Estate agents, she says, should be required to disclose referral fees on mortgages, conveyancing, removals etc in the same way that solicitors and financial intermediaries must do. “All estate agents should be required to partake in training in the basics of money laundering/identity fraud, the Estate Agents Act, the HIP regulations, etc. Every office should have a money laundering officer present.”
She adds: “Legislation is required and is long overdue. The government needs to put in place the licensing and regulatory system for all agencies selling property whether High Street, online or in a supermarket to ensure that there is a level playing field and that consumers may rely upon the same standards throughout the estate agency industry.”
Hope value is not part of the price in leasehold enfranchisement
Landlords are prevented from claiming extra sums in the form of 'hope value' in house claims and lease extension claims.
The House of Lords ruling in the joined appeals of Earl Cadogan v Sportelli [2007] EWCA Civ 1042; and Pitts v Earl Cadogan; Earl Cadogan v Atlantic Telecasters Ltd [2007] EWCA Civ 1280, [2008] RVR 244 has seen Lord Hoffmann dissenting from the majority led by Lord Neuberger on the vexed question of whether 'hope value'—an additional sum payable in the anticipation of selling to a special purchaser in the future—should be taken into account when arriving at the price to be paid by tenants on leasehold enfranchisement under the Leasehold Reform Act 1967 (the 1967 Act), sections 9(1) and (1A).
Dowden, solicitor and a member of the Property Litigation Association, says: “The result leaves ‘hope value’ in place, but only in very limited circumstances. It can be taken into account where tenants of a block of flats exercise their collective right to acquire the freehold in the building under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). The only ‘hope value’ that can be taken into account is that applicable to the possibility that non-participating tenants might negotiate an extension to their leases. It applies only to the possibility of a negotiated deal—not to the exercise of any statutory right to acquire an extension.”
The decision could have a negative impact for some tenants who will have to pay more for the collective purchase of their freehold.
Various statutes since 1967 had conferred on owners of long leases of houses or flats rights to 'enfranchise' by buying out, individually or collectively with other lessees, the reversionary interests, or to extend their leases for defined periods. A key feature of the statutory provisions was a process for the assessment of the price at which the reversioner's interest, or the extended lease, was to be acquired. One valuation concept was 'marriage value' and related to that was 'hope value'.
Dowden explains: “Hope value is the uplift in value that might apply where a potential purchaser thinks that, in addition to its investment value, the freehold interest carries with it the potential benefit of a possible future sale of the freehold to the present tenant or a successor in title (or indeed the acquisition of the leasehold interest), thereby enabling a release of the marriage value in the future. That marriage value is the increase in value that occurs where a tenant acquires the freehold, or where a landlord acquires the leasehold interest so that the full value of the unencumbered freehold can be unlocked. The marriage value is the additional price that would be payable by a party in a position to unlock that value, as compared with a third party buyer who would have to take the freehold subject to the leasehold interest.
“The statutory method of valuing the freehold takes into account the marriage value that is attributable to the participating leaseholders' interests, but not that attributable to the non-participating leaseholders. The majority decision of the Lords means that the possible future marriage value relating to the non-participating leaseholders' interests can be taken into account as hope value under paragraph 3 of Schedule 6 to the 1993 Act.”
Justifying this exceptional treatment of Schedule 6, Lord Neuberger commented: 'It would be both arbitrary and unfair, in my judgment, if a landlord, who can recover marriage value in relation to the participating tenants’ flats, could not recover hope value in respect of the non-participating tenants’ flats. It would be arbitrary because, in so far as they are purchasing the reversion to non-participating tenants’ leases, the participating tenants are acquiring an investment, whereas, in so far as they are purchasing the reversion to their own leases, they are acquiring greater security in their homes.' His Lordship also saw the availability of hope value in the case of non-participating tenants as a means of preventing collusive action which would artificially reduce the price payable to the landlord.
Lord Hoffmann’s dissent was strident. Commenting in particular on the fine distinctions drawn by Lord Neuberger, he said: 'It seems to me that your Lordships have formed a view of what construction fairness to landlords requires and have determined to force the language of the statute to yield up such a meaning. I am less confident of what fairness requires [...] I am therefore not prepared to accept that the apparent mismatch between the inclusion of marriage value (for participating tenants only) and exclusion of hope value (for all tenants) produces such an obvious injustice as to require heroic methods of construction to avoid it. I would dismiss all the appeals.'
