Villarosa v Ryan [2018] EWHC 1914 (Ch) (Morgan J.)
Under the Leasehold Reform Housing & Urban Development Act 1993, a ‘qualifying tenant’ of a long leasehold flat has a right to purchase a 90 year extension to that lease. There is no longer any residence requirement but the tenant must have owned the lease for the two years prior to the serving of the notice exercising the right.
This is well-known to conveyancers in the context of sale/purchase where the unexpired residue is too short for a buyer’s lender, but the buyer cannot seek an extension because of this two year rule. However, s. 43 of the Act permits a notice to be assigned along with the transfer of the lease. So the seller is required to serve the notice and that is assigned to the buyer.
In this case, a buyer (and her solicitors) was faced with two problems:
(1) how does the two year ownership requirement work where the tenant is deceased and the flat vests in personal representatives; and
(2) what is the position if the notice is not served until after the assignment of the lease, but before that assignment is registered?
The Act deals with the issue of personal representatives in s. 42 which requires the notice to be served within 2 years of the issue of the grant.
The Facts
These can be summarised as follows:
- Louis Vambeck was registered proprietor of a 99 year lease of a flat but he died in December 2007.
- Mr Vambeck’s executors obtained a grant of probate in April 2010. Under section 27(5)(a) of the Land Registration Act 2002 the legal title to the lease vested in the executors on his death.
- On 6 April 2016, the executors executed a transfer of the lease to Ms Villarosa.
- On 6 June 2016, the executors’ solicitor served on the landlord, Mr Ryan, a notice claiming a lease extension.
- On 7 or 8 June 2016, the executors assigned the benefit of the notice to Ms Villarosa.
- On 27 June 2016, Ms Villarosa applied to the Land Registry to be registered as proprietor of the lease.
- On 25 July 2016, the solicitors for Mr Ryan served a counter-notice under the 1993 Act contending that the claim to extend the lease was invalid. The grounds relied upon were that the notice had been served more than two years after the executors had obtained a grant of probate and that the lease had been assigned without the benefit of the notice. (Under section 43(3) of the 1993 Act, on such an assignment, the notice is deemed to have been withdrawn.)
Mr Ryan commenced proceedings in the County Court seeking a declaration that the claim to extend the lease was invalid. The Recorder granted that declaration on the basis that the notice had been given more than two years after the issue of the grant of probate. She also went on to say that she did not accept the assertion that the lease had been assigned without the benefit of the notice. Both parties appealed.
Held
Morgan J. decided in favour of Ms Villarosa in relation to both issues.
He held that the correct interpretation of the Act was that the two year rule laid down by section 42(4A) was only intended to be applicable in cases where personal representatives were relying on the deceased’s two year ownership. It did not apply in circumstances where the personal representatives had themselves become entitled to apply for an extension by virtue of their own two year ownership, as was the case here.
Morgan J also decided in favour of the tenant in relation to the assignment of the notice. The assignee, Ms Villarosa only became the legal owner on registration, not on completion. As Morgan J. stated: “during the registration gap, the “tenant” for the purposes of Chapter II of Part I of the 1993 Act remained the executors …. Thus, during the registration gap, a section 42 notice could be given by the executors and could not be given by Ms Villarosa”.
Similarly, “at all times up to 27 June 2016, the legal title to the lease and the benefit of the notice were vested in the same persons, the executors. On and after 27 June 2016, the legal title to the lease and the benefit of the notice were vested in the same person, Ms Villarosa. That would seem to be perfect compliance with what is required by section 43(3), namely, that the lease and the notice go together…”
Comments
This is a strange case but the key message for conveyancers is that where an extended lease is required, the buyers should not complete without proof of service of the notice AND receipt of the notice from the Landlord accepting the claim. Problems like this after completion of the purchase will then be avoided.
