Claim dismissed for order to extend lease to 999 years with no premium

The Chancery Division of the High Court heard an appeal from the Southend County Court in which it dismissed the claimant’s appeal against a decision dismissing her claim for an order to extend the lease on her flat to 999 years with no premium.

The High Court found that there was no proper basis in the case to challenge the exercise of the judge’s discretion.

The claimant's claim was for an order under s14(2) of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). The order sought was to extend the lease on a flat owned by the claimant at 64A Park Road, Westcliffe-on-Sea, Essex, to 999 years for no premium. The County Court Judge dismissed the claim.

The claimant's flat was on the first and second floors of the property at 64 Park Road. The defendant owned the lease on the ground floor flat. There were no other flats. In April 2007, the claimant and the defendant acquired the freehold interest in the entire building for £19,500 from the existing freeholder (Regis Group Ltd). This was a collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993. At the same time, they both signed a Deed of Trust relating to the freehold. The claimant and the defendant were the two trustees and are also the two beneficiaries under the trust. The trust deed was a simple document which provided the co-owners hold the property in trust for each other as tenants in common in equal shares. The price was determined by a valuation report dated 18 July 2006. At all times, the parties had legal advice.

Seven years later the claimant asked the defendant to agree to a 999-year extension of her lease at a peppercorn rent. No agreement was reached and the action was started as a Part 8 claim.

The claimant's case was that the court had power to make the order under s14 of TOLATA and that, under s15 of TOLATA the relevant factors are: the common intentions of the parties who created the trust; and the purpose for which the property the subject of the trust is held. The common intention was to extend the lease. The claimant's purpose throughout the whole process was that she wanted to extend her lease and she would have discussed the 999-year lease with the defendant. Given the common intention of the parties creating the trust, this should be a powerful factor in the exercise of the court's discretion under s14. The claimant said that the order should be made.

The defendant opposed the claim. His case was that there was no power under TOLATA to make the order sought because it would radically diminish the value of the trust property (ie the freehold). He denied that prior to the transaction there were any discussions between himself and the claimant about granting 999-year leases. The defendant also pointed out that the claimant's request for the 999-year lease came in 2014, seven years after the purchase of the freehold.

The County Court Judge accepted the claimant's case that there was power under TOLATA to make the order sought; however, when it came to the facts the judge preferred the evidence of the defendant to the claimant about what had been discussed before the purchase of the freehold. He rejected her case that the common intention was to freely grant new leases and accepted the defendant's evidence about the advantages in acquiring the freehold. Those were that the parties would be able to manage the property without the former freeholder, Regis, and would save on ground rent and insurance. He held that the freehold and leasehold interests were entirely separate and that the Declaration of Trust was clear and simply set out the contract entered into by the two parties as regards their co-ownership. He held that the grant of a 999-year lease would impact the value of the trust and that the claimant had an alternative route open to her to extend her lease under s39 of the 1993 Act. The judge declined to exercise his discretion to make the order under s14.

The High Court Judge considered the claimant's various points separately and rejected them. He was unconvinced that they amounted to anything material in the exercise of the judge's discretion on the facts as he found them to be. There was no proper basis in this case to challenge the exercise of the judge's discretion on appeal so the appeal was dismissed.