It is worth noting that the House of Lords dealt very shortly with the Cadogan estate’s argument on human rights, Dowden says: “Cadogan’s lawyers argued that the Court of Appeal’s finding that hope value should be excluded be upheld, the law does not comply with Article 1 of the First Protocol to the European Convention on Human Rights and must be reinterpreted. Because the House of Lords found by a majority that the matter could be resolved by applying the ordinary principles of statutory interpretation, the Human Rights Act was not engaged.
Articles
Taken for granted
Journal: New Law Journal
Citation: 159 NLJ 29
Issue date: 9 January 2009
Author: Joanna Sykes
Summary: Analyses the scope of the doctrine of non-derogation from grant. Derogation from grant occurs when one party agrees to grant rights to another but then does something which detracts from this grant. The doctrine is uncertain in its scope so the courts look at the facts and the parties' reasonable expectations in each case in order to decide whether the doctrine applies. Tenants have often attempted to invoke the doctrine where they are experiencing problems with competing businesses, particularly in the context of shopping centres and shopping malls where a landlord has some control over the neighbouring tenants and common areas. In light of the case law it would be desirable to ensure when acting for a landlord there is a statement in any lease that nothing in the lease imposes any restriction on the use of any other units or neighbouring property, whether belonging to the landlord or otherwise.
Property repossession rising
Journal: New Law Journal
Citation: 159 NLJ 21
Issue date: 9 January 2009
Author: Tom Poole
Summary: Discusses the case of Horsham Properties Group Ltd v Clark & Others involving the exercise of a statutory power of sale under Law of Property Act 1925, section 101.
In 2004, the defendants entered into a mortgage with GMAC. They fell into arrears with their mortgage payments and in April 2006 GMAC appointed receivers over the property. In September 2006, the receivers sold the property at auction. The purchaser was Coastal Estates Ltd. The property was transferred by the receivers as agents for GMAC and on the same day Coastal transferred the property to Horsham Properties Group Ltd who then brought a claim for possession of the property claiming that the defendants were trespassers. The possession claim was defended on the basis that section 101 of the Law of Property Act 1925 infringed the rights of mortgagors by permitting mortgagees to overreach the mortgagor's rights in relation to mortgaged property by selling it out of court, without first obtaining a court order for possession, or an order for sale. The court found that the exercise of a statutory power of sale under section 101 after a relevant default by the mortgagor is not a deprivation of possessions. The decision reaffirms the power of mortgagees to sell property when mortgage money becomes due within the meaning of LPA 1925, section 101 without first seeking a court order.
Getting started
Journal: Solicitors Journal
Citation: Solicitors Journal, 16 December 2008, 15
Issue date: 16 December 2008
Author: Peter Glover
Summary: Informs the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) is heavily used, whether to enforce a charging order by sale, or to ascertain the existence and/or extent of a beneficial interest in land. It is surprising then, that the Civil Procedure Rules 1998 (CPR) fail to make it entirely clear how such proceedings should be commenced. It would be logical to assume that CPR Part 7 will apply.
Reach breaking point
Journal: Estates Gazette
Citation: Estates Gazette, 13 December 2008, 72
Issue date: 13 December 2008
Author: Simon Edwards, Patrick Stell and Keith Firn
Summary: Explores the bombshells that a tenant may face if it is slow to check its lease. In today's economic climate, landlords are likely to seek to oppose a tenant's request to break. Tenants need to obtain advice on their obligations under the lease at an early stage.
And easy route to repossessions
Journal: Estates Gazette
Citation: Estates Gazette, 6 December 2008, 99
Issue date: 6 December 2008
Author: Sandi Murdoch
Summary: Explains a purchaser from a mortgagee or an appointed receiver can readily regain possession from a defaulting mortgagor. This does not infringe the mortgagor's human rights. Everyone should be concerned about the plight of mortgagors who are faced with losing their homes when they cannot keep up with repayments.
