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Lease Extension Claims:  Court of Appeal Clarifies the Rights of Intermediate Landlords.

09 Jan 2017

The Court of Appeal has recently considered a competent landlord’s (CL) authority to bind an intermediate landlord (IL) when reaching an agreement with an enfranchising tenant in a claim to extend their lease under the Leasehold Reform, Housing and Urban Development Act 1993 (the Act), whilst the matter is yet to be decided by a tribunal.

Under the Act, qualifying tenants have a right to a new lease of their flat by serving notice on the CL. The CL must hold a Freehold or Leasehold interest with enough duration to grant the remainder of the existing lease plus an additional 90 years. If the immediate landlord does not hold a sufficient duration, the tenant must apply the criteria up the chain of “other landlords” until a CL is identified.

The CL has authority to conduct proceedings and bind all other landlords, and where a dispute arises between them, the other landlords can apply to the County Court for directions on how the CL should conduct the proceedings. Other landlords can ask to be separately represented under  the Act. 

In Kateb v Howard De Walden Estates Ltd & Anor [2016] EWCA Civ 1176, the IL challenged the Upper Tribunal’s decision that it was bound by the terms agreed between the CL and enfranchising tenant. The Court of Appeal refused the appeal, and held that the ability of other landlords to apply to the Court for direction was not  a qualification of the power granted to the CL to conduct the proceedings, but is confirmation of the scope of authority. It held that parliament did not intend for the Act to do anything more than to grant other landlords the right to be separately represented in proceedings, which does not remove any authority from the CL. The court found that if it did, the tenant could in a position whereby it is disproportionately burdened with costs and expenses of conducting proceedings against all other landlords. The court was also not persuaded by the IL’s argument that the CL’s ability to bind other landlords amount to a breach of human rights.

The Court of Appeal’s decision serves as a reminder of the rights and limitations of other landlords in lease extension claims under the Act and the CL’s ability to bind other landlords. It is clear that separate representation of itself will not be enough to protect the rights of other landlords who have objections to the terms agreed and in appropriate cases consideration will need to be given to the right under the Act to apply to the Court for directions.

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