Introduction
The Bennets Courtyard case has captivated the public’s attention and sparked intense debates as it unfolded, establishing new legal precedents. This article provides an in-depth exploration of this landmark case, including its background, key arguments, and ultimate outcome.
Background Legal Knowledge
1. Leasehold Reform, Housing and Urban Development Act 1993 (referred to as “The Act“) plays a pivotal role in this groundbreaking case. The Act allows long leaseholders within a block of flats to unite and compel the purchase of the freehold for their building through a process known as “Collective Enfranchisement.” In this context, the freeholder cannot refuse the sale of the freehold to the leaseholders if they opt for this route.
2. Long leases can cover various common parts of a building, such as communal gardens, stairwells, and, in the case of Bennets Courtyard, the roof space. When leaseholders pursue collective enfranchisement, they also have the right to purchase these leases for the common areas if they so choose. Importantly, the purchase of common parts does not have to occur simultaneously. Leaseholders can group together to buy the freehold and later acquire leases for other common areas.
3. The Act establishes a statutory formula, employed by qualified valuers/surveyors, to determine the price at which leaseholders can purchase the freehold. It is worth noting that land, even barren roof spaces, significantly increases in value when granted planning permission for development.
4. Additionally, Paragraph 3 of Schedule 1 of The Act empowers the court to replace the freeholder (“the reversioner”) of a building with another “relevant landlord” if deemed reasonable to do so. The key benefit of this is that the reversioner would be able to set counter-notice terms and prices should they encounter a Collective Enfranchisement notice from the leaseholders
Case Context and Outcome
In the Bennets Courtyard case, the leaseholders had obtained the freehold in September 2022 but intentionally refrained from purchasing the roof space to avoid disputes over its development value. Meanwhile, the leaseholder of the roof space had secured planning permission in November 2022 to construct 17 flats atop the existing buildings. Subsequently, the leaseholders sought a professional valuation of the roof space from Alsop LLP, valuing it at £1,800,000.
In December 2022, a separate group of leaseholders formed an alliance to purchase the roof space and offered £1,000, asserting their legal right under the auspices of the Collective Enfranchisement clauses as written in The Act.
Challenging the value of the roof space lease and unwilling to sell their valuable asset for a mere £1,000, the leaseholder of the roof space refused the notice and brought the notice-servers to court. They argued that the roof space, now with planning permission, held considerable value, making them the most valuable interest in the building. Consequently, they applied to the court to appoint themselves as the reversioner.
In a refreshing outcome, the judge, Judge Saggerson, ruled in accordance with the spirit of the act awarding the developers (leaseholder of the roof space) the coveted reversioner status they sought. This consequential decision empowers them to proceed with their development plans unhindered by allowing them to set the counter notice price to a loftier, fairer level. The implications of this ruling are far-reaching for Airspace developers at large as it establishes a precedent, affording them greater ownership rights and increased control over their designated development areas.
Industry Implications
Although this case may appear highly technical with limited implications for the general public, the Bennets Courtyard ruling imparts a crucial lesson to airspace developers and other potential developers: Planning permission goes beyond increasing airspace value. It can also safeguard freehold ownership. Consider the scenario where the second group of leaseholders at Bennets Courtyard had served notice to purchase the roof space in August 2022. They could have potentially acquired the lease for a mere £1,000. This case clarifies the end value of any common portion of a freehold that has obtained planning permission, and eliminates much of the surrounding ambiguity.
The development process may seem daunting, but with the right guidance it can become a relatively smooth journey. If you possess a roof space and wish to safeguard its value from the outset, gaining ownership and control over your own buildings, we encourage you to reach out to us today.