Keep a close eye on your tenants
Journal: Estates Gazette
Citation: Estates Gazette, 6 December 2008, 95
Issue date: 6 December 2008
Author: Paul Greatholder
She adds: “Legislation is required and is long overdue. The government needs to put in place the licensing and regulatory system for all agencies selling property whether High Street, online or in a supermarket to ensure that there is a level playing field and that consumers may rely upon the same standards throughout the estate agency industry.”
Hope value is not part of the price in leasehold enfranchisement
Landlords are prevented from claiming extra sums in the form of 'hope value' in house claims and lease extension claims.
The House of Lords ruling in the joined appeals of Earl Cadogan v Sportelli [2007] EWCA Civ 1042; and Pitts v Earl Cadogan; Earl Cadogan v Atlantic Telecasters Ltd [2007] EWCA Civ 1280, [2008] RVR 244 has seen Lord Hoffmann dissenting from the majority led by Lord Neuberger on the vexed question of whether 'hope value'—an additional sum payable in the anticipation of selling to a special purchaser in the future—should be taken into account when arriving at the price to be paid by tenants on leasehold enfranchisement under the Leasehold Reform Act 1967 (the 1967 Act), sections 9(1) and (1A).
Dowden, solicitor and a member of the Property Litigation Association, says: “The result leaves ‘hope value’ in place, but only in very limited circumstances. It can be taken into account where tenants of a block of flats exercise their collective right to acquire the freehold in the building under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). The only ‘hope value’ that can be taken into account is that applicable to the possibility that non-participating tenants might negotiate an extension to their leases. It applies only to the possibility of a negotiated deal—not to the exercise of any statutory right to acquire an extension.”
The decision could have a negative impact for some tenants who will have to pay more for the collective purchase of their freehold.
Various statutes since 1967 had conferred on owners of long leases of houses or flats rights to 'enfranchise' by buying out, individually or collectively with other lessees, the reversionary interests, or to extend their leases for defined periods. A key feature of the statutory provisions was a process for the assessment of the price at which the reversioner's interest, or the extended lease, was to be acquired. One valuation concept was 'marriage value' and related to that was 'hope value'.
Dowden explains: “Hope value is the uplift in value that might apply where a potential purchaser thinks that, in addition to its investment value, the freehold interest carries with it the potential benefit of a possible future sale of the freehold to the present tenant or a successor in title (or indeed the acquisition of the leasehold interest), thereby enabling a release of the marriage value in the future. That marriage value is the increase in value that occurs where a tenant acquires the freehold, or where a landlord acquires the leasehold interest so that the full value of the unencumbered freehold can be unlocked. The marriage value is the additional price that would be payable by a party in a position to unlock that value, as compared with a third party buyer who would have to take the freehold subject to the leasehold interest.
“The statutory method of valuing the freehold takes into account the marriage value that is attributable to the participating leaseholders' interests, but not that attributable to the non-participating leaseholders. The majority decision of the Lords means that the possible future marriage value relating to the non-participating leaseholders' interests can be taken into account as hope value under paragraph 3 of Schedule 6 to the 1993 Act.”
Justifying this exceptional treatment of Schedule 6, Lord Neuberger commented: 'It would be both arbitrary and unfair, in my judgment, if a landlord, who can recover marriage value in relation to the participating tenants’ flats, could not recover hope value in respect of the non-participating tenants’ flats. It would be arbitrary because, in so far as they are purchasing the reversion to non-participating tenants’ leases, the participating tenants are acquiring an investment, whereas, in so far as they are purchasing the reversion to their own leases, they are acquiring greater security in their homes.' His Lordship also saw the availability of hope value in the case of non-participating tenants as a means of preventing collusive action which would artificially reduce the price payable to the landlord.
Lord Hoffmann’s dissent was strident. Commenting in particular on the fine distinctions drawn by Lord Neuberger, he said: 'It seems to me that your Lordships have formed a view of what construction fairness to landlords requires and have determined to force the language of the statute to yield up such a meaning. I am less confident of what fairness requires [...] I am therefore not prepared to accept that the apparent mismatch between the inclusion of marriage value (for participating tenants only) and exclusion of hope value (for all tenants) produces such an obvious injustice as to require heroic methods of construction to avoid it. I would dismiss all the appeals.'
