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The Court of Appeal has handed down judgment addressing the right to manage, holding that an equitable owner in the registration gap was not a “landlord” for the purposes of sections 79(6) and 88 of the Commonhold and Leasehold Reform Act 2002, and neither was the Appellant estopped from denying that the equitable owner was a “landlord” for those purposes. The Court distinguished the recent Upper Tribunal (Lands Chamber) decision Avon Freeholds Ltd v Cresta Court E RTM Company Ltd [2024] UKUT 335 (LC) which held that the lessee of a long lease in the registration gap was a qualifying tenant within the Act.
The Respondent had purchased the freehold and headlease of a block of flats from the registered proprietor, but its purchases had not been completed by registration by the time the Appellant had served upon the Respondent a claim notice pursuant to s.79 of the Act. The Respondent served a negative counter notice under s.84(1) disputing the Appellant’s claim to acquire the right to manage, but not denying that it was a “landlord” despite only having equitable rights until the registration of its purchases (s.27 Land Registration Act 2002). The Appellant applied to the First-tier Tribunal under s.84(3) for a determination that it was entitled to manage the property, naming the Respondent as “landlord”. The Appellant subsequently withdrew that application the day before the hearing was due to take place.
The Respondent then applied to the FTT for its costs under s.88, pursuant to which an RTM company which withdraws its claim is liable for the reasonable costs incurred by a “landlord under a lease….in consequence of a claim notice”. This costs application was unsuccessful, the FTT holding that the Respondent was not a "landlord" as required by s.88(1) because it had no legal interest in the property. The Upper Tribunal (Lands Chamber) allowed the Respondent's appeal, relying upon Benedictus v Jalaram (1989) 58 P&CR 330 to hold that the Appellant, having issued proceedings against the Respondent, was estopped from denying the Respondent's standing as the landlord.
The Appellant successfully appealed to the Court of Appeal. The Court held that the Respondent was not a “landlord under a lease” for the purposes of sections 79(6) and 88 of the Act. In its ordinary and natural meaning, a "landlord under a lease" meant the landlord as a matter of law. Both the freehold and headlease interest were existing registered estates which at the material time were not vested in the Respondent, who therefore was not the legal owner. Cresta Court was distinguished: it concerned an interest in land which existed only in equity (i.e. there was not a separate legal owner, as in the present case) and relied upon s.112(2)(b) of the Act which expressly provided that an equitable lease could fall within the Act.
Neither was the Appellant estopped from denying that the Respondent was a “landlord under a lease”. The necessary elements of estoppel by convention and estoppel by representation had not been made out on the facts. Benedictus was not a straightforward decision, and not authority for the proposition that an estoppel by convention can arise simply from the pleadings in the case.
Comment: Section 88 is set to be repealed by s.50(4) of the Leasehold and Freehold Reform Act 2024. Nevertheless, this judgment is useful for its exploration of the wider principles, including complicated issues concerning the position of landowners in the registration gap. Support can be found for the obiter in Cresta Court addressing when equitable interests are sufficient for the purposes of the Act if there exist both legal and equitable titleholders.
Even though it concerns the Landlord and Tenant Act 1954, Benedictus had previously been cited (successfully) in support of similar arguments relating to estoppel under various property statutes, including the Commonhold and Leasehold Reform Act 2002 and the Leasehold Reform, Housing and Urban Development Act 1993. This judgment indicates that in future specific evidence will have to be adduced in relation to every ingredient for the estoppel upon which reliance is sought. Alternatively, an abuse of process argument such as that raised in Benedictus may be more successful – as hinted at in paragraph 60 of the Court’s judgment.
Justin Bates KC and Sophie Gibson acted for the Respondent in 159-167 Prince of Wales Road RTM Co Ltd v Assethold Ltd and the Appellant in Avon Freeholds Ltd v Cresta Court E RTM Company Ltd.
