Collective Enfranchisement – Spotting an Error to Secure a Good Deal for Tenants

We acted on behalf of the owners of 14 flats in a building near Canary Wharf who wanted to buy the freehold from their landlord because they were unhappy with the level of service charges and wanted to take on responsibility for managing their building.

We assisted the tenants in preparing an Initial Notice setting out details of the property that they would acquire and the rights that they needed to exercise over it. The landlord, which is a large bank, served a Counter Notice shortly before the deadline for doing so.  

The law requires the landlord to state whether its accepts or rejects each of the proposals in the Notice of Claim but the bank’s Counter Notice did not state if it agreed if it would agree to our clients acquiring rights over a nearby piece of land which the tenants used to access the building. If the Counter Notice was defective then the tenants would be entitled to acquire the freehold to the flats for the price set out in their Initial Notice rather than the price set out in the landlord’s Counter Notice which was more than the tenants’ offer.

Nockolds wrote to the landlord’s solicitor and pointed out the apparent error in attempt to secure agreement that our clients could purchase the freehold for the price set out in the Initial Notice. Given the difference between the landlord’s and the tenants’ valuations of the freehold, the landlord, perhaps somewhat predictably, did not agree to sell for the price that the tenants had proposed in their Initial Notice and the tenants instructed us to issue a claim in the County Court to seek a declaration i.e. a legally binding decision of the court, that the landlord’s Counter Notice was defective.

If the court were to find that the landlord’s Initial Notice was defective, then it would be ordered to pay a proportion of the tenants’ legal costs. The landlord and perhaps also the solicitors who prepared the notice were aware of the potential costs liability and after a period of negotiation the landlord agreed that the tenant’s could purchase the freehold for less than the price stated in its Counter Notice.