Avon Ground Rents Limited v Canary Gateway (Block A) RTM Company Ltd

The Court of Appeal was asked to construe section 76 of the Commonhold and Leasehold Reform Act 2002 to decide whether a shared ownership lease granted for a term exceeding 21 years is a "long lease" for the purposes of the right to manage where the tenant has not staircased to 100%.

The court held that section 76(2) is to be read as a series of alternative gateways: paragraph (a) covers any lease originally granted for a term of years certain exceeding 21 years, and that gateway therefore catches shared ownership leases of that duration irrespective of the tenant's total share. Paragraph (e) is a specific provision which does not operate to cut down the wider reach of paragraph (a). The natural meaning of the statutory language and Parliament's choice of words were controlling. Policy considerations (for example that shared owners with less than 100% typically pay service charges and have an interest in management) supported that construction.

Applying that construction, the court dismissed the appeal and affirmed that shared ownership tenants of Block A with leases granted for more than 21 years were qualifying tenants under the 2002 Act.

Background and parties. Avon Ground Rents Limited (freehold owner) owned Block A of Canary Gateway. Some flats were subject to shared ownership leases granted for terms exceeding 21 years; some shared owners had staircased to 100% and others had not. Canary Gateway (Block A) RTM Company Ltd sought the right to manage under the 2002 Act.

Procedural history. The point arose through proceedings in the First-tier Tribunal, an Upper Tribunal decision (Fancourt J) dated 26 November 2020 ([2020] UKUT 358 (LC)), and further FTT determinations (including a decision of 2 March 2022). Avon appealed to the Upper Tribunal and then to the Court of Appeal (this appeal), with the sole issue being the construction of section 76 of the 2002 Act.

The legal issue and statutory framework. The issue was whether a "shared ownership lease" granted for a term of years certain exceeding 21 years is a "long lease" under section 76(2) of the Commonhold and Leasehold Reform Act 2002 if the tenant's total share is less than 100%. Chapter 1 of Part 2 of the 2002 Act (sections 71–113) sets out the right to manage and the concept of a "qualifying tenant" who must generally be a tenant under a "long lease". Section 76 lists alternative categories (paragraphs (a)–(f)) that qualify as a "long lease".

Issues framed by the court. The court framed the central issue as one of statutory construction: whether the paragraph-based list in section 76(2) is additive (any one gateway suffices) or whether the specific shared ownership provision in paragraph (e) should be treated as limiting paragraph (a) so that shared ownership leases would only be "long leases" if the tenant's total share is 100%.

Reasoning and authorities considered. The court analysed the language of section 76, the explanatory material to the 2002 Act and the Consultation Paper, and earlier authorities including Brick Farm Management Ltd v Richmond Housing Partnership Ltd [2005] EWHC 1650 (QB), Richardson v Midland Heart Ltd [2008] L&TR 31, and Corscombe Close Block 8 RTM Co Ltd v Roseleb Ltd [2013] UKUT 81 (LC). The court concluded that the natural reading is that paragraphs (a)–(f) are alternative gateways and that paragraph (a) therefore makes a shared ownership lease of more than 21 years a "long lease" even if the tenant's share is less than 100%. The Consultation Paper and explanatory notes did not displace the statute's plain language. Pragmatic and policy considerations reinforced the interpretation.

Relief sought and disposition. The appellant sought to overturn the Upper Tribunal conclusion that shared ownership tenants with less than 100% were qualifying tenants. The Court of Appeal dismissed the appeal and upheld the construction that such shared ownership leases are long leases for the purposes of the 2002 Act.

This was an appeal and it is dismissed. The Court of Appeal held that, for the purposes of section 76 of the Commonhold and Leasehold Reform Act 2002, a lease granted for a term of years certain exceeding 21 years is a "long lease" irrespective of whether it is a shared ownership lease and irrespective of whether the tenant's total share is 100%. Paragraphs (a)–(f) of section 76(2) operate as alternative gateways; paragraph (e) does not cut down the plain and wider effect of paragraph (a). The court relied on the natural meaning of the statutory language, relevant authority and policy considerations about shared owners' interests in management.

Appeal to the Court of Appeal from the Upper Tribunal (Lands Chamber). The contested Upper Tribunal decision was handed down by Fancourt J and recorded at [2020] UKUT 358 (LC). Proceedings included First-tier Tribunal determinations (including a decision of 2 March 2022) and Upper Tribunal proceedings LC-2022-199. The Court of Appeal heard the appeal and dismissed it on 30 May 2023.