Court of Appeal backs rights of 200,000 shared ownership leaseholders after right to manage duel with Israel Moskovitz

By Mark Loveday

A great day for the estimated 200,000+ shared ownership leaseholders, as the Court of Appeal confirms they have the same legal rights as other private sector leaseholders.

In Avon Ground Rents v Canary Gateway (Block A) RTM [2023] EWCA Civ 616, (30 May 2023), the Court rejected an appeal by the litigious landlord Avon Ground Rents, which opposed a claim for the right to manage seven blocks of flats in London’s East End. Leaseholders successfully argued that 12 shared ownership leaseholders (who had not ‘staircased’ to 100%) were properly treated as tenants under right to manage legislation.

The decision brings to a successful end an extraordinary four years of litigation by residents seeking to oust Avon from management of the flats in London’s East End. But not before at least two visits to the First-tier Tribunal (Property Chamber), two to the Upper Tribunal (Lands Chamber) and various forays into the courts as well. Leaseholders first tried to take over the management of their blocks of flats from landlord, Avon Ground Rents, in 2019. In November 2020, the Upper Tribunal (Lands Chamber) ruled that the 12 had “long leases” within the meaning of s.76(2) of the Commonhold and Leasehold Reform Act 2002, but dismissed the application for the right to manage on other grounds. In fresh proceedings, Avon argued the 2020 Upper Tribunal decision was wrong.

The outcome turned on whether the 12 shared ownership leaseholders (none of whom had proceeded to ‘staircase’ to 100% of the leases), each had a “long lease” as defined by s.76(2) of the Commonhold and Leasehold Reform Act 2002. If they did not have a “long lease’, their housing association landlord would be treated as the qualifying tenant – and it would have to be given separate preliminary notices inviting participation. The argument was therefore essentially that a landlord was really a “tenant” for the purposes of the Act.

In the 2020 decision of Avon v Canary Gateway (Block A) RTM Ltd and others [2020] UKUT 358 (LC), the Upper Tribunal decided the 12 shared ownership leaseholders were indeed the qualifying tenants of their flats. Eventually Avon conceded that half the blocks could acquire the right to manage. But in subsequent proceedings, Avon’s legal team argued the Upper Tribunal had been wrong in relation to the rest. It failed in the First-tier Tribunal and again in the Upper Tribunal but appealed to the Court of Appeal.

Avon argued the shared ownership leaseholders failed to meet the requirements of s.76(2)(e) of the Act, which expressly provides that a long lease includes “a shared ownership … where the tenant’s total share is 100%”. But the leaseholders relied on the default provisions of s.76(2)(a), which provides that a long lease is a lease “for a term of years certain exceeding 21 years”.

In the appeal, the RTM company was represented by barristers Mark Loveday and James Castle of Tanfield Chambers. Lord Justice Nourse, (with whom Lady Justice King and Laing agreed) reviewed four previous decisions of the Upper Tribunal and the High Court on the meaning of section 76(2) and the identically worded provisions of s.7(1) of the Leasehold Reform Housing and Urban Development Act 1993. He concluded as a matter of interpretation that:

“On the face of it, the various paragraphs represent, as was submitted by Mr Loveday, a series of gateways. A lease will be a “long lease” if any of paragraphs (a) to (f) is in point. That suggests that, as the Company contends and the Judge held, a shared ownership lease for a term of more than 21 years will be a “long lease” whether or not the tenant has a 100% interest: paragraph (e) will not be applicable, but paragraph (a) will, and that will suffice.”

But the court went further. It rejected arguments about the policy behind the provisions, based on a 2000 government consultation paper. Instead, it took the view that there:

“seems to me to be force in Mr Loveday’s argument as to the policy underlying section 76. Tenants with long shared ownership leases who have not staircased to 100% will still have an obvious interest in how the premises are managed, the more so since they will typically pay full service charges. That being so, Parliament might have been expected to have intended them to be able to participate in management issues.”

Shared ownership leases (or ‘part-rent, part buy’) are a fast expanding form of low-cost home ownership, with the government currently committed to funding another 90,000 on top of the 202,000 existing numbers[1]. Mark Loveday said:

“This is an important win for the Canary Gateway residents – but more importantly a massive win for tens of thousands of shared ownership leaseholders across the country. The Court of Appeal has sent the clearest possible message they are not a second-rate class of homeowners. They have the same legal rights as any other leaseholder”.

James Castle commented:

“The importance of this case may actually lie elsewhere. Given the definition of “long lease” in section 76(2) of the 1993 Act is identical to section s.5(2) of the 2002 Act, this confirms shared ownership leaseholders have valuable rights to extend their leases and participate in collective enfranchisement.”

The decision means the RTM Company has now acquired the right to manage.

Mark and James appeared for the respondents to the appeal, Canary Gateway (Block A) RTM Co. They were instructed by the leasehold litigation specialists, Jobsons Solicitors of Stafford.

A copy of the judgment is here.

[1] https://commonslibrary.parliament.uk/research-briefings/cbp-8828/