopt a more purposive construction only if the literal construction conflicts with statutory purpose or produces genuinely absurd or anomalous consequences.
3. Sections 4(3A) and 13(8)–(10) materially confirmed this construction. Their natural implication was that, absent special provision, an initial notice could relate to a self-contained part capable of further subdivision. Section 4(3A) could be considered because it confirmed, rather than altered, the meaning which section 3(2) had always borne.
4. The statutory scheme deliberately permits a bare majority in number of qualifying tenants to serve an initial notice. The possibility that some tenants may be outvoted is an inherent consequence of that scheme and did not make the construction absurd or contrary to the statutory policy of enabling leaseholders to acquire the relevant premises.
5. There was no basis for recourse to Hansard. The first Pepper v Hart criterion was not satisfied because the legislation was neither ambiguous nor obscure and did not lead to absurdity. In any event, the ministerial statements relied on did not clearly address the specific issue of subdivision.
6. The declarations and order made below under section 25(1) therefore stood.

1. High Court (Chancery Division) [2010] EWHC 1230 (Ch): appeal dismissed; the declaration and order made below upheld.
2. Central London County Court (30 July 2009): declared that the participating tenants were entitled to enfranchise the whole property and ordered acquisition of the freehold under section 25(1) of the Leasehold Reform, Housing and Urban Development Act 1993.