Whitehall Court London Limited v The Crown Estate Commissioners [2018] EWCA Civ 1704
The Court of Appeal has decided that the no-Act assumption on lease extensions extends to the block containing the flat, not just the flat alone. It has been thought by many that the assumption in Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993 did not mean that the subject flat was unique in having no right to a lease extension, and that the assumption applied to all of the flats in the block. However, no reported decision specifically confirmed it. The Court of Appeal in this decision has done just that.
The valuation process for a lease extension in this case was complicated, because the headlease, owned by Whitehall Court, required payment of a rent to the freeholder worked out as a percentage of the headlessee’s total income from the block above a certain fixed sum. The rents on all unextended leases of flats in the building doubled in 2029 taking the total income above the fixed sum. When valuing the loss in value to the freehold and headlease respectively resulting from the grant of a new lease of the subject flat, the valuers needed to know if they were to treat as certain that the rents of all the other flats would double in 2029, or should allow for potentially diminishing rents due to future 1993 Act lease extensions.
The Court of Appeal thus had to decide the extent of the no-Act assumption, amongst other issues. They decided it in the Crown Estate Commissioners’ favour, dismissing the appeal on this issue from the Upper Tribunal (Lands Chamber) below.
The Court also considered the issue of whether the headlessee had to include payments received from transactions entered into in breach of covenant when accounting for income received. The Court of Appeal held that it did. The parties would have understood that, where a breach of covenant occurred, the freeholder could waive the breach, thereby making the transaction lawful. It was no bar to inclusion in the income that was to be taken into account in calculating the rent that the income had been obtained in a way not envisaged as lawful by the leasehold covenants.
Stephen Jourdan QC and Cecily Crampin appeared for the Crown Estate Commissioners. Anthony Radevsky and Paul Letman appeared for Whitehall Court London Limited.
The judgment can be found here
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