9 Cornwall Crescent London Ltd v Kensington and Chelsea

Factual and Procedural Background

This appeal concerns a claim by the Appellant, acting as nominee for a group of tenants in a building, seeking to exercise their right of collective enfranchisement under Part 1, Chapter 1 of the Leasehold Reform, Housing and Urban Development Act 1993 ("the Act"). The Appellant served an initial notice under section 13 of the Act to the common landlord, Company A, specifying a proposed purchase price of £210. The landlord responded with a counter-notice under section 21 of the Act proposing a price of £130,000. The tenants challenged the validity of the landlord's counter-notice on the basis that the proposed price was unrealistically high.

The claim failed in the court below. If the Appellant had succeeded, the tenants would obtain the freehold of the building at the price proposed in their initial notice in default of a valid counter-notice.

The landlord contended that its counter-notice was valid, that the price issue should be resolved by a leasehold valuation tribunal under section 24 of the Act, and that the requirement of a "realistic" proposal does not apply to a landlord's counter-notice if the price was proposed bona fide and based on professional valuation advice.

Legal Issues Presented

1. Whether a landlord's counter-notice proposing an unrealistically high purchase price can be invalidated on that basis.
2. If such invalidation is possible, whether it applies when the landlord's figure is based on bona fide advice from a professional valuer.
3. The proper interpretation of the term "counter-proposal" in section 21(3)(a)(i) of the Act and whether the landlord's counter-proposal must be realistic or genuine.

Arguments of the Parties

Appellant's Arguments

• The landlord’s counter-notice proposing a price of £130,000 was unrealistically high and therefore invalid.
• The test established in Cadogan v Morris, requiring a "realistic" figure, applies equally to landlord's counter-notices as to tenants' initial notices.
• The validity of a landlord's counter-notice should include an objective element of realism, supported by professional valuation evidence.
• Without an objective test, landlords could propose absurdly high prices, undermining the statutory scheme and prejudicing tenants.

Landlord's Arguments

• The principle requiring a "realistic" proposal applies only to tenants' initial notices, not to landlords' counter-notices.
• Section 21 counter-notices serve only to trigger negotiation and tribunal determination; they have no binding or default effect.
• The landlord’s counter-proposal was made bona fide and based on professional valuation advice, despite later concessions that the valuation was at the high end.
• The statutory scheme and case law (including Sun Life Assurance plc v Thales Tracs Ltd) support an objective meaning of "proposal" as a performative act, not requiring genuineness or realism of intention.
• It would be inappropriate for courts to conduct valuation inquiries at the notice stage; disputes should be resolved by the leasehold valuation tribunal.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court undertook a detailed statutory interpretation of the terms "propose" and "counter-proposal" within the context of the Leasehold Reform, Housing and Urban Development Act 1993, with particular focus on sections 13, 21, 24, and 25.

It recognized that tenants' initial notices under section 13 have a "judgment by default" effect if the landlord fails to serve a valid counter-notice, justifying a stricter requirement that tenants propose a "realistic" purchase price genuinely intended to be paid. This protects landlords from being forced to sell at an unrealistically low price.

Conversely, a landlord's counter-notice under section 21 does not have a similar binding or default effect on tenants. The landlord's counter-proposal merely signals an issue for negotiation and possible tribunal determination. Therefore, the Court concluded that the "realistic" test does not apply to landlord counter-notices in the same way.

The Court reasoned that the landlord's counter-proposal must be a genuine act of putting forward a figure for consideration, but it need not be objectively realistic or justified by valuation evidence. The landlord may propose any figure, however high, without invalidating the counter-notice, provided it is made bona fide and not as a sham.

The Court emphasized that the statutory scheme anticipates disputes over price to be resolved by the leasehold valuation tribunal, not by preliminary court inquiries at the notice stage. This preserves the negotiation process and avoids premature litigation over valuation disagreements.

In applying these principles to the facts, the Court noted the landlord's valuer admitted the proposed price was at the high end and not within a reasonable valuation bracket, but the landlord acted in good faith based on professional advice. Thus, the counter-notice was valid.

Holding and Implications

The Court DISMISSED the appeal.

The holding clarifies that the validity of a landlord's counter-notice under section 21(3)(a)(i) of the Leasehold Reform, Housing and Urban Development Act 1993 does not depend on the proposed purchase price being "realistic" or objectively justifiable by valuation evidence. Instead, it requires only that the counter-proposal be a bona fide figure genuinely put forward for consideration.

This decision maintains the statutory scheme's balance by imposing a stricter realism requirement on tenants' initial notices, which have binding consequences if unchallenged, while allowing landlords greater latitude in counter-proposals, subject to good faith. The resolution of price disputes remains within the jurisdiction of the leasehold valuation tribunal, preserving the negotiation and dispute resolution framework established by the Act.

No new precedent altering the fundamental statutory scheme was established; rather, the Court reaffirmed and clarified existing principles as applied to landlord counter-notices.