Summary: In a recent case, the tenant of a flat exercised the statutory right to extend to their lease. The tenant’s immediate landlord was aggrieved at the financial settlement agreed between the tenant and freeholder, and argued that the Act governing lease extensions should be interpreted to give effect to her human rights. Although the court rejected the landlord’s complaint, this case is a timely reminder that these rights must be respected.
Human Rights Act arguments have been debated in cases concerning residential possession and nuisance/negligence. But most cases proceed without any live issue as to Convention rights. Perhaps the legislation concerning property rights is generally perceived as “fair” to all affected parties. Or perhaps it is simply because human rights arguments tend not to be prominent when commercial parties are involved.
Kateb v Howard de Walden Estates Limited & Anor
In this recent Court of Appeal decision, Mrs Kateb was the intermediate landlord of a tenant who exercised the right to acquire a new lease. She argued that the Leasehold Reform Housing & Urban Development Act 1993 (“the Act”) could, if misconstrued, constitute a breach her human rights. Instead the Court should construe the Act to give effect to her rights under Article 6 and A1P1 of the European Convention on Human Rights, respectively the right to a fair hearing and to the peaceful enjoyment of her property.
So what was it about the Act that Mrs Kateb considered to be an infringement of her human rights?
Chapter II of the Act gives individual qualifying tenants the right to acquire a new long lease of their flats. If validly exercised, the tenant becomes entitled to the grant of a new lease at a peppercorn rent for a term expiring 90 years after the term date of the tenant’s existing lease. In most cases, this will extinguish the intermediate landlord’s:
- right to the ground or other rent payable under the existing underlease; and
- reversion (which could be valuable especially if the reversion is lengthy)
for which the intermediate landlord is entitled to receive compensation. You would think that the intermediate landlord would have a say in arriving at the appropriate amount of this compensation. However that is not necessarily the case, and it was not the case for Mrs Kateb. This was because she was not the “competent landlord” for the purpose of the acquisition of the new lease by the tenant. Her leasehold interest in the tenant’s flat was not long enough to enable her to grant a new lease to the tenant under Chapter II of the Act. The competent landlord was, therefore, the freeholder of the premises, Howard de Walden Estates Limited.
The Act provides that if a tenant wishes to acquire a new lease, it must serve a notice on the “competent landlord”, who is given statutory authority to negotiate with the tenant to arrive at the level of compensation and terms of the new lease. This negotiation is conducted by the competent landlord on behalf of the intermediate landlord. Although there is a statutory duty of care owed by the competent landlord, and a duty to act in good faith and with reasonable care and diligence, the intermediate landlord is effectively cut out of the negotiation.
The Act does give the intermediate landlord the right to be separately represented in proceedings relating the determination of the compensation payable. However, most lease extension claims are agreed without proceedings or settled so there is no hearing.
In most cases, the intermediate (non-competent) landlord is obliged to accept the result of the negotiation or compromise between the tenant and competent landlord. If the competent landlord acted in good faith and with reasonable care and diligence in reaching the compromise, the intermediate landlord has nowhere to turn.
Mrs Kateb argued that if this was the true meaning of the Act, its effect was to deprive her of her ability to receive ground rents, the benefit of possession under her reversionary lease and of the opportunity to participate in the negotiation of the compensation. Mrs Kateb said that the Act should be interpreted to give her a seat at the negotiating table.
In answer to the complaint that Mrs Kateb had been denied a right to a fair hearing, the Court of Appeal held that the removal of her rights of direct access to proceedings avoided a multiplicity of proceedings and struck a reasonable balance between protecting the interests of intermediate landlords and facilitating the grant of the extended lease. This was proportionate having regard to the purpose of the legislation and the rights of the parties.
Mrs Kateb did not challenge the amount of compensation, rather the method of assessing it. Her A1P1 complaint mirrored her Article 6 complaint. However, the statutory process had a legitimate aim and was a considered attempt at balancing competing interests.
The court was therefore not persuaded that the procedural model under the Act for determining compensation payable to intermediate landlords was formulated without regard to the protection of Mrs Kateb’s human rights.
In the context of a civil dispute involving the interpretation of legislation governing property rights or a right to compensation, judges must interpret legislation in a way which is compatible with Convention rights. If the court is satisfied that a provision of a law or piece of legislation is incompatible with a Convention right, it may make a declaration of that incompatibility.
Human Rights Act arguments are proper in cases where legislation is said to be fundamentally unfair, depriving individuals or businesses of the property, or proper access to proceedings.