Bolton & Ors v St Anselm Development Company Ltd

Under the Leasehold Reform, Housing and Urban Development Act 1993, a landlord’s counter-notice must identify accepted and rejected proposals and specify a counter-proposal for each rejected proposal. A counter-proposal is sufficiently certain where statutory entitlements and necessary modifications are objectively ascertainable. An unqualified written acceptance concludes agreement on the terms of acquisition, regardless of differing subjective intentions. The prescribed draft-lease procedure then applies. If the landlord fails to respond to proposed amendments within the prescribed period, those amendments are deemed approved and the court may order the lease accordingly.

Tenants sought new leases under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993. Their notices proposed removal of a rent-as-service-charge provision. The freeholders’ counter-notices admitted the tenants’ rights, rejected that proposed removal, and made counter-proposals concerning premiums and lease terms. The tenants accepted all counter-proposals in writing.

The freeholders later supplied draft leases, which the tenants amended by deleting the disputed provision. The freeholders did not respond within the period specified by the Leasehold Reform (Collective Enfranchisement and Lease Renewal) Regulations 1993. The judge held that the premiums had been agreed but the other terms had not, while finding the counter-notices valid. The tenants appealed, and St Anselm Development Company Ltd appealed against the finding on premiums. The central issues were whether the counter-proposals were capable of acceptance and whether the terms of acquisition had consequently been agreed.

1. Disposition. The tenants’ appeal was allowed and St Anselm Development Company Ltd’s appeal was dismissed. The court ordered, under section 48(3) of the Leasehold Reform, Housing and Urban Development Act 1993, the grant of new leases in the form of the freeholders’ drafts as amended by the tenants.
2. Validity of the counter-notices. McCombe LJ held that the counter-proposals were objectively workable. They proposed the statutory modifications to which the landlord was entitled or which Chapter II required, together with further reasonable modifications to be agreed. The statutory elements were objectively ascertainable, and the further wording did not invalidate the notices. The approach was consistent with Burman v Mount Cook Land Limited [2002] Ch 256, which required a counter-notice to state clearly what was accepted, what was rejected, and the counter-proposal for each rejected term.
3. Acceptance and terms of acquisition. The tenants’ unqualified written acceptance meant that the terms of acquisition were agreed. The court had to construe the written proposals objectively. It was not permissible to reopen the agreement by relying on differing subjective intentions or later disagreement about the legal effect of the accepted terms.
4. Draft lease procedure. Once the terms of acquisition were agreed, the procedure under regulation 7 of the Leasehold Reform (Collective Enfranchisement and Lease Renewal) Regulations 1993 governed the form of the lease. The freeholders failed to answer the tenants’ amendments within the prescribed period and were therefore deemed to have approved them.
5. Alternative ground. McCombe LJ stated that, if the counter-proposals had not been capable of acceptance, the counter-notices would have been invalid and the tenants would have been entitled to relief under section 49(1). Burnton LJ additionally reasoned that an obligation to pay the head lessor’s rent was itself rent, not a service charge, and therefore could not be included consistently with the peppercorn-rent requirement in section 56(1). That additional reasoning was not necessary to McCombe LJ’s disposition.

• Court of Appeal (Civil Division): In [2014] EWCA Civ 27, allowed the tenants’ appeal, dismissed St Anselm Development Company Ltd’s appeal, and ordered the grant of amended new leases.
• Central London County Court: His Honour Judge Hand QC dismissed the tenants’ claims, held that the premiums were agreed but the other terms of acquisition were not, and held that the counter-notices were valid.