Vectis Property Company Ltd v Cambrai Court Management Company Ltd [2022] UKUT 42 (LC)

Summary

The Upper Tribunal (Lands Chamber) has considered if a landlord was entitled to build two additional flats on the roof space of a building, despite having no express right to do so in the flat leases. The issue was considered in the context of a collective enfranchisement claim. On appeal, the Upper Tribunal held that the flat leases did not prevent development and the landlord was entitled to build on the roof space.

The facts

Vectis was the freehold owner of Cambai Court (the Property), a block of nine flats. The flats were let to nine lessees under long leases. The lessees were also shareholders in the resident's management company, Cambai Court Management Company Ltd, which had responsibility for maintaining the exterior of the Property, including the roof.

In 2018, a third-party developer obtained planning permission to build two additional flats on the roof of the Property and offered Vectis £200,000 to purchase the Property. The tenants were served with notices under section 5A of the Landlord and Tenant Act 1987, which provided the tenants with a right of first refusal to purchase the Property at the price offered.

Instead, the tenants chose to claim the right to collectively enfranchise the Property (to buy the landlord's freehold interest) under section 13 of the Leasehold Reform Housing and Urban Development Act 1993. Vectis admitted that the tenants had this right; but, the price payable was to be determined by the Tribunal.

The parties agreed that the base price payable for the freehold would be £24,500; but, the landlord claimed an additional £200,000 for the development hope value for the roof space. The tenants claimed that it was not possible to develop the roof space and as such the premium payable to the landlord was only £24,500.

The decision 

The First Tier Tribunal held that the management company could prevent the construction of new flats on the roof as the presence of the new flats would interfere with its obligation to repair and maintain the roof. Accordingly, it decided that the price payable should not include the full development value claimed by the landlord. The landlord appealed.

On appeal, the Upper Tribunal decided that the flat leases did not prevent the development.  The roof and airspace above the Property was not demised and so the landlord was free to develop it. It was not necessary for the landlord to have an express right to do so reserved in the flat leases. 

It also confirmed that the development would not interfere with the management company’s repairing obligations over the roof. Its obligations would require it to repair whatever existed from time to time.

Consequently, Vectis was entitled to be paid a fair price to reflect the loss in development value as part of the premium to enfranchise.

Our comment

This case will be a welcome outcome for landlords forced to sell their freehold interest as result of collective enfranchisement. It seems that the Tribunal will look favourably on the landlord to factor in any potential development value when assessing the premium payable.