A tenant with a shared ownership lease, whether or not they have staircased their interest to 100%, is considered to have a long lease within the meaning of section 76(2) of the Commonhold and Leasehold Reform Act 2002 if the lease was “granted for a term of years certain exceeding 21 years”.
The decision of the Court of Appeal in Avon Ground Rents Ltd v Canary Gateway (Block A) RTM Co Ltd [2023] EWCA Civ 616; [2023] PLSCS 92, has important consequences for shared ownership leaseholders in exercising the right to manage, enfranchise and seek lease extensions.
The appellant was the freehold owner of a development in London, E14.
The development comprised two blocks containing residential flats. Block A contained 97 flats, of which 17 were the subject of headleases in favour of a housing association. Those flats were underlet on shared ownership leases for terms greater than 21 years.
Five of the shared ownership tenants had staircased their interest to 100%, but the remainder had not.
The respondent RTM company sought to acquire the right to manage Block A pursuant to the 2002 Act.
The appellant opposed the claim on a number of grounds. In a long running dispute, the Upper Tribunal (Lands Chamber) determined in 2020 that the shared ownership lessees had long leases within the meaning of section 76(2). Yet, their claim to acquire the right to manage was dismissed on other grounds.
The respondent again attempted to exercise the right to manage Block A. This was again opposed by the respondent.
The sole issue on appeal was whether a “shared ownership lease” granted for a term of more than 21 years was a “long lease” for the purposes of section 76.
A “long lease” is defined in section 76(2). The appellant argued that a shared ownership tenant who had not staircased their interest to 100% could not be deemed to have a “long lease” within the meaning of the Act by virtue of section 76(2)(e).
The respondents contended that section 76(2) should be construed as providing a series of separate gateways. A lease would be a “long lease” if any of sub-paragraphs (a) to (f) were applicable.
Accordingly, under section 76(2)(a) a shared ownership lease for a term of more than 21 years would be a long lease whether or not the tenant had staircased their interest to 100%.
The Court of Appeal agreed. It found that it was unlikely that parliament would have intended to restrict the unqualified ambit of section 76(2)(a).
Elizabeth Dwomoh is a barrister at Lamb Chambers
