No silent agreements

Determining the purchase price of a freehold can lead to disputes between landlords and tenants, including the point at which the terms of the acquisition are agreed under s.24 in Part One of the Leasehold Reform Housing and Urban Development Act 1993. But the recent Court of Appeal ruling in the case of Goldeagle Properties Limited v Thornbury Court Limited [2008] EWCA Civ 264 has shed some light on the issue.

Appropriate period

Once the 'terms of acquisition' of a collective enfranchisement claim are agreed either by the LVT or by agreement between the parties, the jurisdiction in the claim moves from the LVT to the county court. Pursuant to s.24 of the Act, completion of the acquisition must take place within two months. After this two-month period has expired ('the appropriate period') either party may make an application to the county court for an order to force the other party to complete.

If no application is made the claim is deemed withdrawn, and the question of when the 'terms of acquisition' are agreed can in itself be a litigious issue.

In Goldeagle, the tenants in a block of flats known as Thornbury Court made a collective enfranchisement claim for the freehold of their building by serving an initial notice on the landlord, who in turn served a counter notice. The counter notice disputed the price offered by the tenants, and attached to the counter notice was a draft form of conveyance of the freehold. The tenants remained silent at this stage as to whether or not they agreed the terms of the conveyance.

The landlord made an application to the LVT within the requisite time period to determine the purchase price of the freehold. In the application, both parties confirmed to the LVT that the terms of the conveyance had not yet been agreed.

The LVT determined the purchase price to be paid by the tenants on 14 September 2006, and on 13 November 2006 the tenants' solicitors wrote to the landlord confirming that the terms of the conveyance attached to the counter notice were agreed.

Date in dispute

The tenants were of the opinion therefore, that for the purposes of s.24 of the Act, the date that the 'terms of acquisition' were agreed was 13 November 2006. Since completion did not take place within the 'appropriate period' of two months, the tenants made an application to the county court on 9 February 2007.

The application was therefore made within the two-month period following the expiry of the appropriate period as required by s.24 of the Act. The landlord contended, however, that for the purposes of s.24 of the Act the 'terms of acquisition' were agreed on 14 September 2006 when the LVT decided the purchase price.

The landlord had two arguments for its reasoning:

 Firstly, it argued that as the LVT had determined the purchase price, its decision implied that the terms of the conveyance were also agreed, the argument being that the details of the conveyance ought to be known before the purchase price is fixed.

 Secondly, it was also of the opinion that the Act only permitted one application to be made to the LVT in relation to any particular claim, it did not permit successive applications to the LVT. All the 'terms of acquisition' had to be decided by the LVT in one go.

The Court of Appeal disagreed with the landlord. It held that once an application to the LVT has been made within the requisite time period, it 'remains seized of all matters in dispute'.

The LVT had not made any determination as to the terms of the conveyance when it made the determination of the purchase price so it continued to have jurisdiction to do so. Either party could have made a further application for a determination of the terms of the conveyance.

The court also held that it could not be said that the tenants had, by their conduct or impliedly, agreed to the terms of the conveyance attached to the counter notice. Both parties had confirmed in their respective statements of case to the LVT that the terms of the conveyance had not yet been agreed. The landlord could not, therefore, say that the terms of the conveyance were agreed by reason of the LVT determination as to the price.

This decision confirms that where the LVT has made a determination on a claim and consequently closed their file, which is its current practice, either party may make a further application for a determination on any other disputed matters relating to the claim. This is notwithstanding that any subsequent application will not be made within six months of the counter notice as required by the Act.

Silence isn't golden

Landlords may no longer deem silence on the part of the tenant as agreement of the terms of the conveyance. There must be express confirmation on behalf of the tenants that the terms of the conveyance are agreed even if no amendments are requested and regardless of whether or not the purchase price has been agreed.

It would seem prudent, however, and more cost and time efficient for both parties to make sure that any application to the LVT to determine the purchase price also includes an application to determine any dispute regarding the terms of the conveyance. Indeed this is what the Court of Appeal recommended in its judgment.