Factual and Procedural Background
The appeal concerns the interpretation of whether a "shared ownership lease" granted for a term exceeding 21 years qualifies as a "long lease" under section 76 of the Commonhold and Leasehold Reform Act 2002 ("the 2002 Act"), regardless of whether the tenant holds a 100% share. The appellant, Company A, is the freehold owner of a residential development comprising two blocks, with Block A containing 97 flats. Some flats are subject to head leases held by a housing association, Company B, and underlet on separate shared ownership leases for terms exceeding 21 years. Some tenants have staircased to 100% ownership, others have not.
The respondent, an RTM company established to acquire the right to manage Block A under the 2002 Act, initially gave notice of its claim in 2019, which Company A opposed on grounds including failure to give notice to Company B, contending that tenants with less than 100% shared ownership were not "qualifying tenants" under the Act. The dispute was initially decided by a Judge in the Upper Tribunal (Lands Chamber) in November 2020, who held that shared ownership tenants were qualifying tenants regardless of staircasing but found the failure to notify Company B invalidated the claim.
Following this, the RTM company issued notices to all shared ownership tenants and Company B and renewed its claim. The First-tier Tribunal upheld the claim in March 2022, with Company A reserving its position to appeal. Permission to appeal was granted to the Upper Tribunal on the basis that the appeal would likely be dismissed, enabling Company A to appeal to this Court, which it has done.
The sole issue on appeal is whether a shared ownership lease exceeding 21 years is a long lease under section 76 of the 2002 Act if the tenant does not hold a 100% interest. The RTM company also challenges the earlier decision that failure to notify Company B invalidated its claim.
Legal Issues Presented
- Whether a shared ownership lease granted for a term exceeding 21 years qualifies as a "long lease" under section 76 of the 2002 Act regardless of the tenant holding a 100% share.
- Whether failure to give notice of invitation to participate to the head lessee (Company B) invalidates the RTM company’s claim to acquire the right to manage.
Arguments of the Parties
Appellant's Arguments
- Section 76(2)(e) of the 2002 Act comprehensively deals with shared ownership leases, implying that only those with 100% share qualify as long leases.
- It is practically unheard of for shared ownership leases to be granted for 21 years or less, so Parliament did not intend to include such leases under paragraph (a) of section 76(2).
- The interpretation that all shared ownership leases over 21 years are long leases regardless of share would render paragraphs (d), (e), and (f) of section 76(2) redundant or of little importance.
- Paragraph 13 of the Consultation Paper supports the view that only shared ownership leases with 100% share qualify as long leases.
Respondent's Arguments
- The various paragraphs in section 76(2) represent alternative gateways; a lease qualifies as a long lease if it satisfies any one of them.
- A shared ownership lease granted for more than 21 years qualifies as a long lease under paragraph (a) regardless of the tenant’s share.
- Tenants with long shared ownership leases who have not staircased to 100% have a clear interest in management and should be qualifying tenants.
- The failure to give notice to Company B does not invalidate the RTM company’s claim to acquire the right to manage.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Brick Farm Management Ltd v Richmond Housing Partnership Ltd [2005] EWHC 1650 (QB) |
Interpretation of "long lease" under the Leasehold Reform, Housing and Urban Development Act 1993; rejection of excluding shared ownership leases from the broad definition of long leases. |
Cited for the proposition that paragraph (a) of the definition of long lease is unqualified and that paragraph (d) in the 1993 Act is otiose but does not restrict the ambit of (a). The Court found this reasoning persuasive for interpreting the 2002 Act. |
| Richardson v Midland Heart Ltd [2008] L&TR 31 |
Whether a shared ownership lease for 99 years with less than 100% share qualifies as a long lease under section 76 of the 2002 Act. |
The Deputy High Court Judge held that the lease was not a long lease because the tenant’s share was only 50%. The Court noted this decision lacked reference to section 76(2)(a) or Brick Farm and did not follow it. |
| Corscombe Close Block 8 RTM Co Ltd v Roseleb Ltd [2013] UKUT 81 (LC) |
Whether tenants with shared ownership leases below 100% share have long leases under the 2002 Act. |
Held that tenants with shared ownership leases exceeding 21 years are qualifying tenants under paragraph (a) regardless of share. The Court found this approach consistent with natural meaning and parliamentary intent. |
| Settlers Court RTM Co Ltd v FirstPort Property Services Ltd [2022] UKSC 1 |
Principle that statutory language is the primary guide to purpose and application. |
Emphasized that the language of Parliament is the primary guide, supporting the interpretation that a shared ownership lease over 21 years is a long lease regardless of share. |
Court's Reasoning and Analysis
The Court analysed the statutory framework of the 2002 Act, particularly section 76, which defines a "long lease" via multiple alternative criteria (paragraphs (a) to (f)). The Court found that these paragraphs represent a series of gateways, meaning a lease qualifies as a long lease if it meets any one of the criteria.
The Court rejected the appellant’s argument that shared ownership leases exceeding 21 years are only long leases if the tenant holds a 100% share under paragraph (e). Instead, the Court held that such leases qualify under paragraph (a) as leases granted for a term exceeding 21 years, regardless of shareholding.
This interpretation aligns with the natural meaning of the statutory language and is consistent with prior authority, particularly the reasoning in Brick Farm and Corscombe Close, which the Court found persuasive. The Court also noted the policy rationale that tenants with less than 100% shares still have a significant interest in management and are thus appropriately qualifying tenants.
The Court acknowledged the appellant’s concern that this interpretation might render paragraphs (d), (e), and (f) less significant but concluded that these paragraphs address infrequent or particular circumstances and that their limited application does not undermine the broader statutory scheme.
Regarding the Consultation Paper, the Court found that the paragraph cited by the appellant was not a definitive guide to parliamentary intent and that the statutory language itself must prevail.
Consequently, the Court agreed with the Judge below that all shared ownership tenants with leases exceeding 21 years are qualifying tenants under the 2002 Act, regardless of staircasing.
The Court did not find it necessary to address the respondent’s notice concerning the validity of the failure to give notice to the head lessee.
Holding and Implications
The appeal is dismissed.
The Court held that a shared ownership lease granted for a term exceeding 21 years qualifies as a "long lease" under section 76 of the 2002 Act regardless of whether the tenant holds a 100% share. This confirms that tenants with less than 100% shared ownership are "qualifying tenants" entitled to participate in right to manage claims.
This decision directly affects the parties by affirming the RTM company's right to manage Block A based on the inclusion of all shared ownership tenants as qualifying tenants. The Court did not establish any new precedent beyond confirming the correct statutory interpretation consistent with prior authorities.