29 June 2017

Forsters succeed in Court of Appeal

A question of interpretation.

On 29 June 2017 the Court of Appeal gave judgment on an interesting question of statutory construction concerning Section 9 of the Leasehold Reform Act 1967 ("the 1967 Act") and the Interpretation Act 1974 ("the Interpretation Act").

The 1967 Act provides a scheme for enfranchisement which was exercised in this case by the London Sephardi Trust when they served notice on their freeholder, the John Lyon's Charity, to acquire the freehold of a house situated in Maida Vale known as 3 Vale Close. Their original lease expired in December 2016 but, some time ago, it had been extended under the 1967 Act for 50 years to December 2066. The Court of Appeal had to decide whether, on enfranchisement, the freehold interest should be valued as if it was subject to the extended lease or not. This in turn depended on the construction of a statutory provision which had been subject to successive amendments. 

As Nicholas Dowding QC for the Appellant said in his opening "The point in issue is really quite a short one but its brevity only becomes apparent after struggling through a thicket of original and amending legislation". 

The issue has a significant impact on the final premium payable for the freehold. Subject to an extended lease the premium payable for the freehold was £1.748 million. When the extended lease was ignored the premium increased to £2.866 million. It is little surprise that the John Lyon's Charity appealed the Upper Tribunal's decision that the freehold should be valued subject to the extended lease. 

The Court of Appeal dismissed their appeal and decided that the effect of the Interpretation Act was such that the freehold had to be valued on the basis that the sale is subject to a lease expiring in 2066, thus significantly reducing the premium payable. The Court of Appeal had to consider the meaning of Section 9 of the 1967 Act as amended by subsequent Acts and in particular, the impact of Section 17(2)(a) of the Interpretation Act on its construction.

Natasha Rees, Head of Property Litigation at Forsters who acted for the London Sephardi Trust said "Although it is a short point and one which only impacts on a discrete class of leaseholders the decision could have wider ramifications in terms of construction where statutory provisions have been subject to successive amendments."

Philip Rainey QC who appeared for the London Sephardi Trust said "The decision sheds light on the "repeal and re-enactment" provision of the Interpretation Act, a statute we often take for granted".

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