It is worth noting that the House of Lords dealt very shortly with the Cadogan estate’s argument on human rights, Dowden says: “Cadogan’s lawyers argued that the Court of Appeal’s finding that hope value should be excluded be upheld, the law does not comply with Article 1 of the First Protocol to the European Convention on Human Rights and must be reinterpreted. Because the House of Lords found by a majority that the matter could be resolved by applying the ordinary principles of statutory interpretation, the Human Rights Act was not engaged.
Articles
Taken for granted
Journal: New Law Journal
Citation: 159 NLJ 29
Issue date: 9 January 2009
Author: Joanna Sykes
Summary: Analyses the scope of the doctrine of non-derogation from grant. Derogation from grant occurs when one party agrees to grant rights to another but then does something which detracts from this grant. The doctrine is uncertain in its scope so the courts look at the facts and the parties' reasonable expectations in each case in order to decide whether the doctrine applies. Tenants have often attempted to invoke the doctrine where they are experiencing problems with competing businesses, particularly in the context of shopping centres and shopping malls where a landlord has some control over the neighbouring tenants and common areas. In light of the case law it would be desirable to ensure when acting for a landlord there is a statement in any lease that nothing in the lease imposes any restriction on the use of any other units or neighbouring property, whether belonging to the landlord or otherwise.
Property repossession rising
Journal: New Law Journal
Citation: 159 NLJ 21
Issue date: 9 January 2009
Author: Tom Poole
Summary: Discusses the case of Horsham Properties Group Ltd v Clark & Others involving the exercise of a statutory power of sale under Law of Property Act 1925, section 101.
In 2004, the defendants entered into a mortgage with GMAC. They fell into arrears with their mortgage payments and in April 2006 GMAC appointed receivers over the property. In September 2006, the receivers sold the property at auction. The purchaser was Coastal Estates Ltd. The property was transferred by the receivers as agents for GMAC and on the same day Coastal transferred the property to Horsham Properties Group Ltd who then brought a claim for possession of the property claiming that the defendants were trespassers. The possession claim was defended on the basis that section 101 of the Law of Property Act 1925 infringed the rights of mortgagors by permitting mortgagees to overreach the mortgagor's rights in relation to mortgaged property by selling it out of court, without first obtaining a court order for possession, or an order for sale. The court found that the exercise of a statutory power of sale under section 101 after a relevant default by the mortgagor is not a deprivation of possessions. The decision reaffirms the power of mortgagees to sell property when mortgage money becomes due within the meaning of LPA 1925, section 101 without first seeking a court order.
Getting started
Journal: Solicitors Journal
Citation: Solicitors Journal, 16 December 2008, 15
Issue date: 16 December 2008
Author: Peter Glover
Summary: Informs the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) is heavily used, whether to enforce a charging order by sale, or to ascertain the existence and/or extent of a beneficial interest in land. It is surprising then, that the Civil Procedure Rules 1998 (CPR) fail to make it entirely clear how such proceedings should be commenced. It would be logical to assume that CPR Part 7 will apply.
Reach breaking point
Journal: Estates Gazette
Citation: Estates Gazette, 13 December 2008, 72
Issue date: 13 December 2008
Author: Simon Edwards, Patrick Stell and Keith Firn
Summary: Explores the bombshells that a tenant may face if it is slow to check its lease. In today's economic climate, landlords are likely to seek to oppose a tenant's request to break. Tenants need to obtain advice on their obligations under the lease at an early stage.
And easy route to repossessions
Journal: Estates Gazette
Citation: Estates Gazette, 6 December 2008, 99
Issue date: 6 December 2008
Author: Sandi Murdoch
Summary: Explains a purchaser from a mortgagee or an appointed receiver can readily regain possession from a defaulting mortgagor. This does not infringe the mortgagor's human rights. Everyone should be concerned about the plight of mortgagors who are faced with losing their homes when they cannot keep up with repayments.
Keep a close eye on your tenants
Journal: Estates Gazette
Citation: Estates Gazette, 6 December 2008, 95
Issue date: 6 December 2008
Author: Paul Greatholder
Summary: Considers the investment implications of the protection enjoyed by Rent Act tenants. Focuses on practical tips for landlords, surveyors and lawyers when considering a claim for possession. There have been no new Rent Act tenancies since 1989.
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