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Ruling clarifies law on the ability of flat owners to acquire amenity land on collective enfranchisement

Tue 07 Feb 2012

The Fluss v Queensbridge Terrace Residents Limited case may help resolve ambiguities in existing freehold regulations.

A dispute arose when flat owners of a development exercised their right to collectively enfranchise the freehold to their block and as part of that claimed the freehold to the amenity land that served it.

The freeholder resisted the acquisition of the amenity land by offering rights equivalent to those contained in the flat owner’s leases however, the parties could not agree on the package of rights.

The Lands Chamber rejected the Leasehold Valuation Tribunal's draft grant and clarified exactly what issues needed to be addressed when determining the control of amenity land.

Mark Vinall, a partner at Winckworth Sherwood who specialises in enfranchisement matters, commented: "The extent of the building and external parts flat owners enfranchising the freehold to their block are entitled to claim is a thorny issue. This case has helped clarify the position with regard to claims for external parts in an estate situation and demonstrates that whether external parts are claimed or not service charge provisions need to be considered carefully.

"Recent case law has clarified the extent of the building that can be acquired with regard to caretaker's flats and air space and the extent to which the participating flat owners can pick and chose the areas to be acquired; caretaker's flats can constitute a common part in certain circumstances and so be acquired; The roof and an element of air space above it forms part of the building and can be acquired;  the participants do not have to acquire the whole of the roof i.e. where a significant element of development value attaches to part of it the participants can exclude it from their claim so as to avoid the premium being inflated by this.

"With regard to external parts these can be claimed where they either fall within flat owner's ownership pursuant to their leases (their ‘demise’), i.e. parking spaces, or their leases include rights to use them in common with others i.e. gardens. This case deals with the latter. It was complicated by the existence of an intervening lease in respect of the amenity land which was to be acquired by the participants.

"The freeholder is entitled to meet a claim to acquire the freehold to external parts used in common with, amongst other things, an offer of equivalent rights over the land in question. The landlord needs to be careful to ensure that the rights offered are 'nearly as may be the same rights as those enjoyed in relation to the property on the relevant date' as those flats owners benefit from via the leases of their flats.

"If the freeholder does not do so then its rejection of the claim to the freehold to amenity land may fail. 

“In this case the rejection of the claim to the freehold was accepted by the participants but the freeholder’s proposed terms were watered down; the flat owner's leases gave them the right to use certain amenity land subject to conditions including obligations on the flat owner's part to contribute toward the cost of maintaining the land by way of a service charge provision and to observe regulations issued over time by the landlord governing the use of it. The freeholder had proposed a form of deed containing a very detailed set of conditions in this regard and fell down in proposing certain terms that would change the flat owner's position as compared to that they currently enjoyed pursuant to their flat leases and current legislation.

"It fell to the Upper Tribunal to determine the extent of the right to use the amenity land and the conditions that would attach to it after the intermediate lease fell in."The Upper Tribunal determined that:

• the flat owner's current rights for this purpose were those rights spelt out in their leases plus the benefit of current legislation such as the statutory protection afforded with regard to service charges raised pursuant to their leases;
• a freeholder granting such rights may be entitled to compensation (but did not decide the point as it was not necessary to do so).
• with regard to the freeholder's power to issue regulations as to the enjoyment of the amenity land it could not undermine the primary right  (to enjoy the gardens) by imposing regulations that had not previously been issued (it proposed restrictions prohibiting animals being taken onto the land or leaving bicycles there);
• the landlord could not impose a condition precedent to the enjoyment of the rights that the users must have strictly complied with the conditions attaching to the use of the land;
• while it said it would not draft the form of completion deed for the parties it effectively did that by commenting clause by clause the landlord's draft having discarded the participants draft as inadequate;
• the landlord could not open up use of the land to a wider class of users than enjoyed it at the time the claim was made (two other blocks on the estate)."